Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Harcourt General, Inc. 23 95K
2: EX-10.2 1997 Incentive Plan 6 32K
3: EX-11.1 Computation of Shares Outstanding 2± 10K
4: EX-13.1 1997 Annual Report 26 163K
5: EX-21.1 Subsidiaries of the Company 3 14K
6: EX-23.1 Consent of Deloitte & Touche LLP 1 6K
7: EX-27.1 Financial Data Schedule 2± 8K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended October 31, 1997
Commission File Number 1-4925
HARCOURT GENERAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-1619609
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
27 Boylston Street, Chestnut Hill, Massachusetts 02167
(Address of principal executive offices) (Zip Code)
Registrant's telephone number and area code: 617-232-8200
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
-------------------------------- ------------------------
Common Stock, $1.00 par value New York Stock Exchange
Series A Cumulative Convertible New York Stock Exchange
Stock, $1.00 par value
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 amendments to this Form 10-K. [X]
The aggregate market value of the Common Stock held by
non-affiliates of the registrant was $2,670,565,412 on January 15, 1998.
There were 50,765,930 shares of Common Stock, 20,021,600 shares of
Class B Stock and 1,122,063 shares of Series A Cumulative Convertible Stock
outstanding as of January 15, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's 1997 Annual Report to Stockholders are
incorporated by reference in Parts I, II and IV of this Report. Portions of the
Proxy Statement for the Annual Meeting of Stockholders to be held on March 13,
1998 are incorporated by reference in Part III of this Report.
HARCOURT GENERAL, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
TABLE OF CONTENTS
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[Download Table]
PART I PAGE NO.
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Item 1. Business 1
Item 2. Properties 5
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters 6
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 7
Item 8. Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 8
PART III
Item 10. Directors and Executive Officers of the Registrant 8
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial
Owners and Management 10
Item 13. Certain Relationships and Related Transactions 10
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 10
Signatures S-1
PART I
ITEM 1. BUSINESS
The principal businesses of Harcourt General, Inc., a Delaware
corporation formed in 1950 (the "Company"), are publishing and educational
services conducted by Harcourt Brace & Company ("Harcourt Brace"), and specialty
retailing conducted by The Neiman Marcus Group, Inc. ("NMG"). The Company also
has operations in career transition and related professional services.
A. PUBLISHING AND EDUCATIONAL SERVICES.
GENERAL. Harcourt Brace, among the world's largest publishing
companies, publishes books, scholarly journals and related materials in both
print and electronic media for the educational, scientific, technical, medical,
professional and trade markets. As a result of the acquisition by the Company in
June 1997 of National Education Corporation, Harcourt Brace has expanded into
non-traditional educational market segments, including supplemental publishing,
information technology training, and distance education.
ACQUISITION AND INTEGRATION OF NATIONAL EDUCATION CORPORATION. In June
1997 the Company completed the acquisition of National Education Corporation
("NEC") for approximately $854.4 million. The Company currently is in the
process of integrating the three principal NEC businesses - ICS Learning Systems
("ICS"), Steck-Vaughn Company ("Steck- Vaughn"), and National Education Training
Group ("NETg") - into Harcourt Brace in order to maximize the benefits from
relationships and combinations among and between Harcourt Brace's existing
businesses and the acquired NEC businesses. In connection with that integration,
Harcourt Brace has created three new operating groups:
Education and Trade. The Education and Trade group includes
the operations of Harcourt Brace School; Holt, Rinehart and Winston; Harcourt
Brace College; Steck-Vaughn; and Harcourt Brace Trade. Harcourt Brace School
publishes textbooks and related instructional materials for kindergarten through
grade 8. Holt, Rinehart and Winston publishes instructional materials for grades
7 through 12. Harcourt Brace College publishes books and other materials for the
college and university market under the Harcourt Brace, Saunders and Dryden
Press imprints. Steck-Vaughn publishes supplemental educational materials used
in elementary, secondary and adult education. Harcourt Brace Trade publishes
children's books, general adult fiction and nonfiction hardcover books, and
trade paperbacks under the Harvest imprint.
