**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM10-Q/A**

**(Amendment#1)**

 

**ý****        QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

 

### **For the QuarterlyPeriod Ended October 30, 2004**

### ** **

**OR**

 

**o****        TRANSITIONREPORT 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 asspecified in its charter)

 
| **Delaware**                                                        | ** ** | **95-4119509**                        |
|---------------------------------------------------------------------|------------|---------------------------------------|
| (State or  other jurisdiction of  incorporation or organization)    |       | (I.R.S. Employer  Identification No.) |
|                                                                |       |                                  |
| **One  Marcus Square  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 reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Actof 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

YES  ý        NO  o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Exchange Act).

 

YES  ý        NO  o

 

As of December 1, 2004, the number of outstanding shares of eachof the issuer’s classes of common stock was:

 
| **Class**                            | ** ** | **Outstanding Shares** |
|--------------------------------------|------------|------------------------|
| Class A Common Stock, $.01 Par Value |       | 29,372,487             |
| Class B Common Stock, $.01 Par Value |       | 19,422,379             |

 

 

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**ExplanatoryNote**

 

Thisamendment to the Quarterly Report on Form 10-Q for The Neiman Marcus Group,Inc. for the period ended October 30, 2004 is being filed to correcterrors in previously issued financial statements related to 1) theclassification of construction allowances in the balance sheets and statementsof cash flows and 2) the classification of changes in undivided interests inthe NMG Credit Card Master Trust in the statements ofcash flows.  See Note 9 in the Notes toCondensed Consolidated Financial Statements for a discussion of thesecorrections and a reconciliation of amounts previously reported to those shownherein.  We have also revised ourdiscussion in Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations. Information not affectedby the corrections described in Note 9 remains unchanged and reflects thedisclosures made at the time of the original filing of the Form 10-Q on December 6,2004.  Our previously reported netearnings, earnings per share and shareholders’ equity are not impacted by thesecorrections.

 

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**THE NEIMANMARCUS GROUP, INC.**

 

#### **INDEX**

 

 
| Part I.    |   | Financial  Information                                                                                                                       |   |
|------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|--------|
|       |   |                                                                                                                                         |   |
| Item 1.    |   | Condensed Consolidated Balance Sheets as of  October 30, 2004, July 31, 2004 and November 1, 2003 (As  Restated)              |   |
|       |   |                                                                                                                                         |   |
|       |   | Condensed Consolidated Statements of  Earnings for the Thirteen Weeks Ended October 30, 2004 and November 1,  2003                 |   |
|       |   |                                                                                                                                         |   |
|       |   | Condensed Consolidated Statements of Cash  Flows for the Thirteen Weeks Ended October 30, 2004 and November 1,  2003 (As Restated) |   |
|       |   |                                                                                                                                         |   |
|       |   | 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                                                                                   |   |
|       |   |                                                                                                                                         |   |
| Item 4.    |   | Controls and Procedures                                                                                                                      |   |
|       |   |                                                                                                                                         |   |
| Part  II.  |   | Other  Information                                                                                                                           |   |
|       |   |                                                                                                                                         |   |
| Item 1.    |   | Legal Proceedings                                                                                                                            |   |
|       |   |                                                                                                                                         |   |
| Item 2.    |   | Unregistered Sales of Equity and Use of  Proceeds                                                                                            |   |
|       |   |                                                                                                                                         |   |
| Item  6.   |   | Exhibits                                                                                                                                     |   |
|       |   |                                                                                                                                         |   |
| Signatures |   |

 

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**THE NEIMANMARCUS GROUP, INC.CONDENSED CONSOLIDATEDBALANCE SHEETS(UNAUDITED)**

 
| **(in thousands)**                                                           | ** ** | **October 30,  2004**    | ** ** | **July 31,  2004** | ** ** | **November 1,  2003** | ** ** |
|------------------------------------------------------------------------------|------------|-------------------------------|------------|-------------------------|------------|----------------------------|------------|
| ** **                                                                   | ** ** | **(As Restated, See Note 9)** | ** ** |
| **ASSETS**                                                                   |       |                          |       |                    |       |                       |       |
| Current  assets:                                                             |       |                          |       |                    |       |                       |       |
| Cash and  cash equivalents                                                   |       | $                             | 258,367    |                    | $          | 368,367                    |       | $ | 127,524 |   |
| Undivided  interests in NMG Credit Card Master Trust                         |       | —                        |       | —                  |       | 314,138                    |       |
| Accounts  receivable, net of allowance of $11,132, $10,078 and $432          |       | 641,236                       |       | 551,687                 |       | 33,075                     |       |
| Merchandise  inventories                                                     |       | 881,266                       |       | 720,277                 |       | 830,319                    |       |
| Other  current assets                                                        |       | 72,429                        |       | 65,835                  |       | 73,345                     |       |
| Total  current assets                                                        |       | 1,853,298                     |       | 1,706,166               |       | 1,378,401                  |       |
|                                                                         |       |                          |       |                    |       |                       |       |
| Property and  equipment, net                                                 |       | 776,665                       |       | 750,483                 |       | 735,516                    |       |
| Other assets                                                                 |       | 128,112                       |       | 160,999                 |       | 127,939                    |       |
| Total assets                                                                 |       | $                             | 2,758,075  |                    | $          | 2,617,648                  |       | $ | 2,241,856 |   |
|                                                                         |       |                          |       |                    |       |                       |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                               |       |                          |       |                    |       |                       |       |
| Current  liabilities:                                                        |       |                          |       |                    |       |                       |       |
| Accounts  payable                                                            |       | $                             | 293,344    |                    | $          | 289,282                    |       | $ | 266,889 |   |
| Accrued  liabilities                                                         |       | 347,232                       |       | 286,833                 |       | 323,188                    |       |
| Notes  payable and current maturities of long-term liabilities               |       | 4,200                         |       | 1,563                   |       | 2,252                      |       |
| Current  portion of borrowings under Credit Card Facility                    |       | 225,000                       |       | 150,000                 |       | —                     |       |
| Total  current liabilities                                                   |       | 869,776                       |       | 727,678                 |       | 592,329                    |       |
|                                                                         |       |                          |       |                    |       |                       |       |
| Long-term  liabilities:                                                      |       |                          |       |                    |       |                       |       |
| Notes and  debentures                                                        |       | 249,762                       |       | 249,757                 |       | 249,739                    |       |
| Borrowings  under Credit Card Facility                                       |       | —                        |       | 75,000                  |       | —                     |       |
| Deferred real  estate credits                                                |       | 70,587                        |       | 71,898                  |       | 75,830                     |       |
| Other  long-term liabilities                                                 |       | 115,469                       |       | 112,455                 |       | 114,463                    |       |
| Total  long-term liabilities                                                 |       | 435,818                       |       | 509,110                 |       | 440,032                    |       |
|                                                                         |       |                          |       |                    |       |                       |       |
| Minority  interest                                                           |       | 11,474                        |       | 10,298                  |       | 9,700                      |       |
|                                                                         |       |                          |       |                    |       |                       |       |
| Common  stocks                                                               |       | 496                           |       | 492                     |       | 488                        |       |
| Additional  paid-in capital                                                  |       | 505,573                       |       | 491,849                 |       | 471,328                    |       |
| Accumulated  other comprehensive loss                                        |       | (3,068                        | )          | (4,536                  | )          | (25,642                    | )          |
| Retained  earnings                                                           |       | 963,431                       |       | 905,330                 |       | 775,667                    |       |
| Treasury stock, at cost (764,631 shares,  710,227 shares and 699,777 shares) |       | (25,425                       | )          | (22,573                 | )          | (22,046                    | )          |
| Total  shareholders’ equity                                             |       | 1,441,007                     |       | 1,370,562               |       | 1,199,795                  |       |
| Total  liabilities and shareholders’ equity                             |       | $                             | 2,758,075  |                    | $          | 2,617,648                  |       | $ | 2,241,856 |   |

 

*See Notes to CondensedConsolidated Financial Statements.*

 

1

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**THE NEIMANMARCUS GROUP, INC.CONDENSED CONSOLIDATEDSTATEMENTS OF EARNINGS(UNAUDITED)**

 
| ** **                                                                   | ** ** | **Thirteen Weeks Ended**   | ** ** |
|------------------------------------------------------------------------------|------------|----------------------------|------------|
| **(in thousands, except per share  data)**                                   | ** ** | **October 30,  2004** | ** ** | **November 1,  2003** | ** ** |
|                                                                         |       |                       |       |   |   |
| Revenues                                                                     |       | $                          | 907,936    |   | $ | 818,769 |   |
| Cost of  goods sold including buying and occupancy costs                     |       | 554,710                    |       | 510,350 |   |
| Selling,  general and administrative expenses                                |       | 227,963                    |       | 211,130 |   |
| Loss on  disposition of Chef’s Catalog                                  |       | 15,348                     |       | — |   |
|                                                                         |       |                       |       |   |   |
| Operating  earnings                                                          |       | 109,915                    |       | 97,289 |   |
|                                                                         |       |                       |       |   |   |
| Interest  expense, net                                                       |       | 4,037                      |       | 3,462 |   |
|                                                                         |       |                       |       |   |   |
| Earnings  before income taxes and minority interest                          |       | 105,878                    |       | 93,827 |   |
|                                                                         |       |                       |       |   |   |
| Income taxes                                                                 |       | 40,975                     |       | 36,592 |   |
|                                                                         |       |                       |       |   |   |
| Earnings  before minority interest                                           |       | 64,903                     |       | 57,235 |   |
|                                                                         |       |                       |       |   |   |
| Minority  interest in net earnings of subsidiaries                           |       | (787                       | )          | (1,010 | ) |
|                                                                         |       |                       |       |   |   |
| Net earnings                                                                 |       | $                          | 64,116     |   | $ | 56,225 |   |
|                                                                         |       |                       |       |   |   |
| Weighted  average number of common and common equivalent shares outstanding: |       |                       |       |   |   |
| Basic                                                                        |       | 48,226                     |       | 47,624 |   |
| Diluted                                                                      |       | 49,133                     |       | 48,396 |   |
|                                                                         |       |                       |       |   |   |
| Earnings per  share:                                                         |       |                       |       |   |   |
| Basic                                                                        |       | $                          | 1.33       |   | $ | 1.18 |   |
| Diluted                                                                      |       | $                          | 1.30       |   | $ | 1.16 |   |

 

*See Notesto Condensed Consolidated Financial Statements.*

 

