##### Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended January 26, 2002

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file no. 1-9659

The Neiman Marcus Group, Inc.(Exact name of registrant as specified in its charter)

|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 95-4119509
(I.R.S. Employer
Identification No.)

1618 Main Street
Dallas, Texas 75201
(Address of principal executive offices)

(214) 741-6911
(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 February 23, 2002, 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 |  |                    | 27,829,121 | 
|Class B Common Stock, $.01 Par Value |  |                    | 19,941,835 | 





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TABLE OF CONTENTS



|                                                  |                                                                                               |                                                      |  |  |  |  |  | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                    
|                                                  | ITEM 1. CONDENSED CONSOLIDATED BALANCE SHEETS                                                
|                                                  |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS       
|                                                  |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                  |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                                  | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                  | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II- Other Information                       
|                                                  | Item 1. Legal Proceedings                                                                    
|                                                  | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                  | Item 6. Exhibits and Reports on Form 8-K.                                                    
|SIGNATURES                                       
|EX-3.1 Restated Certificate of Incorporation     
|EX-3.2 Bylaws as amended through January 21, 2002



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THE NEIMAN MARCUS GROUP, INC.

INDEX

|           |  |                                                                                                      |  |                                                                                                                                           |      |      |     | 
|---------- |  | ---------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------- | ---- | ---- | --- | 
|           |  |                                                                                                      |  |                                                                                                                                           |      | Page
|           |  |                                                                                                      |  |                                                                                                                                           |      |     
|Part I.    |  | Financial Information                                                                                |  |                                                                                                                                           |      |     
|Item 1.    |  | Condensed Consolidated Balance Sheets as of January 26, 2002,
    July 28, 2001 and January 27, 2001 |  |                                                                                                                                           | 1    |     
|           |  |                                                                                                      |  | Condensed Consolidated Statements of Earnings for the Thirteen Weeks and    
Twenty-Six Weeks Ended January 26, 2002 and January 27, 2001 |      |      | 2   | 
|           |  |                                                                                                      |  | Condensed Consolidated Statements of Cash Flows for the Twenty-Six
    Weeks Ended January 26, 2002 and January 27, 2001                  |      |      | 3   | 
|           |  |                                                                                                      |  | Notes to Condensed Consolidated Financial Statements                                                                                      |      |      | 4-7 | 
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations                |  |                                                                                                                                           | 8-13 |     
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                           |  |                                                                                                                                           | 13   |     
|Part II.   |  | Other Information                                                                                    |  |                                                                                                                                           |      |     
|Item 1.    |  | Legal Proceedings                                                                                    |  |                                                                                                                                           | 14   |     
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                  |  |                                                                                                                                           | 14   |     
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                     |  |                                                                                                                                           | 15   |     
|Signatures |  |                                                                                                      |  |                                                                                                                                           | 16   |     





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THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

|                                              |                             |                                                               |                             |                      |         |             |           |          |         |             |           |         |          |         |           | 
|--------------------------------------------- | --------------------------- | ------------------------------------------------------------- | --------------------------- | -------------------- | ------- | ----------- | --------- | -------- | ------- | ----------- | --------- | ------- | -------- | ------- | --------- | 
|                                              |                             |                                                               |                             |                      |         | January 26, |           | July 28, |         | January 27,
|(in thousands)                                |                             | 2002                                                          |                             | 2001                 |         | 2001       
|                                              |                             |                                                               |                             |                      |         |            
|ASSETS                                        |                             |                                                               |                             |                      |         |             |           |          |         |             |           |        
|Current assets:                               |                             |                                                               |                             |                      |         |             |           |          |         |             |           |        
|                                              |                             | Cash and cash equivalents                                     |                             | $                    | 137,213 |             |           | $        | 97,291  |             |           | $       | $113,404 |        
|                                              |                             | Undivided interests in NMG Credit Card Master Trust           |                             |                      | 284,727 |             |           |          | 220,717 |             |           |         | 303,061  |        
|                                              |                             | Accounts receivable, net                                      |                             |                      | 21,493  |             |           |          | 20,707  |             |           |         | 23,610   |        
|                                              |                             | Merchandise inventories                                       |                             |                      | 584,132 |             |           |          | 648,867 |             |           |         | 613,997  |        
|                                              |                             | Other current assets                                          |                             |                      | 72,470  |             |           |          | 75,747  |             |           |         | 86,031   |        
|                                              |                             |                                                               |                             |                      |         |             |           |          |         |             |           |         |          |        
|                                              |                             |                                                               |                             | Total current assets |         |             | 1,100,035 |          |         |             | 1,063,329 |         |          |         | 1,140,103 | 
|                                              |                             |                                                               |                             |                      |         |             |           |          |         |             |           |         |          |        
|Property and equipment, net                   |                             |                                                               | 633,635                     |                      |         |             | 586,618   |          |         |             | 551,826   |        
|Other assets                                  |                             |                                                               | 131,705                     |                      |         |             | 135,923   |          |         |             | 146,723   |        
|                                              |                             |                                                               |                             |                      |         |             |           |          |         |             |           |         |          |        
|Total assets                                  |                             | $                                                             | 1,865,375                   |                      |         | $           | 1,785,870 |          |         | $           | 1,838,652 |        
|                                              |                             |                                                               |                             |                      |         |             |           |          |         |             |           |         |          |        
|LIABILITIES AND SHAREHOLDERS EQUITY          |                             |                                                               |                             |                      |         |             |           |          |         |             |           |        
|Current liabilities:                          |                             |                                                               |                             |                      |         |             |           |          |         |             |           |        
|                                              |                             | Notes payable and current maturities of long-term
liabilities |                             | $                    | 4,098   |             |           | $        | 858     |             |           | $       | 822      |        
|                                              |                             | Accounts payable                                              |                             |                      | 249,167 |             |           |          | 270,897 |             |           |         | 297,239  |        
|                                              |                             | Accrued liabilities                                           |                             |                      | 259,689 |             |           |          | 225,805 |             |           |         | 255,730  |        
|                                              |                             |                                                               |                             |                      |         |             |           |          |         |             |           |         |          |        
|                                              |                             |                                                               | Total current liabilities   |                      |         | 512,954     |           |          |         | 497,560     |           |         |          | 553,791 |          
|                                              |                             |                                                               |                             |                      |         |             |           |          |         |             |           |         |          |        
|Long-term liabilities:                        |                             |                                                               |                             |                      |         |             |           |          |         |             |           |        
|                                              | Notes and debentures        |                                                               |                             | 249,698              |         |             |           | 249,686  |         |             |           | 249,675 |         
|                                              | Other long-term liabilities |                                                               |                             | 100,584              |         |             |           | 89,244   |         |             |           | 106,938 |         
|                                              |                             |                                                               |                             |                      |         |             |           |          |         |             |           |         |          |        
|                                              |                             |                                                               | Total long-term liabilities |                      |         | 350,282     |           |          |         | 338,930     |           |         |          | 356,613 |          
|                                              |                             |                                                               |                             |                      |         |             |           |          |         |             |           |         |          |        
|Minority interest                             |                             |                                                               | 9,202                       |                      |         |             | 6,640     |          |         |             | 8,156     |        
|                                             
|Common stock                                  |                             |                                                               | 479                         |                      |         |             | 478       |          |         |             | 480       |        
|Additional paid-in capital                    |                             |                                                               | 435,052                     |                      |         |             | 432,726   |          |         |             | 427,972   |        
|Accumulated other comprehensive income (loss) |                             |                                                               | (454                        | )                    |         |             | (1,029    | )        |         |             | (1,364    | )      
|Retained earnings                             |                             |                                                               | 557,860                     |                      |         |             | 510,565   |          |         |             | 493,004   |        
|                                              |                             |                                                               |                             |                      |         |             |           |          |         |             |           |         |          |        
|Total shareholders equity                    |                             |                                                               | 992,937                     |                      |         |             | 942,740   |          |         |             | 920,092   |        
|                                              |                             |                                                               |                             |                      |         |             |           |          |         |             |           |         |          |        
|Total liabilities and shareholders equity    |                             | $                                                             | 1,865,375                   |                      |         | $           | 1,785,870 |          |         | $           | 1,838,652 |        
|                                              |                             |                                                               |                             |                      |         |             |           |          |         |             |           |         |          |        

