Nordstrom 2002 Annual Report Download - page 40

notes to consolidated
financial statements
38 NORDSTROM INC. AND SUBSIDIARIES
Nonemployee Director Stock Incentive Plan
In May 2002, our shareholders approved the 2002 Nonemployee
Director Stock Incentive Plan under which we reserved 450,000
shares of our common stock for issuance to nonemployee directors.
The plan authorizes the grant of awards in the form of restricted
shares, stock units, nonqualified stock options or stock appreciation
rights, or any combination of these forms. As of January 31, 2003,
we issued 18,981 shares of common stock for a total expense of
$405 and had 431,019 remaining shares available for issuance.
Nordstrom.com
Nordstrom.com had two stock option plans, the “1999 Plan” and
the “2000 Plan,” as well as warrants issued to vendors in exchange
for services. In the third quarter of 2002, we purchased 3,608,322
options and 470,000 warrants in connection with the purchase of
the minority interest in Nordstrom.com (see Note 21) for a total
cash payment of $11,802. At January 31, 2003, there are no
outstanding options or warrants for Nordstrom.com.
Employee Stock Purchase Plan
We offer an Employee Stock Purchase Plan (“ESPP”) as a benefit
to our employees. Employees participate through payroll deductions
in amounts related to their base compensation. At the end of each
offering period, the participants purchase shares 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, we issued 596,351,
541,677 and 165,842 shares in 2002, 2001 and 2000. As of
January 31, 2003 and 2002, we had payroll deductions totaling
$3,000 and $2,641 for the purchase of shares. We have
2,196,130 shares available for issuance at January 31, 2003.
Pacesetter Stock Plan
We granted 10,653, 6,687 and 100 shares of common stock to
key employees under the Pacesetters stock plan in 2002, 2001 and
2000. The Pacesetter stock plan was established in 1997 to provide
additional incentive to employees, officers, consultants or advisors
to promote the success of the business. The related expense of
$240, $130 and $2 was recorded in 2002, 2001 and 2000. As of
January 31, 2003, we have 11,055 shares available for issuance.
Grants to Executive Officers
Options and performance share units granted to our president and
four other most highly compensated individuals were 8.3%, 7.9%
and 3.4% as a percent of total options and performance share units
granted in 2002, 2001 and 2000.
SFAS No. 123
If we 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, 2003 2002 2001
Net earnings, as reported $90,224 $124,688 $101,918
Incremental stock-based
compensation expense under
fair value, net of tax (19,674) (17,252) (13,458)
Pro forma net earnings $70,550 $107,436 $88,460
Earnings per share:
Basic—as reported $0.67 $0.93 $0.78
Basic—pro forma $0.52 $0.80 $0.68
Diluted—as reported $0.66 $0.93 $0.78
Diluted—pro forma $0.52 $0.80 $0.67
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, 2003 2002 2001
Stock Options:
Risk-free interest rate 4.3% 4.8% 6.4%
Volatility 69.0% 68.0% 65.0%
Dividend yield 1.5% 1.3% 1.0%
Expected life in years 5.0 5.0 5.0
Weighted-average fair value
at grant date $14 $10 $12
ESPP:
Risk-free interest rate 1.9% 4.3% 6.0%
Volatility 69.0% 68.0% 65.0%
Dividend yield 1.5% 1.3% 1.0%
Expected life in years 0.5 0.5 0.5
Weighted-average fair value
at grant date $7 $5 $6