2

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**THE NEIMANMARCUS GROUP, INC.CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS(UNAUDITED)**

 
| ** **                                                                                          | ** ** | **Thirteen Weeks Ended**      | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|
| **(in thousands)**                                                                                  | ** ** | **October 30,  2004**    | ** ** | **November 1,  2003** | ** ** |
| ** **                                                                                          | ** ** | **(As Restated, See Note 9)** | ** ** |
| **CASH  FLOWS - OPERATING ACTIVITIES**                                                              |       |                          |       |   |   |
| Net earnings                                                                                        |       | $                             | 64,116     |   | $ | 56,225 |   |
| Adjustments  to reconcile net earnings to net cash provided by (used for) operating  activities:    |       |                          |       |   |   |
| Depreciation                                                                                        |       | 24,386                        |       | 22,596 |   |
| Loss on  disposition of Chef’s Catalog                                                         |       | 15,348                        |       | — |   |
| Minority  interest                                                                                  |       | 787                           |       | 1,010 |   |
| Other –  primarily costs related to defined benefit pension and other long-term  benefit plans |       | 8,230                         |       | 8,645 |   |
|                                                                                                |       | 112,867                       |       | 88,476 |   |
| Changes in  operating assets and liabilities:                                                       |       |                          |       |   |   |
| Increase in  undivided interests                                                                    |       | —                        |       | (71,573 | ) |
| Increase in  accounts receivable                                                                    |       | (89,549                       | )          | (10,480 | ) |
| Increase in  merchandise inventories                                                                |       | (160,989                      | )          | (143,257 | ) |
| Decrease  (increase) in other assets                                                                |       | 15,187                        |       | (4,550 | ) |
| Increase in  accounts payable and accrued liabilities                                               |       | 65,401                        |       | 61,566 |   |
| (Decrease)  increase in deferred real estate credits                                                |       | (1,311                        | )          | 5,488 |   |
| Other                                                                                               |       | (1,377                        | )          | 13,118 |   |
| **Net cash  used for operating activities**                                                         |       | (59,771                       | )          | (61,212 | ) |
|                                                                                                |       |                          |       |   |   |
| **CASH  FLOWS - INVESTING ACTIVITIES**                                                              |       |                          |       |   |   |
| Capital  expenditures                                                                               |       | (50,568                       | )          | (24,319 | ) |
| **Net cash  used for investing activities**                                                         |       | (50,568                       | )          | (24,319 | ) |
|                                                                                                |       |                          |       |   |   |
| **CASH  FLOWS - FINANCING ACTIVITIES**                                                              |       |                          |       |   |   |
| Proceeds  from borrowings                                                                           |       | 2,750                         |       | 1,000 |   |
| Acquisitions  of treasury stock                                                                     |       | (2,851                        | )          | (7,026 | ) |
| Proceeds  from stock-based compensation awards                                                      |       | 6,864                         |       | 12,293 |   |
| Cash  dividends paid                                                                                |       | (6,314                        | )          | — |   |
| Distribution  paid                                                                                  |       | (110                          | )          | (162 | ) |
| **Net cash  provided by financing activities**                                                      |       | 339                           |       | 6,105 |   |
|                                                                                                |       |                          |       |   |   |
| **CASH AND  CASH EQUIVALENTS**                                                                      |       |                          |       |   |   |
| Decrease  during the period                                                                         |       | (110,000                      | )          | (79,426 | ) |
| Beginning  balance                                                                                  |       | 368,367                       |       | 206,950 |   |
| Ending  balance                                                                                     |       | $                             | 258,367    |   | $ | 127,524 |   |
|                                                                                                |       |                          |       |   |   |
| **SUPPLEMENTAL  SCHEDULE OF CASH FLOW INFORMATION**                                            |       |                          |       |   |   |
| Cash paid  during the period for:                                                                   |       |                          |       |   |   |
| Interest                                                                                            |       | $                             | 1,170      |   | $ | 174 |   |
| Income taxes                                                                                        |       | $                             | 2,311      |   | $ | 586 |   |

 

*See Notes to CondensedConsolidated Financial Statements.*

 

3

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**THE NEIMANMARCUS GROUP, INC.NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)**

 

1.               Basis of Presentation

 

We have prepared theCondensed Consolidated Financial Statements of The Neiman Marcus Group, Inc.and its subsidiaries in accordance with generally accepted accountingprinciples for interim financial information and the instructions to Form 10-Qand Article 10 of Regulation S-X. Accordingly, these financial statements do not include all of theinformation and footnotes required by accounting principles generally acceptedfor complete financial statements. Therefore, these financial statements shouldbe read in conjunction with our amendment to the Annual Report on Form 10-K/Afor the fiscal year ended July 31, 2004.

 

Our fiscal year ends on the Saturday closestto July 31.  All references to thefirst quarter of 2005 relate to the thirteen weeks ended October 30, 2004and all references to the first quarter of 2004 relate to the thirteen weeksended November 1, 2003.  Allreferences to 2005 relate to the fifty-two weeks ending July 30, 2005.

 

In our opinion, theaccompanying unaudited Condensed ConsolidatedFinancial Statements contain all adjustments, consisting of normal recurringadjustments, necessary to present fairly our financial position, results ofoperations and cash flows for the applicable interim periods.  The results of operations for these periodsare not necessarily comparable to, or indicative of, results of any otherinterim period or for the fiscal year as a whole.

 

**We are required to make estimatesand assumptions about future events in preparing financial statements inconformity with generally accepted accounting principles.  These estimates and assumptions affect theamounts of assets, liabilities, revenues and expenses and the disclosure ofgain and loss contingencies at the date of the Condensed Consolidated FinancialStatements.  We evaluate our estimatesand judgments on an ongoing basis and predicate those estimates and judgmentson historical experience and on various other factors that we believe to bereasonable under the circumstances.  Wemake adjustments to our assumptions and judgments when facts and circumstancesdictate.  Since future events and theireffects cannot be determined with absolute certainty, actual results may differfrom the estimates used in preparing the accompanying Condensed ConsolidatedFinancial Statements.**

** **

**We believe the following criticalaccounting policies, among others, encompass the more significant judgments andestimates used in the preparation of our financial statements:**

** **

•                              Revenuerecognition;

 

•                              Valuation of merchandise inventories,including determination of original retail values, recognition of markdowns andvendor allowances, estimation of inventory shrinkage, and determination of costof goods sold;

 

•                              Recognitionof income and expenses related to our securitization program;

 

•                              Determinationof impairment of long-lived assets;

 

•                              Recognitionof advertising and catalog costs;

 

•                              Measurementof liabilities related to our loyalty programs;

 

•                              Recognition of income taxes; and

 

•                              Measurementof accruals for litigation, general liability, workers’ compensation and healthinsurance, short-term disability, pension and postretirement health carebenefits.

 

A description of our critical accountingpolicies is included in our amendment to the Annual Report on Form 10-K/A forthe fiscal year ended July 31, 2004.

 

4

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***Stock-Based Compensation***.  We account for stock-based compensationawards to employees in accordance with Accounting Principles Board OpinionNo. 25, “Accounting for Stock Issued to Employees,” and relatedinterpretations. Accordingly, we have recognized compensation expense on ourrestricted stock and purchase restricted stock awards buthave not recognized compensation expense for stock options since alloptions granted had an exercise price equal to the market value of our commonstock on the grant date.

 

The following table illustrates the effect onnet earnings and earnings per share as if we had applied the fair valuerecognition provisions of SFAS No. 123 tostock-based employee compensation using the Black-Scholesoption-pricing model for the first quarter of 2005 and 2004:

 
| ** **                                                                                                       | ** ** | **Thirteen Weeks Ended**   | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|----------------------------|------------|
| **(in thousands, except per share  data)**                                                                       | ** ** | **October 30,  2004** | ** ** | **November 1,  2003** | ** ** |
|                                                                                                             |       |                       |       |   |   |
| Net  earnings:                                                                                                   |       |                       |       |   |   |
| As reported                                                                                                      |       | $                          | 64,116     |   | $ | 56,225 |   |
| Add:  stock-based employee compensation recorded under intrinsic value method, net  of related taxes             |       | 932                        |       | 524 |   |
| Less:  stock-based employee compensation expense determined under fair value based  method, net of related taxes |       | (2,894                     | )          | (2,566 | ) |
| Pro forma                                                                                                        |       | $                          | 62,154     |   | $ | 54,183 |   |
|                                                                                                             |       |                       |       |   |   |
| Basic  earnings per share:                                                                                       |       |                       |       |   |   |
| As reported                                                                                                      |       | $                          | 1.33       |   | $ | 1.18 |   |
| Pro forma                                                                                                        |       | $                          | 1.29       |   | $ | 1.14 |   |
|                                                                                                             |       |                       |       |   |   |
| Diluted earnings  per share:                                                                                     |       |                       |       |   |   |
| As reported                                                                                                      |       | $                          | 1.30       |   | $ | 1.16 |   |
| Pro forma                                                                                                        |       | $                          | 1.27       |   | $ | 1.12 |   |

 

The effects on pro forma net earnings andearnings per share of expensing the estimated fair value of stock options arenot necessarily representative of the effects on reported net earnings forfuture periods due to such factors as the vesting periods of stock options andthe potential issuance of additional stock options in future years.  In addition, the Black-Scholesoption-pricing model has inherent limitations in calculating the fair value ofstock options for which no active market exists since the model does notconsider the inability to sell or transfer options, vesting requirements and areduced exercise period upon termination of employment - all of which wouldreduce the fair value of the options.

 

5

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***Reclassification*.**  A substantial portion of the points earned bycustomers in connection with our loyalty programs are redeemed for giftcards.  At the time the qualifying salesgiving rise to the loyalty program points are made, we defer the portion of therevenues on the qualifying sales transactions equal to our estimate of theretail value of the gift cards to be issued upon conversion of the points togift cards.   Beginning in the firstquarter of 2005, we began to record the deferral of revenues related to giftcards awards under our loyalty programs as a reduction of revenues. Previously,we charged such amounts to selling, general and administrative expenses (SG&A).  Inaddition, we now charge the cost of all other awards under our loyalty programsto cost of goods sold (COGS) rather than SG&A.  These changes in classification do not impactthe previously reported operating earnings, net income or earnings per shareamounts.

 

The following table presents quarterly andannual information giving recognition to the changes in classification relatedto our loyalty programs:

 
| **(in thousands)**     | ** ** | **Revenues** | ** ** | **COGS** | ** ** | **SG&A** | ** ** |
|------------------------|------------|--------------|------------|----------|------------|--------------|------------|
|                   |       |         |       |     |       |         |       |
| **Fiscal  Year 2004:** |       |         |       |     |       |         |       |
| First quarter          |       | $            | 818,769    |     | $          | 510,350      |       | $ | 211,130 |   |
| Second  quarter        |       | 1,048,367    |       | 718,985  |       | 239,381      |       |
| Third  quarter         |       | 873,167      |       | 544,663  |       | 208,909      |       |
| Fourth  quarter        |       | 784,468      |       | 553,231  |       | 189,033      |       |
| Total                  |       | $            | 3,524,771  |     | $          | 2,327,229    |       | $ | 848,453 |   |
|                   |       |         |       |     |       |         |       |
| **Fiscal  Year 2003:** |       |         |       |     |       |         |       |
| First  quarter         |       | $            | 727,832    |     | $          | 455,307      |       | $ | 197,281 |   |
| Second quarter         |       | 934,844      |       | 655,459  |       | 220,981      |       |
| Third quarter          |       | 718,557      |       | 465,160  |       | 181,565      |       |
| Fourth  quarter        |       | 699,120      |       | 502,510  |       | 179,981      |       |
| Total                  |       | $            | 3,080,353  |     | $          | 2,078,436    |       | $ | 779,808 |   |

 

***Recent Accounting Pronouncements.****** ***InDecember 2003, the U.S. Congress enacted the Medicare Prescription Drug,Improvement and Modernization Act of 2003 (Act) that will provide aprescription drug subsidy, beginning in 2006, to companies that sponsor postretirementhealth care plans that provide drug benefits. Additional legislation is anticipated that will clarify whether acompany is eligible for the subsidy, the amount of the subsidy available andthe procedures to be followed in obtaining the subsidy.  In May 2004, the FASBissued Staff Position 106-2 “Accounting and Disclosure Requirements Related tothe Medicare Prescription Drug, Improvement and Modernization Act of 2003” thatprovides guidance on the accounting and disclosure for the effects of theAct.  We are evaluating the impact of theAct on our Postretirement Plan as well as future actions that we might take inresponse to the Act.  As a result, we arecurrently unable to quantify the effects of this legislation on our obligationspursuant to the Postretirement Plan.

