Nordstrom 2011 Annual Report Download - page 53

Nordstrom, Inc. and subsidiaries 53
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
Required principal payments on long-term debt, excluding capital lease obligations, are as follows:
Fiscal year
2012 $505
2013 5
2014 406
2015 6
2016 331
Thereafter 2,326
Interest Expense
The components of interest expense, net are as follows:
Fiscal year 2011 2010 2009
Interest on long–term debt and short–term borrowings $139 $133 $148
Less:
Interest income (2) (1) (3)
Capitalized interest (7) (5) (7)
Interest expense, net $130 $127 $138
Credit Facilities
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.
The revolver requires that we maintain a leverage ratio, defined as Adjusted Debt to Earnings before Interest, Income Taxes, Depreciation,
Amortization and Rent (“EBITDAR”), of less than four times. As of January 28, 2012, we were in compliance with this covenant.
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 and 2010, we had no borrowings under our revolver and no issuances under our 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 and 2010, 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. During 2011 and 2010, Nordstrom fsb had no outstanding borrowings under this facility. Borrowings under the facility incur interest
based upon the cost of commercial paper issued by the third-party bank conduit plus specified fees.