Nordstrom 2011 Annual Report Download - page 31

Nordstrom, Inc. and subsidiaries 31
Free Cash Flow (Non-GAAP financial measure)
We define Free Cash Flow as:
Free Cash Flow = Net Cash Provided By Operating Activities – Capital Expenditures – Cash Dividends Paid +/(–) Change in Credit Card
Receivables Originated at Third Parties +/(–) Change in Cash Book Overdrafts
Free Cash Flow is one of our key liquidity measures, and in conjunction with GAAP measures, provides us with a meaningful analysis of our cash
flows. We believe that our ability to generate cash is more appropriately analyzed using this measure. Free Cash Flow is not a measure of liquidity
under GAAP and should not be considered a substitute for operating cash flows as determined in accordance with GAAP. In addition, Free Cash Flow
does have limitations:
 Free Cash Flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to
fund our cash needs; and
 Other companies in our industry may calculate Free Cash Flow differently than we do, limiting its usefulness as a comparative measure.
To compensate for these limitations, we analyze Free Cash Flow in conjunction with other GAAP financial and performance measures impacting
liquidity, including operating cash flows. The closest GAAP measure calculated using GAAP amounts is net cash provided by operating activities,
which was $1,177 for each of the 12 months ended January 28, 2012 and January 29, 2011. The following is a reconciliation of our net cash provided
by operating activities and Free Cash Flow:
Fiscal year 2011 2010
Net cash provided by operating activities $1,177 $1,177
Less: capital expenditures (511) (399)
Less: cash dividends paid (197) (167)
Less: change in credit card receivables originated at third parties (7) (66)
(Less) Add: change in cash book overdrafts (30) 37
Free Cash Flow $432 $582
Net cash used in investing activities $(728) $(462)
Net cash used in financing activities $(78) $(4)
Credit Capacity and Commitments
As of January 28, 2012, we had total short-term borrowing capacity available for general corporate purposes of $800. Of the total capacity, we had
$600 under our commercial paper program, which is backed by our unsecured revolving credit facility (“revolver”) and $200 under our 2007-A
Variable Funding Note (“2007-A VFN”).
During 2011, we entered into a new revolver with a capacity of $600, which expires in June 2016. This revolver replaced our previous $650 unsecured
line of credit which was scheduled to expire in August 2012. Under the terms of the revolver, we pay a variable rate of interest and a commitment fee
based on our debt rating. The revolver is available for working capital, capital expenditures and general corporate purposes, including liquidity
support for our commercial paper program. We have the option to increase the revolving commitment by up to $100, to a total of $700, provided
that we obtain written consent from the new lenders. During 2011, we had no borrowings under our revolver.
Our $600 commercial paper program allows us to use the proceeds to fund share repurchases as well as operating cash requirements. Under
the terms of the commercial paper agreement, we pay a rate of interest based on, among other factors, the maturity of the issuance and
market conditions. The issuance of commercial paper has the effect, while it is outstanding, of reducing borrowing capacity under our revolver
by an amount equal to the principal amount of commercial paper. During 2011, we had no outstanding issuances under our $600 commercial
paper program.
During 2011, we amended the terms of our 2007-A VFN to reduce the borrowing capacity to $200, maturing in January 2013, from the previous
$300 facility. The 2007-A VFN is backed by all of the Nordstrom private label card receivables and a 90% interest in the co-branded Nordstrom VISA
credit card receivables. Borrowings under the 2007-A VFN incur interest based upon one-month LIBOR plus 35 basis points. We pay a commitment fee
for the notes based on the size of the commitment. During 2011, we had no borrowings against this facility.
Our wholly owned federal savings bank, Nordstrom fsb, also maintains a variable funding facility with a short-term credit capacity of $100. This
facility is backed by the remaining 10% interest in the Nordstrom VISA credit card receivables and is available, if needed, to provide liquidity support
to Nordstrom fsb. Borrowings under the facility incur interest based upon the cost of commercial paper issued by the third-party bank conduit plus
specified fees. During 2011, Nordstrom fsb had no borrowings under this facility.
We currently have an automatic shelf registration statement on file with the Securities and Exchange Commission, whereby we are authorized to
issue registered debt.