<page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
(Amendment No. 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 30, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 001-15059
Nordstrom, Inc.
______________________________________________________
(Exact name of Registrant as specified in its charter)
Washington 91-0515058
_______________________________ ___________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1617 Sixth Avenue, Seattle, Washington 98101
____________________________________________________
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (206) 628-2111
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
_____ _____
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). YES X NO
_____ _____
Common stock outstanding as of November 16, 2004: 140,076,823 shares of
common stock.
1 of 25
<page>
Explanatory Note
----------------
This Amendment to the Quarterly Report on Form 10-Q for Nordstrom, Inc. (the
"Company") for the fiscal quarter ended October 30, 2004, is being filed to
correct two errors in our previously issued financial statements: the
statements of cash flows presentation of property incentive cash inflows and
the balance sheet classification of leased assets that were previously treated
as sale-leaseback transactions. In addition, we have reclassified balances in
our previously issued financial statements to conform to our current
presentation. The principal reclassification item relates to the balance sheet
and cash flow presentation of our investments in Auction Rate Securities. See
Note 10 in our Notes to Condensed Consolidated Financial Statements for a
discussion of these corrections and reclassifications, and a reconciliation of
amounts previously reported to those shown herein. We have also revised our
discussion in Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations. Information not affected by the
corrections and reclassifications as described in Note 10 remains unchanged
and reflects the disclosures made at the time of the original filing of the
Form 10-Q on December 3, 2004. Our previously reported net earnings, earnings
per share and shareholders' equity are not impacted by these corrections and
reclassifications.
2 of 25
<page>
<table>
<caption>
NORDSTROM, INC. AND SUBSIDIARIES
--------------------------------
INDEX
-----
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
<s> <c>
Condensed Consolidated Statements of Earnings
Quarter and Year to Date ended October 30, 2004
and November 1, 2003 4
Condensed Consolidated Balance Sheets October 30, 2004,
January 31, 2004 and November 1, 2003 (restated) 5
Condensed Consolidated Statements of Cash Flows
Year to Date ended October 30, 2004
and November 1, 2003 (restated) 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 4. Controls and Procedures 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Unregistered Sales of Equity Securities and Use
of Proceeds 22
Item 6. Exhibits 24
SIGNATURES 25
</table>
3 of 25
<page>
<table>
<caption>
NORDSTROM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(amounts in thousands except per share amounts)
(unaudited)
Quarter Ended Year to Date Ended
---------------------- ----------------------
October 30, November 1, October 30, November 1,
2004 2003 2004 2003
---------- ---------- ---------- ----------
<s> <c> <c> <c> <c>
Net sales $1,542,075 $1,409,109 $5,031,045 $4,529,430
Cost of sales and related
buying and occupancy costs (984,908) (911,429) (3,228,732) (2,991,953)
---------- ---------- ---------- ----------
Gross profit 557,167 497,680 1,802,313 1,537,477
Selling, general and
administrative expenses (465,769) (439,006) (1,454,736) (1,351,628)
---------- ---------- ---------- ----------
Operating income 91,398 58,674 347,577 185,849
Interest expense, net (13,485) (26,681) (64,260) (73,043)
Service charge income
and other, net 45,000 42,576 127,489 114,289
---------- ---------- ---------- ----------
Earnings before income taxes 122,913 74,569 410,806 227,095
Income tax expense (45,085) (29,100) (157,336) (88,600)
---------- ---------- ---------- ----------
Net earnings $ 77,828 $ 45,469 $ 253,470 $ 138,495
========== ========== ========== ==========
Basic earnings per share $ 0.55 $ 0.33 $ 1.81 $ 1.02
========== ========== ========== ==========
Diluted earnings per share $ 0.54 $ 0.33 $ 1.77 $ 1.01
========== ========== ========== ==========
Basic shares 140,698 136,304 140,181 135,907
========== ========== ========== ==========
Diluted shares 143,149 138,103 142,868 136,659
========== ========== ========== ==========
Cash dividends paid per share
of common stock outstanding $ 0.13 $ 0.10 $ 0.35 $ 0.30
========== ========== ========== ==========
</table>
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
4 of 25
<page>
<table>
<caption>
NORDSTROM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(unaudited)
October 30, January 31, November 1,
2004 2004 2003
---------- ---------- ----------
<s> <c> <c> <c>
ASSETS
Current Assets:
Cash and cash equivalents $ 240,407 $ 340,281 $ 128,666
Short-term investments 95,000 176,000 55,000
Accounts receivable, net 635,409 666,811 645,182
Retained interest in accounts receivable 382,325 272,294 227,340
Merchandise inventories 1,193,144 901,623 1,189,996
Current deferred tax assets 134,896 121,681 111,965
Prepaid expenses 49,439 46,153 46,565
---------- ---------- ----------
Total current assets 2,730,620 2,524,843 2,404,714
Land, buildings and equipment (net of
accumulated depreciation of $2,271,531,
$2,121,158 and $2,061,619 1,773,258 1,807,778 1,820,921
Goodwill, net 51,714 51,714 51,714
Tradename, net 84,000 84,000 84,000
Other assets 111,406 100,898 100,025
---------- ---------- ----------
TOTAL ASSETS $4,750,998 $4,569,233 $4,461,374
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 672,847 $ 458,809 $ 627,469
Accrued salaries, wages
and related benefits 252,022 276,007 211,584
Other accrued expenses 305,216 314,753 267,555
Income taxes payable 52,877 66,157 71,105
Current portion of long-term debt 103,021 6,833 6,198
---------- ---------- ----------
Total current liabilities 1,385,983 1,122,559 1,183,911
Long-term debt 932,384 1,227,410 1,225,403
Deferred property incentives, net 393,807 407,856 407,040
Other liabilities 168,426 177,399 143,726
Shareholders' Equity:
Common stock, no par:
500,000 shares authorized;
139,933, 138,377 and 136,971 shares
issued and outstanding 529,284 424,645 384,193
Unearned stock compensation (373) (597) (671)
Retained earnings 1,330,511 1,201,093 1,111,864
Accumulated other comprehensive
earnings 10,976 8,868 5,908
---------- ---------- ----------
Total shareholders' equity 1,870,398 1,634,009 1,501,294
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $4,750,998 $4,569,233 $4,461,374
========== ========== ==========
</table>
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
5 of 25
<page>
<table>
<caption>
NORDSTROM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
