UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) May 13, 2010
NORDSTROM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
| WASHINGTON | 001-15059 | 91-0515058 | ||
| (STATE OR OTHER JURISDICTION | (COMMISSION FILE | (I.R.S. EMPLOYER | ||
| OF INCORPORATION) | NUMBER) | 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
INAPPLICABLE
(FORMER NAME OR FORMER ADDRESS IF CHANGED SINCE LAST REPORT)
(FORMER NAME OR FORMER ADDRESS IF CHANGED SINCE LAST REPORT)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2 below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 Results of Operations and Financial Condition
On May 13, 2010, Nordstrom, Inc. issued an earnings release announcing its results of operations
for the quarter ended May 1, 2010, its financial position as of May 1, 2010, and its cash flows for
the quarter ended May 1, 2010. A copy of this earnings release is attached as Exhibit 99.1.
ITEM 7.01 Regulation FD Disclosure
On May 13, 2010, Nordstrom, Inc. issued an earnings release announcing its results of operations
for the quarter ended May 1, 2010, its financial position as of May 1, 2010, and its cash flows for
the quarter ended May 1, 2010. A copy of this earnings release is attached as Exhibit 99.1.
ITEM 9.01 Financial Statements and Exhibits
| 99.1 | Nordstrom earnings release dated May 13, 2010 relating to the Company’s results of operations for the quarter ended May 1, 2010, its financial position as of May 1, 2010, and its cash flows for the quarter ended May 1, 2010. |
SIGNATURE
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 hereunto duly authorized.
| NORDSTROM, INC. |
||||
| By: | /s/ Robert B. Sari | |||
| Robert B. Sari | ||||
| Executive Vice President, General Counsel and Corporate Secretary |
||||
Dated: May 13, 2010
EXHIBIT INDEX
| EXHIBIT | ||
| NUMBER | DESCRIPTION | |
99.1
|
Nordstrom earnings release dated May 13, 2010 relating to the Company’s results of operations for the quarter ended May 1, 2010, its financial position as of May 1, 2010, and its cash flows for the quarter ended May 1, 2010. |
Exhibit 99.1
 FOR RELEASE: May 13, 2010 at 1:05 p.m. PT |
INVESTOR CONTACT: | Rob Campbell Nordstrom, Inc. (206) 303-3290 |
|
| MEDIA CONTACT: | Colin Johnson Nordstrom, Inc. (206) 373-3036 |
NORDSTROM REPORTS FIRST QUARTER 2010 EARNINGS
SEATTLE, Wash. (May 13, 2010) — Nordstrom, Inc. (NYSE: JWN) today reported net earnings of
$116 million, or $0.52 per diluted share, for the first quarter ended May 1, 2010. This
represented an increase of 43.8 percent compared with net earnings of $81 million, or $0.37 per
diluted share, for the same quarter last year.
First quarter same-store sales increased 12.0 percent compared with the same period in fiscal
2009. Net sales in the first quarter were $1.99 billion, an increase of 16.7 percent compared with
net sales of $1.71 billion during the same period in fiscal 2009.
First Quarter Summary
Nordstrom’s first quarter performance continued the sales momentum experienced
throughout the latter half of 2009. The company’s ongoing progress in serving its customers with a
compelling blend of fashion, newness, and quality, led to same-store sales
increases in each month of the quarter.
