-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EcHrqLMKCYuN8oH3//KGGSlVhvHoxdDhK/EKhpfC7nO6a0xW/Xe66zVI4yI/WZwT HAw8mIBsl9B+teTHOmnBlg== 0000950135-00-001338.txt : 20000313 0000950135-00-001338.hdr.sgml : 20000313 ACCESSION NUMBER: 0000950135-00-001338 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000129 FILED AS OF DATE: 20000310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEIMAN MARCUS GROUP INC CENTRAL INDEX KEY: 0000819539 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 954119509 STATE OF INCORPORATION: DE FISCAL YEAR END: 0801 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09659 FILM NUMBER: 566640 BUSINESS ADDRESS: STREET 1: 27 BOYLSTON ST STREET 2: P O BOX 9187 CITY: CHESTNUT HILL STATE: MA ZIP: 02467 BUSINESS PHONE: 6172320760 MAIL ADDRESS: STREET 1: 27 BOYLSTON ST STREET 2: P O BOX 9187 CITY: CHESTNUT HILL STATE: MA ZIP: 02467 10-Q 1 NEIMAN MARCUS GROUP 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended January 29, 2000 --------------------------------------------------- Commission File Number 1-9659 -------------------------------------------------- THE NEIMAN MARCUS GROUP, INC. - ------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 95-4119509 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 27 Boylston Street, Chestnut Hill,MA 02467 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (617) 232-0760 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] As of March 3, 2000, the number of outstanding shares of each of the issuer's classes of common stock was: Class Outstanding Shares - ----- ------------------ Class A Common Stock, $.01 Par Value 27,918,635 Class B Common Stock, $.01 Par Value 20,948,332 2 THE NEIMAN MARCUS GROUP, INC. I N D E X ---------
Part I. FINANCIAL INFORMATION Page Number ------ Item 1. Condensed Consolidated Balance Sheets as of January 29, 2000, July 31, 1999 and January 30, 1999 1 Condensed Consolidated Statements of Earnings for the Twenty-Six and Thirteen Weeks ended January 29, 2000 and January 30, 1999 2 Condensed Consolidated Statements of Cash Flows for the Twenty- Six Weeks ended January 29, 2000 and January 30, 1999 3 Notes to Condensed Consolidated Financial Statements 4-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12
3 THE NEIMAN MARCUS GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands) January 29, July 31, January 30, 2000 1999 1999 ----------- ---------- ----------- (Restated) (Restated) ASSETS Current assets: Cash and equivalents $ 58,179 $ 29,191 $ 80,600 Undivided interests in NMG Credit Card Master Trust 241,923 133,151 203,282 Accounts receivable, net 69,586 59,317 58,914 Merchandise inventories 538,138 545,252 512,410 Deferred income taxes 15,255 15,255 24,058 Other current assets 52,767 53,102 60,229 ---------- ---------- ---------- Total current assets 975,848 835,268 939,493 Property and equipment, net 522,608 513,439 505,456 Other assets 156,716 163,583 123,973 ---------- ---------- ---------- Total assets $1,655,172 $1,512,290 $1,568,922 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable and current maturities of long-term liabilities $ 953 $ 921 $ 5,932 Accounts payable 228,407 203,071 186,920 Accrued liabilities 211,676 176,188 215,719 ---------- ---------- ---------- Total current liabilities 441,036 380,180 408,571 Long-term liabilities: Notes and debentures 284,651 274,640 344,628 Other long-term liabilities 73,624 74,664 70,147 Deferred income taxes 32,038 32,038 37,139 ---------- ---------- ---------- Total long-term liabilities 390,313 381,342 451,914 ---------- ---------- ---------- Minority interest 6,472 4,485 1,098 Shareholders' equity: Common stock 488 490 490 Additional paid-in capital 459,654 467,283 466,412 Retained earnings 357,209 278,510 240,437 ---------- ---------- ---------- Total shareholders' equity 817,351 746,283 707,339 ---------- ---------- ---------- Total liabilities and shareholders' equity $1,655,172 $1,512,290 $1,568,922 ========== ========== ==========
See Notes to Condensed Consolidated Financial Statements. 1 4 THE NEIMAN MARCUS GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands except for Twenty-Six Weeks Ended Thirteen Weeks Ended per share amounts) ----------------------------- --------------------------- January 29, January 30, January 29, January 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (Restated) (Restated) Revenues $1,567,949 $1,376,267 $890,279 $789,154 Cost of goods sold including buying and occupancy costs 1,027,280 930,642 601,562 546,754 Selling, general and administrative expenses 388,757 332,981 209,917 181,095 Corporate expenses 7,767 6,973 4,219 3,692 ---------- ----------- --------- --------- Operating earnings 144,145 105,671 74,581 57,613 Interest expense (12,789) (13,135) (6,003) (6,999) ---------- ----------- --------- --------- Earnings before income taxes and minority interest 131,356 92,536 68,578 50,614 Income taxes (49,915) (36,089) (26,059) (19,739) ---------- ----------- --------- --------- Earnings before minority interest 81,441 56,447 42,519 30,875 Minority interest in net losses (earnings) of subsidiaries (2,742) 332 (1,263) 332 ----------- ----------- --------- --------- Net earnings $ 78,699 $ 56,779 $ 41,256 $ 31,207 =========== =========== ========= ========= Weighted average number of common and common equivalent shares outstanding: Basic 48,844 49,233 48,610 49,006 =========== =========== ========= ========= Diluted 49,035 49,347 48,888 49,108 =========== =========== ========= ========= Earnings per share: Basic $ 1.61 $ 1.15 $ .85 $ .64 =========== =========== ========= ========= Diluted $ 1.60 $ 1.15 $ .84 $ .64 =========== =========== ========= =========
