EXHIBIT 13.1
THE NEIMAN MARCUS GROUP, INC.
1994 ANNUAL REPORT
OUR MISSION
Our mission is to be the leading specialty retailer of fine merchandise to
discerning, fashion-conscious customers from around the world. We will strive
to exceed customer expectations for service, quality and value as we build upon
our long-standing tradition of excellence. As we pursue this mission, we are
guided by the following important values. * We will maintain an uncompromising
commitment to quality and the highest levels of customer service in all of our
businesses and endeavors. * We will adhere to the highest levels of integrity
and ethical standards in dealing with all constituencies, including customers,
suppliers and employees. * We will aspire to achieve a leadership position in
every one of our operating businesses. * Our management decisions will
emphasize long-term benefits to the value of our businesses, not short-term
gains. * We will employ capable, motivated people; follow sound management
practices; utilize new technology efficiently; and reinvest earnings and
additional capital as required to grow our businesses and maintain the
corporation's financial health. * We will strive to maximize the potential of
all employees and maintain a professionally challenging work environment. * We
will be socially and environmentally responsible and support worthwhile causes,
especially in those communities in which we operate.
THE NEIMAN MARCUS GROUP
A collection of distinctive specialty retailers serving discerning
customers with a goal of exceeding their expectations. NEIMAN MARCUS. A
world-renowned franchise with a long tradition of leadership in high fashion
specialty retailing through 27 stores nationwide. NM DIRECT. A state-of-the-art
direct marketing operation offering style and convenience through the pages of
the Neiman Marcus and Horchow specialty catalogues. BERGDORF GOODMAN AND
BERGDORF GOODMAN MEN. Stores known for elegance, sophistication and exclusive
designer fashion at the world's preeminent retail location - Fifth Avenue and
58th Street in New York City. CONTEMPO CASUALS. A group of 247 contemporary
shops offering fashion-forward apparel and accessories to young women across
the country.
TABLE OF CONTENTS
2 Letter to Shareholders 5 At-A-Glance 6 Neiman Marcus Stores 11 NM Direct
12 Bergdorf Goodman 15 Contempo Casuals 16 Financial Section
36 Shareholder Information 37 Directors and Officers
SHAREHOLDER LETTER
[PHOTO - SEE CAPTION BELOW]
THE NEIMAN MARCUS GROUP REMAINS COMMITTED TO MEETING THE NEEDS OF THE UPSCALE
CUSTOMER
The businesses that comprise The Neiman Marcus Group turned in mixed
performances in fiscal 1994. While we are pleased with the continuing strong
results at Neiman Marcus Stores and NM Direct and are satisfied that lower
earnings in 1994 at Bergdorf Goodman were the result of several unusual
factors, we are very disappointed with the large operating loss at Contempo
Casuals. However, we are optimistic that major restructuring activities at
Contempo, which necessitated a $48.4 million charge in 1994, should result in
improved future performance. This non-recurring factor, along with a positive
outlook for earnings growth at Neiman Marcus, NM Direct and Bergdorf Goodman,
gives us confidence that The Neiman Marcus Group can achieve significant
profit improvement in the years ahead. * Total revenues for The Neiman Marcus
Group in fiscal 1994 were $2.09 billion, a 3.8% increase over fiscal 1993.
Comparable revenues increased 4.4%. Prior to the $48.4 million charge
associated with restructuring activities at Contempo Casuals, operating
earnings were $107.7 million, approximately the same as operating earnings of
$108.8 million in the prior year, despite a significantly larger operating loss
in 1994 at Contempo. Including the restructuring charge, The Neiman Marcus
Group had operating earnings of $59.3 million in 1994. * Net earnings in 1994
were $15.9 million, down from $47.4 million in 1993. After preferred
dividends, the net loss applicable to common shareholders for the year was 35
cents per share, compared to net earnings applicable to common shareholders of
48 cents per share in 1993. The restructuring charge reduced 1994 net earnings
by $28.1 million, or 74 cents per common share.
Robert J. Tarr, Jr., President and Chief Executive Officer (left)
and Richard A. Smith, Chairman
2
* Clearly, a turnaround at Contempo Casuals is the most serious challenge
facing The Neiman Marcus Group. A lack of new fashion trends, reduced mall
traffic and merchandising miscues have all impacted this business over the
past several years. In 1994, Contempo had an operating loss, prior to the
restructuring charge, of $37.0 million, $9.5 million of which was attributable
to Pastille, a new retail concept Contempo had been testing. In 1993, the
Contempo Division incurred an operating loss of $14.1 million, $10.5 million of
which was attributable to Pastille. Fiscal 1994 revenues at the Contempo
Division declined 13.1% to $303.4 million, with comparable revenues decreasing
12.5%. * A number of steps were taken over the past year to reverse this
deterioration in Contempo's operating performance, including the closing of all
39 Pastille stores and 40 under-performing Contempo stores as well as other
actions designed to reduce ongoing expenses and return the business to
profitability. These actions included the closing of Contempo's Hong Kong
buying office and the elimination of its in-house production department. The
majority of these cost-cutting measures were completed by the end of fiscal
1994. * The losses at Contempo over the past few years have masked a very
strong performance trend at the Neiman Marcus Division. This division - which
includes Neiman Marcus Stores and NM Direct - achieved exceptional results in
1994, with operating earnings rising 21.1% to $148.2 million. This represents
the third consecutive year of earnings improvement in excess of 20% for the
Neiman Marcus Division. Operating margins also improved in 1994 to 9.5% from
8.5% in 1993. Total revenues grew 7.7% to $1.56 billion, with revenues at
Neiman Marcus Stores increasing 7.6% and revenues at NM Direct rising 8.2%.
DISTINCTIVE MERCHANDISE AND UNEQUALLED CUSTOMER SERVICE ARE THE CORNERSTONES
OF OUR STRATEGY
* The improvement at Neiman Marcus Stores is the result of a number of
strategic initiatives implemented over the past few years, including extensive
store remodelings, an increased level of in-store events and advertising
activity, an expansion of assortments in the career and casual merchandise
categories, and an increased emphasis on opening price point merchandise. These
efforts, designed to attract new customers, are expanding the Neiman Marcus
customer base while we continue to provide the same exclusive merchandise and
unsurpassed service to our core clientele. Year-over-year increases in
transaction volume as well as steady growth in average sale amounts indicate
that we are succeeding in this objective. Higher finance charge income due to
a change in the credit card terms offered to Neiman Marcus customers has also
contributed to the division's improved performance. * At NM Direct, an increase
in the number of transactions, an improved operating expense rate and higher
gross margins culminated in significantly higher operating earnings for the
year. * Revenues at Bergdorf Goodman rose 4.7% to $229.5 million in 1994,
with both the original Bergdorf Goodman store and Bergdorf Goodman Men
achieving respectable gains. However, a higher level of markdowns and a charge
for the LIFO inventory accounting method caused operating earnings to decline
to $10.3 million from $12.8 million last year. The elevated markdown level was
due in part to reduced traffic at both stores, reflecting the opening of a
major new competitor
3
in the fall and poor weather conditions in the winter and early spring.
However, business rebounded toward the end of the year, and we are confident
that Bergdorf's profit margins will improve in 1995. * Future expansion plans
for The Neiman Marcus Group include three new Neiman Marcus stores, the first
of which is scheduled to open in Short Hills, New Jersey in August 1995. This
will be followed by openings of new stores in King of Prussia, Pennsylvania and
Paramus, New Jersey in calendar 1996. * As a result of this new store
construction and continuing renovation work, capital expenditures will increase
in 1995 to about $100 million. Capital expenditures in 1994 totaled $65.1
million, $15 million of which was used to expand NM Direct's telemarketing and
fulfillment facility. * The bulk of our major store renovation program is now
behind us, although ongoing remodeling projects will always be required to
ensure that our stores remain fresh, competitive and efficient. Major
renovations of Neiman Marcus stores were completed during 1994 in San Francisco
and Boston. We will conclude the majority of planned remodeling work in Neiman
Marcus' NorthPark store in Dallas in 1995, along with major projects in
Westchester, New York and Northbrook, just outside Chicago. * Several senior
management changes occurred during the year. In May, Burton Tansky - previously
chairman and chief executive officer of Bergdorf Goodman - became chairman and
chief executive officer of Neiman Marcus Stores. Stephen C. Elkin - formerly
president and chief operating officer at Bergdorf Goodman - was promoted to
chairman and chief executive officer of Bergdorf Goodman. Dawn Mello, who had
been creative director of Guccio Gucci SpA, returned to Bergdorf Goodman as
president, a post she held prior to joining Gucci in 1989. Our operating
management teams hold a strong balance of merchandising, operational and
financial skills necessary to develop and implement the strategies that will
yield continued growth. * Since its formation seven years ago, The Neiman
Marcus Group has invested nearly $500 million in store expansion and renovation
efforts and the building of a strong infrastructure. While our efforts have led
to a very strong rebound at Neiman Marcus Stores and NM Direct, a number of
factors have hampered progress at Bergdorf Goodman and Contempo Casuals. At
Bergdorf Goodman, the men's store, opened in 1990, has taken longer than
anticipated to achieve the volume necessary to reach profitability. At Contempo
Casuals, a general downturn in the junior women's market and unsuccessful
merchandising strategies have hurt profits over the past several years.
However, we are on the way to overcoming these setbacks. Bergdorf Goodman Men
should achieve profitability in 1995, and Contempo's performance is expected
to improve significantly. * We have chosen to feature our operating management
teams in this year's annual report. With the continued efforts of these
executives and all those who work with them, we are confident that The Neiman
Marcus Group is well-positioned to generate a meaningful return on the
significant capital that has been invested over the past seven years.