| • | Multi-channel same-store sales increased 13.7 percent compared with the same period in fiscal 2009. Full-line same-store sales in the first quarter increased 11.7 percent and Direct sales increased 38.7 percent compared to the same period in 2009. Top-performing merchandise categories for multi-channel included Jewelry, Dresses and Women’s Shoes. The Midwest, Northeast, and South regions were the top-performing geographic areas for full-line stores relative to the first quarter of 2009. During the first quarter, the company opened two Nordstrom full-line stores. | ||
| • | Nordstrom Rack continued to experience positive performance with a same-store sales increase of 1.9 percent in the first quarter compared with the same period in fiscal 2009. During the first quarter, the company opened six Nordstrom Rack stores. | ||
| • | Gross profit, as a percentage of net sales, increased approximately 245 basis points compared with last year’s first quarter. The improvement was mainly driven by merchandise margin, as a percentage of net sales, but also from reduced buying and occupancy costs as a percentage of net sales. The company ended the quarter with sales per square foot up 13.0 percent and inventory per square foot up 1.9 percent compared with the first quarter of 2009. | ||
| • | Retail selling, general and administrative expenses, as a percentage of net sales, increased approximately 60 basis points primarily due to the timing of performance-related expenses, and to a lesser extent, due to planned expenses related to new stores and technology. This increase in performance-related expense in the quarter is reflective of the improvement in the company’s sales and earnings performance over its plan, and better visibility into operating trends relative to the first quarter of 2009. | ||
| • | Credit selling, general, and administrative expenses were flat compared with last year’s first quarter. Bad debt expense decreased $4 million compared with the first quarter of 2009. The decrease in bad debt expense reflects recent improvements in our credit trends. Delinquencies as a percentage of ending accounts receivable during the first quarter were 4.2 percent, which is a sequential improvement of 110 basis points compared with the fourth quarter of 2009 and reflects delinquency rates comparable to those experienced during the first half of 2009. | ||
| • | Earnings before interest and taxes increased to $219 million, or 10.5 percent of total revenues, from $146 million, or 8.1 percent of total revenues, in last year’s first quarter. |
Expansion Update
During the first quarter of 2010, Nordstrom opened the following stores:
| Location | Store Name | Square Footage | Date | |||||
Full-Line Stores |
||||||||
Braintree, Massachusetts
|
South Shore Plaza | 155,000 | March 26 | |||||
Newport Beach, California
|
Fashion Island | 143,000 | April 16 | |||||
Nordstrom Rack Stores |
||||||||
Houston, Texas
|
The Centre at Post Oak | 31,000 | February 25 | |||||
Kendall, Florida
|
The Palms at Town & Country | 35,000 | March 11 | |||||
Coral Gables, Florida
|
Miracle Marketplace | 33,000 | March 11 | |||||
Denver, Colorado
|
Cherry Creek | 40,000 | March 25 | |||||
Framingham, Massachusetts
|
Shoppers World | 40,000 | April 8 | |||||
Atlanta, Georgia
|
Buckhead Station | 39,000 | April 22 | |||||
On May 7, 2010, Nordstrom relocated a full-line store in Los Cerritos Center in Cerritos,
California which replaced a store built in 1981. On May 11, 2010, Nordstrom opened a Nordstrom Rack
store at One Union Square South in Manhattan, New York.
Fiscal Year 2010 Outlook
Based on first quarter performance, Nordstrom is revising its outlook for the 2010 year. For
the 2010 fiscal year, Nordstrom expects earnings per diluted share in the range of $2.50 to $2.65,
increased from the previous range of $2.35 to $2.55.
The company’s revised expectations for fiscal 2010 are as follows:
Same-store Sales
|
4.0 percent to 6.0 percent increase | |
Credit Card Revenues
|
$35 to $45 million increase | |
Gross Profit (%)
|
100 to 130 basis point increase | |
Retail Selling, General and Admin. Expense ($)
|
$200 to $250 million increase | |
Credit Selling, General and Admin. Expense ($)
|
$15 to $30 million decrease | |
Total Selling, General and Admin. Expense (%)
|
25 to 50 basis point decrease | |
Interest Expense, net
|
$5 to $15 million decrease | |
Effective Tax Rate
|
38.6 percent | |
Earnings per Diluted Share
|
$2.50 to $2.65 | |
Diluted Shares Outstanding
|
223.7 million |
Conference Call Information
The company’s senior management will host a conference call to discuss first quarter results
at 4:45 p.m. Eastern Daylight Time today. To listen, please dial 517-308-9140 (passcode: NORD). A
telephone replay will be available beginning approximately one hour after the conclusion of the
call by dialing 203-369-3965 (passcode: 6673) until the close of business on May 20, 2010.
