<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarter Ended January 29, 2000
---------------------------------------------------
Commission File Number 1-9659
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THE NEIMAN MARCUS GROUP, INC.
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4119509
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 Boylston Street, Chestnut Hill,MA 02467
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 232-0760
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
As of March 3, 2000, the number of outstanding shares of each of the issuer's
classes of common stock was:
Class Outstanding Shares
- ----- ------------------
Class A Common Stock, $.01 Par Value 27,918,635
Class B Common Stock, $.01 Par Value 20,948,332
<PAGE> 2
THE NEIMAN MARCUS GROUP, INC.
I N D E X
---------
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page
Number
------
<S> <C>
Item 1. Condensed Consolidated Balance Sheets as of January 29, 2000,
July 31, 1999 and January 30, 1999 1
Condensed Consolidated Statements of Earnings for the Twenty-Six
and Thirteen Weeks ended January 29, 2000 and January 30, 1999 2
Condensed Consolidated Statements of Cash Flows for the Twenty-
Six Weeks ended January 29, 2000 and January 30, 1999 3
Notes to Condensed Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-9
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
<PAGE> 3
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
January 29, July 31, January 30,
2000 1999 1999
----------- ---------- -----------
(Restated) (Restated)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 58,179 $ 29,191 $ 80,600
Undivided interests in NMG
Credit Card Master Trust 241,923 133,151 203,282
Accounts receivable, net 69,586 59,317 58,914
Merchandise inventories 538,138 545,252 512,410
Deferred income taxes 15,255 15,255 24,058
Other current assets 52,767 53,102 60,229
---------- ---------- ----------
Total current assets 975,848 835,268 939,493
Property and equipment, net 522,608 513,439 505,456
Other assets 156,716 163,583 123,973
---------- ---------- ----------
Total assets $1,655,172 $1,512,290 $1,568,922
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities
of long-term liabilities $ 953 $ 921 $ 5,932
Accounts payable 228,407 203,071 186,920
Accrued liabilities 211,676 176,188 215,719
---------- ---------- ----------
Total current liabilities 441,036 380,180 408,571
Long-term liabilities:
Notes and debentures 284,651 274,640 344,628
Other long-term liabilities 73,624 74,664 70,147
Deferred income taxes 32,038 32,038 37,139
---------- ---------- ----------
Total long-term liabilities 390,313 381,342 451,914
---------- ---------- ----------
Minority interest 6,472 4,485 1,098
Shareholders' equity:
Common stock 488 490 490
Additional paid-in capital 459,654 467,283 466,412
Retained earnings 357,209 278,510 240,437
---------- ---------- ----------
Total shareholders' equity 817,351 746,283 707,339
---------- ---------- ----------
Total liabilities and shareholders'
equity $1,655,172 $1,512,290 $1,568,922
========== ========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
1
<PAGE> 4
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands except for Twenty-Six Weeks Ended Thirteen Weeks Ended
per share amounts) ----------------------------- ---------------------------
January 29, January 30, January 29, January 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues $1,567,949 $1,376,267 $890,279 $789,154
Cost of goods sold including buying and
occupancy costs 1,027,280 930,642 601,562 546,754
Selling, general and administrative expenses 388,757 332,981 209,917 181,095
Corporate expenses 7,767 6,973 4,219 3,692
---------- ----------- --------- ---------
Operating earnings 144,145 105,671 74,581 57,613
Interest expense (12,789) (13,135) (6,003) (6,999)
---------- ----------- --------- ---------
Earnings before income taxes and
minority interest 131,356 92,536 68,578 50,614
Income taxes (49,915) (36,089) (26,059) (19,739)
---------- ----------- --------- ---------
Earnings before minority interest 81,441 56,447 42,519 30,875
Minority interest in net losses
(earnings) of subsidiaries (2,742) 332 (1,263) 332
----------- ----------- --------- ---------
Net earnings $ 78,699 $ 56,779 $ 41,256 $ 31,207
=========== =========== ========= =========
Weighted average number of common and common
equivalent shares outstanding:
Basic 48,844 49,233 48,610 49,006
=========== =========== ========= =========
Diluted 49,035 49,347 48,888 49,108
=========== =========== ========= =========
Earnings per share:
Basic $ 1.61 $ 1.15 $ .85 $ .64
=========== =========== ========= =========
Diluted $ 1.60 $ 1.15 $ .84 $ .64
=========== =========== ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 5
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands) Twenty-Six Weeks Ended
--------------------------
January 29, January 30,
2000 1999
----------- -----------
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 78,699 $ 56,779
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 36,886 32,893
Minority interest 2,742 (332)
Other 5,451 3,677
Changes in current assets and liabilities:
Accounts receivable (10,269) (4,239)
Merchandise inventories 7,114 2,126
Other current assets 335 973
Taxes payable 9,579 24,117
Accounts payable and
accrued liabilities 51,928 (14,054)
--------- ---------
Net cash provided by operating
activities 182,465 101,940
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (42,792) (55,900)
Acquisition of Gurwitch Bristow Products, net -- (2,778)
Purchases of held-to-maturity securities (444,765) (397,009)
Maturities of held-to-maturity securities 373,493 332,594
--------- ---------
Net cash used for investing activities (114,064) (123,093)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 10,000 60,000
Repurchase of common stock (10,012) (15,356)
Distributions paid (2,435) --
Repayment of receivables securitization (37,500) --
Other financing activities 534 465
--------- ---------
Net cash provided by financing activities (39,413) 45,109
--------- ---------
CASH AND EQUIVALENTS
Increase during the period 28,988 23,956
Beginning balance 29,191 56,644
--------- ---------
Ending balance $ 58,179 $ 80,600
========= =========
See Notes to Condensed Consolidated Financial Statements.