See Notes to Condensed Consolidated Financial Statements.

1



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THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)

|                                                                            |         |      |                      |        |                        |      |             |        |             |   |           |        |  |   |           |        | 
|--------------------------------------------------------------------------- | ------- | ---- | -------------------- | ------ | ---------------------- | ---- | ----------- | ------ | ----------- | - | --------- | ------ |  | - | --------- | ------ | 
|                                                                            |         |      | Thirteen Weeks Ended |        | Twenty-Six Weeks Ended
|                                                                            |         |      |                      |        |                       
|                                                                            |         |      | January 26,          |        | January 27,            |      | January 26, |        | January 27,
|(in thousands, except per share data)                                       |         | 2002 |                      | 2001   |                        | 2002 |             | 2001  
|                                                                            |         |      |                      |        |                        |      |             |       
|Revenues                                                                    |         | $    | 908,086              |        |                        | $    | 923,950     |        |             | $ | 1,589,235 |        |  | $ | 1,681,171 |       
|Cost of goods sold including buying and occupancy costs                     |         |      | 645,766              |        |                        |      | 634,120     |        |             |   | 1,081,656 |        |  |   | 1,092,834 |       
|Selling, general and administrative expenses                                |         |      | 217,503              |        |                        |      | 219,745     |        |             |   | 420,490   |        |  |   | 431,727   |       
|                                                                            |         |      |                      |        |                        |      |             |        |             |   |           |        |  |   |           |       
|Operating earnings                                                          |         |      | 44,817               |        |                        |      | 70,085      |        |             |   | 87,089    |        |  |   | 156,610   |       
|Interest expense                                                            |         |      | 4,260                |        |                        |      | 4,073       |        |             |   | 8,246     |        |  |   | 8,351     |       
|                                                                            |         |      |                      |        |                        |      |             |        |             |   |           |        |  |   |           |       
|Earnings before income taxes and minority interest                          |         |      | 40,557               |        |                        |      | 66,012      |        |             |   | 78,843    |        |  |   | 148,259   |       
|Income taxes                                                                |         |      | 15,411               |        |                        |      | 25,084      |        |             |   | 29,960    |        |  |   | 56,338    |       
|                                                                            |         |      |                      |        |                        |      |             |        |             |   |           |        |  |   |           |       
|Earnings before minority interest                                           |         |      | 25,146               |        |                        |      | 40,928      |        |             |   | 48,883    |        |  |   | 91,921    |       
|Minority interest in net earnings of subsidiaries                           |         |      | (844                 | )      |                        |      | (994        | )      |             |   | (1,588    | )      |  |   | (1,998    | )     
|                                                                            |         |      |                      |        |                        |      |             |        |             |   |           |        |  |   |           |       
|Net earnings                                                                |         | $    | 24,302               |        |                        | $    | 39,934      |        |             | $ | 47,295    |        |  | $ | 89,923    |       
|                                                                            |         |      |                      |        |                        |      |             |        |             |   |           |        |  |   |           |       
|Weighted average number of common and
common equivalent shares outstanding: |         |      |                      |        |                        |      |             |        |             |   |           |        |  |   |           |       
|                                                                            | Basic   |      |                      | 47,431 |                        |      |             | 47,119 |             |   |           | 47,379 |  |   |           | 47,032 | 
|                                                                            |         |      |                      |        |                        |      |             |        |             |   |           |        |  |   |           |       
|                                                                            | Diluted |      |                      | 47,763 |                        |      |             | 47,621 |             |   |           | 47,698 |  |   |           | 47,538 | 
|                                                                            |         |      |                      |        |                        |      |             |        |             |   |           |        |  |   |           |       
|Earnings per share:                                                         |         |      |                      |        |                        |      |             |        |             |   |           |        |  |   |           |       
|                                                                            | Basic   |      | $                    | 0.51   |                        |      | $           | 0.85   |             |   | $         | 1.00   |  |   | $         | 1.91   | 
|                                                                            |         |      |                      |        |                        |      |             |        |             |   |           |        |  |   |           |       
|                                                                            | Diluted |      | $                    | 0.51   |                        |      | $           | 0.84   |             |   | $         | 0.99   |  |   | $         | 1.89   | 
|                                                                            |         |      |                      |        |                        |      |             |        |             |   |           |        |  |   |           |       

See Notes to Condensed Consolidated Financial Statements.

