EXHIBIT 13.1
2001 ANNUAL REPORT
Financial Highlights
Dollars in thousands except per share amounts
FISCAL YEAR 2001 2000 % Change
- ----------- ---------- ---------- --------
Net sales $5,634,130 $5,528,537 1.9
Earnings before income taxes 204,488 167,018 22.4
Net earnings 124,688 101,918 22.3
Basic earnings per share .93 .78 19.2
Diluted earnings per share .93 .78 19.2
Cash dividends paid per share .36 .35 2.9
Stock Prices
2001 2000
-------------------- --------------------
FISCAL YEAR HIGH LOW high low
- -------------- ----- ----- ----- -----
First Quarter 21.17 15.60 34.50 18.25
Second Quarter 22.75 17.00 30.00 16.56
Third Quarter 22.97 13.80 19.50 14.19
Fourth Quarter 25.50 14.25 21.00 14.88
Nordstrom, Inc. common stock is traded on the New York Stock Exchange NYSE
Symbol JWN
[COMPARABLE STORE BAR GRAPH]
Comparable Store Sales % Change Total Sales % Change
------------------------------- --------------------
91 1.4% 9.8%
92 1.4% 7.6%
93 2.7% 5.1%
94 4.4% 8.5%
95 -0.7% 5.6%
96 0.6% 8.4%
97 4.0% 9.1%
98 -2.7% 3.8%
99 -1.1% 2.0%
00 0.3% 7.4%
01 -2.9% 1.9%
[SALES PER SQUARE FOOT BAR GRAPH]
Sales per Square Foot
91 $388
92 $381
93 $383
94 $395
95 $382
96 $377
97 $384
98 $362
99 $350
00 $342
01 $321
[SG&A BAR GRAPH]
SG&A as a % of Sales
91 26.2%
92 26.4%
93 26.2%
94 26.4%
95 27.6%
96 27.7%
97 27.5%
98 28.3%
99 29.6%
00 31.6%
01 30.6%
[DILUTED EARNINGS PER SHARE BAR GRAPH]
Diluted Earnings per Share
91 $0.82
92 $0.82
93 $0.86
94 $1.23
95 $1.00
96 $0.90
97 $1.20
98 $1.41
99 $1.46
00 $0.78
01 $0.93
NORDSTROM INC. AND SUBSIDIARIES
Index
9 Management's Discussion and Analysis
16 Consolidated Statements of Earnings
17 Consolidated Balance Sheets
18 Consolidated Statements of Shareholders' Equity
19 Consolidated Statements of Cash Flows
20 Notes to Consolidated Financial Statements
37 Independent Auditors' and Management Report
38 Eleven-Year Statistical Summary
40 Officers of the Corporation and Executive Team
41 Board of Directors and Committees
42 Retail Store Facilities
44 Shareholder Information
View this entire report online. Please visit www.nordstrom.com to see this
report and obtain the latest available information.
Management's Discussion and Analysis
OVERVIEW
Earnings for 2001 (the fiscal year ended January 31, 2002) for Nordstrom, Inc.
and its subsidiaries (collectively, the "Company") increased by 22% as compared
to 2000. This increase was primarily attributable to nonrecurring charges
experienced in the prior year. Excluding nonrecurring charges, earnings for 2001
declined by 8.4% due in large part to the slowing economy. The Company
experienced a modest increase in net sales due to the opening of new stores but
comparable store sales (sales from stores open at least one full fiscal year)
declined. Gross profit as a percent of sales also declined primarily due to
higher markdowns taken to increase sales and liquidate excess inventories.
Selling, general and administrative expenses as a percent of sales declined as a
result of focused efforts in 2001 to reduce costs.
In 2002 (the fiscal year ending January 31, 2003), the Company plans to focus on
sales growth, managing merchandise inventory levels, controlling expenses, and
making disciplined capital investment decisions. The Company will also strive to
build on its core values of customer service and delivering the right mix of
quality merchandise at the right price.
RESULTS OF OPERATIONS
Percentage of 2001 Sales by Merchandise Category
[PIE CHART]
CHILDREN'S APPAREL AND ACCESSORIES 4%
OTHER 3%
MEN'S APPAREL AND FURNISHINGS 18%
WOMEN'S APPAREL 35%
SHOES 19%
WOMEN'S ACCESSORIES 21%
[BAR GRAPH]
NET SALES (IN MILLIONS)
1997 $4,865
1998 $5,049
1999 $5,149
2000 $5,529
2001 $5,634
Year over year net sales percentage increases and comparable store sales
percentages are as follows:
FISCAL YEAR 2001 2000 1999
- ----------- ---- ---- ----
Net sales increase 1.9% 7.4% 2.0%
Comparable store sales (2.9%) 0.3% (1.1%)
The net sales increase of 1.9% in 2001 was due to new store openings. During
2001, the Company opened four Nordstrom full-line stores, eight Nordstrom Rack
stores and three Faconnable boutiques. The increases in net sales were offset by
negative comparable store sales and a decline in sales at Nordstrom.com.
Comparable store sales in the first half of the year were lower by 1.3% and in
the second half of the year were lower by 4.4%. The decline in the second half
of 2001 was largely due to the overall slowdown in the economy. The most
significant sales declines were in men's apparel and shoes while women's apparel
was essentially flat.
Net sales increased 7.4% in 2000 due to new store openings. During 2000, the
Company opened six Nordstrom full-line stores and ten Nordstrom Rack stores.
Comparable store sales were essentially flat in 2000, with increases in shoes,
cosmetics and accessories offset by decreases in women's apparel. The decrease
in women's apparel was primarily attributable to a change in product mix.
9
Management's Discussion and Analysis
In 2002, the Company plans to open eight full-line stores, four Nordstrom Rack
stores and two Faconnable boutiques, increasing retail square footage 8%. Given
the continued weakness in the economy, comparable store sales are planned to be
flat. Based on the sales trend seen in the prior year, comparable store sales
are planned to be negative in the first half of the year and positive in the
second half of the year.
GROSS PROFIT
Gross profit as a percentage of net sales is as follows:
FISCAL YEAR 2001 2000 1999
- ----------- ---- ---- ----
Gross profit as a percent of net sales 33.2% 34.0% 34.8%
Gross profit as a percentage of net sales declined in 2001 due to higher
markdowns and new store occupancy expenses. The higher markdowns were taken to
drive sales and to liquidate excess inventory caused by the decrease in
comparable store sales.
In 2000, the decline in gross profit as a percentage of sales was due to
increased markdowns taken to liquidate excess inventory and increased occupancy
expenses as a result of additional stores.
In 2002, gross profit as a percentage of sales is expected to improve moderately
through careful management of inventory levels in relation to sales trends.
However, any improvement may be limited if sales trends are weaker than
expected. The Company expects to complete the rollout of its perpetual inventory
system in 2002. The benefits of having better inventory tracking tools through
perpetual inventory should, over time, also improve gross profit performance.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses as a percent of net sales are as
follows:
FISCAL YEAR 2001 2000 1999
- ----------- ---- ---- ----
Selling, general and administrative 30.6% 31.6% 29.6%
Nonrecurring charges -- 0.4% 0.2%
Selling, general and administrative before
nonrecurring charges 30.6% 31.2% 29.4%
Excluding nonrecurring charges, selling, general and administrative expenses as
a percentage of net sales decreased in 2001 primarily due to a focused effort to
control expenses in the areas of sales promotion, direct selling and information
technology. These decreases were partially offset by an increase in bad debt on
the Company's credit cards.
In 2000, before nonrecurring charges, the increase in selling, general and
administrative expenses as a percent of sales was due to increased costs in the
areas of direct selling, credit and sales promotion, related in part to store
openings, and increased costs for information services resulting from the
Company's investment in new technology.
Fiscal 2000 included nonrecurring charges of $23 million, of which approximately
$10 million (pre-tax) related to the write-off of abandoned and impaired
information technology projects, and approximately $13 million (pre-tax) related
to employee severance and other costs associated with a change in management.
In 2002, selling, general and administrative expenses as a percent of net sales
are expected to improve slightly as the Company continues its focus on expense
management while incurring higher costs related to new stores, higher
depreciation related to new information systems and continued high levels of bad
debt.
INTEREST EXPENSE, NET
Interest expense, net increased 19.7% in 2001 due to higher average borrowings,
partially offset by a decrease in interest rates.
In 2000, interest expense, net increased 24.4% primarily due to higher average
borrowings.
10
Management's Discussion and Analysis
[BAR GRAPH]
SERVICE CHARGE INCOME AND OTHER, NET (IN MILLIONS)
1997 $111
1998 $110
1999 $117
2000 $131
2001 $134
Service charge income and other, net primarily represents income from the
Company's credit card operations. Service charge income declined slightly in
2001 due to lower interest rates, flat credit sales and a steady number of
credit accounts. This decline was offset by lower miscellaneous charges compared
to the prior year.
In 2000, service charge income increased due to higher credit sales and
increases in the number of credit accounts. Credit sales and the number of
credit accounts increased as a result of a targeted marketing effort toward
inactive accounts and the introduction of a rewards program.
In 2002, service charge income is planned to be higher due to a small increase
in credit sales and credit accounts, and adjustments to interest rates charged.
WRITE-OFF OF INVESTMENT
The Company held common shares in Streamline, Inc., an Internet grocery and
consumer goods delivery company, at a cost of approximately $33 million.
Streamline ceased its operations effective November 2000. During 2000, the
Company wrote off its entire investment in Streamline.
EARNINGS PER SHARE (DILUTED)
[BAR GRAPH]
1997 $1.20
1998 $1.41
1999 $1.46
2000 $0.78
2001 $0.93
Diluted earnings per share are as follows:
FISCAL YEAR 2001 2000 1999
- ----------- ---- ---- ----
Diluted earnings per share $.93 $ .78 $1.46
Nonrecurring charges -- .26 .04
Diluted earnings per share before
nonrecurring charges $.93 $1.04 $1.50
Excluding nonrecurring charges, earnings per share for 2001 were 10.6% worse
than 2000 primarily driven by a decline in comparable store sales and a decline
in gross profit percent offset by decreases in selling, general and
administrative expenses as a percent of sales.
Excluding nonrecurring charges, earnings per share for 2000 were 30.7% lower
than 1999 primarily due to the decline in gross profit percent and higher
selling, general and administrative expenses, partially offset by higher service
charge income.
FOURTH QUARTER RESULTS
Fourth quarter 2001 earnings per share were $.38 compared with $.20 in 2000. The
prior year included a $.01 nonrecurring charge related to the write-off of the
remaining Streamline investment. Total sales for the quarter declined by 1.5%
versus the same quarter in the prior year and comparable store sales declined by
3.4%. The decline in sales was primarily due to the overall slowdown in the
economy. Gross profit increased compared to the same quarter in the prior year
due to lower markdowns. Selling, general and administrative expenses improved in
the quarter compared to the
11
Management's Discussion and Analysis
prior year due to lower costs in selling and sales promotion, partially offset
by higher bad debt. The lower selling, general and administrative costs were the
result of a focused effort to control costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its working capital needs, capital expenditures,
acquisitions, and share repurchase activity with a combination of cash flows
from operations and borrowings.
Management believes that the Company's operating cash flows, existing cash and
available credit facilities are sufficient to finance the Company's operations
and planned growth for the foreseeable future.
CASH FLOWS FROM OPERATIONS
Net cash provided by operating activities increased approximately $238 million
in 2001 compared to 2000 primarily due to decreases in merchandise inventories
and accounts receivable.
Net cash provided by operating activities decreased approximately $193 million
in 2000 compared to 1999 largely due to lower net earnings and increases in
credit card accounts receivable and merchandise inventories.
In 2002, cash flows provided by operating activities are expected to decrease
due to increases in accounts receivable related to increases in credit sales and
inventory increases related to the opening of new stores.
CAPITAL EXPENDITURES
The Company's capital expenditures aggregated approximately $683 million over
the last three years, net of developer reimbursements, principally to add
stores, improve existing facilities and purchase or develop new information
systems. Over 3.5 million square feet of retail store space was added during
this period, representing an increase of 25% since January 31, 1999.
The Company plans to spend approximately $875 million, net of developer
reimbursements, on capital projects during the next three years, including new
stores, the remodeling of existing stores, new systems and technology, and other
items.
