SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended August 2, 1997
Commission File Number 1-9659
_______________
THE NEIMAN MARCUS GROUP, INC.
(Exact name of registrant as specified in its charter)
27 Boylston Street, Chestnut Hill, Massachusetts 02167
(Address of principal executive offices) (Zip Code)
Delaware 95-4119509
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Registrant's telephone number and area code: 617-232-0760
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each Exchange on which Registered
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
_______________
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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of October 22, 1997 was $824,900,923.
There were 49,870,692 shares of Common Stock outstanding as of October 22,
1997.
Documents Incorporated by Reference
Portions of the Company's 1997 Annual Report to Shareholders are
incorporated by reference in Parts I, II and IV of this Report.
THE NEIMAN MARCUS GROUP, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED AUGUST 2, 1997
TABLE OF CONTENTS
Page No.
PART I --------
Item 1. Business 1
Item 2. Properties 3
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 4
Item 6. Selected Financial Data 4
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 4
Item 8. Financial Statements and Supplementary Data 4
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 4
PART III
Item 10. Directors and Executive Officers of the Registrant 5
Item 11. Executive Compensation 8
Item 12. Security Ownership of Certain Beneficial Owners and 22
Management
Item 13. Certain Relationships and Related Transactions 24
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports 25
on Form 8-K
Signatures . . . . . . . . . . . . . . . . . . 27
PART I
Item 1. Business
General
The Neiman Marcus Group, Inc. (together with its operating divisions and
subsidiaries, the "Company") is a Delaware corporation which commenced
operations in August 1987. Harcourt General, Inc. ("Harcourt General"), a
Delaware corporation based in Chestnut Hill, Massachusetts, owns approximately
53% of the outstanding Common Stock of the Company. In addition, two of
Harcourt General's directors and virtually all of its officers, including its
Chairman and Chief Executive Officer, occupy similar positions with the
Company. For more information about the relationship between the Company and
Harcourt General, see Note 1 to the Summary Compensation Table (in Item 11),
Item 12, and Notes 2, 7 and 8 to the Consolidated Financial Statements in Item
14 below. Harcourt General is a public company subject to the reporting
requirements of the Securities Exchange Act of 1934. For further information
about Harcourt General, reference may be made to the reports filed by Harcourt
General from time to time with the Securities and Exchange Commission.
Business Overview
The Company, operating through Neiman Marcus Stores, Bergdorf Goodman and
NM Direct, is a high end specialty retailer. The 30 Neiman Marcus stores are
in premier retail locations in major markets nationwide and the two Bergdorf
Goodman stores, the main store and the Bergdorf Goodman Men store, are located
in Manhattan at 58th Street and Fifth Avenue. Neiman Marcus Stores and
Bergdorf Goodman offer high end fashion apparel and accessories primarily from
leading designers. NM Direct, the Company's direct marketing operation, offers
a mix of apparel and home furnishings which is complementary to the Neiman
Marcus Stores merchandise, and it publishes the Horchow catalogues and the
world famous Neiman Marcus Christmas Catalogue.
Description of Operations
Neiman Marcus Stores. Neiman Marcus Stores offer women's and men's
apparel, fashion accessories, shoes, cosmetics, furs, precious jewelry,
decorative home accessories, fine china, crystal and silver, gourmet food
products, children's apparel and gift items. A relatively small portion of
Neiman Marcus Stores' customers accounts for a significant percentage of its
retail sales.
As of August 2, 1997, the Company operated 30 Neiman Marcus stores, located
in Arizona (Scottsdale); California (five stores: Beverly Hills, Newport
Beach, Palo Alto, San Diego and San Francisco); Colorado (Denver); the
District of Columbia; Florida (two stores: Fort Lauderdale and Bal Harbour);
Georgia (Atlanta); Illinois (three stores: Chicago, Northbrook and Oak Brook);
Missouri (St. Louis); Massachusetts (Boston); Minnesota (Minneapolis);
Michigan (Troy); Nevada (Las Vegas); New Jersey (two stores: Short Hills and
Paramus); New York (Westchester); Pennsylvania (King of Prussia); Texas (six
stores: three in Dallas, one in Fort Worth and two in Houston); and Virginia
(McLean). The average size of the Neiman Marcus stores is approximately
142,000 gross square feet, and the stores range in size from 90,000 gross
square feet to 269,000 gross square feet. A new Neiman Marcus store in
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Honolulu's Ala Moana Center (160,000 gross square feet) is currently under
construction and is expected to open in November 1998. The Company also plans
to open new Neiman Marcus stores in Palm Beach, Florida in the fall of 1998
(60,000 gross square feet), Coral Gables, Florida in 2000 (120,000 gross
square feet) and Oyster Bay, New York in 2001 (150,000 gross square feet). In
addition, the Company plans to open a new store in Plano, Texas in 2001
(145,000 gross square feet) which will replace the existing Prestonwood store
(123,000 gross square feet) near Dallas, and a new store at the Memorial City
Mall in Houston, Texas (150,000 gross square feet) which will replace the
existing Town & Country store (153,000 gross square feet).
Bergdorf Goodman. The core of Bergdorf Goodman's offerings includes high
end women's apparel and unique fashion accessories from leading designers.
Bergdorf Goodman also features traditional and contemporary decorative home
accessories, precious jewelry, gifts and gourmet foods. The Company operates
two Bergdorf Goodman stores in Manhattan at 58th Street and Fifth Avenue. The
main Bergdorf Goodman store consists of 250,000 gross square feet and is
dedicated to women's apparel and accessories, home furnishings and gifts.
Bergdorf Goodman Men consists of 66,000 gross square feet and is dedicated to
high end men's apparel and accessories.
NM Direct. NM Direct operates an upscale direct marketing business, which
primarily offers women's apparel under the Neiman Marcus name and, through its
Horchow catalogue, offers hard goods such as quality home furnishings,
tabletop, linens and decorative accessories to its domestic and international
customers. NM Direct also offers a broad range of more modestly priced items
through its Trifles and Grand Finale lines and annually publishes the world
famous Neiman Marcus Christmas Catalogue.
Clearance Centers. The Company operates several small clearance centers
which provide an efficient and controlled outlet for the sale of marked down
merchandise from Neiman Marcus Stores, Bergdorf Goodman and NM Direct.
Competition
The specialty retail industry is highly competitive and fragmented. The
Company competes with large specialty retailers, traditional and better
department stores, national apparel chains, designer boutiques, individual
specialty apparel stores and direct marketing firms.
The Company competes for customers principally on the basis of quality,
assortment and presentation of merchandise, customer service, sales and
marketing programs and value. In addition, the Company competes for quality
merchandise and assortment principally based on relationships with designer
resources and purchasing power. The Company's apparel business is especially
dependent upon its relationship with these designer resources. Neiman Marcus
Stores and Bergdorf Goodman also compete for customers on the basis of store
ambience, and for real estate opportunities principally on the basis of their
ability to attract customers. NM Direct competes principally on the basis of
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quality, assortment and presentation of merchandise, customer service, price
and speed of delivery.
Employees
At August 2, 1997, Neiman Marcus Stores had 11,300 employees, of whom 3,310
were part-time, Bergdorf Goodman had 1,050 employees, of whom 45 were part-
time, and NM Direct had 1,060 employees, of whom 500 were part-time. All
employee numbers are approximate. None of the employees of Neiman Marcus
Stores or NM Direct are subject to collective bargaining agreements.
Approximately 17% of the Bergdorf Goodman employees are subject to collective
bargaining agreements. The Company believes that its relations with its
employees are generally good. The Company's staffing requirements fluctuate
during the year as a result of the seasonality of the retail apparel industry
and, accordingly, the Company generally adds 3,000 to 3,500 more seasonal
employees in its second quarter.
Capital Expenditures; Seasonality; Liquidity
For information on capital expenditures, seasonality and liquidity, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 7 below.