Interested parties may also listen to the live call over the Internet by visiting the Investor
Relations section of the company’s corporate Web site at http://investor.nordstrom.com. An archived
webcast will be available in the Webcasts section through August 13, 2010.
About Nordstrom
Nordstrom, Inc. is one of the nation’s leading fashion specialty retailers, with 193 stores
located in 28 states. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 114
full-line stores, 76 Nordstrom Racks, two Jeffrey boutiques and one clearance store. Nordstrom also
serves customers through its online presence at www.nordstrom.com and through its catalogs.
Nordstrom, Inc’s common stock is publicly traded on the NYSE under the symbol JWN.
Certain statements in this news release contain “forward-looking” information (as defined in
the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties,
including, but not limited to, anticipated financial outlook for the
fiscal year ending January 29, 2011, anticipated annual same-store sales rate, anticipated store openings and trends
in company operations. Such statements are based upon the current beliefs and expectations of the
company’s management and are subject to significant risks and uncertainties. Actual future results
and trends may differ materially from historical results or current
expectations depending upon factors including, but not limited to the impact
of deteriorating economic and market
conditions and the resultant impact on consumer spending patterns, the company’s ability to respond to the
business environment and fashion trends, the company’s ability to safeguard its brand and
reputation, effective inventory management, efficient and proper allocation of the company’s
capital resources, successful execution of the company’s store growth strategy including the timely
completion of construction associated with newly planned stores, relocations and remodels, all of
which may be impacted by the financial health of third parties, the company’s compliance with
applicable banking and related laws and regulations impacting the company’s ability to extend
credit to its customers, trends in personal bankruptcies and bad debt write-offs, availability of
consumer credit, impact of the current regulatory environment and financial system reforms, changes
in interest rates, disruptions in the company’s supply chain, the company’s ability to maintain its
relationship with vendors who may be experiencing economic difficulties, the geographic locations
of the company’s stores, the company’s ability to maintain its relationships with its employees and
to effectively train and develop its future leaders, the company’s compliance with information
security and privacy laws and regulations, employment laws and regulations and other laws and
regulations applicable to the company, successful execution of the company’s information technology
strategy, successful execution of the company’s multi-channel strategy, risks related to
fluctuations in world currencies, public health concerns and the resulting impact on consumer
spending patterns, supply chain, and employee health, weather conditions and hazards of nature that
affect consumer traffic and consumers’ purchasing patterns, the effectiveness of planned
advertising, marketing, and promotional campaigns, and the company’s ability to control costs. Our
SEC reports, including our Form 10-K for the fiscal year ended January 30, 2010, contain other
information on these and other factors that could affect our financial results and cause actual
results to differ materially from any forward-looking information we may provide. The company
undertakes no obligation to update or revise any forward-looking statements to reflect subsequent
events, new information or future circumstances.