Year to Date Ended
------------------------
October 30, November 1,
2004 2003
---------- ----------
As Restated, see Note 10
-------------------------
<s> <c> <c>
OPERATING ACTIVITIES:
Net earnings $253,470 $138,495
Adjustments to reconcile net earnings to net
cash from operating activities:
Depreciation and amortization 194,593 185,163
Amortization of deferred property incentives
and other, net (23,054) (20,316)
Stock-based compensation expense 4,663 9,548
Deferred income taxes, net (5,012) (4,629)
Tax benefit on stock option exercises 19,906 2,664
Provision for bad debt expense 18,798 21,336
Change in operating assets and liabilities:
Accounts receivable, net 13,153 (3,467)
Retained interest in accounts receivable (110,569) (100,814)
Merchandise inventories (261,610) (234,246)
Prepaid expenses (1,116) (4,003)
Other assets (11,118) (6,437)
Accounts payable 183,369 238,910
Accrued salaries, wages and related benefits (26,126) (14,440)
Other accrued expenses (9,558) (8,228)
Income taxes payable (42,561) 9,935
Property incentives 10,806 37,157
Other liabilities 17,844 8,913
---------- ----------
Net cash provided by operating activities 225,878 255,541
---------- ----------
INVESTING ACTIVITIES:
Capital expenditures (164,681) (204,536)
Proceeds from sale of assets 5,473 -
Sales of short-term investments 2,999,875 1,268,318
Purchases of short-term investments (2,918,875) (1,202,052)
Other, net (959) (1,037)
---------- ----------
Net cash used in investing activities (79,167) (139,307)
---------- ----------
FINANCING ACTIVITIES:
Principal payments on long-term debt (202,016) (109,148)
Proceeds from sale of interest rate swap - 2,341
(Decrease)increase in cash book overdrafts (2,958) 10,284
Proceeds from exercise of stock options 69,549 16,577
Proceeds from employee stock purchases 12,892 8,861
Cash dividends paid (49,091) (40,736)
Repurchase of common stock (74,961) -
---------- ----------
Net cash used in financing activities (246,585) (111,821)
---------- ----------
Net decrease in cash and cash equivalents (99,874) 4,413
Cash and cash equivalents at beginning of period 340,281 124,253
---------- ----------
Cash and cash equivalents at end of period $240,407 $128,666
========== ==========
</table>
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
6 of 25
<page>
NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except per share amounts)
(unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
- ---------------------
The accompanying condensed consolidated financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements contained in
our 2003 Amended Annual Report filed with the Securities and Exchange
Commission on April 8, 2005. The same accounting policies are followed for
preparing quarterly and annual financial data. All adjustments necessary for
the fair presentation of the results of operations, financial position and
cash flows have been included and are of a normal, recurring nature.
Our business, like that of other retailers, is subject to seasonal
fluctuations. Our Anniversary sale in July and the holidays in December
typically result in higher sales in the second and fourth quarters of our
fiscal years. Accordingly, results for any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal year.
Critical Accounting Policies
- ----------------------------
The preparation of our financial statements requires that we make estimates
and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and disclosure of contingent assets and liabilities.
We regularly evaluate our estimates including those related to doubtful
accounts, inventory valuation, intangible assets, income taxes, self-insurance
liabilities, post-retirement benefits, sales return accruals, contingent
liabilities and litigation. We base our estimates on historical experience
and other assumptions that we believe to be reasonable under the
circumstances. Actual results may differ from these estimates. Our
accounting policies and methodologies in the third quarter of 2004 are
consistent with those discussed in our 2003 Amended Annual Report.
In October 2004, we completed a review of our current and deferred tax
accounts, which resulted in a lower effective tax rate. This change increased
net income by approximately $2,900 for the quarter and year to date periods
ended October 30, 2004.
Nordstrom fsb, our wholly-owned bank subsidiary, offers a co-branded VISA
credit card program to its customers. The balances due from the VISA
cardholders are transferred to a third party trust, Nordstrom Credit Card
Master Note Trust (the "Trust"). In 2002, the Trust issued $200,000 of notes
to third parties; those notes are due in 2007 and are secured by a portion of
the Trust's assets. We do not record the notes that the Trust sold to third
parties or the pro-rata share of the Trust's assets on our financial
statements. The remaining interest in the Trust is held by our wholly-owned
subsidiaries. The remaining interest is held in certificated form; it is
recorded as "Retained interest in accounts receivable" on our accompanying
condensed consolidated balance sheets and accounted for as investments in debt
securities under Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities".
7 of 25
<page>
NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except per share amounts)
(unaudited)
Note 1 - Summary of Significant Accounting Policies (Cont.)
In the third quarter of 2004, the U.S. Department of the Treasury Office of
Thrift Supervision, which regulates Nordstrom fsb, directed Nordstrom, Inc. to
change our accounting treatment for a portion of the remaining interest in the
Trust. We asked the Securities and Exchange Commission ("SEC") staff to
confirm that our existing accounting treatment for the remaining interest in
the Trust is consistent with their interpretation of accounting principles
generally accepted in the United States ("U.S. GAAP"). In October 2004, the
SEC staff confirmed that our existing accounting treatment and financial
statement presentations comply with U.S. GAAP. Therefore, we plan to continue
to follow our existing accounting treatment for the remaining certificated
interest in the Trust. The SEC staff also suggested that we voluntarily
expand our quarterly disclosures related to the certificated interests; please
see Note 5 for this additional disclosure.
Reclassifications
- ----------------
Certain reclassifications of previously reported balances have been made to
conform with our current presentation.
See Note 10 for a discussion of the significant reclassifications and a
reconciliation of amounts previously reported to those shown herein.
Stock Compensation
- ------------------
We apply Accounting Principles Board No. 25, "Accounting for Stock Issued to
Employees," in measuring compensation costs under our stock-based compensation
programs, which is described more fully in our 2003 Annual Report.