Item 2. Properties
The Company's corporate headquarters are located at Harcourt General's
leased facility in Chestnut Hill, Massachusetts. The operating headquarters
for Neiman Marcus Stores, Bergdorf Goodman and NM Direct are located in
Dallas, New York City and Las Colinas, Texas, respectively. The aggregate
square footage used in the Company's operations is approximately as follows:
Owned
Subject to
Owned Ground Lease Leased Total
------- ------------ --------- ---------
Stores . . . . 348,000 1,931,000 2,297,000 4,576,000
Distribution, Support and
Office Facilities and
Clearance Centers ... 1,170,000 0 634,000 1,804,000
Leases for Neiman Marcus stores, including renewal options, range from 30
to 99 years. The lease on the Bergdorf Goodman main store expires in 2050, and
the lease on the Bergdorf Goodman Men's store expires in 2010, with two 10-
year renewal options. Leases are generally at fixed rentals, and a majority
of leases provide for additional rentals based on sales in excess of
predetermined levels. The Company owns approximately 34 acres of land in
Longview, Texas, where its National Service Center, the principal distribution
facility for Neiman Marcus Stores, is located in a 465,000 square foot
facility, and also owns approximately 50 acres of land in Las Colinas, Texas,
where its 705,000 square foot NM Direct warehouse and distribution facility is
located. For further information on the Company's properties, see "Operating
Leases" in Note 12 of the Notes to the Consolidated Financial Statements in
Item 14 below. For more information about plans to open additional Neiman
Marcus stores, see "Description of Operations" in Item 1 above.
3
Item 3. Legal Proceedings
The Company presently is engaged in various legal actions which are
incidental to the ordinary conduct of its business. The Company believes that
any liability arising as a result of these actions and proceedings will not
have a material adverse effect on the Company's financial position or results
of operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The information contained under the captions "Stock Information" and
"Shares Outstanding" on page 51 of the 1997 Annual Report is incorporated
herein.
Beginning with the third quarter of fiscal 1995, the Company
eliminated its quarterly cash dividend on its Common Stock. The Company
currently does not intend to resume paying cash dividends on its Common Stock.
The Company's revolving credit agreement contains restrictions on the
Company's ability to pay dividends and make other distributions.
Item 6. Selected Financial Data
The response to this Item is contained in the 1997 Annual Report under the
caption "Selected Financial Data" on page 50 and is incorporated herein.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The response to this Item is contained in the 1997 Annual Report under the
caption "Management's Discussion and Analysis" on pages 25 though 31 and is
incorporated herein.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements and supplementary data referred to in
Item 14 are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
4
PART III
Item 10. Directors and Executive Officers of the Registrant
A. Directors
Below are the names, ages at October 22, 1997, and principal
occupations for the last five years of each director of the Company.
Class I Directors Terms expire at 1998 Annual Meeting
Richard A. Smith - 72 Chairman of the Board of the Company and of
Director since 1987 Harcourt General; Chief Executive Officer of the
Company and of Harcourt General since January 15,
1997 and prior to December 1991; Chairman of the
Board, President (until November 1995) and Chief
Executive Officer of GC Companies, Inc. since
December 1993; Director of Harcourt General, GC
Companies, Inc., and Steck-Vaughn Publishing
Corporation. Mr. Smith is the father of Robert A.
Smith, President and Chief Operating Officer and a
director of the Company and President and Co-Chief
Operating Officer and a director of Harcourt
General.
Robert A. Smith - 38 President and Chief Operating Officer of the
Director since 1997 Company and President and Co-Chief Operating
Officer of Harcourt General since January 15, 1997;
Group Vice President of the Company and Harcourt
General prior thereto; President and Chief
Operating Officer of GC Companies, Inc. since
November 1995; Director of Harcourt General and
Steck-Vaughn Publishing Corporation. Mr. Smith is
the son of Richard A. Smith, Chairman of the Board
and Chief Executive Officer of the Company and of
Harcourt General.
Class II Directors Terms expire at 1999 Annual Meeting
Walter J. Salmon - 66 Stanley Roth Sr. Professor of Retailing, Emeritus,
Director since 1987 Graduate School of Business Administration, Harvard
University; Director of Hannaford Bros. Co., The
Quaker Oats Company, Circuit City Stores, Inc.,
Luby s Cafeterias, Inc., Harrah s Entertainment,
Inc., Cole National Corporation and PetsMart, Inc.
5
Matina S. Horner - 58 Executive Vice President of the Teachers Insurance
Director since 1993 and Annuity Association-College Retirement Equities
Fund (TIAA-CREF) and President Emerita of Radcliffe
College since 1989; Director of Boston Edison
Company.
Class III Directors Terms expire at 2000 Annual Meeting
Jean Head Sisco - 72 Partner in Sisco Associates, international
Director since 1987 management consultants; Director of Textron, Inc.,
Newmont Mining Corporation and its principal
subsidiary, Newmont Gold Company, Washington Mutual
Investors Fund, Chiquita Brands International,
Inc., The American Funds Tax-Exempt Series I and K-
Tron International, Inc.
Vincent M. O'Reilly - 60 Distinguished Senior Lecturer, Carroll School of
Director since 1997 Management, Boston College since October 1,
1997; Executive Vice Chairman of Coopers &
Lybrand from October 1994 until October 1997;
Chief Operating Officer or Deputy Chairman of
Coopers & Lybrand from 1988 to October 1994.
B. Executive Officers
Below are the names, ages at October 22, 1997, and principal occupations
for the last five years of each executive officer of the Company who is not
also a director of the Company. All such persons have been elected to serve
until the next annual election of officers and their successors are elected or
until their earlier resignation or removal.
Burton M. Tansky - 59 Chairman and Chief Executive Officer of Neiman
Marcus Stores since May 1994; Chairman and Chief
Executive Officer of Bergdorf Goodman from February
1992 to May 1994.
Gerald A. Sampson - 56 President and Chief Operating Officer of Neiman
Marcus Stores since April 1993; Chairman of May
Company California, a division of May Department
Stores Company, from 1991 to January 1993.
Stephen C. Elkin - 54 Chairman and Chief Executive Officer of Bergdorf
Goodman since May 1994; President and Chief
Operating Officer of Bergdorf Goodman prior
thereto.
6
Dawn Mello - 66 President of Bergdorf Goodman since May 1994 and
from 1983 to 1989; Executive Vice President and
Creative Director Worldwide of Guccio Gucci SpA
from October 1989 to May 1994.
Bernie Feiwus - 49 President and Chief Executive Officer of NM Direct.
John R. Cook - 56 Senior Vice President and Chief Financial Officer
of the Company and of Harcourt General.
Eric P. Geller - 50 Senior Vice President, General Counsel and
Secretary of the Company and of Harcourt General.
Peter Farwell - 54 Vice President - Corporate Relations of the Company
and of Harcourt General.
Paul F. Gibbons - 46 Vice President and Treasurer of the Company and of
Harcourt General.
Gerald T. Hughes - 40 Vice President Human Resources of the Company and
of Harcourt General since June 1994; Associate
General Counsel of the Company and of Harcourt
General with responsibility for labor and
employment matters from August 1992 to June 1994.
Michael F. Panutich - 49 Vice President - General Auditor of the Company and
of Harcourt General since June 1993; Vice President
Accounting of the Company and of Harcourt General
prior thereto.
Stephen C. Richards - 42 Vice President and Controller of the Company and of
Harcourt General since June 1993; Partner, Deloitte
& Touche prior to June 1993.
7
C. Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than
10% of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. The Company believes that all filing
requirements applicable to its insiders were complied with during fiscal
1997.
Item 11. Executive Compensation
Summary Compensation Table (1)
The following table provides information on the compensation provided by the
Company during fiscal 1997, 1996 and 1995 to the Company's Chief Executive
Officers and the five most highly paid executive officers of the Company during
fiscal 1997.