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF EARNINGS — 1st Quarter
(unaudited; amounts in millions, except per share data)
CONSOLIDATED STATEMENTS OF EARNINGS — 1st Quarter
(unaudited; amounts in millions, except per share data)
| Quarter ended | ||||||||
| 5/1/10 | 5/2/09 | |||||||
Net sales |
$ | 1,990 | $ | 1,706 | ||||
Credit card revenues |
97 | 86 | ||||||
Total revenues |
2,087 | 1,792 | ||||||
Cost of sales and related buying & occupancy costs |
(1,243 | ) | (1,107 | ) | ||||
Selling, general and administrative expenses: |
||||||||
Retail |
(533 | ) | (447 | ) | ||||
Credit |
(92 | ) | (92 | ) | ||||
Earnings before interest and income taxes |
219 | 146 | ||||||
Interest expense, net |
(31 | ) | (31 | ) | ||||
Earnings before income taxes |
188 | 115 | ||||||
Income tax expense |
(72 | ) | (34 | ) | ||||
Net earnings |
$ | 116 | $ | 81 | ||||
Earnings per share |
||||||||
Basic |
$ | 0.53 | $ | 0.38 | ||||
Diluted |
$ | 0.52 | $ | 0.37 | ||||
Weighted average shares outstanding |
||||||||
Basic |
218.4 | 215.9 | ||||||
Diluted |
222.4 | 217.4 | ||||||
NORDSTROM, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; amounts in millions)
CONSOLIDATED BALANCE SHEETS
(unaudited; amounts in millions)
| 5/1/10 | 1/30/10 | 5/2/09 | ||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 1,040 | $ | 795 | $ | 78 | ||||||
Accounts receivable, net |
1,964 | 2,035 | 1,921 | |||||||||
Merchandise inventories |
1,067 | 898 | 1,004 | |||||||||
Current deferred tax assets, net |
234 | 238 | 220 | |||||||||
Prepaid expenses and other |
84 | 88 | 70 | |||||||||
Total current assets |
4,389 | 4,054 | 3,293 | |||||||||
Land, buildings and equipment, net |
2,262 | 2,242 | 2,231 | |||||||||
Goodwill |
53 | 53 | 53 | |||||||||
Other assets |
252 | 230 | 183 | |||||||||
Total assets |
$ | 6,956 | $ | 6,579 | $ | 5,760 | ||||||
Liabilities and Shareholders’ Equity |
||||||||||||
Current liabilities: |
||||||||||||
Commercial paper |
$ | — | $ | — | $ | 125 | ||||||
Accounts payable |
908 | 726 | 594 | |||||||||
Accrued salaries, wages and related benefits |
216 | 336 | 182 | |||||||||
Other current liabilities |
621 | 596 | 539 | |||||||||
Current portion of long-term debt |
6 | 356 | 375 | |||||||||
Total current liabilities |
1,751 | 2,014 | 1,815 | |||||||||
Long-term debt, net |
2,756 | 2,257 | 2,002 | |||||||||
Deferred property incentives, net |
481 | 469 | 459 | |||||||||
Other liabilities |
274 | 267 | 210 | |||||||||
Commitments and contingencies |
||||||||||||
Shareholders’ equity: |
||||||||||||
Common stock, no par value: 1,000 shares
authorized; 218.9, 217.7, and 216.2 shares
issued and outstanding |
1,107 | 1,066 | 1,014 | |||||||||
Retained earnings |
607 | 525 | 269 | |||||||||
Accumulated other comprehensive loss |
(20 | ) | (19 | ) | (9 | ) | ||||||
Total shareholders’ equity |
1,694 | 1,572 | 1,274 | |||||||||
Total liabilities and shareholders’ equity |
$ | 6,956 | $ | 6,579 | $ | 5,760 | ||||||
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; amounts in millions)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; amounts in millions)
| Quarter | Quarter | |||||||
| ended | ended | |||||||
| 5/1/10 | 5/2/09 | |||||||
Operating Activities |
||||||||
Net earnings |
$ | 116 | $ | 81 | ||||
Adjustments to reconcile net earnings to net cash provided
by operating activities: |
||||||||