/s/ RICHARD A. SMITH /s/ ROBERT J. TARR, JR.
Richard A. Smith Robert J. Tarr, Jr.
Chairman President and
Chief Executive Officer
September 30, 1994
4
AT-A-GLANCE
Operating
Earnings
Revenues (Loss)
- - ----------------------------------------------------------------
1994 $ 1,559,970,000 $ 148,205,000
1993 $ 1,448,725,000 $ 122,441,000
[NEIMAN-MARCUS 1992 $ 1,285,832,000 $ 84,703,000
LOGO] 1991 $ 1,208,459,000 $ 60,520,000
1990 $ 1,226,420,000 $ 61,064,000
Stores
Year Gross Year Gross
Operations Store Operations Store
Locations Began Sq. Feet Locations Began Sq. Feet
- - ------------------------------------------------------------------------------------------------------------
Dallas (Downtown) 1907 269,000 Oak Brook, Illinois 1981 119,000
Dallas (NorthPark) 1965 218,000 San Diego 1981 106,000
Houston (Galleria) 1969 206,000 Fort Lauderdale 1982 92,000
Bal Harbour, Florida 1971 94,000 San Francisco 1982 195,000
Atlanta 1972 154,000 Houston (Town & Country) 1983 153,000
St. Louis 1974 143,000 Chicago (Michigan Avenue) 1983 188,000
Northbrook, Illinois 1976 143,000 Boston 1984 108,000
Fort Worth 1977 119,000 Palo Alto, California 1985 120,000
Washington, D.C. 1977 130,000 McLean, Virginia 1989 130,000
Newport Beach, California 1978 124,000 Denver 1990 90,000
Beverly Hills 1979 173,000 Minneapolis 1991 122,000
Dallas (Prestonwood) 1979 123,000 Scottsdale, Arizona 1991 115,000
Westchester, New York 1980 137,000 Troy, Michigan 1992 157,000
Las Vegas 1981 104,000 ---------
Total 3,832,000
- - -----------------------------------------------------------------------------------------------------------
<Capton>
Operating
Earnings
Revenues (Loss)
- - ----------------------------------------------------------------
1994 $ 229,491,000 $ 10,327,000
[BERGDORF 1993 $ 219,100,000 $ 12,785,000
GOODMAN 1992 $ 199,113,000 $ 7,699,000
LOGO] 1991 $ 198,711,000 $ 3,909,000
1990 $ 187,268,000 $ 21,865,000
Year Gross
Operations Store
Locations Began Sq. Feet
----------------------------------------------------
New York City 1901 250,000
New York City (Men) 1990 66,000
-------
Total 316,000
<Capton>
Operating
Earnings
Revenues (Loss)
- - ----------------------------------------------------------------
1994 $ 303,445,000 ($ 37,009,000)*
[CONTEMPO 1993 $ 349,089,000 ($ 14,111,000)*
LOGO] 1992 $ 323,409,000 ($ 9,466,000)*
1991 $ 337,630,000 $ 18,668,000*
1990 $ 274,923,000 $ 17,082,000
Total Gross Total Gross
Number Store Number Store
Locations of Stores Sq. Feet Locations of Stores Sq. Feet
- - ----------------------------------------------------------------------------------------------------------------------
Arizona 5 21,000 Missouri 3 10,000
California 66 269,000 Nevada 4 17,000
Colorado 6 23,000 New Hampshire 1 3,000
Connecticut 7 28,000 New Jersey 10 40,000
Delaware 1 5,000 New Mexico 1 4,000
Florida 24 98,000 New York 14 57,000
Georgia 3 11,000 North Carolina 2 8,000
Hawaii 5 20,000 Ohio 4 16,000
Illinois 16 68,000 Oklahoma 1 4,000
Indiana 1 4,000 Pennsylvania 7 27,000
Kentucky 1 5,000 Puerto Rico 2 6,000
Louisiana 3 11,000 Rhode Island 1 4,000
Maine 1 4,000 Tennessee 1 4,000
Maryland 4 16,000 Texas 17 66,000
Massachusetts 9 34,000 Utah 3 13,000
Michigan 12 47,000 Virginia 3 12,000
Minnesota 6 22,000 Wisconsin 3 13,000
------------------
Total 247 990,000
<FN>
* Includes operating losses of $9.5 million, $10.5 million, $5.9 million and $5.1 million relating to the development
of Pastille in 1994, 1993, 1992 and 1991, respectively. 1994 figures are prior to the $48.4 million restructuring
charge.
5
NEIMAN MARCUS STORES
By continuing merchandising and operating initiatives to expand the
customer base while meeting the needs of its core clientele, Neiman Marcus
Stores had another outstanding year in fiscal 1994. Comparable store revenues
grew 7.6%, with the women's designer sportswear and men's apparel categories
leading the improvement. Both the number of transactions and the average sale
amount for the year increased, evidence of a growing clientele and successful
merchandising strategies. * The Neiman Marcus Division, which includes Neiman
Marcus Stores and NM Direct, had revenues of $1.56 billion in 1994, up 7.7% from
the previous year. The division's operating earnings increased 21.1% to $148.2
million in 1994. * The improvement achieved by Neiman Marcus Stores over
MEETING THE NEEDS OF NEW AND EXISTING CUSTOMERS WITH THE ULTIMATE SHOPPING
EXPERIENCE
the past several years is due to a number of factors, including merchandising
modifications, higher finance charge income, increased advertising and
promotional activities, and an extensive store renovation and expansion
program. * The merchandising strategy refinements implemented at Neiman
Marcus Stores over the past two years are designed to attract a new, younger
customer while simultaneously fulfilling a broader range of the wardrobe needs
of Neiman Marcus core customers. These refinements include an expansion of
assortments offered at the Neiman Marcus opening price points as well as a
stronger presence in the career and casual merchandise categories. Inventory
levels in these categories have increased, and the merchandise is now more
prominently featured within the stores. For example, over the past year, NM
Workshop boutiques were installed in a number of Neiman Marcus stores to
specifically address the wardrobing needs of the career customer.
* Importantly, these
6
modifications have been implemented without abandoning the commitment to high
end, upscale merchandise that is the Neiman Marcus trademark. Within a
difficult retail environment when many competitors have reduced their
commitment to designer merchandise, Neiman Marcus Stores remains strongly
positioned as the leading national retailer of upscale apparel for men and
women. * Merchandising efforts have been supported by an increased calendar of
in-store events, including trunk shows and personal appearances by major
designers -- important marketing tools for Neiman Marcus Stores. * A 12-page
advertising insert in Vogue proved to be another successful marketing vehicle
for Neiman Marcus Stores. Customer response was extremely positive, and similar
inserts are planned in 1995 with such leading magazines as Harper's Bazaar, W
and Vogue. * Neiman Marcus Stores continued its successful designer catalogue
ALWAYS THE DESTINATION FOR THE FINEST IN EXCLUSIVE FASHION, QUALITY AND
CUSTOMER SERVICE
mailings, this year producing exclusive catalogues in partnership with Donna
Karan, Calvin Klein and Giorgio Armani that featured merchandise available only
at Neiman Marcus and Bergdorf Goodman. Response rates were very strong,
illustrating the consumer appeal of exclusive merchandise and the importance of
maintaining strong relationships with major resources. * Remodeling work was
completed in 1994 at the Neiman Marcus stores in Boston and San Francisco. In
1995, stores in Westchester, New York; NorthPark in Dallas; and Northbrook,
outside Chicago, will be undergoing renovation. * Construction has begun on a
new Neiman Marcus store in Short Hills, New Jersey, which is scheduled to open
in August 1995. New stores are also planned in King of Prussia, Pennsylvania
near Philadelphia and Paramus, New Jersey, with both openings scheduled for
1996.
7
[PHOTO]
Neiman Marcus Stores: (left page) Tom Stangle, Senior Vice President, Stores *
Steve Harding, Senior Vice President, Chief Financial Officer * Craig Innes,
Senior Vice President, Human Resources * Leonard Utz, Senior Vice President,
Stores * Tom Lehnen, Senior Vice President, Properties & New Store
Development * Gerald A. Sampson, President and Chief Operating Officer
[PHOTO]
(right page) Janet Gurwitch, Executive Vice President, Women's Merchandising *
Burton M. Tansky, Chairman and Chief Executive Officer * Sharen Turney,
Senior Vice President, General Merchandise Manager * Robert Ackerman, Senior
Vice President, General Merchandise Manager, Butch Mullins, Senior Vice
President, General Merchandise Manager * Ann Stordahl, Senior Vice President,
General Merchandise Manager * Joe Feczko, Senior Vice President, Creative
Services
[PHOTO]
NM Direct: Larry Jenkins, Senior Vice President -- Finance and Operations
* Jessica Weiland, Vice President, Marketing & Circulation, B.D. Feiwus,
President and Chief Executive Officer * Pat Morgan-McEvoy, Senior Vice
President/General Merchandise Manager * Jo Marie Lilly, Vice President,
Advertising & Creative Services
NM DIRECT
Providing customers with a unique array of apparel, home furnishings and
gift items within the convenience of the home, NM Direct continued its strong
performance in 1994. Catalogues are distributed in a variety of formats, with
titles including NM by Mail, The Horchow Collection, Horchow Home, Trifles,
Grand Finale and Pastille, which has demonstrated potential for success as a
mail order brand. * Approximately 90 catalogues were mailed during the year with
an average circulation of 1.2 million households per book. Strong revenue
growth, along with cost containment efforts, yielded a significant increase in
operating earnings for NM Direct in 1994. * As part of an effort to explore new
avenues of distribution, NM Direct is participating in Catalog 1, an electronic
BUILDING THE CORE BUSINESS WITH INNOVATIVE MERCHANDISING, EXPLORING NEW
DIRECTIONS FOR GROWTH
retailing joint venture of Time Warner and Spiegel, to test home shopping
distribution of merchandise currently featured in the Horchow, Pastille and
Trifles catalogues. * NM Direct is also considering international opportunities
and completed several major mailings this past year to prospective customers in
the Mexico City area to test the potential of the Mexican market. * NM Direct's
telemarketing and fulfillment facility in Las Colinas, Texas underwent a major
250,000 square-foot expansion and related automated system upgrade over the
past year. Completed this summer at a cost of approximately $15 million, this
expansion increased capacity by more than 50% and solidifies NM Direct's
position as one of the country's most technologically advanced direct marketing
operations. * A small increase in catalogue circulation and page count is
planned for fiscal 1995, as NM Direct continues to build its core business
while experimenting with new growth opportunities.
