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52
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share and per option amounts
Weighted-average assumptions used to determine benefit obligation and net periodic benefit cost are as follows:
Fiscal year 2007 2006 2005
Assumption percentages used to determine
benefit obligation:
Discount rate 6.35% 6.00% 6.00%
Rate of compensation increase 3.00% 4.00% 4.00%
Assumption percentages used to determine net
periodic benefit cost:
Discount rate 6.00% 6.00% 6.00%
Rate of compensation increase 4.00% 4.00% 4.00%
Measurement date 10/31/07 10/31/06 10/31/05
In accordance with SFAS 158, beginning in fiscal 2008, we will measure our benefit obligation as of our fiscal year-end. We do not believe the impact will
be material.
We used a discount rate for 2007 that was determined by constructing a hypothetical bond portfolio based on bonds available on October 31, 2007
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. The
discount rate changed from 6.00% to 6.35% to reflect the current interest rate environment.
In 2007, we updated the post-retirement mortality table to better reflect plan experience. In addition, we updated our assumptions relating to
bonus payments.
As of October 31, 2007, 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
2008 $5
2009 5
2010 5
2011 5
2012 5
2013-2017 35
In 2008, we expect $3 of costs currently in accumulated other comprehensive earnings to be recognized as components of net periodic benefit cost.
This cost includes $1 for prior service cost and $2 for accumulated loss. We expect to make contributions to the plan of $5.
NOTE 12: 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.
During the third quarter, we entered into a Minimum Purchase Agreement with the Façonnable U.S. wholesale business whereby we committed
to purchase $246 of Façonnable inventory over the next three years. As of February 2, 2008, we have purchased $31 under the agreement.
Our estimated total purchase obligations, capital expenditure contractual commitments and inventory purchase orders were $1,382
as of February 2, 2008, including the remaining balance of $215 under the Minimum Purchase Agreement.
In connection with the purchase of foreign merchandise, we have outstanding import letters of credit totaling $8 as of February 2, 2008.