Nordstrom 2006 Annual Report Download - page 63

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Nordstrom, Inc. and subsidiaries 45
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in thousands except per share and per option amounts
The components of SERP expense and a summary of significant assumptions are as follows:
Fiscal year
2006
2005
2004
Participant service cost
$2,270
$1,763
$1,489
Interest cost
5,331
4,747
3,965
Amortization of net loss
2,953
2,615
1,543
Amortization of prior service cost
1,049
962
962
Total expense
$11,603
$10,087
$7,959
Assumption percentages:
Discount rate
6.00%
6.00%
6.25%
Rate of compensation increase
4.00%
4.00%
4.00%
Measurement date
10/31/06
10/31/05
10/31/04
Beginning in fiscal 2008, we will measure our benefit obligation as of the fiscal year-end.
We used a discount rate for 2006 that was determined by constructing a hypothetical bond portfolio based on bonds available on October 31, 2006
rated “AA” or better by either Moody’s or Standard & Poor’s. This assumption was built to match the expected benefit payments under the SERP.
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.
As of October 31, 2006, the expected future benefit payments based upon the assumptions described above and including benefits attributable
to future employee service for the following periods are as follows:
Fiscal year
2007
$4,425
2008
4,434
2009
4,474
2010
4,734
2011
4,879
2012-2016
32,494
In 2007, we expect $4,135 of costs currently in accumulated other comprehensive earnings to be recognized as components of net periodic benefit
cost. This cost includes $1,049 for prior service cost and $3,086 for accumulated loss. We expect to make contributions to the plan of $4,425.
NOTE 11: COMMITMENTS AND CONTINGENT LIABILITIES
We are involved in routine claims, proceedings, and litigation arising in the normal course of our business. We do not believe any such claim,
proceeding or litigation, either alone or in aggregate, will have a material impact on our results of operations, financial position, or liquidity.
We are routinely audited for tax compliance by the federal, state, local and foreign jurisdictions in which we operate. The audits generally cover
several years and issues raised in an audit can impact other years that are available to be audited. While it is often difficult to predict whether we will
prevail, we believe that our tax reserves reflect the probable outcome of known tax contingencies. We periodically reassess the amount of such
reserves in light of changing facts and circumstances and adjust reserve balances as necessary. We have accrued $17,600 for anticipated tax and
interest to be paid for our exposure items. Our income tax returns for 2002 through 2005 are currently under examination by the IRS.
Our estimated total purchase obligations, capital expenditure contractual commitments and inventory purchase orders were $1,070,023 as of
February 3, 2007.
In connection with the purchase of foreign merchandise, we have outstanding import letters of credit totaling $9,846 as of February 3, 2007.