11
BERGDORF GOODMAN
As arbiters of fashion and customer service standards, Bergdorf Goodman
and Bergdorf Goodman Men are unsurpassed. The stores maintain their premier
positions by providing distinctive, exclusive merchandise to a discerning
clientele in an elegant, service-oriented atmosphere. * Operating results at
Bergdorf Goodman in 1994 were affected by difficult winter weather conditions in
the New York City area as well as the short-term impact of the opening of a
major competitor several blocks from Bergdorf's Fifth Avenue location. These two
factors temporarily restricted store traffic during several important months,
leading to increased markdowns and reduced gross margins. As a result, operating
earnings for the year were $10.3 million, down from $12.8 million in 1993.
Revenues at Bergdorf Goodman rose 4.7% to $229.5 million in 1994, with both the
original store and Bergdorf Goodman Men achieving gains. Importantly, the
number of transactions rose in both stores, evidence of an expanding customer
base, with particular strength in women's sportswear and coats and men's
clothing. * Bergdorf Goodman Men had a modest loss in fiscal 1994 on revenues of
approximately $40 million. That loss has narrowed each year since
EXCEEDING CUSTOMER EXPECTATIONS WITH EXQUISITE DESIGNER MERCHANDISE AND
UNSURPASSED SERVICE
the store's opening in 1990. With the continuation of its current volume growth
trend, Bergdorf Goodman Men should become profitable in 1995. * Renovation
efforts over the past several years have revitalized the original Bergdorf
Goodman store, allocating space to more profitable merchandise categories and
developing sophisticated boutiques to better showcase distinctive designer
merchandise. Ongoing remodeling activity includes the renovation of 7,500
square feet on the store's sixth floor. Work on that floor - which will be
coined "The Sixth Sense" - will conclude in the spring of 1995. The updated
space will showcase designer sportswear, coats, dresses and eveningwear as well
as merchandise specifically geared toward the career customer. * Bergdorf
Goodman and Bergdorf Goodman Men will continue their successful advertising
programs and implement expanded special events schedules in 1995 to attract new
customers and increase volume. * Bergdorf Goodman's mail order operation
remains an important sales and marketing vehicle, with approximately 15
catalogues distributed annually.
12
[PHOTO]
Bergdorf Goodman: Marita O'Dea Glodt, Senior Vice President, Human Resources
* Joseph M. Boitano, Senior Vice President, General Merchandise Manager * Dawn
Mello, President * Stephen C. Elkin, Chairman and Chief Executive Officer *
Vicki Haupt, Senior Vice President, General Merchandise Manager * Carl Barbato,
Senior Vice President, Store Manager
[PHOTO]
Contempo Casuals: Robert Kelleher, President and Chief Operating Officer
* Melanie Cox, Vice President, General Merchandise Manager
CONTEMPO CASUALS
Continued weakness at the Contempo Casuals Division over the past
several years necessitated a $48.4 million charge in 1994 to cover restructuring
activities designed to return Contempo to profitability. * Comparable revenues
at the Contempo Casuals stores decreased 12.5% in fiscal 1994, the third
consecutive year of comparable store sales declines. Total revenues were $303.4
million, down 13.1% from 1993. The Contempo Division had an operating loss,
prior to the $48.4 million restructuring charge, of $37.0 million in 1994,
compared to an operating loss of $14.1 million in 1993. These results include
operating losses, prior to the restructuring charge, of $9.5 million in 1994 and
$10.5 million in 1993 attributable to Pastille, the retail concept which
Contempo had been testing. * Contempo's operating loss for the year was
exacerbated by lower gross margins due to increased markdown activity -
particularly in the fourth quarter - to purge inventories and position the
business for better results in 1995. * Restructuring activities completed by
FILLING THE WARDROBE NEEDS OF YOUNG, ACTIVE CUSTOMERS WITH THE VERY LATEST IN
TREND-SETTING FASHION
year-end include the closing of 40 under-performing Contempo stores as well as
the shutdown of the 39-store Pastille retail business. A number of other steps
were taken to reduce ongoing operating expenses, including the closure of
Contempo's Hong Kong buying office and the elimination of its in-house
production department. Efforts to further reduce operating expenses will
continue in fiscal 1995. * In addition, Contempo will implement a more focused
merchandising approach emphasizing better assortment planning and inventory
management. An everyday fair pricing policy has been instituted to improve
regular price sales and generate higher gross margins. * Capital spending at
Contempo in 1995 will be limited to modest expenditures designed to enhance
the stores' image, increase operating efficiencies and augment customer
service efforts. * The restructuring activities, combined with new
merchandising strategies, should help Contempo improve its operating
performance in 1995.
15
TABLE OF CONTENTS
17 Management's Discussion and Analysis 21 Consolidated Statements of
Operations 22 Consolidated Balance Sheets 24 Consolidated Statements of Cash
Flows 25 Consolidated Statements of Common Shareholders' Equity
26 Notes to Consolidated Financial Statements 34 Independent Auditors' Report
34 Statement of Management's Responsibility for Financial Statements
35 Selected Financial Data
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Neiman Marcus Group, Inc.
OPERATING RESULTS
The following summarizes the Company's revenues and operating earnings by
business segment:
Years ended
-----------------------------------
Revenues July 30, July 31, August 1,
(In millions) 1994 1993 1992
- - ----------------------------------------------------------------------------
Neiman Marcus Division $ 1,560.0 $ 1,448.7 $ 1,285.8
Bergdorf Goodman 229.5 219.1 199.1
Contempo Casuals(1) 303.4 349.1 323.4
-----------------------------------
Total $ 2,092.9 $ 2,016.9 $ 1,808.3
============================================================================
Years ended
---------------------------------
Operating Earnings (Loss) July 30, July 31, August 1,
(in millions) 1994 1993 1992
- - -----------------------------------------------------------------------------
Neiman Marcus Division $148.2 $ 122.4 $ 84.7
Bergdorf Goodman 10.3 12.8 7.7
Contempo Casuals(2) (37.0) (14.1) (9.5)
Contempo Casuals Restructuring (48.4) - -
Corporate expenses (13.8) (12.3) (13.5)
---------------------------------
Total $ 59.3 $ 108.8 $ 69.4
============================================================================
<FN>
(1) Includes Pastille revenues of $26.4 million in 1994, $29.7 million in 1993
and $6.9 million in 1992.
(2) Includes Pastille operating losses of $9.5 million before the
restructuring charge in 1994, $10.5 million in 1993 and $5.9 million in
1992.
Neiman Marcus Division
Operating earnings of the Neiman Marcus Division, which includes Neiman
Marcus Stores and NM Direct, increased $25.8 million, or 21.1%, in 1994, and
operating margins improved to 9.5% compared to 8.5% in 1993. Higher trans-
action volume, an increase in the average selling price and higher finance
charge income at both Neiman Marcus Stores and NM Direct contributed to the
increase in operating earnings.
Bergdorf Goodman
Operating earnings at Bergdorf Goodman declined $2.5 million, or 19.2%, in
1994. Operating margins declined to 4.5% in 1994 from 5.8% in 1993,
principally due to the effect of lower gross margin rates from the impact of
the LIFO accounting method and increased markdowns. Revenues at Bergdorf
Goodman increased 4.7% over 1993, with both the original Bergdorf Goodman
store and Bergdorf Goodman Men contributing to the improvement.
Contempo Casuals
A 13.1% revenue decline at the Contempo Casuals Division was attributable to
store closings coupled with comparable store revenue declines of 12.5%, both of
which negatively impacted operating performance. Higher markdowns contributed to
gross margin decline and continued to be the most significant contributor to the
weak operating performance of Contempo Casuals. In April 1994, the Company
announced a restructuring of the Contempo Casuals Division and recorded a
$48.4 million pre-tax restructuring charge related to the Company's decision to
close 40 under-performing Contempo stores and all of the Pastille stores, a
retail concept which Contempo had been testing. Pastille incurred a $9.5
million operating loss in 1994 prior to the restructuring charge.
OPERATING RESULTS: 1994 VERSUS 1993
Revenues in fiscal 1994 increased 3.8% to $2.09 billion from $2.02 billion in
fiscal 1993, benefiting from comparable revenue increases at the Neiman Marcus
Division and Bergdorf Goodman, partially offset by revenue decreases at Contempo
Casuals.
Cost of goods sold was $1.47 billion in 1994, a 4.9% increase over 1993,
primarily due to an increase in merchandise sold. As a percentage of revenues,
cost of goods sold increased to 70.0% in 1994 from 69.2% in 1993.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Neiman Marcus Group, Inc.
Neiman Marcus Stores achieved improved gross margins through higher regular
price sell-throughs and increased transaction volume. The overall decline in
gross margins was primarily attributable to the decrease in margins at
Contempo Casuals and Pastille due to higher markdowns. The LIFO method of
accounting had the effect of decreasing gross margins by $2.4 million in 1994
and increasing gross margins by $3.7 million in 1993.