At January 31, 2002, approximately $456 million has been contractually committed
for the construction of new stores or remodel of existing stores. Although the
Company has made commitments for stores opening in 2002 and beyond, it is
possible that some stores may not be opened as scheduled because of delays
inherent in the development process, or because of the termination of store site
negotiations.
TOTAL SQUARE FOOTAGE (THOUSANDS)
1997 12,614
1998 13,593
1999 14,487
2000 16,056
2001 17,048
SHARE REPURCHASE
In May 1995, the Board of Directors authorized $1.1 billion of share
repurchases. As of January 31, 2002, the Company has purchased 39 million shares
of its common stock for $1 billion, with remaining share repurchase authority of
$82 million. The share repurchase represents 24% of the shares outstanding as of
May 1995 after adjusting for the 1998 stock split, at an average price per share
of $25.93. Share repurchases have been partially financed through additional
borrowings, resulting in an increase in the Company's debt to capital ratio.
DIVIDEND POLICY
In 2001, the Company paid $.36 per share of common stock in cash dividends, the
fifth consecutive annual dividend increase. The Company paid $.35 and $.32 per
share of common stock in fiscal 2000 and 1999.
12
Management's Discussion and Analysis
ACQUISITION
In 2000, the Company acquired Faconnable, S.A. ("Faconnable"), of Nice, France,
a designer, wholesaler and retailer of high quality men's and women's apparel
and accessories. The Company paid $88 million in cash and issued 5,074,000
shares of common stock of the Company for a total consideration of $169 million.
The purchase also provides for a contingent payment to one of the previous
owners that may be paid after five years from the acquisition date. If the
previous owner continues to have active involvement in the business and
performance targets are met, the contingent payment would approximate $10
million. Since the contingent payment is performance based, the actual amount
paid will likely vary from this amount and will be expensed when it becomes
probable that the targets will be met.
DEBT, AVAILABLE CREDIT AND DEBT RATINGS
In October 2000, the Company issued $300 million of 8.95% Senior Notes due in
2005. These proceeds were used to reduce short-term indebtedness, to fund the
acquisition of Faconnable, and for general corporate purposes.
The Company entered into a variable interest rate swap agreement in the third
quarter of 2001. The swap has a $300 million notional amount and a four-year
term. Under the agreement, the Company receives a fixed rate of 8.95% and pays a
variable rate based on LIBOR plus a margin of 4.44% set at six-month intervals
(6.85% at January 31, 2002). Any differences between the amounts paid and
received on interest rate swap agreements are recognized as adjustments to
interest expense over the life of the swap.
In November 2001, the Company issued $300 million of Class A notes backed by
Nordstrom Private Label Receivables ("PL Term"). The PL Term bears a fixed
interest rate of 4.82% and has a maturity of five years. Both the debt and
related assets of the PL Term are included in the Company's consolidated balance
sheet. The Company will use the proceeds for general corporate purposes and
capital expansion.
The Company has an outstanding $200 million variable funding note backed by
Nordstrom VISA credit card receivables ("Visa VFN"). In accordance with SFAS No.
140 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" this debt and the related assets are not
reflected in the Company's consolidated balance sheets. The Visa VFN is
scheduled to expire in April 2002. The Company is in the process of renewing
this credit facility.
The Company owns a 49% interest in a limited partnership which constructed a new
corporate office building in which the Company is the primary occupant. Land,
building and equipment includes capitalized costs related to this building of
$93 million and $57 million as of January 31, 2002 and 2001. The Company is a
guarantor of a $93 million credit facility of the limited partnership of which
$89 million and $53 million is outstanding as of January 31, 2002 and 2001 and
is included in other long-term debt.
The limited partnership is currently refinancing the $93 million credit facility
and has signed a commitment agreement for an $85 million mortgage secured by the
property. The obligation will have a fixed interest rate of 7.68% and a term of
18 years. The Company expects the agreement to close in April 2002 subject to
various requirements. The difference between the amount outstanding under the
original credit facility and the new mortgage will be funded by the Company.
In November 2001, the Company entered into a $300 million unsecured revolving
credit facility that expires in November 2004. This credit facility replaced an
existing $500 million line of credit, that was scheduled to expire in July 2002.
As of January 31, 2002, no borrowings have been made against this revolving
credit facility.
In November 2001, the Company issued a variable funding note backed by Nordstrom
Private Label Receivables ("PL VFN") with a $200 million capacity. As of January
31, 2002, no borrowings have been made against this note.
The Company has the following credit ratings as of the date of this report.
STANDARD
CREDIT RATINGS MOODY'S* AND POOR'S*
- -------------- -------- -------------
Senior unsecured debt Baa1 A-
Commercial paper P-2 A-2
- ----------
* negative outlook
These ratings are subject to change depending on the Company's performance. A
significant ratings drop could result in the termination of the $200 million PL
VFN and the $200 million Visa VFN, and a change in interest rates on the $300
million 8.95% Senior Notes and the $300 million revolving credit facility.
13
The remainder of the Company's outstanding debt is not subject to termination or
interest rate adjustments based on changes in credit ratings.
The following table summarizes the Company's contractual obligations and the
expected effect on liquidity and cash flows excluding the $93 million
construction loan and any potential liability related to the Nordstrom.com Put
Agreement.
LESS
THAN 1 - 3 4 - 5 OVER
FISCAL YEAR TOTAL 1 YEAR YEARS YEARS 5 YEARS
- ----------- -------- -------- -------- -------- --------
Long-term Debt $1,330.6 $ 77.7 $ 3.0 $ 700.6 $ 549.3
Capital Leases 17.2 1.3 2.2 2.2 11.5
Operating Leases 674.1 66.9 125.2 108.5 373.5
Construction Commitments 456.1 195.9 151.2 -- 109.0
-------- -------- -------- -------- --------
Total $2,478.0 $ 341.8 $ 281.6 $ 811.3 $1,043.3
======== ======== ======== ======== ========
Construction commitments include $109 million shown in the Over 5 Years category
for new stores construction. These contracts do not have specific due dates and
may become due sooner than five years.
CRITICAL ACCOUNTING POLICIES
The preparation of the Company's financial statements require that management
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and disclosure of contingent assets and
liabilities. On an on-going basis, the Company evaluates its estimates
including those related to doubtful accounts, inventory valuation, intangible
assets, income taxes, self-insurance liabilities, pensions, contingent
liabilities and litigation. The Company bases its estimates on historical
experience and on other assumptions that management believes to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions.
PUT AGREEMENT
The holders of the minority interest of Nordstrom.com LLC, through their
ownership interests in its managing member, Nordstrom.com, Inc., have the right
to sell their shares of Nordstrom.com, Inc. to the Company for effectively $80
million in the event that certain events do not occur. This right would
terminate if the Company provides at least $100 million in additional funding to
Nordstrom.com, Inc. prior to July 1, 2002 or if Nordstrom.com, Inc. completes an
initial public offering of its common stock prior to September 1, 2002. It is
possible that the Company will choose not to provide the $100 million in
additional funding and that Nordstrom.com, Inc. will not complete an initial
public offering on or before September 1, 2002. If and when the Company
determines that neither of those events is likely to occur and that the purchase
of the minority interest shares is probable, the Company will begin to accrete,
over the period remaining prior to the purchase, the difference between that $80
million and the fair value of the shares. Based on current values for similar
businesses, management of the Company believes that the amount of that
difference could range from $55 million to $65 million.
VALUATION OF INTANGIBLE ASSETS
The Company is in the process of performing a valuation to determine if there
has been an impairment of the $138 million intangible asset resulting from the
purchase of Faconnable. This is the Company's only intangible asset. The
valuation is dependent on many factors including future performance and market
conditions. Should this asset be impaired, a charge will be recorded in the
first quarter of 2002.
REALIZATION OF DEFERRED TAX ASSETS
As of January 31, 2002, the Company has $34 million of capital loss
carryforwards. The utilization of this deferred tax asset is contingent upon the
ability to generate capital gains within the next four years. No valuation
allowance has been provided because management believes it is probable that the
full benefit of the carryforwards will be realized.
14
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2001, the Company adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 137 and No. 138. It
requires the fair value of all derivatives to be recognized as assets or
liabilities, and specifies accounting for changes in their fair value. Adoption
of this standard did not have a material impact on the Company's financial
statements.
In March 2001, the Company adopted SFAS No. 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," a replacement
of SFAS No. 125 with the same title. It revises the standards for
securitizations and other transfers of financial assets and collateral and
requires certain additional disclosures, but otherwise retains most of SFAS No.
125's provisions. Adoption of this standard did not have a material impact on
the Company's financial statements.
The Emerging Issues Task Force reached a consensus on Issue No. 99-20,
"Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets," which provides guidance
on how a transferor that retains an interest in securitized financial assets, or
an enterprise that purchases a beneficial interest in securitized financial
assets, should account for related interest income and impairment. Adoption of
this accounting issue for the quarter ended July 31, 2001, did not have a
material impact on the Company's financial statements.
In February 2002, the Company adopted SFAS No. 141 "Business Combinations" and
No. 142 "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001, and establishes specific criteria for the recognition of
goodwill separate from other intangible assets. Adoption of the accounting
provisions of SFAS No. 141 did not have a material impact on the Company's
financial statements. Under SFAS No. 142, goodwill and intangible assets having
indefinite lives will no longer be amortized but will be subject to annual
impairment tests. Other intangible assets will continue to be amortized over
their estimated useful lives. The Company is currently evaluating the impact of
SFAS No. 142 on its earnings and financial position.
In February 2002, the Company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 retains the
fundamental provisions of SFAS No. 121, but establishes new criteria for asset
classification and broadens the scope of qualifying discontinued operations. The
adoption of this statement did not have a material impact on the Company's
financial statements.
FORWARD-LOOKING INFORMATION CAUTIONARY STATEMENT
Certain statements made in this annual report include forward-looking
statements regarding the Company's performance, liquidity and adequacy of
capital resources. These statements are based on the Company's 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
increased competition, shifting consumer demand, changing consumer credit
markets, changing capital markets and general economic conditions, hiring and
retaining effective team members, sourcing merchandise from domestic and
international vendors, investing in new business strategies, achieving growth
objectives, and other risks and uncertainties, including the uncertain economic
and political environment arising from the terrorist acts of September 11th and
subsequent terrorist activities. As a result, while the Company believes there
is a reasonable basis for the forward-looking statements, one should not place
undue reliance on those statements.
