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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 001-15059
Nordstrom, Inc.
______________________________________________________
(Exact name of Registrant as specified in its charter)
Washington 91-0515058
_______________________________ ___________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1617 Sixth Avenue, Seattle, Washington 98101
____________________________________________________
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (206) 628-2111
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
_____ _____
Common stock outstanding as of May 26, 2000: 130,224,559 shares of
common stock.
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NORDSTROM, INC. AND SUBSIDIARIES
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INDEX
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<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Statements of Earnings
Three months ended April 30, 2000
and 1999 3
Consolidated Balance Sheets
April 30, 2000 and 1999 and
January 31, 2000 4
Consolidated Statements of
Shareholders' Equity
Three months ended April 30,
2000 and 1999 5
Consolidated Statements of Cash Flows
Three months ended April 30, 2000
and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
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NORDSTROM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months
Ended April 30,
----------------------
2000 1999
---------- ----------
<S> <C> <C>
Net sales $1,146,336 $1,039,105
Cost of sales and related buying
and occupancy (745,655) (688,196)
---------- ----------
Gross profit 400,681 350,909
Selling, general and administrative
expenses (364,858) (315,417)
---------- ----------
Operating income 35,823 35,492
Interest expense, net (13,296) (12,009)
Service charge income and other, net 31,162 28,205
---------- ----------
Earnings before income taxes 53,689 51,688
Income taxes (20,900) (20,150)
---------- ----------
Net earnings $ 32,789 $ 31,538
========== ==========
Basic earnings per share $ .25 $ .22
========== ==========
Diluted earnings per share $ .25 $ .22
========== ==========
Cash dividends paid per share of
common stock outstanding $ .08 $ .08
========== ==========
<FN>
These statements should be read in conjunction with the Notes to
Consolidated Financial Statements contained herein.
</TABLE>
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NORDSTROM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
April 30, January 31, April 30,
2000 2000 1999
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 24,461 $ 27,042 $ 71,932
Short-term investment 11,567 25,527 -
Accounts receivable, net 587,341 616,989 536,252
Merchandise inventories 922,727 797,845 864,832
Prepaid income taxes and other 110,141 97,245 94,550
---------- ---------- ----------
Total current assets 1,656,237 1,564,648 1,567,566
Land, buildings and equipment, net 1,447,938 1,429,492 1,398,258
Available-for-sale investment 15,973 35,251 -
Other assets 37,377 32,690 61,049
---------- ---------- ----------
TOTAL ASSETS $3,157,525 $3,062,081 $3,026,873
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 219,260 $ 70,934 $ -
Accounts payable 449,970 390,688 391,532
Accrued salaries, wages
and related benefits 150,445 211,308 134,013
Income taxes and other accruals 130,918 135,388 118,916
Current portion of long-term debt 16,191 58,191 105,341
---------- ---------- ----------
Total current liabilities 966,784 866,509 749,802
Long-term debt 757,886 746,791 762,821
Deferred lease credits 215,547 194,995 169,854
Other liabilities 57,965 68,172 58,081
Shareholders' Equity:
Common stock, no par:
250,000,000 shares authorized;
130,907,175, 132,279,988 and
140,925,098 shares issued
and outstanding 250,668 247,559 241,832
Unearned stock compensation (8,128) (8,593) (8,977)
Retained earnings 920,046 929,616 1,053,460
Accumulated other comprehensive
(loss)income (3,243) 17,032 -
---------- ---------- ----------
Total shareholders' equity 1,159,343 1,185,614 1,286,315
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $3,157,525 $3,062,081 $3,026,873
========== ========== ==========
<FN>
These statements should be read in conjunction with the Notes to
Consolidated Financial Statements contained herein.