Learning and Assessment. The Learning and Assessment group
includes the operations of NETg, ICS, The Psychological Corporation, Harcourt
Professional Education Group, and Archipelago Productions. NETg develops and
sells self-study information technology and related professional training
products and services which are delivered by CD-ROM, the internet, and corporate
intranets to information technology and human resources professionals and
end-users. ICS provides direct marketed distance learning opportunities in
vocational, degree and professional self-studies to consumers worldwide.
The Psychological Corporation provides tests and related products and services
for educational, psychological, clinical and professional assessment and,
through its subsidiary Assessment Systems, provides computerized tests and
related services for business and professional credentialing and licensing.
Harcourt Professional Education Group conducts review courses under the BAR/BRI
name for individuals preparing for bar examinations, as well as live-lecture and
computer-based review courses for law and accounting examinations, and publishes
print and electronic information resources, including reference guides and
newsletters, for financial, legal and human resources professionals. Archipelago
Productions is a producer of multimedia educational products and is a developer
of distance learning programs.
Worldwide Scientific, Technical and Medical. The Worldwide
Scientific, Technical and Medical group includes the operations of W.B.
Saunders, Academic Press, Churchill Livingstone, and Harcourt Brace Publishers
International. W.B. Saunders publishes books, periodicals and electronic
products in the health sciences, and advertising-based newsletters for health
professionals. Academic Press publishes scholarly books and journals, in print
and electronic media, in the life, physical, social and computer sciences.
Churchill Livingstone is Europe's largest English-language medical publisher.
Harcourt Brace Publishers International is a newly established division,
reflecting the increased commitment by Harcourt Brace to both the international
distribution of its English language products and the publication of
adaptations, translations, and indigenous materials worldwide. In September 1996
Harcourt Brace Publishers International acquired the exclusive right to market
and sell the professional medical publications of Mosby-Year Book in most parts
of the world outside of the United States, and in fiscal 1997 completed the
acquisitions of both Doyma Libros (now Harcourt Brace de Espana), a leading
Spanish-language medical publisher, and Churchill Livingstone.
COMPETITION. Numerous companies compete in all of the markets in which
the Company's publishing and educational services businesses operate. The
Company believes that the principal competitive factors in connection with these
businesses are the breadth, quality, timeliness, and price of products and
services; customer service and support; the ability to acquire intellectual
property rights; editorial, marketing, and distribution capabilities; the
ability to maintain key vendor alliances; the reputation of the Company; and the
Company's financial and management resources.
B. SPECIALTY RETAILING.
The Company owns approximately 53% of the outstanding equity of NMG,
which operates Neiman Marcus Stores, Bergdorf Goodman and NM Direct.
NMG is a separate public company which is listed on the New York Stock
Exchange and is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). On October 29, 1997, NMG filed an
Annual Report on Form 10-K with respect to its fiscal year ended August 2, 1997.
Set forth below is a brief description of the businesses of NMG. For further
information with respect to NMG, reference may be made to the NMG Annual Report
on Form 10-K and to subsequent reports and other information filed by NMG from
time to time with the Securities and Exchange Commission.
NEIMAN MARCUS STORES. Neiman Marcus Stores is a high fashion specialty
retailer which offers primarily women's and men's apparel, fashion accessories,
and gifts. As of October 31, 1997, Neiman Marcus operated 30 stores in 27
cities. The average Neiman Marcus store size is 142,000 gross square feet and
the stores range in size from 90,000 gross square feet to 269,000 gross square
feet. Neiman Marcus opened new stores in Short Hills, New Jersey in August 1995,
King of Prussia, Pennsylvania in February 1996 and Paramus, New Jersey in August
1996. A new Neiman Marcus store in Honolulu's Ala Moana Center is currently
under construction and is expected to open in September 1998, and Neiman Marcus
plans to open new stores in Palm Beach, Florida in the fall of 1999, Coral
Gables, Florida in 2000, and Oyster Bay, New York in 2001. Neiman Marcus also
plans to open a new store in Plano, Texas in 2001 which will replace the
existing Prestonwood store near Dallas, and a new store at the Memorial City
Mall in Houston which will replace the existing Town & Country store in Houston.