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THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

|                                                                                               |                                                      |      |                        |          |             |   |          |          |  
|---------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ---- | ---------------------- | -------- | ----------- | - | -------- | -------- | -
|                                                                                               |                                                      |      | Twenty-Six Weeks Ended
|                                                                                               |                                                      |      |                       
|                                                                                               |                                                      |      | January 26,            |          | January 27,
|(in thousands)                                                                                 |                                                      | 2002 |                        | 2001    
|                                                                                               |                                                      |      |                        |         
|OPERATING ACTIVITIES                                                                           |                                                      |      |                        |          |             |   |          |         
|Net earnings                                                                                   |                                                      | $    | 47,295                 |          |             | $ | 89,923   |         
|Adjustments to reconcile net earnings to net cash
provided by (used for) operating activities: |                                                      |      |                        |          |             |   |          |         
|                                                                                               | Depreciation and amortization                        |      |                        | 40,882   |             |   |          | 40,986   |  
|                                                                                               | Minority interest                                    |      |                        | 1,588    |             |   |          | 1,998    |  
|                                                                                               | Other                                                |      |                        | 10,914   |             |   |          | 4,251    |  
|Changes in current assets and liabilities:                                                     |                                                      |      |                        |          |             |   |          |         
|                                                                                               | Increase in accounts receivable                      |      |                        | (786     | )           |   |          | (4,331   | )
|                                                                                               | Decrease (increase) in merchandise inventories       |      |                        | 64,735   |             |   |          | (35,653  | )
|                                                                                               | Increase in accounts payable and accrued liabilities |      |                        | 16,785   |             |   |          | 60,218   |  
|                                                                                               | Other                                                |      |                        | 3,277    |             |   |          | 1,718    |  
|                                                                                               |                                                      |      |                        |          |             |   |          |         
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                                      |                                                      |      | 184,690                |          |             |   | 159,110  |         
|                                                                                               |                                                      |      |                        |          |             |   |          |         
|INVESTING ACTIVITIES                                                                           |                                                      |      |                        |          |             |   |          |         
|Capital expenditures                                                                           |                                                      |      | (85,003                | )        |             |   | (50,125  | )       
|Transactions related to undivided interests in NMG
Credit Card Master Trust:                   |                                                      |      |                        |          |             |   |          |         
|                                                                                               | Purchases of held-to-maturity securities             |      |                        | (555,937 | )           |   |          | (595,768 | )
|                                                                                               | Maturities of held-to-maturity securities            |      |                        | 491,927  |             |   |          | 504,288  |  
|                                                                                               |                                                      |      |                        |          |             |   |          |         
|NET CASH USED FOR INVESTING ACTIVITIES                                                         |                                                      |      | (149,013               | )        |             |   | (141,605 | )       
|                                                                                               |                                                      |      |                        |          |             |   |          |         
|FINANCING ACTIVITIES                                                                           |                                                      |      |                        |          |             |   |          |         
|Proceeds from borrowings                                                                       |                                                      |      | 133,240                |          |             |   |         |         
|Repayment of debt                                                                              |                                                      |      | (130,000               | )        |             |   | (80,000  | )       
|Distributions paid                                                                             |                                                      |      |                       |          |             |   | (3,949   | )       
|Other financing activities                                                                     |                                                      |      | 1,005                  |          |             |   | 4,463    |         
|                                                                                               |                                                      |      |                        |          |             |   |          |         
|NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES                                           |                                                      |      | 4,245                  |          |             |   | (79,486  | )       
|                                                                                               |                                                      |      |                        |          |             |   |          |         
|CASH AND CASH EQUIVALENTS                                                                      |                                                      |      |                        |          |             |   |          |         
|Increase (decrease) during the period                                                          |                                                      |      | 39,922                 |          |             |   | (61,981  | )       
|Beginning balance                                                                              |                                                      |      | 97,291                 |          |             |   | 175,385  |         
|                                                                                               |                                                      |      |                        |          |             |   |          |         
|Ending balance                                                                                 |                                                      | $    | 137,213                |          |             | $ | 113,404  |         
|                                                                                               |                                                      |      |                        |          |             |   |          |         
|SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION                                                 |                                                      |      |                        |          |             |   |          |         
|Cash paid during the period for:                                                               |                                                      |      |                        |          |             |   |          |         
|Interest                                                                                       |                                                      | $    | 9,783                  |          |             | $ | 8,935    |         
|                                                                                               |                                                      |      |                        |          |             |   |          |         
|Income taxes                                                                                   |                                                      | $    | 11,113                 |          |             | $ | 28,487   |         
|                                                                                               |                                                      |      |                        |          |             |   |          |         

See Notes to Condensed Consolidated Financial Statements.

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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. and subsidiaries (the Company) have been prepared in accordance with
generally accepted accounting principles for interim financial information
and the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted for complete financial
statements. Therefore, the financial statements should be read in
conjunction with the Companys Annual Report on Form 10-K for the fiscal
year ended July 28, 2001.                                                                                                                                                                                                                      
|  
|   |  | In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the financial
position, results of operations, and cash flows of the Company for the
applicable interim periods. The results of operations for these periods are
not necessarily comparable to, or indicative of, results of any other
interim period or for the fiscal year as a whole.                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | The preparation of condensed consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
certain estimates and assumptions. These estimates and assumptions affect
the reported amounts of assets, liabilities, revenues, and expenses and the
disclosure of gain and loss contingencies at the date of the condensed
consolidated financial statements. Actual results could differ from those
estimates.                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | Prior year revenue amounts have been reclassified to comply with Emerging
Issues Task Force Issue No. 00-10, Accounting for Shipping and Handling
Fees and Costs. As reclassified from selling, general and administrative
expenses, shipping and handling revenues of $23.1 million for the thirteen
weeks ended January 27, 2001 are included in revenues and the related costs
of $20.4 million are included in cost of goods sold. As reclassified from
selling, general and administrative expenses, shipping and handling revenues
of $40.6 million for the twenty-six weeks ended January 27, 2001 are
included in revenues and the related costs of $33.3 million are included in
cost of goods sold. Such reclassifications had no impact on previously
reported operating earnings, net earnings, shareholders equity or cash
flows.
|  
|   |  | The Company adopted Statement of Financial Accounting Standards (SFAS) No.
133, Accounting for Derivative Instruments and Certain Hedging Activities,
as amended by SFAS No. 138, Accounting for Certain Derivative Instruments
and Certain Hedging Activities, during the first quarter of fiscal year
2001. Upon further interpretation of the provisions of SFAS No. 133, the
Company has reclassified the transition adjustment (previously presented as
a cumulative effect of an accounting change) to cost of sales during the
first quarter of fiscal year 2001.                                                                                                                                                                                                                                                                     
|  
|2. |  | Earnings per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | The weighted average shares used in computing basic and diluted earnings per
share (EPS) are 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 1,260,050 shares of common stock for the thirteen weeks
ended January 26, 2002 and options to purchase 1,264,850 shares of common stock
for the twenty-six weeks ended January 26, 2002 were not included in the
computation of diluted EPS because the exercise prices of those options were
greater than the average market price of the common shares. Options to
purchase 944,500 shares of common stock for the thirteen weeks ended January
27, 2001 and options to purchase 967,000 shares of common stock for the
twenty-six weeks ended January 27, 2001 were not included in the computation of
diluted EPS because the exercise prices of those options were greater than the
average market price of the common shares.                                                                                          