The $48.4 million pre-tax restructuring charge is the result of an evaluation
of the operating performance of the Contempo Casuals Division. Based upon
this evaluation, the Company decided to close 40 under-performing Contempo
Casuals retail stores and all of the Pastille retail stores. The
restructuring charge for Contempo Casuals and Pastille includes the following
components:
(in millions) Contempo Pastille Total
- - -----------------------------------------------------------------------
Lease termination costs $ 10.7 $ 10.0 $ 20.7
Write-down of fixed assets 6.2 6.6 12.8
Inventory liquidation costs 2.2 4.7 6.9
Fabric inventory liquidation 2.6 1.3 3.9
Other expenses 1.4 2.7 4.1
---------------------------------
Total restructuring charge $ 23.1 $ 25.3 $ 48.4
=======================================================================
Other expenses are primarily costs associated with closing the foreign buying
office and employee severance payments. The Company does not anticipate
additional charges related to this restructuring and does not currently
contemplate any future restructuring charges. Substantially all of the savings
which are expected to result from the restructuring are attributable to the
elimination of the losses generated by the closed stores. The amount of fiscal
1994 losses attributable to the closed stores was approximately $4.5 million
for Contempo Casuals and $8.3 million for Pastille. In addition, the Company
anticipates other cost savings due to the streamlining of foreign buying,
product development and other business processes. As of August 12, 1994, all of
the Contempo Casuals and Pastille stores provided for in the restructuring
charge were closed. As of July 30, 1994, the Company had made $7.0 million of
cash payments for lease terminations; all final cash payments for lease
terminations are expected to occur by October 29, 1994.
Selling, general and administrative expenses increased 1.3% in 1994 to $505.7
million from $499.2 million in 1993. This increase was a result of increases
in volume-related selling expenses and higher sales promotion expenses. As a
percentage of revenues, selling, general and administrative expenses improved
to 24.2% from 24.8% in 1993.
Corporate expenses increased 12.3% in 1994 compared to 1993 due to higher
professional service fees associated with corporate activities in 1994.
Interest expense increased 7.7% in 1994, reflecting higher interest rates on
borrowings and a higher level of average outstanding debt between periods.
The Company's effective income tax rate remained unchanged at 42% in 1994.
During the year, the Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes." The effects of
adopting SFAS 109 were not material to the Company's consolidated financial
position or results of operations.
OPERATING RESULTS: 1993 VERSUS 1992
Revenues in fiscal 1993 increased 11.5% to $2.02 billion from $1.81 billion
in fiscal 1992, benefiting from a new Neiman Marcus store in Troy, Michigan;
52 weeks of revenues from the Neiman Marcus store in Scottsdale, Arizona in
1993 versus 42 weeks in 1992; 10 additional Contempo Casuals stores; and 31
incremental Pastille stores. Comparable revenues increased 6.6%.
Cost of goods sold was $1.40 billion in 1993, a 9.3% increase over 1992, pri-
marily due to incremental merchandise sold. As a percentage of revenues, cost
of goods sold improved to 69.2% in 1993 from 70.7% in 1992. The gross margin
improvement reflects higher regular price sell-throughs, increased transaction
volume and a slightly higher percentage markup on purchases. The LIFO method
of accounting for inventories had the impact of increasing gross margins by
$3.7 million in 1993 compared with decreasing gross margins by $4.7 million
in 1992.
18
Selling, general and administrative expenses increased 11.5% in 1993 to $499.2
million from $447.8 million in 1992. This increase was the result of an
increase in volume-related selling expenses and higher sales promotion
expenses, offset by higher finance charge income. As a percentage of revenues,
selling, general and administrative expenses were 24.8% in both years.
Corporate expenses decreased 9.0% in 1993 compared to 1992 due to lower
professional service fees associated with corporate activities in 1993.
Interest expense decreased 8.7%, reflecting lower interest rates on
borrowings partially offset by increased interest expense on a higher level
of average outstanding debt during 1993.
Other income principally reflects a gain from the reduction in the level of
the Company's estimated liabilities due to the settlement of various disputes
with Carter Hawley Hale Stores, Inc., now Broadway Stores, Inc.
The Company's effective income tax rate was 42.0% in 1993 and 41.0% in 1992.
The higher rate in 1993 reflects changes in the federal tax law.
In fiscal 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," which mandates a change in accounting for employee
postretirement healthcare benefits, resulting in an after-tax charge to
earnings of $11.2 million, or $0.30 per share.
REVIEW OF FINANCIAL CONDITION
Operating activities provided net cash of $33.6 million in 1994, used net cash
of $9.3 million in 1993, and provided net cash of $60.3 million in 1992. In
1994, the increase in cash provided by operating activities was primarily the
result of a decline in cash used to fund significant increases in accounts
receivable in fiscal 1993 along with lower inventory requirements at Contempo
Casuals. In mid-fiscal 1993, the Company modified the credit terms offered to
Neiman Marcus cardholders, extending the period of time over which balances
could be paid. This change, which caused significant increases in accounts
receivable, together with higher inventory levels required by increased
transaction volume and new stores, resulted in a decrease in cash flows from
operating activities in 1993. Working capital at the end of fiscal 1994 and
1993 was $365.5 million and $382.0 million, respectively. In 1994,
approximately $98.0 million of revolving credit debt, which comes due in 1995,
was reclassified to current liabilities, contributing to the decrease in
working capital. Offsetting the increase in current maturities of long-term
liabilities is an increase of $52.7 million in accounts receivable. The Company
believes that it has good banking relationships and expects to negotiate new
revolving credit facilities and other long-term financing arrangements.
Cash used by the Company's investing activities consists principally of
capital expenditures for store renovations, new store construction and
expansion of the NM Direct distribution facility. Capital expenditures were
$65.1 million in 1994, $56.3 million in 1993 and $73.9 million in 1992.
Additional store renovation and expansion plans include the opening of three
new Neiman Marcus stores, all of which are expected to be opened by the end
of the 1996 calendar year as well as the renovation of three Neiman Marcus
stores in 1995. Capital expenditures for the Company are currently estimated
at $100.0 million in 1995.
Cash provided by the Company's financing activities in 1994 consisted
primarily of borrowings under the Company's committed credit facilities.
Through the Dividend Reinvestment and Stock Purchase Plan (the Plan), $16.5
million and $32.3 million of new equity was issued primarily from dividends
reinvested by Harcourt General in fiscal 1993 and 1992, respectively. On
January 31, 1993, Harcourt General ceased its participation in the Plan.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Neiman Marcus Group, Inc.
The Company declared quarterly dividends on its Common Stock of $0.05 per
share totaling $7.6 million in 1994, $7.5 million in 1993 and $7.1 million in
1992. In addition, the Company paid dividends on its Preferred Stocks of
$27.1 million in 1994, 1993 and 1992.
During the period from August 1987 through July 1994, the Company invested
$489.0 million in its store renovation and expansion program and in 1989
purchased the Horchow mail order business for $108.0 million. In connection
with these activities, the Company's long-term and short-term debt increased
from $90.7 million in 1987 to $485.7 million in 1994. At September 1, 1994, the
Company had available approximately $144.0 million of committed credit facil
ities, the majority of which expires in March 1995. Until that time, the
Company believes that its credit facilities will be sufficient to fund its
capital and working capital requirements. The Company believes its
relationships with banks and other credit sources are good and that it has
the ability to replace the existing revolving credit facilities and obtain
other additional long-term financing during this period. The Company believes
its current and future debt capacity will be sufficient to fund its planned
capital growth as well as operating and dividend requirements.
SEASONALITY
The Company's business is seasonal in nature, with the second quarter (which
includes the holiday selling season) accounting for approximately 30% of the
Company's revenues and a majority of its net earnings. Inventories typically
increase in the first quarter.
IMPACT OF INFLATION
The Company's financial statements are prepared on an historical cost basis
under generally accepted accounting principles. The Company values
approximately 83% of its inventories using the last-in-first-out (LIFO)
method. Thus, the cost of merchandise sold approximates current cost.
Depreciation and amortization expense is believed to approximate current cost
because the Company continues to open new stores and refurbish existing
stores.
The Company has adjusted selling prices to maintain certain profit levels and
will continue to do so as competitive conditions permit. In general,
management believes that the impact of inflation or of changing prices is not
material to the results of operations.
NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which is effective for fiscal years beginning after December 15,
1993. The Company does not expect that its planned adoption of this standard
in fiscal 1995 will have a material impact on its consolidated financial
position or results of operations.
20
CONSOLIDATED STATEMENTS OF OPERATIONS
The Neiman Marcus Group, Inc.
Years Ended
---------------------------------------------------------
July 30, July 31, August 1,
(in thousands except for per share data) 1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------------------
Revenues $ 2,092,906 $ 2,016,914 $ 1,808,354
Cost of goods sold including buying and occupancy costs 1,465,656 1,396,603 1,277,642
Selling, general and administrative expenses 505,727 499,202 447,776
Corporate expenses 13,786 12,273 13,491
Restructuring of Contempo Casuals 48,401 - -
---------------------------------------------------------
Operating earnings 59,336 108,836 69,445
Interest expense (31,878) (29,589) (32,408)
Other income - 21,741 -
---------------------------------------------------------
Earnings before income taxes and cumulative effect
of accounting change 27,458 100,988 37,037
Income taxes 11,532 42,415 15,185
---------------------------------------------------------
Earnings before cumulative effect of accounting change 15,926 58,573 21,852
Cumulative effect of change in accounting for
postretirement healthcare benefits, net - (11,199) -
---------------------------------------------------------
Net earnings 15,926 47,374 21,852
Dividends and accretion on redeemable preferred stocks (29,080) (29,068) (29,197)
---------------------------------------------------------
Net earnings (loss) applicable to common shareholders ($13,154) $18,306 ($7,345)
=========================================================
Amounts per share applicable to common shareholders:
Earnings (loss) before cumulative effect of
accounting change ($ .35) $ .78 ($ .21)
Cumulative effect of accounting change, net - (.30) -
---------------------------------------------------------
Net earnings (loss) ($ .35) $ .48 ($ .21)
=======================================================================================================================
<FN>
See Notes to consolidated financial statements.