Depreciation and amortization of buildings and equipment, net |
79 | 77 | ||||||
Amortization of deferred property incentives and other, net |
(15 | ) | (10 | ) | ||||
Stock-based compensation expense |
10 | 7 | ||||||
Deferred income taxes, net |
(11 | ) | (20 | ) | ||||
Tax benefit from stock-based payments |
7 | 1 | ||||||
Excess tax benefit from stock-based payments |
(7 | ) | (1 | ) | ||||
Provision for bad debt expense |
63 | 67 | ||||||
Change in operating assets and liabilities: |
||||||||
Accounts receivable |
13 | (16 | ) | |||||
Merchandise inventories |
(159 | ) | (114 | ) | ||||
Prepaid expenses and other assets |
— | (1 | ) | |||||
Accounts payable |
172 | 84 | ||||||
Accrued salaries, wages and related benefits |
(120 | ) | (32 | ) | ||||
Other current liabilities |
20 | 31 | ||||||
Deferred property incentives |
28 | 42 | ||||||
Other liabilities |
8 | 9 | ||||||
Net cash provided by operating activities |
204 | 205 | ||||||
Investing Activities |
||||||||
Capital expenditures |
(95 | ) | (102 | ) | ||||
Change in credit card receivables originated at third parties |
(4 | ) | (30 | ) | ||||
Other, net |
1 | — | ||||||
Net cash used in investing activities |
(98 | ) | (132 | ) | ||||
Financing Activities |
||||||||
Repayments of commercial paper borrowings, net |
— | (10 | ) | |||||
Proceeds from long-term borrowings, net of discounts |
498 | — | ||||||
Principal payments on long-term borrowings |
(352 | ) | (1 | ) | ||||
Decrease in cash book overdrafts |
(3 | ) | (32 | ) | ||||
Cash dividends paid |
(34 | ) | (35 | ) | ||||
Proceeds from exercise of stock options |
17 | 3 | ||||||
Proceeds from employee stock purchase plan |
7 | 7 | ||||||
Excess tax benefit from stock-based payments |
7 | 1 | ||||||
Other, net |
(1 | ) | — | |||||
Net cash provided by (used in) financing activities |
139 | (67 | ) | |||||
Net increase in cash and cash equivalents |
245 | 6 | ||||||
Cash and cash equivalents at beginning of period |
795 | 72 | ||||||
Cash and cash equivalents at end of period |
$ | 1,040 | $ | 78 | ||||
NORDSTROM, INC.
STATEMENTS OF EARNINGS BY SEGMENT
(unaudited; amounts in millions, except percentages)
STATEMENTS OF EARNINGS BY SEGMENT
(unaudited; amounts in millions, except percentages)
Retail
Our Retail
business includes our multi-channel operations, which are composed of our full-line and
online stores, and our Rack and Jeffrey stores; and also includes unallocated corporate center
expenses. The following tables summarize the results of our Retail business for the quarter ended
May 1, 2010 compared with the quarter ended May 2, 2009:
| Quarter | Quarter | |||||||||||||||
| ended | ended | |||||||||||||||
| 5/1/10 | % of sales1 | 5/2/09 | % of sales1 | |||||||||||||
Net sales |
$ | 1,990 | 100.0 | % | $ | 1,706 | 100.0 | % | ||||||||
Cost of sales and related buying
& occupancy costs |
(1,227 | ) | (61.7 | %) | (1,095 | ) | (64.2 | %) | ||||||||
Gross profit |
763 | 38.3 | % | 611 | 35.8 | % | ||||||||||
Selling, general and administrative expenses |
(533 | ) | (26.8 | %) | (447 | ) | (26.2 | %) | ||||||||
Earnings before interest and income taxes |
230 | 11.5 | % | 164 | 9.6 | % | ||||||||||
Interest expense, net |
(24 | ) | (1.2 | %) | (21 | ) | (1.2 | %) | ||||||||
Earnings before income taxes |
$ | 206 | 10.4 | % | $ | 143 | 8.4 | % | ||||||||
| 1 | Subtotals and totals may not foot due to rounding. |
NORDSTROM, INC.