 

**2.**               Loss on Disposition of Chef’s Catalog

** **

In November 2004, we sold our Chef’sCatalog direct marketing business to a private equity firm.  Chef’s Catalog is a multi-channel retailer ofprofessional-quality kitchenware with revenues in 2004 of approximately $73million.  At October 30, 2004, Chef’sCatalog had net tangible assets, primarily inventory, of $12.5 million and netintangible assets of $17.2 million.  Wereceived proceeds, net of selling costs, of $14.4 million from the sale.  As the carrying value of the Chef’s Catalogassets exceeded the fair value of such assets as determined by the sale, weincurred a pre-tax loss of $15.3 million in the first quarter of 2005 relatedto the disposition of Chef’s Catalog.

 

6

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3.               OperatingSegments

 

We have identified two reportable segments: SpecialtyRetail Stores and Direct Marketing.  TheSpecialty Retail Stores segment includes all of our Neiman Marcus and BergdorfGoodman retail stores, including Neiman Marcus clearance stores.  The Direct Marketing segment conducts bothprint catalog and online operations under the Neiman Marcus, Horchow and Bergdorf Goodman brand names.  Other includes the operations of Kate SpadeLLC and Gurwitch Products, LLC (the Brand DevelopmentCompanies).

 

Both theSpecialty Retail Stores and Direct Marketing segments, as well as Kate SpadeLLC and Gurwitch Products, LLC, derive their revenuesfrom the sales of high-end fashion apparel, accessories, cosmetics andfragrances from leading designers, precious and fashion jewelry and decorativehome accessories.

 

The following table setsforth the information for our reportable segments:

 
| ** **                                  | ** ** | **Thirteen Weeks Ended**   | ** ** |
|---------------------------------------------|------------|----------------------------|------------|
| **(in thousands)**                          | ** ** | **October 30,  2004** | ** ** | **November 1,  2003** | ** ** |
| **REVENUES:**                               |       |                       |       |   |   |
| Specialty  Retail Stores                    |       | $                          | 736,890    |   | $ | 664,474 |   |
| Direct  Marketing                           |       | 139,799                    |       | 128,006 |   |
| Other                                       |       | 31,247                     |       | 26,289 |   |
| Total                                       |       | $                          | 907,936    |   | $ | 818,769 |   |
|                                        |       |                       |       |   |   |
| OPERATING  EARNINGS:                        |       |                       |       |   |   |
| Specialty  Retail Stores                    |       | $                          | 120,189    |   | $ | 91,109 |   |
| Direct  Marketing                           |       | 11,358                     |       | 10,624 |   |
| Other                                       |       | 2,860                      |       | 3,667 |   |
| Subtotal                                    |       | 134,407                    |       | 105,400 |   |
| Corporate  expenses                         |       | (9,144                     | )          | (8,111 | ) |
| Loss on  disposition of Chef’s Catalog |       | (15,348                    | )          | — |   |
| Total                                       |       | $                          | 109,915    |   | $ | 97,289 |   |

 

4.               Stock Repurchase Program

 

In prior years, our Board of Directorsauthorized various stock repurchase programs and increases in the number ofshares subject to repurchase.  In thefirst quarter of 2005, we repurchased 54,404 shares at an average purchase priceof $52.40.  As of October 30, 2004,approximately 1.2 million shares remain available for repurchase under ourstock repurchase programs.

 

7

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5.               Earnings per Share

 

The weighted average shares used in computingbasic and diluted earnings per share (EPS) are presented in the tablebelow.  We made no adjustments to netearnings for the computations of basic and diluted EPS during the periodspresented.

 
| ** **                                             | ** ** | **Thirteen Weeks Ended**   | ** ** |
|--------------------------------------------------------|------------|----------------------------|------------|
| **(in thousands of shares)**                           | ** ** | **October 30,  2004** | ** ** | **November 1,  2003** | ** ** |
|                                                   |       |                       |       |   |   |
| Weighted  average shares outstanding                   |       | 48,730                     |       | 48,078 |   |
| Less: shares  of non-vested restricted stock           |       | (504                       | )          | (454 | ) |
| Shares for  computation of basic EPS                   |       | 48,226                     |       | 47,624 |   |
| Effect of  dilutive stock options and restricted stock |       | 907                        |       | 772 |   |
| Shares for  computation of diluted EPS                 |       | 49,133                     |       | 48,396 |   |
|                                                   |       |                       |       |   |   |
| Shares  represented by antidilutive stock options      |       | 569                        |       | 28 |   |

 

We did not include antidilutivestock options in the computation of diluted EPS because the exercise price ofthose options was greater than the average market price of the common shares.

 

6.               Undivided Interests in NMG Credit Card Master Trust

 

Pursuant to a revolving credit cardsecuritization program (the Credit Card Facility), wetransfer substantially all of our credit card receivables to a wholly-ownedsubsidiary, Neiman Marcus Funding Corporation, which in turn sells suchreceivables to the Neiman Marcus Credit Card Master Trust (Trust).  At the inception of the Credit Card Facilityin September 2000, the Trust issued certificates representing undividedinterests in the credit card receivables to third-party investors in the faceamount of $225 million (Sold Interests). We hold certificates representing interests in the credit card portfolioequal to the excess of the balance of the credit card portfolio over $225million (Retained Interests).  In orderto maintain the committed level of securitized assets, the Trust uses cashcollections on the securitized receivables to purchase new credit card balancesfrom us in accordance with the terms of the Credit Card Facility.

 

From the inception of the Credit CardFacility until December 2003, our transfers and sales of credit cardreceivables pursuant to the terms of the Credit Card Facility were accountedfor as sales (Off-Balance Sheet Accounting). As a result, we removed $225 million of credit card receivables from ourbalance sheet at the inception of the Credit Card Facility and the Trust’s $225million repayment obligation to the holders of the certificates representingthe Sold Interests was not shown as a liability on our consolidated balancesheet.  During the period the transfersand sales qualified for Off-Balance Sheet Accounting, our Retained Interestswere shown as “Undivided interests in NMG Credit CardMaster Trust” on our consolidated balance sheets.

 

Beginning in December 2003, oursubsequent transfers to the Trust ceased to qualify for Off-Balance SheetAccounting. Rather, credit card receivables transferred to the Trust after November 2003remain on our balance sheet and are recorded as secured borrowings (FinancingAccounting).  The transition period fromOff-Balance Sheet Accounting to Financing Accounting (Transition Period) lastedapproximately four months (December 2003 to March 2004).  During the Transition Period, we allocatedcash collections on our credit card receivables to the previous Sold Interestsand Retained Interests until such time as those balances were reduced to zeroand we recorded a liability for our repayment obligation to the holders of the$225 million of certificates representing the Sold Interests.

 

8

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A reconciliation of the outstanding balanceof our accounts receivable to the balances recorded at October 30, 2004and November 1, 2003 is as follows:

 
| **(in millions)**                                                            | ** ** | **October 30,  2004** | ** ** | **November 1,  2003** | ** ** |
|------------------------------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
|                                                                         |       |                       |       |                       |       |
| Credit card  receivables, net                                                |       | $                          | 603.8      |                       | $          | 539.1 |   |
| Other  receivables                                                           |       | 37.4                       |       | 33.1                       |       |
|                                                                         |       | 641.2                      |       | 572.2                      |       |
| Less: Sold  Interests originally qualifying for Off-Balance Sheet Accounting |       | —                     |       | (225.0                     | )          |
| Net balance                                                                  |       | $                          | 641.2      |                       | $          | 347.2 |   |
|                                                                         |       |                       |       |                       |       |
| Amounts  reflected in the balance sheet:                                     |       |                       |       |                       |       |
| Undivided  interests in NMG Credit Card Master Trust                         |       | $                          | —     |                       | $          | 314.1 |   |
| Accounts  receivable, net                                                    |       | 641.2                      |       | 33.1                       |       |
|                                                                         |       | $                          | 641.2      |                       | $          | 347.2 |   |
|                                                                         |       |                       |       |                       |       |
| Current  portion of borrowings under Credit Card Facility                    |       | $                          | 225.0      |                       | $          | — |   |

 

After the Transition Period, our entirecredit card portfolio is included in accounts receivable in our consolidatedbalance sheet and the $225 million repayment obligation is shown as aliability.

 

7.               Employee BenefitPlans

 

***Description of Benefit Plans.***  We sponsor a defined benefit pension plan(Pension Plan) covering substantially all full-time employees.  We also sponsor an unfunded supplementalexecutive retirement plan (SERP Plan) that providesadditional pension benefits to certain employees.  Benefits under both plans are based on theemployees’ years of service and compensation over defined periods ofemployment.  Pension Plan assets consistprimarily of equity and fixed income securities.

 

Retirees andactive employees hired prior to March 1, 1989 are eligible to participatein a plan providing certain limited postretirement health care benefits(Postretirement Plan) if they have met certain service and minimum agerequirements.

 

9

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***Costs of Benefits.****** ***Thecomponents of the expenses incurred under our Pension Plan, SERPPlan and Postretirement Plan are as follows:

 
| ** **                                          | ** ** | **Thirteen Weeks Ended**   | ** ** |
|-----------------------------------------------------|------------|----------------------------|------------|
| **(in thousands)**                                  | ** ** | **October 30,  2004** | ** ** | **November 1,  2003** | ** ** |
|                                                |       |                       |       |   |   |
| Pension  Plan:                                      |       |                       |       |   |   |
| Service cost                                        |       | $                          | 3,196      |   | $ | 3,168 |   |
| Interest  cost                                      |       | 4,636                      |       | 4,823 |   |
| Expected  return on plan assets                     |       | (4,712                     | )          | (4,835 | ) |
| Net  amortization of losses and prior service costs |       | 1,208                      |       | 933 |   |
| Pension Plan  expense                               |       | $                          | 4,328      |   | $ | 4,089 |   |
|                                                |       |                       |       |   |   |
| SERP Plan:                                          |       |                       |       |   |   |
| Service cost                                        |       | $                          | 361        |   | $ | 340 |   |
| Interest cost                                       |       | 1,014                      |       | 974 |   |
| Net amortization of losses and prior  service costs |       | 384                        |       | 366 |   |
| SERP Plan  expense                                  |       | $                          | 1,759      |   | $ | 1,680 |   |
|                                                |       |                       |       |   |   |
| Postretirement Plan:                                |       |                       |       |   |   |
| Service cost                                        |       | $                          | 15         |   | $ | 20 |   |
| Interest cost                                       |       | 318                        |       | 384 |   |
| Net amortization of losses                          |       | 26                         |       | 110 |   |
| Postretirement expense                              |       | $                          | 359        |   | $ | 514 |   |

 

***Funding Policy and Plan Assets.***  Our policy is to fund the Pension Plan at orabove the minimum required by law.  In2004, we made voluntary contributions of $30.0 million in the second quarterfor the plan year ended July 31, 2003 and $15.0 million in the fourthquarter for the plan year ended July 31, 2004.  Based upon currently available information,we will not be required to make contributions to the Pension Plan for eitherthe 2004 or 2005 plan years.

 

**8.**               Commitmentsand Contingencies

** **

**We are involved in various suitsand claims in the ordinary course of business. We do not believe that the disposition of any such suits or claims willhave a material adverse effect upon our consolidated results of operations,cash flows or financial position.**

 

10

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**9.**               Restatements

** **

##### **Subsequent to the issuance of the first quarter 2005financial statements, we corrected errors in our previously issued financialstatements related to 1) the classification of construction allowances in ourbalance sheets and statements of cash flows and 2) the classification of thechanges in our Retained Interests in connection with the Credit Card Facilityin our statements of cash flows. Previously reported operating earnings, net income, earnings per shareand shareholders’ equity were not impacted by these corrections.**

##### ** **

##### ***ConstructionAllowances***.  On February 7,2005, the Chief Accountant of the Securities and Exchange Commission (SEC)released a letter regarding various lease accounting issues and the applicationof generally accepted accounting principles to such issues.  Following the issuance of the letter by theSEC, we reviewed our accounting policies related to construction allowances anddetermined that our classification of construction allowances in our balancesheets and statements of cash flows was not in accordance with generallyaccepted accounting principles.