15
Consolidated Statements of Earnings
Dollars in thousands except per share amounts
% OF % of % of
YEAR ENDED JANUARY 31, 2002 SALES 2001 sales 2000 sales
- ---------------------- ----------- ----- ----------- ----- ----------- -----
Net sales $ 5,634,130 100.0 $ 5,528,537 100.0 $ 5,149,266 100.0
Cost of sales and related
buying and occupancy (3,765,859) (66.8) (3,649,516) (66.0) (3,359,760) (65.2)
----------- ----- ----------- ----- ----------- -----
Gross profit 1,868,271 33.2 1,879,021 34.0 1,789,506 34.8
Selling, general and administrative (1,722,635) (30.6) (1,747,048) (31.6) (1,523,836) (29.6)
----------- ----- ----------- ----- ----------- -----
Operating income 145,636 2.6 131,973 2.4 265,670 5.2
Interest expense, net (75,038) (1.4) (62,698) (1.1) (50,396) (1.0)
Write-down of investment -- -- (32,857) (0.6) -- --
Service charge income and other, net 133,890 2.4 130,600 2.3 116,783 2.2
----------- ----- ----------- ----- ----------- -----
Earnings before income taxes 204,488 3.6 167,018 3.0 332,057 6.4
Income taxes (79,800) (1.4) (65,100) (1.2) (129,500) (2.5)
----------- ----- ----------- ----- ----------- -----
NET EARNINGS $ 124,688 2.2 $ 101,918 1.8 $ 202,557 3.9
=========== ===== =========== ===== =========== =====
Basic earnings per share $ 0.93 $ 0.78 $ 1.47
=========== =========== ===========
Diluted earnings per share $ 0.93 $ 0.78 $ 1.46
=========== =========== ===========
Cash dividends paid per share $ 0.36 $ 0.35 $ 0.32
=========== =========== ===========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
16
Consolidated Balance Sheets
Dollars in thousands
JANUARY 31, 2002 2001
- ----------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 331,327 $ 25,259
Accounts receivable, net 698,475 721,953
Merchandise inventories 888,172 945,687
Prepaid expenses 34,375 28,760
Other current assets 102,249 91,323
----------- -----------
Total current assets 2,054,598 1,812,982
Land, buildings and equipment, net 1,761,082 1,599,938
Intangible assets, net 138,331 143,473
Other assets 94,768 52,110
----------- -----------
TOTAL ASSETS $ 4,048,779 $ 3,608,503
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 148 $ 83,060
Accounts payable 490,988 466,476
Accrued salaries, wages and related benefits 236,373 234,833
Income taxes and other accruals 142,002 153,613
Current portion of long-term debt 78,227 12,586
----------- -----------
Total current liabilities 947,738 950,568
Long-term debt 1,351,044 1,099,710
Deferred lease credits 342,046 275,252
Other liabilities 93,463 53,405
Shareholders' equity:
Common stock, no par:
250,000,000 shares authorized;
134,468,608 and 133,797,757
shares issued and outstanding 341,316 330,394
Unearned stock compensation (2,680) (3,740)
Retained earnings 975,203 900,090
Accumulated other comprehensive earnings 649 2,824
----------- -----------
Total shareholders' equity 1,314,488 1,229,568
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,048,779 $ 3,608,503
----------- -----------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
17
Consolidated Statements of Shareholders' Equity
Dollars in thousands except per share amounts
Common Stock Accum. Other
------------------------- Unearned Stock Retained Comprehensive
Shares Amount Compensation Earnings Earnings Total
----------- ---------- -------------- ------------ ------------- ------------
BALANCE AT FEBRUARY 1, 1999 142,114,167 $ 230,761 $ (4,703) $ 1,074,487 -- $ 1,300,545
Net earnings -- -- -- 202,557 -- 202,557
Unrealized gain on investment,
net of tax -- -- -- -- $ 17,032 17,032
------------
Comprehensive net earnings: -- -- -- -- -- 219,589
Cash dividends paid ($.32 per
share) -- -- -- (44,463) -- (44,463)
Issuance of common stock 341,947 9,577 -- -- -- 9,577
Stock compensation 40,274 7,221 (3,890) -- -- 3,331
Purchase and retirement of
common stock (10,216,400) -- -- (302,965) -- (302,965)
----------- ---------- --------- ------------ ---------- ------------
BALANCE AT JANUARY 31, 2000 132,279,988 247,559 (8,593) 929,616 17,032 1,185,614
Net earnings -- -- -- 101,918 -- 101,918
Other comprehensive earnings:
Unrealized loss on investment
during period, net of tax -- -- -- -- (23,461) (23,461)
Reclassification of realized
loss, net of tax -- -- -- -- 6,429 6,429
Foreign currency translation
adjustment -- -- -- -- 2,824 2,824
------------
Comprehensive net earnings: -- -- -- -- -- 87,710
Cash dividends paid ($.35 per
share) -- -- -- (45,935) -- (45,935)
Issuance of common stock for:
Stock option plans 181,910 4,039 -- -- -- 4,039
Employee stock purchase plan 165,842 2,211 -- -- -- 2,211
Business acquisition 5,074,000 77,696 -- -- -- 77,696
Stock compensation, net (14,075) (1,111) 4,853 -- -- 3,742
Purchase and retirement of
common stock (3,889,908) -- -- (85,509) -- (85,509)
----------- ---------- --------- ------------ ---------- ------------
BALANCE AT JANUARY 31, 2001 133,797,757 330,394 (3,740) 900,090 2,824 1,229,568
Net earnings -- -- -- 124,688 -- 124,688
Other comprehensive earnings:
Foreign currency translation
adjustment -- -- -- -- (2,175) (2,175)
------------
Comprehensive net earnings: -- -- -- -- -- 122,513
Cash dividends paid ($.36 per
share) -- -- -- (48,265) -- (48,265)
Issuance of common stock for:
Stock option plans 186,165 3,788 -- -- -- 3,788
Employee stock purchase plan 541,677 6,754 -- -- -- 6,754
Stock compensation 19,009 380 1,060 -- -- 1,440
Purchase and retirement of
common stock (76,000) -- -- (1,310) -- (1,310)
----------- ---------- --------- ------------ ---------- ------------
BALANCE AT JANUARY 31, 2002 134,468,608 $ 341,316 $ (2,680) $ 975,203 $ 649 $ 1,314,488
----------- ---------- --------- ------------ ---------- ------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
18
Consolidated Statements of Cash Flows
Dollars in thousands
YEAR ENDED JANUARY 31, 2002 2001 2000
- ---------------------- --------- --------- ---------
OPERATING ACTIVITIES
Net earnings $ 124,688 $ 101,918 $ 202,557
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization of buildings and equipment 213,089 203,048 193,718
Amortization of intangible assets 4,630 1,251 --
Amortization of deferred lease credits and other, net (8,538) (12,349) (6,387)
Stock-based compensation expense 3,414 6,480 3,331
Deferred income taxes, net 15,662 (3,716) (22,859)
Write-down of investment -- 32,857 --
Change in operating assets and liabilities, net of effects from
acquisition of business:
Accounts receivable, net 22,556 (102,945) (29,854)
Merchandise inventories 215,731 6,741 79,894
Prepaid expenses (1,684) (173) (6,976)
Other assets (16,770) (3,821) (8,880)
Accounts payable (159,636) (67,924) (76,417)
Accrued salaries, wages and related benefits (203) 17,850 14,942
Income tax liabilities and other accruals (11,310) 3,879 965
Other liabilities 12,088 (7,184) 25,212
--------- --------- ---------
Net cash provided by operating activities 413,717 175,912 369,246
--------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures (390,138) (321,454) (305,052)
Additions to deferred lease credits 126,383 92,361 114,910
Payment for acquisition, net of cash acquired -- (83,828) --
Other, net (3,309) (1,781) (452)
--------- --------- ---------
Net cash used in investing activities (267,064) (314,702) (190,594)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds (payments) from notes payable (82,912) 12,126 (7,849)
Proceeds from issuance of long-term debt 300,000 308,266 --
Principal payments on long-term debt (18,640) (58,191) (63,341)
Capital contribution to subsidiary from minority shareholders -- -- 16,000
Proceeds from issuance of common stock 10,542 6,250 9,577
Cash dividends paid (48,265) (45,935) (44,463)
Purchase and retirement of common stock (1,310) (85,509) (302,965)
--------- --------- ---------
Net cash provided by (used in) financing activities 159,415 137,007 (393,041)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 306,068 (1,783) (214,389)
Cash and cash equivalents at beginning of year 25,259 27,042 241,431
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 331,327 $ 25,259 $ 27,042
--------- --------- ---------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
19
Notes to Consolidated Financial Statements
Dollars in thousands except per share amounts
NOTE 1: Summary of Significant Accounting Policies
The Company: Nordstrom, Inc. is a fashion specialty retailer offering a wide
selection of high-quality apparel, shoes and accessories for women, men and
children, in the United States through 80 Nordstrom full-line stores, 46
Nordstrom Rack and clearance stores, 4 Faconnable boutiques and 2 free-standing
shoe stores. The Company also operates 24 Faconnable boutiques located primarily
in Europe. Additionally, the Company generates catalog and Internet sales
through Nordstrom.com LLC and service charge income through Nordstrom Credit,
Inc.
Basis of Presentation: The consolidated financial statements include the
balances of Nordstrom, Inc. and its subsidiaries for the entire fiscal year. All
significant intercompany transactions and balances are eliminated in
consolidation.
Use of Estimates: Management makes estimates and assumptions that affect the
reported amounts in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Reclassifications: Certain reclassifications of prior year balances have been
made for consistent presentation with the current year.
Revenue Recognition: Revenues are recorded net of estimated returns and exclude
sales tax. Revenue is recorded at the point of sale for retail stores. Catalog
and e-commerce sales include shipping revenue and are recorded upon shipment to
the customer.
Buying and Occupancy Costs: Buying costs consist primarily of salaries and
expenses incurred by the Company's merchandise managers, buyers and private
label product development group. Occupancy costs include rent, depreciation,
property taxes and operating costs related to the Company's retail and
distribution facilities.
Shipping and Handling Costs: The Company's costs for shipping and handling to
customers include payments to third-party shippers and costs incurred to store,
move and prepare merchandise for shipment. Shipping and handling costs of
$30,868, $38,062 and $29,085 in 2001, 2000 and 1999 were included in selling,
general and administrative expenses.
Advertising: Costs for newspaper, television, radio and other media are
generally expensed as incurred. Direct response advertising costs, consisting
primarily of catalog book production and printing costs, are deferred and
recognized over the expected life of the catalog, not to exceed six months.
Total advertising expenses were $145,341, $190,991 and $160,957 in 2001, 2000
and 1999.
Store Preopening Costs: Store opening and preopening costs are charged to
expense when incurred.
Cash Equivalents: Cash equivalents represent short-term investments with a
maturity of three months or less from the time of purchase.
Cash Management: The Company's cash management system provides for the
reimbursement of all major bank disbursement accounts on a daily basis. Accounts
payable at January 31, 2002 includes $31,817 of checks not yet presented for
payment drawn in excess of cash balances.
Customer Accounts Receivable: In accordance with industry practices,
installments maturing in more than one year and deferred payment accounts
receivable are included in current assets.
Merchandise Inventories: Merchandise inventories are stated at the lower of cost
(first-in, first-out basis) or market, using the retail method.
Land, Buildings and Equipment: Depreciation is computed using a combination of
accelerated and straight-line methods. Estimated useful lives by major asset
category are as follows:
ASSET LIFE (IN YEARS)
- ----- ---------------
Buildings 5 - 40
Store fixtures and equipment 3 - 15
Leasehold improvements Shorter of life of lease or asset life
Software 3 - 7
Asset Impairment: The Company reviews its intangibles and other long-lived
assets for impairment when events or changes in circumstances indicate the
carrying value of these assets may not be recoverable.
20
Notes to Consolidated Financial Statements
Deferred Lease Credits: The Company receives developer reimbursements as
incentives to construct stores in certain developments. The Company capitalizes
certain property, plant and equipment for these stores during the construction
period. At the end of the construction period, developer reimbursements in
excess of construction costs are recorded as deferred lease credits and
amortized as a reduction to rent expense, on a straight-line basis over the life
of the applicable lease or operating covenant. Construction costs in excess of
developer reimbursements are recorded as prepaid rent and amortized as rent
expense on a straight-line basis over the life of the applicable lease or
operating covenant.
Fair Value of Financial Instruments: The carrying amount of cash equivalents and
notes payable approximates fair value. The fair value of long-term debt
(including current maturities), using quoted market prices of the same or
similar issues with the same remaining term to maturity, is approximately
$1,378,000 and $1,041,000 at January 31, 2002 and 2001.
Derivatives Policy: The Company limits its use of derivative financial
instruments to the management of foreign currency and interest rate risks. The
effect of these activities is not material to the Company's financial condition
or results of operations. The Company has no material off-balance sheet credit
risk, and the fair value of derivative financial instruments at January 31, 2002
and 2001 is not material.
Recent Accounting Pronouncements: In February 2001, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and
No. 138. It requires the fair value of all derivatives to be recognized as
either assets or liabilities and specifies accounting for changes in their fair
value. Adoption of this standard did not have a material impact on the Company's
financial statements.
In March 2001, the Company adopted SFAS No. 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," a replacement
of SFAS No. 125 with the same title. It revises the standards for
securitizations and other transfers of financial assets and collateral and
requires certain additional disclosures, but otherwise retains most of SFAS No.
125's provisions. Adoption of this standard did not have a material impact on
the Company's financial statements.
The Emerging Issues Task Force ("EITF") has reached a consensus on Issue No.
99-20, "Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets," which provides guidance
on how a transferor that retains an interest in securitized financial assets, or
an enterprise that purchases a beneficial interest in securitized financial
assets, should account for related interest income and impairment. Adoption of
this accounting issue in the quarter ended July 31, 2001, did not have a
material impact on the Company's financial statements.