See Notes to Condensed Consolidated Financial Statements. 2 5 THE NEIMAN MARCUS GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Twenty-Six Weeks Ended -------------------------- January 29, January 30, 2000 1999 ----------- ----------- (Restated) CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 78,699 $ 56,779 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 36,886 32,893 Minority interest 2,742 (332) Other 5,451 3,677 Changes in current assets and liabilities: Accounts receivable (10,269) (4,239) Merchandise inventories 7,114 2,126 Other current assets 335 973 Taxes payable 9,579 24,117 Accounts payable and accrued liabilities 51,928 (14,054) --------- --------- Net cash provided by operating activities 182,465 101,940 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (42,792) (55,900) Acquisition of Gurwitch Bristow Products, net -- (2,778) Purchases of held-to-maturity securities (444,765) (397,009) Maturities of held-to-maturity securities 373,493 332,594 --------- --------- Net cash used for investing activities (114,064) (123,093) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 10,000 60,000 Repurchase of common stock (10,012) (15,356) Distributions paid (2,435) -- Repayment of receivables securitization (37,500) -- Other financing activities 534 465 --------- --------- Net cash provided by financing activities (39,413) 45,109 --------- --------- CASH AND EQUIVALENTS Increase during the period 28,988 23,956 Beginning balance 29,191 56,644 --------- --------- Ending balance $ 58,179 $ 80,600 ========= ========= See Notes to Condensed Consolidated Financial Statements. 3 6 THE NEIMAN MARCUS GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The Condensed Consolidated Financial Statements of The Neiman Marcus Group, Inc. (the Company) are submitted in response to the requirements of Form 10-Q and should be read in conjunction with the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K. In the opinion of management, these statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results for the interim periods presented. The retail industry is seasonal in nature, and the results of operations for these periods historically have not been indicative of the results for a full year. Certain reclassifications and restatements have been made to the fiscal 1999 financial statements to conform to the fiscal 2000 presentation. 2. MERCHANDISE INVENTORIES During the thirteen weeks ended October 30, 1999, the Company changed its method of determining the cost of inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. Management believes that the FIFO method better measures the current value of such inventories and provides a more appropriate matching of revenues and expenses. Under the current low-inflationary environment, the use of the FIFO method more accurately reflects the Company's financial position. The change to the FIFO method has been applied by retroactively restating the accompanying condensed consolidated financial statements. The effect of this change was to increase merchandise inventories, accrued liabilities and retained earnings by $16.6 million, $6.6 million and $10.0 million, respectively, as of January 30, 1999, and to increase merchandise inventories and retained earnings by $16.8 million and $10.1 million, respectively, and to decrease the deferred tax asset by $6.7 million as of July 31, 1999. For the twenty-six weeks ended January 30, 1999, the effect of the change increased net earnings by $1.2 million. For the thirteen weeks ended January 30, 1999 the effect of the change increased net earnings by $.6 million. 3. EARNINGS PER SHARE Pursuant to the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share," the weighted average shares used in computing basic and diluted earnings per share (EPS) are as presented in the table below. No adjustments were made to net earnings for the computations of basic and diluted EPS during the periods presented. Options to purchase 975,080 and 572,230 shares of common stock were not included in the computation of diluted EPS for the twenty-six and thirteen weeks ended January 29, 2000, respectively, because the exercise price of those options was greater than the average market price of the common shares. Options to purchase 896,300 shares of common stock were not included in the computation of diluted EPS for both the twenty-six and thirteen weeks ended January 30, 1999 because the exercise price of those options was greater than the average market price of the common shares. TWENTY-SIX WEEKS ENDED THIRTEEN WEEKS ENDED ------------------------ ------------------------ (in thousands of shares) January 29, January 30, January 29, January 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Shares for computation of basic EPS 48,844 49,233 48,610 49,006 Effect of dilutive stock options and nonvested stock under common stock incentive plans 191 114 278 102 ----------- ----------- ----------- ----------- Shares for computation of diluted EPS 49,035 49,347 48,888 49,108 =========== =========== =========== =========== 4 7 THE NEIMAN MARCUS GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. AUTHORIZED CAPITAL On September 15, 1999, shareholders of the Company approved a proposal to amend the Company's Restated Certificate of Incorporation to increase the Company's authorized capital to 250 million shares of common stock (consisting of 100 million shares of Class A Common Stock, 100 million shares of Class B Common Stock and 50 million shares of a new Class C Common Stock (having one-tenth (1/10) of one vote per share) and 50 million shares of preferred stock. 5. SPIN-OFF FROM HARCOURT GENERAL, INC. On October 22, 1999, Harcourt General, Inc. (Harcourt General) completed the spin-off of its controlling equity position in the Company in a tax-free distribution to its shareholders. Harcourt General distributed approximately 21.4 million of its approximately 26.4 million shares of the Company. Harcourt General retained approximately 5.0 million shares. Each common shareholder of Harcourt General received .3013 of a share of Class B Common Stock of the Company for every share of Harcourt General Common Stock and Class B Stock held on October 12, 1999, which was the record date for the distribution. The Company and Harcourt General are parties to various agreements which govern their ongoing relationship. 6. OPERATING SEGMENTS The Company has two reportable business segments: specialty retail stores and direct marketing. The specialty retail stores segment includes all the operations of Neiman Marcus Stores and Bergdorf Goodman. Direct marketing includes the operations of NM Direct, which publishes NM by Mail, the Horchow catalogues, Chef's Catalog and the Neiman Marcus Christmas Catalogue. Other includes unallocated corporate expenses, costs incurred to launch the Company's e-commerce business and operations which do not meet the quantitative thresholds of Statement of Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Company's senior management evaluates the performance of the Company's assets on a consolidated basis. Therefore, separate financial information for the Company's assets on a segment basis is not presented. The following tables set forth the information for the Company's reportable segments:
(in thousands) Twenty-Six Weeks Twenty-Six Weeks Thirteen Weeks Thirteen Weeks Ended January 29, Ended January 30, Ended January 29, Ended January 30, 2000 1999 2000 1999 ----------------- ----------------- ----------------- ----------------- REVENUES Specialty Retail Stores $1,334,692 $1,196,738 $758,880 $686,004 Direct Marketing 201,228 178,380 115,087 102,001 Other 32,029 1,149 16,312 1,149 ---------- ---------- -------- -------- Total $1,567,949 $1,376,267 $890,279 $789,154 ========== ========== ======== ======== OPERATING EARNINGS Specialty Retail Stores $ 139,840 $ 106,327 $ 72,056 $ 57,929 Direct Marketing 12,547 6,851 7,548 3,910 Other (8,242) (7,507) (5,023) (4,226) ---------- ---------- -------- -------- Total $ 144,145 $ 105,671 $ 74,581 $ 57,613 ========== ========== ======== ========
5 8 THE NEIMAN MARCUS GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7. STOCKHOLDER RIGHTS PLAN On October 6, 1999, the Company's Board of Directors adopted a stockholder rights plan. The rights plan is designed to improve the ability of the Company's board to protect and advance the interests of the Company's stockholders in the event of an unsolicited proposal to acquire a significant interest in the Company. 8. STOCK REPURCHASE PROGRAM In October 1999, the Company's Board of Directors authorized an increase in the stock repurchase program to two million shares. During the twenty-six weeks ended January 29, 2000, the Company repurchased 427,800 shares at an average price of $23.41 per share. Subsequent to January 29, 2000, the Company repurchased an additional 187,700 shares at an average price of $21.01 per share; 1,384,500 shares were remaining under the stock repurchase program. 9. RECENT ACCOUNTING DEVELOPMENTS In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements," to clarify the revenue recognition rules for certain types of transactions. The Company is currently evaluating the effect of implementing SAB 101. 6 9 THE NEIMAN MARCUS GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE TWENTY-SIX WEEKS ENDED JANUARY 29, 2000 COMPARED WITH THE TWENTY-SIX WEEKS ENDED JANUARY 30, 1999 Revenues in the twenty-six weeks ended January 29, 2000 increased $191.7 million or 13.9% over revenues in the twenty-six weeks ended January 30, 1999. The increase in revenues was primarily attributable to comparable sales growth and sales from the Kate Spade LLC and Gurwitch Bristow Products subsidiaries, majority interests in which were acquired in fiscal 1999 as part of the Company's brand development initiative. Specialty retail stores revenues in the twenty-six weeks ended January 29, 2000 increased $138.0 million or 11.5% over the prior year. Direct marketing revenues in the twenty-six weeks ended January 29, 2000 increased $22.8 million or 12.8% over the prior year. Total comparable sales for the Company increased 10.7%. Comparable sales increased 10.3% in the specialty retail store segment and 12.8% in the direct marketing segment. Cost of goods sold including buying and occupancy costs increased $96.6 million or 10.4% to $1.03 billion compared to the same period last year, primarily due to increased sales. As a percentage of revenues, cost of goods sold decreased to 65.5% from 67.6% in the prior year, due primarily to higher comparable sales, lower markdowns, higher markups on goods sold and, to a lesser extent, proportionately lower buying and occupancy costs. Selling, general and administrative expenses increased $55.8 million or 16.8% to $388.8 million. As a percentage of revenues, selling, general and administrative expenses increased to 24.8% from 24.2% in the prior year, primarily attributable to expenses incurred to launch the Company's new e-commerce business. Interest expense decreased 2.6% to $12.8 million in the twenty-six weeks ended January 29, 2000 from $13.1 million in the prior year. The decrease resulted primarily from lower average outstanding borrowings during the period. The Company's effective income tax rate was 38% in the twenty-six weeks ended January 29, 2000, as compared to 39% in the twenty-six weeks ended January 30, 1999. RESULTS OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED JANUARY 29, 2000 COMPARED WITH THE THIRTEEN WEEKS ENDED JANUARY 30, 1999 Revenues in the thirteen weeks ended January 29, 2000 increased $101.1 million or 12.8% over revenues in the thirteen weeks ended January 30, 1999. The increase in revenues was primarily attributable to comparable sales growth and sales from the Kate Spade LLC and Gurwitch Bristow Products subsidiaries. Specialty retail store revenues in the thirteen weeks ended January 29, 2000 increased $72.9 million or 10.6% over the prior year. Direct marketing revenues in the thirteen weeks ended January 29, 2000 increased $13.1 million or 12.8% over the prior year. Total comparable sales for the Company increased 10.6%. Comparable sales increased 10.0% in the specialty retail store segment and 12.8% in the direct marketing segment. Costs of goods sold including buying and occupancy costs increased 10.0% to $601.6 million in the thirteen week period ended January 29, 2000 compared to the same period last year, primarily due to increased sales and lower markdowns. As a percentage of revenues, cost of goods sold decreased to 67.6% from 69.3% in the prior year, primarily due to lower markdowns. Selling, general and administrative expenses increased 15.9% to $209.9 million from $181.1 million in the prior year, primarily due to higher sales volume. As a percentage of revenues, selling, general and administrative expenses increased to 23.6% from 22.9% from the prior year, principally reflecting expenses incurred to launch the Company's new e-commerce business. Interest expense decreased 14.2% to $6.0 million in the thirteen weeks ended January 29, 2000. The decrease resulted primarily from lower average outstanding borrowings during the period. The Company's effective income tax rate was 38% in the thirteen weeks ended January 29, 2000, as compared to 39% in the thirteen weeks ended January 30, 1999. 