##### ** **

##### **We periodically receive allowances from developers relatedto the construction of our stores. Historically, we recorded these allowances as a reduction of capitalexpenditures and, as result, the carrying values of property and equipment.  After our review related to the accountingfor construction allowances, we have corrected the classification of theseconstruction allowances from a reduction of property and equipment to deferredreal estate credits on our balance sheets. These deferred real estate credits are amortized over the lease termwhich is consistent with the amortization period for the constructed assets.**

 

##### **In addition, capital expenditures, as presented in thestatements of cash flows, were previously presented net of the constructionallowances received.  We have correctedthe error in the classification of the cash receipts of construction allowancesto cash flows from operating activities and, as a result, restated thestatements of cash flows.**

 

***RetainedInterests.****** ***Pursuant to the terms of theCredit Card Facility, as more fully described in Note 6, our Retained Interestsfluctuate monthly based on the underlying balance of our credit cardreceivables.  We previously reflected thechanges in our Retained Interests in the determination of cash flows from investingactivities.  We have determined that suchpresentation is not in accordance with generally accepted accounting principlesand have corrected such error by restating our statements of cash flows toinclude the changes in the Retained Interests in the determination of cashflows from operating activities.

 

##### **The following table summarizes the impact of theserestatements in our previously issued financial statements:**

 
| ** **                                            | ** ** | ** **                   | ** ** | **Restatements**             | ** ** | ** **                          | ** ** |
|-------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|-------------------------------------|------------|
| ** **                                            | ** ** | **As  Originally  Reported** | ** ** | **Construction  Allowances** | ** ** | **Changes in  Retained  Interests** | ** ** | **As  Restated** | ** ** |
|                                                  |       |                         |       |                         |       |                                |       |   |   |
| **First Quarter 2005**                                |       |                         |       |                         |       |                                |       |   |   |
| **Consolidated Balance Sheet:**                       |       |                         |       |                         |       |                                |       |   |   |
| Property and  equipment, net                          |       | $                            | 706,078    |                         | $          | 70,587                              |       | $ | — |   | $ | 776,665 |   |
| Total assets                                          |       | 2,687,488                    |       | 70,587                       |       | —                              |       | 2,758,075 |   |
| Deferred real  estate credits                         |       | —                       |       | 70,587                       |       | —                              |       | 70,587 |   |
| Total  long-term liabilities                          |       | 365,231                      |       | 70,587                       |       | —                              |       | 435,818 |   |
|                                                  |       |                         |       |                         |       |                                |       |   |   |
| **Consolidated Statement of Cash Flow:**              |       |                         |       |                         |       |                                |       |   |   |
| Net cash  (used for) provided by operating activities |       | $                            | (74,958    | )                            | $          | 15,187                              | ** ** | **$** | **—** |   | $ | (59,771 | ) |
| Net cash  used for investing activities               |       | (35,381                      | )          | (15,187                      | )          | —                              |       | (50,568 | ) |

 

11

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| ** **                                            | ** ** | ** **                   | ** ** | **Restatements**             | ** ** | ** **                          | ** ** |
|-------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|-------------------------------------|------------|
| ** **                                            | ** ** | **As  Originally  Reported** | ** ** | **Construction  Allowances** | ** ** | **Changes in  Retained  Interests** | ** ** | **As  Restated** | ** ** |
| ** **                                            | ** ** | ** **                   | ** ** | ** **                   | ** ** | ** **                          | ** ** | ** ** | ** ** |
| **Fiscal Year 2004**                                  |       |                         |       |                         |       |                                |       |   |   |
| **Consolidated Balance Sheet:**                       |       |                         |       |                         |       |                                |       |   |   |
| Property and  equipment, net                          |       | $                            | 693,772    |                         | $          | 56,711                              |       | $ | — |   | $ | 750,483 |   |
| Other assets                                          |       | 145,812                      |       | 15,187                       |       | —                              |       | 160,999 |   |
| Total assets                                          |       | 2,545,750                    |       | 71,898                       |       | —                              |       | 2,617,648 |   |
| Deferred  real estate credits                         |       | —                       |       | 71,898                       |       | —                              |       | 71,898 |   |
| Total  long-term liabilities                          |       | 437,212                      |       | 71,898                       |       | —                              |       | 509,110 |   |
|                                                  |       |                         |       |                         |       |                                |       |   |   |
| **First Quarter 2004**                                |       |                         |       |                         |       |                                |       |   |   |
| **Consolidated Balance Sheet:**                       | ** ** | ** **                   | ** ** | ** **                   | ** ** | ** **                          | ** ** | ** ** | ** ** |
| Property and  equipment, net                          |       | $                            | 674,970    |                         | $          | 60,546                              |       | $ | — |   | $ | 735,516 |   |
| Other assets                                          |       | 112,655                      |       | 15,284                       |       | —                              |       | 127,939 |   |
| Total assets                                          |       | 2,166,026                    |       | 75,830                       |       | —                              |       | 2,241,856 |   |
| Deferred  real estate credits                         |       | —                       |       | 75,830                       |       | —                              |       | 75,830 |   |
| Total  long-term liabilities                          |       | 364,202                      |       | 75,830                       |       | —                              |       | 440,032 |   |
|                                                  |       |                         |       |                         |       |                                |       |   |   |
| **Consolidated  Statement of Cash Flow:**             | ** ** | ** **                   | ** ** | ** **                   | ** ** | ** **                          | ** ** | ** ** | ** ** |
| Net cash  provided by (used for) operating activities |       | $                            | 8,115      |                         | $          | 2,246                               | ** ** | **$** | (71,573 | ) | $ | (61,212 | ) |
| Net cash (used  for) provided by investing activities |       | (93,646                      | )          | (2,246                       | )          | 71,573                              |       | (24,319 | ) |

 

12

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

** **

**EXECUTIVEOVERVIEW**

 

**The following discussion and analysis gives effect to therestatements described in Note 9 of the Notes to Condensed ConsolidatedFinancial Statements.**

** **

**Company Profile**

** **

The Neiman Marcus Group, Inc., together with its operating divisionsand subsidiaries, is a high-end specialty retailer.  Our operations include the Specialty RetailStores segment and the Direct Marketing segment.  Our Specialty Retail Stores segment consistsprimarily of Neiman Marcus and Bergdorf Goodman stores.  Our Direct Marketing segment conducts bothprint catalog and online operations under the brand names of Neiman Marcus,Horchow and Bergdorf Goodman (beginning in September 2004).  We recently sold our Chef’s Catalogoperations, as more fully described in Note 2 to the Condensed ConsolidatedFinancial Statements.

 

We own a 51 percent interest in Gurwitch Products, LLC, whichdistributes and markets the Laura Mercier cosmetic line, and a 56 percentinterest in Kate Spade LLC, a manufacturer and retailer of high-end designerhandbags and accessories.  GurwitchProducts, LLC and Kate Spade LLC are hereafter referred to collectively as the “BrandDevelopment Companies.”

 

Our fiscal year ends on the Saturday closest to July 31.  All references to the first quarter of 2005relate to the thirteen weeks ended October 30, 2004 and all references tothe first quarter of 2004 relate to the thirteen weeks ended November 1,2003.  All references to 2005 relate tothe fifty-two weeks ending July 30, 2005.

 

The informationcontained in this “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” (MD&A) should be read in conjunction with ouramendment to the Annual Report on Form 10-K/A for the fiscal year ended July 31,2004.  Unless otherwise specified, themeanings of all defined terms in MD&A are consistent with the meanings ofsuch terms as defined in the Notes to the Condensed Consolidated Financial Statements.

 

**Overview of the Business**

 

We believe that our unique product assortment of luxury, designer andfashion merchandise, coupled with our sales promotion activities and ourcommitment to superior customer service, have been critical to our success inthe past.  In addition, we believe thesefactors are critical to our future growth and success.

 

We conduct our selling activities in two primary selling seasons, Falland Spring.  Sales and margins increaseand decrease during each selling season due to the results of in-storemarketing towards the beginning of each season, sales on a marked down basistowards the end of each season and the effects of the December holidayseason.  As a result of the seasonalityof our selling activities, inventory management is critical to our success.

 

Inherent in the successful execution of our business plans,particularly our inventory management strategy, is our ability both to predictthe fashion trends that will be of interest to our customers and to anticipatefuture spending patterns of our customer base. Accordingly, we monitor the sales performance of our inventoriesthroughout each season.  We seek to orderadditional goods to supplement our original purchasing decisions when the levelof customer demand is higher than originally anticipated.  However, in certain merchandise categories,particularly fashion apparel, our ability to purchase additional goods can belimited.  This can result in lost salesin the event of higher than anticipated demand for the fashion goods offered ora higher than anticipated level of consumer spending.  Conversely, in the event we buy fashion goodsthat are not accepted by our customer or the level of consumer spending is lessthan we anticipated, we typically incur a higher than anticipated level ofmarkdowns, net of vendor allowances, to sell the goods that remain at the endof the season, resulting in lower operating profits.  We believe that the experience of ourmerchandising and selling organizations help to minimize the inherent risk inpredicting fashion trends and related demand.

 

13

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**First Quarter Fiscal Year 2005 Highlights**

 

Diluted earnings per share for the first quarter of 2005 increased 12.1percent to $1.30 from $1.16 in the prior year period.  Other significant highlights for the firstquarter of 2005 include:

 

•      **Revenues** – Our revenues for the first quarter of 2005 were$907.9 million compared to $818.8 million in the prior year period.  Total revenues increased 10.9 percent in thefirst quarter of 2005 while comparable revenues increased 11.4 percent.  We have experienced double digit percentageincreases in comparable store sales in the last five consecutive quarters.

 

•      **Margins** – Margins increased to 38.9 percent of revenues inthe first quarter of 2005 from 37.7 percent in the first quarter of 2004.  This increase is reflective of the high levelof acceptance and demand for the fashion goods we offer as well as our purchasingefforts that resulted in the close alignment of purchases to customerdemand.  These factors resulted in alower level of markdowns in the current quarter.

 

•      **Selling, general and administrative expenses** – Selling,general and administrative (SG&A) expenses decreased to 25.1 percent ofrevenues from 25.8 percent in the first quarter 2004.  This decrease was attributable to both theleveraging of fixed expenses over the higher revenue base and the control andcontainment of variable expenses.

 

•      **Loss on disposition of Chef’s Catalog**– In the first quarterof 2005, we incurred a pre-tax loss of $15.3 million related to the sale of our Chef’s Catalog direct marketingbusiness.

 

•      **Operating earnings**– Operating earnings increased 13.0percent in the first quarter of 2005, representing 12.1 percent of our revenuescompared to 11.9 percent in first quarter of 2004.  Excluding the loss on disposition of Chef’sCatalog, operating earnings were 13.8 percent of our revenues for the firstquarter of 2005.  Operating earnings were16.3 percent of revenues for our Specialty Retail Stores and 8.1 percent ofrevenues for Direct Marketing.