BERGDORF GOODMAN. The core of Bergdorf Goodman's offerings includes
high end women's and men'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. NMG
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 offers high fashion women's apparel and accessories, home furnishings and
gifts. Bergdorf Goodman Men consists of 66,000 gross square feet and features
high end men's apparel and accessories. Bergdorf Goodman also operates a direct
marketing business.
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. In January 1998, NMG acquired The
Chef's Catalog, Inc., a leading direct marketer of gourmet cookware and other
high-end kitchenware.
COMPETITION. The specialty retail industry is highly competitive and
fragmented, and NMG competes with large specialty retailers, traditional and
better department stores, national apparel chains, designer boutiques,
individual specialty apparel stores and direct marketing firms. NMG competes for
customers principally on the basis of quality, assortment and presentation of
merchandise, customer service, sales and marketing programs and value, and it
competes for quality merchandise and assortment principally based on
relationships with designer resources and purchasing power. NMG'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 quality, assortment and presentation of merchandise, customer
service, price and speed of delivery.
C. PROFESSIONAL SERVICES.
The Company believes that its career transition business, Drake Beam
Morin, Inc. ("DBM"), is the world's leading organizational and individual
transition consulting firm. DBM assists organizations and individuals worldwide
in outplacement; career and transition management; and employee selection and
performance evaluation. The Company believes that the principal competitive
factors for DBM are quality of service, including the ability to respond
promptly to clients' needs for services, and price. The Company expects that its
DBM operations will become part of the Harcourt Brace Learning and Assessment
group during fiscal 1998.
D. DISCONTINUED OPERATIONS.
On June 30, 1995, NMG sold its Contempo Casuals subsidiary to The Wet
Seal, Inc. for approximately 250,000 shares of Wet Seal Class A Common Stock and
$100,000 in cash.
E. CERTAIN ADDITIONAL INFORMATION.
1. EMPLOYEES
[Download Table]
Number of Percentage of Employees
Number of Employees Who Covered by Collective
Employees Are Part-time Bargaining Agreements
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Harcourt Brace
& Company
(including NEC) 6,000 200 4%
The Neiman
Marcus Group 12,000 1,400 1%
Drake Beam Morin 400 10 None
Corporate 100 None None
The figures in the above table are approximate as of October 31,
1997. The Company believes that its relations with its employees are generally
good.
2. CAPITAL EXPENDITURES; SEASONALITY; LIQUIDITY; CAPITAL RESOURCES
For a review of the Company's financial results for fiscal 1997,
including information on capital expenditures, seasonality, liquidity, capital
resources and other financial information, reference is made to the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section on pages 23 through 27 of the Company's Annual Report to
Stockholders for the fiscal year ended October 31, 1997 (the "1997 Annual
Report"), which information is incorporated herein.
3. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The information set forth under the heading "Additional Financial
Information" in Note 2 of the Notes to Consolidated Financial Statements on page
36 of the 1997 Annual Report is incorporated herein.
4. EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the heading "Executive Officers" in
Item 10 below is incorporated herein.
ITEM 2. PROPERTIES
The Company's corporate headquarters, as well as the corporate
headquarters for NMG and DBM, are located in leased facilities in Chestnut Hill,
Massachusetts, a suburb of Boston.
The operational headquarters for Harcourt Brace are located in Orlando,
Florida. At October 31, 1997, Harcourt Brace operated out of approximately 4.8
million square feet of office and distribution facilities throughout the world,
consisting of approximately 136,000 square feet of owned office facilities, 2.7
million square feet of leased office facilities, 1.3 million square feet of
owned distribution facilities, and 687,000 square feet of leased distribution
facilities.
NMG's operating divisions are headquartered in leased or owned
facilities in Dallas (Neiman Marcus Stores), New York City (Bergdorf Goodman),
and Irving, Texas (NM Direct). At October 31, 1997, the approximate square
footage used in NMG's operations was as follows:
[Download Table]
Owned
Subject to
Owned Ground Lease Leased Total
----- ------------ ------ -----
Stores ................... 348,000 1,934,000 2,298,000 4,580,000
Distribution, support
and office facilities and
clearance centers .. 1,154,000 0 591,000 1,745,000
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.