3
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THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The Condensed Consolidated Financial Statements of The Neiman Marcus
Group, Inc. (the Company) are submitted in response to the requirements
of Form 10-Q and should be read in conjunction with the Consolidated
Financial Statements included in the Company's Annual Report on Form
10-K. In the opinion of management, these statements contain all
adjustments, consisting only of normal recurring accruals, necessary for
a fair presentation of the results for the interim periods presented.
The retail industry is seasonal in nature, and the results of operations
for these periods historically have not been indicative of the results
for a full year.
Certain reclassifications and restatements have been made to the fiscal
1999 financial statements to conform to the fiscal 2000 presentation.
2. MERCHANDISE INVENTORIES
During the thirteen weeks ended October 30, 1999, the Company changed
its method of determining the cost of inventories from the last-in,
first-out (LIFO) method to the first-in, first-out (FIFO) method.
Management believes that the FIFO method better measures the current
value of such inventories and provides a more appropriate matching of
revenues and expenses. Under the current low-inflationary environment,
the use of the FIFO method more accurately reflects the Company's
financial position.
The change to the FIFO method has been applied by retroactively
restating the accompanying condensed consolidated financial statements.
The effect of this change was to increase merchandise inventories,
accrued liabilities and retained earnings by $16.6 million, $6.6 million
and $10.0 million, respectively, as of January 30, 1999, and to increase
merchandise inventories and retained earnings by $16.8 million and $10.1
million, respectively, and to decrease the deferred tax asset by $6.7
million as of July 31, 1999. For the twenty-six weeks ended January 30,
1999, the effect of the change increased net earnings by $1.2 million.
For the thirteen weeks ended January 30, 1999 the effect of the change
increased net earnings by $.6 million.
3. EARNINGS PER SHARE
Pursuant to the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings per Share," the weighted average shares
used in computing basic and diluted earnings per share (EPS) are as
presented in the table below. No adjustments were made to net earnings
for the computations of basic and diluted EPS during the periods
presented.
Options to purchase 975,080 and 572,230 shares of common stock were not
included in the computation of diluted EPS for the twenty-six and
thirteen weeks ended January 29, 2000, respectively, because the
exercise price of those options was greater than the average market
price of the common shares. Options to purchase 896,300 shares of common
stock were not included in the computation of diluted EPS for both the
twenty-six and thirteen weeks ended January 30, 1999 because the
exercise price of those options was greater than the average market
price of the common shares.
TWENTY-SIX WEEKS ENDED THIRTEEN WEEKS ENDED
------------------------ ------------------------
(in thousands of shares) January 29, January 30, January 29, January 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
Shares for computation
of basic EPS 48,844 49,233 48,610 49,006
Effect of dilutive stock
options and nonvested stock
under common stock
incentive plans 191 114 278 102
----------- ----------- ----------- -----------
Shares for computation
of diluted EPS 49,035 49,347 48,888 49,108
=========== =========== =========== ===========
4
<PAGE> 7
THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. AUTHORIZED CAPITAL
On September 15, 1999, shareholders of the Company approved a proposal
to amend the Company's Restated Certificate of Incorporation to increase
the Company's authorized capital to 250 million shares of common stock
(consisting of 100 million shares of Class A Common Stock, 100 million
shares of Class B Common Stock and 50 million shares of a new Class C
Common Stock (having one-tenth (1/10) of one vote per share) and 50
million shares of preferred stock.
5. SPIN-OFF FROM HARCOURT GENERAL, INC.
On October 22, 1999, Harcourt General, Inc. (Harcourt General) completed
the spin-off of its controlling equity position in the Company in a
tax-free distribution to its shareholders. Harcourt General distributed
approximately 21.4 million of its approximately 26.4 million shares of
the Company. Harcourt General retained approximately 5.0 million shares.
Each common shareholder of Harcourt General received .3013 of a share of
Class B Common Stock of the Company for every share of Harcourt General
Common Stock and Class B Stock held on October 12, 1999, which was the
record date for the distribution. The Company and Harcourt General are
parties to various agreements which govern their ongoing relationship.
6. OPERATING SEGMENTS
The Company has two reportable business segments: specialty retail
stores and direct marketing. The specialty retail stores segment
includes all the operations of Neiman Marcus Stores and Bergdorf
Goodman. Direct marketing includes the operations of NM Direct, which
publishes NM by Mail, the Horchow catalogues, Chef's Catalog and the
Neiman Marcus Christmas Catalogue. Other includes unallocated corporate
expenses, costs incurred to launch the Company's e-commerce business and
operations which do not meet the quantitative thresholds of Statement of
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information."
The Company's senior management evaluates the performance of the
Company's assets on a consolidated basis. Therefore, separate financial
information for the Company's assets on a segment basis is not
presented.