 

**OPERATINGRESULTS**

 

**Performance Summary**

 

The following table sets forth certainitems expressed as percentages of net sales for the periods indicated.

 
| ** **                                                                          | ** ** | **Thirteen Weeks Ended**   | ** ** |
|-------------------------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                                          | ** ** | **October 30,  2004** | ** ** | **November 1,  2003** | ** ** |
|                                                                                |       |                       |       |   |   |
| Revenues                                                                            |       | 100.0                      | %          | 100.0 | % |
| Cost of  goods sold including buying and occupancy costs                            |       | 61.1                       |       | 62.3 |   |
| Selling,  general and administrative expenses                                       |       | 25.1                       |       | 25.8 |   |
| Loss on  disposition of Chef’s Catalog                                         |       | 1.7                        |       | — |   |
| Operating  earnings                                                                 |       | 12.1                       |       | 11.9 |   |
| Interest  expense, net                                                              |       | 0.4                        |       | 0.4 |   |
| Earnings  before income taxes, minority interest and change in accounting principle |       | 11.7                       |       | 11.5 |   |
| Income taxes                                                                        |       | 4.5                        |       | 4.5 |   |
| Earnings  before minority interest                                                  |       | 7.2                        |       | 7.0 |   |
| Minority  interest in net earnings of subsidiaries                                  |       | (0.1                       | )          | (0.1 | ) |
| Net earnings                                                                        |       | 7.1                        | %          | 6.9 | % |

 

14

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Set forth in the following table is certain summary information withrespect to our operations for the periods indicated.

 
| ** **                                  | ** ** | **Thirteen Weeks Ended**   | ** ** |
|---------------------------------------------|------------|----------------------------|------------|
| **(dollars in millions)**                   | ** ** | **October 30,  2004** | ** ** | **November 1,  2003** | ** ** |
|                                        |       |                       |       |   |   |
| REVENUES                                    |       |                       |       |   |   |
| Specialty  Retail Stores                    |       | $                          | 736.9      |   | $ | 664.5 |   |
| Direct  Marketing                           |       | 139.8                      |       | 128.0 |   |
| Other (1)                                   |       | 31.2                       |       | 26.3 |   |
| Total                                       |       | $                          | 907.9      |   | $ | 818.8 |   |
|                                        |       |                       |       |   |   |
| OPERATING  EARNINGS                         |       |                       |       |   |   |
| Specialty  Retail Stores                    |       | $                          | 120.2      |   | $ | 91.1 |   |
| Direct  Marketing                           |       | 11.3                       |       | 10.6 |   |
| Other (1)                                   |       | 2.9                        |       | 3.7 |   |
| Corporate  expenses                         |       | (9.2                       | )          | (8.1 | ) |
| Loss on  disposition of Chef’s Catalog |       | (15.3                      | )          | — |   |
| Total                                       |       | $                          | 109.9      |   | $ | 97.3 |   |
|                                        |       |                       |       |   |   |
| OPERATING  PROFIT MARGIN                    |       |                       |       |   |   |
| Specialty  Retail Stores                    |       | 16.3                       | %          | 13.7 | % |
| Direct  Marketing                           |       | 8.1                        | %          | 8.3 | % |
| Total                                       |       | 12.1                       | %          | 11.9 | % |
|                                        |       |                       |       |   |   |
| COMPARABLE  REVENUES (2)                    |       |                       |       |   |   |
| Specialty  Retail Stores (3)                |       | 11.1                       | %          | 9.6 | % |
| Direct  Marketing (4)                       |       | 13.1                       | %          | 13.2 | % |
| Total (3),  (4)                             |       | 11.4                       | %          | 10.9 | % |
|                                        |       |                       |       |   |   |
| STORE COUNT                                 |       |                       |       |   |   |
|                                        |       |                       |       |   |   |
| Neiman  Marcus and Bergdorf Goodman stores: |       |                       |       |   |   |
| Open at  beginning of period                |       | 37                         |       | 37 |   |
| Opened  during the period                   |       | —                     |       | — |   |
| Open at end  of period                      |       | 37                         |       | 37 |   |
| Clearance  centers:                         |       |                       |       |   |   |
| Open at beginning  of period                |       | 14                         |       | 14 |   |
| Opened  during the period                   |       | —                     |       | — |   |
| Open at end  of period                      |       | 14                         |       | 14 |   |

 

----

(1)   Other includes theoperations of the Brand Development Companies.

 

(2)   Comparablerevenues include 1) revenues derived from our retail stores open for more than52 weeks, including stores that have been relocated or expanded, 2) revenuesfrom our Direct Marketing operations and 3) revenues from our Brand DevelopmentCompanies.

 

**(3)**   The calculation of the changes in comparablerevenues has been adjusted to give recognition to the change in classificationof revenues deferred in connection with our loyalty programs, as more fullydescribed in Note 1 to the Condensed Consolidated Financial Statements.

** **

**(4)**   The calculation of the changes in comparable revenueshas been adjusted to exclude the revenues of Chef’s Catalog for all periodsprior to our sale of these operations in November 2004, as more fullydescribed in Note 2 to the Condensed Consolidated Financial Statements.

 

15

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**Thirteen Weeks Ended October 30,2004 Compared to Thirteen Weeks Ended November 1, 2003**

** **

***Revenues.**** *Our revenues for thefirst quarter of 2005 of $907.9 million increased $89.1 million, or 10.9percent, from $818.8 million in the first quarter of 2004.

 

Comparable revenues in the first quarter of 2005 increased 11.4 percentcompared to the prior year period. Comparable revenues increased 11.1 percent for Specialty Retail Storesand 13.1 percent for Direct Marketing. Comparable revenues in the first quarter of 2004 increased by 10.9percent.

 

Revenues increased in the first quarter of 2005 compared to the prioryear at all our operating companies, consistent with a higher level of consumerspending, in general, with a higher increase coming from the affluent luxurycustomer served by the company.  Inaddition, we believe the increases in comparable revenues were driven by salesevents conducted by our Specialty Retail Stores and by the growth of internetsales for Direct Marketing.  In the firstquarter of 2005, internet sales by Direct Marketing, excluding Chef’s Catalog,were $60.7 million, an increase of 42.7 percent from the first quarter of 2004.

 

***Gross margin.***  Gross margin was 38.9 percent of revenues forthe first quarter of  2005 compared to37.7 percent in the prior year period. The increase in gross margin was primarily due to higher product marginsand a decrease in buying and occupancy costs as a percentage of revenues.

 

We incurred a lower level of net markdowns at both our Specialty RetailStores and Direct Marketing during the first quarter of 2005 resulting inhigher product margins.  Net markdownsdecreased as a percentage of revenues by 0.2 percent in the first quarter of2005 compared to the prior year period. For Specialty Retail Stores, full-price sales increased in the firstquarter of 2005 compared to the prior year period.  We believe the lower level of markdowns wasdue to the higher level of sales generated during the quarter and our continuedemphasis on both inventory management and full-price selling.

 

Consistent with industry business practice, we receive allowances fromcertain of our vendors in support of the merchandise we purchase forresale.  We receive certain allowances toreimburse us for markdowns taken and/or to support the gross margins earned inconnection with the sales of the vendor’s merchandise.  We recognize these allowances as an increaseto gross margin when the allowances are earned and approved by the vendor.  Other allowances we receive representreductions to the amounts paid to acquire the merchandise.  We recognize these allowances as a reductionin the cost of the acquired merchandise resulting in an increase to grossmargin at the time the goods are sold. The amount of vendor reimbursements we received did not have asignificant impact on the year-over-year change in gross margin in the firstquarter of 2005.

 

A significant portion of our buying and occupancy costs are fixed innature.  Buying and occupancy costsdecreased as a percentage of revenues during the first quarter of 2005 comparedto the prior year period primarily due to the leveraging of fixed expenses,including payroll expenses, depreciation, rent and related occupancy expensesover the higher level of revenues we generated during the first quarter of2005.

 

***Selling, general and administrative expenses*.**  SG&A expenses were 25.1 percent ofrevenues in the first quarter of 2005 compared to 25.8 percent of revenues inthe prior year period.

 

The net decrease in SG&A expenses as a percentage of revenues inthe first quarter of 2005 was primarily due to 1) productivity improvements forour Specialty Retail Stores in various expense categories, including payrolland advertising, as a result of the higher level of revenues in the firstquarter of 2005, as well as the control and containment of variable expenses,2) lower costs for incentive compensation compared to the prior year period, 3)a lower level of bad debt expense related to our credit card portfolio and 4) lower costs related to store remodels.

 

The decreases in SG&A expenses as a percentage of revenues werepartially offset by 1) higher catalog and other marketing costs incurred by ourDirect Marketing operations in connection with the planned increase in catalogcirculation and web-based marketing prior to the holiday season and 2) higherprofessional fees.

 

***Loss on disposition of Chef’s Catalog*.**   In November 2004, we sold our Chef’sCatalog direct marketing business to a private equity firm.  Chef’s Catalog is a multi-channel retailer ofprofessional-quality kitchenware with revenues in 2004 of approximately $73million.  At October 30, 2004, Chef’sCatalog had net tangible assets, primarily inventory, of $12.5 million and netintangible assets of $17.2 million.  Wereceived proceeds, net of selling costs, of $14.4 million from the sale. As thecarrying value of the Chef’s Catalog assets exceeded the fair value of suchassets as determined by the sale, we incurred a pre-tax loss of $15.3 millionin the first quarter of 2005 related to the disposition of Chef’s Catalog.

 

16

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***Segment operating earnings.***  Operating earnings for our Specialty RetailStores segment were $120.2 million for the first quarter of 2005 compared to$91.1 million for the prior year period. This 31.9 percent increase was primarily the result of increased sales,reduced markdowns and net decreases in both buying and occupancy expenses andSG&A expenses as percentages of revenues.

 

Operating earnings for Direct Marketing increased to $11.3 million inthe first quarter of 2005 from $10.6 million for the prior year period,primarily as a result of increased revenues, reduced markdowns and netdecreases in buying and occupancy costs as a percentage of revenues offset, inpart, by higher SG&A expenses as a percentage of revenues primarily relatedto higher catalog production and web-based marketing costs.

 

***Interest expense, net*.**  Net interest expense was $4.0 million in thefirst quarter of 2005 and $3.5 million for the prior year period.

 

***Income taxes.***  Our effective income tax rate was 38.7percent for the first quarter of 2005 and 39.0 percent for the prior yearperiod.

 

**Outlook**

 

Based on current estimates, we anticipate percentage increases incomparable store revenues of 8 to 10 percent for our second quarter ending January 29,2005.  The accuracy of our assumptionsand forecasts is subject to uncertainties and circumstances beyond ourcontrol.  Consequently, actual resultscould differ materially from the forecasted results.  See “Factors That May Affect Future Results”for a discussion of items and events that could cause our actual results tovary from our expectations.

 

**Inflation andDeflation**

** **

We believe changes in revenues and net earnings that have resulted frominflation or deflation have not been material during the periodspresented.  In recent years, we haveexperienced certain inflationary conditions related to 1) increases in productcosts due primarily to changes in foreign currency exchange rates that havereduced the purchasing power of the U.S. dollar and 2) increases inSG&A.  We attempt to offset theeffects of inflation through control of expenses and price increases, althoughour ability to increase prices may be limited by competitive factors.  We attempt to offset the effects ofmerchandise deflation, which has occurred on a limited basis in recent years,through control of expenses.  There is noassurance, however, that inflation or deflation will not materially affect ouroperations in the future.

 

**LIQUIDITY ANDCAPITAL RESOURCES**

** **

Our cash requirements consist principally of 1) the funding of ouraccounts receivable and merchandise purchases, 2) capital expenditures for newstore growth, store renovations and upgrades of our management informationsystems, 3) debt service requirements and 4) obligations related to our PensionPlan.  Our working capital requirementsfluctuate during the year, increasing substantially during the first and secondquarters of each fiscal year as a result of higher seasonal levels of accountsreceivable and inventory.   We typicallyfinance the increases in working capital needs during the first and secondfiscal quarters with cash flows from operations, cash provided from the CreditCard Facility and borrowings under the Credit Agreement.