In July 2001, the FASB issued SFAS No. 141 "Business Combinations." SFAS No. 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, and establishes specific criteria
for the recognition of goodwill separate from other intangible assets. Adoption
of the accounting provisions of SFAS No. 141 in February 2002 did not have a
material impact on the Company's financial statements.
At February 1, 2002, the Company implemented SFAS No. 142 "Goodwill and Other
Intangible Assets." Under SFAS No. 142, goodwill and intangible assets having
indefinite lives will no longer be amortized but will be subject to annual
impairment tests. Other intangible assets will continue to be amortized over
their estimated useful lives. Prior to the adoption of SFAS No. 142, the
Company's intangible assets were amortized over their estimated useful lives on
a straight-line basis ranging from 10 to 35 years. Accumulated amortization of
intangible assets was $5,881 and $1,251 at January 31, 2002 and 2001. The
Company is currently evaluating the impact of SFAS No. 142 on its earnings and
financial position.
In February 2002, the Company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 retains the
fundamental provisions of SFAS No. 121, but establishes new criteria for asset
classification and broadens the scope of qualifying discontinued operations. The
adoption of this statement did not have a material impact on the Company's
financial statements.
21
Notes to Consolidated Financial Statements
NOTE 2: Acquisition
In 2000, the Company acquired Faconnable, S.A. ("Faconnable"), of Nice, France,
a designer, wholesaler and retailer of high quality men's and women's apparel
and accessories. The Company paid $87,685 in cash and issued 5,074,000 shares of
common stock of the Company for a total consideration of $168,868. The purchase
also provides for a contingent payment to one of the previous owners that may be
paid after five years from the acquisition date. If the previous owner continues
to have active involvement in the business and performance targets are met, the
contingent payment would approximate $10,000. Since the contingent payment is
performance based, the actual amount paid will likely vary from this amount and
will be expensed when it becomes probable that the targets will be met.
NOTE 3: Employee Benefits
The Company provides a profit sharing plan and 401(k) plan for employees. The
profit sharing plan is non-contributory and is fully funded by the Company. The
Board of Directors establishes the Company's contribution to the profit sharing
plan each year. The 401(k) plan is funded by voluntary employee contributions.
In addition, the Company provides matching contributions up to a stipulated
percentage of employee contributions. The Company's matching contributions to
the 401(k) plan and contributions to the profit sharing plan totaled $28,525,
$29,113 and $47,500 in 2001, 2000 and 1999.
NOTE 4: Interest Expense, Net
The components of interest expense, net are as follows:
YEAR ENDED JANUARY 31, 2002 2001 2000
- ---------------------- -------- -------- --------
Short-term debt $ 3,741 $ 12,682 $ 2,584
Long-term debt 83,225 58,988 56,831
-------- -------- --------
Total interest expense 86,966 71,670 59,415
Less: Interest income (1,545) (1,330) (3,521)
Capitalized interest (10,383) (7,642) (5,498)
-------- -------- --------
Interest expense, net $ 75,038 $ 62,698 $ 50,396
-------- -------- --------
NOTE 5: Income Taxes
Income tax expense consists of the following:
YEAR ENDED JANUARY 31, 2002 2001 2000
- ---------------------- --------- --------- ---------
Current income taxes:
Federal $ 58,122 $ 79,778 $ 130,524
State and local 6,142 11,591 21,835
--------- --------- ---------
Total current
income taxes 64,264 91,369 152,359
Deferred income taxes:
Current (7,217) (11,215) (18,367)
Non-current 22,753 (15,054) (4,492)
--------- --------- ---------
Total deferred income taxes 15,536 (26,269) (22,859)
--------- --------- ---------
Total income taxes $ 79,800 $ 65,100 $ 129,500
--------- --------- ---------
A reconciliation of the statutory Federal income tax rate to the Company's
effective tax rate is as follows:
YEAR ENDED JANUARY 31, 2002 2001 2000
- ---------------------- ----- ----- -----
Statutory rate 35.00% 35.00% 35.00%
State and local
income taxes, net of
Federal income taxes 3.93 3.93 4.06
Other, net .09 .05 (.06)
----- ----- -----
Effective tax rate 39.02% 38.98% 39.00%
----- ----- -----
22
Notes to Consolidated Financial Statements
Deferred income taxes reflect the net tax effect of temporary differences
between amounts recorded for financial reporting purposes and amounts used for
tax purposes. The major components of deferred tax assets and liabilities are as
follows:
JANUARY 31, 2002 2001
- ----------- --------- ---------
Accrued expenses $ 33,896 $ 33,458
Compensation and
benefits accruals 48,584 43,803
Merchandise inventories 24,643 26,290
Capital loss on investment 13,399 12,751
Other 21,123 18,298
--------- ---------
Total deferred tax assets 141,645 134,600
--------- ---------
Land, buildings and
equipment basis and
depreciation differences (49,978) (25,678)
Employee benefits (9,771) (10,937)
Other (3,195) (3,748)
--------- ---------
Total deferred tax liabilities (62,944) (40,363)
--------- ---------
Net deferred tax assets $ 78,701 $ 94,237
--------- ---------
As of January 31, 2002, the Company has $34,357 of capital loss carryforwards
available to be utilized within four years to reduce future capital gain income.
No valuation allowance has been provided because management believes it is more
likely than not that the full benefit of the carryforwards will be realized.
NOTE 6: Earnings Per Share
Basic earnings per share is computed on the basis of the weighted average number
of common shares outstanding during the year.
Diluted earnings per share is computed on the basis of the weighted average
number of common shares outstanding during the year plus dilutive common stock
equivalents (primarily stock options, performance share units and restricted
stock).
Options with an exercise price greater than the average market price were not
included in the computation of diluted earnings per share. These options totaled
8,563,996, 7,409,387 and 2,798,966 shares in 2001, 2000 and 1999.
YEAR ENDED JANUARY 31, 2002 2001 2000
- ---------------------- ------------ ------------ ------------
Net earnings $ 124,688 $ 101,918 $ 202,557
------------ ------------ ------------
Basic shares 134,104,582 131,012,412 137,814,589
------------ ------------ ------------
Basic earnings per share $ 0.93 $ 0.78 $ 1.47
------------ ------------ ------------
Dilutive effect of stock options
and restricted stock 234,587 100,673 610,255
------------ ------------ ------------
Diluted shares 134,339,169 131,113,085 138,424,844
------------ ------------ ------------
Diluted earnings per share $ 0.93 $ 0.78 $ 1.46
------------ ------------ ------------
NOTE 7: Investment
In September 1998, the Company made an investment in Streamline.com, Inc.
("Streamline"), an Internet grocery and consumer goods delivery company.
Streamline ceased its operations effective November 22, 2000, due to failure to
obtain additional capital to fund its operations. During 2000, the Company wrote
off its entire investment in Streamline, for a total pre-tax loss on the
investment of $32,857.
23
Notes to Consolidated Financial Statements
NOTE 8: Accounts Receivable
The components of accounts receivable are as follows:
JANUARY 31, 2002 2001
- ----------- --------- ---------
Unrestricted trade receivables $ 73,157 $ 716,218
Restricted trade receivables 628,271 --
Other 21,325 22,266
Allowance for doubtful accounts (24,278) (16,531)
--------- ---------
Accounts receivable, net $ 698,475 $ 721,953
--------- ---------
Bad debt expense totaled $34,750, $20,368 and $11,707 in 2001, 2000 and 1999.
Restricted trade receivables back the $300 million of Class A notes and the $200
million variable funding note issued by the Company in November 2001. Other
accounts receivable consists primarily of vendor receivables and cosmetic
rebates receivable.
NOTE 9: Receivable-backed Securities
Nordstrom has $200 million in outstanding debt securities (Class A) and holds
securities that represent undivided interests (Class B and Seller Retained
Interest) or residual interests (Interest Only Strip) in a master trust. These
securities are collateralized by Nordstrom VISA credit card receivables that are
sold to the trust on an ongoing basis. The carrying amounts of the retained
interests approximate fair value and are included in customer accounts
receivable.
Gains or losses are recognized on the sale of VISA receivables to the trust
based on the difference between the face value of the receivables sold and the
fair value of the assets created in the securitization process. The receivables
sold to the trust are then allocated between the various interests in the trust
based on those interests' relative fair market value. The fair values of the
assets are calculated as the present value of their expected future cash flows,
which assumes the weighted average remaining life of 2.4 months, average credit
losses of 7.41%, average gross yield of 17.48%, average interest expense on
issued securities of 2.38%, average payment rate of 22.04%, and discount rates
of 7.75% for the Seller Retained Interest, 13.62% for the Class B and 25.35% for
the Interest Only Strip. These discount rates represent the volatility and risk
of the assets and are calculated using an established formula that considers
both the current interest rate environment and credit spreads.
The following table summarizes the estimated fair value of the securities held
by the Company and certain cash flows received from and paid to the master
trust.
YEAR ENDED JANUARY 31, 2002 2001
- ---------------------- -------- --------
Class B Certificate $ 10,849 $ 11,000
Seller Retained Interest 47,102 42,052
Interest Only Strip 1,335 3,464
Principal collections reinvested
in new receivables 669,582 485,422
Gains on sales of receivables 3,147 5,356
Income earned on retained assets 6,711 9,035
Cash flows from retained assets:
Class B Certificate 715 684
Seller Retained Interest 6,217 4,411
Interest Only Strip 4,984 4,955
Servicing Fees 8,440 8,121
-------- --------
Interest income earned on the Class B certificate, Interest Only Strip and the
Seller Retained Interest are included in service charge income and other on the
consolidated statements of earnings.
24
Notes to Consolidated Financial Statements
The following table illustrates the change in fair market value estimates given
independent changes in assumptions.
+10% +20% -10% -20%
---- ---- ---- ----
Gross Yield:
IO Strip 668 1,339 (661) (1,312)
Class B -- -- -- --
Seller Retained Interest 156 313 (156) (313)
Interest Expense on
Issued Classes:
IO Strip (85) (170) 85 171
Class B -- -- -- --
Seller Retained Interest -- -- -- --
Card Holders Payment Rate:
IO Strip (76) (137) 90 195
Class B 7 14 (9) (18)
Seller Retained Interest 58 110 (71) (161)
Charge Offs:
IO Strip (325) (647) 330 661
Class B -- -- -- --
Seller Retained Interest (136) (271) 136 273
Discount Rate:
IO Strip (10) (19) 10 19
Class B (28) (57) 29 57
Seller Retained Interest (71) (142) 71 142
The total principal balance of the VISA receivables is $258,075 as of January
31, 2002. Gross credit losses were $17,050 for the 12 months ending January 31,
2002 and receivables past due for more than 30 days were $8,170 on January 31,
2002.
The following table illustrates default projections using net credit losses as a
percentage of average outstanding receivables in comparison to actual
performance:
2002 2001 2000
----- ----- -----
Original projection 7.66% 5.99% 5.39%
Actual N/A 6.62% 5.46%
Under the terms of the trust agreement, the Company may be required to fund
certain amounts upon the occurrence of specific events. The Company does not
believe additional funding will be required.
The Company's continuing involvement in the securitization of Visa receivables
will include recording gains/losses on sales in accordance with SFAS No. 140 and
recognizing income on retained assets as prescribed by EITF 99-20, holding both
subordinated, non-subordinated, and residual interests in the trust, and
servicing the portfolio.
The Company also issued $300 million of receivable-backed securities supported
by substantially all of its private label credit cards. This transaction is
accounted for as a secured financing. Total principal receivables of the
securitized portfolio on January 31, 2002 were approximately $625,516,
receivables more than 30 days past due were approximately $19,301, and charged
off receivables for the 12 months ending January 31, 2002 were $28,134. The
private label receivables also serve as collateral for a variable funding
facility with a limit of $200 million. Nothing was outstanding on this facility
on January 31, 2002.
The Company's continuing involvement in the securitization of private label
receivables will include pledging new receivables to the master note trust,
accounting for the transaction as a secured financing and servicing the
portfolio.