NMG owns approximately 50 acres of land in Las Colinas, Texas, where its NM
Direct operations are located in a 690,000 square foot facility, and
approximately 34 acres of land in Longview, Texas where its National Service
Center is located in a 464,000 square foot facility. NMG operates five small
clearance centers which provide an outlet for the sale of marked down
merchandise from Neiman Marcus Stores, Bergdorf Goodman and NM Direct. These
facilities and clearance centers are included in the table above.
At October 31, 1997, DBM conducted its business from 63 leased offices
in 30 states and 23 leased offices in six other countries, and maintained a
network of licensed service providers in 26 other countries.
For additional information about the properties of the Company, see
Item 1 above and the information contained in Note 13 of the Notes to
Consolidated Financial Statements under the heading "Leases" on page 43 of the
1997 Annual Report, which is incorporated herein.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various suits and claims incidental to the
ordinary course of its business. The Company does not believe that the
disposition of any such suits or claims will have a material adverse effect on
the financial position or continuing operations of the Company.
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 following information contained in the 1997 Annual Report is
incorporated herein:
(i) "Dividends per share" in Note 17 of the Notes to Consolidated
Financial Statements on page 46 of the 1997 Annual Report; and
(ii) "Stock Information" (including the accompanying table and text)
on page 50 of the 1997 Annual Report. In addition to the information
set forth therein with respect to the Company's Common Stock and Series
A Cumulative Convertible Stock, the Company's Class B Stock is subject
to significant restrictions on transfer and is not listed or traded on
any exchange or in any market. As of January 15, 1998, there were 1,673
record holders of Class B Stock. For further information with respect
to the Class B Stock, including the ownership by the family of Richard
A. Smith (the Chairman and Chief Executive Officer of the Company)
of 99.8% of the Class B stock, reference is made to the information
contained in the Company's Proxy Statement for the 1998 Annual Meeting
of Stockholders under the heading "Stock Ownership of Certain
Beneficial Owners and Management."
ITEM 6. SELECTED FINANCIAL DATA
The response to this Item is contained in the 1997 Annual Report under
the caption "Five Year Summary (Unaudited)" on page 48 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 of Financial Condition and
Results of Operations" on pages 23 through 27 and is incorporated herein.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The market risk inherent in the Company's financial instruments and
position represents the potential loss arising from adverse changes in interest
rates. The Company does not enter into financial instruments for trading
purposes.
At October 31, 1997, the fair value of the Company's fixed-rate debt
was estimated at $1.02 billion using quoted market prices and comparable
publicly-traded issues. Such fair value exceeded the carrying value at October
31, 1997 by approximately $47.2 million. Market risk is estimated as the
potential change in fair value resulting from a hypothetical 10% adverse change
in interest rates, and amounted to approximately $58.6 million at October 31,
1997.
Subsidiaries of the Company had approximately $314.0 million of
variable rate borrowings outstanding under revolving credit agreements, which
approximated fair value, at October 31, 1997. A hypothetical 10% adverse change
in interest rates for this variable rate debt would have an approximate $1.9
million negative effect on the Company's earnings and cash flows.
For additional information about the Company's financial instruments,
see Notes 1, 8 and 16 of the Notes to Consolidated Financial Statements,
beginning, respectively, on pages 33, 39, and 45 of the 1997 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and supplementary data set forth
in Item 14 are incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. DIRECTORS
The response to this Item regarding the directors of the Company and
compliance with Section 16(a) of the Securities Exchange Act of 1934 by the
Company's officers and directors is contained in the Proxy Statement for the
1998 Annual Meeting of Stockholders under the captions "Election of Directors"
and "Section 16(a) Beneficial Ownership Reporting Compliance" and is
incorporated herein.
B. EXECUTIVE OFFICERS
Below is the name, age and principal occupations for the last five
years of each current executive officer 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.
