Nordstrom 2013 Annual Report Download - page 32

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Contractual Obligations
The following table summarizes our contractual obligations and the expected effect on our liquidity and cash flows as of February 1, 2014.
We expect to fund these commitments primarily with operating cash flows generated in the normal course of business and credit available to
us under existing and potential future facilities.
Total Less than 1 year 1 – 3 years 3 – 5 years More than 5 years
Long-term debt $5,169 $165 $654 $924 $3,426
Capital lease obligations 92 4 3 —
Operating leases 1,995 177 389 375 1,054
Purchase obligations 2,125 1,450 217 358 100
Other long-term liabilities 290 — 51 34 205
Total $9,588 $1,794 $1,315 $1,694 $4,785
Included in the required debt repayments disclosed above are estimated total interest payments of $2,035 as of February 1, 2014, payable
over the remaining life of the debt.
The capital and operating lease obligations in the table above do not include payments for operating expenses that are required by most of
our lease agreements. Such expenses, which include common area charges, real estate taxes and other executory costs, totaled $81 in
2013, $74 in 2012 and $69 in 2011. In addition, some of our leases require additional rental payments based on a percentage of our sales,
referred to as “percentage rent.” Percentage rent, which is also excluded from the obligations in the table above, was $14 in 2013, $14 in
2012 and $12 in 2011.
Purchase obligations primarily consist of purchase orders for unreceived goods or services and capital expenditure commitments, including
our Manhattan store.
Other long-term liabilities consist of workers’ compensation and general liability insurance reserves and postretirement benefits. The payment
amounts presented above were estimated based on historical payment trends. Other long-term liabilities not requiring cash payments, such
as deferred property incentives and deferred revenue, were excluded from the table above. Also excluded from the table above are
unrecognized tax benefits of $13, as we are unable to reasonably estimate the timing of future cash payments, if any, for these liabilities.
Off-Balance Sheet Arrangements
We enter into commitments to extend credit to customers through our Nordstrom credit cards. The unused credit card capacity available to
our customers represents an off-balance sheet commitment. As of February 1, 2014, this unfunded commitment was $15,140.
Other than operating leases entered into in the normal course of business, we had no material off-balance sheet arrangements during 2013.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements requires that we make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. We base our estimates on historical experience and
other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. The following
discussion highlights the estimates we believe are critical and should be read in conjunction with the Notes to Consolidated Financial
Statements in Item 8: Financial Statements and Supplementary Data. Our management has discussed the development and selection of
these critical accounting estimates with the Audit Committee of our Board of Directors and the Audit Committee has reviewed our disclosures
that follow.
Allowance for Credit Losses
The allowance for credit losses reflects our best estimate of the losses inherent in our credit card receivables as of the balance sheet date,
including uncollectible finance charges and fees. We estimate such credit losses based on several factors, including historical aging and
delinquency trends, write-off experience, portfolio concentration and risk metrics and general economic conditions.
We believe the allowance for credit losses is adequate to cover anticipated losses in our credit card receivables under current conditions;
however, significant deterioration in any of the factors mentioned above could materially change these expectations. During 2013, our
delinquency and net write-off results continued to improve. As a result, we reduced our allowance for credit losses by $5 during 2013, from
$85 to $80, and by $30 in 2012, from $115 to $85. A 10% change in our allowance for credit losses would have affected net earnings by
approximately $5 for the fiscal year ended February 1, 2014.
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