25
Notes to Consolidated Financial Statements
NOTE 10: Land, Buildings and Equipment
Land, buildings and equipment consist of the following:
JANUARY 31, 2002 2001
---------- ----------
Land and land improvements $ 59,141 $ 60,871
Buildings 683,926 760,029
Leasehold improvements 910,291 903,925
Capitalized software 46,603 38,642
Store fixtures and equipment 1,142,169 1,172,914
---------- ----------
2,842,130 2,936,381
Less accumulated depreciation
and amortization (1,663,409) (1,554,081)
---------- ----------
1,178,721 1,382,300
Construction in progress 582,361 217,638
---------- ----------
Land, buildings and
equipment, net $1,761,082 $1,599,938
---------- ----------
Capitalized software includes external direct costs, capitalized internal direct
labor and other employee benefits, and capitalized interest associated with the
development of internal-use computer software. Depreciation begins in the period
in which the software is ready for its intended use. Construction in progress
includes $127,847 and $46,696 of software in progress at January 31, 2002 and
2001.
At January 31, 2002, the Company has contractual commitments of approximately
$456,090 for the construction of new stores or remodeling of existing stores.
NOTE 11: Notes Payable
A summary of notes payable is as follows:
YEAR ENDED JANUARY 31, 2002 2001 2000
---------- ---------- ----------
Average daily short-
term borrowings $ 81,647 $ 192,392 $ 45,030
Maximum amount
outstanding 177,100 360,480 178,533
Weighted average
interest rate:
During the year 4.6% 6.6% 5.8%
At year-end -- 6.4% 6.0%
At January 31, 2002, the Company has an unsecured line of credit totaling
$300,000, which is available as liquidity support for the Company's commercial
paper program, and expires in November 2004. The line of credit agreement
contains restrictive covenants, which include maintaining certain financial
ratios. The Company pays a commitment fee for the line based on the Company's
debt rating.
In November 2001, the Company issued a variable funding note backed by Nordstrom
Private Label Receivables ("PL VFN") with a $200 million capacity. Interest on
the PL VFN varies based on 30-day commercial paper rated at A1/P1. As of January
31, 2002, there have been no borrowings on the PL VFN.
Additionally, in connection with the purchase of foreign merchandise, the
Company has outstanding letters of credit totaling $77,085 at January 31, 2002.
26
Notes to Consolidated Financial Statements
NOTE 12: Long-Term Debt
A summary of long-term debt is as follows:
JANUARY 31, 2002 2001
----------- -----------
Receivable-backed PL Term, 4.82%,
due 2006 $ 300,000 --
Senior debentures, 6.95%,
due 2028 300,000 $ 300,000
Senior notes, 5.625%, due 2009 250,000 250,000
Senior notes, 8.950%, due 2005 300,000 300,000
Medium-term notes, 7.25%, due 2002 76,750 87,750
Notes payable, 6.7%, due 2005 100,000 100,000
Other 102,521 74,546
----------- -----------
Total long-term debt 1,429,271 1,112,296
Less current portion (78,227) (12,586)
----------- -----------
Total due beyond one year $ 1,351,044 $ 1,099,710
----------- -----------
The Company entered into a variable interest rate swap agreement in the third
quarter of 2001. The swap has a $300 million notional amount and a four-year
term. Under the agreement, the Company receives a fixed rate of 8.95% and pays a
variable rate based on LIBOR plus a margin of 4.44% set at six-month intervals
(6.85% at January 31, 2002). Any differences between the amounts paid and
received on interest rate swap agreements are recognized as adjustments to
interest expense over the life of the swap. The swap agreement qualifies as a
fair value hedge and is recorded at fair value in other liabilities.
In November 2001, the Company issued $300 million of Class A notes backed by
Nordstrom Private Label Receivables ("PL Term"). The PL Term bears a fixed
interest rate of 4.82% and has a maturity of five years. The Company will use
the proceeds for general corporate purposes and capital expansion.
The Company owns a 49% interest in a limited partnership that completed
construction on a new corporate office building in which the Company is the
primary occupant. Land, buildings and equipment includes capitalized costs
related to this building of $92,952 and $57,270 as of January 31, 2002 and 2001
which includes noncash amounts of $78,003 and $41,883 as of January 31, 2002 and
2001. The corresponding finance obligation of $89,180 and $53,060 is included in
other long-term debt. This finance obligation will be amortized as rental
payments are made by the Company to the limited partnership over the life of the
permanent financing. The Company is a guarantor of a $93,000 credit facility of
the limited partnership. The credit facility provides for interest at either the
LIBOR rate plus 0.75%, or the greater of the Federal Funds rate plus 0.5% and
the prime rate, and matures in August 2002 (2.63% and 6.36% at January 31, 2002
and 2001).
The limited partnership is currently refinancing the $93,000 credit facility and
has signed a commitment agreement for an $85,000 mortgage secured by the
property. The obligation will have a fixed interest rate of 7.68% and a term of
18 years. The Company expects the agreement to close in April 2002 subject to
various requirements. The difference between the amount outstanding under the
original credit facility and the new mortgage will be funded by the Company.
Required principal payments on long-term debt, excluding capital lease
obligations and construction loan obligations, are as follows:
YEAR ENDED JANUARY 31,
2003 $ 77,730
2004 1,535
2005 1,463
2006 400,410
2007 300,188
Thereafter 549,332
--------
27
Notes to Consolidated Financial Statements
NOTE 13: Leases
The Company leases land, buildings and equipment under noncancelable lease
agreements with expiration dates ranging from 2002 to 2080. Certain leases
include renewal provisions at the Company's option. Most of the leases provide
for additional rent payments based upon specific percentages of sales and
require the Company to pay for certain common area maintenance and other costs.
YEAR ENDED JANUARY 31, 2002 2001 2000
------- ------- -------
Minimum rent:
Store locations $26,951 $16,907 $18,794
Offices, warehouses
and equipment 20,144 21,070 19,926
Percentage rent:
Store locations 8,047 9,241 7,441
------- ------- -------
Total rent expense $55,142 $47,218 $46,161
------- ------- -------
Future minimum lease payments as of January 31, 2002 are as follows:
CAPITAL OPERATING
YEAR ENDED JANUARY 31, LEASES LEASES
------- ---------
2003 $ 1,335 $ 66,940
2004 1,120 64,480
2005 1,120 60,680
2006 1,120 56,191
2007 1,120 52,285
Thereafter 11,470 373,517
-------- --------
Total minimum lease payments 17,285 $674,093
-------- --------
Less amount representing interest 7,851
--------
Present value of net minimum
lease payments $9,434
--------
NOTE 14: Stock-Based Compensation
STOCK OPTION PLAN
The Company has a stock option plan ("the Plan") under which stock options,
performance share units and restricted stock may be granted to key employees.
Stock options are issued at the fair market value of the stock at the date of
grant. Options vest over periods ranging from four to eight years, and expire
ten years after the date of grant.
In addition to option grants, the Company granted 273,864, 355,072 and 272,970
performance share units in 2001, 2000 and 1999, which will vest over three years
if certain financial goals are attained. Employees may elect to receive common
stock or cash upon vesting of these performance shares. At January 31, 2002 and
2001, $4,713 and $2,741 was recorded in accrued salaries, wages and related
benefits for these performance shares. Employees who receive performance share
units pay no monetary consideration. No amounts have been paid and no common
stock has been issued in connection with this program. As of January 31, 2002,
518,189 units were outstanding.
The Company also granted 30,069 and 180,000 shares of restricted stock in 1999
and 1998, with a weighted average fair value of $32.09 and $27.75. In September
2000, the Company accelerated the vesting of 144,000 shares of restricted stock
resulting in compensation expense of $3,039, and also cancelled 14,175 shares of
restricted stock as a result of management changes. In January 2002, the Company
accelerated the vesting on the remaining 9,536 unvested shares of restricted
stock, resulting in compensation expense of $193. At January 31, 2002, there are
no shares of unvested restricted stock.
At January 31, 2002, approximately 7,856,298 shares are reserved for future
stock option grants pursuant to the Plan.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," in measuring compensation costs under its
stock-based compensation programs. Accordingly, no compensation cost has been
recognized for stock options issued under the Plan. Performance share
compensation expense is recorded over the performance period at the fair value
of the stock at the date when probable that such shares have been earned.
Restricted stock compensation expense is based on the market price on the date
of grant and is recorded over the vesting period. Stock-based compensation
expense for 2001, 2000 and 1999 was $3,414, $6,480 and $3,331.
28
Notes to Consolidated Financial Statements
Stock option activity for the Nordstrom, Inc. Plan was as follows:
YEAR ENDED JANUARY 31, 2002 2001 2000
------------------------- ------------------------- -------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- ----------- --------- ----------- --------- -----------
Outstanding, beginning of year 8,873,342 $ 27 8,135,301 $ 28 5,893,632 $ 27
Granted 3,288,826 19 2,470,169 21 2,926,368 31
Exercised (186,165) 18 (181,910) 20 (341,947) 23
Cancelled (1,212,110) 25 (1,550,218) 28 (342,752) 30
---------- ----------- --------- ----------- --------- -----------
Outstanding, end of year 10,763,893 $ 24 8,873,342 $ 27 8,135,301 $ 28
---------- ----------- --------- ----------- --------- -----------
Options exercisable at end of year 4,533,281 $ 27 3,833,379 $ 26 3,145,393 $ 25
The following table summarizes information about stock options outstanding for
the Nordstrom, Inc. Plan as of January 31, 2002:
Options Outstanding Options Exercisable
----------------------------------------------- ----------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Contractual Exercise Exercise
Exercise Prices Shares Life (Years) Price Shares Price
- --------------- --------- ------------ ---------- --------- ----------
$13 - $22 6,183,330 8 $ 19 1,671,982 $ 20
$23 - $32 2,479,733 6 27 1,683,022 27
$33 - $40 2,100,830 7 36 1,178,277 35
---------- ---- ---------- --------- ----------
10,763,893 7 $ 24 4,533,281 $ 27
---------- ---- ---------- --------- ----------
Stock option activity for the Nordstrom.com 1999 and 2000 Plans were as follows:
YEAR ENDED JANUARY 31, 2002 2001 2000
------------------------- ------------------------- -------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- ----------- --------- ----------- --------- -----------
Outstanding, beginning of year 4,174,950 $ 1.72 1,373,950 $ 1.67 -- --
Granted 41,500 1.92 3,794,931 1.73 1,379,950 $ 1.67
Exercised -- -- (135,000) 1.67 -- --
Cancelled (691,642) 1.68 (858,931) 1.68 (6,000) 1.67
---------- ----------- --------- ----------- --------- -----------
Outstanding, end of year 3,524,808 $ 1.73 4,174,950 $ 1.72 1,373,950 $ 1.67
---------- ----------- --------- ----------- --------- -----------
Options exercisable at end of year 1,241,104 $ 1.68 703,750 $ 1.67 -- --
29
Notes to Consolidated Financial Statements
NORDSTROM.COM
Nordstrom.com has two stock option plans, the "1999 Plan" and the "2000 Plan."
Vested options under the 1999 Plan are exercisable only in the event of an
initial public offering of Nordstrom.com. As of January 31, 2002, the weighted
average contractual life for options outstanding was 8.2 years with exercise
prices ranging from $1.67 to $1.92 per share. No compensation cost has been
recognized related to the options under the 2000 plan because the exercise price
was equal to the fair value of Nordstrom.com stock on the date of grant. The
options vest over a period of two and one-half to four years and must be
exercised within ten years of the grant date. Nordstrom.com LLC has also issued
warrants to purchase 2,176,250 common shares at an exercise price of $1.67 to
its managing member, Nordstrom.com, Inc. The warrants expire on January 31,
2012. As of January 31, 2002, warrants to purchase 135,000 common shares are
exercisable.
EMPLOYEE STOCK PURCHASE PLAN
In May 2000, the Company's shareholders approved the establishment of an
Employee Stock Purchase Plan (the "ESPP") under which 3,500,000 shares of the
Company's common stock are reserved for issuance to employees. The plan
qualifies as a noncompensatory employee stock purchase plan under Section 423 of
the Internal Revenue Code. Employees are eligible to participate through payroll
deductions in amounts related to their base compensation. At the end of each
offering period, shares are purchased by the participants at 85% of the lower of
the fair market value at the beginning or the end of the offering period,
usually six months. Under the ESPP, 541,677 and 165,842 shares were issued in
2001 and 2000. As of January 31, 2002, payroll deductions totaling $2,641 were
accrued for purchase of shares on March 31, 2002.
