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48
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in thousands except per share and per option amounts
NOTE 13: ACCUMULATED OTHER COMPREHENSIVE EARNINGS
The following table shows the components of accumulated other comprehensive earnings, net of tax:
February 3, 2007
January 28, 2006
January 29, 2005
Foreign currency translation
$15,770
$14,461
$16,276
Fair value adjustment to asset
backed securities
4,982
7,787
4,857
Unrecognized loss on SERP, prior to
adoption of SFAS 158
(16,508)
(19,540)
(11,798)
Adjustment to initially apply SFAS 158
(12,824)
—
—
Total accumulated other
comprehensive earnings
$(8,580)
$2,708
$9,335
Included in our adjustment to initially apply SFAS 158 is our SERP, discussed in Note 10, and our employee retiree medical plan. Adoption of SFAS 158 had
a $(3,195) (net of tax of $2,042) impact to accumulated other comprehensive earnings for the retiree medical plan.
NOTE 14: EARNINGS PER SHARE
Earnings per basic share is computed using the weighted average number of common shares outstanding during the year. Earnings per diluted share
uses the weighted average number of common shares outstanding during the year plus dilutive common stock equivalents, primarily stock options
and performance share units.
Options and other equity instruments totaling 1,883 shares in 2006 and 144 shares in 2005 were excluded from earnings per diluted share because
their impact was anti-dilutive. There were no anti-dilutive options or other equity instruments in 2004.
Since the beginning of 2004, 16,899 shares have been issued upon the exercise of stock options; we repurchased 38,857 shares in 2006, 2005,
and 2004.
The computation of earnings per share is as follows:
Fiscal year
2006
2005
2004
Net earnings
$677,999
$551,339
$393,450
Basic shares
260,689
271,958
278,993
Dilutive effect of stock options and performance
share units
5,023
5,818
5,540
Diluted shares
265,712
277,776
284,533
Earnings per basic share
$2.60
$2.03
$1.41
Earnings per diluted share
$2.55
$1.98
$1.38
NOTE 15: SEGMENT REPORTING
We offer three channels through which our customers can shop: Full-Line and Rack retail stores and Nordstrom Direct (online and catalog). Our goal
is to create an integrated, consistent merchandise offering for our customers regardless of which channel they choose. These three channels meet
the aggregation criteria set forth in Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information
(“SFAS 131”) with the
exception of “distribution method.” Nordstrom Direct sells merchandise via our online store and the catalog as opposed to in a retail store. As such,
we aggregate our Full-Line and Rack stores into the Retail Stores segment and report Direct as a separate segment.
The Credit segment earns finance charges and securitization gains and losses through operation of the Nordstrom private label and co-branded VISA
credit cards. Intersegment revenues consist of interchange fees charged to our other segments.
The Other segment includes our Façonnable stores, our product development group, which coordinates the design and production of private label
merchandise sold in our retail stores, and our distribution network. This segment also includes our corporate center operations.
Beginning in September 2005, we changed our internal method for recognizing returns of Direct sales at Retail Stores. Previously, these returns were
recognized in the Direct segment and now they are recognized in the Retail Stores segment. We have adjusted our previously disclosed segment
information for 2005 and 2004 to present those years consistent with the 2006 method.