|                                                                                        |  |                      |        |                        |  |             |        |             |  |  |        |  |  |  |        | 
|--------------------------------------------------------------------------------------- |  | -------------------- | ------ | ---------------------- |  | ----------- | ------ | ----------- |  |  | ------ |  |  |  | ------ | 
|                                                                                        |  | Thirteen Weeks Ended |        | Twenty-Six Weeks Ended
|                                                                                        |  |                      |        |                       
|                                                                                        |  | January 26,          |        | January 27,            |  | January 26, |        | January 27,
|(in thousands of shares)                                                                |  | 2002                 |        | 2001                   |  | 2002        |        | 2001       
|                                                                                        |  |                      |        |                        |  |             |        |            
|Shares for computation of basic EPS                                                     |  |                      | 47,431 |                        |  |             | 47,119 |             |  |  | 47,379 |  |  |  | 47,032 | 
|Effect of dilutive stock options and nonvested
stock under common stock incentive plans |  |                      | 332    |                        |  |             | 502    |             |  |  | 319    |  |  |  | 506    | 
|                                                                                        |  |                      |        |                        |  |             |        |             |  |  |        |  |  |  |        | 
|Shares for computation of diluted EPS                                                   |  |                      | 47,763 |                        |  |             | 47,621 |             |  |  | 47,698 |  |  |  | 47,538 | 
|                                                                                        |  |                      |        |                        |  |             |        |             |  |  |        |  |  |  |        | 

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THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)



|3. |  | Undivided Interests in NMG Credit Card Master Trust                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Company utilizes a credit card securitization program as part of its
overall funding strategy. Under the securitization program, the Company
transfers substantially all of its proprietary credit card receivables to a
wholly-owned subsidiary, Neiman Marcus Funding Corp. who in turn sells such
receivables to the NMG Credit Card Master Trust (Trust). Under generally
accepted accounting principles, if the structure of the securitization meets
certain requirements, these transactions are accounted for as sales of
receivables. The Companys transfers and sales transactions qualify for sale
treatment.                                                                                                                                                                                                  
|  
|   |  | Certificates representing undivided interests in the credit card receivables
sold to the Trust are held by both outside investors and the Company. The
certificates held by the Company are classified on the balance sheet as
Undivided Interests in NMG Credit Card Master Trust. These certificates
represent securities that the Company intends to hold to maturity.
Due to the short-term revolving nature of the credit card portfolio, the
carrying value of the Companys undivided interests in the NMG Credit Card
Master Trust approximates fair value.                                                                                                                                                                                                                                                            
|  
|4. |  | Derivative Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | The Company enters into forward exchange contracts to hedge forecasted
inventory purchases denominated in foreign currencies for periods and
amounts consistent with the Companys identified exposures. The purpose of
the hedging activities is to minimize the effect of foreign exchange
movements on cash flows. Gains and losses related to the Companys foreign
currency exchange contracts that qualify as hedges are deferred and
recognized in cost of sales in the period the inventory is sold.                                                                                                                                                                                                                                                                                                                   
|  
|   |  | As of January 26, 2002, the Company had foreign currency contracts in the
form of forward exchange contracts in the amount of approximately $35.0
million. The contracts have varying maturity dates through February 2003.
The settlement terms of the forward contracts, including amount, currency
and maturity, correspond with the anticipated payment terms for the
merchandise inventories. These contracts have been designated and accounted
for as cash flow hedges. The Company recorded a charge of approximately
$0.3 million resulting from hedge ineffectiveness during the first quarter
of fiscal year 2002.                                                                                                                                                                                                  
|  
|   |  | At January 26, 2002, the Company had an unrealized loss related to their
outstanding foreign currency exchange contracts of approximately $0.7
million which is recorded in other current liabilities. This amount, net of
taxes, is reflected in accumulated other comprehensive income (loss), in the
accompanying condensed consolidated balance sheets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|5. |  | Revolving Credit Facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | The Company has an unsecured revolving credit facility with a group of banks
pursuant to which the Company may borrow up to $450 million. The rate of
interest payable varies according to one of four pricing options selected by
the Company. The facility, which expires in October 2002, may be terminated
by the Company at any time on three business days notice. The revolving
credit facility contains covenants that require the Company to maintain
certain leverage and fixed charge ratios. The Company currently pays a
facility fee on the total commitment amount at a rate based on the Companys
quarterly fixed charge coverage ratio. The Company expects to replace the
existing facility on or before the expiration date. There were no borrowings
outstanding under this facility at January 26, 2002.

5



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##### Table of Contents



THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)