SFAS No. 123
If the Company had elected to recognize compensation cost based on the fair
value of the options and shares at grant date as prescribed by SFAS No. 123,
"Accounting for Stock-Based Compensation," net earnings and earnings per share
would have been the pro forma amounts shown below:
YEAR ENDED JANUARY 31, 2002 2001 2000
----------- ----------- -----------
Pro forma net earnings $ 107,436 $ 88,460 $ 192,916
Pro forma basic EPS $ 0.80 $ 0.68 $ 1.40
Pro forma diluted EPS $ 0.80 $ 0.67 $ 1.39
The Black-Scholes method was used to estimate the fair value of the options at
grant date based on the following factors:
YEAR ENDED JANUARY 31, 2002 2001 2000
------ ------ ------
Stock Options:
Risk-free interest rate 4.8% 6.4% 5.7%
Volatility 68.0% 65.0% 61.0%
Dividend yield 1.3% 1.0% 1.0%
Expected life in years 5.0 5.0 5.0
---- ---- ----
Weighted-average fair value
at grant date $ 10 $ 12 $ 17
---- ---- ----
ESPP:
Risk-free interest rate 4.3% 6.0% --
Volatility 68.0% 65.0% --
Dividend yield 1.3% 1.0% --
Expected life in years 0.5 0.5 --
---- ---- ----
Weighted-average fair value
at grant date $ 5 $ 6 --
---- ---- ----
For Nordstrom.com, the Company used the following weighted-average assumptions:
YEAR ENDED JANUARY 31, 2002 2001 2000
------ ------ ------
Risk-free interest rate 4.5% 6.2% 6.0%
Volatility 127.0% 121.0% 81.0%
Dividend yield 0.0% 0.0% 0.0%
Expected life in years 4.0 4.0 4.0
----- ----- -----
Weighted-average fair value
at grant date $1.56 $1.39 $1.05
----- ----- -----
NOTE 15: Postretirement Benefits
The Company has a Supplemental Executive Retirement Plan ("SERP"), which
provides retirement benefits to certain officers and other select employees of
the Company. The benefits are unfunded and limited to a maximum of 60% of the
monthly average compensation less the actuarial equivalent of any monthly
benefits payable under the profit sharing plan.
30
Notes to Consolidated Financial Statements
The following provides a reconciliation of benefit obligations, funded status of
the SERP, as well as a summary of significant assumptions:
JANUARY 31, 2002 2001
-------- --------
Change in benefit obligation:
Benefit obligation at beginning of year $ 23,543 $ 23,645
Service cost 1,092 630
Interest cost 2,668 2,044
Amortization of adjustments 1,821 688
Change in additional minimum liability 7,308 (1,519)
Distributions (2,021) (1,945)
-------- --------
Benefit obligations at end of year $ 34,411 $ 23,543
-------- --------
Funded status of plan:
Under funded status $(39,547) $(28,964)
Unrecognized transitional obligation 324 648
Unrecognized prior service cost 6,396 240
Unrecognized loss 6,983 5,792
-------- --------
Accrued pension cost $(25,844) $(22,284)
-------- --------
Balance sheet amounts:
Additional minimum liability $ (8,567) $ (1,259)
Intangible asset 6,720 888
-------- --------
The components of SERP expense are as follows:
JANUARY 31, 2002 2001 2000
------ ------ ------
Service cost $1,092 $ 630 $ 906
Interest cost 2,668 2,044 1,952
Amortization of adjustments 1,821 688 1,013
------ ------ ------
Total SERP expense $5,581 $3,362 $3,871
------ ------ ------
Assumption percentages:
Discount rate 7.25% 7.50% 6.50%
Rate of compensation increase 5.00% 5.00% 5.00%
------ ------ ------
NOTE 16: Supplementary Cash Flow Information
The Company capitalizes certain property, plant and equipment during the
construction period of commercial buildings which are subsequently derecognized
and leased back. During the year ended January 31, 2002, the noncash activity
related to the derecognition of new stores that qualified as sale and leaseback
were $75,555.
Supplementary cash flow information includes the following:
YEAR ENDED JANUARY 31, 2002 2001 2000
-------- -------- --------
Cash paid during the year for:
Interest (net of
capitalized interest) $ 77,025 $ 58,190 $ 54,195
Income taxes 80,689 88,911 129,566
NOTE 17: Segment Reporting
The Company has three reportable segments that have been identified based on
differences in products and services offered and regulatory conditions: the
Retail Stores, Credit Operations, and Catalog/Internet segments. The Retail
Stores segment derives its revenues from sales of high-quality apparel, shoes
and accessories. It includes the Company's product development group, which
coordinates the design and production of private label merchandise sold in the
Company's retail stores. The Credit Operations segment revenues consist
primarily of finance charges earned through issuance of the Nordstrom
proprietary and VISA credit cards. The Catalog/Internet segment generates
revenues from direct mail catalogs and the Nordstrom.com website.
The measurements used to compute net earnings for reportable segments are
consistent with those used to compute net earnings for the Company. The
accounting policies of the operating segments are the same as those described in
the summary of significant accounting policies in Note 1.
The following tables set forth the information for the Company's reportable
segments and a reconciliation to the consolidated totals:
31
Notes to Consolidated Financial Statements
Retail Credit Catalog/ Corporate
YEAR ENDED JANUARY 31, 2002 Stores Operations Internet and Other Eliminations Total
---------- ---------- ---------- ---------- ------------ ----------
Revenues from external
customers (b) $5,356,875 -- $ 277,255 -- -- $5,634,130
Service charge income -- $ 129,697 -- -- -- 129,697
Intersegment revenues 20,204 33,767 -- -- $ (53,971) --
Interest expense, net 994 24,994 77 $ 48,973 -- 75,038
Depreciation and amortization 182,960 2,253 5,498 22,378 -- 213,089
Amortization of intangible assets 4,630 -- -- -- -- 4,630
Income tax expense (benefit) 150,921 9,104 -- (80,225) -- 79,800
Net earnings (loss) 235,815 14,226 (8,139) (117,214) -- 124,688
Assets (a)(b) 2,564,375 695,556 69,457 719,391 -- 4,048,779
Intangible assets 138,331 -- -- -- -- 138,331
Capital expenditures 373,909 2,054 2,554 11,621 -- 390,138
Retail Credit Catalog/ Corporate
YEAR ENDED JANUARY 31, 2001 Stores Operations Internet and Other Eliminations Total
---------- ---------- ---------- ---------- ------------ ----------
Revenues from external
customers (b) $5,217,889 -- $ 310,648 -- -- $5,528,537
Service charge income -- $ 135,121 -- -- -- 135,121
Intersegment revenues 30,294 26,889 -- -- $ (57,183) --
Interest expense, net 795 29,267 (604) $ 33,240 -- 62,698
Depreciation and amortization 176,758 1,786 7,552 16,952 -- 203,048
Amortization of intangible assets 1,251 -- -- -- -- 1,251
Income tax expense (benefit) 165,150 13,140 -- (113,190) -- 65,100
Net earnings (loss) 258,416 20,557 (29,367) (147,688) -- 101,918
Assets (a)(b) 2,557,616 703,077 68,010 279,800 -- 3,608,503
Intangible assets 143,473 -- -- -- -- 143,473
Capital expenditures 286,941 3,095 5,187 26,231 -- 321,454
Retail Credit Catalog/ Corporate
YEAR ENDED JANUARY 31, 2000 Stores Operations Internet and Other Eliminations Total
---------- ---------- ---------- ---------- ------------ ----------
Revenues from external customers $4,914,293 -- $ 234,973 -- -- $5,149,266
Service charge income -- $ 125,727 -- -- -- 125,727
Intersegment revenues 20,285 25,963 -- -- $ (46,248) --
Interest expense, net 728 26,933 (167) $ 22,902 -- 50,396
Depreciation and amortization 170,826 1,424 6,313 15,155 -- 193,718
Income tax expense (benefit) 191,790 19,450 -- (81,740) -- 129,500
Net earnings (loss) 300,009 30,417 (35,685) (92,184) -- 202,557
Assets (a) 2,051,327 601,320 95,241 314,193 -- 3,062,081
Capital expenditures 263,352 2,792 5,206 33,702 -- 305,052
(a) Segment assets in Corporate and Other include unallocated assets in
corporate headquarters, consisting primarily of land, buildings and equipment,
and deferred tax assets.
(b) Includes sales of foreign operations of $68,487 for the year ended January
31, 2002, and $12,318 for the period from October 24, 2000, the date of
acquisition, to January 31, 2001, and assets of $198,689 and $206,601 as of
January 31, 2002 and 2001.
32
Notes to Consolidated Financial Statements
NOTE 18: Restructurings, Impairments, and Other One-Time Charges
The following table provides a summary of restructuring, impairments and other
charges:
YEAR ENDED JANUARY 31, 2002 2001 2000
------- ------- -------
Employee severance $ 1,791 -- $ 2,685
Other expenses -- -- 1,206
------- ------- -------
Restructuring subtotal 1,791 -- 3,891
Management severance -- $13,000 --
Asset impairment -- 10,227 4,053
Litigation settlement costs -- -- 2,056
------- ------- -------
Total charges $ 1,791 $23,227 $10,000
------- ------- -------
During the year ended January 31, 2002, the Company streamlined its operations
through a reduction in workforce of approximately 2,600 employees. As a result,
the Company recorded a restructuring charge of $1,791 in selling, general and
administrative expenses relating to severance for approximately 195 employees.
Personnel affected were primarily located in the corporate center and in
full-line stores.
During the year ended January 31, 2001, the Company recorded an impairment
charge of $10,227, consisting of $9,627 recorded in selling, general and
administrative expenses and $600 in interest expense. Due to changes in business
strategy, the Company determined that several software projects under
development were either impaired or obsolete. The charges consisted of $6,542
primarily related to the disposition of transportation management software.
Additionally, merchandise software was written down $3,685 to its estimated fair
value. During the same year, the Company accrued and paid $13,000 for certain
severance and other costs related to a change in management.
During the year ended January 31, 2000, the Company recorded a charge of $10,000
in selling, general and administrative expenses primarily associated with the
restructuring of the Company's information technology services area. The charge
consisted of $4,053 in the disposition of several software projects under
development, $2,685 in employee severance and $1,206 in other miscellaneous
costs. Additionally, the Company recorded $2,056 related to settlement costs for
two lawsuits. The restructuring included the termination of 50 employees in the
information technology department.
The following table presents the activity and balances of the reserves
established in connection with the restructuring charges:
YEAR ENDED JANUARY 31, 2002 2001 2000
------- ------- -------
Beginning balance $ 178 $ 1,452 --
Additions 1,791 -- $ 3,891
Payments (1,890) (1,220) (2,122)
Adjustments (79) (54) (317)
------- ------- -------
Ending balance $ -- $ 178 $ 1,452
------- ------- -------
NOTE 19: Vulnerability Due to Certain Concentrations
Approximately 31% of the Company's retail square footage is located in the state
of California. At January 31, 2002, the net book value of property located in
California was approximately $276,000. Accordingly, the Company carries
earthquake insurance in California with a $50,000 deductible and a $50,000
coverage limit per occurrence.
At January 31, 2002 and 2001, approximately 40% and 41% of the Company's
receivables were obligations of customers residing in California. Concentration
of the remaining receivables is considered to be limited due to their
geographical dispersion.
33
Notes to Consolidated Financial Statements
NOTE 20: Nordstrom.com Put Agreement
The holders of the minority interest of Nordstrom.com LLC, through their
ownership interests in its managing member, Nordstrom.com, Inc., have the right
to sell their shares of Nordstrom.com, Inc. to the Company for effectively $80
million in the event that certain events do not occur. This right would
terminate if the Company provides at least $100 million in additional funding to
Nordstrom.com, Inc. prior to July 1, 2002 or if Nordstrom.com, Inc. completes an
initial public offering of its common stock prior to September 1, 2002. It is
possible that the Company will choose not to provide the $100 million in
additional funding and that Nordstrom.com, Inc. will not complete an initial
public offering on or before September 1, 2002. If and when the Company
determines that neither of those events is likely to occur and that the purchase
of the minority interest shares is probable, the Company will begin to accrete,
over the period remaining prior to the purchase, the difference between that $80
million and the fair value of the shares. Based on current values for similar
businesses, management of the Company believes that the amount of that
difference could range from $55,000 to $65,000.