Richard A. Smith - 73
Chairman of the Company and of The Neiman Marcus Group, Inc.; Chief
Executive Officer of the Company and of The Neiman Marcus Group, Inc.
since January 15, 1997 and prior to December 1991; Chairman, President
(until November 1, 1995) and Chief Executive Officer of GC Companies,
Inc. since December 1993; Director of The Neiman Marcus Group, Inc. and
GC Companies, Inc. Mr. Smith is the father of Robert A. Smith and the
father-in-law of Brian J. Knez, who are Presidents and Co-Chief
Operating Officers and directors of the Company. Mr. Smith is the uncle
of Jeffrey R. Lurie, a director of the Company.
Robert A. Smith - 38
President and Co-Chief Operating Officer of the Company and President
and Chief Operating Officer of The Neiman Marcus Group, Inc. since
January 15, 1997; Group Vice President of the Company and of The Neiman
Marcus Group, Inc. prior thereto; President and Chief Operating Officer
of GC Companies, Inc. since November 1995. Director of The Neiman
Marcus Group, Inc. Mr. Smith is the son of Richard A. Smith, Chairman
and Chief Executive Officer of the Company, the brother-in-law of Brian
J. Knez, who is also President and Co-Chief Operating Officer and a
director of the Company, and the cousin of Jeffrey R. Lurie, a director
of the Company.
Brian J. Knez - 40
President and Co-Chief Operating Officer of the Company since January
15, 1997; President and Chief Executive Officer of Harcourt Brace &
Company since May 1995; President of the Scientific, Technical, Medical
and Professional Group of Harcourt Brace from 1993 to May 1995; Group
Vice President of the Scientific, Technical and Medical Group of
Harcourt Brace from 1991 to 1993; Director of The Neiman Marcus Group,
Inc. and Open Market, Inc. Mr. Knez is the son-in-law of Richard A.
Smith, Chairman and Chief Executive Officer of the Company, and the
brother-in-law of Robert A. Smith, who is also President and Co-Chief
Operating Officer and a director of the Company.
John R. Cook - 56
Senior Vice President and Chief Financial Officer of the Company and of
The Neiman Marcus Group, Inc.; Director of The Neiman Marcus Group,
Inc.
Eric P. Geller - 50
Senior Vice President, General Counsel and Secretary of the Company and
of The Neiman Marcus Group, Inc.
Peter Farwell - 54
Vice President - Corporate Relations of the Company and of The Neiman
Marcus Group, Inc.
Paul F. Gibbons - 46
Vice President and Treasurer of the Company and of The Neiman Marcus
Group, Inc.
Gerald T. Hughes - 41
Vice President-Human Resources of the Company and of The Neiman Marcus
Group, Inc. since June 1994; Associate General Counsel of the Company
and of The Neiman Marcus Group, Inc. with responsibility for labor and
employment matters prior thereto.
Catherine N. Janowski - 37
Vice President and Controller of the Company and of The Neiman Marcus
Group, Inc. since November 1997. Director, Corporate Accounting of the
Company and of The Neiman Marcus Group, Inc. from August 1993 until
November 1997. Manager, Corporate Accounting and International
Financial Analysis of Ocean Spray Cranberries, Inc. prior thereto.
Michael F. Panutich - 49
Vice President - General Auditor of the Company and of The Neiman
Marcus Group, Inc. since June 1993; Vice President - Accounting of the
Company and of The Neiman Marcus Group, Inc. prior thereto.
ITEM 11. EXECUTIVE COMPENSATION
The response to this Item is contained in the Proxy Statement for the
1998 Annual Meeting of Stockholders under the captions "Directors'
Compensation", "Executive Compensation" and "Transactions Involving Management"
and is incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The response to this Item is contained in the Proxy Statement for the
1998 Annual Meeting of Stockholders under the caption "Stock Ownership of
Certain Beneficial Owners and Management" and is incorporated herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this Item is contained in the Proxy Statement for the
1998 Annual Meeting of Stockholders under the captions "Executive Compensation"
and "Transactions Involving Management" and is incorporated herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
14(a)(1) FINANCIAL STATEMENTS
The documents listed below are incorporated herein by reference
to the Company's 1997 Annual Report to Shareholders:
Consolidated Balance Sheets - October 31, 1997 and 1996.
