Nordstrom 2008 Annual Report Download - page 30

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30
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
(Dollars in millions)
INTEREST RATE RISK
Our primary exposure to market risk is through changes in interest rates. In seeking to minimize risk, we manage exposure through our regular
operating and financing activities. We do not use financial instruments for trading or other speculative purposes and are not party to any leveraged
financial instruments.
We have both credit card receivables that generate finance charge income and debt obligations for which we pay fixed and variable interest expense.
We manage our net interest rate exposure through our mix of fixed and variable rate borrowings. A portion of our credit card receivables maintains a fixed
interest rate. Additionally, a portion of this portfolio is used as convenience by our customers who pay in full monthly. The annualized effect of a one-
percentage-point change in interest rates would not materially affect net earnings.
Additionally, short-term borrowing and investing activities generally bear interest at variable rates, but because they have maturities of three months or
less, we believe that the risk of material loss is low, and that the carrying amount approximates fair value.
The table below presents information about our debt obligations that are sensitive to changes in interest rates at January 31, 2009. For debt obligations,
including our capital leases, the table presents principal amounts, at book value, by maturity date, and related weighted average interest rates.
Dollars in millions
2009
2010
2011
2012
2013
Thereafter
Total at
January 31,
2009
Fair value at
January 31,
2009
Long-term debt
Fixed $24 $356 $6 $6 $7 $1,339 $1,738 $1,400
Avg. int. rate 6.3% 5.0% 8.8% 8.5% 8.4% 6.7% 6.4%
Variable — — — $500 — — $500 $350
Avg. int. rate — — — 0.5% — — 0.5%
FOREIGN CURRENCY EXCHANGE RISK
The majority of our revenue, expense and capital expenditures are transacted in U.S. dollars. However, we periodically enter into foreign currency
purchase orders denominated in Euros for apparel, accessories and shoes. We use forward contracts to hedge against fluctuations in foreign currency
prices. We do not believe the fair value of our outstanding forward contracts at January 31, 2009 to be material.