|6. |  | Operating Segments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Company has identified two reportable segments: Specialty Retail Stores
and Direct Marketing. The Specialty Retail Stores segment includes all
Neiman Marcus and Bergdorf Goodman retail stores. Direct Marketing includes
the operations of Neiman Marcus Direct, which publishes NM by Mail, the
Horchow catalogues, Chefs Catalog and the Neiman Marcus Christmas
Catalogue. Other includes the on-line operations of NeimanMarcus.com, the
operations of Kate Spade LLC and Gurwitch Bristow Products LLC, and
corporate expenses.
|  
|   |  | The following table sets forth operating results for the Companys
reportable segments:                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                        |  |                      |         |                        |  |             |         |             |  |   |           |   |  |   |           |  
|----------------------- |  | -------------------- | ------- | ---------------------- |  | ----------- | ------- | ----------- |  | - | --------- | - |  | - | --------- | -
|                        |  | Thirteen Weeks Ended |         | Twenty-Six Weeks Ended
|                        |  |                      |         |                       
|                        |  | January 26,          |         | January 27,            |  | January 26, |         | January 27,
|(in thousands)          |  | 2002                 |         | 2001                   |  | 2002        |         | 2001       
|                        |  |                      |         |                        |  |             |         |            
|Revenues (1):           |  |                      |         |                        |  |             |         |             |  |   |           |   |  |   |           |  
|Specialty Retail Stores |  | $                    | 745,714 |                        |  | $           | 760,955 |             |  | $ | 1,306,661 |   |  | $ | 1,393,539 |  
|Direct Marketing        |  |                      | 132,075 |                        |  |             | 138,252 |             |  |   | 228,658   |   |  |   | 241,016   |  
|Other (2)               |  |                      | 30,297  |                        |  |             | 24,743  |             |  |   | 53,916    |   |  |   | 46,616    |  
|                        |  |                      |         |                        |  |             |         |             |  |   |           |   |  |   |           |  
|Total                   |  | $                    | 908,086 |                        |  | $           | 923,950 |             |  | $ | 1,589,235 |   |  | $ | 1,681,171 |  
|                        |  |                      |         |                        |  |             |         |             |  |   |           |   |  |   |           |  
|Operating Earnings:     |  |                      |         |                        |  |             |         |             |  |   |           |   |  |   |           |  
|Specialty Retail Stores |  | $                    | 39,232  |                        |  | $           | 65,537  |             |  | $ | 87,145    |   |  | $ | 151,263   |  
|Direct Marketing        |  |                      | 8,522   |                        |  |             | 7,515   |             |  |   | 9,029     |   |  |   | 14,102    |  
|Other (2)               |  |                      | (2,937  | )                      |  |             | (2,967  | )           |  |   | (9,085    | ) |  |   | (8,755    | )
|                        |  |                      |         |                        |  |             |         |             |  |   |           |   |  |   |           |  
|Total                   |  | $                    | 44,817  |                        |  | $           | 70,085  |             |  | $ | 87,089    |   |  | $ | 156,610   |  
|                        |  |                      |         |                        |  |             |         |             |  |   |           |   |  |   |           |  



| |  | (1) | Prior year revenue amounts have been reclassified to comply with
Emerging Issues Task Force Issue No. 00-10, Accounting for Shipping and
Handling Fees and Costs. As reclassified from selling, general and
administrative expenses, shipping and handling revenues are included in
revenues and the related costs are included in cost of goods sold. These
reclassifications had no impact on previously reported operating earnings,
net earnings, shareholders equity or cash flows.
| |  | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (2) | Other includes the on-line operations of NeimanMarcus.com, the
operations of Kate Spade LLC and Gurwitch Bristow Products LLC, and
corporate expenses.                                                                                                                                                                                                                                                                                                                                     



|7. |  | Commitments and Contingencies                                                                                                                                                                                                                                                                              
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Company is involved in various suits and claims in the ordinary course
of business. Management does not believe that the disposition of any such
suits and claims will have a material adverse effect upon the consolidated
results of operations, cash flows or the financial position of the Company.

6



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##### Table of Contents



THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)



|8. |  | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | During June 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142, upon
adoption, eliminates goodwill amortization and the amortization of other
indefinite-lived intangible assets. However, goodwill and indefinite-lived
intangibles will be subject to at least an annual assessment for impairment
by applying a fair value-based test. The Company will adopt the provisions
of SFAS No. 142 as of the beginning of fiscal year 2003. The Company has
not yet determined the ultimate impact of the provisions of SFAS No. 142 on
its consolidated financial statements. Amortization of goodwill and
intangible assets was $1.5 million for the thirteen weeks ended January 26,
2002 and $2.9 million for the twenty-six weeks ended January 26, 2002.                                                                                                                                                                                 
|  
|   |  | During June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. SFAS No. 143
requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred with the
associated asset retirement costs being capitalized as a part of the
carrying amount of the long-lived asset. SFAS No. 143 is effective for
financial statements issued for fiscal years beginning after June 15, 2002.
The Company has not determined the ultimate impact of the provisions of
SFAS No. 143 on its consolidated financial statements.                                                                                                                                                                                                                         
|  
|   |  | In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 addresses the accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed of and Accounting Principles Board
Opinion No. 30, Reporting the Results of Operations  Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. SFAS No. 144 establishes a
single accounting model for long-lived assets to be disposed of by sale and
resolves implementation issues related to Statement No. 121. SFAS No. 144
is effective for financial statements issued for fiscal years beginning
after December 15, 2001. The Company has not yet determined the ultimate
impact of the provisions of SFAS No. 144 on its consolidated financial
statements.

7



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##### Table of Contents






ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Neiman Marcus Group, Inc., together with its operating divisions and
subsidiaries (the Company), is a high-end specialty retailer. The Companys
operations include the Specialty Retail Stores segment, which consists of
Neiman Marcus and Bergdorf Goodman stores, and the Direct Marketing segment,
which conducts operations through Neiman Marcus Direct.

Set forth in the following table is certain summary information with respect to
the Companys operations for the thirteen weeks and twenty-six weeks ended
January 26, 2002 and January 27, 2001.

|                        |  |                      |       |                        |  |             |       |             |  |   |         |   |  |   |         |  
|----------------------- |  | -------------------- | ----- | ---------------------- |  | ----------- | ----- | ----------- |  | - | ------- | - |  | - | ------- | -
|                        |  | Thirteen Weeks Ended |       | Twenty-Six Weeks Ended
|                        |  |                      |       |                       
|                        |  | January 26,          |       | January 27,            |  | January 26, |       | January 27,
|(dollars in millions)   |  | 2002                 |       | 2001                   |  | 2002        |       | 2001       
|                        |  |                      |       |                        |  |             |       |            
|Revenues (1):           |  |                      |       |                        |  |             |       |             |  |   |         |   |  |   |         |  
|Specialty Retail Stores |  | $                    | 745.7 |                        |  | $           | 761.0 |             |  | $ | 1,306.7 |   |  | $ | 1,393.5 |  
|Direct Marketing        |  |                      | 132.1 |                        |  |             | 138.3 |             |  |   | 228.6   |   |  |   | 241.0   |  
|Other(2)                |  |                      | 30.3  |                        |  |             | 24.7  |             |  |   | 53.9    |   |  |   | 46.6    |  
|                        |  |                      |       |                        |  |             |       |             |  |   |         |   |  |   |         |  
|Total                   |  | $                    | 908.1 |                        |  | $           | 924.0 |             |  | $ | 1,589.2 |   |  | $ | 1,681.2 |  
|                        |  |                      |       |                        |  |             |       |             |  |   |         |   |  |   |         |  
|Operating Earnings:     |  |                      |       |                        |  |             |       |             |  |   |         |   |  |   |         |  
|Specialty Retail Stores |  | $                    | 39.2  |                        |  | $           | 65.5  |             |  | $ | 87.1    |   |  | $ | 151.3   |  
|Direct Marketing        |  |                      | 8.5   |                        |  |             | 7.5   |             |  |   | 9.0     |   |  |   | 14.1    |  
|Other(2)                |  |                      | (2.9  | )                      |  |             | (2.9  | )           |  |   | (9.0    | ) |  |   | (8.8    | )
|                        |  |                      |       |                        |  |             |       |             |  |   |         |   |  |   |         |  
|Total                   |  | $                    | 44.8  |                        |  | $           | 70.1  |             |  | $ | 87.1    |   |  | $ | 156.6   |  
|                        |  |                      |       |                        |  |             |       |             |  |   |         |   |  |   |         |  