</TABLE>
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NORDSTROM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Accumulated Other
Common Stock Unearned Retained Comprehensive
Shares Amount Compensation Earnings Income Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
February 1, 2000 132,279,988 $247,559 $(8,593) $929,616 $17,032 $1,185,614
Net earnings - - - 32,789 - 32,789
Unrealized loss on
investment, net of tax - - - - (20,275) (20,275)
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Comprehensive net earnings 12,514
Cash dividends
($.08 per share) - - - (10,568) - (10,568)
Issuance of common stock 128,487 3,109 - - - 3,109
Stock compensation - - 465 - - 465
Purchase and retirement of
common stock (1,501,300) - - (31,791) - (31,791)
-----------------------------------------------------------------------
Balance at
April 30, 2000 130,907,175 $250,668 $(8,128) $ 920,046 $(3,243) $1,159,343
=======================================================================
Balance at
February 1, 1999 142,114,167 $230,761 $(4,703) $1,074,487 - $1,300,545
Net earnings - - - 31,538 - 31,538
Cash dividends
($.08 per share) - - - (11,355) - (11,355)
Issuance of common stock 168,431 5,077 - - - 5,077
Stock compensation - 5,994 (4,274) - - 1,720
Purchase and retirement of
common stock (1,357,500) - - (41,210) - (41,210)
-----------------------------------------------------------------------
Balance at
April 30, 1999 140,925,098 $241,832 $(8,977) $1,053,460 - $1,286,315
=======================================================================
<FN>
These statements should be read in conjunction with the Notes to
Consolidated Financial Statements contained herein.
</TABLE>
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NORDSTROM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months
Ended April 30,
---------------------
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 32,789 $ 31,538
Adjustments to reconcile net earnings to net
cash (used for) provided by operating activities:
Depreciation and amortization 47,625 46,295
Amortization of deferred lease
credits and other, net (2,162) (1,304)
Stock-based compensation expense 465 1,720
Change in:
Accounts receivable, net 29,648 50,883
Merchandise inventories (124,882) (114,563)
Prepaid income taxes and other (7,452) (4,696)
Accounts payable 59,282 51,897
Accrued salaries, wages and
related benefits (60,863) (62,353)
Income tax liabilities and other accruals (7,660) 2,156
Other liabilities 502 1,903
-------- --------
Net cash (used for) provided by operating activities (32,708) 3,476
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (66,071) (66,547)
Additions to deferred lease credits 22,904 24,201
Other, net (4,855) (4,264)
-------- --------
Net cash used for investing activities (48,022) (46,610)
-------- --------
FINANCING ACTIVITIES:
Increase (decrease) in notes payable 148,326 (78,783)
Proceeds from long-term borrowings 11,176 -
Principal payments on long-term debt (42,103) (94)
Proceeds from issuance of common stock 3,109 5,077
Cash dividends paid (10,568) (11,355)
Purchase and retirement of common stock (31,791) (41,210)
-------- --------
Net cash provided by (used for) financing activities 78,149 (126,365)
-------- --------
Net decrease in cash and cash equivalents (2,581) (169,499)
Cash and cash equivalents at beginning of period 27,042 241,431
-------- --------
Cash and cash equivalents at end of period $ 24,461 $ 71,932
======== ========
<FN>
These statements should be read in conjunction with the Notes to
Consolidated Financial Statements contained herein.
</TABLE>
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NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
---------------------
The consolidated balance sheets of Nordstrom, Inc. and subsidiaries (the
"Company") as of April 30, 2000 and 1999, and the related consolidated
statements of earnings, cash flows and shareholders' equity for the periods
then ended, have been prepared from the accounts without audit.
The consolidated financial information applicable to interim periods
is not necessarily indicative of the results for the fiscal year.
The financial information should be read in conjunction with the Notes to
Consolidated Financial Statements contained in the Nordstrom, Inc. Annual
Report on Form 10-K for the fiscal year ended January 31, 2000.
In the opinion of management, the consolidated financial information
includes all adjustments (consisting only of normal, recurring
adjustments) necessary to present fairly the financial position of
Nordstrom, Inc. and subsidiaries as of April 30, 2000 and 1999, and the
results of their operations and cash flows for the periods then ended,
in accordance with generally accepted accounting principles applied on a
consistent basis.
Certain reclassifications of prior year balances have been made for
consistent presentation with the current year.
Recent Accounting Pronouncements
--------------------------------
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended by SFAS No. 137,
requires an entity to recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
Adoption of this standard, on February 1, 2001, is not expected to have a
material impact on the Company's financial statements.