If we had elected to recognize compensation cost based on the fair value of
the options and shares at grant date, net earnings and earnings per share
would have been as follows:
<table>
<caption>
Quarter Ended Year to Date Ended
---------------------- ----------------------
October 30, November 1, October 30, November 1,
2004 2003 2004 2003
---------- ---------- ---------- ----------
<s> <c> <c> <c> <c>
Net earnings, as reported $77,828 $45,469 $253,470 $138,495
Add: stock-based compensation
(income)/expense included in
reported net earnings, net
of tax (500) 4,717 2,844 5,824
Deduct: stock-based
compensation expense
determined under fair value,
net of tax (4,160) (7,492) (16,460) (18,219)
---------- ---------- ---------- ----------
Pro forma net earnings $73,168 $42,694 $239,854 $126,100
========== ========== ========== ==========
Earnings per share:
Basic - as reported $0.55 $0.33 $1.81 $1.02
Diluted - as reported $0.54 $0.33 $1.77 $1.01
Basic - pro forma $0.52 $0.31 $1.71 $0.93
Diluted - pro forma $0.51 $0.31 $1.68 $0.93
</table>
8 of 25
<page>
NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except per share amounts)
(unaudited)
Note 2 - Postretirement Benefits
The expense components of our Supplemental Executive Retirement Plan, which
provides retirement benefits to certain officers and select employees, are as
follows:
<table>
<caption>
Quarter Ended Year to Date Ended
------------------------ ------------------------
October 30, November 1, October 30, November 1,
2004 2003 2004 2003
----------- ----------- ----------- -----------
<s> <c> <c> <c> <c>
Service cost $372 $205 $1,116 $615
Interest cost 991 855 2,973 2,565
Amortization of net loss 386 173 1,158 564
Amortization of prior
service cost 240 188 720 519
----------- ----------- ----------- -----------
Total expense $1,989 $1,421 $5,967 $4,263
=========== =========== =========== ===========
</table>
Note 3 - Earnings Per Share
<table>
<caption>
Quarter Ended Year to Date Ended
------------------------ ------------------------
October 30, November 1, October 30, November 1,
2004 2003 2004 2003
----------- ----------- ----------- -----------
<s> <c> <c> <c> <c>
Net earnings $77,828 $45,469 $253,470 $138,495
=========== =========== =========== ===========
Basic shares 140,698 136,304 140,181 135,907
Dilutive effect of
stock options and
performance share units 2,451 1,799 2,687 752
----------- ----------- ----------- -----------
Diluted shares 143,149 138,103 142,868 136,659
=========== =========== =========== ===========
Basic earnings per share $0.55 $0.33 $1.81 $1.02
Diluted earnings per share $0.54 $0.33 $1.77 $1.01
Antidilutive stock options 10 2,974 10 7,578
</table>
Note 4 - Accounts Receivable
The components of accounts receivable are as follows:
<table>
<caption>
October 30, January 31, November 1,
2004 2004 2003
----------- ----------- -----------
<s> <c> <c> <c>
Trade receivables:
Unrestricted $35,988 $25,228 $32,669
Restricted 544,976 589,992 567,396
Allowance for doubtful accounts (19,534) (20,320) (20,746)
----------- ----------- -----------
Trade receivables, net 561,430 594,900 579,319
Other 73,979 71,911 65,863
----------- ----------- -----------
Accounts receivable, net $635,409 $666,811 $645,182
=========== =========== ===========
</table>
9 of 25
<page>
NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except per share amounts)
(unaudited)
Note 4 - Accounts Receivable (Cont.)
The restricted trade receivables relate to our proprietary credit card and
back the $300,000 Class A notes and the $150,000 variable funding note renewed
in May 2004. Other accounts receivable consist primarily of credit card
receivables due from third party financial institutions, vendor receivables
and cosmetic rebate receivables, which are believed to be fully realizable as
they are collected soon after they are earned.
Note 5 - Retained Interest in Accounts Receivable
Our investment in master trust certificates and off-balance sheet financing
are described in Note 9 of our 2003 Annual Report. In 2004, the Trust issued
$250,000 of Class A & B notes ("2004 Class A & B Notes") to Nordstrom Credit,
Inc., our wholly-owned subsidiary. The following table summarizes our VISA
credit card activities and the estimated fair values of our retained interests
as well as the assumptions used:
<table>
<caption>
------------------------
October 30, January 31,
2004 2004
----------- -----------
<s> <c> <c>
Total face value of Nordstrom VISA credit card
principal receivables $571,407 $465,198
=========== ===========
Securities issued at fair value:
Amounts not recorded on balance sheet (sold to
third parties):
2002 Class A & B Notes $200,000 $200,000
----------- -----------
Amounts recorded on balance sheet:
Retained interest 132,325 272,294
2004 Class A & B Notes 250,000 -
----------- -----------
Total retained interest in accounts receivable 382,325 272,294
----------- -----------
Total fair value of securities issued by the Trust $582,325 $472,294
=========== ===========
Assumptions used to estimate the fair value of
the retained interest:
Weighted average remaining life (in months) 2.3 2.5
Average credit losses 5.4% 5.5%
Average gross yield 18.2% 17.8%
Weighted average coupon on issued securities 2.6% 1.4%
Average payment rates 22.0% 23.4%
Discount rates of retained interests 8.1%-14.3% 6.8%-12.6%
</table>
10 of 25
<page>
NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except per share amounts)
(unaudited)
Note 5 - Retained Interest in Accounts Receivable (Cont.)
The following table summarizes the income earned by the retained interest that
is included in service charge income and other, net on the condensed
consolidated statements of earnings:
<table>
<caption>
Quarter Ended Year to Date Ended
------------------------ ------------------------
October 30, November 1, October 30, November 1,
2004 2003 2004 2003
----------- ----------- ----------- -----------
<s> <c> <c> <c> <c>
Income earned by retained
interest $16,236 $11,515 $48,376 $29,133
=========== =========== =========== ===========
</table>
Note 6 - Debt
Year to date we have retired $196,770 of our 8.95% senior notes and $1,473 of
our 6.7% medium-term notes for a total cash payment of $220,106. After
considering non-cash items related to these debt retirements, our net expense
for the three quarters ended October 30, 2004 was $20,862.