Long-Term Compensation
Compensation (2)
Annual Compensation Awards
Restricted
Other Annual Stock All Other
Name and Fiscal Salary Bonus Compensation Awards Options Compensation
Principal Position Year ($) ($)(3) ($)(4) ($)(5) (#) ($)(6)
======================================================================================================
Richard A. Smith (1) 1997 -- -- -- -- -- --
Chairman and Chief
Executive Officer 1996 -- -- -- -- -- --
commencing
January 15, 1997 1995 -- -- -- -- -- --
B. Tansky 1997 $750,000 $292,500 -- -- 10,000 $ 19,357
Chairman and Chief
Executive Officer of 1996 $650,000 $292,500 -- $153,750 -- $ 16,866
Neiman Marcus
Stores 1995 $600,000 $230,640 $160,339 -- 25,000 $ 14,560
G. Sampson 1997 $500,000 $174,000 -- -- 6,500 $ 14,070
President and Chief
Operating Officer of 1996 $475,000 $190,000 -- -- 12,000 $ 12,854
Neiman Marcus
Stores 1995 $450,000 $150,480 -- $ 71,875 -- $ 12,687
S. Elkin 1997 $480,000 $185,000 -- -- -- $ 10,771
Chairman and Chief
Executive Officer of 1996 $480,000 -- -- $115,313 -- $ 17,170
Bergdorf Goodman
1995 $450,000 $ 22,500 -- -- 20,000 $ 15,812
D. Mello (7) 1997 $365,000 $110,000 -- -- 4,000 $ 9,210
President of Bergdorf
Goodman 1996 $350,000 $ 67,900 -- $ 53,813 -- $ 8,496
1995 $325,000 $ 50,000 -- -- 15,000 $ 2,418
B. Feiwus 1997 $345,000 $115,000 -- -- 6,000 $ 10,697
President and Chief
Executive Officer of 1996 $325,000 $135,000 -- $ 76,875 10,000 $ 10,026
NM Direct
1995 $300,000 -- -- -- 10,000 $ 7,314
R. J. Tarr, Jr. (1) 1997 -- -- -- -- -- --
President and Chief
Executive Officer 1996 -- -- -- -- -- --
through
January 15, 1997 1995 -- -- -- -- -- --
8
(1) Under the terms of an Intercompany Services Agreement, Harcourt
General provides certain management, accounting, financial, legal,
tax, human resources and other corporate services to the Company,
including the services of certain officers of Harcourt General who
are also officers of the Company, in consideration of a fee based on
Harcourt General's direct and indirect costs of providing the
corporate services. The level of services and fees are subject to
the approval of the Special Review Committee of the Board of
Directors of the Company, which consists solely of directors who are
independent of Harcourt General. During fiscal 1997, 1996 and 1995,
the Company paid or accrued approximately $5.7 million, $6.9 million
and $6.5 million, respectively, to Harcourt General for all of its
services under the Intercompany Services Agreement. Mr. Smith
succeeded Mr. Tarr as Chief Executive Officer of the Company upon Mr.
Tarr's resignation effective January 15, 1997. Since both served as
Chief Executive Officer of the Company during fiscal 1997, they are
required to be named in this table. The other senior officers of
Harcourt General, who derive all of their compensation directly from
Harcourt General, are not included in this table. Of the amount
payable under the Intercompany Services Agreement for fiscal 1997,
approximately $365,000 was attributable to Mr. Smith's services and
approximately $1.0 million was attributable to Mr. Tarr's services.
Of the amounts payable under the Intercompany Services Agreement for
fiscal 1996 and 1995, approximately $2.3 million and $2.4 million,
respectively, were attributable to Mr. Tarr's services. These
amounts include costs related to base compensation, bonuses, benefits
and amounts necessary to fund retirement benefits, all of which are
direct obligations of Harcourt General. Under the terms of an
agreement between Mr. Tarr and Harcourt General dated December 17,
1996, Mr. Tarr is entitled to receive certain compensation,
retirement and other payments directly from Harcourt General. None
of these amounts will be payable by the Company.
(2) Other than restricted stock, stock options and stock appreciation
rights which may be granted under the Company's 1997 Incentive Plan,
the Company does not have a long-term compensation program that
includes long-term incentive payouts. No stock appreciation rights
were granted to any of the named executive officers during the years
reported in the table.
(3) Bonus payments are reported with respect to the year in which the
related services were performed.
(4) No disclosure regarding items included in this category is required
unless the amounts in any year for any named executive officer exceed
the lesser of $50,000 or 10% of the annual salary and bonus for the
named executive officer. Of the $160,339 reported with respect to
Mr. Tansky in this column for fiscal 1995, $140,236 was attributable
to relocation-related reimbursements paid by the Company in fiscal
1995 in connection with his move from New York to Dallas to assume
the position of Chairman and Chief Executive Officer of Neiman Marcus
Stores, the same position he had previously held with Bergdorf
Goodman.
(5) Calculated by multiplying the closing price of the Company's Common
Stock on the New York Stock Exchange on the date of grant by the
number of shares awarded. With respect to awards of restricted stock
made through fiscal 1997, twenty percent of each award are freed from
the restrictions on transfer each year, commencing one year after the
9
date of grant, provided that the recipient continues to be employed
by the Company on the anniversary date of the grant. Holders of such
restricted stock are entitled to vote their restricted shares and
receive dividends, if any. In the event of termination of employment
for any reason, other than death or permanent disability, restricted
shares are forfeited by the holders and revert to the Company. At
the end of fiscal 1997, the named executive officers' restricted
stock holdings and market values (based on the New York Stock
Exchange closing price of $27.9375 for the Company's Common Stock at
fiscal year end) were as follows: Mr. Tansky - 8,000 shares
($223,500); Mr. Sampson - 3,000 shares ($83,813); Mr. Elkin - 6,000
shares ($167,625); Ms. Mello - 2,800 shares ($78,225) and Mr. Feiwus
- 4,000 shares ($111,750). The restricted shares held by Mr. Tansky
were granted in fiscal 1996, the restricted shares held by Mr.
Sampson were granted in fiscal 1995, the restricted shares held by
Ms. Mello were granted in fiscal 1996, and the restricted shares held
by Messrs. Elkin and Feiwus were granted in fiscal 1996 and fiscal
1992.
(6) The items accounted for in this column include the cost to the
Company of matching contributions under (a) the Company's Key
Employee Deferred Compensation Plan and (b) group life insurance
premiums. For fiscal 1997, such amounts for each of the named
executive officers were, respectively, as follows: Mr. Tansky -
$15,637 and $3,720; Mr. Sampson - $10,350 and $3,720; Mr. Elkin -
$7,200 and $3,571; Ms. Mello - $6,494 and $2,716; and Mr. Feiwus -
$7,200 and $3,497.
(7) Ms. Mello rejoined the Company in May 1994. As a condition of
employment, Ms. Mello was guaranteed a minimum bonus of $50,000 for
fiscal 1995.
Option Grants in Last Fiscal Year (1)
The following table provides information regarding options granted under
the Company's 1987 Stock Incentive Plan during the fiscal year ended August 2,
1997 to the executive officers named in the Summary Compensation Table.
Individual Grants
---------------------------------------------
% of Potential
Number of Total Realizable Value at
Securities Options Assumed Annual
Underlying Granted to Exercise Rates of Stock
Options Employees or Base Price Appreciation
Granted in Fiscal Price Expiration for Option Term(2)
Name (#)(3) Year ($/Sh) Date ___________________
5%($) 10%($)
---- -------- --------- -------- ---------- -------- --------
R. Smith (4) -- -- -- -- -- --
B. Tansky 10,000 7.63% $ 33.375 9/11/06 $208,894 $531,912
G. Sampson 6,500 4.96% $ 33.375 9/11/06 $136,431 $345,743
S. Elkin -- -- -- -- -- --
D. Mello 4,000 3.05% $ 33.375 9/11/06 $ 83,957 $212,765
B. Feiwus 6,000 4.58% $ 33.375 9/11/06 $125,936 $319,147
R. Tarr, Jr.(4) -- -- -- -- -- --
__________
10
(1) No stock appreciation rights were granted to any named executive
officer during fiscal 1997.