 

Our primary sources ofshort-term liquidity are comprised of cash on hand and availability under our$350 million unsecured revolving credit agreement.  As of October 30, 2004, we had cash andcash equivalents of $258.4 million and no outstanding borrowings under ourcredit agreement.  Our cash and cashequivalents consisted principally of invested cash and store operatingcash.  At November 1, 2003, we hadcash and cash equivalents of $127.5 million and no outstanding borrowings undera previous $300 million unsecured revolving credit facility.  The amount of cash on hand and borrowingsunder the credit facility are influenced by a number of factors, includingrevenues, accounts receivable and inventory levels, vendor terms, the level ofcapital expenditures, cash requirements related to financing instruments,Pension Plan funding obligations and tax payment obligations, among others.

 

17

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We believe that operatingcash flows, currently available vendor financing and amounts available pursuantto our credit agreement and our $225 million Credit Card Facility should besufficient to fund our operations, debt service, Pension Plan fundingrequirements, contractual obligations and commitments and currently anticipatedcapital expenditure requirements through the end of 2005.  In addition, we anticipate negotiating a newcredit card facility to replace the Credit Card Facility prior to the finalpayoff of our borrowings in September 2005.

 

We generated cash from operations (net earnings as adjusted fornon-cash charges) of $112.9 million in the first quarter of 2005 compared to$88.5 million in prior year period. However, we used cash of $59.8 million in conducting our operatingactivities in the first quarter of 2005 and $61.2 million in the first quarterof 2004, primarily in funding the seasonal increase in our accounts receivableand merchandise inventories.

 

Net cash used for investing activities for capital expenditures was$50.6 million in the first quarter of 2005 compared to $24.3 million in theprior year period.  We currently projectcapital expenditures for 2005 to be approximately $160 million to $170 millionprimarily for new store construction, store renovations and upgrades toinformation systems, including warehousing systems to support our DirectMarketing operation and a new human capital management system.  We are currently remodeling our stores inNewport Beach, Los Angeles, San Francisco and Houston.  We expect to complete the expansion andrenovation of the Newport Beach and Los Angeles stores in the spring of fiscalyear 2005 and the San Francisco and Houston stores in the spring of fiscal2006.

 

**Financing Structure**

 

Our major sources of funds are comprisedof vendor financing, the $350 million credit agreement, the $225 million CreditCard Facility, $125 million senior unsecured notes, $125 million seniorunsecured debentures, operating leases and capital leases.

 

At October 30, 2004, we had $225.0 million borrowings under ourCredit Card Facility.  Repayment of thisobligation begins in April 2005 in six monthly installments of $37.5million.  Borrowings pursuant to theCredit Card Facility bear interest at the contractually-defined rate of onemonth LIBOR plus 0.27 percent (2.14 percent at October 30, 2004) and arepayable monthly to the holders of the Class A Certificates.  We anticipate negotiating a new credit cardfacility to replace the Credit Card Facility prior to the final payoff of ourborrowings in September 2005.

 

In the second quarter of 2004, our Boardof Directors initiated a quarterly cash dividend of $0.13 per share.  We declared dividends on October 30,2004 aggregating $6.4 million.  Thesedividends were paid in November 2004.

 

In prior years, our Board of Directors authorized various stockrepurchase programs and increases in the number of shares subject torepurchase.  In the first quarter of2005, we repurchased 54,404 shares at an average purchase price of $52.40.    As of October 30, 2004, approximately1.2 million shares remain available for repurchase under the stock repurchaseprograms.

 

**Off-Balance Sheet Arrangements**

 

Pursuant to a revolving credit card securitization program, we transfersubstantially all of our credit card receivables to a wholly-owned subsidiary,Neiman Marcus Funding Corporation, which in turn sells such receivables to theNeiman Marcus Credit Card Master Trust (Trust). At the inception of the Credit Card Facility in September 2000, theTrust issued certificates representing undivided interests in the credit cardreceivables to third-party investors in the face amount of $225 million (SoldInterests).  We hold certificatesrepresenting interests in the credit card portfolio equal to the excess of thebalance of the credit card portfolio over $225 million (RetainedInterests).  In order to maintain thecommitted level of securitized assets, the Trust uses cash collections on thesecuritized receivables to purchase new credit card balances from us inaccordance with the terms of the Credit Card Facility.  Beginning in April 2005, cashcollections will be used by the Trust to repay the $225 million principalbalance of the Class A Certificates in six monthly installments of $37.5million.

 

From the inception of the Credit Card Facility until December 2003,our transfers and sales of credit card receivables pursuant to the terms of theCredit Card Facility were accounted for as sales (Off-Balance SheetAccounting).  As a result, we removed the$225 million of credit card receivables sold from our balance sheet at theinception of the Credit Card Facility and our $225 million repayment obligationto the holders of the certificates representing the Sold Interests was notrequired to be shown as a liability on our consolidated balance sheet.  During the period the transfers and salesqualified for

 

18

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Off-Balance Sheet Accounting, the Retained Interests were shown as “Undividedinterests in NMG Credit Card Master Trust” on the consolidated balance sheets.

 

Beginning in December 2003, our subsequent transfers to the Trustceased to qualify for Off-Balance Sheet Accounting.  Rather, credit card receivables transferredto the Trust after November 2003 remain on our balance sheet and arerecorded as secured borrowings (Financing Accounting).  As of October 30, our entire credit cardportfolio is included in accounts receivable and the $225 million ofoutstanding borrowings under the Credit Card Facility are shown as a liabilityin the condensed consolidated balance sheet.

 

Our securitization of credit card receivables is more fully describedin Note 6 of the Notes to Condensed Consolidated Financial Statements.

 

**OTHERMATTERS**

 

**Factors That May Affect Future Results**

 

**Matters discussed in MD&A include forward-lookingstatements.  We make theseforward-looking statements based on our expectations and beliefs concerningfuture events, as well as currently available data.  These forward-looking statements involve anumber of risks and uncertainties and, therefore, are not guarantees of futureperformance.  A variety of factors couldcause our actual results to differ materially from the anticipated or expectedresults expressed in our forward-looking statements.  Factors that could affect future performanceinclude, but are not limited, to:**

** **

**Political and General Economic Conditions**

** **

**•**      currentpolitical and general economic conditions or changes in such conditions;

** **

**•**      terroristactivities in the United States;

** **

**•**      political,social, economic, or other events resulting in the short or long-termdisruption in business at our stores, distribution centers or offices;

** **

**Customer Demographic Issues**

** **

**•**      changes in thedemographic or retail environment;

** **

**•**      changes inconsumer confidence resulting in a reduction of discretionary spending on goodsthat are, or are perceived to be, “luxuries”;

** **

**•**      changes inconsumer preferences or fashion trends;

** **

**•**      changes in ourrelationships with key customers;

** **

**•**      changes in ourproprietary credit card arrangement that adversely impact our ability toprovide consumer credit;

** **

**Merchandise Procurement and Supply Chain Considerations**

** **

**•**      changes in ourrelationships with designers, vendors and other sources of merchandise,including adverse changes in their financial viability;

** **

**•**      delays inreceipt of merchandise ordered due to work stoppages and/or other causes ofdelay in connection with either the manufacture or shipment of suchmerchandise;

** **

**•**      changes inforeign currency exchange rates;

** **

**•**      significantincreases in paper, printing and postage costs;

** **

**Industry and Competitive Factors**

** **

**•**      competitiveresponses to our marketing, merchandising and promotional efforts and/orinventory liquidations by vendors or other retailers;

** **

**•**      seasonality ofthe retail business;

 

19

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**•**      adverse weatherconditions or natural disasters, particularly during peak selling seasons;

** **

**•**      delays inanticipated store openings and renovations;

** **

**Employee Considerations**

** **

**•**      changes in keymanagement personnel;

** **

**•**      changes in ourrelationships with certain of our key sales associates;

** **

**Legal and Regulatory Issues**

** **

**•**      changes ingovernment or regulatory requirements increasing our costs of operations;

** **

**•**      litigation thatmay have an adverse effect on our financial results or reputation;

** **

**Other Factors**

** **

**•**      impact offunding requirements related to our noncontributory defined benefit pensionplan;

** **

**•**      the design andimplementation of new information systems as well as enhancements of existingsystems.

** **

**We undertake no obligation to update or revise (publicly orotherwise) any forward-looking statements to reflect subsequent events, newinformation or future circumstances.**

** **

**Critical AccountingPolicies**

** **

The preparation of condensed financial statements in conformity withgenerally accepted accounting principles requires  us  tomake estimates and assumptions about future events.  These estimates and assumptions affectamounts of assets, liabilities, revenues and expenses and the disclosure ofgain and loss contingencies at the date of the Condensed Consolidated FinancialStatements.  Our current estimates aresubject to change if different assumptions as to the outcome of future eventswere made.  We evaluate our estimates andjudgments on an ongoing basis and predicate those estimates and judgments onhistorical experience and on various other factors that we believe arereasonable under the circumstances.  Wemake adjustments to our assumptions and judgments when facts and circumstancesdictate.  Since future events and theireffects cannot be determined with absolute certainty, actual results may differfrom the estimates we used in preparing the accompanying Condensed ConsolidatedFinancial Statements.

 

**See Note 1 of the Notes toCondensed Consolidated Financial Statements in Item 1 for a summary of ourcritical accounting policies.  A completedescription of our critical accounting policies is included in our amendment tothe Annual Report to Shareholders on Form 10-K/A for the fiscal year ended July 31,2004.**

** **

We have changed the basis of presentation of certain prior year amountsand calculations presented in this quarterly report to conform to the currentyear presentation.

 

***Reclassification*.**  As more fully described in Note 1, asubstantial portion of the points earned by customers in connection with ourloyalty programs are redeemed for gift cards. At the time the qualifying sales giving rise to the loyalty programpoints are made, we defer the portion of the revenues on the qualifying salestransactions equal to our estimate of the retail value of the gift cards to beissued upon conversion of the points to gift cards.   Beginning in the first quarter of 2005, webegan to record the deferral of revenues related to gift cards awards under ourloyalty programs as a reduction of revenues. Previously, we charged suchamounts to selling, general and administrative expenses.  In addition, we now charge the cost of allother awards under our loyalty programs to cost of goods sold rather thanSG&A.  These changes inclassification do not impact the previously reported operating earnings, netincome or earnings per share amounts.

 

20

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***Changes in Comparable Revenues.***  As more fully described in Note 2, we havesold our Chef’s Catalog operations.  The changesin comparable revenues have been adjusted 1) to exclude the revenues of Chef’sCatalog operations for all periods prior to the sale and 2) to give recognitionto the change in classification of revenues deferred in connection with ourloyalty programs and are summarized below:

 
| ** **             | ** ** | **Total** | ** ** | **Specialty  Retail Stores** | ** ** | **Direct  Marketing** | ** ** |
|------------------------|------------|-----------|------------|------------------------------|------------|-----------------------|------------|
|                   |       |      |       |                         |       |                  |       |
| **Fiscal  Year 2004:** |       |      |       |                         |       |                  |       |
| First  quarter         |       | 10.9      | %          | 9.6                          | %          | 13.2                  | %          |
| Second  quarter        |       | 12.7      | %          | 10.2                         | %          | 25.7                  | %          |
| Third  quarter         |       | 22.0      | %          | 22.2                         | %          | 14.4                  | %          |
| Fourth  quarter        |       | 12.6      | %          | 11.3                         | %          | 21.7                  | %          |
| Fiscal year  2004      |       | 14.4      | %          | 13.1                         | %          | 19.2                  | %          |
|                   |       |      |       |                         |       |                  |       |
| **Fiscal  Year 2003:** |       |      |       |                         |       |                  |       |
| First  quarter         |       | 6.3       | %          | 5.0                          | %          | 15.7                  | %          |
| Second quarter         |       | 0.9       | %          | (2.1                         | )%         | 18.7                  | %          |
| Third quarter          |       | 1.6       | %          | (0.6                         | )%         | 14.8                  | %          |
| Fourth  quarter        |       | 9.0       | %          | 6.3                          | %          | 22.3                  | %          |
| Fiscal year 2003       |       | 4.1       | %          | 1.8                          | %          | 17.8                  | %          |

 

##### ***Restatements*.** Subsequent to the issuance of the first quarter 2005financial statements, we corrected errors in our previously issued financialstatements related to 1) the classification of construction allowances in ourbalance sheets and statements of cash flows and 2) the classification of thechanges in our Retained Interests in connection with the Credit Card Facilityin our statements of cash flows. Previously reported operating earnings, net income, earnings per share andshareholders’ equity were not impacted by these corrections.  See Note 9 to the Condensed ConsolidatedFinancial Statements.