21
CONSOLIDATED BALANCE SHEETS
The Neiman Marcus Group, Inc.
July 30, July 31,
(dollar amounts in thousands) 1994 1993
- - ---------------------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash and equivalents $ 16,600 $ 20,204
Accounts receivable-trade, less allowance
for doubtful accounts of $13,700 and $9,500 362,236 309,572
Merchandise inventories 345,145 362,567
Deferred income taxes 24,317 16,918
Other current assets 51,741 38,537
--------------------------------
Total current assets $ 800,039 $ 747,798
--------------------------------
Property and equipment
Land, buildings and improvements 379,256 383,760
Fixtures and equipment 210,703 220,733
Construction in progress 50,456 25,343
--------------------------------
640,415 629,836
Less accumulated depreciation and amortization 229,502 213,317
--------------------------------
Property and equipment, net 410,913 416,519
--------------------------------
Other assets 112,176 114,257
--------------------------------
$1,323,128 $1,278,574
=========================================================================================================
<FN>
See Notes to consolidated financial statements.
22
July 30, July 31,
1994 1993
- - ---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable and current maturities of long-term liabilities $116,619 $ 45,877
Accounts payable 164,281 171,348
Accrued liabilities 153,625 148,533
---------------------------------
Total current liabilities 434,525 365,758
---------------------------------
Long-term liabilities
Notes and debentures 368,667 377,000
Other long-term liabilities 74,982 72,448
---------------------------------
Total long-term liabilities 443,649 449,448
---------------------------------
Deferred income taxes 37,768 37,500
Commitments and contingencies - -
Redeemable preferred stocks
(redemption value $424,923) 403,470 401,510
Common stock
Common Stock - $.01 par value
Authorized - 100,000,000 shares
Issued and outstanding - 37,951,227 and 37,938,388 shares 380 379
Additional paid-in capital 82,254 82,154
Accumulated deficit (78,918) (58,175)
---------------------------------
$ 1,323,128 $ 1,278,574
=====================================================================================================================
23
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Neiman Marcus Group, Inc.
Years Ended
---------------------------------------------
July 30, July 31, August 1,
(in thousands) 1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net earnings $ 15,926 $ 47,374 $ 21,852
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Charge for cumulative effect of accounting change, net - 11,199 -
Depreciation and amortization 60,832 59,227 56,042
Deferred income taxes (7,131) 4,743 (1,005)
Other income - (20,755) -
Other 14,379 3,181 (1,994)
Changes in current assets and liabilities:
Accounts receivable (52,664) (87,657) (14,902)
Merchandise inventories 17,422 (55,467) (23,278)
Accounts payable and accrued liabilities (1,975) 38,617 25,133
---------------------------------------------
Other (13,203) (9,758) (1,550)
---------------------------------------------
Net cash provided (used) by operating activities 33,586 (9,296) 60,298
Cash flows used by investing activities
Additions to property and equipment (65,074) (56,325) (73,933)
---------------------------------------------
Cash flows from financing activities
Debt transactions:
Borrowings and issuance of debt 73,800 77,200 85,000
Repayment of debt (11,307) (646) (60,049)
Equity transactions:
Common stock issued 458 16,484 32,279
Common stock repurchased (358) - (619)
Dividends paid (34,709) (34,633) (34,191)
---------------------------------------------
Net cash provided by financing activities 27,884 58,405 22,420
---------------------------------------------
Cash and equivalents
Increase (decrease) during the year (3,604) (7,216) 8,785
Beginning balance 20,204 27,420 18,635
---------------------------------------------
Ending balance $ 16,600 $ 20,204 $ 27,420
=============================================
Supplemental schedule of cash flow information
Cash paid during the year for:
Interest $ 31,504 $ 28,514 $ 28,900
Income taxes $ 34,258 $ 26,796 $ 11,169
=================================================================================================================
<FN>
See Notes to consolidated financial statements.
24
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
The Neiman Marcus Group, Inc.
Common Stocks Additional
------------------------- Paid-in Accumulated
(in thousands) Shares Amount Capital Deficit
- - ----------------------------------------------------------------------------------------------------------------------
Balance - August 3, 1991 34,503 $345 $33,891 ($54,540)
Net earnings - - - 21,852
Accretion of redeemable preferred stock - - - (2,089)
Common dividends - - - (7,083)
Preferred dividends - - - (27,108)
Shares issued under Dividend Reinvestment Plan 2,327 23 30,952 -
Other equity transactions 42 1 837 -
---------------------------------------------------------------------
Balance - August 1, 1992 36,872 369 65,680 (68,968)
Net earnings - - - 47,374
Accretion of redeemable preferred stock - - - (1,948)
Common dividends - - - (7,513)
Preferred dividends - - - (27,120)
Shares issued under Dividend Reinvestment Plan 1,036 10 15,659 -
Other equity transactions 30 - 815 -
---------------------------------------------------------------------
Balance - July 31, 1993 37,938 379 82,154 (58,175)
Net earnings - - - 15,926
Accretion of redeemable preferred stock - - - (1,960)
Common dividends - - - (7,589)
Preferred dividends - - - (27,120)
Other equity transactions 13 1 100 -
---------------------------------------------------------------------
Balance - July 30, 1994 37,951 $ 380 $ 82,254 ($78,918)
======================================================================================================================
<FN>
See Notes to consolidated financial statements.
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Neiman Marcus Group, Inc.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Reporting
The Company operates three specialty retailing businesses, Neiman Marcus,
Bergdorf Goodman and Contempo Casuals. The consolidated financial statements
include the accounts of all of the Company's wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated. The
Company's fiscal year ends on the Saturday closest to July 31.
Cash and Equivalents
Cash and equivalents consists of cash and highly liquid investments with
maturities of three months or less from the date of purchase.
Merchandise Inventories
Inventories are stated at the lower of cost or market. Approximately 83% of
the Company's inventories are valued using the retail method on the last-in,
first-out (LIFO) basis. The remaining inventories are valued using the retail
or cost method on the first-in, first-out (FIFO) basis. While the Company
believes that the LIFO method provides a better matching of costs and
revenues, some specialty retailers use the FIFO method and, accordingly, the
Company has provided the following data for comparison purposes as if the
Company were utilizing the FIFO methodology.
If the FIFO method of inventory valuation had been used to value all
inventories, merchandise inventories would have been $24.6 million and
$22.2 million higher than reported at July 30, 1994 and July 31, 1993,
respectively. The LIFO valuation method had the effect of decreasing net
earnings by $1.4 million, or $.04 per common share, in 1994, increasing net
earnings by $2.2 million, or $.06 per common share, in 1993, and decreasing
net earnings by $2.8 million, or $.08 per common share, in 1992.
Depreciation and Amortization
Depreciation and amortization are provided on a straight-line basis over the
shorter of the estimated useful lives of the related assets or the lease
term.
When property and equipment are retired or have been fully depreciated, the
cost and the related accumulated depreciation are eliminated from the
respective accounts. Gains or losses arising from the dispositions are
reported as income or expense.
Intangibles are amortized on a straight-line basis over their estimated
useful lives, not exceeding 40 years. Amortization expense was $4.2 million
in 1994, $4.1 million in 1993 and $5.4 million in 1992.
Income Taxes
Effective August 1, 1993, income taxes are calculated in accordance with
Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting
for Income Taxes." SFAS 109 requires the asset and liability method of
accounting for income taxes. Prior to August 1, 1993, the Company accounted
for income taxes in accordance with Accounting Principles Board Opinion 11.
The effects of adopting SFAS 109 were not material to the Company's
continuing operations or financial position.
Receivables and Finance Charge Income
The Company's credit operations generate finance charge income, which is
recognized as income when earned and is recorded as a reduction of selling,
general and administrative expenses. Finance charge income amounted to $54.3
million in 1994, $36.3 million in 1993 and $28.3 million in 1992.
Concentration of credit risk with respect to trade receivables is limited due
to the large number of customers to whom the Company extends credit. Ongoing
credit evaluation of customers' financial position is performed, and collateral
is not required as a condition of extending credit. The Company maintains
reserves for potential credit losses.
Earnings (Loss) Per Common and Common Share Equivalent
Earnings (loss) per share information reflects the earnings and losses of the
Company applicable to common shareholders. The dividend and accretion
requirements of the redeemable preferred stocks are deducted from the net
earnings of the Company to arrive at net earnings (loss) applicable to common
shareholders.
Earnings (loss) per common share is based upon the weighted average number of
common and, when dilutive, common share equivalents outstanding during the
year. Weighted average shares outstanding amounted to 37.9 million in 1994,
37.6 million in 1993 and 35.6 million in 1992.
Preopening Expenses
Costs associated with the opening of new stores are expensed as incurred.
26
Changes in Presentation
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. RESTRUCTURING OF CONTEMPO CASUALS
In April 1994, the Company recorded a pre-tax charge of $48.4 million related
to the decision to close 40 under-performing Contempo Casuals retail stores
and all of the Pastille retail stores. This charge includes an estimate for
lease termination costs, the write-down of fixed assets, inventory
liquidation costs and other related expenses. At July 30, 1994, $14.4 million
related to this charge is reflected in accrued liabilities.
