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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 2, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to___________
Commission File Number: 001-15059
NORDSTROM, INC.
(Exact name of registrant as specified in its charter)
Washington
 
91-0515058
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
1617 Sixth Avenue, Seattle, Washington 98101
(Address of principal executive offices)
206-628-2111
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock, without par value
JWN
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
Common stock outstanding as of May 30, 2020: 157,032,858 shares

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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “pursue,” “going forward,” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, our anticipated financial outlook for the fiscal year ending January 30, 2021, trends in our operations and the following:
Strategic and Operational
the impacts of the recent novel coronavirus (“COVID-19”) global pandemic and the significant civil unrest, looting and rioting in several urban centers on our business and results, which effects may include the exacerbation of any of the risks discussed below,
successful execution of our customer strategy to provide the best possible service, product and experience, both in stores and online,
timely and effective implementation and execution of our evolving business model, including:
scaling our market strategy, which consists of the integration of our physical and digital assets, development of new supply chain capabilities and timely delivery of products,
our merchandise strategy, including our ability to offer compelling assortments,
enhancing our platforms and processes to allow for more flexible inventory management,
our ability to effectively allocate and scale our marketing strategies and resources between The Nordy Club, advertising and promotional campaigns,
our ability to respond to the evolving retail environment and our development of new market strategies and customer offerings, which result from new fashion trends, environmental considerations and our customers’ changing expectations of service and experience in stores and online,
our ability to properly balance our investments in existing and new store locations, technology and supply chain facilities, including the expansion of our market strategy,
successful execution of our information technology strategy, including engagement with third-party service providers,
our ability to effectively utilize internal and third-party data in strategic planning and decision making,
our ability to maintain or expand our presence, including timely completion of construction associated with new, relocated and remodeled stores and Supply Chain Network facilities, as well as, any potential store closures, all of which may be impacted by third parties, consumer demand and other natural or man-made disruptions,
efficient and proper allocation of our capital resources,
effective inventory management processes and systems, fulfillment and supply chain processes and systems, our ability to prevent or mitigate disruptions in our supply chain and our ability to control costs,
the impact of any systems or network failures, cybersecurity and/or security breaches, including any security breach of our systems or those of a third-party provider that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information or compliance with information security and privacy laws and regulations in the event of such an incident,
our ability to safeguard our reputation and maintain relationships with our vendors, third-party service providers and landlords
our ability to maintain relationships with and motivate our employees and to effectively attract, develop and retain our top talent and future leaders,
our ability to realize the expected benefits, respond to potential risks and appropriately manage costs associated with our credit card revenue sharing program,
market fluctuations, increases in operating costs, exit costs and overall liabilities and losses associated with owning and leasing real estate,
potential goodwill impairment charges, future impairment charges, fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames or our strategic direction changes,
compliance with debt and operating covenants, availability and cost of credit, changes in our credit rating and changes in interest rates, and our ability to maintain an investment grade credit rating,
the actual timing, price, manner and amounts of future share repurchases, dividend payments, or share issuances, if any,
Economic and External
the length and severity of epidemics or pandemics, such as the COVID-19 pandemic, or other catastrophic events, and the related impact on customer behavior, store and online operations and supply chain functions, as well as our future consolidated financial position, results of operations and cash flows,
the impact of the seasonal nature of our business and cyclical customer spending,
the impact of economic and market conditions and the resultant impact on consumer spending and credit patterns,
the impact of economic, environmental or political conditions in the U.S. and Canada and countries where our third-party vendors operate,

