Nordstrom 1999 Annual Report Download - page 42

NORDSTROM, INC. AND SUBSIDIARIES
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(Note 1 continued)
$10,189 of checks not yet presented for payment drawn
in excess of cash balances.
Deferred Lease Credits: Deferred lease credits are amor-
tized on a straight-line basis primarily over the life of the
applicable lease.
Fair Value of Financial Instruments: The carrying amount
of cash equivalents and notes payable approximates fair
value because of the short maturity of these instruments.
The fair value of the Company’s investment in mar-
ketable equity securities is based upon the quoted market
price and is approximately $60,778 at January 31, 2000.
The fair value of long-term debt (including current
maturities), using quoted market prices of the same or
similar issues with the same remaining term to maturity,
is approximately $715,500 and $894,000 at January 31,
2000 and 1999.
Derivatives Policy: The Company limits its use of deriva-
tive financial instruments to the management of foreign
currency and interest rate risks.The effect of these activ-
ities is not material to the Company’s financial condition
or results of operations. The Company has no material
off-balance sheet credit risk, and the fair value of deriva-
tive financial instruments at January 31, 2000 and 1999 is
not material.
Statement of Financial Accounting Standards No. 133,
“Accounting For Derivative Instruments and Hedging
Activities,” as amended, requires an entity to recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair
value.The Company is currently reviewing the impact of
this statement; however, based on the Company’s mini-
mal use of derivatives, management expects that adoption
of this standard, in its fiscal year beginning February 1,
2001, will not have a material impact on the Company’s
consolidated financial statements.
Reclassifications: Certain reclassifications of prior year
balances have been made for consistent presentation with
the current year.
Note 2: Employee Benefits
The Company provides a profit sharing plan for
employees. The plan is fully funded by the Company
and is non-contributory except for employee contribu-
tions made under Section 401(k) of the Internal
R evenue Code. Under this provision of the plan, the
Company provides matching contributions up to a stipu-
lated percentage of employee contributions. Company
contributions to the profit sharing portion of the plan vest
over a seven-year period. The Company contribution is
established each year by the Board of Directors and totaled
$47,500, $50,000 and $45,000 in 1999, 1998 and 1997.
Note 3: Interest, Net
The components of interest, net are as follows:
Year ended January 31 , 2000 1999 1998
Short-term debt $ 2,584 $10,707 $ 10,931
Long-term debt 56,831 43,601 32,887
Total interest cost 59,415 54,308 43,818
Less: Interest income (3,521) (1,883) (1,221)
Capitalized interest (5,498) (5,334) (8,347)
Interest, net $50,396 $47,091 $3 4,250
Note 4: Income Taxes
Income taxes consist of the following:
Year ended January 31 , 2000 1999 1998
Current income taxes:
Federal $130,524 $113,270 $ 98,464
State and local 21,835 19,672 18,679
Total current
income taxes 152,359 132,942 117,143
Deferred income taxes:
Current (18,367) (1,357) (4,614)
Non-current (4,492) (585) 8,471
Total deferred
income taxes (22,859) (1,942) 3,857
Total income taxes $129,500 $1 31,000 $121,000
A reconciliation of the statutory Federal income tax rate
to the effective tax rate is as follows:
Year ended January 31 , 2000 1999 1998
Statutory rate 35.00% 35.00% 35.00%
State and local
income taxes, net of
Federal income taxes 4.06 4.03 4.17
Other, net (.06) (0.24) 0.21
Effective tax rate 39.00% 38.79 % 39 .38%