The following tables set forth the information for the Company's
reportable segments:
<TABLE>
<CAPTION>
(in thousands) Twenty-Six Weeks Twenty-Six Weeks Thirteen Weeks Thirteen Weeks
Ended January 29, Ended January 30, Ended January 29, Ended January 30,
2000 1999 2000 1999
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES
Specialty Retail Stores $1,334,692 $1,196,738 $758,880 $686,004
Direct Marketing 201,228 178,380 115,087 102,001
Other 32,029 1,149 16,312 1,149
---------- ---------- -------- --------
Total $1,567,949 $1,376,267 $890,279 $789,154
========== ========== ======== ========
OPERATING EARNINGS
Specialty Retail Stores $ 139,840 $ 106,327 $ 72,056 $ 57,929
Direct Marketing 12,547 6,851 7,548 3,910
Other (8,242) (7,507) (5,023) (4,226)
---------- ---------- -------- --------
Total $ 144,145 $ 105,671 $ 74,581 $ 57,613
========== ========== ======== ========
</TABLE>
5
<PAGE> 8
THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. STOCKHOLDER RIGHTS PLAN
On October 6, 1999, the Company's Board of Directors adopted a
stockholder rights plan. The rights plan is designed to improve the
ability of the Company's board to protect and advance the interests of
the Company's stockholders in the event of an unsolicited proposal to
acquire a significant interest in the Company.
8. STOCK REPURCHASE PROGRAM
In October 1999, the Company's Board of Directors authorized an increase
in the stock repurchase program to two million shares. During the
twenty-six weeks ended January 29, 2000, the Company repurchased 427,800
shares at an average price of $23.41 per share. Subsequent to January
29, 2000, the Company repurchased an additional 187,700 shares at an
average price of $21.01 per share; 1,384,500 shares were remaining under
the stock repurchase program.
9. RECENT ACCOUNTING DEVELOPMENTS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements," to clarify the revenue recognition rules for certain types
of transactions. The Company is currently evaluating the effect of
implementing SAB 101.
6
<PAGE> 9
THE NEIMAN MARCUS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE TWENTY-SIX WEEKS ENDED JANUARY 29, 2000 COMPARED
WITH THE TWENTY-SIX WEEKS ENDED JANUARY 30, 1999
Revenues in the twenty-six weeks ended January 29, 2000 increased $191.7 million
or 13.9% over revenues in the twenty-six weeks ended January 30, 1999. The
increase in revenues was primarily attributable to comparable sales growth and
sales from the Kate Spade LLC and Gurwitch Bristow Products subsidiaries,
majority interests in which were acquired in fiscal 1999 as part of the
Company's brand development initiative. Specialty retail stores revenues in the
twenty-six weeks ended January 29, 2000 increased $138.0 million or 11.5% over
the prior year. Direct marketing revenues in the twenty-six weeks ended January
29, 2000 increased $22.8 million or 12.8% over the prior year. Total comparable
sales for the Company increased 10.7%. Comparable sales increased 10.3% in the
specialty retail store segment and 12.8% in the direct marketing segment.
Cost of goods sold including buying and occupancy costs increased $96.6 million
or 10.4% to $1.03 billion compared to the same period last year, primarily due
to increased sales. As a percentage of revenues, cost of goods sold decreased to
65.5% from 67.6% in the prior year, due primarily to higher comparable sales,
lower markdowns, higher markups on goods sold and, to a lesser extent,
proportionately lower buying and occupancy costs.
Selling, general and administrative expenses increased $55.8 million or 16.8% to
$388.8 million. As a percentage of revenues, selling, general and administrative
expenses increased to 24.8% from 24.2% in the prior year, primarily attributable
to expenses incurred to launch the Company's new e-commerce business.
Interest expense decreased 2.6% to $12.8 million in the twenty-six weeks ended
January 29, 2000 from $13.1 million in the prior year. The decrease resulted
primarily from lower average outstanding borrowings during the period.
The Company's effective income tax rate was 38% in the twenty-six weeks ended
January 29, 2000, as compared to 39% in the twenty-six weeks ended January 30,
1999.
RESULTS OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED JANUARY 29, 2000 COMPARED
WITH THE THIRTEEN WEEKS ENDED JANUARY 30, 1999
Revenues in the thirteen weeks ended January 29, 2000 increased $101.1 million
or 12.8% over revenues in the thirteen weeks ended January 30, 1999. The
increase in revenues was primarily attributable to comparable sales growth and
sales from the Kate Spade LLC and Gurwitch Bristow Products subsidiaries.
Specialty retail store revenues in the thirteen weeks ended January 29, 2000
increased $72.9 million or 10.6% over the prior year. Direct marketing revenues
in the thirteen weeks ended January 29, 2000 increased $13.1 million or 12.8%
over the prior year. Total comparable sales for the Company increased 10.6%.
Comparable sales increased 10.0% in the specialty retail store segment and 12.8%
in the direct marketing segment.
Costs of goods sold including buying and occupancy costs increased 10.0% to
$601.6 million in the thirteen week period ended January 29, 2000 compared to
the same period last year, primarily due to increased sales and lower markdowns.
As a percentage of revenues, cost of goods sold decreased to 67.6% from 69.3% in
the prior year, primarily due to lower markdowns.
Selling, general and administrative expenses increased 15.9% to $209.9 million
from $181.1 million in the prior year, primarily due to higher sales volume. As
a percentage of revenues, selling, general and administrative expenses increased
to 23.6% from 22.9% from the prior year, principally reflecting expenses
incurred to launch the Company's new e-commerce business.
