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38
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Amounts in thousands except per share amounts
In 2005, we updated the post-retirement mortality table to better anticipate future experience and granted additional years of service for
purposes of enhancing the SERP benefit for certain mid-career new hires. In addition, we updated our assumptions relating to bonus payments.
The expected future benefit payments based upon the same assumptions as of October 31, 2005 and including benefits attributable for future
employee service for the following periods are as follows:
Fiscal year
2006 $4,365
2007 4,361
2008 4,367
2009 4,428
2010 4,597
2011-2015 28,455
NOTE 4: INTEREST EXPENSE, NET
The components of interest expense, net are as follows:
Fiscal Year 2005 2004 2003
Interest expense on long-term debt $63,378 $88,518 $100,518
Less:
Interest income (13,273) (7,929) (5,981)
Capitalized interest (4,805) (3,161) (3,585)
Interest expense, net $45,300 $77,428 $90,952
NOTE 5: INCOME TAXES
Income tax expense consists of the following:
Fiscal Year 2005 2004 2003
Current income taxes:
Federal $311,996
$282,430 $118,559
State and local 38,100
45,091 15,516
Total current income tax expense 350,096 327,521 134,075
Deferred income taxes:
Current (7,208) (15,259) (7,904)
Non-current (9,002) (58,431) 29,129
Total deferred income tax (benefit) expense (16,210) (73,690) 21,225
Total income tax expense $333,886 $253,831 $155,300
A reconciliation of the statutory Federal income tax rate to the effective tax rate on earnings before income tax expense is as follows:
Fiscal Year 2005 2004 2003
Statutory rate 35.0% 35.0% 35.0%
State and local income taxes, net of federal
income taxes 3.2 3.5 3.1
Change in valuation allowance (0.1) 0.3 —
Other, net (0.4) 0.4 0.9
Effective tax rate 37.7% 39.2% 39.0%