|1)  |  | Prior year revenue amounts have been reclassified to comply with Emerging
Issues Task Force Issue No. 00-10, Accounting for Shipping and Handling Fees
and Costs. As reclassified from selling, general and administrative expenses,
shipping and handling revenues are included in revenues and the related costs
are included in cost of goods sold. These reclassifications had no impact on
previously reported operating earnings, net earnings, shareholders equity or
cash flows.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Other includes the on-line operations of NeimanMarcus.com, the operations
of Kate Spade LLC and Gurwitch Bristow Products LLC, and corporate expenses.                                                                                                                                                                                                                                                                                                                                     

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THIRTEEN WEEKS ENDED JANUARY 26, 2002 COMPARED TO THIRTEEN WEEKS ENDED JANUARY 27, 2001

Revenues.Revenues for the second quarter of fiscal year 2002 of $908.1
million decreased $15.9 million, or 1.7 percent, from $924.0 million for the
prior year period. This decrease in the current year was primarily attributable
to a 3.0 percent decrease in comparable revenues offset, in part, by the
revenues from one new Neiman Marcus store in Tampa, Florida and one new
clearance store in Atlanta, Georgia, each of which was opened during the first
quarter of fiscal year 2002.

Comparable revenues for the second quarter of fiscal year 2002 decreased 3.3
percent for Specialty Retail Stores and 4.4 percent for Direct Marketing. The
Company believes the comparable revenue decreases in the second quarter of
fiscal year 2002 were primarily due to general economic conditions and the
softening in the retail industry that began in fiscal year 2001 and a decrease
in consumer spending that occurred subsequent to the September 11, 2001
terrorist attacks in the United States. The Company currently expects revenues
to decline 2 percent to 4 percent for the remaining six months of fiscal year
2002 compared to the prior year.

Gross margin.The Companys gross margin was 28.9 percent of revenues in the
second quarter of fiscal year 2002 compared to 31.4 percent in the prior year
period. The decline in gross margin as a percentage of revenues was primarily
due to a higher level of markdowns in the second quarter of fiscal year 2002
than in the prior year period associated with additional and more aggressive
promotional events necessary to clear inventories in response to the decline in
retail sales.

Merchandise inventories were $584.1 million at January 26, 2002 compared to
$614.0 million at January 27, 2001.

Selling, general and administrative expenses (SG&A).SG&A was $217.5 million
in the second quarter of fiscal year 2002, or 24.0 percent of revenues,
compared to $219.7 million, or 23.8 percent of revenues, in the prior year
period.

As a percentage of revenues, SG&A increased due to 1) higher health care and
various tax expenses, 2) a higher level of SG&A to revenues for the Companys
less mature stores, and 3) nonrecurring expenses incurred in connection with
the execution of certain cost reduction strategies.

The above increases were offset in part by 1) a lower level of SG&A as a
percentage of revenues for both Specialty Retail Stores and Direct Marketing as
a result of various cost reduction strategies initiated by the Company in
response to the decline in sales and 2) lower expenses incurred in connection
with the Companys $225 million revolving credit card securitization facility
as a result of a decline in interest rates.

In the second quarter of fiscal year 2002, the Company incurred nonrecurring
expenses of approximately $2.0 million in connection with cost reduction
strategies. These nonrecurring expenses consisted primarily of severance costs
and lease termination expenses incurred in connection with the closing of the
Galleries store in Seattle, Washington.

Interest expense. Interest expense was $4.3 million for the second quarter of
fiscal year 2002 compared to $4.1 million for the second quarter of fiscal year
2001.

Income taxes.The Companys effective income tax rate was 38 percent for both
the second quarter of fiscal year 2002 and fiscal year 2001.

9



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##### Table of Contents



TWENTY-SIX WEEKS ENDED JANUARY 26, 2002 COMPARED TO TWENTY-SIX WEEKS ENDED JANUARY 27, 2001

Revenues.Revenues for the twenty-six weeks ended January 26, 2002 of $1.59
billion decreased $91.9 million, or 5.5 percent, from $1.68 billion for the
prior year period. This decrease in revenues in the current year was primarily
attributable to a 6.5 percent decrease in comparable revenues offset, in part,
by the revenues from new stores.

Comparable revenues for the twenty-six weeks ended January 26, 2002 decreased
7.3 percent for Specialty Retail Stores and 5.1 percent for Direct Marketing.
The Company believes the comparable revenue decreases were primarily due to
general economic conditions and the softening in the retail industry that began
in fiscal year 2001 and a decrease in consumer spending that occurred
subsequent to the September 11, 2001 terrorist attacks in the United States.

Gross margin.Gross margin was 31.9 percent of revenues for the twenty-six
weeks ended January 26, 2002 compared to 35.0 percent for the prior year
period. As a percentage of revenues, the decline in gross margin was primarily
due to a higher level of markdowns and an increase in buying and occupancy
costs.

The Company incurred a higher level of markdowns in the twenty-six weeks ended
January 26, 2002 than in the prior year period in connection with additional
and more aggressive promotional events. These events were necessary to clear
inventories in response to the decline in retail sales.

A significant portion of the Companys buying and occupancy costs are fixed in
nature. As a result, buying and occupancy costs increased as a percentage of
revenues for the twenty-six weeks ended January 26, 2002 compared to the
corresponding period in the prior year as a result of lower sales in the
current year, primarily in the first quarter of fiscal year 2002.