3. OTHER ASSETS
July 30, July 31,
(in thousands) 1994 1993
- - -----------------------------------------------------------------------
Trademarks $ 73,000 $ 73,000
Goodwill 30,874 30,874
Other assets 32,341 32,156
----------------------
136,215 136,030
Accumulated amortization (24,039) (21,773)
----------------------
$112,176 $114,257
=======================================================================
4. LONG-TERM LIABILITIES
Interest July 30, July 31,
(in thousands) Rate 1994 1993
- - ------------------------------------------------------------------------------
Revolving credit agreement (a) Variable $306,000 $232,200
Senior notes (b) Various 172,000 182,000
Capital lease obligations (c) 7.63-10.25% 7,672 8,099
Other long-term liabilities (d) Various 74,596 73,026
--------------------------------
Total long-term liabilities 560,268 495,325
Less current maturities (116,619) (45,877)
--------------------------------
Total $443,649 $449,448
=============================================================================
<FN>
(a) The Company has a revolving credit agreement with nine banks, pursuant to
which the Company may borrow up to $300.0 million, of which $100.0 million
expires during fiscal 1995, $175.0 million expires during fiscal 1996, and
$25.0 million may be terminated on not less than three years' notice. The
Company may terminate this agreement at any time. The rate of interest payable
(4.8% at July 30, 1994) varies according to one of four pricing options
selected by the Company. The revolving credit agreement contains, among other
restrictions, provisions limiting the issuance of additional debt, the amount
and type of investments, and the payment of dividends. At July 30, 1994, the
amount available for dividend payments was $1 21.5 million. Borrowings under
this agreement were $295.0 million and $205.0 million at July 30, 1994 and July
31, 1993, respectively.
The Company also has revolving credit agreements with four banks, pursuant to
which the Company may borrow up to $25.0 million from each bank. In addition,
early in fiscal 1995, the Company entered into new revolving agreements with
two banks for $25.0 million each. All six of these credit agreements expire
on March 31, 1995 and contain covenants similar to those in the revolving
credit agreement described in the preceding paragraph. Borrowings under these
agreements were $11.0 million and $17.2 million at July 30, 1994 and July 31,
1993, respectively.
In addition to its revolving credit agreements, the Company borrows from
other banks on an uncommitted basis. Such borrowings are included in notes
payable and current maturities of long-term liabilities and amounted to $10.0
million at July 31, 1993.
(b) Senior notes consist of:
Principal Amount
Interest rate Due (in thousands)
- - ------------------------------------------------------------------------------------
9.89% May 1996 $ 40,000
9.59% August 1996 $ 52,000
9.24% December 1996 $ 40,000
Variable December 1996 $ 40,000
- - ------------------------------------------------------------------------------------
The notes have no sinking fund requirements. All fixed-rate senior notes may be
redeemed at any time at a premium plus accrued interest. The variable
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Neiman Marcus Group, Inc.
rate note bears interest at LIBOR plus 0.7% (4.83% at July 30, 1994) and is
adjusted semi-annually.
(c) The amount of assets under capital leases included in property and
equipment net of amortization was $4.4 million at July 30, 1994 and $4.8
million at July 31, 1993. The minimum payment obligations arising from the
above leases are $1.1 million for each of the next five years (fiscal 1995
through 1999) and $6.2 million thereafter. These leases mature in 2004 and
2005.
(d) Other long-term liabilities consist primarily of the present value of
certain employee benefit obligations assumed by the Company, postretirement
healthcare benefits and a provision for certain scheduled rent increases. The
present value of the employee benefit obligations assumed by the Company is
increasing on an average of 10% annually. The expense related to the accretion
of these obligations was $1.6 m illion in 1994, $1.9 million in 1993 and $4.2
million in 1992.
The aggregate maturities of all long-term liabilities and capital lease
obligations are $116.6 million in 1995, $217.9 million in 1996, $138.4
million in 1997, $6.4 million in 1998, $6.5 million in 1999 and $74.5 million
thereafter.
5. REDEEMABLE PREFERRED STOCKS
The Company's authorized and outstanding preferred stocks consist of 1,000,000
shares of 6% Cumulative Convertible Preferred Stock (6% Preferred Stock) and
500,000 shares of 91/4% Cumulative Redeemable Preferred Stock (91/4% Preferred
Stock), all of which are owned by Harcourt General, Inc. (Harcourt General).
The 6% Preferred Stock is entitled to receive cumulative dividends at an
annual rate of 6% of its $374.9 million stated value; is entitled to a class
vote on certain matters; is convertible on a per share basis into
approximately 8.99 shares of Common Stock subject to certain antidilution
adjustments; and, upon liquidation of the Company, is entitled to receive a
liquidation distribution equal to its stated value, together with any accrued
and unpaid dividends, before any distribution to any junior class of stock.
The conversion price of the 6% Preferred Stock at July 30, 1994 was
approximately $41.70 per share of Common Stock; the market value of the
Company's Common Stock on July 30, 1994 was $15.25. The 6% Preferred Stock
may be redeemed by the Company at a premium over its stated value under
certain conditions through September 1997. Beginning in September 1997 (when
a sinking fund for this purpose commences), the Company is required to redeem
annually not less than 5% of the 6% Preferred Stock at a redemption value of
$374.92 per share plus accrued dividends. The difference between the
redemption value and the carrying value is being accreted over 30 years.
The 91/4% Preferred Stock has a stated value of $100 per share; is not
redeemable until July 31, 1998 except under certain limited circumstances;
and must be redeemed in full in July 2001. The Company may be required to
purchase the 9G% Preferred Stock at its stated value plus accrued dividends
if a change in control of the Company occurs. The 9G% Preferred Stock is
senior to the Common Stock of the Company with respect to dividends and the
distribution of assets upon liquidation or dissolution of the Company. If
dividends payable on the 91/4% Preferred Stock are in arrears for six full
quarters or any mandatory redemption is in arrears, the holders of the 91/4%
Preferred Stock, voting together as one class with other series of the
Company's preferred stock, shall be entitled to elect two members of the
Company's Board of Directors. The terms of the 91/4% Preferred Stock also
contain restrictions regarding the consolidation or merger of the Company and
sales of assets.
6. SHAREHOLDERS' EQUITY
Ownership by and Relationship with Harcourt General
Harcourt General owns 21.4 million shares of Common Stock and all of the
outstanding Redeemable Preferred Stocks. The shares presently owned by
Harcourt General represent approximately 65% of the voting power and
fully-converted equity of the Company.
The Company and Harcourt General are parties to an agreement pursuant to
which Harcourt General provides certain management, accounting, financial,
legal, tax and other corporate services to the Company. The fees for these
services are based on Harcourt General's costs and are subject to the
approval of a committee of directors of the Company who are not affiliated
with Harcourt General. This agreement may be terminated by either party on 180
days' notice. Charges to the Company were $6.9 million in 1994, $7.2 million
in 1993 and $6.4 million in 1992.
28
The Company's Chairman of the Board; President and Chief Executive Officer;
Senior Vice President and Chief Financial Officer; and Senior Vice President
and General Counsel, as well as certain other officers of the Company, serve
in similar capacities with Harcourt General. The first two named officers
also serve as directors of both companies.
Common Stock
Common Stock is entitled to dividends as declared by the Board of Directors,
and each share carries one vote.
Holders of Common Stock have no cumulative voting, conversion, redemption or
preemptive rights.
Common Stock Incentive Plan
The Company has established a common stock incentive plan allowing for the
granting of stock options, stock appreciation rights and stock-based awards.
The aggregate number of shares of Common Stock that may be issued pursuant to
the plan is 1.3 million shares.
Options outstanding at July 30, 1994 were granted at prices (not less than 100
% of the fair market value on the date of the grant) varying from $11.63 to
$19.27 per share and expire between 1995 and 2003. There were 110 employees
with options outstanding at July 30, 1994. The weighted average exercise
price for all outstanding shares at July 30, 1994 was $14.47.
At July 30, 1994, there were 456,850 shares of Common Stock available under
the plan for grants.
Option activity was as follows:
Years ended
------------------------------
July 30, July 31, August 1,
Common Shares 1994 1993 1992
- - -------------------------------------------------------------------------
Options outstanding -
beginning of year 684,136 573,360 621,623
Granted 214,100 179,350 91,950
Exercised (54,116) (14,937) (23,566)
Canceled (177,772) (53,637) (116,647)
------------------------------
Options outstanding - end of year 666,348 684,136 573,360
==============================
Exercisable options - end of year 294,800 332,296 260,750
=========================================================================
7. INCOME TAXES
Income tax expense was as follows:
Years ended
--------------------------------
July 30, July 31, August 1,
(in thousands) 1994 1993 1992
- - --------------------------------------------------------------------------
Current
Federal $13,138 $ 24,107 $ 13,705
State 5,525 5,783 2,485
--------------------------------
18,663 29,890 16,190
--------------------------------
Deferred
Federal (5,787) 10,308 (1,120)
State (1,344) 2,217 115
--------------------------------
(7,131) 12,525 (1,005)
--------------------------------
Income tax expense $11,532 $ 42,415 $ 15,185
==========================================================================
The Company's effective income tax rate was 42% in 1994 and 1993, and 41% in
1992. The difference between the statutory federal tax rate and the effective
tax rate is due primarily to state income taxes.
Significant components of the Company's net deferred income tax liability
stated on a gross basis at July 30, 1994 are as follows:
(in thousands)
- - ----------------------------------------------------------------------------
Gross deferred income tax assets:
Financial accruals and reserves $ 29,088
Employee benefits 22,712
Deferred lease payments 6,349
Other 6,938
-----------
Total deferred tax assets 65,087
Gross deferred income tax liabilities:
Excess of tax over financial depreciation (65,782)
Pension accrual (6,324)
Other assets previously deducted on tax return (6,432)
-----------
Total deferred tax liabilities (78,538)
-----------
Net deferred tax liabilities ($13,451)
============================================================================
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Neiman Marcus Group, Inc.