In May 2004, we replaced our existing $300,000 unsecured line of credit with a
$350,000 unsecured line of credit, which is available as liquidity support for
our commercial paper program. Under the terms of the agreement, we pay a
variable rate of interest based on LIBOR plus a margin of 0.31%. The variable
rate of interest increases to LIBOR plus a margin of 0.41% if more than
$175,000 is outstanding on the facility. The line of credit agreement expires
in three years and contains restrictive covenants, which include maintaining a
leverage ratio. We also pay a commitment fee for the line based on our debt
rating.
Also in May 2004, we renewed our variable funding note backed by Nordstrom
private label receivables and reduced the capacity by $50,000 to $150,000.
This note is renewed annually and interest is paid based on the actual cost of
commercial paper plus specified fees. We also pay a commitment fee for the
note based on the amount of the facility.
We did not make any borrowings under our unsecured line of credit or our
variable funding note backed by Nordstrom private label receivables during
2004.
We have an interest rate swap outstanding recorded in other liabilities. Our
swap has a $250,000 notional amount, expires in 2009 and is designated as a
fully effective fair value hedge. Under the agreement, we receive a fixed
rate of 5.63% and pay a variable rate based on LIBOR plus a margin of 2.3% set
at six-month intervals (5.095% at October 30, 2004.) The fair value of our
interest rate swap is as follows:
<table>
<caption>
October 30, January 31, November 1,
2004 2004 2003
----------- ----------- -----------
<s> <c> <c> <c>
Interest rate swap fair value ($5,365) ($8,091) ($10,884)
</table>
11 of 25
<page>
NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except per share amounts)
(unaudited)
Note 7 - Comprehensive Net Earnings
<table>
<caption>
Year to Date Ended
------------------------
October 30, November 1,
2004 2003
----------- -----------
<s> <c> <c>
Net earnings $253,470 $138,495
Foreign currency translation adjustment 2,436 2,351
Securitization adjustment, net of tax of $210
and ($1,268) (328) 1,983
SERP adjustment, net of tax of $0 and $720 - (1,126)
----------- -----------
Comprehensive net earnings $255,578 $141,703
=========== ===========
</table>
Note 8 - Segment Reporting
The following tables set forth the information for our reportable segments and
a reconciliation to the consolidated totals:
<table>
<caption>
Quarter ended Retail Credit Catalog/ Corporate
October 30, 2004 Stores Operations Internet and Other Eliminations Total
- ---------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c>
Net sales $1,453,528 $- $88,547 $- $- $1,542,075
Service charge income - 40,065 - - - 40,065
Intersegment revenues 8,440 7,323 - - (15,763) -
Interest expense, net (61) (5,833) 26 (7,617) - (13,485)
Earnings before taxes 158,592 8,538 7,452 (51,669) - 122,913
Net earnings (loss) 100,540 5,406 4,669 (32,787) - 77,828
Quarter ended Retail Credit Catalog/ Corporate
November 1, 2003 Stores Operations Internet and Other Eliminations Total
- ---------------------------------------------------------------------------------------------------
Net sales $1,341,041 $- $68,068 $- $- $1,409,109
Service charge income - 36,824 - - - 36,824
Intersegment revenues 6,245 6,942 - - (13,187) -
Interest expense, net (390) (5,549) 62 (20,804) - (26,681)
Earnings before taxes 121,136 3,853 (482) (49,938) - 74,569
Net earnings (loss) 73,864 2,350 (295) (30,450) - 45,469
Year to date ended Retail Credit Catalog/ Corporate
October 30, 2004 Stores Operations Internet and Other Eliminations Total
- ---------------------------------------------------------------------------------------------------
Net sales $4,776,943 $- $254,102 $- $- $5,031,045
Service charge income - 119,275 - - - 119,275
Intersegment revenues 22,200 25,974 - - (48,174) -
Interest expense, net (324) (17,058) 113 (46,991) - (64,260)
Earnings before taxes 547,308 28,498 17,689 (182,689) - 410,806
Net earnings (loss) 337,693 17,583 10,914 (112,720) - 253,470
Assets 2,908,449 961,738 127,715 753,096 - 4,750,998
Year to date ended Retail Credit Catalog/ Corporate
November 1, 2003 Stores Operations Internet and Other Eliminations Total
- ---------------------------------------------------------------------------------------------------
Net sales $4,323,933 $- $205,497 $- $- $4,529,430
Service charge income - 105,359 - - - 105,359
Intersegment revenues 20,766 24,180 - - (44,946) -
Interest expense, net (508) (16,364) 74 (56,245) - (73,043)
Earnings before taxes 379,128 15,559 (1,967) (165,625) - 227,095
Net earnings (loss) 231,213 9,489 (1,200) (101,007) - 138,495
Assets 2,971,931 810,184 103,433 575,826 - 4,461,374
</table>
12 of 25
<page>
NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except per share amounts)
(unaudited)
Note 8 - Segment Reporting (Cont.)
As of October 30, 2004, January 31, 2004, and November 1, 2003, Retail Stores
assets included $35,998 of goodwill and $84,000 of tradename, and
Catalog/Internet assets included $15,716 of goodwill. Goodwill and tradename
included in all segments totaled $135,714.
Note 9 - Litigation
We are involved in routine claims, proceedings, and litigation arising from
the normal course of our business. We do not believe any such claim,
proceeding or litigation, either alone or in aggregate, will have a material
impact on our results of operations, financial position, or liquidity.
Note 10 - Restatement and Reclassifications
Subsequent to issuance of our 2004 quarterly financial statements, we have
corrected two errors in our previously issued financial statements: the
statements of cash flows presentation of property incentive cash inflows and
the balance sheet classification of leased assets that were previously treated
as sale-leaseback transactions. Our previously reported net earnings, earnings
per share and shareholders' equity are not impacted by these corrections.
Statements of cash flows presentation of property incentives cash inflows: On
February 7, 2005, the Chief Accountant of the U.S. Securities and Exchange
Commission ("SEC") released a letter expressing the SEC's views on certain
lease accounting matters and their application under generally accepted
accounting principles in the United States of America. Following the issuance
of this letter, we reviewed our lease accounting policies and determined that
our classification of property incentives in our consolidated statements of
cash flows was not in accordance with GAAP.