STATEMENTS OF EARNINGS BY SEGMENT
(unaudited; amounts in millions, except percentages)
STATEMENTS OF EARNINGS BY SEGMENT
(unaudited; amounts in millions, except percentages)
Credit
Our Credit business earns finance charges, interchange fees and late fee income through operation
of the Nordstrom private label and Nordstrom VISA credit cards. The following tables summarize the
results of our Credit business for the quarter ended May 1, 2010 compared with the quarter ended
May 2, 2009:
| Quarter | Quarter | |||||||
| ended | ended | |||||||
| 5/1/10 | 5/2/09 | |||||||
Credit card revenues |
$ | 97 | $ | 86 | ||||
Interest expense |
(7 | ) | (10 | ) | ||||
Net credit card income |
90 | 76 | ||||||
Cost of sales — loyalty program |
(16 | ) | (12 | ) | ||||
Selling, general and administrative expenses: |
||||||||
Operational and marketing expense |
(29 | ) | (25 | ) | ||||
Bad debt expense |
(63 | ) | (67 | ) | ||||
Loss before income taxes |
$ | (18 | ) | $ | (28 | ) | ||
The following table illustrates the allowance for doubtful accounts activity for the quarter
ended May 1, 2010 and May 2, 2009:
| Quarter | Quarter | |||||||
| ended | ended | |||||||
| 5/1/10 | 5/2/09 | |||||||
Allowance at beginning of period |
$ | 190 | $ | 138 | ||||
Bad debt provision |
63 | 67 | ||||||
Net write-offs |
(63 | ) | (44 | ) | ||||
Allowance at end of period |
$ | 190 | $ | 161 | ||||
Allowance as a percentage of accounts receivable |
9.2 | % | 8.0 | % | ||||
Delinquent balances over thirty days as a percentage of accounts receivable |
4.2 | % | 3.9 | % | ||||
Bad debt provision as a percentage of average accounts receivable1 |
11.9 | % | 13.3 | % | ||||
Net write-offs as a percentage of average receivables2 |
11.9 | % | 8.7 | % | ||||
| 1 | Based upon annualized first quarter bad debt provision. | |
| 2 | Based upon annualized first quarter net write-offs. |
NORDSTROM, INC.
ADJUSTED DEBT TO EBITDAR (NON-GAAP FINANCIAL MEASURE)
(unaudited; amounts in millions)
ADJUSTED DEBT TO EBITDAR (NON-GAAP FINANCIAL MEASURE)
(unaudited; amounts in millions)
We use various financial measures in our conference calls, investor meetings, and other forums
which may be considered non-GAAP financial measures within the meaning of Regulation G of the
Securities and Exchange Commission. The following disclosure provides additional information
regarding our Adjusted Debt to EBITDAR as of May 1, 2010:
Adjusted Debt to EBITDAR is one of our key financial metrics, and we believe that our debt levels
are best analyzed using this measure. Our current goal is to manage debt levels to maintain an
investment grade credit rating as well as operate with an efficient capital structure for our size,
growth plans and industry. Investment grade credit ratings are important to maintaining access to a
variety of short-term and long-term sources of funding, and we rely on these funding sources to
continue to grow our business. We believe a higher ratio, among other factors, could result in
rating agency downgrades. In contrast, we believe a lower ratio would result in a higher cost of
capital and could negatively impact shareholder returns. As of May 1, 2010 our Adjusted Debt to
EBITDAR was 2.5 compared with 2.7 as of May 2, 2009.