Selling, general and administrative expenses (SG&A).SG&A was $420.5 million
for the twenty-six weeks ended January 26, 2002, or 26.5 percent of revenues,
compared to $431.7 million, or 25.7 percent of revenues, in the prior year
period.

As a percentage of revenues, SG&A increased due to 1) a higher ratio of SG&A to
revenues for the Companys less mature stores, 2) higher health care and
various tax expenses, 3) a higher level of SG&A for the Companys Direct
Marketing operations, primarily due to printing and circulation costs that tend
to be more fixed in nature in the short-term, 4) nonrecurring costs incurred in
connection with the execution of certain cost reduction strategies, and 5)
higher preopening costs than in the prior year.

The above increases were offset in part by 1) a lower level of SG&A as a
percentage of revenues for Specialty Retail Stores as a result of various cost
reduction strategies initiated by the Company in response to the decline in
sales and 2) lower expenses incurred in connection with the Companys $225
million revolving credit card securitization facility as a result of a decline
in interest rates.

In the second quarter of fiscal year 2002, the Company incurred nonrecurring
expenses of approximately $2.0 million in connection with cost reduction
strategies. These nonrecurring expenses consisted primarily of severance costs
and lease termination expenses incurred in connection with the closing of the
Neiman Marcus Galleries store in Seattle, Washington.

The Company incurred pre-opening costs of $3.2 million for the twenty-six weeks
ended January 26, 2002 in connection with the opening of a new store in Tampa,
Florida during September 2001 and a replacement store in Plano, Texas during
August 2001. The Company incurred pre-opening costs of $1.7 million in the
prior year period associated with the opening of a new store in Palm Beach,
Florida.

Interest expense. Interest expense was $8.2 million for the twenty-six week
period ended January 26, 2002 of fiscal year 2002 compared to $8.4 million in
the prior year period.

Income taxes.The Companys effective income tax rate was 38 percent for both
the twenty-six week period ended January 26, 2002 and the twenty-six week
period ended January 27, 2001.

10



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##### Table of Contents



QUARTERLY DATA AND SEASONALITY

The specialty retail industry is seasonal in nature and a disproportionately
higher level of the Companys revenues and earnings are generated in the fall
and holiday selling seasons. The Companys working capital requirements and
inventories increase substantially in its first quarter in anticipation of the
holiday selling season.

LIQUIDITY AND CAPITAL RESOURCES

The Companys cash requirements consist principally of the funding of its
merchandise purchases, debt service requirements, and capital expenditures for
new store construction, store renovations and management information systems.
The Companys working capital requirements fluctuate during the year,
increasing substantially during the fall season as a result of higher planned
seasonal inventory levels.

For the twenty-six weeks ended January 26, 2002, cash provided by operating
activities was $184.7 million compared to $159.1 million for the prior year
period. The increase in net cash provided by operating activities was
primarily due to a $100.4 million decrease in the growth of inventories, offset
in part by a $42.6 million decrease in net earnings and a $43.4 million
decrease in the growth of accounts payable and accrued liabilities.

As of January 26, 2002, the Company had cash and cash equivalents of $137.2
million. There were no borrowings outstanding pursuant to the Companys $450
million unsecured revolving credit facility. During the second quarter, the
Company repaid the $130 million previously borrowed to fund seasonal working
capital requirements. The Company may terminate its outstanding revolving
credit facility, which expires in October 2002, at any time with three business
days notice. The revolving credit facility contains covenants that require the
Company to maintain certain leverage and fixed charge ratios. The Company
expects to replace the existing facility on or before the expiration date.

The Company currently plans to open four new Neiman Marcus stores over the next
three fiscal years and has consistently focused on renovating and modernizing
its stores to improve productivity. The Company anticipates total capital
expenditures for fiscal year 2002 to be approximately $140 million to $150
million.

Management believes that operating cash flows, currently available vendor
financing, amounts available pursuant to its $450 million revolving credit
agreement and its outstanding accounts receivable securitization facility
should be sufficient to fund the Companys operations, debt service and
currently anticipated capital expenditure requirements through the end of
fiscal year 2002.

IMPACT OF INFLATION

The Company believes changes in revenues and net earnings that have resulted
from inflation and changing prices have not been material during the periods
presented. The Company adjusts selling prices to maintain certain profit
levels and will continue to do so as economic conditions permit. There is no
assurance, however, that inflation will not materially affect the Company in
the future.

11



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##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS

During June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 142, upon adoption,
eliminates goodwill amortization and the amortization of other indefinite-lived
intangible assets. However, goodwill and indefinite-lived intangibles will be
subject to at least an annual assessment for impairment by applying a fair
value-based test. The Company will adopt the provisions of SFAS No. 142 as of
the beginning of fiscal year 2003. The Company has not yet determined the
ultimate impact of the provisions of SFAS No. 142 on its consolidated financial
statements. Amortization of goodwill and intangible assets was $1.5 million
for the thirteen weeks ended January 26, 2002 and $2.9 million for the
twenty-six weeks ended January 26, 2002.

During June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 requires that
the fair value of a liability for an asset retirement obligation be recognized
in the period in which it is incurred with the associated asset retirement
costs being capitalized as a part of the carrying amount of the long-lived
asset. SFAS No. 143 is effective for financial statements issued for fiscal
years beginning after June 15, 2002. The Company has not determined the
ultimate impact of the provisions of SFAS No. 143 on its consolidated financial
statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 addresses the accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of and Accounting Principles Board
Opinion No. 30, Reporting the Results of Operations  Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. SFAS No. 144 establishes a
single accounting model for long-lived assets to be disposed of by sale and
resolves implementation issues related to Statement No. 121. SFAS No. 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001. The Company has not yet determined the ultimate impact of
the provisions of SFAS No. 144 on its consolidated financial statements.