Consolidated Statements of Operations for the fiscal years
ended October 31, 1997, 1996, and 1995.
Consolidated Statements of Cash Flows for the fiscal years
ended October 31, 1997, 1996 and 1995.
Consolidated Statements of Shareholders' Equity for the
fiscal years ended October 31, 1997, 1996 and 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:
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Page In
Form 10-K
---------
Independent Auditors' Report on Consolidated Financial
Statement Schedule F-1
Schedule VIII - 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.
14(b) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K during the quarter ended
October 31, 1997.
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.
HARCOURT GENERAL, INC.
By: S/ RICHARD A. SMITH
------------------------------
Richard A. Smith, Chairman
and Chief Executive Officer
Dated: January 28, 1998
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.
[Download Table]
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE
OFFICER:
S/RICHARD A. SMITH Chairman and Chief January 28, 1998
------------------------------ Executive Officer
Richard A. Smith
PRINCIPAL FINANCIAL
OFFICER:
S/JOHN R. COOK Senior Vice President and January 28, 1998
--------------------------- Chief Financial Officer
John R. Cook
PRINCIPAL ACCOUNTING
OFFICER:
S/CATHERINE N. JANOWSKI Vice President and January 28, 1998
--------------------------- Controller
Catherine N. Janowski
S-1
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DIRECTORS:
----------
S/WILLIAM F. CONNELL January 28, 1998
---------------------------
William F. Connell
January , 1998
---------------------------
Gary L. Countryman
S/JACK M. GREENBERG January 28, 1998
---------------------------
Jack M. Greenberg
S/BRIAN J. KNEZ January 28, 1998
---------------------------
Brian J. Knez
S/JEFFREY R. LURIE January 28, 1998
---------------------------
Jeffrey R. Lurie
S/LYNN MORLEY MARTIN January 14, 1998
---------------------------
Lynn Morley Martin
S/MAURICE SEGALL January 28, 1998
---------------------------
Maurice Segall
S/ROBERT A. SMITH January 28, 1998
---------------------------
Robert A. Smith
S/PAULA STERN January 14, 1998
---------------------------
Paula Stern
S/HUGO UYTERHOEVEN January 21, 1998
---------------------------
Hugo Uyterhoeven
S/CLIFTON R. WHARTON, JR. January 28, 1998
---------------------------
Clifton R. Wharton, Jr.
S-2
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Harcourt General, Inc.
Chestnut Hill, Massachusetts
We have audited the consolidated financial statements of Harcourt General, Inc.
and its subsidiaries (the "Company") as of October 31, 1997 and 1996, and for
each of the three years in the period ended October 31, 1997, and have issued
our report thereon dated December 8, 1997. Such consolidated financial
statements and report are included in the Company's 1997 Annual Report to
Shareholders and are incorporated herein by reference. Our audits also included
the consolidated financial statement schedule of the Company listed in Item
14(a)(2). The consolidated 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 consolidated 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.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 8, 1997
F-1
SCHEDULE VIII
HARCOURT GENERAL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
THREE YEARS ENDED OCTOBER 31, 1997
(In thousands)
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COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
-----------------------
Charged
Balance at Charged to to Other
Beginning Costs and Accounts- Deductions- Balance at
Description of Period Expenses Describe Describe End of Period
------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1997
Allowance for doubtful accounts $15,132 13,485 13,775(B) 10,374(C) $32,018
(deducted from accounts receivable)
Allowance for book returns (A) $53,189 102,175 3,915(B) 93,368(D) $65,911
(deducted from accounts receivable)
YEAR ENDED OCTOBER 31, 1996
Allowance for doubtful accounts $17,897 5,405 - 8,170(C) $15,132
(deducted from accounts receivable)
Allowance for book returns (A) $49,403 94,182 (94) 90,302(D) $53,189
(deducted from accounts receivable)
YEAR ENDED OCTOBER 31, 1995
Allowance for doubtful accounts $13,492 8,829 - 4,424(C) $17,897
(deducted from accounts receivable)
Allowance for book returns (A) $49,091 82,548 437 82,673(D) $49,403
(deducted from accounts receivable)
(A) Reflects gross allowance netted against accounts receivable. Reserves for
returns to inventory and recovery of royalties payable are netted
directly against those balances and are not material.