We historically recognized property incentives in our consolidated statements
of cash flows as a separate line item in investing activities. After a review
of our lease accounting policies, we determined that property incentives
should be classified in operating activities and, accordingly, have restated
our statements of cash flows.
Leased assets previously treated as sale-leaseback transactions: From 1998 to
2000, we partnered with developers to build five new full-line stores. We
controlled the construction phase of the new stores' development and we
received payments from the developers to offset a portion of the related
capital expenditures. In our previously issued financial statements, we
treated those stores as being sold to and leased back from the developer. As
we analyzed our lease accounting in connection with the SEC Staff's letter
discussed above, we determined that sale-leaseback accounting treatment was
not correct because we have ongoing involvement at the stores. We have
restated our previously issued balance sheets by classifying the stores'
assets in land, buildings and equipment, the developer payment in deferred
property incentives, and eliminating the net of those two balances, which was
previously recorded in other assets and prepaid expenses. The impact to
earnings is not material.
Reclassifications
We have reclassified balances in our previously issued financial statements to
conform to our current presentation. The principal reclassification item is as
follows:
13 of 25
<page>
NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except per share amounts)
(unaudited)
Auction rate securities: In order to maximize our earnings on available
capital, we invest in high-quality bonds known as Auction Rate Securities
("ARS"), which we had classified as cash equivalents in previously issued
financial statements. The interest rates for ARS that we invest in are set for
short periods, ranging from seven to 35 days, via auction. At the end of each
interest period, we choose to rollover our holdings or redeem the investment
for cash. A `market maker' facilitates the redemption of the ARS and the
underlying issuers are not required to redeem the investments within 90 days
of our purchase of the investments. We have reclassified $95,000, $176,000 and
$55,000 at the end of October 30, 2004, January 31, 2004 and November 1, 2003
to short term investments and we have reflected the purchases and sales of
these securities in our statements of cash flows for 2003 through 2004.
In addition to this reclassification, we have revised the grouping of some
liabilities within the current liabilities section of the 2003 and 2004
balance sheets.
The following table summarizes the impacts of the restatements and
reclassifications on the previously issued financial statements:
<table>
<caption>
Year to Date Ended October 30, 2004
------------------------------------------------
As As Restated
Originally Restatement Reclass and
Reported Adjustments Adjustments Reclassified
---------- ----------- ----------- ------------
<s> <c> <c> <c> <c>
Consolidated Statement of
Cash Flows
Net cash provided by
operating activities $ 215,072 $ 10,806 $ - $ 225,878
Net cash used in investing
activities (149,361) (10,806) 81,000 (79,167)
---------- ---------- ---------- -----------
Consolidated Balance Sheet October 30, 2004
------------------------------------------------
Cash and cash equivalents $ 335,407 $ - $ (95,000) $ 240,407
Short-term investments - - 95,000 95,000
Prepaid expenses 53,231 (3,792) - 49,439
Total current assets 2,734,412 (3,792) - 2,730,620
Land, buildings and equipment
net 1,692,202 81,056 - 1,773,258
Other assets 159,631 (48,225) - 111,406
Total assets 4,721,959 29,039 - 4,750,998
Accounts payable 772,559 - (99,712) 672,847
Other accrued expenses 205,504 - 99,712 305,216
Total current liabilities 1,385,983 - - 1,385,983
Deferred property incentives,
net 364,768 29,039 - 393,807
Total liabilities and
shareholders' equity 4,721,959 29,039 - 4,750,998
---------- ---------- ---------- -----------
</table>
14 of 25
<page>
NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except per share amounts)
(unaudited)
Note 10 - Restatement and Reclassifications (cont.)
<table>
<caption>
Year to Date Ended November 1, 2003
------------------------------------------------
As As Restated
Originally Restatement Reclass and
Reported Adjustments Adjustments Reclassified
---------- ----------- ----------- ------------
<s> <c> <c> <c> <c>
Consolidated Statement of
Cash Flows
Net cash provided by
operating activities $ 218,384 $ 37,157 $ - $ 255,541
Net cash used in investing
activities (168,416) (37,157) 66,266 (139,307)
---------- ---------- ---------- -----------
Consolidated Balance Sheet November 1, 2003
------------------------------------------------
Cash and cash equivalents $ 183,666 $ - $ (55,000) $ 128,666
Short-term investments - - 55,000 55,000
Prepaid expenses 50,083 (3,518) - 46,565
Total current assets 2,408,232 (3,518) - 2,404,714
Land, buildings and equipment
net 1,736,617 84,304 - 1,820,921
Other assets 149,778 (49,753) - 100,025
Total assets 4,430,341 31,033 - 4,461,374
Accounts payable 716,380 - (88,911) 627,469
Other accrued expenses 178,644 - 88,911 267,555
Total current liabilities 1,183,911 - - 1,183,911
Deferred property incentives,
net 376,007 31,033 - 407,040
Total liabilities and
shareholders' equity 4,430,341 31,033 - 4,461,374
---------- ---------- ---------- -----------
</table>
15 of 25
<page>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Management's
Discussion and Analysis section of our 2003 Amended Annual Report. All dollar
amounts are in millions except per share amounts.
RESULTS OF OPERATIONS
- ---------------------
Overview
- --------
Earnings for the third quarter of 2004 increased 71% to $77.8 or $0.54 per
diluted share from $45.5 or $0.33 per diluted share for the same period in
2003. For the year to date period ended October 30, 2004, earnings increased
83% to $253.5 or $1.77 per diluted share from $138.5 or $1.01 per diluted
share for the same period in 2003. Our results improved in the quarter and
year to date periods due to strong sales momentum combined with gross profit
and selling, general and administrative expense improvement.
Sales
- -----
Total sales increased 9.4% for the quarter and 11.5% year to date on a 4-5-4
comparable basis due to substantial same-store sales increases. Same-store
sales on a 4-5-4 comparable basis increased 8.1% for the quarter and 9.1% year
to date. The sales growth for the quarter and year to date is a result of our
continuous improvement in merchandising efforts, supported by our enhanced
information systems. Our merchandise offering continues to meet customers'
preferences, which drove full-price sales. The year to date increase is also
attributable to the improved overall retail environment, especially in the
first quarter. See our GAAP sales reconciliation on page 17.