##### ** **

**Recent Accounting Pronouncements**

 

In December 2003, the U.S. Congress enacted the MedicarePrescription Drug, Improvement and Modernization Act of 2003 (Act) that willprovide a prescription drug subsidy, beginning in 2006, to companies thatsponsor postretirement health care plans that provide drug benefits.  Additional legislation is anticipated thatwill clarify whether a company is eligible for the subsidy, the amount of thesubsidy available and the procedures to be followed in obtaining thesubsidy.  In May 2004, the FASB issuedStaff Position 106-2 “Accounting and Disclosure Requirements Related to theMedicare Prescription Drug, Improvement and Modernization Act of 2003” thatprovides guidance on the accounting and disclosure for the effects of theAct.  We are evaluating the impact of theAct on our Postretirement Plan as well as future actions that we might take inresponse to the Act.  As a result, we arecurrently unable to quantify the effects of this legislation on our obligationspursuant to the Postretirement Plan.

 

**ITEM3.  QUANTITATIVE****AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

The market risk inherent in our financial instruments represents thepotential loss arising from adverse changes in interest rates and foreigncurrency exchange rates.  We do not enterinto derivative financial instruments for trading purposes.  We seek to manage exposure to adverse interestrate changes through our normal operating and financing activities. We areexposed to interest rate risk through our securitization and borrowingactivities, which are described in Notes 2 and 5 to our Consolidated FinancialStatements in our amendment to the Annual Report on Form 10-K/A for the fiscalyear ended July 31, 2004.

 

As of October 30, 2004, we had no borrowings outstanding under ourrevolving credit agreement.  Futureborrowings under our revolving credit agreement, to the extent of outstandingborrowings, would be affected by interest rate changes.

 

Our outstanding long-term debt as of October 30, 2004 is at fixedinterest rates and would not be affected by interest rate changes.  Based upon quoted prices, the fair value ofour senior notes and debentures (face value of $250 million) was $278.9 millionas of October 30, 2004.

 

Pursuant to our proprietary credit card securitization program thatbegins to expire in September 2005, we have sold

 

21

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substantially all of our credit card receivables through a subsidiaryin exchange for certificates representing undivided interests in suchreceivables.  We sold the Class ACertificates, which have an aggregate principal value of $225 million, toinvestors. The holders of the Class A Certificates are entitled to monthlyinterest distributions from the Trust at the contractually-defined rate of onemonth LIBOR plus 0.27 percent annually. The distributions to the Class A Certificate holders are payable fromthe finance charge income generated by the credit card receivables held by theTrust.   At     October 30, 2004, we estimate a 100basis point increase in LIBOR would result in an approximate annual increase of$2.25 million in the interest distributions to the Class A Certificate Holders.

 

We use derivative financial instruments to manage foreign currency riskrelated to the procurement of merchandise inventories from foreignsources.  We enter into foreign currencycontracts denominated in the euro and British pound. We had foreign currencycontracts in the form of forward exchange contracts in the amount ofapproximately $31.5 million as of October 30, 2004.  The market risk inherent in these instrumentswas not material to our consolidated financial position, results of operationsor cash flows in the first quarter of 2005.

 

**The effects of changes in the U.S. equity and bond marketsserve to increase or decrease the value of Pension Plan assets, resulting in anincrease or decrease in our cash funding obligation.  We seek to manage exposure to adverse equityand bond returns by maintaining diversified investment portfolios and utilizingprofessional investment managers.**

** **

Based on a review of ourfinancial instruments outstanding at October 30, 2004 that are sensitiveto market risks, we have determined that there was no material market riskexposure to our consolidated financial position, results of operations, or cashflows as of such date.

 

**ITEM 4. CONTROLS****AND PROCEDURES**

 

In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried outan evaluation, under the supervision and with the participation of the ChiefExecutive Officer and Chief Financial Officer, as well as other key members ofour management, of the effectiveness of our disclosure controls and proceduresas of the end of the period covered by this report. Based on that evaluation,our Chief Executive Officer and Chief Financial Officer concluded that ourdisclosure controls and procedures were effective, as of the end of the period coveredby this report, to provide reasonable assurance that information we arerequired to disclose in our reports filed or submitted under the Exchange Actis recorded, processed, summarized and reported within the time periodsspecified in the Securities and Exchange Commission’s rules and forms.

 

In the ordinary course of business, we routinely enhance ourinformation systems by either upgrading our current systems or implementing newsystems.  No change in our internalcontrols occured during the quarter ended October 30, 2004 that hasmaterially affected, or is reasonably likely to materially affect, our internalcontrols over financial reporting.

 

In coming to the conclusion that our internalcontrols over financial reporting were effective as of October 30, 2004,we considered, among other things, the control deficiencies related to both theaccounting and classification of construction allowances and the classificationof cash flows in the statements of cash flows, which resulted in therestatements of our previously issued financial statements as disclosed in Note9 of this Form 10-Q/A.  After reviewingand analyzing applicable authoritative guidance (including the Securities andExchange Commission’s Staff Accounting Bulletin No. 99, “Materiality,” AccountingPrinciple Board Opinion No. 20, “Accounting Changes” and Public CompanyAccounting Oversight Board Auditing Standard No. 2, “An Audit of InternalControl over Financial Reporting Performed in Conjunction with an Audit ofFinancial Statements”) and taking into consideration that the restatements didnot impact previously reported amounts for revenues, net earnings, earnings pershare, total cash flows or shareholder’s equity, we concluded that the controldeficiencies that resulted in the restatements of the previously issuedfinancial statements were not a material weakness.  Following the identification of the controldeficiencies, we corrected the processes for evaluating, accounting andclassifying construction allowances received and the classification of cashflows in the preparation of our financial statements.

 

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**THE NEIMANMARCUS GROUP, INC.**

 

**PART II**

 

**ITEM 1.****          LEGALPROCEEDINGS**

 

Note 8 of the Notes to Condensed Consolidated Financial Statements inPart I, Item 1 is incorporated herein by reference as if fully restatedherein.  Note 8 contains forward-lookingstatements that are subject to the risks and uncertainties discussed in “Management’sDiscussion and Analysis of Financial Condition and Results of Operations –Factors That May Affect Future Results.”

 

###### **ITEM2.**          UNREGISTERDSALES OF EQUITY AND SECURITIES AND USE OF PROCEEDS

###### ** **

The following table indicates our stockrepurchases of equity securities in the first quarter of 2005:

 
| **First Quarter 2005**                    | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average  Price Paid  Per Share** | ** ** | **Total Number  of Shares  Purchased as  Part of  Publicly  Announced  Plans or  Programs (1)** | ** ** | **Maximum  Number of  Shares that  May Yet Be  Purchased  under the  Plans or  Programs** | ** ** |
|-------------------------------------------|------------|----------------------------------------|------------|------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|
|                                      |       |                                   |       |                               |       |                                                                                            |       |                                                                                      |       |
| August 2004  (8/1/04 to 8/28/04)     |       | 15,100                                 |       | $                                  | 49.52      |                                                                                            | 15,100     |                                                                                      | 1,199,273  |   |
|                                      |       |                                   |       |                               |       |                                                                                            |       |                                                                                      |       |
| September 2004  (8/29/04 to 10/2/04) |       | 18,954                                 |       | $                                  | 52.11      |                                                                                            | 18,954     |                                                                                      | 1,180,319  |   |
|                                      |       |                                   |       |                               |       |                                                                                            |       |                                                                                      |       |
| October 2004  (10/3/04 to 10/30/04)  |       | 20,350                                 |       | $                                  | 54.70      |                                                                                            | 20,350     |                                                                                      | 1,159,969  |   |

 

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(1)   InApril 2000, the Board of Directors authorized up to 4.0 million shares tobe repurchased, with no expiration date.

 

**ITEM 6.****          EXHIBITS**

 
| 3.1    |   | Restated  Certificate of Incorporation of the Company, incorporated herein by reference  to the Company’s Quarterly Report on Form 10-Q for the quarter ended January 26,  2002.                                                                                                                                       |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                             |
| 3.2    |   | Bylaws of  the Company, incorporated herein by reference to the Company’s Annual Report  on Form 10-K for the fiscal year ended August 2, 2003.                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                             |
| 4.1    |   | Certificates  of Designation with respect to Series A Junior Participating Preferred Stock,  Series B Junior Participating Preferred Stock and Series C Junior  Participating Preferred Stock, incorporated herein by reference to the  Company’s Annual Report on Form 10-K for the fiscal year ended July 31,  2004. |
|   |   |                                                                                                                                                                                                                                                                                                                             |
| 4.2    |   | Indenture,  dated as of May 27, 1998, between the Company and The Bank of New York, as  trustee (the “Indenture”), incorporated herein by reference to the Company’s  Annual Report on Form 10-K for the fiscal year ended July 31, 2004.                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                             |
| 4.3    |   | Form of 6.65  percent Senior Note Due 2008, dated May 27, 1998, issued by the Company  pursuant to the Indenture, incorporated herein by reference to the Company’s  Annual Report on Form 10-K for the fiscal year ended July 31, 2004.                                                                               |

 