7 10 THE NEIMAN MARCUS GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CHANGES IN FINANCIAL CONDITION AND LIQUIDITY SINCE JULY 31, 1999 During the twenty-six weeks ended January 29, 2000, the Company financed its working capital needs and capital expenditures primarily with cash from operations and borrowings under its revolving credit facility. The following discussion analyzes liquidity and capital resources by operating, investing and financing activities as presented in the Company's Condensed Consolidated Statements of Cash Flows. Net cash provided by operating activities was $182.5 million during the first twenty-six weeks of fiscal 2000 as compared to $101.9 million in the prior year period. The most significant item affecting working capital was an increase in accounts payable and accrued liabilities of $51.9 million. Capital expenditures were $42.8 million during the twenty-six week period ended January 29, 2000 as compared to $55.9 million in the prior year period. Capital expenditures were primarily related to existing store renovations, including remodeling at Bergdorf Goodman's main store. Capital expenditures are expected to approximate $130.0 million during fiscal 2000. The Company has increased its bank borrowings by $10.0 million since July 31, 1999. At January 29, 2000 the Company had $415.0 million available under its revolving credit facility. In September 1999 the Company reduced the revolving credit facility from $650 million to $450 million to reflect its current and anticipated cash flow requirements. The Company's five year revolving securitization of its accounts receivable matures in fiscal 2000. In January 2000, the Company used proceeds from its credit facility to repay $37.5 million of the $246 million of certificates sold to third parties under the securitization. The Company will repay $37.5 million to third parties each month for six successive months with a final payment of $21.0 million in July 2000. The Company's undivided interests in NMG Credit Card Master Trust will increase by the amount of each repayment. The Company intends to ultimately finance the repayment of the certificates with a new securitization during fiscal 2000. In October 1999, the Company's Board of Directors authorized an increase in the stock repurchase program to two million shares. In the twenty-six weeks ended January 29, 2000, the Company repurchased 427,800 shares at an average price of $23.41 per share. Subsequent to January 29, 2000, the Company repurchased an additional 187,700 shares at an average price of $21.01 per share; at March 3, 2000, 1,384,500 shares were remaining under this program. Kate Spade LLC, a majority owned subsidiary of the Company, distributed $2.4 million to its minority shareholders. The Company believes that it will have sufficient resources to fund its planned capital growth, operating requirements and the maturities of the securitization certificates. YEAR 2000 DATE CONVERSION The Company has completed its assessment of its hardware and software systems, including the embedded systems in the Company's buildings, property and equipment, and has implemented plans to ensure that the operations of such systems would not be adversely affected by the Year 2000 date change. As of the date of this report, the Company has not experienced any significant problems with its hardware and software systems related to the Year 2000 date change. The Company established a program to communicate with its significant suppliers and vendors to determine the extent to which the Company's systems and operations are vulnerable to those third parties' failure to rectify their own Year 2000 issues. As of the date of this filing, the Company has not experienced any significant problems with its suppliers and vendors related to the Year 2000 date change. The Company is not presently aware of any significant exposure arising from potential third party failures. However, there can be no assurance that the systems of other companies on which the Company's systems or operations rely have been successfully converted or that any failure of such parties to achieve Year 2000 compliance would not have an adverse effect on the Company's results of operations. 8 11 THE NEIMAN MARCUS GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS Statements in this report referring to the expected future plans and performance of the Company are forward-looking statements. Actual future results may differ materially from such statements. Factors that could affect future performance include, but are not limited to: changes in economic conditions or consumer confidence; changes in consumer preferences or fashion trends; delays in anticipated store openings; adverse weather conditions, particularly during peak selling seasons; changes in demographic or retail environments; competitive influences; significant increases in paper, printing and postage costs; and changes in the Company's relationships with designers and other resources. 9 12 THE NEIMAN MARCUS GROUP, INC. PART II Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Annual Meeting of Stockholders was held on January 21, 2000. The following matters were voted upon at the meeting: 1. Election of three Class III directors. VINCENT M. O'REILLY (CLASS A) JOHN R. COOK (CLASS B) ----------------------------- ---------------------- For 24,826,570 For 18,241,907 Against 793,155 Against 963,326 JEAN HEAD SISCO (CLASS B) ---------------------------- For 18,236,364 Against 968,869 2. Approval of an amendment of the Company's 1997 Incentive Plan to increase the shares reserved for issuance under the Plan. For 26,785,806 Against 13,932,992 Abstain 377,423 Non-Voting 3,728,735 3. Ratification of the appointment by the Board of Directors of Deloitte & Touche LLP as the Company's independent auditors for the 2000 fiscal year. For 44,469,151 Against 34,168 Abstain 321,638 4. Stockholder proposal concerning cumulative voting in the election of directors. For 10,666,718 Against 29,672,107 Abstain 736,656 Non-voting 3,749,566 10 13 THE NEIMAN MARCUS GROUP, INC. Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. 10.1 The Neiman Marcus Group, Inc. 1997 Incentive Plan as amended. 27.1 Financial data schedules. (b) REPORTS ON FORM 8-K. The Company did not file any reports on Form 8-K during the thirteen week period ended January 29, 2000. 11 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE NEIMAN MARCUS GROUP, INC. SIGNATURE TITLE DATE - --------- ----- ---- Principal Financial Senior Vice President and March 10, 2000 Officer: Chief Financial Officer /s/ John R. Cook - ------------------------- John R. Cook Principal Accounting Vice President and Controller March 10, 2000 Officer: /s/ Catherine N. Janowski - ------------------------- Catherine N. Janowski 12 EX-10.1 2 NEIMAN MARCUS GROUP 1997 INCENTIVE PLAN 1 EXHIBIT 10.1 THE NEIMAN MARCUS GROUP, INC. 1997 INCENTIVE PLAN 1. DEFINED TERMS Appendix A, which is incorporated by reference, defines the terms used in the Plan. 2. IN GENERAL The Plan has been established to advance the interests of the Company by giving selected Employees, directors and other persons (including both individuals and entities) who provide services to the Company or its Affiliates equity-based or cash incentives through the grant of Awards. No Award may be granted under the Plan after September 1, 2006, but Awards previously granted may extend beyond that date. 3. ADMINISTRATION The Administrator has discretionary authority, subject only to the express provisions of the Plan, to interpret the Plan; determine eligibility for and grant Awards; determine, modify or waive the terms and conditions of any Award; prescribe forms, rules and procedures (which it may modify or waive); and otherwise do all things necessary to carry out the purposes of the Plan. Once an Award has been communicated in writing to a Participant, the Administrator may not, without the Participant's consent, alter the terms of the Award so as to affect adversely the Participant's rights under the Award, unless the Administrator expressly reserved the right to do so. In the case of any Award intended to be eligible for the performance-based compensation exception under Section 162(m)(4)(C) of the Code, the Committee shall exercise its discretion consistent with qualifying the Award for such exception. 4. SHARES SUBJECT TO THE PLAN A. A total of 4,900,000 shares of Stock have been reserved for issuance under the Plan. The following shares of Stock will also be available for future grants: (i) shares remaining under an Award that terminates without having been exercised in full (in the case of an Award requiring exercise by a Participant for delivery of Stock); (ii) shares subject to an Award, where cash is delivered to a Participant in lieu of such shares; (iii) shares of Restricted Stock that are forfeited to the Company; (iv) shares of Stock tendered by a Participant as payment upon exercise of an Award; and (v) shares of Stock held back by the Administrator, or tendered by a Participant, in satisfaction of tax withholding requirements. Stock delivered under the Plan may be authorized but unissued Stock or previously issued Stock acquired by the Company and held in treasury. No fractional shares of Stock will be delivered under the Plan. B. The maximum number of shares for which Stock Options may be granted to any person over the life of the Plan shall be 1,000,000. The maximum number of shares subject to SARs granted to any person over the life of the Plan shall likewise be 1,000,000. For purposes of the preceding two sentences, the repricing of a Stock Option or SAR shall be treated as a new grant to the extent required A-1 2 under Section 162(m) of the Code. The aggregate maximum number of shares of Stock delivered to any person over the life of the Plan pursuant to Awards that are not Stock Options or SARs shall also be 1,000,000. Subject to these limitations, each person eligible to participate in the Plan shall be eligible in any year to receive Awards covering up to the full number of shares then available for Awards under the Plan. 5. ELIGIBILITY AND PARTICIPATION The Administrator will select Participants from among those key Employees, directors and other individuals or entities providing services to the Company or its Affiliates who, in the opinion of the Administrator, are in a position to make a significant contribution to the success of the Company and its Affiliates. Eligibility for ISOs is further limited to those individuals whose employment status would qualify them for the tax treatment described in Sections 421 and 422 of the Code. 6. RULES APPLICABLE TO AWARDS a. ALL AWARDS (1) Performance Objectives. Where rights under an Award depend in whole or in part on attainment of performance objectives, actions by the Company that have an effect, however material, on such performance objectives or on the likelihood that they will be achieved will not be deemed an amendment or alteration of the Award unless accomplished by a change in the express terms of the Award or other action that is without substantial consequence except as it affects the Award. (2) Alternative Settlement. The Company retains the right at any time to extinguish rights under an Award in exchange for payment in cash, Stock (subject to the limitations of Section 4) or other property on such terms as the Administrator determines, provided the holder of the Award consents to such exchange. (3) Transferability Of Awards. Except as the Administrator otherwise expressly provides, Awards (other than an Award in the form of an outright transfer of cash or Unrestricted Stock) may not be transferred other than by will or by the laws of descent and distribution and, during a Participant's lifetime an Award requiring exercise may be exercised only by the Participant (or in the event of the Participant's incapacity, the person or persons legally appointed to act on the Participant's behalf). (4) Vesting, Etc. The Administrator may determine the time or times at which an Award will vest (i.e., become free of restrictions) or become exercisable. Unless the