Nordstrom 1999 Annual Report Download - page 40

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NORDSTROM, INC. AND SUBSIDIARIES
38
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,
principally through 71 large specialty stores and 28 clear-
ance stores.All of the Company’s stores are located in the
United States, with approximately 34% of its retail square
footage located in the state of California.
The Company purchases a significant percentage of its
merchandise from foreign countries, principally in the
Far East. An event causing a disruption in imports from
the Far East could have a material adverse impact on the
Company’s operations. In connection with the purchase
of foreign merchandise, the Company has outstanding
letters of credit totaling $60,038 at January 31, 2000.
On November 1, 1999 the Company established a sub-
sidiary to operate its Internet commerce and catalog busi-
nesses, N ORD STROM .com LLC . The Company contributed
certain assets and liabilities associated with its Internet
commerce and catalog businesses, and $10 million in cash.
Funds associated with Benchmark Capital and Madrona
Investment Group collectively contributed $16 million in
cash to the new entity. At January 31, 2000 the Company
owns approximately 81.4% of NORD STROM .com LLC, with
Benchmark Capital and Madrona Investment Group
holding the remaining minority interest. The minority
interest holders have the right to put their shares of
NORD STROM .com LLC to the Company at a multiple of
their original investment in the event that certain events
do not occur. This put right will expire if the Company
provides additional funding to N O RD ST RO M .com LLC prior
to September 2002.
Basis of Presentation: The consolidated financial state-
ments include the accounts of Nordstrom, Inc. and
its subsidiaries, the most significant of which are
Nordstrom Credit, Inc., Nordstrom National Credit Bank
and N ORD STRO M.com LLC . All significant intercompany
transactions and balances are eliminated in consolidation.
The presentation of these financial statements in con-
formity with generally accepted accounting principles
requires management to make estimates and judgments
that affect the reported amounts of assets, liabilities,
revenues and expenses. Actual results could differ from
those estimates.
Prior to 1999, the Company did not record sales returns
on the accrual basis of accounting because the difference
between the cash and accrual basis of accounting was not
material. In 1999, the Company began accruing sales
returns.Accordingly, the Company recorded the cumula-
tive effect of this change on prior periods, which resulted
in an increase in current assets of $9,840, an increase
in current liabilities of $25,948 and a corresponding
decrease in retained earnings of $16,108 as of February 1,
1997. Because the effects of this change were insignifi-
cant in 1997 and 1998, the Company recorded such
amounts in 1999 as a reduction in net income of $1,313,
or $.01 per share.
Notes to Consolidated
Financial Statements
Dollars in thousands except per share amounts