12



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##### Table of Contents



CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS

This report contains forward-looking statements, including statements regarding
the Companys objectives and expectations regarding its merchandising and
marketing strategies, the extension or replacement of its $450 million
revolving credit agreement, store renovation and expansion plans, inventory
performance, capital expenditures, liquidity, development of its management
information systems and productivity and profitability that are based upon
managements beliefs as well as on assumptions made by and data currently
available to management. These forward-looking statements are not guarantees of
future performance and a variety of factors could cause the Companys actual
results to differ materially from the anticipated or expected results expressed
in these forward-looking statements. Factors that could affect future
performance include, but are not limited to: current political and economic
conditions subsequent to the September 11, 2001 terrorist attacks on the United
States of America; changes in economic conditions, political conditions or
consumer confidence resulting in a reduction of discretionary spending on goods
that are, or are perceived to be, luxuries; changes in demographic or retail
environments; changes in consumer preferences or fashion trends; competitive
responses to the Companys marketing, merchandising and promotional efforts;
seasonality of the retail business; adverse weather conditions, particularly
during peak selling seasons; delays in anticipated store openings; significant
increases in paper, printing and postage costs; litigation that may have an
adverse effect on the financial results or reputation of the Company; changes
in the Companys relationships with designers, vendors and other sources of
merchandise; changes in key personnel who have been hired or retained by the
Company; changes in the Companys private label credit card arrangement which
might adversely impact its ability to provide consumer credit; and changes in
government or regulatory requirements increasing the Companys cost of
operations. The Company undertakes no obligation to update or revise (publicly
or otherwise) any forward-looking statements to reflect subsequent events, new
information or future circumstances.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk inherent in the Companys financial instruments represents the potential
loss arising from adverse changes in interest rates and foreign
currency exchange rates. The
Company does not enter into derivative financial instruments for trading purposes.

The Company seeks to manage exposure to adverse interest rate changes
through its normal operating and financing activities. The Company is exposed
to interest rate risk through its securitization and borrowing activities,
which are described in the Companys Annual Report to Shareholders on Form
10-K for the fiscal year ended July 28, 2001.

The Company uses derivative financial instruments to manage foreign currency
risk related to the procurement of merchandise inventories from
foreign sources. The
Company enters into foreign currency contracts denominated in the Euro and
British pound.

Based on the Companys market risk sensitive instruments (including variable
rate debt and derivative financial instruments) outstanding at January 26,
2002, the Company has determined that there was no material market risk
exposure to the Companys consolidated financial position, results of
operations, or cash flows as of such date.

13



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##### Table of Contents



THE NEIMAN MARCUS GROUP, INC.




PART II- Other Information




Item 1. Legal
Proceedings

Note 7 of the Notes to Condensed Consolidated Financial Statements in Part I,
Item 1 is incorporated herein by reference as if fully restated herein. Note 7
contains forward-looking statements that are subject to the risks and
uncertainties discussed in Managements Discussion and Analysis of Financial
Condition and Results of Operations  Cautionary Statement Regarding Risks and
Uncertainties That May Affect Future Results.




Item 4. Submission of Matters to a Vote of Security Holders



| | 1. |  | The Annual Meeting of Shareholders of the Company was held on
January 21, 2002. Three Class B directors were elected to serve for
three-year terms expiring at the 2005 Annual Meeting of Shareholders
as follows:
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                 |  |                |            |                |  |                  |        |  |  |  |   | 
|---------------- |  | -------------- | ---------- | -------------- |  | ---------------- | ------ |  |  |  | - | 
|                 |  | Votes Cast For |            | Votes Withheld |  | Broker Non-Votes
|                 |  |                |            |                |  |                 
|Matina S. Horner |  |                | 15,666,375 |                |  |                  | 57,652 |  |  |  | 0 | 
|Brian J. Knez    |  |                | 15,665,759 |                |  |                  | 58,268 |  |  |  | 0 | 
|Walter J. Salmon |  |                | 15,662,506 |                |  |                  | 61,521 |  |  |  | 0 | 



| |  | There were no abstentions with respect to the election of directors.                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Richard A. Smith, Robert A. Smith, Vincent M. OReilly, John R. Cook,
Paula Stern and Burton M. Tansky continued as directors of the Company.
Subsequent to the approval by the shareholders of the amendments to
the Certificate of Incorporation and Bylaws of the Company increasing
the maximum size of the Board, Mr. Gary L. Countryman was elected by
the Board of Directors to serve as a Class B director whose term as a
Class I director will expire in 2004.



| | 2. |  | Proposal to increase the number of shares reserved for issuance
under the Companys 1997 Incentive Plan from 4,900,000 shares to
7,200,000 shares:
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

|                 |  |  |            | 
|---------------- |  |  | ---------- | 
|For              |  |  | 29,050,533 | 
|Against          |  |  | 9,181,449  | 
|Abstain          |  |  | 80,318     | 
|Broker Non-Votes |  |  | 2,745,801  | 



| | 3. |  | Proposal to amend the Companys Bylaws and Certificate of
Incorporation to increase the maximum size of the Board of Directors
from nine (9) to twelve (12):
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|        |  |  |            | 
|------- |  |  | ---------- | 
|For     |  |  | 40,351,591 | 
|Against |  |  | 626,703    | 
|Abstain |  |  | 79,806     | 



| | 4. |  | Ratification of the appointment by the Board of Directors of
Deloitte & Touche LLP as the Companys independent auditors for the
2002 fiscal year.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

|        |  |  |            | 
|------- |  |  | ---------- | 
|For     |  |  | 40,666,931 | 
|Against |  |  | 323,106    | 
|Abstain |  |  | 68,064     | 



| | 5. |  | Stockholder proposal concerning cumulative voting in the election
of directors:
| | -- |  | -------------------------------------------------------------------------------

|                 |  |  |            | 
|---------------- |  |  | ---------- | 
|For              |  |  | 8,553,702  | 
|Against          |  |  | 29,588,350 | 
|Abstain          |  |  | 170,248    | 
|Broker Non-Votes |  |  | 2,745,801  | 

14



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##### Table of Contents






Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits.

3.1 Restated Certificate of Incorporation of The Neiman Marcus
Group, Inc., with amendments through January 21, 2002

3.2 Bylaws of The Neiman Marcus Group, Inc., as amended through
January 21,2002

(b)  Reports on Form 8-K.



| |  | No reports on Form 8-K were filed during the thirteen week
period ended January 26, 2002.
| |  | -----------------------------------------------------------------------------------------

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##### Table of Contents






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          
|                                      
|/s/ T. Dale StapletonT. Dale Stapleton |  | Vice President and Controller
(principal accounting officer) |  | March 12, 2002

16



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##### Table of Contents



INDEX TO EXHIBITS

|        |  |                                                                                                                 
|------- |  | ----------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                 
|Number  |  | Description                                                                                                     
|        |  |                                                                                                                 
|3.1     |  | Restated Certificate of Incorporation of The Neiman Marcus
Group, Inc., with amendments through January 21, 2002
|3.2     |  | Bylaws of The Neiman Marcus Group, Inc., as amended through
January 21, 2002