Deferred income tax expense (benefit) for fiscal years 1993 and 1992 consists of:
Years ended
-------------------
July 31, August 1,
(in thousands) 1993 1992
- - -------------------------------------------------------------------------
Excess of tax over financial depreciation $ 5,128 $ 2,244
Settlements 8,604 (704)
Other employee benefits (921) (975)
Other (286) (1,570)
------------------
Deferred income tax expense (benefit) 12,525 (1,005)
Change in accounting for postretirement
healthcare benefits (7,782) -
------------------
Net change in deferred taxes $ 4,743 ($ 1,005)
========================================================================
8. COMMITMENTS AND CONTINGENCIES
Leases
The Company's operations are conducted primarily in leased properties which
include retail stores, distribution centers and other facilities.
Substantially all leases are for periods of up to 30 years with renewal
options at agreed-upon amounts, except that certain leases provide for
additional rent based on revenues in excess of predetermined levels.
Rent expense under operating leases was as follows:
Years ended
--------------------------------
July 30, July 31, August 1,
(in thousands) 1994 1993 1992
- - ------------------------------------------------------------------------
Minimum rent $60,200 $61,300 $ 56,500
Rent based on revenues 9,400 8,200 7,300
-------------------------------
Total rent expense $69,600 $69,500 $ 63,800
========================================================================
Future minimum lease payments under operating leases are as follows: 1995,
$55.2 million; 1996, $53.2 million; 1997, $50.9 million; 1998, $47.3 million;
1999, $43.8 million; all years thereafter, $1.1 billion.
Pension Plans
The Company has a non-contributory defined benefit pension plan covering
substantially all full-time employees. The Company also sponsors an unfunded
supplemental executive retirement plan which provides certain employees with
additional pension benefits. Benefits under the plans are based on an
employee's years of service and compensation prior to retirement. The
Company's general funding policy is to contribute amounts that are deductible
for federal income tax purposes. Pension plan assets consist primarily of
equity and fixed income securities.
Components of net pension expense are as follows:
Years ended
-----------------------------
July 30, July 31, August 1,
(in thousands) 1994 1993 1992
- - -------------------------------------------------------------------------
Service cost - benefits earned
during the period $4,800 $ 4,400 $ 3,800
Interest cost on projected benefit
obligation 7,200 6,600 5,900
Actual return on assets (2,700) (6,700) (8,400)
Net amortization and deferral (3,000) 2,200 4,400
-----------------------------
Net pension expense $6,300 $ 6,500 $ 5,700
=========================================================================
The accounting assumptions used include a discount rate of 7.5% in 1994 (8.5%
in 1993 and 1992); an expected long-term rate of return on assets of 9.0% in
1994 and 1993 (10.0% in 1992); and a projected rate of compensation increases
of 5.0% in 1994 (6.0% in 1993 and 1992).
30
The plans' funded status and amounts recognized in the consolidated balance
sheets were as follows:
July 30, 1994 July 31, 1993
--------------------------------------------------------
Funded Unfunded Funded Unfunded
(in thousands) Plan Plan Plan Plan
- - ---------------------------------------------------------------------------------------------------------------------
Vested benefit obligation $ 68,500 $12,100 $ 57,500 $ 9,900
========================================================
Accumulated benefit obligation $ 70,600 $13,400 $ 59,100 $11,000
========================================================
Projected benefit obligation $ 85,900 $20,200 $ 71,400 $16,600
Pension plan assets at fair value 77,600 - 72,400 -
--------------------------------------------------------
Overfunded (underfunded) projected obligation (8,300) (20,200) 1,000 (16,600)
Net amortization and deferral 19,300 2,800 7,900 1,200
Unrecognized net obligation at transition and
unrecognized prior service cost 4,300 2,800 4,700 3,200
--------------------------------------------------------
Pension asset (liability) recognized in the balance sheets $ 15,300 ($14,600) $ 13,600 ($12,200)
=====================================================================================================================
Postretirement Healthcare Benefits
The Company provides healthcare benefits for retired employees which are
funded as claims are incurred. Retirees and active employees hired prior to
March 1, 1989 are eligible for these benefits if they have met certain
service and minimum age requirements. Beginning in fiscal 1993, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 106
(SFAS 106), "Employers' Accounting for Postretirement Benefits Other Than
Pensions." This statement requires accrual of these postretirement healthcare
benefits during the years in which an employee provides services. The
cumulative effect of adopting this change on August 2, 1992 resulted in a
charge of $11.2 million, or $0.30 per share, which is net of a tax benefit of
$7.8 million. Prior to August 2, 1992, the expense for these benefits was
recognized as actual claims were incurred. The Company paid postretirement
healthcare benefit claims of $1.8 million during 1994 and $1.2 million during
1993.
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Neiman Marcus Group, Inc.
The actuarial present value of accumulated postretirement healthcare benefit obligations
and the amounts recognized in the consolidated balance sheets were as follows:
Years ended
----------------------
July 30, July 31,
(in thousands) 1994 1993
- - ---------------------------------------------------------------------------
Retirees $11,986 $11,988
Fully eligible active plan participants 1,550 2,088
Other active plan participants 4,158 5,997
Unrecognized net gain 1,929 -
---------------------
Total $ 19,623 $20,073
===========================================================================
The periodic postretirement healthcare benefit cost was as follows:
Years ended
------------------
July 30, July 31,
(in thousands) 1994 1993
- - ----------------------------------------------------------------------------
Net periodic cost:
Service cost $ 286 $ 397
Interest cost on accumulated postretirement
healthcare benefit obligation 1,288 1,576
-----------------
Total $ 1,574 $ 1,973
============================================================================
The assumed healthcare cost trend rate used in measuring the accumulated
postretirement healthcare benefit obligation was 16% in 1994 and 18% in 1993,
gradually declining to 5% by the year 2006. Measurement of the accumulated
postretirement healthcare benefit obligation was based on an assumed 7.5%
discount rate in 1994 and 8.5% in 1993. An increase of 1% in the healthcare
cost trend rate would increase the accumulated postretirement healthcare
benefit obligation as of July 30, 1994 by $2.4 million. The effect of this
change on the annual net periodic postretirement healthcare benefit cost would
be an increase of $246,000.
Litigation
When the Company was formed as part of the restructuring of Carter Hawley Hale
Stores, Inc. (CHH), now Broadway Stores, Inc., in August 1987, it entered into
a variety of agreements with CHH, including agreements concerning the
allocation of CHH taxes and the guaranty of certain CHH employee benefits. The
Company and CHH negotiated a settlement of all disputes between them, which
became effective in October 1992. In connection with that settlement, the
Company paid CHH $7.7 million and was discharged as guarantor of certain CHH
employee benefits. In light of this settlement, the Company reevaluated its
liabilities to CHH and recognized a gain during the first quarter of 1993 of
$20.8 million. This gain is recorded as other income in the consolidated
statements of operations.
The Company is involved in various other suits and claims in the ordinary
course of business. Management does not believe that the disposition of any
such suits and claims will have a material adverse effect upon the continuing
operations of the Company.
Letters of Credit
The Company had approximately $38.7 million of outstanding irrevocable
letters of credit relating to purchase commitments at July 30, 1994.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments is estimated as the
amounts reported in the consolidated financial statements, except as
discussed below.
Interest Rate Swap
During September 1991, the Company entered into an interest rate swap agreement
having a notional principal amount of $50.0 million that effectively fixes the
interest rate on variable rate debt at 8.94%. The amount to be paid or received
is accrued as interest rates change and is recognized over the life of the
agreement. The interest rate swap matures in September 1996. The fair value of
the interest rate swap is the amount at which it could be settled, based on
estimates obtained from dealers. The estimated unrealized pre-tax loss on the
interest rate swap was approximately $2.8 million at July 30, 1994, $6.6
million at July 31, 1993 and $5.2 million at August 1, 1992. This amount
changes during the life of the swap as a function of maturity, interest rates
and the credit standing of the parties to the swap agreement. The incremental
pre-tax interest expense incurred due to the interest rate swap agreement was
$2.3 million in 1994, $2.4 million in 1993 and $1.3 million in 1992.
32
10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Year ended July 30, 1994
-----------------------------------------------------------------
First Second Third Fourth
(in millions except for per share data) Quarter Quarter Quarter Quarter Total
- - -----------------------------------------------------------------------------------------------------------------------------------
Revenues $ 507.6 $ 650.7 $ 472.7 $ 461.9 $ 2,092.9
=================================================================
Gross profit $ 165.1 $ 191.8 $ 146.3 $ 124.1 $ 627.3
=================================================================
Net earnings (loss) $ 15.2 $ 21.5 ($ 18.8) ($ 2.0) $ 15.9
Preferred dividends and accretion (7.3) (7.3) (7.3) (7.2) (29.1)
-----------------------------------------------------------------
Net earnings (loss) applicable to common shareholders $ 7.9 $ 14.2 ($ 26.1) ($9.2) ($ 13.2)
Amount per share applicable to common shareholders:
Net earnings (loss) $ .21 $ .37 ($ .69) ($ .24) ($ .35)
=================================================================
Dividends $ .05 $ .05 $ .05 $ .05 $ .20
=================================================================
Year ended July 31, 1993
-----------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- - -----------------------------------------------------------------------------------------------------------------------------------
Revenues $ 479.0 $617.2 $456.5 $464.2 $2,016.9
=================================================================
Gross profit $ 157.6 $179.7 $145.0 $138.0 $ 620.3
=================================================================
Earnings before cumulative effect of accounting change $ 27.3 $ 17.6 $ 11.1 $ 2.6 $ 58.6
Cumulative effect of accounting change, net (11.2) - - - (11.2)
Preferred dividends and accretion (7.3) (7.3) (7.3) (7.2) (29.1)
-----------------------------------------------------------------
Net earnings (loss) applicable to common shareholders $ 8.8 $ 10.3 $ 3.8 ($ 4.6) $ 18.3
=================================================================
Amounts per share applicable to common shareholders:
Earnings (loss) before cumulative effect of
accounting change $ .54 $ .27 $ .10 ($ .12) $ .78
Cumulative effect of accounting change, net (.30) - - - (.30)
-----------------------------------------------------------------
Net earnings (loss) $ .24 $ .27 $ .10 ($ .12) $ .48
=================================================================
Dividends $ .05 $ .05 $ .05 $ .05 $ .20
===================================================================================================================================
In the fourth quarter, the effect of the LIFO method of accounting for inventories increased net earnings by $3.1 million in
1994 and $6.5 million in 1993.