All of our geographic regions and major merchandise divisions reported same-
store sales increases in the third quarter and year to date.
Gross Profit
- ------------
<table>
<caption>
Third Quarter Year to Date
------------------- -------------------
2004 2003 2004 2003
-------- -------- -------- --------
<s> <c> <c> <c> <c>
Gross profit as a percent of sales 36.1% 35.3% 35.8% 33.9%
</table>
Gross profit as a percentage of sales improved 80 basis points for the quarter
and 190 basis points for the year to date period ended October 30, 2004. The
quarter to date performance was primarily due to buying and occupancy expense
leverage resulting from stronger than expected sales. The year to date
performance was primarily due to lower markdowns resulting from our ongoing
improvement in managing our merchandise inventory and increased leverage on
our buying and occupancy expenses.
Selling, General and Administrative Expense
- -------------------------------------------
<table>
<caption>
Third Quarter Year to Date
------------------- -------------------
2004 2003 2004 2003
-------- -------- -------- --------
<s> <c> <c> <c> <c>
Selling, general and
administrative expense
as a percent of sales 30.2% 31.1% 28.9% 29.8%
</table>
16 of 25
<page>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT.)
Selling, general and administrative expense as a percentage of sales improved
90 basis points for the quarter and for the year to date period ended October
30, 2004. Our existing support functions have been able to manage our same-
store sales growth. As a result, the significant year over year sales
increases in relation to relatively flat SG&A costs on a same-store basis have
resulted in significant improvements in SG&A as a percentage of sales. Costs
associated with new stores, selling, and incentive compensation have increased
in 2004 in line with our sales increases and our improved operating
performance.
Interest Expense
- ----------------
Interest expense, net decreased by $13.2 to $13.5 for the quarter ended
October 30, 2004 compared to the same period in 2003. The prior year expense
includes debt prepayment costs of $7.9. Also, our long-term borrowings have
been reduced by 16 percent in the past 12 months, leading to lower borrowing
costs.
Interest expense, net decreased by $8.8 to $64.3 for the year to date period
ended October 30, 2004. We incurred debt prepayment costs of $20.9 and $14.3
in 2004 and 2003, respectively. The decrease in our long-term borrowings in
2004 as compared to 2003 resulted in the overall interest expense reduction.
Service Charge Income and Other, net
- ------------------------------------
Service charge income and other, net increased by $2.4 for the quarter and
$13.2 for the year to date periods ended October 30, 2004. The increase is
primarily due to growth in our Nordstrom fsb VISA credit card transaction
volume and finance charges.
Seasonality
- ------------
Our business, like that of other retailers, is subject to seasonal
fluctuations. Our Anniversary sale in July and the holidays in December
typically result in higher sales in the second and fourth quarters of our
fiscal years. Accordingly, results for any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal year.
GAAP Sales Reconciliation
- -------------------------
We converted to a 4-5-4 Retail Calendar at the beginning of 2003. This change
in our fiscal calendar has resulted in one less day of sales being included in
our year to date 2004 results versus the same period in the prior year. Sales
performance numbers included in this document have been calculated on a
comparative 4-5-4 basis. We believe that adjusting for the difference in days
provides a more comparable basis from which to evaluate sales performance.
The following reconciliation bridges the reported GAAP sales to the 4-5-4
comparable sales.
<table>
<caption>
Dollar % Change % Change
Sales reconciliation ($M) YTD 2003 YTD 2004 Increase Total Sales Comp Sales
-------- -------- ---------- ----------- ----------
<s> <c> <c> <c> <c> <c>
Number of days GAAP 274 273
GAAP sales $4,529.4 $5,031.0 $501.6 11.1% N/A
Less Feb. 1, 2003 sales ($18.2) --
-------- --------
Reported 4-5-4 sales $4,511.2 $5,031.0 $519.8 11.5% 9.1%
======== ========
4-5-4 adjusted days 273 273
</table>
17 of 25
<page>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT.)
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Overall cash decreased by $180.9 in 2004 as compared to $61.9 in 2003,
primarily due to additional debt prepayments and repurchases of our common
stock.
Cash Flow from Operations
- -------------------------
Cash flow provided by operating activities decreased by $29.7 to $225.9 in
2004. Higher net earnings were offset by our merchandise purchase and payment
flow changes in 2004 as compared to 2003, the timing of income tax payments
and decreased property incentive receipts. Toward the end of 2003 and into
2004, we have achieved a more even flow of merchandise purchases in relation
to our sales trends. Our 2004 inventory turns have improved over the prior
year; the payables leverage we achieved in 2004 is consistent with our
merchandise purchase plan. Income tax payments have increased in 2004 as a
result of our earnings growth. Deferred property incentive receipts have
decreased as a result of fewer store openings.
Cash Flow Used in Investing
- ---------------------------
Net cash used in investing activities decreased in 2004 as compared to 2003
due to the reduction in our short-term investments, which was used to
repurchase outstanding debt.
Year to date, we opened one full-line store in Charlotte, North Carolina. In
addition, we opened one full-line store in Miami, Florida in November 2004.
During the first three quarters of 2003, we opened three full-line stores and
two Nordstrom Rack stores; in the last quarter of 2003, we opened one full-
line store.
We plan to spend approximately $850.0 to $875.0, net of developer
reimbursements, on capital projects during the next three fiscal years. We
plan to use approximately 35% of this investment to build new stores, 30% on
remodels and 15% toward information technology. The remaining 20% is planned
for maintenance and other miscellaneous spending.
Cash Flow Used in Financing
- ---------------------------
For the year to date period ended October 30, 2004, cash used in financing
activities increased primarily due to our debt retirements and common stock
repurchases, partially offset by an increase in the cash received from
employee stock option exercises.
Year to date we have retired $196.8 of our 8.95% senior notes and $1.5 of our
6.7% medium-term notes for a total cash payment of $220.1. After considering
non-cash items related to these debt retirements, our net expense for the
three quarters ended October 30, 2004 was $20.9.