(2) These potential realizable values are based on assumed rates of
appreciation required by applicable regulations of the Securities
and Exchange Commission.
(3) All option grants are non-qualified stock options having a term of
10 years and one day. They become exercisable at the rate of 20% on
each of the first five anniversary dates of the grant.
(4) None of the executive officers of Harcourt General who are also
officers of the Company participated in the Company's 1987 Stock
Incentive Plan, nor will these executive officers participate in the
Company s 1997 Incentive Plan.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
The following table provides information regarding the number and value of
stock options held at August 2, 1997 by the executive officers named in the
Summary Compensation Table.
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
August 2, 1997(#) August 2, 1997($)(1)
----------------- --------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
---- --------------- ------------ ----------------- --------------------
R. Smith (2) -- -- -- --
B. Tansky -- -- 60,900/35,600 $858,344 / $350,875
G. Sampson -- -- 8,400/20,100 $110,775 / $174,350
S. Elkin -- -- 54,350/18,000 $709,972 / $248,375
D. Mello -- -- 4,500/13,000 $ 61,031 / $122,063
B. Feiwus -- -- 6,500/24,000 $ 88,344 / $238,125
R. Tarr, Jr. (2) -- -- -- --
(1) The value of unexercised in-the-money options is calculated by
multiplying the number of underlying shares by the difference between the
closing price of the Company's Common Stock on the New York Stock
Exchange at fiscal year end ($27.9375) and the option exercise price for
those shares. These values have not been realized. The closing price of
the Company's Common Stock on the New York Stock Exchange on October 22,
1997 was $35.375.
(2) None of the executive officers of Harcourt General who are also officers
of the Company participated in the Company's 1987 Stock Incentive Plan,
nor will these executive officers participate in the Company's 1997
Incentive Plan.
11
Directors Compensation
Directors who are not affiliated with the Company or Harcourt General each
receive an annual retainer of $20,000 and a fee of $2,000 per Board of
Directors meeting attended, plus travel and incidental expenses (an aggregate
of $5,413 in fiscal 1997) incurred in attending meetings and carrying out
their duties as directors. They also receive a fee of $750 (the Chairperson
receives $1,500) for each committee meeting attended. If a director is unable
to attend a meeting in person but participates by telephone, he or she
receives one-half of the fee that would otherwise be payable.
The Company offers non-employee directors the alternative of receiving
directors' fees on a deferred basis. Those directors may elect to defer
receipt of all or a specified portion of their fees (i) in the form of cash
with interest at a rate equal to the average of the top rates paid by major
New York banks on three month negotiable certificates of deposit, or (ii) in
the form of stock based units, the value of each unit initially being equal to
the fair market value of one share of Common Stock of the Company on the date
the fees would otherwise be payable. To date, Dr. Horner has elected to
receive all of her fees on a deferred basis using the stock based method and
Mrs. Sisco has elected to receive fifty percent of her fees on a deferred
basis using the stock based method.
Pension Plans
The Company maintains a funded, qualified pension plan known as The Neiman
Marcus Group, Inc. Retirement Plan (the "Retirement Plan"). Most non-union
employees over age 21 who have completed one year of service with 1,000 or
more hours participate in the Retirement Plan, which pays benefits upon
retirement or termination of employment. The Retirement Plan is a "career-
average" plan, under which a participant earns each year a retirement annuity
equal to 1% of his or her compensation for the year up to the Social Security
wage base and 1.5% of his or her compensation for the year in excess of such
wage base. Benefits under the Retirement Plan become fully vested after five
years of service with the Company.
The Company also maintains a Supplemental Executive Retirement Plan (the
"SERP"). The SERP is an unfunded, nonqualified plan under which benefits are
paid from the Company's general assets to supplement Retirement Plan benefits
and Social Security. Executive, administrative and professional employees
(other than those employed as salespersons) with an annual base salary at
least equal to a minimum established by the Company ($100,000 as of August 2,
1997) are eligible to participate. At normal retirement age (age 65), a
participant with 25 or more years of service is entitled to payments under the
SERP sufficient to bring his or her combined annual benefit from the
Retirement Plan and SERP, computed as a straight life annuity, up to 50% of
the participant's highest consecutive 60 month average of annual pensionable
earnings, less 60% of his or her estimated annual primary Social Security
benefit. If the participant has fewer than 25 years of service, the combined
benefit is proportionately reduced. Benefits under the SERP become fully
vested after five years of service with the Company.
The following table shows the estimated annual pension benefits payable to
employees in various compensation and years of service categories. The
12
estimated benefits apply to an employee retiring at age 65 in 1997 who elects
to receive his or her benefit in the form of a straight life annuity. These
benefits include amounts attributable to both the Retirement Plan and the SERP
and are in addition to any retirement benefits that might be received from
Social Security. The amounts actually payable will be lower than the amounts
shown below, since such amounts will be reduced by 60% of the participant's
estimated primary Social Security benefit.
Estimated Annual Retirement Benefits
Under Retirement Plan and SERP
Average Total Years of Service
Pensionable ----------------------
Earnings 5 10 15 20 25
-------- -------- -------- -------- --------
$300,000 $ 30,000 $ 60,000 $ 90,000 $120,000 $150,000
400,000 40,000 80,000 120,000 160,000 200,000
500,000 50,000 100,000 150,000 200,000 250,000
600,000 60,000 120,000 180,000 240,000 300,000
700,000 70,000 140,000 210,000 280,000 350,000
800,000 80,000 160,000 240,000 320,000 400,000
900,000 90,000 180,000 270,000 360,000 450,000
13
The following table shows the pensionable earnings and credited years of
service for the executive officers named in the Summary Compensation Table as
of August 2, 1997 and years of service creditable at age 65.
Pensionable Earnings
for Year Ended Years of Service(3)
Name August 2, 1997(2) at August 2, 1997 at Age 65
---- ----------------- ----------------- ---------
R. Smith(1) -- -- --
B. Tansky $750,000 --(4) 20 (4)
G. Sampson 500,000 --(5) 20 (5)
S. Elkin 480,000 19 29
D. Mello 365,000 16 15
B. Feiwus 345,000 17 33
R. Tarr, Jr.(1) -- -- --
__________
(1) Mr. Smith does not participate in the Company's Retirement Plan or SERP.
Mr. Tarr, who resigned as Chief Executive Officer of the Company,
effective January 15, 1997, did not participate in the Company's
Retirement Plan or SERP.
(2) In computing the combined benefit under the Retirement Plan and SERP,
"pensionable earnings" means, with respect to the Retirement Plan, base
salary and any bonus and, with respect to the SERP, base salary only.
The amounts shown above include base salary only. For the amount of
bonus included in pensionable earnings under the Retirement Plan see the
Summary Compensation Table in Item 11 above. With respect to both the
Retirement Plan and the SERP, deferred base salary and/or deferred bonus
amounts are included in benefit calculations.
(3) The years of credited service set forth in the table reflect years of
credited service under the Retirement Plan, which is a "career average
plan" with no limitation on years of credited service. However,
credited service under the SERP may not exceed 25 years.
(4) Under Mr. Tansky's employment agreement with the Company, for purposes
of determining his retirement benefits under the SERP, Mr. Tansky will
be credited with 5/3 times his years of service with the Company
provided (i) he remains continuously employed by the Company until his
65th birthday or (ii) the Company fails to extend his employment beyond
January 31, 2000; otherwise, Mr. Tansky's accrued service under the SERP
will be calculated in the normal manner. Mr. Tansky is 59 years old.