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weather conditions, natural disasters, epidemics, national security or other market and supply chain disruptions, or the effects of tariffs, or the prospects of these events and the resulting impact on consumer spending patterns or information technology systems and communications,
Legal and Regulatory
our compliance with applicable domestic and international laws, regulations and ethical standards, including those related to employment and tax, information security and privacy, consumer credit and the outcome of any claims and litigation and resolution of such matters,
the impact of the current regulatory environment and financial system, health care and tax reforms,
the impact of changes in accounting rules and regulations, changes in our interpretation of the rules or regulations, or changes in underlying assumptions, estimates or judgments,
the impact of claims, litigation and regulatory investigations, including those related to information security, privacy and consumer credit.
These and other factors, including those factors we discussed in our Form 8-K filed with the SEC on April 8, 2020, could affect our financial results and cause our actual results to differ materially from any forward-looking information we may provide. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
All references to “Nordstrom,” “we,” “us,” “our,” or the “Company” mean Nordstrom, Inc. and its subsidiaries.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

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DEFINITIONS
The following table includes definitions of Nordstrom commonly used terms:
Term
Definition
2019 Plan
2019 Equity Incentive Plan
2019 Annual Report
Annual Report on Form 10-K filed on March 20, 2020
Adjusted EBITDA
Adjusted earnings before interest, income taxes, depreciation and amortization (a non-GAAP financial measure)
Adjusted EBITDAR
Adjusted earnings before interest, income taxes, depreciation, amortization and rent, as defined by our Revolver covenant (a non-GAAP financial measure)
Adjusted ROIC
Adjusted return on invested capital (a non-GAAP financial measure)
ASC
Accounting Standards Codification
ASU
Accounting Standards Update
CARES Act
Coronavirus Aid, Relief and Economic Security Act
CODM
Chief operating decision maker
COVID-19
Novel coronavirus
Digital sales
Online and digitally-assisted store sales, which include Online Order Pickup, Ship to Store and Style Board, a digital selling tool
EBIT
Earnings (Loss) before interest and income taxes
EPS
Earnings per share
ESPP
Employee Stock Purchase Plan
Exchange Act
Securities Exchange Act of 1934, as amended
Express Services
Full-Price order pickups and returns offered at certain Nordstrom Rack stores
FASB
Financial Accounting Standards Board
First quarter of 2020
13 fiscal weeks ending May 2, 2020
First quarter of 2019
13 fiscal weeks ending May 4, 2019
Fiscal year 2020
52 fiscal weeks ending January 30, 2021
Fiscal year 2019
52 fiscal weeks ending February 1, 2020
FLS
Full-line stores
Full-Price
Nordstrom U.S. full-line stores, Nordstrom.com, Canada, Trunk Club, Jeffrey and Nordstrom Local
GAAP
Generally accepted accounting principles
Generational Investments
NRHL, Canada, Trunk Club and Nordstrom NYC
Gross profit
Net sales less cost of sales and related buying and occupancy costs
Inventory turnover rate
Trailing 4-quarter cost of sales and related buying and occupancy costs divided by the trailing 4-quarter average inventory
Lease Standard
ASU No. 2016-02, Leases, and all related amendments (ASC 842)
Leverage Ratio
Ratio of adjusted debt to earnings before interest, income taxes, depreciation, amortization and rent (a non-GAAP financial measure)
MD&A
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Nordstrom Local
Nordstrom Local service hubs, which offer Full-Price order pickups, returns, alterations and other services
Nordstrom NYC
Our New York City flagship FLS, including the Men’s location
The Nordy Club
Our customer loyalty program enhanced in October 2018
NRHL
Nordstromrack.com/HauteLook
NYSE
New York Stock Exchange
Off-Price
Nordstrom U.S. Rack stores, Nordstromrack.com/HauteLook and Last Chance clearance stores
Operating Lease Cost
Fixed rent expense, including fixed common area maintenance expense, net of developer reimbursement amortization
PCAOB
Public Company Accounting Oversight Board (United States)
Property incentives
Developer and vendor reimbursements
PSU
Performance share unit
Revolver
Senior revolving credit facility
ROU asset
Operating lease right-of-use asset
RSU
Restricted stock unit
SEC
Securities and Exchange Commission
SERP
Unfunded defined benefit Supplemental Executive Retirement Plan
Secured Notes
8.750% senior secured notes due May 2025
SG&A
Selling, general and administrative
Supply Chain Network
Fulfillment centers that primarily process and ship orders to our customers, distribution centers that primarily process and ship merchandise to our stores and other facilities and omni-channel centers that both fulfill customer orders and ship merchandise to our stores
TD
Toronto-Dominion Bank, N.A.

