Nordstrom 2001 Annual Report Download - page 16

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20200324 NORDSTROM
2001 Annual Report • VERSION
8.375 x 10.875 • SCITEX • 175 lpi • Kodak 80# Cougar
Management’s Discussion and Analysis
1 4 NORDSTROM INC. AND SUBSIDIARIES
The remainder of the Company’s outstanding debt is not subject
to termination or interest rate adjustments based on changes in
credit ratings.
The following table summarizes the Company’s contractual
obligations and the expected effect on liquidity and cash f lows
excluding the $93 million construction loan and any potential
liability related to the Nordstrom.com Put Agreement.
Less
than 1 - 3 4 – 5 Over
Fiscal Year Total 1 Year Years Years 5 Years
Long-term
Debt $1,330.6 $77.7 $3.0 $700.6 $549.3
Capital Leases 17.2 1.3 2.2 2.2 11.5
Operating
Leases 674.1 66.9 125.2 108.5 373.5
Construction
Commitments 456.1 195.9 151.2 — 10 9.0
Total $2,478.0 $341.8 $281.6 $811.3 $1,043.3
Construction commitments include $109 million shown in the
Over 5 Years category for new stores construction. These contracts
do not have specific due dates and may become due sooner than
five years.
CRITICAL ACCOUNTING POLICIES
The preparation of the Company’s financial statements require
that management make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses,
and disclosure of contingent assets and liabilities. On an on-
going basis, the Company evaluates its estimates including
those related to doubtful accounts, inventory valuation, intangible
assets, income taxes, self-insurance liabilities, pensions, contingent
liabilities and litigation. The Company bases its estimates on
historical experience and on other assumptions that management
believes to be reasonable under the circumstances. Actual results
may differ from these estimates under dif ferent assumptions
or conditions.
Put Agreement
The holders of the minority interest of Nordstrom.com LLC, through
their ownership interests in its managing member, Nordstrom.com,
Inc., have the right to sell their shares of Nordstrom.com, Inc. to the
Company for effectively $80 million in the event that certain events
do not occur. This right would terminate if the Company provides at
least $100 million in additional funding to Nordstrom.com, Inc.
prior to July 1, 2002 or if Nordstrom.com, Inc. completes an initial
public offering of its common stock prior to September 1, 2002.
It is possible that the Company will choose not to provide the $100
million in additional funding and that Nordstrom.com, Inc. will not
complete an initial public offering on or before September 1, 2002.
If and when the Company determines that neither of those events is
likely to occur and that the purchase of the minority interest shares
is probable, the Company will begin to accrete, over the period
remaining prior to the purchase, the difference between that $80
million and the fair value of the shares. Based on current values
for similar businesses, management of the Company believes that
the amount of that difference could range from $55 million to
$65 million.
Valuation of Intangible Assets
The Company is in the process of performing a valuation to
determine if there has been an impairment of the $138 million
intangible asset resulting from the purchase of Façonnable. This is
the Company’s only intangible asset. The valuation is dependent
on many factors including future performance and market
conditions. Should this asset be impaired, a charge will be
recorded in the first quarter of 2002.
Realization of Deferred Tax Assets
As of January 31, 2002, the Company has $34 million of capital
loss carryforwards. The utilization of this deferred tax asset is
contingent upon the ability to generate capital gains within the
next four years. No valuation allowance has been provided
because management believes it is probable that the full benefit
of the carryforwards will be realized.