Note 2 - Earnings Per Share
<TABLE>
<CAPTION>
Three Months
Ended April 30,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Basic shares 131,164,628 141,844,713
Dilutive effect of stock options
and restricted stock 462,564 1,131,501
----------- -----------
Diluted shares 131,627,192 142,976,214
=========== ===========
Antidilutive options 5,005,671 0
=========== ===========
</TABLE>
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NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
Note 3 - Investment
In September 1998, the Company purchased non-voting convertible preferred
stock in a private company. In June 1999, the investee completed an initial
public offering of common stock. Upon completion of the offering, the
Company's investment was converted to common stock, which has been
categorized as available-for-sale. In January 2000, the investee merged with
a private company in which the Company had previously purchased preferred
stock. The Company's available-for-sale investment has been adjusted to
reflect the consummation of the merger. A portion of the investment is
reported as short-term because the Company intends to sell it during fiscal
2000. Accumulated other comprehensive loss includes the decrease in the fair
market value of the investment based on its quoted market value at April 30,
2000, net of applicable tax benefits of $13 million.
Note 4 - Segment Reporting
The following tables set forth information for the Company's reportable
segments and a reconciliation to the consolidated totals:
<TABLE>
<CAPTION>
Three months ended Retail Credit Catalog/ Corporate
April 30, 2000 Stores Operations Internet and Other Eliminations Total
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales and revenues to
external customers $1,084,939 - $ 61,397 - - $1,146,336
Service charge income - $ 30,952 - - 30,952
Intersegment revenues 6,320 5,232 - $(11,552) -
Net earnings 56,719 3,517 (4,841) $ (22,606) - 32,789
Three months ended Retail Credit Catalog/ Corporate
April 30, 1999 Stores Operations Internet and Other Eliminations Total
---------------------------------------------------------------------------------------------------
Net sales and revenues to
external customers $ 997,901 - $ 41,204 - - $1,039,105
Service charge income - $ 28,378 - - - 28,378
Intersegment revenues 3,856 4,977 - - $(8,833) -
Net earnings 53,358 7,674 (7,032) $ (22,462) - 31,538
</TABLE>
Note 5 - Contingent Liabilities
Because the cosmetics and Nine West lawsuits, described in the Nordstrom, Inc.
Annual Report on Form 10-K for the fiscal year ended January 31, 2000, are
still in their preliminary stages, the Company is not in a position at this
time to quantify the amount or range of any possible losses related to those
claims. The Company intends to vigorously defend itself in those cases. While
no assurance can be given as to the ultimate outcomes 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.
The Company is also subject to other ordinary routine litigation incidental to
its business and with respect to which no material liability is expected.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Statements made in this filing that are not historical facts are forward
looking information that involve risks and uncertainties. Forward-looking
statements typically are identified by the use of such terms as "may," "will,"
"expect," "believe," "anticipate," "estimate," "plan" and similar words,
although some forward-looking statements are expressed differently. You
should be aware that our actual results could differ materially from
those contained in the forward-looking statements due to a number of
factors, which include, but are not limited to, the following: the
Company's ability to predict fashion trends, consumer apparel buying
patterns, the Company's ability to control costs and expenses,
the Company's ability to overcome technological problems, trends in personal
bankruptcies and bad debt write-offs, employee relations, adverse
weather conditions and other hazards of nature such as earthquakes and floods,
the Company's ability to continue its store, brand and line expansion plans,
and the impact of competitive market forces.
The following discussion should be read in conjunction with the Management's
Discussion and Analysis section of the Nordstrom, Inc. Annual Report on Form
10-K for the fiscal year ended January 31, 2000.
Results of Operations:
----------------------
The Company achieved a 10.3% sales increase during the first quarter of 2000
compared to the same quarter in 1999. Comparable store sales (sales in
stores open at least one full fiscal year at the beginning of the fiscal
year) increased 5.3%, partially due to one more Saturday and Sunday, and one
less Monday in the fiscal 2000 quarter than the first quarter of 1999. Sales
in the first quarter of 2000 also reflect the impact of clearance activity
for certain merchandise resulting from a reconfiguration of the women's
merchandise mix in the stores.
Gross profit (net sales less cost of sales and related buying and occupancy
expenses) as a percentage of net sales improved to 35.0% in the first quarter
of 2000, as compared to 33.8% in the same period in 1999. The increase was
due primarily to improvements in the Company's vendor programs and lower
occupancy costs as a percent of sales, which were partially offset by higher
markdowns due to the transition in the women's merchandise mix.
Selling, general and administrative expenses as a percentage of sales were
31.9% for the quarter ended April 30, 2000, compared to 30.4% for the quarter
ended April 30, 1999. The increase was primarily due to the increased
promotional expense associated with the Company's national advertising
campaign, credit card marketing programs, system expenditures and costs
related to growth and development of the Nordstrom.com subsidiary.