(5) For purposes of determining Mr. Sampson's retirement benefits under the
SERP, Mr. Sampson will be credited with 20/13 times his years of service
with the Company provided he remains continuously employed by the
Company until his 65th birthday; otherwise, Mr. Sampson's accrued
service under the SERP will be calculated in the normal manner. Mr.
Sampson is 56 years old.
14
Employment and Severance Agreements
Burton Tansky. The Company and Mr. Tansky have entered into an employment
agreement, effective February 1, 1997, pursuant to which Mr. Tansky is
employed as Chairman and Chief Executive Officer of Neiman Marcus Stores
through January 31, 2000. In the event Mr. Tansky is terminated without cause
within 24 months of a change of control of the Company, or if within 24 months
of such a change of control Mr. Tansky resigns because he is not permitted to
continue in a position comparable in duties and responsibilities to that which
he held prior to the change of control, Mr. Tansky will be entitled to receive
his then-current base compensation for 18 months. If the Company terminates
Mr. Tansky's employment during the term of the Employment Agreement for any
reason other than for cause or other than because of his total disability or
death, Mr. Tansky will continue to receive his base compensation and benefits
until January 31, 2001 or for 18 months following termination, whichever is
greater. If the Company determines not to extend Mr. Tansky's employment
beyond January 31, 2000, the Company will pay to Mr. Tansky his then-current
base compensation through January 31, 2001, which amount will be reduced by
any amounts earned by him from other employment between August 1, 2000 and
January 31, 2001, and the Company will credit Mr. Tansky with service pursuant
to the SERP as if he had remained employed by the Company until age 65.
Gerald A. Sampson. Pursuant to an agreement between Mr. Sampson and the
Company, effective September 1996, Mr. Sampson is entitled to receive
severance payments in the event his employment with the Company is terminated
in certain situations. If the Company terminates Mr. Sampson's employment
other than for cause or other than due to his total disability or death, Mr.
Sampson shall have the right to receive an amount equal to his then-current
annual base salary, payable in 12 monthly installments. Mr. Sampson will also
be entitled to receive such payments if his employment is terminated by a
successor to the Company within 24 months of a change of control of the
Company without cause or other than due to his total disability or death, or
if within 24 months of such a change of control Mr. Sampson resigns because he
is not permitted to continue in a position comparable in duties and
responsibilities to that which he held prior to the change of control.
Beginning six months following the date of a covered termination or
resignation, all amounts to be paid under such agreement shall be reduced by
the amount Mr. Sampson receives as compensation or severance related to other
employment. Mr. Sampson has agreed to provide the Company with 3 months
advance notice of his intent to resign from the Company provided that such
resignation does not follow a change of control of the Company.
Stephen C. Elkin. Pursuant to an agreement between Mr. Elkin and Bergdorf
Goodman, effective September 1993, Mr. Elkin is entitled to receive severance
payments in the event his employment with Bergdorf Goodman is terminated in
certain situations. If the Company terminates Mr. Elkin's employment other
than for cause or other than due to his total disability or death, he will
receive an amount equal to one and one half times his then-current base
salary, which amount will be paid to him in 18 monthly installments following
such termination but will be reduced by any amounts received by him from other
employment during the period beginning six months following his termination
15
and ending at the end of the 18 month period. Mr. Elkin will also be entitled
to receive such payments in the event his employment is terminated without
cause within 24 months of a change of control of either Bergdorf Goodman or
the Company, or in the event he resigns within 24 months of a change of
control because he is not permitted to continue in a position comparable in
duties and responsibilities to that which he held before the change of
control.
Dawn Mello. Pursuant to an agreement between Ms. Mello and Bergdorf
Goodman, effective May 1994, Ms. Mello is entitled to receive severance
payments in the event her employment with Bergdorf Goodman is terminated in
certain situations. If the Company terminates Ms. Mello's employment other
than for cause or other than due to her total disability or death, Ms. Mello
will receive an amount equal to her then-current annual salary, which amount
will be paid in 12 monthly installments following such termination but will be
reduced by any amounts received by her from other employment during the period
beginning six months and ending 12 months following such termination.
Bernie Feiwus. Pursuant to an agreement between Mr. Feiwus and NM Direct,
effective October 1995, Mr. Feiwus is entitled to receive severance payments
in the event his employment with NM Direct is terminated in certain
situations. If the Company terminates Mr. Feiwus' employment without cause
within 24 months of a change of control of the Company or of NM Direct, or if
within 24 months after such a change of control Mr. Feiwus resigns his
employment because he is not permitted to continue in a position comparable in
duties and responsibilities to that which he held before the change of
control, he will receive an amount equal to one and one half times his then-
current annual base salary, which amount will be paid in 18 monthly
installments following such termination but will be reduced by any amounts
received by him from other employment during the period beginning six months
and ending 18 months following such termination.
_______________
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange
Act of 1934, each as amended, that might incorporate future filings, including
this Form 10-K, in whole or in part, the following Compensation Committee
Report on Executive Compensation and Stock Performance Graph shall not be
deemed to be incorporated by reference into any such filings, nor shall
such sections of this Report be deemed to be incorporated into any future
filings made by the Company under the Securities Act of 1933 or the
Securities Exchange Act of 1934.
Compensation Committee Report on Executive Compensation
The Compensation Committee is composed of Walter J. Salmon (Chairman),
Matina S. Horner, Vincent M. O'Reilly and Jean Head Sisco. The members
of the Compensation Committee are all independent directors.
The principal responsibility of the Committee is to review the performance
of, and determine the compensation for, the executive officers of the Company
who are not also executive officers of Harcourt General. The individuals in
16
this group include Messrs. Tansky, Sampson, Elkin, Feiwus and Ms. Mello, all
of whom are named executive officers in the Summary Compensation Table. The
compensation of Harcourt General's executive officers, most of whom are also
executive officers of the Company, is determined by Harcourt General's
Compensation Committee.
Compensation Policies
The principal objectives of the Company's executive compensation program
are to reward competitively its executive officers in order to attract and
retain individuals important to the success of the Company and to provide
incentives that will motivate those executives and reward them for achieving
the business objectives of the Company and its operating divisions over both
the short and long terms.
Early in each fiscal year, the Committee considers the recommendations of
the Chief Executive Officer, which are supported by data generated by the
Company's Human Resources Department, for each component of compensation of
the Company's executive officers. The Committee reviews those recommendations
and then approves them or makes such modifications as it deems appropriate.
In September 1997, the Committee considered and adopted modifications to
certain elements of the Company's compensation policies. These changes will
take effect in fiscal 1998 and are discussed below under the heading "Changes
in Compensation Policies."
The principal components of the Company's compensation program are:
Base Salary
For fiscal 1997, base salary was determined with reference both to salary
survey information from recognized compensation consulting firms and to each
executive officer's level of responsibility, experience and performance. The
salary survey data was used to establish benchmark amounts for both base
salary and total cash compensation for each executive position. Comparisons
were made to a range of retail companies or to divisions within such
companies, with the principal selection criteria for comparisons being similar
revenues to the division within the Company. For fiscal 1997, the Committee
generally set its salary and total cash compensation benchmarks (assuming that
maximum bonuses would be achieved) for executive officers above the 50th
percentile of the comparison group of companies.
Because the Company competes for executive talent with a broad range of
companies, the Committee did not limit its comparison information for
compensation purposes to the companies included in the peer groups in the
Stock Performance Graph.
17
The Committee reviewed in detail the base salary levels for each of the
named executive officers of the Company. While the Committee used the above
described benchmarks as a reference point, a particular individual's base
salary may vary from the benchmark depending upon his or her salary history,
experience, individual performance, guidelines established by the Chief
Executive Officer with respect to salary increases for the entire Company and
the subjective judgment of the Committee.