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| 4.4    |   | Form of  7.125 percent Senior Note Due 2008, dated May 27, 1998, issued by the Company  pursuant to the Indenture, incorporated herein by reference to the Company’s  Annual Report on Form 10-K for the fiscal year ended July 31, 2004.                                                                                                                                                                                       |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.5    |   | Amended and  Restated Rights Agreement, dated as of August 8, 2002, between the  Company and Mellon Investor Services LLC, as Rights Agent, incorporated  herein by reference to the Company’s Annual Report on Form 10-K for the fiscal  year ended August 3, 2002.                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.1*  |   | The Neiman  Marcus Group, Inc. 1987 Stock Incentive Plan, incorporated herein by  reference to the Company’s Annual Report on Form 10-K for the fiscal year  ended August 3, 2002.                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.2*  |   | The Neiman  Marcus Group, Inc. 1997 Incentive Plan, as amended, incorporated herein by  reference to the Company’s Form S-8 dated Mary 28, 2003.                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.3*  |   | Employment  Agreement between the Company and Burton M. Tansky, effective as of August 3,  2003, incorporated herein by reference to the Company’s Quarterly Report on  Form 10-Q for the quarter ended November 1, 2003.                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.4*  |   | Confidentiality,  Non-Competition and Termination Benefits Agreement between the Company and  Phillip L. Maxwell dated November 20, 2002, incorporated herein by  reference to the Company’s Annual Report on Form 10-K for the fiscal year  ended August 3, 2002.                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.5*  |   | Supplemental  Executive Retirement Plan, incorporated herein by reference to the Company’s  Annual Report on Form 10-K for the fiscal year ended August 3,  2002.                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.6*  |   | Description  of the Company’s Executive Life Insurance Plan, incorporated herein by  reference to the Company’s Annual Report on Form 10-K for the fiscal year  ended August 3, 2002.                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.7*  |   | Supplementary  Executive Medical Plan, incorporated herein by reference to the Company’s  Annual Report on Form 10-K for the fiscal year ended August 3, 2002.                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.8*  |   | Key Employee  Deferred Compensation Plan, incorporated herein by reference to the Company’s  Annual Report on Form 10-K for the fiscal year ended August 3, 2002.                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.9*  |   | Deferred  Compensation Plan for Non-Employee Directors, as amended, incorporated herein  by reference to the Company’s Annual Report on Form 10-K for the fiscal year  ended July 31, 2004.                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.10* |   | Confidentiality,  Non-Competition and Termination Benefits Agreement between Bergdorf Goodman,  Inc. and James J. Gold dated May 3, 2004, incorporated herein by reference to  the Company’s Annual Report on Form 10-K for the fiscal year ended July 31,  2004.                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.11* |   | Confidentiality,  Non-Competition and Termination Benefits Agreement between the Company and  Karen W. Katz dated November 20, 2002, incorporated herein by reference  to the Company’s Annual Report on Form 10-K for the fiscal year ended August 3,  2002.                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.12  |   | Credit  Agreement dated as of June 9, 2004 among the Company, the Lenders  parties thereof, Bank of America, N.A., as Syndication Agent, Wachovia Bank,  N.A., Wells Fargo Bank National Association, and BNP Paribas, as  Documentation Agents, and JPMorgan Chase Bank, as Administrative Agent,  incorporated herein by reference to the Company’s Annual Report on Form 10-K  for the fiscal year ended July 31, 2004. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.13  |   | Neiman  Marcus Group Credit Card Master Trust Series 2000-1 Class A Purchase  Agreement, dated July 12, 2000, incorporated herein by reference to the  Company’s Annual Report on Form 10-K for the fiscal year ended July 29,  2000.                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.14  |   | Receivables  Purchase Agreement dated as of July 2, 2000 between Bergdorf Goodman,  Inc. and Neiman Marcus Funding Corporation, incorporated herein by reference  to the Company’s Annual Report on Form 10-K for the fiscal year ended July 29,  2000.                                                                                                                                                                    |

 

24

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| 10.15  |   | Receivables  Purchase Agreement, dated as of March 1, 1995, and amended and restated  as of July 2, 2000 between the Company and Neiman Marcus Funding  Corporation, incorporated herein by reference to the Company’s Annual Report  on Form 10-K for the fiscal year ended July 29, 2000.                                                                                        |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.16  |   | Pooling and  Servicing Agreement, dated as of March 1, 1995, and amended and restated  as of July 2, 2000 between Neiman Marcus Funding Corporation, the  Company, and The Bank of New York, incorporated herein by reference to the  Company’s Annual Report on Form 10-K for the fiscal year ended July 29,  2000.                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.17  |   | Series  2000-1 Supplement, dated as of July 2, 2000, to the Pooling and  Servicing Agreement, dated as of March 1, 1995, and amended and restated  as of July 2, 2000 among Neiman Marcus Funding Corporation, the Company,  and The Bank of New York, incorporated herein by reference to the Company’s  Annual Report on Form 10-K for the fiscal year ended July 29, 2000. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.18  |   | Trustee  Resignation and Agent Appointment Agreement dated as of July 2, 2000 by  and among the Company, Neiman Marcus Funding Corporation, The Chase Manhattan  Bank, and The Bank of New York, incorporated herein by reference to the  Company’s Annual Report on Form 10-K for the fiscal year ended July 29,  2000.                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.19  |   | Amended and  Restated Agreement and Plan of Merger, dated as of July 1, 1999, among  The Neiman Marcus Group, Inc., Harcourt General, Inc., and Spring Merger  Corporation, incorporated herein by reference to the Company’s Definitive Schedule 14A  dated August 10, 1999.                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.20  |   | Amended and Restated  Distribution Agreement, dated as of July 1, 1999, between Harcourt  General, Inc. and The Neiman Marcus Group, Inc., incorporated herein by  reference to the Company’s Definitive Schedule 14A dated August 10,  1999.                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.21  |   | Agreement,  dated as of September 1, 1999, among the Company and certain holders of  the Company’s Class B Common Stock, incorporated herein by reference to the  Company’s Annual Report on Form 10-K for the fiscal year ended July 31,  1999.                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.22* |   | Confidentiality,  Non-Competition and Termination Benefits Agreement between the Company and  Nelson A. Bangs dated May 21, 2003, incorporated herein by reference to the  Company’s Annual Report on Form 10-K for the fiscal year ended August 2,  2003.                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.23* |   | Confidentiality,  Non-Competition and Termination Benefits Agreement between the Company and  James E. Skinner dated November 20, 2002, incorporated herein by  reference to the Company’s Annual Report on Form 10-K for the fiscal year  ended August 3, 2002.                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.24* |   | Confidentiality,  Non-Competition and Termination Benefits Agreement between the Company and  Marita O’Dea dated November 20, 2002, incorporated herein by reference  to the Company’s Annual Report on Form 10-K for the fiscal year ended August 3,  2002.                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.25* |   | Confidentiality,  Non-Competition and Termination Benefits Agreement between the Company and  Brendan L. Hoffman dated January 29, 2003, incorporated herein by  reference to the Company’s Annual Report on Form 10-K for the fiscal year  ended August 3, 2002.                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.26* |   | Description  of Director Compensation, incorporated herein by reference to the Company’s  Quarterly Report on Form 10-Q for the quarter ended October 30,  2004.                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.27* |   | Form of 2002  Purchased Restricted Stock Unit Agreement, incorporated herein by reference  to the Company’s Annual Report on Form 10-K for the fiscal year ended July 31,  2004.                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.28* |   | Form of 2003  Purchased Restricted Stock Unit Agreement, incorporated herein by reference  to the Company’s Annual Report on Form 10-K for the fiscal year ended July 31,  2004.                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.29* |   | Form of 2002  Restricted Stock Unit Agreement, incorporated herein by reference to the  Company’s Annual Report on Form 10-K for the fiscal year ended July 31,  2004.                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.30* |   | Form of 2003  Restricted Stock Unit Agreement, incorporated herein by reference to the  Company’s Annual Report on Form 10-K for the fiscal year ended July 31,  2004.                                                                                                                                                                                                                       |

 

25

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| 10.31* |   | Form of  Non-Qualified Stock Option Agreement, incorporated herein by reference to the  Company’s Annual Report on Form 10-K for the fiscal year ended July 31,  2004.                                                                                               |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                           |
| 10.32* |   | Form of  Regular Restricted Stock Agreement, incorporated herein by reference to the  Company’s Annual Report on Form 10-K for the fiscal year ended July 31,  2004.                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                           |
| 10.33* |   | Form of  Retention Restricted Stock Agreement, incorporated herein by reference to the  Company’s Annual Report on Form 10-K for the fiscal year ended July 31,  2004.                                                                                               |
|   |   |                                                                                                                                                                                                                                                                           |
| 10.34* |   | Form of  Purchased Restricted Stock Agreement, incorporated herein by reference to the  Company’s Annual Report on Form 10-K for the fiscal year ended July 31,  2004.                                                                                               |
|   |   |                                                                                                                                                                                                                                                                           |
| 10.35* |   | Form of  Non-Qualified Stock Option Agreement with incremental vesting, incorporated  herein by reference to the Company’s Annual Report on Form 10-K for the  fiscal year ended July 31, 2004.                                                                      |
|   |   |                                                                                                                                                                                                                                                                           |
| 10.36* |   | Confidentiality,  Non-Competition and Termination Benefits Agreement between the Company and  Steven P. Dennis dated September 9, 2004, incorporated herein by  reference to the Company’s Annual Report on Form 10-K for the fiscal year  ended July 31, 2004. |
|   |   |                                                                                                                                                                                                                                                                           |
| 10.37* |   | Description  of annual incentives set by the Compensation Committee of the Board of  Directors for the 2005 fiscal year, incorporated herein by reference to the  Company’s Current Report on Form 8-K dated September 24, 2004.                                     |
|   |   |                                                                                                                                                                                                                                                                           |
| 10.38* |   | The Neiman  Marcus Group, Inc. Key Employee Bonus Plan, incorporated herein by reference  to the Company’s Current Report on Form 8-K for dated September 24,  2004.                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                           |
| 10.39* |   | Form of  Restricted Stock Unit Agreement, incorporated herein by reference to the  Company’s Quarterly Report on Form 10-Q for the quarter ended October 30,  2004.                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                           |
| 10.40* |   | Form of  Matching Restricted Stock Unit Agreement, incorporated herein by reference to  the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30,  2004.                                                                                         |
|   |   |                                                                                                                                                                                                                                                                           |
| 12.1   |   | Computation  of Ratio of Earnings to Fixed Charges (Unaudited), incorporated herein by  reference to the Company’s Annual Report on Form 10-K for the fiscal year  ended July 31, 2004.                                                                              |
|   |   |                                                                                                                                                                                                                                                                           |
| 14.1   |   | The Neiman  Marcus Group, Inc. Code of Ethics and Conduct, incorporated herein by  reference to the Company’s Annual Report on Form 10-K for the fiscal year  ended July 31, 2004.                                                                                   |
|   |   |                                                                                                                                                                                                                                                                           |
| 14.2   |   | The Neiman  Marcus Group, Inc. Code of Ethics for Financial Professionals, incorporated  herein by reference to the Company’s Annual Report on Form 10-K for the  fiscal year ended August 2, 2003.                                                                  |
|   |   |                                                                                                                                                                                                                                                                           |
| 18.1   |   | Letter  regarding Change in Accounting Principle, incorporated herein by reference to  the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30,  1999.                                                                                          |
|   |   |                                                                                                                                                                                                                                                                           |
| 21.1   |   | Subsidiaries  of the Company, incorporated herein by reference to the Company’s Annual  Report on Form 10-K for the fiscal year ended July 31, 2004.                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                           |
| 23.1   |   | Consent of  Deloitte & Touche LLP, incorporated herein by reference to the amendment  to the Company’s Annual Report on Form 10-K/A for the fiscal year ended July 31,  2004.                                                                                    |
|   |   |                                                                                                                                                                                                                                                                           |
| 31.1   |   | Certification  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002. (1)                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                           |
| 31.2   |   | Certification  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002. (1)                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                           |
| 32     |   | Certifications  of Chief Executive Officer and Chief Financial Officer pursuant to Section 906  of the Sarbanes-Oxley Act of 2002. (1)                                                                                                                                    |

 

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(1)           Filed herewith

*              Management contractor compensatory plan or arrangement.

 

26

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, asamended, the registrant has duly caused this report to be signed on its behalfby the undersigned hereunto duly authorized.

 

 
| THE NEIMAN  MARCUS GROUP, INC. |
|--------------------------------|
| (Registrant)                   |

 

 
| **Signature**         | ** ** | **Title**                      | ** **                    | **Date** |
|-----------------------|------------|--------------------------------|-------------------------------|----------|
|                  |       |                           |                          |     |
| /s/ T. Dale Stapleton |       |                           | Vice President and Controller |     | May 27, 2005 |
| T. Dale Stapleton     |       | and Duly Authorized Officer    |                          |     |
|                  |       | (principal accounting officer) |                          |     |
|                       |            |                                |                               |          |  |

 

27

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