(B) Reflects additions to the allowance from acquisitions during the year.
(C) Write-off of uncollectible accounts net of recoveries.
(D) Books actually returned during the year.
F-2
EXHIBIT INDEX
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3.1 Restated Certificate of Incorporation of the Company,
incorporated herein by reference to Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended April 30, 1997.
3.2 By-Laws of the Company, as amended, incorporated
herein by reference to Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1991.
4.1 Indenture, dated as of May 1, 1987, between the Company
and Manufacturers Hanover Trust Company, as Trustee and
Terms Agreement, dated March 16, 1988, among the Company,
The First Boston Corporation and Salomon Brothers Inc relating
to the Company's 9 1/2% Subordinated Notes due 2000,
incorporated herein by reference to Exhibit 1 to the Company's
Report on Form 8-K, dated March 16, 1988.
4.2 Indenture dated as of April 23, 1992 between the
Company and Bankers Trust Company, as Trustee, relating
to the Company's 8 1/4% Senior Notes Due 2002 and the
Company's 8 7/8% Senior Debentures Due 2022,
incorporated herein by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-3,
File No. 33-46148.
4.3 First Supplemental Indenture dated as of August 5, 1997
between the Company and Bankers Trust Company, as
Trustee, relating to the Company's 6.70% Senior
Notes Due 2007, the Company's 7.20% Senior Debentures
Due 2027, and the Company's 7.30% Senior Debentures
Due 2097, incorporated herein by reference to Exhibit 4.2
to the Company's Registration Statement on Form S-3,
File No. 333-30621.
4.4 Indenture dated as of May 15, 1986 between National
Education Corporation and Continental Illinois National
Bank and Trust Company of Chicago, as Trustee,
incorporated herein by reference to Exhibit 4.2 to Amendment
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No. 1 to National Education Corporation's Registration
Statement on Form S-3, File No. 33-5552.
4.5 Tripartite Agreement dated as of June 1, 1990 among National
Education Corporation, IBJ Schroder Bank & Trust Company
and Continental Bank, National Association, as resigning Trustee,
incorporated herein by reference to Exhibit 4 to National
Education Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1990, File No. 1-6981.
4.6 First Supplemental Indenture dated as of July 21, 1997 among
National Education Corporation, Harcourt General, Inc., and
IBJ Schroder Bank & Trust Company, incorporated herein by
reference to Exhibit 4 the Company's Registration Statement
on Form 8-A, dated July 22, 1997, File No. 1-4925.
4.7 Smith-Lurie/Marks Stockholders' Agreement, dated
December 29, 1986, incorporated herein by reference to
Exhibit 4.5 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 1992.
*10.1 1988 Stock Incentive Plan, incorporated herein by reference
to Exhibit 28.1 to the Company's Registration Statement on
Form S-8, File No. 33-26079.
*10.2 1997 Incentive Plan.
*10.3 1983 Key Executive Stock Purchase Loan Plan, as amended,
incorporated herein by reference to Exhibit 10.4(b) to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1984.
*10.4 Executive Medical Plan, as amended, incorporated herein by
reference to Exhibit 10.5 to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1994.
*10.5(a) Supplemental Executive Retirement Plan, incorporated
herein by reference to Exhibit 10.9 to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1988.
*10.5(b) Amendment to Supplemental Executive Retirement Plan, dated
October 26, 1990, incorporated herein by reference to
Exhibit 10.7(b) to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1990.
*10.6 Deferred Compensation and Retirement Income Plan for
Non-Employee Directors, incorporated herein by reference
to Exhibit 10.7 to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1993.