Annual Incentive Plan
The annual incentive bonus program is intended to put substantial amounts
of total cash compensation at risk with the intent of focusing the attention
of the executives on achieving both the Company's and their division's
performance goals and their individual goals, thereby contributing to
profitability and building shareholder value.
The determination of annual bonuses for fiscal 1997 was based principally
on the achievement of performance objectives by the operating division for
which the executive was responsible and the individual executive's own
performance. For each of the named executive officers, a component of their
bonus eligibility also depended on the Company's overall performance.
In September 1997 the Compensation Committee established the Company's and
each division's performance goals for fiscal 1998 and determined the executive
officers who should participate in the annual incentive plan for that year and
their respective bonus award opportunities.
For fiscal 1997, the plan provided for maximum bonuses ranging from 35% to
45% of base salary. The divisional performance component of the bonus was
determined based on a weighting of several factors, the most important of
which was operating earnings before corporate expenses. Other factors included
return on net assets and working capital as a percentage of sales. In
addition, each of the Company's named executive officers were required to meet
individual performance goals, which typically include achievement of specific
tasks, in addition to the performance targets in order to receive his or her
full bonus.
The bonuses actually awarded to the named executive officers for fiscal
1997 were determined by an assessment of all of these factors, as well as
certain subjective factors.
Under the annual incentive program in effect for fiscal 1997, even if the
financial performance targets were exceeded, bonus awards would not have
increased over the maximum bonus values established by the Committee. Since
the highest divisional performance targets were not met, the bonus awards
granted by the Committee for fiscal 1997 were below the maximum bonus values.
If the Company and/or the relevant division fell sufficiently short of its
performance target, there was a presumption that bonuses would not be paid
absent special circumstances. Factors such as the performance of a business
unit for which the executive officer is responsible and achievement of
individual performance goals were considered in the decision to award a bonus.
18
If corporate and/or division performance targets were met, but an individual
fell short of his or her performance goals, the individual's bonus could have
been reduced or eliminated in the discretion of the Committee.
Stock Incentives
The Committee's purpose in awarding equity based incentives in fiscal 1997
in the form of stock options which vest over a five year period and terminate
ten years from the date of grant and restricted stock which vests over a five
year period, is to achieve as much as possible an identity of interest between
the executives and the long term interest of the stockholders. The principal
factors considered in determining which executive officers (including the
named executive officers) were awarded equity based compensation in the 1997
fiscal year, and in determining the types and amounts of such awards, were
salary levels, equity awards granted to executives at competing retail
companies, as well as the performance, experience and level of responsibility
of each executive.
Changes in Compensation Policies
At its meeting in September 1997, the Committee made several changes in
elements of the Company's compensation policies that will be applied in fiscal
1998 and in the future to achieve the objectives described above under the
"Compensation Policies" heading. First, the Committee determined that it
would use for compensation benchmarking purposes a broad range of domestic
publicly held "upscale" specialty retailing companies. This group of companies
is not limited to those in the Stock Performance Graph peer groups. Second,
the Committee determined that for the base salary component of compensation it
would target the middle range of salaries for comparable positions in the
comparison group of companies. Most important, the Committee determined to
make annual and long term incentives a greater portion of total compensation
and to increase the variable risk and reward of such incentive compensation in
proportion to an executive's level of responsibility in the Company. For
example, for fiscal 1998 the named executive officers' cash bonus opportunity
for performance at the level of meeting the fiscal 1998 budget will range from
7.5% to 11% of base salary and will increase to a range of 30% to 45% of base
salary for performance above the fiscal 1998 budget, which would represent a
significant improvement over the Company's fiscal 1997 results. For superior
performance in excess of the fiscal 1998 budget, cash bonus opportunities will
increase to a range of 60% to 90% of base salary. If performance is below the
fiscal 1998 budget, the Committee may reduce cash bonus awards or not grant
them at all. Similarly, long term stock incentives will be structured to
provide more significant capital accumulation opportunities than in the past,
and the vesting of restricted stock awards will take place upon the
achievement of specified business objectives which include improvements in
operating earnings and return on net assets and may also include other factors
as determined by the Committee from time to time. In any event, restricted
stock awards will vest eight years after the grant date.
19
Compensation of the Chief Executive Officer
Mr. Smith succeeded Mr. Tarr as Chief Executive Officer of the Company upon
Mr. Tarr's resignation effective January 15, 1997. While serving as Chief
Executive Officer of the Company, each of them also served as the Chief
Executive Officer of Harcourt General, which owns a majority of the
outstanding Common Stock of the Company. Both Mr. Smith and Mr. Tarr received
all of their cash and non-cash compensation from Harcourt General and not from
the Company. However, pursuant to the Intercompany Services Agreement between
the Company and Harcourt General, Harcourt General provides certain management
and other corporate services to the Company, including the services of Mr.
Tarr and then Mr. Smith as Chief Executive Officer. During fiscal 1997, the
Company paid or accrued approximately $5.7 million to Harcourt General for all
of its services under the Intercompany Services Agreement, of which
approximately $1.0 million was attributable to Mr. Tarr's services and
approximately $365,000 was attributable to Mr. Smith's services. While the
Special Review Committee of the Company reviews each year the appropriateness
of the charges by Harcourt General to the Company under the Intercompany
Services Agreement, neither this Committee nor the Special Review Committee
plays any role in determining the compensation that Mr. Tarr, Mr. Smith or any
other executive officer of Harcourt General receives from Harcourt General.
Compliance with the Internal Revenue Code
The Internal Revenue Code (the "Code") generally disallows a tax deduction
to public companies for compensation in excess of $1 million per year which is
not "performance based" paid to each of the executive officers named in the
Summary Compensation Table. During fiscal 1997, the Committee, the Board of
Directors and the stockholders of the Company approved The Neiman Marcus Group
1997 Incentive Plan. This Plan allows the Committee to continue to award stock
incentives and cash bonuses based on objective criteria. It is expected that
the stock incentives and cash bonuses awarded under the Plan will be
characterized as "performance based" compensation and therefore will be fully
deductible by the Company.
The Committee will continue to monitor the requirements of the Code to
determine what actions should be taken by the Company in order to preserve the
tax deduction for executive compensation to the maximum extent, consistent
with the Company's continuing goals of providing the executives of the Company
with appropriate incentives and rewards for their performance.
COMPENSATION COMMITTEE
Walter J. Salmon, Chairman
Matina S. Horner
Vincent M. O'Reilly
Jean Head Sisco
20
Stock Performance Graph
The graph below compares the cumulative total shareholder return on the
Company's Common Stock against the cumulative total return during the five
fiscal years ended August 2, 1997 of (i) the Standard & Poor's 500 Index, and
(ii) a peer group index used by the Company in the last fiscal year (Old Peer
Index) consisting of Tiffany & Co. and Nordstrom, Inc., and (iii) a new peer
index (New Peer Index) which includes Saks Holdings, Inc. along with Tiffany
and Nordstrom. The graph assumes a $100 investment in the Company's Common
Stock and in each index company other than Saks Holdings at August 3, 1991,
and that all dividends were reinvested. Saks Holdings began trading on the
New York Stock Exchange in May 1996 and, accordingly, is included in the New
Peer Index commencing as of the end of the Company's 1996 fiscal year. For
comparative purposes, the value of an investment in Saks as of that date is
set at an amount equal to the average of the cumulative total returns of the
other members of the New Peer Index as of that same date ($165.17). The
common stocks of the companies in each peer group index have been weighted
annually to reflect relative stock market capitalization. The comparisons
provided in this graph are not intended to be indicative of possible future
performance of the Company's stock.
