Neiman Marcus 2003 Annual Report Download - page 57

Stock Repurchase Program. In prior years, the Company's Board of Directors authorized various stock repurchase programs and
increases in the number of shares subject to repurchase. In 2004, the Company repurchased 175,600 shares at an average purchase
price of $40.01 during the first quarter and 10,450 shares at an average price of $50.48 during the fourth quarter. During the second
quarter of 2003, the Company repurchased 524,177 shares at an average purchase price of $28.65. During 2002, there were no stock
repurchases under the stock repurchase program. As of July 31, 2004, approximately 1.2 million shares remain available for
repurchase under the Company's stock repurchase programs.
Shareholder Rights Plan. In October 1999, the Company adopted a shareholder rights plan designed to ensure that its shareholders
receive fair and equal treatment in the event of any proposed takeover of the Company and to guard against partial tender offers and
other abusive takeover tactics to gain control of the Company without paying all shareholders a fair price. The rights plan was not
adopted in response to any specific takeover proposal.
Under the rights plan, one right (Right) is attached to each share of The Neiman Marcus Group, Inc. Class A, Class B and Class C
Common Stock. Each Right will entitle the holder to purchase one one-thousandth of a share of a corresponding series of
participating preferred stock, with a par value of $.01 per share, at an exercise price of $100.00 per one one-thousandth of a share of
such series. The Rights are not currently exercisable and will become exercisable only in the event a person or group acquires
beneficial ownership of 15 percent or more of the shares of Class B Common Stock or 15 percent or more of total number of shares of
Common Stock outstanding. The Rights expire on October 6, 2009 if not earlier redeemed or exchanged.
Common Stock Incentive Plans. The Company has established common stock incentive plans allowing for the granting of stock
options, stock appreciation rights, restricted stock and other stock-based awards to its employees. The Company previously adopted
the 1997 Incentive Plan (1997 Plan) which is currently used for grants of equity-based awards to employees. All outstanding equity-
based awards at July 31, 2004 were granted under the Company's 1997 Plan and the 1987 Stock Incentive Plan. At July 31, 2004,
there were 1.8 million shares of common stock available for grant under the 1997 Plan.
In 2004 and 2003, the Company made stock-based awards in the form of 1) restricted stock awards for which there was no exercise
price payable by the employee and 2) purchased restricted stock awards for which the exercise price was equal to 50 percent of the fair
value of the Company's common stock on the date of grant. In 2004, the restricted stock and purchased restricted stock awards
aggregated 254,757 shares at a weighted-average exercise price of $15.89 as of the grant date. In 2003, the restricted stock and
purchased restricted stock awards aggregated 105,110 shares at a weighted-average exercise price of $8.88 as of the grant date. The
Company did not make any restricted stock grants in 2002.
Compensation cost for restricted stock and purchased restricted stock awards is recognized in an amount equal to the difference
between the exercise price of the award and its fair value at the date of grant. Such expense is recorded on a straight-line basis over
the expected life of the award with the offsetting entry to additional paid-in capital. For performance accelerated restricted stock, the
expected life is determined based on management's best estimate of the number of years from the grant date to the date at which it is
probable that the performance targets will be met (four or five years, depending on the grant). Compensation cost is calculated as if
all instruments granted that are subject only to a service requirement will vest. Compensation expense related to restricted stock
grants was $3.1 million in 2004, $2.4 million in 2003 and $2.4 million in 2002.
F-18