*10.7(a) Amended and Restated Deferred Compensation Agreement,
dated August 27, 1990, between the Company and Richard A.
Smith, incorporated herein by reference to Exhibit 10.13
of the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1990.
*10.7(b) Deferred Compensation Agreement dated as of December 15,
1994, between the Company and Richard A. Smith,
incorporated herein by reference to Exhibit 10.9(b) of the
Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1995.
*10.8 Split Dollar Life Insurance Agreement, dated as of June
21, 1990, by and between the Company and the Richard and
Susan Smith 1990 Issue Trust, under a Declaration of Trust
dated as of April 3, 1990, incorporated herein by
reference to Exhibit 10.17 to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1991.
*10.9 Key Employee Deferred Compensation Plan, as amended,
incorporated herein by reference to Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1994.
*10.10 Resignation Agreement dated as of December 17, 1996 by and
between the Company and Robert J. Tarr, Jr., incorporated
herein by reference to Exhibit 10.15(c) to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1996.
10.11 Intercompany Services Agreement, dated as of July 24,
1987, between the Company and NMG, incorporated herein
by reference to Exhibit 10.17(c) to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31,
1987.
10.12 Amended and Restated Intercompany Services Agreement
dated as of November 1, 1995, between the Company and
GC Companies, Inc., incorporated herein by reference to
Exhibit 10.11(b) of the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1995.
10.13 Reimbursement and Security Agreement, dated as of
December 14, 1993, between the Company and GC
Companies, Inc., incorporated herein by reference to
Exhibit 10.12 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1993.
10.14 Credit Agreement dated as of July 18, 1997 among the
Company, the banks listed therein, The Chase Manhattan
Bank, as syndication agent, Morgan Guaranty Trust Company
of New York, as documentation agent, and BankBoston, N.A.,
as administrative agent, incorporated herein by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended July 31, 1997.
10.15 Credit Agreement dated as of October 29, 1997 among
The Neiman Marcus Group, Inc., the banks listed therein,
Bank of America National Trust and Savings Association,
as syndication agent, The Chase Manhattan Bank, as
documentation agent, and Morgan Guaranty Trust Company
of New York, as administrative agent, incorporated herein
by reference to Exhibit 10.1 to The Neiman Marcus Group,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
November 1, 1997, File No. 1-9659.
10.16 Receivables Purchase Agreement dated as of March 1, 1995
between The Neiman Marcus Group, Inc. and Neiman Marcus
Funding Corporation, incorporated herein by reference to
Exhibit 10.1 to Neiman Marcus Group Credit Card Master
Trust's Registration Statement on Form S-3, File No.
33-88098.
10.17 Exchange and Repurchase Agreement, incorporated herein by
reference to Exhibit 10.1 to The Neiman Marcus Group,
Inc.'s Registration Statement on Form S-3, File No.
333-11721.
10.18 Agreement and Plan of Merger among the Company, Nick
Acquisition Corporation and National Education
Corporation, dated as of May 12, 1997, incorporated herein
by reference to Exhibit 11(c)(1) to Amendment No. 3 to the
Company's Schedule 14D-1, dated May 14, 1997, File No.
1-4925.
10.19 Agreement and Plan of Merger, dated as of September
29, 1997, by and among the Company, Steck-Vaughn
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Publishing Corporation, National Education Corporation,
and SV Acquisition Corporation, incorporated herein by
reference to Appendix A to Exhibit D to Steck-Vaughn
Publishing Corporation's Schedule 13E-3, dated October 6,
1997, File No. 0-21730.
11.1 Computation of 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
Stockholders ("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 23
through 27 of the 1997 Annual Report.
Consolidated Financial Statements and the Notes
thereto at pages 28 through 46 of the 1997 Annual
Report.
Independent Auditors' Report at page 47 of the 1997
Annual Report.
The information appearing under the caption "Five
Year Summary (Unaudited)" on page 48 of the 1997
Annual Report.
The information appearing under the caption "Stock
Information" (including the accompanying tables and
text) on page 50 of the 1997 Annual Report.
21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule.
Dates Referenced Herein and Documents Incorporated by Reference
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