Nordstrom 2001 Annual Report Download - page 15

Blk + 1 pms PAGE 13 pms
550
Cyan Mag Yelo Blk
20200324 NORDSTROM
2001 Annual Report • VERSION
8.375 x 10.875 • SCITEX • 175 lpi • Kodak 80# Cougar
NORDSTROM INC. AND SUBSIDIARIES 1 3
Management’s Discussion and Analysis
Acquisition
In 2000, the Company acquired Façonnable, S.A. ("Façonnable"),
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 Façonnable,
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 of fice 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.