Stock Performance Graph
Comparison of Five-Year Cumulative Total Return
The Neiman Marcus Group, Inc., S&P 500 Index, Old Peer Index, and New Peer Index
01-Aug-92 31-Jul-93 30-Jul-94 29-Jul-95 03-Aug-96 02-Aug-97
Neiman Marcus Group, Inc. $100.00 $108.81 $115.90 $117.69 $205.72 $213.86
S&P 500 Index $100.00 $108.51 $113.65 $142.50 $171.54 $257.84
Old Peer Index $100.00 $ 98.64 $151.29 $143.55 $165.17 $239.24
New Peer Index $100.00 $ 98.64 $151.29 $143.55 $165.17 $202.92
21
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, as of October 22, 1997, with
respect to the beneficial ownership of the Common Stock by (i) each person
known to the Company to own beneficially more than 5% of the outstanding
shares of Common Stock; (ii) each executive officer named in the Summary
Compensation Table; (iii) each director of the Company; and (iv) all directors
and current executive officers of the Company as a group. Robert J. Tarr,
Jr., who is listed in the table because he is named in the Summary
Compensation Table, resigned as a director and officer of the Company
effective January 15, 1997.
Number Percent
of Shares of Common
Name of Beneficial Owner Owned(1) Stock
------------------------ ---------- ---------
Harcourt General, Inc.(2) 26,429,502 53%
27 Boylston Street
Chestnut Hill, MA 02167
Gabelli Funds, Inc.(3) 4,475,500 9%
One Corporate Center
Rye, NY 10580
Burton M. Tansky(4) 92,100 *
Gerald A. Sampson(5) 48,606 *
Stephen Elkin(6) 85,759 *
Dawn Mello(7) 13,600 *
Bernie Feiwus(8) 41,045 *
Matina S. Horner -- *
Vincent M. O Reilly 800 *
Walter J. Salmon 8,942 *
Jean Head Sisco 1,134 *
Richard A. Smith (9) -- *
Robert A. Smith (9) -- *
Robert J. Tarr, Jr.(10) -- *
All current executive officers and directors as a
group (18 persons)(11) 291,986 *
__________
* Less than 1%.
(1) Unless otherwise indicated in the following footnotes, each stockholder
referred to above has sole voting and investment power with respect to
the shares listed.
(2) Richard A. Smith, Chairman and Chief Executive Officer of the Company
and of Harcourt General, his sister, Nancy L. Marks, and certain
members of their families (including Robert A. Smith, President and
Chief Operating Officer of the Company and President and Co-Chief
Operating Officer of Harcourt General) may be regarded as controlling
persons of Harcourt General, and therefore of the Company. The shares
22
of Harcourt General Class B Stock and Harcourt General Common Stock
beneficially owned by or for the benefit of the Smith family constitute
approximately 28% of the aggregate number of outstanding equity
securities of Harcourt General. Each share of Harcourt General voting
stock entitles the holder thereof to one vote on all matters submitted
to Harcourt General's stockholders, except that each share of Harcourt
General Class B Stock (virtually all of which is owned by the Smith
family) entitles the holder thereof to ten votes on the election of
directors at any Harcourt General stockholders' meeting under certain
circumstances. Accordingly, as to any elections in which the Harcourt
General Class B Stock would carry ten votes per share at a Harcourt
General stockholders' meeting, the Smith family would have
approximately 80% of the combined voting power of the Harcourt General
voting securities.
Under the definition of "beneficial ownership" in Rule 13d-3 of the
Rules and Regulations promulgated under the Securities Exchange Act of
1934, as amended, the Smith family and the members of Harcourt
General's Board of Directors may be deemed to be the beneficial owners
of the securities of the Company beneficially owned by Harcourt
General in that they may be deemed to share with Harcourt General the
power to direct the voting and/or disposition of such securities.
However, this information should not be deemed to constitute an
admission that any such person or group of persons is the beneficial
owner of such securities.
(3) The information reported is based on a Schedule 13G dated August 15,
1997 filed with the Securities and Exchange Commission (the
"Commission") by the Gabelli Funds, Inc. and its affiliates
(collectively, the "Gabelli Affiliates"). The Gabelli Affiliates have
sole voting power with respect to 4,372,500 shares and sole dispositive
power with respect to all of the shares shown in the table.
(4) Includes 74,200 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of October 22, 1997. Also includes
13,900 shares of restricted stock over which Mr. Tansky has voting but
not dispositive power.
(5) Includes 14,100 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of October 22, 1997. Also includes
5,800 shares of restricted stock over which Mr. Sampson has voting but
not dispositive power.
(6) Includes 58,750 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of October 22, 1997. Also includes
8,300 shares of restricted stock over which Mr. Elkin has voting but
not dispositive power.
(7) Includes 8,300 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of October 22, 1997. Also includes
3,900 shares of restricted stock over which Ms. Mello has voting but
not dispositive power.
(8) Includes 14,200 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of October 22, 1997. Also includes
6,800 shares of restricted stock over which Mr. Feiwus has voting but
not dispositive power.
23
(9) The members of the Board of Directors of Harcourt General, including
Richard A. Smith and Robert A. Smith, may be deemed to be the
beneficial owners of the securities of the Company owned by Harcourt
General. However, this information should not be deemed to be an
admission that any such person or group is the beneficial owner of
such securities.
(10) Mr. Tarr resigned as a director and officer of the Company effective
January 15, 1997.
(11) Excludes the beneficial ownership of securities of the Company which
may be deemed to be attributed to Richard A. Smith and Robert A.
Smith (see Notes 2 and 9 above). Includes 169,550 shares of Common
Stock which are subject to outstanding options exercisable within 60
days of October 22, 1997. Also includes 38,700 shares of restricted
stock over which individuals in the group have voting but not
dispositive power.
Item 13. Certain Relationships and Related Transactions
Transactions with Principal Stockholder Intercompany Services Agreement
See Note 1 to the Summary Compensation Table in Item 11 above.
Transactions with Officers
During fiscal 1997 and through October 22, 1997, Messrs. Sampson, Elkin and
Feiwus had outstanding loans under the Company's Key Executive Stock Purchase
Loan Plan (the "Loan Plan") in the respective maximum aggregate principal
amounts of $457,894, $94,687 and $193,315. In accordance with the provisions
of the Loan Plan, these loans were used to acquire shares of Common Stock
either in the open market or pursuant to stock option exercises and to
discharge certain tax liabilities incurred in connection with the release of
restrictions on previous grants of restricted Common Stock. The loans are
secured by a pledge of the purchased shares and bear interest at an annual
rate of 5%, payable quarterly. Pursuant to the terms of the Loan Plan, each
executive officer's loan will become due and payable seven months after his
employment with the Company terminates. No other officer of the Company had
outstanding loans under the Loan Plan in excess of $60,000 during fiscal 1997
or subsequent thereto.
24
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
14(a)(1) Consolidated Financial Statements
The documents listed below are incorporated herein by reference to the
Company's 1997 Annual Report to Shareholders and are incorporated herein by
reference into Item 8 hereof:
Consolidated Balance Sheets -August 2, 1997 and August 3, 1996.
Consolidated Statements of Earnings for the fiscal years ended
August 2, 1997, August 3, 1996 and July 29, 1995.
Consolidated Statements of Cash Flows for the fiscal years
ended August 2, 1997, August 3, 1996 and July 29, 1995.
Consolidated Statements of Shareholders' Equity for the fiscal
years ended August 2, 1997, August 3, 1996 and July 29, 1995.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
14(a)(2) Consolidated Financial Statement Schedules
The document and schedule listed below are filed as part of this Form 10-K:
Page in
Form 10-K
Independent Auditors' Report on
Consolidated Financial Statement F-1
Schedule
Schedule II -- Valuation and Qualifying
Accounts and Reserves . . . . . . . . F-2
All other schedules for which provision is made in the applicable
regulations of the Securities and Exchange Commission have been omitted
because the information is disclosed in the Consolidated Financial Statements
or because such schedules are not required or are not applicable.