Administrator expressly provides otherwise, an Award requiring exercise will cease to be exercisable, and all other Awards to the extent not already fully vested will be forfeited, immediately upon the cessation (for any reason, including death) of the Participant's employment or other service relationship with the Company and its Affiliates. (5) Taxes. The Administrator will make such provision for the withholding of taxes as it deems necessary. The Administrator may, but need not, hold back shares from an Award or permit a Participant to tender previously owned shares in satisfaction of tax withholding requirements. (6) Dividend Equivalents, Etc. The Administrator may provide for the payment of amounts in lieu of dividends or other distributions with respect to Stock subject to an Award. (7) Rights Limited. Nothing in the Plan shall be construed as giving any person the right to continued employment or service with the Company or its Affiliates, nor any rights as a shareholder except as to shares actually issued under the Plan. The loss of existing or potential profit in Awards will not constitute an element of damages in the event of termination of employment or service for any A-2 3 reason, even if the termination is in violation of an obligation of the Company or Affiliate to the Participant. (8) Section 162(m). In the case of an Award intended to be eligible for the performance-based compensation exception under Section 162(m)(4)(C) of the Code, the Plan and such Award shall be construed in a manner consistent with qualifying the Award for such exception. b. AWARDS REQUIRING EXERCISE (1) Time And Manner Of Exercise. Unless the Administrator expressly provides otherwise, (a) an Award requiring exercise by the holder will not be deemed to have been exercised until the Administrator receives a written notice of exercise (in form acceptable to the Administrator) signed by the appropriate person and accompanied by any payment required under the Award; and (b) if the Award is exercised by any person other than the Participant, the Administrator may require satisfactory evidence that the person exercising the Award has the right to do so. (2) Payment Of Exercise Price, If Any. Where the exercise of an Award is to be accompanied by payment, the Administrator may determine the required or permitted forms of payment either at or after the time of the Award, subject to the following: (a) unless the Administrator expressly provides otherwise, all payments will be by cash or check acceptable to the Administrator; and (b) where shares issued under an Award are part of an original issue of shares, the Award shall require an exercise price equal to at least the par value of such shares. (3) Reload Awards. The Administrator may provide that upon the exercise of an Award through the tender of previously owned shares of Stock, the Participant or other person exercising the Award will automatically receive a new Award of like kind covering a number of shares determined by reference to the number of shares tendered in payment of the exercise price of the first Award. c. AWARDS NOT REQUIRING EXERCISE Awards of Restricted Stock and Unrestricted Stock may be made in return for either (i) services determined by the Administrator to have a value not less than the par value of the awarded shares, or (ii) cash or other property having a value not less than the par value of the awarded shares plus such additional amounts (if any) as the Administrator may determine payable in such combination of cash, other property (of any kind) or services as the Administrator may determine. 7. EFFECT OF CERTAIN TRANSACTIONS a. MERGERS, ETC. In the event of a consolidation or merger in which the Company is not the surviving corporation or which results in the acquisition of substantially all the Company's outstanding Stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the sale or transfer of substantially all the Company's assets or a dissolution or liquidation of the Company (a "covered transaction"), all outstanding Awards requiring exercise will cease to be exercisable, and all other Awards to the extent not fully vested (including Awards subject to performance conditions not yet satisfied or determined) will be forfeited, as of the effective time of the covered transaction. Prior to such time the Administrator may (but need not) accelerate the vesting or exercisability of any Award or provide for substitute or replacement awards from the acquiring entity (if any). A-3 4 b. CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE STOCK (1) Basic Antidilution Provisions. In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capital structure, the Administrator will make appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4.a. and to the maximum share limits described in Section 4.b., and will also make appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provision of Awards affected by such change. (2) Certain Other Adjustments. The Administrator may also make adjustments of the type described in paragraph (1) above to take into account distributions to common stockholders other than stock dividends or normal cash dividends, mergers, consolidations, acquisitions, dispositions or similar corporate transactions, or any other event, if the Administrator determines that adjustments are appropriate to avoid distortion in the operation of the Plan and to preserve the value of Awards made hereunder; provided, that no such adjustment shall be made to the maximum share limits described in Section 4.b., or otherwise to an Award intended to be eligible for the performance-based exception under Section 162(m)(4)(C) of the Code, except to the extent consistent with that exception. c. CHANGE OF CONTROL Notwithstanding anything to the contrary in this Plan and unless specifically provided otherwise in the Award Agreement at the time an Award is granted, upon any Change of Control of the Company, any time periods, conditions or contingencies relating to the exercise or realization of, or lapse of restrictions under, any Award shall be automatically accelerated or waived so that the Award may be exercised or realized in full; provided that, in the event of a Change of Control that is