In May 2004, we replaced our existing $300.0 unsecured line of credit with a
$350.0 unsecured line of credit, which is available as liquidity support for
our commercial paper program. Under the terms of the agreement, we pay a
variable rate of interest based on LIBOR plus a margin of 0.31%. The variable
rate of interest increases to LIBOR plus a margin of 0.41% if more than $175.0
is outstanding on the facility. The line of credit agreement expires in three
years and contains restrictive covenants, which include maintaining a leverage
ratio. We also pay a commitment fee for the line based on our debt rating.
18 of 25
<page>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT.)
Also in May 2004, we renewed our variable funding note backed by Nordstrom
private label receivables and reduced the capacity by $50.0 to $150.0. This
note is renewed annually and interest is paid based on the actual cost of
commercial paper plus specified fees. We also pay a commitment fee for the
note based on the amount of the facility.
We did not make any borrowings under our unsecured line of credit or our
variable funding note backed by Nordstrom private label receivables during
2004.
In August 2004, the Board of Directors authorized $300.0 of share repurchases.
This authorization extends for three years to August 2007, although we expect
the shares to be acquired through open market transactions during the next 12
months. This replaced the previous remaining share repurchase authority of
$82.4. The actual number and timing of share repurchases will be subject to
market conditions and applicable SEC rules. Year to date, we have purchased
1,925,700 shares for $75.0.
Liquidity
- ---------
We maintain a level of liquidity to allow us to cover our seasonal cash needs
and rely on short-term borrowings only as needed. We believe that our
operating cash flows, existing cash and available credit facilities are
sufficient to finance our cash requirements for the next 12 months. We plan
to pay the remaining $96.5 of our 6.7% medium-term notes due in July 2005 with
existing cash and cash from operations.
Over the long term, we manage our cash and capital structure to strengthen our
financial position and maintain flexibility for future strategic initiatives.
We continuously assess our debt and leverage levels, capital expenditure
requirements, principal debt payments, dividend payouts, potential share
repurchases, and future investments or acquisitions. We believe our operating
cash flows, existing cash, and available credit facilities, as well as any
potential future borrowing facilities will be sufficient to fund these
scheduled future payments and potential long term initiatives.
CRITICAL ACCOUNTING POLICIES
- ----------------------------
The preparation of our financial statements requires that we make estimates
and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and disclosure of contingent assets and liabilities.
We regularly evaluate our estimates, including those related to doubtful
accounts, inventory valuation, intangible assets, income taxes, self-insurance
liabilities, post-retirement benefits, sales return accruals, contingent
liabilities and litigation. We base our estimates on historical experience
and other assumptions that we believe to be reasonable under the
circumstances. Actual results may differ from these estimates. Our
accounting policies and methodologies in the third quarter of 2004 are
consistent with those discussed in our 2003 Amended Annual Report and our
second quarter Form 10-Q.
In October 2004, we completed a review of our current and deferred tax
accounts, which resulted in a lower effective tax rate. This change increased
net income by approximately $2.9 for the quarter and year to date periods
ended October 30, 2004.
19 of 25
<page>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT.)
Nordstrom fsb, our wholly-owned bank subsidiary, offers a co-branded VISA
credit card program to its customers. The balances due from the VISA
cardholders are transferred to a third party trust, Nordstrom Credit Card
Master Note Trust (the "Trust"). In 2002, the Trust issued $200.0 of notes to
third parties; those notes are due in 2007 and are secured by a portion of the
Trust's assets. We do not record the notes that the Trust sold to third
parties or the pro-rata share of the Trust's assets on our financial
statements. The remaining interest in the Trust is held by our wholly-owned
subsidiaries. The remaining interest is held in certificated form; it is
recorded as "Retained interest in accounts receivable" on our accompanying
condensed consolidated balance sheets and accounted for as investments in debt
securities under Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities".
In the third quarter of 2004, the U.S. Department of the Treasury Office of
Thrift Supervision, which regulates Nordstrom fsb, directed Nordstrom, Inc. to
change our accounting treatment for a portion of the remaining interest in the
Trust. We asked the Securities and Exchange Commission ("SEC") staff to
confirm that our existing accounting treatment for the remaining interest in
the Trust is consistent with their interpretation of accounting principles
generally accepted in the United States ("U.S. GAAP"). In October 2004, the
SEC staff confirmed that our existing accounting treatment and financial
statement presentations comply with U.S. GAAP. Therefore, we plan to continue
to follow our existing accounting treatment for the remaining certificated
interest in the Trust. The SEC staff also suggested that we voluntarily
expand our quarterly disclosures related to the certificated interests; please
see Note 5 for this additional disclosure.
FORWARD-LOOKING INFORMATION CAUTIONARY STATEMENT
- ------------------------------------------------
The preceding disclosures included forward-looking statements regarding our
performance, liquidity, capital expenditures and adequacy of capital
resources. These statements are based on our current assumptions and
expectations and are subject to certain risks and uncertainties that could
cause actual results to differ materially from those projected. Forward-
looking statements are qualified by the risks and challenges posed by our
ability to predict fashion trends, consumer apparel buying patterns, our
ability to control costs, weather conditions, hazards of nature, trends in
personal bankruptcies and bad debt write-offs, changes in interest rates,
employee relations, our ability to continue our expansion plans, changes in
governmental or regulatory requirements, and the impact of economic and
competitive market forces, including the impact of terrorist activity or the
impact of a war on us, our customers and the retail industry. As a result,
while we believe there is a reasonable basis for the forward-looking
statements, you should not place undue reliance on those statements. We
undertake no obligation to update or revise any forward-looking statements to
reflect subsequent events, new information or future circumstances. This
discussion and analysis should be read in conjunction with the condensed
consolidated financial statements.
20 of 25
<page>
Item 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this Quarterly Report on Form 10-Q, we
performed an evaluation under the supervision and with the participation of
management, including our President and Chief Financial Officer, of our
disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e)
under the Securities and Exchange Act of 1934 (the "Exchange Act")). Based
upon that evaluation, our President and Chief Financial Officer concluded
that, as of the end of the period covered by this Quarterly Report, our
disclosure controls and procedures are effective in the timely recording,
processing, summarizing and reporting of material financial and non-financial
information.