NOTE 21: Contingent Liabilities
The Company has been named in various lawsuits and intends to vigorously defend
itself in those cases. The Company is not in a position at this time to quantify
the amount or range of any possible losses related to those claims. While no
assurance can be given as to the ultimate outcome of these lawsuits, based on
preliminary investigations, management currently believes that resolving these
matters will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
COSMETICS. The Company was 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 have now been consolidated in Marin
County state 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" 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 period four years prior to the filing of the amended
complaint. Defendants, including the Company, have answered the amended
complaint denying the allegations. The Company and the other retail defendants
have produced documents and responded to plaintiffs' other discovery requests,
including providing witnesses for depositions. Plaintiffs have not yet moved for
class certification. Pursuant to an order of the court, plaintiffs and
defendants participated in mediation sessions in May and September 2001.
34
Notes to Consolidated Financial Statements
WASHINGTON PUBLIC TRUST ADVOCATES. In early 2002, the Company was named as one
of 30 defendants in Washington Public Trust Advocates, ex rel., et al. v. City
of Spokane, et al., filed in the Spokane County Superior Court, State of
Washington. Plaintiff is a not-for-profit corporation bringing claims on behalf
of the City of Spokane and the Spokane Parking Public Development Authority. The
claims relate to the River Park Square Mall and Garage Project in Spokane,
Washington (the "Project"), which includes a Nordstrom store. The portion of the
complaint applicable to the Company seeks to recover from the Company the amount
of a Department of Housing and Urban Development loan made to the developer of
the Project. Damages are sought in the amount of $22.75 million, or a lesser
amount to the extent that the HUD loan proceeds were used for the construction
of the store and not as tenant improvements. Other portions of the complaint
seek to invalidate bonds issued to finance the public parking garage serving the
Project, terminate the lease of the parking garage by the City of Spokane, and
rescind other agreements between the City of Spokane and the developer of the
Project, as well as damages from the developer of the Project in unspecified
amounts. The Complaint also alleges breach of fiduciary duties by various
defendants, including the Company, to the people of the City of Spokane
regarding lack of disclosures concerning the developer and the Project.
Unspecified damages are sought for this cause of action. The lawsuit was
recently filed, the Company has not answered, and no discovery has commenced.
OTHER. The Company is also subject to other ordinary routine litigation
incidental to its business and with respect to which no material liability is
expected.
35
Notes to Consolidated Financial Statements
NOTE 22: Selected Quarterly Data (unaudited)
YEAR ENDED JANUARY 31, 2002 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTAL
------------- ------------- ------------- ------------- -------------
Net sales $ 1,218,040 $ 1,545,759 $ 1,239,241 $ 1,631,090 $ 5,634,130
Gross profit 419,610 504,851 402,280 541,530 1,868,271
Earnings before income taxes 40,555 63,499 17,095 83,339 204,488
Net earnings 24,755 38,699 10,495 50,739 124,688
Basic earnings per share .18 .29 .08 .38 .93
Diluted earnings per share .18 .29 .08 .38 .93
Dividends per share .09 .09 .09 .09 .36
Common stock price
High 21.17 22.75 22.97 25.50 25.50
Low 15.60 17.00 13.80 14.25 13.80
YEAR ENDED JANUARY 31, 2001 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTAL
------------- ------------- ------------- ------------- -------------
Net sales $ 1,153,377 $ 1,457,035 $ 1,262,390 $ 1,655,735 $ 5,528,537
Gross profit 407,722 502,722 438,522 530,055 1,879,021
Write-down of investment -- (10,540) (20,655) (1,662) (32,857)
Earnings before income taxes 53,689 74,501 (5,520) 44,348 167,018
Net earnings 32,789 45,401 (3,320) 27,048 101,918
Basic earnings per share .25 .35 (.03) .20 .78
Diluted earnings per share .25 .35 (.03) .20 .78
Dividends per share .08 .09 .09 .09 .35
Common stock price
High 34.50 30.00 19.50 21.00 34.50
Low 18.25 16.56 14.19 14.88 14.19
36
Independent Auditors' and Management Report
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of Nordstrom, Inc.
and subsidiaries (the "Company") as of January 31, 2002 and 2001, and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the three years in the period ended January 31, 2002. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the financial position of Nordstrom, Inc. and
subsidiaries as of January 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 2002, in conformity with accounting principles generally accepted in
the United States of America.
/s/ DELOITTE & TOUCHE LLP
- -----------------------------------
Deloitte & Touche LLP
Seattle, Washington
March 25, 2002
Management Report
Management is responsible for preparing the Company's financial statements and
the other information that appears in the annual report. The financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America and include estimates based on
management's best judgment.
The Company maintains a comprehensive system of internal controls and procedures
designed to provide reasonable assurance that assets are safeguarded and
transactions are executed in accordance with established procedures. The concept
of reasonable assurance is based on the recognition that the cost of maintaining
the system of internal accounting controls should not exceed the benefit derived
from the system.
Deloitte and Touche LLP audits the Company's financial statements in accordance
with auditing standards generally accepted in the United States of America and
provides an objective, independent review of the Company's internal controls and
the fairness of its reported financial condition and results of operations.
The Audit Committee, which is comprised of five independent directors, meets
periodically with management and the independent auditors to ensure that each is
properly fulfilling its responsibilities. The Committee oversees the Company's
systems of internal control, accounting practices, financial reporting and
audits to ensure their quality, integrity and objectivity are sufficient to
protect shareholders' investments.
/s/ MICHAEL G. KOPPEL
- -----------------------------------
Michael G. Koppel
Executive Vice President and Chief Financial Officer
37
Eleven-Year Statistical Summary
Dollars in thousands except square footage and per share amounts
YEAR ENDED JANUARY 31, 2002 2001 2000 1999
----------- ----------- ----------- -----------
FINANCIAL POSITION
Customer accounts receivable, net $ 677,150 $ 699,687 $ 596,020 $ 567,661
Merchandise inventories 888,172 945,687 797,845 750,269
Current assets 2,054,598 1,812,982 1,564,648 1,668,689
Current liabilities 947,738 950,568 866,509 794,490
Working capital 1,106,860 862,414 698,139 874,199
Working capital ratio 2.17 1.91 1.81 2.10
Land, buildings and equipment, net 1,761,082 1,599,938 1,429,492 1,378,006
Long-term debt, including current portion 1,429,271 1,112,296 804,982 868,234
Debt/capital ratio .5209 .4929 .4249 .4214
Shareholders' equity 1,314,488 1,229,568 1,185,614 1,300,545
Shares outstanding 134,468,608 133,797,757 132,279,988 142,114,167
Book value per share 9.78 9.19 8.96 9.15
Total assets 4,048,779 3,608,503 3,062,081 3,103,689
OPERATIONS
Net sales 5,634,130 5,528,537 5,149,266 5,049,182
Gross profit 1,868,271 1,879,021 1,789,506 1,704,237
Selling, general and administrative (1,722,635) (1,747,048) (1,523,836) (1,429,837)
Operating income 145,636 131,973 265,670 274,400
Interest expense, net (75,038) (62,698) (50,396) (47,091)
Write-down of investment -- (32,857) -- --
Service charge income and other, net 133,890 130,600 116,783 110,414
Earnings before income taxes 204,488 167,018 332,057 337,723
Income taxes (79,800) (65,100) (129,500) (131,000)
Net earnings 124,688 101,918 202,557 206,723
Basic earnings per share .93 .78 1.47 1.41
Diluted earnings per share .93 .78 1.46 1.41
Dividends per share .36 .35 .32 .30
Comparable store sales percentage increase (decrease) (2.9%) .3% (1.1%) (2.7%)
Net earnings as a percent of net sales 2.21% 1.84% 3.93% 4.09%
Return on average shareholders' equity 9.80% 8.44% 16.29% 14.98%
Sales per square foot for Company-operated stores 321 342 350 362
STORES 156 140 104 97
TOTAL SQUARE FOOTAGE 17,048,000 16,056,000 14,487,000 13,593,000
38
1998 1997 1996 1995 1994 1993 1992
----------- ------------ ---------- ------------ ------------ ------------ ------------
$ 641,862 $ 693,123 $ 874,103 $ 655,715 $ 565,151 $ 584,379 $ 585,490
826,045 719,919 626,303 627,930 585,602 536,739 506,632
1,613,492 1,549,819 1,612,776 1,397,713 1,314,914 1,219,844 1,177,638
979,031 795,321 833,443 693,015 631,064 516,397 558,768
634,461 754,498 779,333 704,698 683,850 703,447 618,870
1.65 1.95 1.94 2.02 2.08 2.36 2.11
1,252,513 1,152,454 1,103,298 984,195 845,596 824,142 856,404
420,865 380,632 439,943 373,910 438,574 481,945 491,076
.3194 .2720 .3232 .2575 .2934 .3337 .4029
1,458,950 1,457,084 1,408,053 1,330,437 1,153,594 1,038,649 927,465
152,518,104 159,269,954 162,226,288 164,488,196 164,118,256 163,949,594 163,688,454
9.57 9.15 8.68 8.09 7.03 6.34 5.67
2,890,664 2,726,495 2,732,619 2,396,783 2,177,481 2,053,170 2,041,875
4,864,604 4,457,931 4,113,717 3,895,642 3,591,228 3,415,613 3,174,822
1,568,791 1,378,472 1,310,931 1,297,018 1,121,539 1,079,608 1,007,554
(1,338,235) (1,232,860) (1,136,069) (1,029,856) (940,708) (901,446) (831,005)
230,556 145,612 174,862 267,162 180,831 178,162 176,549
(34,250) (39,400) (39,295) (30,664) (37,646) (44,810) (49,106)
-- -- -- -- -- -- --
110,907 135,331 134,179 98,311 88,509 86,140 87,443
307,213 241,543 269,746 334,809 231,694 219,492 214,886
(121,000) (95,227) (106,190) (132,304) (90,804) (84,489) (80,527)
186,213 146,316 163,556 202,505 140,890 135,003 134,359
1.20 .90 1.00 1.23 .86 .82 .82
1.20 .90 1.00 1.23 .86 .82 .82
.265 .25 .25 .1925 .17 .16 .155
4.0% 0.6% (0.7%) 4.4% 2.7% 1.4% 1.4%
3.83% 3.28% 3.98% 5.20% 3.92% 3.95% 4.23%
12.77% 10.21% 11.94% 16.30% 12.85% 13.73% 15.41%
384 377 382 395 383 381 388
92 83 78 76 74 72 68
12,614,000 11,754,000 10,713,000 9,998,000 9,282,000 9,224,000 8,590,000
39
Officers of the Corporation and Executive Team
Officers of the Corporation
Jammie Baugh, 49
Executive Vice President,
Human Resources
MEMBER OF EXECUTIVE TEAM
Laurie M. Black, 43
Executive Vice President and
President, Nordstrom Rack
MEMBER OF EXECUTIVE TEAM
Mark S. Brashear, 40
Executive Vice President and
President, Faconnable, S.A.S.
Dale Cameron, 53
Executive Vice President,
Corporate Merchandise Manager, Cosmetics
Full-line Stores
Robert E. Campbell, 46
Vice President, Strategy and Planning,
Treasurer
N. Claire Chapman, 41
Corporate Secretary
Linda Toschi Finn, 54
Executive Vice President, Marketing
MEMBER OF EXECUTIVE TEAM
Bonnie M. Junell, 45
Vice President,
Corporate Merchandise Manager,
Point of View, Narrative
Full-line Stores
Kevin T. Knight, 46
Executive Vice President, Chairman and
Chief Executive Officer of Nordstrom fsb,
President of Nordstrom Credit, Inc.