intended to qualify for pooling of interests accounting, the foregoing provisions of this paragraph shall be of no force and effect if implementation of such provisions would preclude the Change of Control from so qualifying and, in such event, the Committee shall take whatever action it deems appropriate to enable holders of Awards to realize a substantially similar economic result as would have been realized by acceleration of Awards but without precluding the Change of Control from qualifying as a pooling of interests. A Change of Control will occur for purposes of this Plan: (i) upon the consummation of any transaction or series of transactions under which the Company is merged or consolidated with any other company, other than a merger or consolidation which would result in the shareholders of the Company immediately prior thereto continuing to own (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company, the acquiring entity or such surviving entity outstanding immediately after such merger or consolidation in substantially the same proportion such shareholders held the voting securities of the Company immediately prior to the merger or consolidation; (ii) if any person or group (as used in section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing more than 40% of (a) the shares of the Company's Class B Common Stock then outstanding or (b) the total voting power (other than in the election of directors) of all securities of the Company then outstanding; or (iii) if, during any period of twenty-four consecutive months, individuals who at the beginning of such period constitute the Board of Directors, and any director whose election or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason (other than death or disability) to constitute at least a majority thereof; or (iv) the complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company's assets, other than a liquidation of the Company into a wholly-owned subsidiary. 8. CONDITIONS ON DELIVERY OF STOCK The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or to remove any restriction from shares previously delivered under the Plan until: the Company's counsel has approved all legal matters in connection with the issuance and delivery of such shares; if the outstanding Stock is at the time listed on any stock exchange or national market system, the shares to be delivered have been listed or authorized to be listed on such exchange or system upon official notice of notice of issuance; and all conditions of the Award have been satisfied or waived. If the sale of Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such Act. The Company may require that certificates evidencing Stock issued under the Plan bear an appropriate legend reflecting any restriction on transfer applicable to such Stock. 9. AMENDMENT AND TERMINATION Subject to the last sentence of Section 3, the Administrator may at any time or times amend the Plan or any outstanding Award for any purpose which may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards, provided that (except to the extent expressly required or permitted by the Plan) no such amendment will, without the approval of the stockholders of the Company, effectuate a change for which stockholder approval is required in order for the Plan to continue to qualify under Section 422 of the Code or for Awards to be eligible for the performance-based exception under Section 162(m)(4)(C) of the Code. 10. NON-LIMITATION OF THE COMPANY'S RIGHTS The existence of the Plan or the grant of any Award shall not in any way affect the Company's right to award a person bonuses or other compensation in addition to Awards under the Plan. 11. GOVERNING LAW The Plan shall be construed in accordance with the laws of The Commonwealth of Massachusetts. A-4 5 APPENDIX A DEFINITION OF TERMS The following terms, when used in the Plan, shall have the meanings and be subject to the provisions set forth below: "Administrator": The Committee, if one has been appointed; otherwise the Board. "Affiliate": Any corporation or other entity owning, directly or indirectly, 50% or more of the outstanding Stock of the Company, or in which the Company or any such corporation or other entity owns, directly or indirectly, 50% of the outstanding capital stock (determined by aggregate voting rights) or other voting interests. "Award": Any of the following: (i) Options ("Stock Options") entitling the recipient to acquire shares of Stock upon payment of the exercise price. Each Stock Option (except as otherwise expressly provided by the Committee consistent with continued qualification of the Stock Option as a performance-based award for purposes of Section 162(m) of the Code, or unless the Committee expressly determines that such Stock Option is not subject to Section 162(m) of the Code or that the Stock Option is not intended to qualify for the performance-based exception under Section 162(m) of the Code), will have an exercise price not less than the fair market value of the Stock subject to the option, determined as of the date of grant, except that an ISO granted to an Employee described in Section 422(b)(6) of the Code will have an exercise price not less than 110% of such fair market value. The Administrator will determine the medium in which the exercise price is to be paid, the duration of the option, the time or times at which an option will become exercisable, provisions for continuation (if any) of option rights following termination of the Participant's employment with the Company and its Affiliates, and all other terms of the Option. No Stock Option awarded under the Plan will be an ISO unless the Administrator expressly provides for ISO treatment. (ii) Rights ("SARs") entitling the holder upon exercise to receive cash or Stock, as the Administrator determines, equal to a function (determined by the Administrator using such factors as it deems appropriate) of the amount by which the Stock has appreciated in value since the date of the Award. (iii) Stock subject to restrictions ("Restricted Stock") under the Plan requiring that the Stock be redelivered to the Company if specified conditions are not satisfied. The conditions to be satisfied in connection with any Award of