33
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
The Neiman Marcus Group, Inc.
Chestnut Hill, Massachusetts
We have audited the accompanying consolidated balance sheets of The Neiman
Marcus Group, Inc. and subsidiaries as of July 30, 1994 and July 31, 1993 and
the related consolidated statements of operations, common shareholders'
equity and cash flows for each of the three years in the period ended July 30,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
Neiman Marcus Group, Inc. and subsidiaries as of July 30, 1994 and July 31,
1993 and the results of their operations and their cash flows for each of the
three years in the period ended July 30, 1994 in conformity with generally
accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," in
fiscal year 1993.
Deloitte & Touche LLP
Boston, Massachusetts
September 19, 1994
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
The management of The Neiman Marcus Group, Inc. and its subsidiaries is
responsible for the integrity and objectivity of the financial and operating
information contained in this Annual Report, including the consolidated
financial statements covered by the Independent Auditors' Report. These
statements were prepared in conformity with generally accepted accounting
principles and include amounts that are based on the best estimates and
judgments of management.
The Company maintains a system of internal controls which provides management
with reasonable assurance that transactions are recorded and executed in
accordance with its authorizations, that assets are properly safeguarded and
accounted for, and that records are maintained so as to permit preparation of
financial statements in accordance with generally accepted accounting
principles. This system includes written policies and procedures, an
organizational structure that segregates duties, financial reviews and a
comprehensive program of periodic audits by the internal auditors. The
Company also has instituted policies and guidelines which require employees
to maintain a high level of ethical standards.
In addition, the Audit Committee of the Board of Directors, consisting solely
of outside directors, meets periodically with management, the internal
auditors and the independent auditors to review internal accounting controls,
audit results and accounting principles and practices, and annually
recommends to the Board of Directors the selection of independent auditors.
John R. Cook Stephen C. Richards
Senior Vice President and Vice President and
Chief Financial Officer Controller
34
SELECTED FINANCIAL DATA (UNAUDITED)
The Neiman Marcus Group, Inc.
Years ended
---------------------------------------------------------------
July 30, July 31, August 1, August 3, August 4,
(in millions except for per share data) 1994 1993 1992 1991 1990
- - ---------------------------------------------------------------------------------------------------------------------------------
Operating Results:
Revenues $ 2,092.9 $ 2,016.9 $1,808.4 $1,744.8 $ 1,688.6
==============================================================
Earnings before cumulative effect of accounting change 15.9 58.6 21.9 9.3 28.2
Cumulative effect of accounting change, net (1) - (11.2) - - -
--------------------------------------------------------------
Net earnings $ 15.9 $ 47.4 $ 21.9 $ 9.3 $ 28.2
==============================================================
Net earnings (loss) applicable to common shareholders ($ 13.2) $ 18.3 ($ 7.3) ($ 15.1) $ 3.8
notes to consolidated financial statements ==============================================================
The Neiman Marcus Group, Inc.
Amounts per share applicable to common shareholders:
Earnings (loss) before cumulative effect of
accounting change ($ .35) $ .78 ($ .21) ($ .45) $ .12
Cumulative effect of accounting change, net - (.30) - - -
--------------------------------------------------------------
Net earnings (loss) ($ .35) $ .48 ($ .21) ($ .45) $ .12
==============================================================
Common dividends $ .20 $ .20 $ .20 $ .20 $ .20
==============================================================
Financial Position:
Total assets $ 1,323.1 $ 1,278.6 $1,141.4 $1,072.2 $ 1,026.9
Long-term liabilities $ 443.6 $ 449.4 $ 414.2 $ 382.4 $ 351.1
Redeemable Preferred Stocks $ 403.5 $ 401.5 $ 399.6 $ 397.6 $ 345.7
- - --------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The cumulative effect of accounting change reflects the change in accounting for postretirement healthcare benefits.
35
SHAREHOLDER INFORMATON
The Neiman Marcus Group, Inc.
Requests for general information or published financial information should be
made in writing to the Corporate Relations Department, The Neiman Marcus
Group, Inc., Post Office Box 9187, Chestnut Hill, MA 02167-9187,
(617) 232-0760.
Dividend Policy
The Board of Directors has established a policy of paying cash dividends. The
current rate is $0.05 per common share per quarter payable in January, April,
July and October.
Dividend Reinvestment and Common Stock Purchase Plan
The Plan provides stockholders with a convenient way to purchase common shares
by reinvesting their dividends and/or by investing additional cash amounts. The
Company will absorb any brokerage and agency fees for stock purchased in
connection with the Plan. For further information, please write to: The Neiman
Marcus Group, c/o The First National Bank of Boston, The Neiman Marcus Group
Dividend Reinvestment Plan, Post Office Box 1681, Boston, MA 02105-1681.
Transfer Agent and Registrar
The First National Bank of Boston
Shareholder Services Division
Post Office Box 644, Mail Stop 45-01-05
Boston, MA 02102-0644
(800) 442-2001
Form 10-K
The Company's Form 10-K as filed with the Securities and Exchange Commission
is available upon written request to the Corporate Relations Department of
the Company.
Annual Meeting
The Annual Meeting of Stockholders will be held on Friday, January 20, 1995
at 10:00 a.m. at the Company's corporate headquarters, 27 Boylston Street,
Chestnut Hill, Massachusetts.
Stock Information
The Neiman Marcus Group's Common Stock is traded on the New York Stock
Exchange under the symbol NMG. The following table indicates the quarterly
price range of the Common Stock for the past two fiscal years.
1994 1993
---------------------------------------
Quarter High Low High Low
- - -------------------------------------------------------------------------
First $ 16.63 $ 13.88 $ 14.13 $ 11.13
Second $ 19.25 $ 15.75 $ 19.75 $ 12.75
Third $ 17.38 $ 15.00 $ 19.50 $ 14.38
Fourth $ 16.63 $ 14.75 $ 16.88 $ 13.88
- - -------------------------------------------------------------------------
Shares Outstanding
The Neiman Marcus Group has 37.9 million common shares outstanding. Harcourt
General, Inc. owns approximately 56.5% of NMG's outstanding common equity and
100% of the Company's redeemable preferred stocks. The Neiman Marcus Group
had 12,988 common shareholders of record at July 30, 1994.
Corporate Address
The Neiman Marcus Group, Inc.
27 Boylston Street
Post Office Box 9187
Chestnut Hill, MA 02167-9187
(617) 232-0760
The Neiman Marcus Group is an Equal Opportunity Employer.
36
DIRECTORS AND OFFICERS
The Neiman Marcus Group, Inc.
DIRECTORS EXECUTIVE OFFICERS STAFF OFFICERS
Richard A. Smith (1, 2) Richard A. Smith Peter Farwell
Chairman of the Board Chairman of the Board Vice President -
Corporate Relations
Gary L. Countryman (1, 2, 3, 4, 5) Robert J. Tarr, Jr.
President and Chief Executive Officer President, Chief Executive Officer Paul F. Gibbons
Liberty Mutual Insurance Company and Chief Operating Officer Vice President an
Treasurer
Matina Horner, Ph. D. (2, 3, 4, 5) John R. Cook
Executive Vice President Senior Vice President and Gerald T. Hughes
Teachers Insurance and Annuity Association- Chief Financial Officer Vice President -
College Retirement Equities Fund Human Resources
Eric P. Geller
Walter J. Salmon (2, 3, 4, 5) Senior Vice President, Michael F. Panutich
Roth Professor of Retailing General Counsel and Secretary Vice President -
Graduate School of Business General Auditor
Harvard University Robert A. Smith
Group Vice President Stephen C. Richards
Jean Head Sisco (2, 3, 4, 5) Vice President and
Partner OPERATING OFFICERS Controller
Sisco Associates
NEIMAN MARCUS Craig B. Sawin
Robert J. Tarr, Jr. (1, 2) Vice President -
President, Chief Executive Officer Burton M. Tansky Planning and Analysis
and Chief Operating Officer Chairman and
Chief Executive Officer
Gerald A. Sampson
President and
Chief Operating Officer
NM DIRECT
B.D. Feiwus
President and
Chief Executive Officer
BERGDORF GOODMAN
Stephen C. Elkin
Chairman and
Chief Executive Officer
Dawn Mello
President
CONTEMPO CASUALS
Robert S. Kelleher
President and
Chief Operating Officer
(1) Executive Committee
(2) Nominating Committee
(3) Audit Committee
(4) Compensation Committee
(5) Special Review Committee
All Executive and Staff Officers hold similar
positions at Harcourt General, Inc.
Richard A. Smith, Robert J. Tarr, Jr.,
and Robert A. Smith are Directors of
Harcourt General, Inc.
Design: Belk Mignogna Associates, Ltd. New York
The Neiman Marcus Group, Inc.
27 Boylston Street
Chestnut Hill, MA 02167