MEMBER OF EXECUTIVE TEAM
Michael G. Koppel, 45
Executive Vice President and
Chief Financial Officer
MEMBER OF EXECUTIVE TEAM
Llynn (Len) A. Kuntz, 41
Executive Vice President,
WA/AK Regional Manager
Full-line Stores
David P. Lindsey, 52
Vice President, Store Planning
David L. Mackie, 53
Vice President, Real Estate
and Legal Affairs
Robert J. Middlemas, 45
Executive Vice President,
Central States Regional Manager
Full-line Stores
Jack H. Minuk, 47
Vice President,
Corporate Merchandise Manager,
Women's Shoes
Full-line Stores
Blake W. Nordstrom, 41
President
MEMBER OF EXECUTIVE TEAM
Bruce A. Nordstrom, 68
Chairman of the Board of Directors
Erik B. Nordstrom, 38
Executive Vice President,
Full-line Stores
Peter E. Nordstrom, 40
Executive Vice President and
President, Full-line Stores
MEMBER OF EXECUTIVE TEAM
James R. O'Neal, 43
Executive Vice President and
President, Nordstrom Product Group
MEMBER OF EXECUTIVE TEAM
Suzanne R. Patneaude, 55
Vice President, Corporate
Merchandise Manager, Designer/Savvy
Full-line Stores
R. Michael Richardson, 45
Vice President and
Chief Information Officer
Karen Bowman Roesler, 46
Vice President, Marketing
Nordstrom Credit Group
K.C. (Karen) Shaffer, 48
Executive Vice President,
Nordstrom Rack NW Regional Manager
Joel T. Stinson, 52
Executive Vice President and
Chief Administrative Officer
MEMBER OF EXECUTIVE TEAM
Delena M. Sunday, 41
Executive Vice President,
Diversity Affairs
MEMBER OF EXECUTIVE TEAM
Geevy S.K. Thomas, 37
Executive Vice President,
South Regional Manager
Full-line Stores
Additional Member of Nordstrom, Inc.
Executive Team
J. Daniel Nordstrom, 39
Chief Executive Officer, Nordstrom.com
40
Board of Directors and Committees
Committees
Executive
John A. McMillan
Bruce A. Nordstrom
John N. Nordstrom
Corporate Governance
and Nominating
D. Wayne Gittinger, Chair
Enrique Hernandez, Jr.
Alfred E. Osborne, Jr.
William D. Ruckelshaus
Audit
Enrique Hernandez, Jr.
Alfred E. Osborne, Jr.
William D. Ruckelshaus
Bruce G. Willison, Chair
Alison A. Winter
Compensation
and Stock Options
Enrique Hernandez, Jr.
Alfred E. Osborne, Jr.
William D. Ruckelshaus, Chair
Alison A. Winter
Finance
D. Wayne Gittinger
Enrique Hernandez, Jr.
John A. McMillan
John N. Nordstrom
Alfred E. Osborne, Jr., Chair
Bruce G. Willison
FIRST ROW
D. Wayne Gittinger, 69
Partner, Lane Powell Spears Lubersky LLP
Seattle, Washington
Enrique Hernandez, Jr., 46 [FIRST ROW - 3 PHOTOGRAPHS]
President and CEO,
Inter-Con Security Systems, Inc.
Pasadena, California
John A. McMillan, 70
Retired Co-Chairman of
the Board of Directors
Seattle, Washington
SECOND ROW
Bruce A. Nordstrom, 68
Chairman of the Board of Directors
Seattle, Washington
John N. Nordstrom, 65 [SECOND ROW - 3 PHOTOGRAPHS]
Retired Co-Chairman of
the Board of Directors
Seattle, Washington
Alfred E. Osborne, Jr., 57
Director of the Harold Price Center
for Entrepreneurial Studies and
Associate Professor of Business Economics,
The Anderson School at UCLA
Los Angeles, California
THIRD ROW
William D. Ruckelshaus, 69 [THIRD ROW - 3 PHOTOGRAPHS]
A Strategic Director,
Madrona Venture Group
Seattle, Washington
Bruce G. Willison, 53
Dean, The Anderson School at UCLA
Los Angeles, California
Alison A. Winter, 55
Executive Vice President for
Midwest Personal Financial Services,
The Northern Trust Corporation
Chicago, Illinois
41
Retail Store Facilities open at January 31, 2002
STORE SQUARE
LOCATION STORE NAME FOOTAGE
- --------- ---------------------------------- ------------
SOUTHWEST GROUP
ARIZONA
Chandler Chandler Fashion Center 149,000
Scottsdale Scottsdale Fashion Square 235,000
CALIFORNIA
Arcadia Santa Anita 151,000
Brea Brea Mall 195,000
Canoga Park Topanga 154,000
Cerritos Los Cerritos Center 122,000
Corte Madera The Village at Corte Madera 116,000
Costa Mesa South Coast Plaza 235,000
Escondido North County 156,000
Glendale Glendale Galleria 147,000
Los Angeles Westside Pavilion 150,000
Mission Viejo The Shops at Mission Viejo 172,000
Montclair Montclair Plaza 134,000
Palo Alto Stanford Shopping Center 187,000
Pleasanton Stoneridge Mall 173,000
Redondo Beach The Galleria at South Bay 161,000
Riverside The Galleria at Tyler in Riverside 164,000
Roseville Galleria at Roseville 149,000
Sacramento Arden Fair 190,000
San Diego Fashion Valley Center 220,000
San Diego Horton Plaza 151,000
San Diego University Towne Centre 130,000
San Francisco Stonestown Galleria 174,000
San Francisco San Francisco Shopping Centre 350,000
San Jose Valley Fair 232,000
San Mateo Hillsdale Shopping Center 149,000
Santa Ana MainPlace/Santa Ana 169,000
Santa Barbara Paseo Nuevo 186,000
Walnut Creek Broadway Plaza 193,000
EAST COAST GROUP
CONNECTICUT
Farmington Westfarms 189,000
FLORIDA
Boca Raton Town Center at Boca Raton 193,000
Tampa International Plaza 172,000
GEORGIA
Atlanta Perimeter Mall 243,000
Buford Mall of Georgia 172,000
MARYLAND
Annapolis Annapolis Mall 162,000
Bethesda Montgomery Mall 225,000
Columbia The Mall in Columbia 173,000
Towson Towson Town Center 205,000
NEW JERSEY
Edison Menlo Park 266,000
Freehold Freehold Raceway Mall 174,000
Paramus Garden State Plaza 282,000
Short Hills The Mall at Short Hills 188,000
NEW YORK
Garden City Roosevelt Field 241,000
White Plains The Westchester 219,000
PENNSYLVANIA
King of Prussia The Plaza at King of Prussia 238,000
RHODE ISLAND
Providence Providence Place 206,000
VIRGINIA
Arlington The Fashion Centre at Pentagon City 241,000
McLean Tysons Corner Center 253,000
Norfolk MacArthur Center 166,000
CENTRAL STATES
ILLINOIS
Chicago Michigan Avenue 271,000
Oak Brook Oakbrook Center 249,000
Schaumburg Woodfield Shopping Center 215,000
Skokie Old Orchard Center 209,000
INDIANA
Indianapolis Circle Centre 216,000
KANSAS
Overland Park Oak Park Mall 219,000
MICHIGAN
Troy Somerset Collection 258,000
MINNESOTA
Bloomington Mall of America 240,000
OHIO
Beachwood Beachwood Place 231,000
Columbus Easton Town Center 174,000
42
STORE SQUARE
LOCATION STORE NAME FOOTAGE
- --------- ---------------------------------- ------------
TEXAS
Dallas Dallas Galleria 249,000
Frisco Stonebriar Centre 149,000
Hurst North East Mall 149,000
NORTHWEST GROUP
ALASKA
Anchorage Anchorage 97,000
COLORADO
Broomfield FlatIron Crossing 172,000
Littleton Park Meadows 245,000
OREGON
Portland Clackamas Town Center 121,000
Portland Downtown Portland 174,000
Portland Lloyd Center 150,000
Salem Salem Center 71,000
Tigard Washington Square 189,000
UTAH
Murray Fashion Place 110,000
Salt Lake City Crossroads Plaza 140,000
WASHINGTON
Bellevue Bellevue Square 285,000
Lynnwood Alderwood Mall 127,000
Seattle Downtown Seattle 383,000
Seattle Northgate 122,000
Spokane Spokane 137,000
Tacoma Tacoma Mall 134,000
Tukwila Southcenter 170,000
Vancouver Vancouver Mall 71,000
OTHER
Honolulu, HI Women's Ala Moana Shoes 14,000
Honolulu, HI Men's Ala Moana Shoes 8,000
Faconnable U.S. (4 boutiques) 40,000
Faconnable International (24 boutiques) 81,000
NORDSTROM RACK GROUP
Chandler, AZ Chandler Festival Rack 37,000
Phoenix, AZ Last Chance 48,000
Scottsdale, AZ The Promenade Rack 38,000
Brea, CA Brea Union Plaza Rack 45,000
Chino, CA Chino Marketplace Rack 30,000
Colma, CA Colma Rack 31,000
Costa Mesa, CA Metro Pointe Rack 50,000
Glendale, CA Glendale Fashion Center Rack 36,000
Los Angeles, CA The Promenade at Howard
Hughes Center Rack 41,000
Oxnard, CA Esplanade Shopping Center Rack 38,000
Roseville, CA Creekside Town Center Rack 36,000
Sacramento, CA Howe `Bout Arden Center Rack 54,000
San Diego, CA Mission Valley Rack 57,000
San Francisco, CA 555 Ninth Street
Retail Center Rack 43,000
San Jose, CA Westgate Mall Rack 48,000
San Leandro, CA San Leandro Rack 44,000
Woodland Hills, CA Topanga Rack 64,000
Littleton, CO Meadows Marketplace Rack 34,000
Broomfield, CO Flatiron Marketplace Rack 36,000
Buford, GA Mall of Georgia Crossing Rack 44,000
Honolulu, HI Victoria Ward Center Rack 34,000
Northbrook, IL Northbrook Rack 40,000
Oak Brook, IL The Shops at Oak Brook
Place Rack 42,000
Schaumburg, IL Woodfield Rack 45,000
Gaithersburg, MD Gaithersburg Rack 49,000
*Silver Spring, MD City Place Rack 37,000
Towson, MD Towson Rack 31,000
Grand Rapids, MI Centerpointe Mall Rack 40,000
Troy, MI Troy Marketplace Rack 40,000
Bloomington, MN Mall of America Rack 41,000
Las Vegas, NV Silverado Ranch Plaza Rack 33,000
Westbury, NY The Mall at the Source Rack 48,000
Beaverton, OR Tanasbourne Town Center Rack 53,000
Clackamas, OR Clackamas Promenade Rack 28,000
Portland, OR Downtown Portland Rack 19,000
Philadelphia, PA Franklin Mills Mall Rack 43,000
Hurst, TX The Shops at North East Mall Rack 40,000
Plano, TX Preston Shepard Place Rack 39,000
Salt Lake City, UT Sugarhouse Rack 31,000
Dulles, VA Dulles Town Crossing Rack 41,000
Woodbridge, VA Potomac Mills Rack 46,000
Auburn, WA SuperMall of the Great
Northwest Rack 48,000
Bellevue, WA Factoria Mall Rack 46,000
Lynnwood, WA Golde Creek Plaza Rack 38,000
Seattle, WA Downtown Seattle Rack 42,000
Spokane, WA NorthTown Mall Rack 28,000
* Store closed January 21, 2002, however it has been treated as open for the
full year.
43
Shareholder Information
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
COUNSEL
LANE POWELL SPEARS LUBERSKY LLP
TRANSFER AGENT AND REGISTRAR
Mellon Investor Services LLC
P.O. Box 3315
South Hackensack, New Jersey 07606
Telephone (800) 318-7045
TDD for Hearing Impaired (800) 231-5469
Foreign Shareholders (201) 329-8660
TDD Foreign Shareholders (201) 329-8354
GENERAL OFFICES
1617 Sixth Avenue
Seattle, Washington 98101-1742
Telephone (206) 628-2111
ANNUAL MEETING
May 21, 2002 at 11:00 a.m.
Pacific Daylight Time
Nordstrom Downtown Seattle Store
John W. Nordstrom Room, fifth floor
1617 Sixth Avenue
Seattle, Washington 98101-1742
FORM 10-K
The Company's annual report on Form 10-K
for the year ended January 31, 2002 will be
provided to shareholders upon written request to:
Nordstrom, Inc. Investor Relations
P.O. Box 2737
Seattle, Washington 98111
Or by calling (206) 303-3200
SHAREHOLDER INFORMATION
Please visit WWW.NORDSTROM.COM to obtain shareholder information. In addition,
the Company is always willing to discuss matters of concern to shareholders,
including its vendor standards compliance mechanisms and progress in achieving
compliance.
44