Nordstrom 2009 Annual Report Download - page 63

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Nordstrom, Inc. and subsidiaries 55
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2009, 2008 and 2007 is as follows:
Fiscal Year
2009 2008 2007
Unrecognized tax benefit at beginning of year $28
$27 $21
Gross increase to tax positions in prior periods 18 2 5
Gross decrease to tax positions in prior periods (3) (1) (1)
Gross increase to tax positions in current period 3 4 3
Lapse of statute – (1) (1)
Settlements (3) (3) -
Unrecognized tax benefit at end of year $43 $28 $27
At the end of 2009, 2008 and 2007, $25, $10 and $9 of the ending gross unrecognized tax benefit balance relates to deferred items which,
if recognized, would not impact the effective tax rate.
During both 2009 and 2008, our income tax expense included $2 of tax-related interest and penalties. During 2007, our income tax expense included
$3 of tax-related interest and penalties. At the end of 2009, 2008 and 2007, our liability for interest and penalties was $7, $6 and $4.
We file income tax returns in federal and various state and local jurisdictions. Prior to 2008, we filed returns in France and other foreign
jurisdictions. With few exceptions, we are no longer subject to federal, state and local, or non-U.S. income tax examinations for years before 2001.
The federal tax returns for 2008 and 2009 are under concurrent year processing (accelerated audits), which are expected to be completed in 2010
and 2011. We also currently have an open audit in France for the years 2001 through 2004, related to our Façonnable business which we sold in 2007.
Unrecognized tax benefits related to federal, state and foreign tax positions may decrease by $3 by January 29, 2011, subject to the completion of
examinations and the expiration of various statutes of limitations.
NOTE 13: 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.
The computation of earnings per share is as follows:
Fiscal year 2009 2008 2007
Net earnings $441 $401 $715
Basic shares 216.8 216.6 244.8
Dilutive effect of stock options and performance
share units 2.9 2.6 4.0
Diluted shares 219.7 219.2 248.8
Earnings per basic share $2.03 $1.85 $2.92
Earnings per diluted share $2.01 $1.83 $2.88
Options and other equity instruments totaling 7.2 shares in 2009, 4.9 shares in 2008 and 2.7 shares in 2007 were excluded from earnings per diluted
share because their impact was anti-dilutive.