14(a)(3) Exhibits
The exhibits filed as part of this Annual Report are listed in the Exhibit
Index immediately preceding the exhibits. The Company has identified with an
asterisk in the Exhibit Index each management contract and compensation plan
filed as an exhibit to this Form 10-K in response to Item 14(c) of Form 10-K.
25
14(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
August 2, 1997.
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE NEIMAN MARCUS GROUP, INC.
By: /s/ Richard A. Smith
Richard A. Smith
Chairman of the Board and Chief Executive Officer
Dated: October 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the following capacities and on the dates indicated.
Signature Title Date
Principal Executive Officer:
/s/ Richard A. Smith Chairman of the Board, October 28,1997
Richard A. Smith Chief Executive Officer
and Director
Principal Financial Officer:
/s/ John R. Cook Senior Vice President and October 28, 1997
John R. Cook Chief Financial Officer
Principal Accounting Officer:
/s/ Stephen C. Richards Vice President and October 28, 1997
Stephen C. Richards Controller
27
Directors:
/s/ Richard A. Smith October 28, 1997
Richard A. Smith
/s/ Matina S. Horner October 16, 1997
Matina S. Horner
/s/ Vincent M. O'Reilly October 23, 1997
Vincent M. O'Reilly
/s/ Walter J. Salmon October 28, 1997
Walter J. Salmon
/s/ Jean Head Sisco October 23, 1997
Jean Head Sisco
/s/ Robert A. Smith October 28, 1997
Robert A. Smith
28
EXHIBIT INDEX
3.1 (a) Restated Certificate of Incorporation of the Company,
incorporated herein by reference to the Company's Annual Report
on Form 10-K for the twenty-six week period ended August 1, 1987.
3.2 By-Laws of the Company, as amended, incorporated herein by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended August 1, 1992.
*10.1 Intercompany Services Agreement, dated as of July 24,
1987, between Harcourt General and the Company, incorporated
herein by reference to the Company's Annual Report on Form
10-K for the twenty-six week period ended August 1, 1987.
*10.2 1987 Stock Incentive Plan, incorporated herein by
reference to the Company's Annual Report on Form 10-K for the
twenty-six week period ended August 1, 1987.
*10.3 The Neiman Marcus Group, Inc. 1997 Incentive Plan,
incorporated herein by reference to Exhibit A to the
Company's Definitive Schedule 14A dated December 10, 1996 and
filed with the Securities and Exchange Commission.
*10.4 Employment Agreement between the Company and Burton M.
Tansky effective February 1, 1997, incorporated herein
by reference to the Company's Annual Report on From 10-K for
the fiscal year ended August 3, 1996.
*10.5 Termination and Change of Control Agreement between the
Company and Gerald A. Sampson dated September 10, 1996,
herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended August 3, 1996.
29
*10.6 Termination Agreement between Bergdorf Goodman, Inc. and
Stephen C. Elkin, effective September 1993, incorporated herein
by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended July 31, 1993.
*10.7 Termination Agreement between Bergdorf Goodman, Inc. and
Dawn Mello, effective May 1994, incorporated herein by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended July 30, 1994.
*10.8 Change of Control Agreement between the Company and Bernie
Feiwus, effective October 1995, incorporated herein by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended July 29, 1995.
*10.9 Key Executive Stock Purchase Loan Plan, as amended.
*10.10 Supplemental Executive Retirement Plan, incorporated
herein by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended July 30, 1988.
*10.11 Description of the Company's Executive Life Insurance
Plan, incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended August 1, 1992.
*10.12 Supplementary Executive Medical Plan, incorporated herein
by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended July 31, 1993.
*10.13 Key Employee Deferred Compensation Plan, as amended,
incorporated herein by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended July 30, 1994.
10.14 Credit Agreement dated as of April 7, 1995 among the Company,
the Banks listed therein and Morgan Guaranty Trust Company of
New York, as Agent, incorporated herein by reference to
the Company's Annual Report on Form 10-K for the fiscal year
ended August 3, 1996.
30
10.15 Receivables Purchase Agreement, dated as of March 1, 1995,
between the Company and Neiman Marcus Funding Corporation,
incorporated herein by reference to Exhibit 10.1 to
Registration Statement on Form S-3 of Neiman Marcus Group
Credit Card Master Trust dated March 3, 1995 (Registration No.
33-88098).
10.16 Pooling and Servicing Agreement, dated as of March 1,
1995, between Neiman Marcus Funding Corporation, the Company
and The Chase Manhattan Bank, N.A., incorporated herein by
reference to Exhibit 4.1 to Registration Statement on Form
S-3 of Neiman Marcus Group Credit Card Master Trust dated March
3, 1995 (Registration No. 33-88098).
10.17 Series 1995-1 Supplement to the Pooling and Servicing
Agreement, dated as of March 1, 1995, among Neiman Marcus
Funding Corporation, the Company and The Chase Manhattan
Bank, N.A., incorporated herein by reference to Exhibit 4.2 to
Registration Statement on Form S-3 of Neiman Marcus Group Credit
Card Master Trust dated March 3, 1995 (Registration No.
33-88098).
10.18 Exchange and Repurchase Agreement between The Neiman
Marcus Group, Inc. and Harcourt General, Inc., incorporated
herein by Reference to Exhibit 10.1 to Registration Statement
on Form S-3 of The Neiman Marcus Group, Inc. dated October
10, 1996 (Registration No. 333-11721).
11.1 Computation of Weighted Average Number of Shares
Outstanding Used in Determining Primary and Fully-Diluted
Earnings Per Share.
13.1 The following sections of the 1997 Annual Report to
Shareholders ("1997 Annual Report") which are expressly
incorporated by reference into this Annual Report on Form 10-K:
Management's Discussion and Analysis of Financial
Condition and Results of Operations at pages 25 through 31
of the 1997 Annual Report.
Consolidated Financial Statements and the Notes thereto
at pages 32 through 48 of the 1997 Annual Report.
31
Independent Auditors Report at page 49 of the 1997
Annual Report.
The information appearing under the caption "Selected
Financial Data" on page 50 of the 1997 Annual Report.
The information appearing under the captions "Stock
Information" and "Shares Outstanding" on page 51 of the
1997 Annual Report.
21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule.
99.1 Dividend Reinvestment and Common Stock Purchase Plan,
incorporated herein by reference to the Company's
Registration Statement on Form S-3 dated September 17, 1990
(Registration No. 33-36419).
__________
* Exhibits filed pursuant to Item 14(c) of Form 10-K.
32
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
The Neiman Marcus Group, Inc.
Chestnut Hill, MA
We have audited the consolidated financial statements of The Neiman Marcus
Group, Inc. and subsidiaries as of August 2, 1997 and August 3, 1996, and for
each of the three fiscal years in the period ended August 2, 1997, and have
issued our report thereon dated August 28, 1997; such financial statements and
report are included in your 1997 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the financial
statement schedule of The Neiman Marcus Group, Inc. and subsidiaries, listed
in Item 14. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 28, 1997
F-1
THE NEIMAN MARCUS GROUP, INC. SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
THREE YEARS ENDED AUGUST 2, 1997
(In thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other Deductions- End
Description of Period Expenses Accounts- (A) of Period
__________________________________________________________________________________________
YEAR ENDED AUGUST 2, 1997
Allowance for doubtful accounts $1,300 2,815 - 2,415 $1,700
(deducted from accounts receivable)
YEAR ENDED AUGUST 3, 1996
Allowance for doubtful accounts $1,512 2,385 - 2,597 $1,300
(deducted from accounts receivable)
YEAR ENDED JULY 29, 1995
Allowance for doubtful accounts $ 754 3,777 - 3,019 $1,512
(deducted from accounts receivable)
(A) Write-off of uncollectible accounts net of recoveries.
F-2