Interest expense decreased 14.2% to $6.0 million in the thirteen weeks ended
January 29, 2000. The decrease resulted primarily from lower average outstanding
borrowings during the period.
The Company's effective income tax rate was 38% in the thirteen weeks ended
January 29, 2000, as compared to 39% in the thirteen weeks ended January 30,
1999.
7
<PAGE> 10
THE NEIMAN MARCUS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CHANGES IN FINANCIAL CONDITION AND LIQUIDITY SINCE JULY 31, 1999
During the twenty-six weeks ended January 29, 2000, the Company financed its
working capital needs and capital expenditures primarily with cash from
operations and borrowings under its revolving credit facility. The following
discussion analyzes liquidity and capital resources by operating, investing and
financing activities as presented in the Company's Condensed Consolidated
Statements of Cash Flows.
Net cash provided by operating activities was $182.5 million during the first
twenty-six weeks of fiscal 2000 as compared to $101.9 million in the prior year
period. The most significant item affecting working capital was an increase in
accounts payable and accrued liabilities of $51.9 million.
Capital expenditures were $42.8 million during the twenty-six week period ended
January 29, 2000 as compared to $55.9 million in the prior year period. Capital
expenditures were primarily related to existing store renovations, including
remodeling at Bergdorf Goodman's main store. Capital expenditures are expected
to approximate $130.0 million during fiscal 2000.
The Company has increased its bank borrowings by $10.0 million since July 31,
1999. At January 29, 2000 the Company had $415.0 million available under its
revolving credit facility. In September 1999 the Company reduced the revolving
credit facility from $650 million to $450 million to reflect its current and
anticipated cash flow requirements.
The Company's five year revolving securitization of its accounts receivable
matures in fiscal 2000. In January 2000, the Company used proceeds from its
credit facility to repay $37.5 million of the $246 million of certificates sold
to third parties under the securitization. The Company will repay $37.5 million
to third parties each month for six successive months with a final payment of
$21.0 million in July 2000. The Company's undivided interests in NMG Credit Card
Master Trust will increase by the amount of each repayment. The Company intends
to ultimately finance the repayment of the certificates with a new
securitization during fiscal 2000.
In October 1999, the Company's Board of Directors authorized an increase in the
stock repurchase program to two million shares. In the twenty-six weeks ended
January 29, 2000, the Company repurchased 427,800 shares at an average price of
$23.41 per share. Subsequent to January 29, 2000, the Company repurchased an
additional 187,700 shares at an average price of $21.01 per share; at March 3,
2000, 1,384,500 shares were remaining under this program.
Kate Spade LLC, a majority owned subsidiary of the Company, distributed $2.4
million to its minority shareholders.
The Company believes that it will have sufficient resources to fund its planned
capital growth, operating requirements and the maturities of the securitization
certificates.
YEAR 2000 DATE CONVERSION
The Company has completed its assessment of its hardware and software systems,
including the embedded systems in the Company's buildings, property and
equipment, and has implemented plans to ensure that the operations of such
systems would not be adversely affected by the Year 2000 date change. As of the
date of this report, the Company has not experienced any significant problems
with its hardware and software systems related to the Year 2000 date change.
The Company established a program to communicate with its significant suppliers
and vendors to determine the extent to which the Company's systems and
operations are vulnerable to those third parties' failure to rectify their own
Year 2000 issues. As of the date of this filing, the Company has not experienced
any significant problems with its suppliers and vendors related to the Year 2000
date change. The Company is not presently aware of any significant exposure
arising from potential third party failures. However, there can be no assurance
that the systems of other companies on which the Company's systems or operations
rely have been successfully converted or that any failure of such parties to
achieve Year 2000 compliance would not have an adverse effect on the Company's
results of operations.
8
<PAGE> 11
THE NEIMAN MARCUS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Statements in this report referring to the expected future plans and performance
of the Company are forward-looking statements. Actual future results may differ
materially from such statements. Factors that could affect future performance
include, but are not limited to: changes in economic conditions or consumer
confidence; changes in consumer preferences or fashion trends; delays in
anticipated store openings; adverse weather conditions, particularly during peak
selling seasons; changes in demographic or retail environments; competitive
influences; significant increases in paper, printing and postage costs; and
changes in the Company's relationships with designers and other resources.
9
<PAGE> 12
THE NEIMAN MARCUS GROUP, INC.
PART II
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Stockholders was held on January 21, 2000. The
following matters were voted upon at the meeting:
1. Election of three Class III directors.
VINCENT M. O'REILLY (CLASS A) JOHN R. COOK (CLASS B)
----------------------------- ----------------------
For 24,826,570 For 18,241,907
Against 793,155 Against 963,326
JEAN HEAD SISCO (CLASS B)
----------------------------
For 18,236,364
Against 968,869
2. Approval of an amendment of the Company's 1997 Incentive
Plan to increase the shares reserved for issuance under
the Plan.
For 26,785,806
Against 13,932,992
Abstain 377,423
Non-Voting 3,728,735
3. Ratification of the appointment by the Board of Directors
of Deloitte & Touche LLP as the Company's independent
auditors for the 2000 fiscal year.
For 44,469,151
Against 34,168
Abstain 321,638
4. Stockholder proposal concerning cumulative voting in the
election of directors.