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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
NORDSTROM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in millions except per share amounts)
(Unaudited)
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Net sales

$2,026

 

$3,349

Credit card revenues, net
93

 
94

Total revenues
2,119

 
3,443

Cost of sales and related buying and occupancy costs
(1,810
)
 
(2,228
)
Selling, general and administrative expenses
(1,122
)
 
(1,138
)
(Loss) earnings before interest and income taxes
(813
)

77

Interest expense, net
(34
)
 
(24
)
(Loss) earnings before income taxes
(847
)
 
53

Income tax benefit (expense)
326

 
(16
)
Net (loss) earnings

($521
)
 

$37

 
 
 
 
(Loss) earnings per share:
 
 
 
Basic

($3.33
)
 

$0.24

Diluted

($3.33
)
 

$0.23

 
 
 
 
Weighted-average shares outstanding:
 
 
 
Basic
156.4

 
155.0

Diluted
156.4

 
156.2

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
NORDSTROM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(Amounts in millions)
(Unaudited)
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Net (loss) earnings

($521
)
 

$37

Foreign currency translation adjustment
(24
)
 
(9
)
Post retirement plan adjustments, net of tax
2

 

Comprehensive net (loss) earnings

($543
)
 

$28

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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NORDSTROM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions)
(Unaudited)
 
May 2, 2020

 
February 1, 2020

 
May 4, 2019

Assets
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents

$1,355

 

$853

 

$448

Accounts receivable, net
154

 
179

 
233

Merchandise inventories
1,489

 
1,920

 
2,006

Prepaid expenses and other
669

 
278

 
271

Total current assets
3,667

 
3,230

 
2,958

 
 
 
 
 
 
Land, property and equipment (net of accumulated depreciation of $6,683, $6,995 and $6,678)
3,974

 
4,179

 
3,963

Operating lease right-of-use assets
1,722

 
1,774

 
1,833

Goodwill
249

 
249

 
249

Other assets
357

 
305

 
335

Total assets

$9,969

 

$9,737

 

$9,338

 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Borrowings under revolving line of credit

$800

 

$—

 

$—

Accounts payable
1,125

 
1,576

 
1,619

Accrued salaries, wages and related benefits
280

 
510

 
315

Current portion of operating lease liabilities
243

 
244

 
237

Other current liabilities
1,351

 
1,190

 
1,222

Current portion of long-term debt

 

 
499

Total current liabilities
3,799

 
3,520

 
3,892

 
 
 
 
 
 
Long-term debt, net
3,264

 
2,676

 
2,177

Non-current operating lease liabilities
1,836

 
1,875

 
1,951

Other liabilities
673

 
687

 
667

 
 
 
 
 
 
Commitments and contingencies (Note 5)

 

 

 
 
 
 
 
 
Shareholders’ equity:
 
 
 
 
 
Common stock, no par value: 1,000 shares authorized; 157.0, 155.6 and 154.6 shares issued and outstanding
3,148

 
3,129

 
3,067

Accumulated deficit
(2,661
)
 
(2,082
)
 
(2,370
)
Accumulated other comprehensive loss
(90
)
 
(68
)
 
(46
)
Total shareholders’ equity
397

 
979

 
651

Total liabilities and shareholders’ equity

$9,969

 

$9,737

 

$9,338

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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NORDSTROM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Amounts in millions except per share amounts)
(Unaudited)
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Common stock
 
 
 
Balance, beginning of period

$3,129

 

$3,048

Issuance of common stock under stock compensation plans
11

 
10

Stock-based compensation
8

 
9

Balance, end of period

$3,148

 

$3,067

 
 
 
 
Accumulated deficit
 
 
 
Balance, beginning of period

($2,082
)
 