There has been no change in our internal control over financial reporting (as
defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our most
recently completed fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
Cosmetics
- ---------
We were originally named as a defendant along with other department store and
specialty retailers in nine separate but virtually identical class action
lawsuits filed in various Superior Courts of the State of California in May,
June and July 1998 that were consolidated in Marin County Superior Court. In
May 2000, plaintiffs filed an amended complaint naming a number of
manufacturers of cosmetics and fragrances and two other retailers as
additional defendants. Plaintiffs' amended complaint alleges that the retail
price of the "prestige" or "Department Store" cosmetics sold in department and
specialty stores was collusively controlled by the retailer and manufacturer
defendants in violation of the Cartwright Act and the California Unfair
Competition Act.
Plaintiffs seek treble damages and restitution in an unspecified amount,
attorneys' fees and prejudgment interest, on behalf of a class of all
California residents who purchased cosmetics and fragrances for personal use
from any of the defendants during the four years prior to the filing of the
amended complaint. Defendants, including us, have answered the amended
complaint denying the allegations. The defendants have produced documents and
responded to plaintiffs' other discovery requests, including providing
witnesses for depositions.
We entered into a settlement agreement with the plaintiffs and the other
defendants on July 13, 2003. In furtherance of the settlement agreement, the
case was refiled in the United States District Court for the Northern District
of California on behalf of a class of all persons who currently reside in the
United States and who purchased "Department Store" cosmetics from the
defendants during the period May 29, 1994 through July 16, 2003. The Court
has given preliminary approval to the settlement. A summary notice of class
certification and the terms of the settlement have been disseminated to class
members. A hearing on whether the Court will grant final approval of the
settlement has been scheduled for January 11, 2005. If approved by the Court,
the settlement will result in the plaintiffs' claims and the claims of all
class members being dismissed, with prejudice, in their entirety. In
connection with the settlement agreement, the defendants will provide class
members with certain free products and pay the plaintiffs' attorneys' fees,
awarded by the Court up to $24 million. Our share of the cost of the
settlement will not have a material adverse effect on our financial condition,
results of operations or cash flows.
21 of 25
<page>
Item 1. Legal Proceedings (cont.)
- ---------------------------------
Other
- -----
We are involved in various routine legal proceedings incidental to the
ordinary course of business. In management's opinion, the outcome of pending
legal proceedings, separately and in the aggregate, will not have a material
adverse effect on our business or consolidated financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
- --------------------------------------------------------------------
<table>
<caption>
(c) Repurchases
-----------
(dollars in millions except per share amounts)
Total Total Number Maximum Number (or
Number of Average of Shares (or Units) Approximate Dollar Value)
Shares Price Paid Purchased as Part of of Shares (or Units) that
(or Units) Per Share Publicly Announced May Yet Be Purchased Under
Purchased (or Units) Plans or Programs the Plans or Programs (2)
---------- ---------- -------------------- --------------------------
<s> <c> <c> <c> <c>
Feb. 2004 - - - $82
(2/1/04 to
2/28/04)
---------- ---------- -------------------- --------------------------
Mar. 2004 - - - $82
(2/29/04 to
4/3/04)
---------- ---------- -------------------- --------------------------
Apr. 2004 672 (1) $39.99 - $82
(4/4/04 to
5/1/04)
---------- ---------- -------------------- --------------------------
May. 2004 - - - $82
(5/2/04 to
5/29/04)
---------- ---------- -------------------- --------------------------
Jun. 2004 - - - $82
(5/30/04 to
7/3/04)
---------- ---------- -------------------- --------------------------
Jul. 2004 - - - $82
(7/4/04 to
7/31/04)
---------- ---------- -------------------- --------------------------
Aug. 2004 258,500 $37.31 258,500 $290
(8/1/04 to
8/28/04)
---------- ---------- -------------------- --------------------------
Sep. 2004 1,117,700 $38.51 1,117,700 $247
(8/29/04 to
10/2/04)
---------- ---------- -------------------- --------------------------
Oct. 2004 549,500 $40.53 549,500 $225
(10/3/04 to
10/30/04)
---------- ---------- -------------------- --------------------------
</table>
(1) The 672 shares redeemed were not part of a publicly announced repurchase
plan or program. These shares were owned and tendered by an employee to
Nordstrom as payment for an option exercise.
22 of 25
<page>
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (cont.)
- ----------------------------------------------------------------------------
(2) In May 1995, the Board of Directors authorized $1,100.0 of share
repurchases, with no expiration date. In August 2004, the Board of Directors
authorized $300.0 of share repurchases. This replaced the previous remaining
share repurchase authority of $82.4. This authorization extends for three
years to August 2007, although we expect the shares to be acquired through
open market transactions during the next 12 months. The actual number and
timing of share repurchases will be subject to market conditions and
applicable SEC rules. Program to date, we have purchased 1,925,700 shares for
$75.0 at an average price of $38.93 per share.
23 of 25
<page>
Item 6. Exhibits
- -----------------
3.2 Bylaws, as amended and restated on November 17, 2004.
31.1 Certification of President required by Section 302(a)
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer required by Section 302(a)
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of President regarding periodic report containing
financial statements pursuant to 18 U.S.C. 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer regarding periodic report
containing financial statements pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
24 of 25
<page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORDSTROM, INC.
(Registrant)
/s/ Michael G. Koppel
----------------------------------------------------
Michael G. Koppel
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: June 3, 2005
------------
25 of 25
<page>
NORDSTROM INC. AND SUBSIDIARIES
<table>
<caption>
Exhibit Index
Exhibit Method of Filing
- ------- ----------------
<s> <c>
3.2 Bylaws, as amended and restated on Incorporated by reference from
November 17, 2004 Registrant's Form 10-Q for the
quarter ended October 30, 2004,
Exhibit 3.2
31.1 Certification of President Filed herewith electronically
required by Section 302(a) of
the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Filed herewith electronically
Officer required by Section 302(a)
of the Sarbanes-Oxley Act of 2002
32.1 Certification of President Furnished herewith electronically
regarding periodic report
containing financial statements
pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Furnished herewith electronically
Officer regarding periodic report
containing financial statements
pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
</table>