For 10,666,718
Against 29,672,107
Abstain 736,656
Non-voting 3,749,566
10
<PAGE> 13
THE NEIMAN MARCUS GROUP, INC.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
10.1 The Neiman Marcus Group, Inc. 1997 Incentive Plan as amended.
27.1 Financial data schedules.
(b) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K during
the thirteen week period ended January 29, 2000.
11
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE NEIMAN MARCUS GROUP, INC.
SIGNATURE TITLE DATE
- --------- ----- ----
Principal Financial Senior Vice President and March 10, 2000
Officer: Chief Financial Officer
/s/ John R. Cook
- -------------------------
John R. Cook
Principal Accounting Vice President and Controller March 10, 2000
Officer:
/s/ Catherine N. Janowski
- -------------------------
Catherine N. Janowski
12
<PAGE> 1
EXHIBIT 10.1
THE NEIMAN MARCUS GROUP, INC.
1997 INCENTIVE PLAN
1. DEFINED TERMS
Appendix A, which is incorporated by reference, defines the terms used in
the Plan.
2. IN GENERAL
The Plan has been established to advance the interests of the Company by
giving selected Employees, directors and other persons (including both
individuals and entities) who provide services to the Company or its Affiliates
equity-based or cash incentives through the grant of Awards. No Award may be
granted under the Plan after September 1, 2006, but Awards previously granted
may extend beyond that date.
3. ADMINISTRATION
The Administrator has discretionary authority, subject only to the express
provisions of the Plan, to interpret the Plan; determine eligibility for and
grant Awards; determine, modify or waive the terms and conditions of any Award;
prescribe forms, rules and procedures (which it may modify or waive); and
otherwise do all things necessary to carry out the purposes of the Plan. Once an
Award has been communicated in writing to a Participant, the Administrator may
not, without the Participant's consent, alter the terms of the Award so as to
affect adversely the Participant's rights under the Award, unless the
Administrator expressly reserved the right to do so. In the case of any Award
intended to be eligible for the performance-based compensation exception under
Section 162(m)(4)(C) of the Code, the Committee shall exercise its discretion
consistent with qualifying the Award for such exception.
4. SHARES SUBJECT TO THE PLAN
A. A total of 4,900,000 shares of Stock have been reserved for issuance
under the Plan. The following shares of Stock will also be available for future
grants:
(i) shares remaining under an Award that terminates without having been
exercised in full (in the case of an Award requiring exercise by a
Participant for delivery of Stock);
(ii) shares subject to an Award, where cash is delivered to a
Participant in lieu of such shares;
(iii) shares of Restricted Stock that are forfeited to the Company;
(iv) shares of Stock tendered by a Participant as payment upon exercise
of an Award; and
(v) shares of Stock held back by the Administrator, or tendered by a
Participant, in satisfaction of tax withholding requirements.
Stock delivered under the Plan may be authorized but unissued Stock or
previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
B. The maximum number of shares for which Stock Options may be granted to
any person over the life of the Plan shall be 1,000,000. The maximum number of
shares subject to SARs granted to any person over the life of the Plan shall
likewise be 1,000,000. For purposes of the preceding two sentences, the
repricing of a Stock Option or SAR shall be treated as a new grant to the extent
required
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under Section 162(m) of the Code. The aggregate maximum number of shares of
Stock delivered to any person over the life of the Plan pursuant to Awards that
are not Stock Options or SARs shall also be 1,000,000. Subject to these
limitations, each person eligible to participate in the Plan shall be eligible
in any year to receive Awards covering up to the full number of shares then
available for Awards under the Plan.
5. ELIGIBILITY AND PARTICIPATION
The Administrator will select Participants from among those key Employees,
directors and other individuals or entities providing services to the Company or
its Affiliates who, in the opinion of the Administrator, are in a position to
make a significant contribution to the success of the Company and its
Affiliates. Eligibility for ISOs is further limited to those individuals whose
employment status would qualify them for the tax treatment described in Sections
421 and 422 of the Code.
6. RULES APPLICABLE TO AWARDS
a. ALL AWARDS
(1) Performance Objectives. Where rights under an Award depend in
whole or in part on attainment of performance objectives, actions by the Company
that have an effect, however material, on such performance objectives or on the
likelihood that they will be achieved will not be deemed an amendment or
alteration of the Award unless accomplished by a change in the express terms of
the Award or other action that is without substantial consequence except as it
affects the Award.
(2) Alternative Settlement. The Company retains the right at any time
to extinguish rights under an Award in exchange for payment in cash, Stock
(subject to the limitations of Section 4) or other property on such terms as the
Administrator determines, provided the holder of the Award consents to such
exchange.
(3) Transferability Of Awards. Except as the Administrator otherwise
expressly provides, Awards (other than an Award in the form of an outright
transfer of cash or Unrestricted Stock) may not be transferred other than by
will or by the laws of descent and distribution and, during a Participant's
lifetime an Award requiring exercise may be exercised only by the Participant
(or in the event of the Participant's incapacity, the person or persons legally
appointed to act on the Participant's behalf).
(4) Vesting, Etc. The Administrator may determine the time or times at
which an Award will vest (i.e., become free of restrictions) or become
exercisable. Unless the Administrator expressly provides otherwise, an Award
requiring exercise will cease to be exercisable, and all other Awards to the
extent not already fully vested will be forfeited, immediately upon the
cessation (for any reason, including death) of the Participant's employment or
other service relationship with the Company and its Affiliates.