($2,138
)
Cumulative effect of adopted accounting standards

 
(25
)
Net (loss) earnings
(521
)
 
37

Dividends
(58
)
 
(58
)
Repurchase of common stock

 
(186
)
Balance, end of period

($2,661
)
 

($2,370
)
 
 
 
 
Accumulated other comprehensive loss
 
 
 
Balance, beginning of period

($68
)
 

($37
)
Other comprehensive loss
(22
)
 
(9
)
Balance, end of period

($90
)
 

($46
)
 
 
 
 
Total

$397

 

$651

 
 
 
 
Dividends per share

$0.37

 

$0.37

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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NORDSTROM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Operating Activities
 
 
 
Net (loss) earnings

($521
)
 

$37

Adjustments to reconcile net (loss) earnings to net cash used in operating activities:
 
 
 
Depreciation and amortization expenses and other, net
178

 
165

Asset impairment
117

 

Right-of-use asset amortization
44

 
43

Deferred income taxes, net
(54
)
 
18

Stock-based compensation expense
13

 
20

Change in operating assets and liabilities:

 
 
Accounts receivable
25

 
(2
)
Merchandise inventories
228

 
(89
)
Prepaid expenses and other assets
(393
)
 
(12
)
Accounts payable
(292
)
 
181

Accrued salaries, wages and related benefits
(227
)
 
(266
)
Other current liabilities
167

 
(74
)
Lease liabilities
(65
)
 
(59
)
Other liabilities
2

 
7

Net cash used in operating activities
(778
)

(31
)
 
 
 
 
Investing Activities
 
 
 
Capital expenditures
(131
)
 
(249
)
Other, net
5

 
1

Net cash used in investing activities
(126
)
 
(248
)
 
 
 
 
Financing Activities
 
 
 
Proceeds from revolving line of credit
800



Proceeds from long-term borrowings
600

 

Increase in cash book overdrafts
83

 
40

Cash dividends paid
(58
)
 
(58
)
Payments for repurchase of common stock

 
(210
)
Proceeds from issuances under stock compensation plans
11

 
10

Tax withholding on share-based awards
(8
)
 
(12
)
Other, net
(11
)
 

Net cash provided by (used in) financing activities
1,417

 
(230
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(11
)
 

Net increase (decrease) in cash and cash equivalents
502

 
(509
)
Cash and cash equivalents at beginning of period
853

 
957

Cash and cash equivalents at end of period

$1,355

 

$448

 
 
 
 
Supplemental Cash Flow Information
 
 
 
Cash paid during the period for:
 
 
 
Income taxes, net

$—

 