Interest expense, net, increased by 10.7% during the quarter, to $13.3
million, reflecting higher average borrowing levels, as compared to the prior
year, a portion of which was used to finance the Company's share repurchase
activity.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT.)
Net earnings for the three months ended April 30, 2000 increased 4.0% to
$32.8 million from $31.5 million in the same period in 1999, primarily due to
higher gross profit, partially offset by higher selling, general and
administrative expenses. Diluted earnings per share were $0.25, an increase
of 13.6% over the $0.22 achieved in the prior year, primarily due to a
decrease in the number of shares outstanding.
Liquidity and Capital Resources:
--------------------------------
The Company finances its working capital needs, capital expenditures and
share repurchase activity with cash provided by operations and borrowings.
The Company's cash and cash equivalents decreased $2.6 million during the
quarter ended April 30, 2000, as cash used for operating activities and
capital expenditures was slightly more than the cash provided by additional
short-term borrowings. The decrease in cash provided by operating activities
was primarily due to a decrease in cash collected from credit card
receivables.
During the quarter, the Company opened a new full-line store and a new Rack
store in Atlanta, Georgia. Additionally, in May 2000, the Company opened a
Rack store in Plano, Texas and one in Hurst, Texas. The Company plans to open
another five full-line stores and eight Rack stores during the remainder of
fiscal year 2000.
Although the Company has made commitments for stores opening in 2000 and
beyond, it is possible that in one or more instances store site negotiations
may be terminated and the store may not be built or delays may occur.
Furthermore, environmental and land use regulations and the difficulties
encountered by shopping center developers in securing financing could make
future development of stores more difficult, time-consuming and expensive.
In November 1999, the Board of Directors authorized an additional repurchase
of $150 million of the Company's common stock. During the three months ended
April 30, 2000, the Company repurchased 1.5 million shares of its common
stock for an aggregate of approximately $32 million. At April 30, 2000, the
Company had remaining share repurchase authorization of approximately $137
million.
The Company has invested $32.9 million in common shares of a public company,
which has a market value of $27.5 million as of April 30, 2000. The
unrealized loss has been reflected as a component of other comprehensive
income, as management believes that the reduction in fair value is temporary.
This investee is attempting to obtain additional capital to allow it to fund
its operations beyond their current fiscal year. In the event it is unable
to secure additional financing, the decrease in value may be deemed to be
other than temporary, and the Company may have to recognize a charge to
earnings.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT.)
Seasonality
------------
The Company's business, like that of other retailers, is subject to seasonal
fluctuations. Due to the Company's anniversary sale in July and holidays in
December, sales are higher in the second and fourth quarters of the fiscal
year than in the first and third quarters. Accordingly, results for any
quarter are not necessarily indicative of the results that may be achieved
for a full fiscal year.
Year 2000
---------
The Company transitioned into the Year 2000 without any material negative
effects on its business, operations or financial condition.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to the risk of fluctuating interest rates in the normal
course of business, primarily as a result of its short-term borrowing and
investment activities which generally bear interest at variable rates.
Because the short-term borrowings and investments, other than the investment
in marketable equity securities, have maturities of three months or less, the
Company believes that the risk of material loss is low, and that the carrying
amount approximates fair value. The Company's investment in marketable equity
securities is classified as available-for-sale and is recorded on the balance
sheet at fair value based upon the quoted market price with unrealized gains
or loss reported as a separate component of accumulated other comprehensive
(loss) income. During the quarter, the Company borrowed $148 million under
short term notes payable, which bear interest from 6.03% to 6.10%, and mature
from May 1, 2000 to May 22, 2000.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-------------------------
The information required under this item is included in the following section
of Part I, Item 1 of this report:
Note 5 in Notes to Consolidated Financial Statements
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Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
--------
(27.1) Financial Data Schedule is filed herein as an Exhibit.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter for which this
report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORDSTROM, INC.
(Registrant)
/s/ Michael G. Koppel
----------------------------------------------------
Michael G. Koppel
Vice President and Corporate Controller
(Principal Accounting Officer)
Date: June 7, 2000
------------
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NORDSTROM, INC. AND SUBSIDIARIES
Exhibit Index
Exhibit Method of Filing
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27.1 Financial Data Schedule Filed herewith electronically