(5) Taxes. The Administrator will make such provision for the
withholding of taxes as it deems necessary. The Administrator may, but need not,
hold back shares from an Award or permit a Participant to tender previously
owned shares in satisfaction of tax withholding requirements.
(6) Dividend Equivalents, Etc. The Administrator may provide for the
payment of amounts in lieu of dividends or other distributions with respect to
Stock subject to an Award.
(7) Rights Limited. Nothing in the Plan shall be construed as giving
any person the right to continued employment or service with the Company or its
Affiliates, nor any rights as a shareholder except as to shares actually issued
under the Plan. The loss of existing or potential profit in Awards will not
constitute an element of damages in the event of termination of employment or
service for any
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<PAGE> 3
reason, even if the termination is in violation of an obligation of the Company
or Affiliate to the Participant.
(8) Section 162(m). In the case of an Award intended to be eligible
for the performance-based compensation exception under Section 162(m)(4)(C) of
the Code, the Plan and such Award shall be construed in a manner consistent with
qualifying the Award for such exception.
b. AWARDS REQUIRING EXERCISE
(1) Time And Manner Of Exercise. Unless the Administrator expressly
provides otherwise, (a) an Award requiring exercise by the holder will not be
deemed to have been exercised until the Administrator receives a written notice
of exercise (in form acceptable to the Administrator) signed by the appropriate
person and accompanied by any payment required under the Award; and (b) if the
Award is exercised by any person other than the Participant, the Administrator
may require satisfactory evidence that the person exercising the Award has the
right to do so.
(2) Payment Of Exercise Price, If Any. Where the exercise of an Award
is to be accompanied by payment, the Administrator may determine the required or
permitted forms of payment either at or after the time of the Award, subject to
the following: (a) unless the Administrator expressly provides otherwise, all
payments will be by cash or check acceptable to the Administrator; and (b) where
shares issued under an Award are part of an original issue of shares, the Award
shall require an exercise price equal to at least the par value of such shares.
(3) Reload Awards. The Administrator may provide that upon the
exercise of an Award through the tender of previously owned shares of Stock, the
Participant or other person exercising the Award will automatically receive a
new Award of like kind covering a number of shares determined by reference to
the number of shares tendered in payment of the exercise price of the first
Award.
c. AWARDS NOT REQUIRING EXERCISE
Awards of Restricted Stock and Unrestricted Stock may be made in return for
either (i) services determined by the Administrator to have a value not less
than the par value of the awarded shares, or (ii) cash or other property having
a value not less than the par value of the awarded shares plus such additional
amounts (if any) as the Administrator may determine payable in such combination
of cash, other property (of any kind) or services as the Administrator may
determine.
7. EFFECT OF CERTAIN TRANSACTIONS
a. MERGERS, ETC.
In the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a dissolution or
liquidation of the Company (a "covered transaction"), all outstanding Awards
requiring exercise will cease to be exercisable, and all other Awards to the
extent not fully vested (including Awards subject to performance conditions not
yet satisfied or determined) will be forfeited, as of the effective time of the
covered transaction. Prior to such time the Administrator may (but need not)
accelerate the vesting or exercisability of any Award or provide for substitute
or replacement awards from the acquiring entity (if any).
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<PAGE> 4
b. CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE STOCK
(1) Basic Antidilution Provisions. In the event of a stock dividend,
stock split or combination of shares, recapitalization or other change in the
Company's capital structure, the Administrator will make appropriate adjustments
to the maximum number of shares that may be delivered under the Plan under
Section 4.a. and to the maximum share limits described in Section 4.b., and will
also make appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
such change.
(2) Certain Other Adjustments. The Administrator may also make
adjustments of the type described in paragraph (1) above to take into account
distributions to common stockholders other than stock dividends or normal cash
dividends, mergers, consolidations, acquisitions, dispositions or similar
corporate transactions, or any other event, if the Administrator determines that
adjustments are appropriate to avoid distortion in the operation of the Plan and
to preserve the value of Awards made hereunder; provided, that no such
adjustment shall be made to the maximum share limits described in Section 4.b.,
or otherwise to an Award intended to be eligible for the performance-based
exception under Section 162(m)(4)(C) of the Code, except to the extent
consistent with that exception.
c. CHANGE OF CONTROL
Notwithstanding anything to the contrary in this Plan and unless
specifically provided otherwise in the Award Agreement at the time an Award is
granted, upon any Change of Control of the Company, any time periods, conditions
or contingencies relating to the exercise or realization of, or lapse of
restrictions under, any Award shall be automatically accelerated or waived so
that the Award may be exercised or realized in full; provided that, in the event
of a Change of Control that is intended to qualify for pooling of interests
accounting, the foregoing provisions of this paragraph shall be of no force and
effect if implementation of such provisions would preclude the Change of Control
from so qualifying and, in such event, the Committee shall take whatever action
it deems appropriate to enable holders of Awards to realize a substantially
similar economic result as would have been realized by acceleration of Awards
but without precluding the Change of Control from qualifying as a pooling of
interests.