$8

Interest, net of capitalized interest
34

 
31

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


NOTE 1: BASIS OF PRESENTATION
The accompanying Condensed Consolidated Financial Statements include the balances of Nordstrom, Inc. and its subsidiaries. All intercompany transactions and balances are eliminated in consolidation. The interim Condensed Consolidated Financial Statements have been prepared on a basis consistent in all material respects with the accounting policies described and applied in our 2019 Annual Report and reflect all adjustments of a normal recurring nature that are, in management’s opinion, necessary for the fair presentation of the results of operations, financial position and cash flows for the periods presented.
The Condensed Consolidated Financial Statements as of and for the periods ended May 2, 2020 and May 4, 2019 are unaudited. The Condensed Consolidated Balance Sheet as of February 1, 2020 has been derived from the audited Consolidated Financial Statements included in our 2019 Annual Report. The interim Condensed Consolidated Financial Statements should be read together with the Consolidated Financial Statements and related footnote disclosures contained in our 2019 Annual Report.
Our business, like that of other retailers, is subject to seasonal fluctuations. Our sales are typically higher during our Anniversary Sale in July and the holidays in the fourth quarter. As a result of COVID-19, the Anniversary Sale has moved to August in 2020. Results for any one quarter may not be indicative of the results that may be achieved for a full fiscal year.
Use of Estimates
The preparation of financial statements in conformity with GAAP in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities during the reporting period. Uncertainties regarding such estimates and assumptions are inherent in the preparation of financial statements and actual results may differ from these estimates and assumptions. Our most significant accounting judgments and estimates include leases, revenue recognition, inventory valuation, long-lived asset recoverability, goodwill impairment and income taxes, all of which involve assumptions about future events. As a result of COVID-19, we may be unable to accurately predict the impact of the pandemic going forward and as a result our estimates may change in the near term. See below for areas that required more judgments and estimates as a result of COVID-19.
Revenue Recognition
We reduce sales and cost of sales by an estimate of our future customer merchandise returns, which is calculated based on historical return patterns, and record a sales return allowance and an estimated return asset. We record the impact of the sales return allowance in our separate Full-Price, Off-Price and digital sales metrics. The majority of our returns from both digital and physical sales come through our stores. With the temporary closure of our stores beginning March 17, 2020, customers are generally not able to return goods in our stores, impacting the expected timing of returns. As a result, our estimates of future returns require more judgment and estimates and actual returns may differ from our historical return rates.
Merchandise Inventory
Under our retail method of inventory accounting, we adjust our inventory and costs of sales for retail inventory markdowns taken on the selling price. Our estimated markdown reserves increased approximately $75 as of May 2, 2020, compared to the prior year, as a result of the temporary closure of our stores beginning on March 17, 2020, and the impact on demand from COVID-19. Markdown estimates may be more volatile as we consider current and anticipated demand, customer preferences, age of merchandise, fashion trends and the current promotional environment.
Long-Lived Assets
As we optimize our mix of physical and digital assets to align with longer-term customer trends, we permanently closed 16 FLS. As part of the closures, and when facts and circumstances indicate that the carrying values of buildings, equipment and ROU assets may be impaired, we compare the carrying value to the related projected future cash flows, among other quantitative and qualitative analysis. These projections are inherently subject to uncertainties and while we believe the inputs and assumptions utilized in our future cash flows are reasonable, our estimates may change in the near term based on our future performance.
We incurred non-cash impairment charges on long-lived tangible and ROU assets, primarily associated with the FLS closures, to adjust the carrying value to its estimated fair value. The following table provides details related to asset impairment charges as a result of COVID-19:
 
May 2, 2020

Long-lived asset impairment1

$94

Operating lease ROU asset impairment1
23

Total asset impairment

$117

1 As of May 2, 2020, the carrying value of the applicable long-lived and operating lease ROU assets after impairment was $15 and $6.
These charges are included in our Retail segment SG&A expense on the Condensed Consolidated Statement of Earnings.