Restricted Stock, the terms on which such Stock must be redelivered to the Company, the purchase price of such Stock, and all other terms shall be determined by the Administrator. (iv) Stock not subject to any restrictions under the Plan ("Unrestricted Stock"). (v) A promise to deliver Stock or other securities in the future on such terms and conditions as the Administrator determines. (vi) Securities (other than Stock Options) that are convertible into or exchangeable for Stock on such terms and conditions as the Administrator determines. A-5 6 (vii) Cash bonuses tied to performance criteria as described at (viii) below ("Cash Performance Awards"). (viii) Awards described in any of (i) through (vii) above where the right to exercisability, vesting or full enjoyment of the Award is conditioned in whole or in part on the satisfaction of specified performance criteria ("Performance Awards"). The Committee in its discretion may grant Performance Awards that are intended to qualify for the performance-based compensation exception under Section 162(m)(4)(C) of the Code and Performance Awards that are not intended so to qualify. No more than $2,000,000 may be paid to any individual with respect to any Cash Performance Award. In applying the limitation of the preceding sentence: (A) multiple Cash Performance Awards to the same individual that are determined by reference to performance periods of one year or less ending with or within the same fiscal year of the Company shall be subject in the aggregate to one $2,000,000 limit, and (B) multiple Cash Performance Awards to the same individual that are determined by reference to one or more multi-year performance periods ending in the same fiscal year of the Company shall be subject in the aggregate to a separate limit of $2,000,000. With respect to any Performance Award other than a Cash Performance Award, Stock Option or SAR, the maximum award opportunity shall be 1,000,000 shares or their equivalent value in cash, subject to the limitations of Section 4.b. For the avoidance of doubt, any Performance Award of a type described in (i) through (vi) above shall be treated for purposes of this paragraph as a Performance Award that is not a Cash Performance Award, even if payment is made in cash. In the case of a Performance Award intended to qualify as performance-based for the purposes of Section 162(m) of the Code, the Committee shall in writing preestablish a specific performance goal (based solely on one or more qualified performance criteria) no later than 90 days after the commencement of the period of service to which the performance relates (or at such earlier time as is required to qualify the award as performance-based under Code Section 162(m)(4)(C)). For purposes of the Plan, a qualified performance criterion is any of the following: (1) earnings or earnings per share (whether on a pre-tax, after-tax, operational or other basis), (2) return on equity, (3) return on assets, (4) revenues, (5) sales, (6) expenses, (7) one or more operating ratios, (8) stock price, (9) stockholder return, (10) market share, (11) cash flow, (12) inventory levels or inventory turn, (13) capital expenditures, (14) net borrowing, debt leverage levels or credit quality, (15) the accomplishment of mergers, acquisitions, dispositions, public offerings or similar extraordinary business transactions or (16) any combination of the foregoing. The performance goals selected in any case need not be applicable across the Company, but may be particular to an individual's function or business unit. Prior to payment of any Performance Award intended to qualify as performance-based under Section 162(m)(4)(C) of the Code, the Committee shall certify whether the performance goal has been attained and such determination shall be final and conclusive. If the performance goal is not attained, no other Award shall be provided in substitution of the Performance Award. (ix) Grants of cash, or loans, made in connection with other Awards in order to help defray in whole or in part the economic cost (including tax cost) of the Award to the Participant. The terms of any such grant or loan shall be determined by the Administrator. Awards may be combined in the Administrator's discretion. "Board": The Board of Directors of the Company. "Code": The U.S. Internal Revenue Code of 1986, as from time to time amended and in effect. A-6 7 "Committee": A committee of the Board comprised solely of two or more outside directors within the meaning of Section 162(m) of the Code. The Committee may delegate ministerial tasks to such persons (including Employees) as it deems appropriate. "Company": The Neiman Marcus Group, Inc. "Employee": Any person who is employed by the Company or an Affiliate. "ISO": A Stock Option intended to be an "incentive stock option" within the meaning of Section 422 of the Code. "Participant": An Employee, director or other person providing services to the Company or its Affiliates who is granted an Award under the Plan. "Plan": The Neiman Marcus Group, Inc. 1997 Incentive Plan as from time to time amended and in effect. "Stock": Common Stock of the Company, par value $.01 per share. A-7 EX-27.1 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS 12-MOS 6-MOS 3-MOS JUL-29-2000 JUL-31-1999 JUL-31-1999 JUL-31-1999 JAN-29-2000 JUL-31-1999 JAN-30-1999 OCT-31-1998 58,179 29,191 80,600 24,661 241,923 133,151 203,282 180,504 69,586 61,617 60,614 61,392 2,300 2,300 1,700 1,800 538,138 545,252 512,410 661,776 975,848 835,268 939,493 1,004,324 942,067 899,275 865,253 842,797 419,459 385,836 359,797 347,823 1,655,172 1,512,290 1,568,922 1,622,875 441,036 380,180 408,571 430,717 284,651 274,640 344,628 409,622 0 0 0 0 0 0 0 0 488 490 490 490 816,863 745,793 706,849 675,430 1,655,172 1,512,290 1,568,922 1,622,875 1,567,949 2,553,421 1,376,267 587,113 1,567,949 2,553,421 1,376,267 587,113 1,027,280 1,738,511 930,642 383,888 1,423,804 2,370,807 1,270,596 539,055 0 0 0 0 1,549 2,366 894 520 12,789 24,972 13,135 6,136 131,356 157,642 92,536 41,922 49,915 61,480 36,089 16,350 78,699 94,852 56,779 25,572 0 0 0 0 0 0 0 0 0 0 0 0 78,699 94,852 56,779 25,572 1.61 1.93 1.15 0.52 1.60 1.93 1.15 0.52
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