A Change of Control will occur for purposes of this Plan:
(i) upon the consummation of any transaction or series of transactions
under which the Company is merged or consolidated with any other company, other
than a merger or consolidation which would result in the shareholders of the
Company immediately prior thereto continuing to own (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities of
the Company, the acquiring entity or such surviving entity outstanding
immediately after such merger or consolidation in substantially the same
proportion such shareholders held the voting securities of the Company
immediately prior to the merger or consolidation;
(ii) if any person or group (as used in section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (other than the Company,
any trustee or other fiduciary holding securities under an employee benefit plan
of the Company, or any company owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of securities of the Company representing
more than 40% of (a) the shares of the Company's Class B Common Stock then
outstanding or (b) the total voting power (other than in the election of
directors) of all securities of the Company then outstanding; or
(iii) if, during any period of twenty-four consecutive months, individuals
who at the beginning of such period constitute the Board of Directors, and any
director whose election or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason (other than death or disability) to constitute at least a majority
thereof; or
(iv) the complete liquidation of the Company or the sale or disposition by
the Company of all or substantially all of the Company's assets, other than a
liquidation of the Company into a wholly-owned subsidiary.
8. CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove any restriction from shares previously delivered under
the Plan until: the Company's counsel has approved all legal matters in
connection with the issuance and delivery of such shares; if the outstanding
Stock is at the time listed on any stock exchange or national market system, the
shares to be delivered have been listed or authorized to be listed on such
exchange or system upon official notice of notice of issuance; and all
conditions of the Award have been satisfied or waived. If the sale of Stock has
not been registered under the Securities Act of 1933, as amended, the Company
may require, as a condition to exercise of the Award, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act. The Company may require that certificates evidencing
Stock issued under the Plan bear an appropriate legend reflecting any
restriction on transfer applicable to such Stock.
9. AMENDMENT AND TERMINATION
Subject to the last sentence of Section 3, the Administrator may at any
time or times amend the Plan or any outstanding Award for any purpose which may
at the time be permitted by law, or may at any time terminate the Plan as to any
further grants of Awards, provided that (except to the extent expressly required
or permitted by the Plan) no such amendment will, without the approval of the
stockholders of the Company, effectuate a change for which stockholder approval
is required in order for the Plan to continue to qualify under Section 422 of
the Code or for Awards to be eligible for the performance-based exception under
Section 162(m)(4)(C) of the Code.
10. NON-LIMITATION OF THE COMPANY'S RIGHTS
The existence of the Plan or the grant of any Award shall not in any way
affect the Company's right to award a person bonuses or other compensation in
addition to Awards under the Plan.
11. GOVERNING LAW
The Plan shall be construed in accordance with the laws of The Commonwealth
of Massachusetts.
A-4
<PAGE> 5
APPENDIX A
DEFINITION OF TERMS
The following terms, when used in the Plan, shall have the meanings and be
subject to the provisions set forth below:
"Administrator": The Committee, if one has been appointed; otherwise the
Board.
"Affiliate": Any corporation or other entity owning, directly or
indirectly, 50% or more of the outstanding Stock of the Company, or in which the
Company or any such corporation or other entity owns, directly or indirectly,
50% of the outstanding capital stock (determined by aggregate voting rights) or
other voting interests.
"Award": Any of the following:
(i) Options ("Stock Options") entitling the recipient to acquire
shares of Stock upon payment of the exercise price. Each Stock Option
(except as otherwise expressly provided by the Committee consistent with
continued qualification of the Stock Option as a performance-based award
for purposes of Section 162(m) of the Code, or unless the Committee
expressly determines that such Stock Option is not subject to Section
162(m) of the Code or that the Stock Option is not intended to qualify for
the performance-based exception under Section 162(m) of the Code), will
have an exercise price not less than the fair market value of the Stock
subject to the option, determined as of the date of grant, except that an
ISO granted to an Employee described in Section 422(b)(6) of the Code will
have an exercise price not less than 110% of such fair market value. The
Administrator will determine the medium in which the exercise price is to
be paid, the duration of the option, the time or times at which an option
will become exercisable, provisions for continuation (if any) of option
rights following termination of the Participant's employment with the
Company and its Affiliates, and all other terms of the Option. No Stock
Option awarded under the Plan will be an ISO unless the Administrator
expressly provides for ISO treatment.
(ii) Rights ("SARs") entitling the holder upon exercise to receive
cash or Stock, as the Administrator determines, equal to a function
(determined by the Administrator using such factors as it deems
appropriate) of the amount by which the Stock has appreciated in value
since the date of the Award.
(iii) Stock subject to restrictions ("Restricted Stock") under the
Plan requiring that the Stock be redelivered to the Company if specified
conditions are not satisfied. The conditions to be satisfied in connection
with any Award of Restricted Stock, the terms on which such Stock must be
redelivered to the Company, the purchase price of such Stock, and all other
terms shall be determined by the Administrator.
(iv) Stock not subject to any restrictions under the Plan
("Unrestricted Stock").
(v) A promise to deliver Stock or other securities in the future on
such terms and conditions as the Administrator determines.
(vi) Securities (other than Stock Options) that are convertible into
or exchangeable for Stock on such terms and conditions as the Administrator
determines.
A-5
<PAGE> 6
(vii) Cash bonuses tied to performance criteria as described at
(viii) below ("Cash Performance Awards").