10 of 28




NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


Goodwill Impairment
We review our goodwill annually in the fourth quarter or when circumstances indicate that the carrying value may exceed fair value. Our most recently completed goodwill impairment analyses in the fourth quarter of 2019 indicated significant excess fair values over carrying values. After performing both qualitative and quantitative analyses, including review of future long-term revenue and cash flow assumptions, we concluded a triggering event requiring us to accelerate our annual goodwill impairment analysis did not occur, as we still expect any potential change in fair value to exceed carrying value. As a result, we did not record a goodwill impairment charge in the first quarter of 2020.
CARES Act
On March 27, 2020 the CARES Act was signed into law, providing payroll tax credits for employee retention, deferral of payroll taxes, and several income tax provisions including modifications to the net interest deduction limitation, changes to certain property depreciation and allows for carryback of certain operating losses.
We have estimated the impacts of the CARES Act in accordance with our overall approach for determining our income tax provision that uses an estimated annual effective tax rate based on our best estimates and adjusts for discrete taxable events that occur during the quarter. As a result, we will carryback our 2020 US Federal operating loss and recover taxes previously paid at the applicable 35% tax rate rather than the current rate of 21%. Our estimated annual effective tax rate reflects this benefit and is the primary driver for the rate increase when compared to the same period in 2019. As a result, we recorded $275 in taxes receivable, which is classified in prepaid expenses and other on the Condensed Consolidated Balance Sheet.
In addition, for the quarter ended May 2, 2020, we recognized $34 in employee retention payroll tax credits and elected to defer payment of the employer portion of social security taxes.
Severance
In the first quarter of 2020, we recorded $88 of restructuring costs in connection with our regional and corporate reorganization, including $25 in cost of sales and related buying and occupancy costs and $63 in SG&A on the Condensed Consolidated Statement of Earnings. We expect payments to occur by the end of the second quarter of 2020.
Leases
We incurred operating lease liabilities arising from the commencement of lease agreements of $37 for the quarter ended May 2, 2020 and $24 for the quarter ended May 4, 2019.
Subsequent Events
In May 2020, we began reopening stores by applying a phased market-by-market approach, where allowed by state and local governments, when we are prepared with the right safety measures and protocols, and when we believe we can provide for the safety and wellbeing of our employees and customers.
Also in May 2020, significant civil unrest, looting and rioting in several urban centers impacted 27 stores with varying degrees of damage, including recently reopened stores as well as those only supporting web fulfill. As a result, we temporarily closed these stores in order to assess the damage and make repairs, as well as surrounding stores in affected areas to ensure the safety of our customers and employees. We maintain business interruption and property insurance coverage, which covers inventory at the selling price and property and equipment at replacement costs, less a deductible. We are currently assessing the degree of the damage and the extent to which insurance may be available to cover the costs associated with these events. However, we do not expect losses after insurance recoveries to be material to our Condensed Consolidated Financial Statements. We currently have more than 60% of our stores open, including stores that were damaged from the civil unrest, and we offer contactless curbside pickup service in most full-line stores.
In June 2020, we amended our Program Agreement with TD to eliminate the prior requirement to post collateral under the Agreement and to extend the term of the agreement until April 2024.

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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


NOTE 2: REVENUE
Contract Liabilities
Contract liabilities represent our obligation to transfer goods or services to customers and include deferred revenue for The Nordy Club (including points and Nordstrom Notes) and gift cards. Our contract liabilities are classified as current on the Condensed Consolidated Balance Sheet and are as follows:
 
Contract Liabilities

Balance as of February 2, 2019

$548

Balance as of May 4, 2019
504

 
 
Balance as of February 1, 2020
576

Balance as of May 2, 2020
489


Revenues recognized from our beginning contract liability balance were $130 for the quarter ended May 2, 2020 and $148 for the quarter ended May 4, 2019.
Disaggregation of Revenue
The following table summarizes our disaggregated net sales:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Full-Price

$1,357

 

$2,127

Off-Price
669

 
1,222

Total net sales

$2,026

 

$3,349

 
 
 
 
Digital sales as a % of total net sales
54
%
 
31
%

The following table summarizes the percent of net sales by merchandise category:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Women’s Apparel
33
%
 
33
%
Shoes
24
%
 
24
%
Men’s Apparel
12
%
 
15
%
Women’s Accessories
12
%
 
11
%
Beauty
12
%
 
10
%
Kids’ Apparel
4
%
 
4
%
Other
3
%
 
3
%
Total net sales
100
%
 
100
%


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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