Adjusted Debt to EBITDAR is not a measure of financial performance under GAAP and should not be
considered a substitute for debt to net earnings, net earnings or debt as determined in accordance
with GAAP. In addition, Adjusted Debt to EBITDAR does have limitations:
| • | Adjusted Debt is not exact, but rather our best estimate of the total company debt we would incur if we had purchased the property and issued debt associated with our operating leases; | ||
| • | EBITDAR does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, including leases, or the cash requirements necessary to service interest or principal payments on our debt; and | ||
| • | Other companies in our industry may calculate Adjusted Debt to EBITDAR differently than we do, limiting its usefulness as a comparative measure. |
To compensate for these limitations, we analyze Adjusted Debt to EBITDAR in conjunction with other
GAAP financial and performance measures impacting liquidity, including operating cash flows,
capital spending and net earnings. The closest GAAP measure is debt to net earnings, which was 5.8
and 6.9 for the first quarter of 2010 and 2009. The following is a comparison of debt to net
earnings and Adjusted Debt to EBITDAR:
| 20101 | 20091 | |||||||
Debt2 |
$ | 2,762 | $ | 2,502 | ||||
Add: rent expense x 83 |
384 | 296 | ||||||
Adjusted Debt |
$ | 3,146 | $ | 2,798 | ||||
Net earnings |
476 | 363 | ||||||
Add: income tax expense |
293 | 204 | ||||||
Add: interest expense, net |
138 | 131 | ||||||
Earnings before interest and income taxes |
907 | 698 | ||||||
Add:
depreciation and amortization of buildings and equipment |
314 | 307 | ||||||
Add: rent expense |
48 | 37 | ||||||
EBITDAR |
$ | 1,269 | $ | 1,042 | ||||
Debt to Net Earnings |
5.8 | 6.9 | ||||||
Adjusted Debt to EBITDAR |
2.5 | 2.7 | ||||||
| 1 | The components of adjusted debt are as of May 1, 2010 and May 2, 2009, while the components of EBITDAR are for the 12 months ended May 1, 2010 and May 2, 2009. | |
| 2 | Debt includes $265 of commercial paper borrowings outstanding as of May 2, 2009. There were no outstanding commercial paper borrowings as of May 1, 2010. | |
| 3 | The multiple of eight times rent expense used to calculate adjusted debt is our best estimate of the debt we would record for our leases that are classified as operating if they had met the criteria for a capital lease, or we had purchased the property. |
NORDSTROM, INC.
FREE CASH FLOW (NON-GAAP FINANCIAL MEASURE)
(unaudited; amounts in millions)
FREE CASH FLOW (NON-GAAP FINANCIAL MEASURE)
(unaudited; amounts in millions)
We use various financial measures in our conference calls, investor meetings, and other forums
which may be considered non-GAAP financial measures within the meaning of Regulation G of the
Securities and Exchange Commission. The following disclosure provides additional information
regarding our free cash flow for the quarter ended May 1, 2010 and May 2, 2009:
Free cash flow is one of our key liquidity measures and in conjunction with GAAP measures, provides
us with a meaningful analysis of our cash levels. Free cash flow is not a measure of liquidity
under GAAP and should not be considered a substitute for operating cash flows as determined in
accordance with GAAP. In addition, free cash flow does have limitations:
| • | Free cash flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs; and | ||
| • | Other companies in our industry may calculate free cash flow differently than we do, limiting its usefulness as a comparative measure. |
To compensate for these limitations, we analyze free cash flow in conjunction with other GAAP
financial and performance measures impacting liquidity, including operating cash flows. The closest
GAAP measure is net cash provided by operating activities, which was $204 and $205 for the quarters
ended May 1, 2010 and May 2, 2009. The following is a reconciliation of our net cash provided by
operating activities and free cash flow:
| Quarter ended | Quarter ended | |||||||
| 5/1/10 | 5/2/09 | |||||||
Net cash provided by operating activities |
$ | 204 | $ | 205 | ||||
Less: Capital expenditures |
(95 | ) | (102 | ) | ||||
Change in credit card receivables originated at
third parties |
(4 | ) | (30 | ) | ||||
Cash dividends paid |
(34 | ) | (35 | ) | ||||
Decrease in cash book overdrafts |
(3 | ) | (32 | ) | ||||
Free cash flow |
$ | 68 | $ | 6 | ||||
Net cash used in investing activities |
(98 | ) | (132 | ) | ||||
Net cash provided by (used in) financing activities |
139 | (67 | ) | |||||