(viii) Awards described in any of (i) through (vii) above where the
right to exercisability, vesting or full enjoyment of the Award is
conditioned in whole or in part on the satisfaction of specified
performance criteria ("Performance Awards"). The Committee in its
discretion may grant Performance Awards that are intended to qualify for
the performance-based compensation exception under Section 162(m)(4)(C) of
the Code and Performance Awards that are not intended so to qualify. No
more than $2,000,000 may be paid to any individual with respect to any Cash
Performance Award. In applying the limitation of the preceding sentence:
(A) multiple Cash Performance Awards to the same individual that are
determined by reference to performance periods of one year or less ending
with or within the same fiscal year of the Company shall be subject in the
aggregate to one $2,000,000 limit, and (B) multiple Cash Performance Awards
to the same individual that are determined by reference to one or more
multi-year performance periods ending in the same fiscal year of the
Company shall be subject in the aggregate to a separate limit of
$2,000,000. With respect to any Performance Award other than a Cash
Performance Award, Stock Option or SAR, the maximum award opportunity shall
be 1,000,000 shares or their equivalent value in cash, subject to the
limitations of Section 4.b. For the avoidance of doubt, any Performance
Award of a type described in (i) through (vi) above shall be treated for
purposes of this paragraph as a Performance Award that is not a Cash
Performance Award, even if payment is made in cash.
In the case of a Performance Award intended to qualify as
performance-based for the purposes of Section 162(m) of the Code, the
Committee shall in writing preestablish a specific performance goal (based
solely on one or more qualified performance criteria) no later than 90 days
after the commencement of the period of service to which the performance
relates (or at such earlier time as is required to qualify the award as
performance-based under Code Section 162(m)(4)(C)). For purposes of the
Plan, a qualified performance criterion is any of the following: (1)
earnings or earnings per share (whether on a pre-tax, after-tax,
operational or other basis), (2) return on equity, (3) return on assets,
(4) revenues, (5) sales, (6) expenses, (7) one or more operating ratios,
(8) stock price, (9) stockholder return, (10) market share, (11) cash flow,
(12) inventory levels or inventory turn, (13) capital expenditures, (14)
net borrowing, debt leverage levels or credit quality, (15) the
accomplishment of mergers, acquisitions, dispositions, public offerings or
similar extraordinary business transactions or (16) any combination of the
foregoing. The performance goals selected in any case need not be
applicable across the Company, but may be particular to an individual's
function or business unit. Prior to payment of any Performance Award
intended to qualify as performance-based under Section 162(m)(4)(C) of the
Code, the Committee shall certify whether the performance goal has been
attained and such determination shall be final and conclusive. If the
performance goal is not attained, no other Award shall be provided in
substitution of the Performance Award.
(ix) Grants of cash, or loans, made in connection with other Awards
in order to help defray in whole or in part the economic cost (including
tax cost) of the Award to the Participant. The terms of any such grant or
loan shall be determined by the Administrator.
Awards may be combined in the Administrator's discretion.
"Board": The Board of Directors of the Company.
"Code": The U.S. Internal Revenue Code of 1986, as from time to time
amended and in effect.
A-6
<PAGE> 7
"Committee": A committee of the Board comprised solely of two or more
outside directors within the meaning of Section 162(m) of the Code. The
Committee may delegate ministerial tasks to such persons (including Employees)
as it deems appropriate.
"Company": The Neiman Marcus Group, Inc.
"Employee": Any person who is employed by the Company or an Affiliate.
"ISO": A Stock Option intended to be an "incentive stock option" within
the meaning of Section 422 of the Code.
"Participant": An Employee, director or other person providing services to
the Company or its Affiliates who is granted an Award under the Plan.
"Plan": The Neiman Marcus Group, Inc. 1997 Incentive Plan as from time to
time amended and in effect.
"Stock": Common Stock of the Company, par value $.01 per share.
A-7
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> JUL-29-2000 JUL-31-1999 JUL-31-1999 JUL-31-1999
<PERIOD-END> JAN-29-2000 JUL-31-1999 JAN-30-1999 OCT-31-1998
<CASH> 58,179 29,191 80,600 24,661
<SECURITIES> 241,923 133,151 203,282 180,504
<RECEIVABLES> 69,586 61,617 60,614 61,392
<ALLOWANCES> 2,300 2,300 1,700 1,800
<INVENTORY> 538,138 545,252 512,410 661,776
<CURRENT-ASSETS> 975,848 835,268 939,493 1,004,324
<PP&E> 942,067 899,275 865,253 842,797
<DEPRECIATION> 419,459 385,836 359,797 347,823
<TOTAL-ASSETS> 1,655,172 1,512,290 1,568,922 1,622,875
<CURRENT-LIABILITIES> 441,036 380,180 408,571 430,717
<BONDS> 284,651 274,640 344,628 409,622
0 0 0 0
0 0 0 0
<COMMON> 488 490 490 490
<OTHER-SE> 816,863 745,793 706,849 675,430
<TOTAL-LIABILITY-AND-EQUITY> 1,655,172 1,512,290 1,568,922 1,622,875
<SALES> 1,567,949 2,553,421 1,376,267 587,113
<TOTAL-REVENUES> 1,567,949 2,553,421 1,376,267 587,113
<CGS> 1,027,280 1,738,511 930,642 383,888
<TOTAL-COSTS> 1,423,804 2,370,807 1,270,596 539,055
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 1,549 2,366 894 520
<INTEREST-EXPENSE> 12,789 24,972 13,135 6,136
<INCOME-PRETAX> 131,356 157,642 92,536 41,922
<INCOME-TAX> 49,915 61,480 36,089 16,350
<INCOME-CONTINUING> 78,699 94,852 56,779 25,572
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 78,699 94,852 56,779 25,572
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