NOTE 3: DEBT AND CREDIT FACILITIES
Debt
During the first quarter of 2020, we issued $600 aggregate principal amount of 8.750% Senior Secured Notes due May 2025. These notes are guaranteed by certain subsidiaries and secured by various store, distribution center and corporate properties. The Secured Notes contain covenants that include limitations on indebtedness, liens, mergers, acquisitions, asset sales, investments, dividend payments and equity distributions, in addition to certain change of control triggering events and provisions for events of default. We will be permitted to prepay our Secured Notes at a premium beginning in 2022.
Credit Facilities
During the first quarter of 2020, we amended our existing Revolver and borrowed $800. Under the terms of the amendment, if our Leverage Ratio is greater than four or our unsecured debt is rated below BBB- with a stable outlook at Standard & Poor’s and Baa3 with a stable outlook at Moody’s, any borrowings under our Revolver will be secured by substantially all our personal property and we will be subject to asset coverage and minimum liquidity covenants, as well as a fixed charge coverage covenant beginning in the third quarter of 2020. If our Leverage Ratio is below four and our unsecured debt is rated above BBB- with a stable outlook at Standard & Poor’s and Baa3 with a stable outlook at Moody’s, any borrowings under our Revolver will be unsecured, we will not be subject to the above covenants and the restrictions on dividend payments and share repurchases will be removed. As of May 2, 2020, our borrowings under the Revolver were classified as secured as our Leverage Ratio exceeded four. We met our asset coverage and minimum liquidity covenants.
The Revolver expires in September 2023 and is classified in total current liabilities on the Condensed Consolidated Balance Sheet. The Revolver contains customary representations, warranties, covenants and terms, including paying 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. Provided that we obtain written consent from the lenders, we have the option to increase the Revolver by up to $200, to a total of $1,000, and two options to extend the Revolver by one year.
As a result of our borrowings under the Revolver, our $800 commercial paper program is not available for borrowing at this time. When available, the program allows us to use the proceeds to fund 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 of reducing available liquidity under the Revolver by an amount equal to the principal amount of commercial paper outstanding. As of May 2, 2020, we had no issuances outstanding under our commercial paper program.

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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


NOTE 4: FAIR VALUE MEASUREMENTS
We disclose our financial assets and liabilities that are measured at fair value in our Condensed Consolidated Balance Sheets by level within the fair value hierarchy as defined by applicable accounting standards:
Level 1: Quoted market prices in active markets for identical assets or liabilities
Level 2: Other observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs that cannot be corroborated by market data that reflect the reporting entity’s own assumptions
Financial Instruments Measured at Carrying Value
Financial instruments measured at carrying value on a recurring basis include cash and cash equivalents, accounts receivable, accounts payable and our Revolver, which approximate fair value due to their short-term nature.
Long-term debt is recorded at carrying value. If long-term debt was measured at fair value, we would use quoted market prices of the same or similar issues, which is considered a Level 2 fair value measurement. The following table summarizes the carrying value and fair value estimate of our long-term debt, including current maturities:
 
May 2, 2020

 
February 1, 2020

 
May 4, 2019

Carrying value of long-term debt

$3,264

 

$2,676

 

$2,676

Fair value of long-term debt
2,804

 
2,905

 
2,741


Non-financial Assets Measured at Fair Value on a Nonrecurring Basis
We also measure certain non-financial assets at fair value on a nonrecurring basis, primarily goodwill, long-lived tangible and ROU assets, in connection with periodic evaluations for potential impairment. We estimate the fair value of these assets using primarily unobservable inputs and, as such, these are considered Level 3 fair value measurements. For more information regarding long-lived tangible and ROU asset impairment charges for the quarter ended May 2, 2020, see Note 1: Basis of Presentation. There were no material impairment charges for the quarter ended May 4, 2019.
NOTE 5: COMMITMENTS AND CONTINGENCIES
Our NYC flagship store opened in October 2019 and the related building and equipment assets were placed into service at the end of the third quarter of 2019, while construction continues in the residential condominium units above the store. As of May 2, 2020, we have a fee interest in the retail condominium unit. We are committed to make one remaining installment payment based on the developer meeting final pre-established construction and development milestones. Precautions related to the COVID-19 pandemic have caused delays in meeting these milestones and the timing of the remaining payment.
Our estimated total purchase obligations decreased by approximately 40% as of May 2, 2020, compared with our balance as of February 2, 2020. This decrease was primarily from a reduction in inventory purchase orders.

