Nordstrom 2000 Annual Report Download - page 18

Cyan Mag Yelo Blk
20100444 Nordstrom
2001 Annual Report • 44pgs. + 4 covers pg. 16
8.375 x 10.875 • PDF • 150 lpi
PMS
5773
PMS
5503
16
NORDSTROM, INC. AND SUBSIDIARIES
Interest Expense, Net
Interest expense, net increased 24.4% in 2000 primarily
due to higher average borrowings to finance capital
expenditures, the purchase of Façonnable, S.A. and the
repurchase of shares. In 1999, interest expense, net
increased 7% as a result of higher average borrowings to
finance share repurchases. The Company repurchased 3.9
million and 10.2 million shares at an aggregate cost of
approximately $86 million and $303 million in 2000 and
1999, respectively.
Service Charge Income and Other, Net
Service charge income and other, net primarily represents
income from the Company’s credit card operations, offset by
miscellaneous expenses.
Service charge income and other, net increased in 2000 due
to higher service charge and late fee income associated with
increases in credit sales and the number of credit accounts,
and higher accounts receivable securitization gains. Service
charge income and other, net was flat in 1999.
Write-off of Investment
The Company held common shares in Streamline.com, Inc.,
an Internet grocery and consumer goods delivery company, at
a cost of approximately $33 million. Streamline ceased its
operations effective November 2000. During the year, the
Company wrote off the entire investment in Streamline.
Net Earnings
Net earnings for 2000 were lower than in 1999 due primarily
to the write-off of the Streamline investment ($20 million
after-tax, $.15 per share), non-recurring charges related to
the write-down of abandoned and impaired information and
technology projects ($6 million after-tax, $.05 per share),
and employee severance and other costs ($8 million after-
tax, $.06 per share). Net earnings, excluding non-recurring
charges would have been $136 million and $209 million in
2000 and 1999, respectively. In addition, the Company
experienced higher selling, general and administrative
expenses, partially offset by higher service charge income.
Net earnings for 1999 were slightly lower than 1998 as the
Company’s sales and gross margin improvements were offset
by increases in selling, general and administrative expenses.
Liquidity and Capital Resources
The Company finances its working capital needs, capital
expenditures, the purchase of Façonnable, and share
repurchase activity with cash provided by operations and
borrowings.
For the fiscal year ended January 31, 2001, net cash
provided by operating activities decreased approximately
$198 million compared to the fiscal year ended January 31,
2000, primarily due to lower net earnings and an increase in
accounts receivable and merchandise inventories, partially
offset by an increase in accounts payable. The increase in
accounts payable was primarily due to a change in the
Company’s policy to pay its vendors based on receipt of
goods rather than the invoice date. For the fiscal year ended
January 31, 2000, net cash provided by operating activities
decreased approximately $223 million compared to the fiscal
year ended January 31, 1999, primarily due to the non-
recurring benefit of prior year reductions in inventories and
customer receivable account balances.
For the fiscal year ended January 31, 2001, net cash used
for investing activities increased approximately $119 million
compared to the fiscal year ended January 31, 2000,
primarily due to an increase in capital expenditures to fund
new stores and remodels. Additionally, approximately $84
million of cash, net of cash acquired, was used to purchase
Façonnable, S.A. ("Façonnable"), of Nice, France, a designer,
wholesaler and retailer of high quality men’s and women’s
apparel and accessories. The purchase also provides for
contingent payments to the principals that may be paid in
fiscal 2006 based on the performance of the subsidiary and
the continued active involvement of the principals in
Façonnable. The contingent payments will be expensed
when it becomes probable that the performance targets will