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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


NOTE 6: SHAREHOLDERS’ EQUITY
In August 2018, our Board of Directors authorized a program to repurchase up to $1,500 of our outstanding common stock, with no expiration date. On March 23, 2020, in response to uncertainty from the COVID-19 pandemic, we announced suspension of our quarterly dividend payments beginning in the second quarter of 2020 and the immediate suspension of our share repurchase program. We remain committed to these programs over the long-term and intend to resume dividend payments and share repurchases when appropriate.
The following is a summary of share repurchase activity:
 
Quarter Ended

 
May 4, 2019

2018 Program
 
Shares of common stock repurchased
4.1

Aggregate amount of common stock repurchased

$186


We had $707 remaining in share repurchase capacity as of May 2, 2020. The actual timing, price, manner and amounts of future share repurchases, if any, will be subject to market and economic conditions, certain financial covenants and applicable SEC rules.
The amendment to our Revolver contains negative covenants with respect to the payment of dividends and share repurchases when either our Leverage Ratio is above four or our unsecured debt is rated below BBB- with a stable outlook at Standard & Poor’s and Baa3 with a stable outlook at Moody’s. As of May 2, 2020, our Leverage Ratio exceeded four and we did not meet our credit rating covenant, preventing us from paying dividends or repurchasing shares.
NOTE 7: STOCK-BASED COMPENSATION
The following table summarizes our stock-based compensation expense:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

RSUs

$13

 

$14

Stock options
2

 
4

Other1
(2
)
 
2

Total stock-based compensation expense, before income tax benefit
13

 
20

Income tax benefit
(5
)
 
(5
)
Total stock-based compensation expense, net of income tax benefit

$8

 

$15


1 Other stock-based compensation expense includes PSUs, ESPP and nonemployee director stock awards.
The following table summarizes our grant allocations:
 
Quarter Ended
 
May 2, 2020
 
May 4, 2019
 
Granted

 
Weighted-average grant-date fair value per unit

 
Granted

 
Weighted-average grant-date fair value per unit

RSUs
2.2

 

$23

 
1.1

 

$41

Stock options
0.3



$7

 
1.0

 

$15

PSUs
0.4

 

$24

 
0.3

 

$42


Under our deferred and stock-based compensation plan arrangements, we issued 1.5 shares of common stock during the first quarter of 2020 and 1.1 shares during the first quarter of 2019.

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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


NOTE 8: EARNINGS PER SHARE
The computation of EPS is as follows:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Net (loss) earnings

($521
)
 

$37

 
 
 
 
Basic shares
156.4

 
155.0

Dilutive effect of common stock equivalents

 
1.2

Diluted shares
156.4

 
156.2

 
 
 
 
(Loss) earnings per basic share

($3.33
)
 

$0.24

(Loss) earnings per diluted share

($3.33
)
 

$0.23

 
 
 
 
Anti-dilutive common stock equivalents
13.1

 
9.3


NOTE 9: SEGMENT REPORTING
The following table sets forth information for our reportable segment:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Retail segment EBIT

($711
)
 

$142

Corporate/Other loss before interest and income taxes
(102
)
 
(65
)
Interest expense, net
(34
)
 
(24
)
(Loss) earnings before income taxes

($847
)
 

$53


For information about disaggregated revenues, see Note 2: Revenue.

16 of 28




Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions except per share amounts)

OVERVIEW
In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce the spread of COVID-19 including restrictions on business operations, public gatherings and travel, as well as stay-at-home orders, social distancing, and quarantines.
With health and safety as our priority, we temporarily closed our stores beginning March 17, 2020 to do our part to limit the spread of the virus. The temporary store closures had a meaningful impact on our financial results as stores made up two-thirds of sales in 2019. For the first quarter, our net loss per share of $3.33 and EBIT loss of $813 included net charges related to COVID-19 of $280 before taxes. These charges included non-cash asset impairments primarily related to our permanent store closures as well as premium pay and benefits and restructuring charges, slightly offset by payroll tax credits from the CARES Act.
Total net sales declined 40% as a result of our temporary store closures, while we saw online demand, which is an indicator of underlying trends, grow by 9% in the first quarter, consistent with the second half of 2019. In our e-commerce business, sales grew 5% and we saw more than 50% growth in customers who are new to Nordstrom.
Liquidity and Results
We finished 2019 in a strong financial position, with momentum from accelerated sales trends in the second half of last year continuing in February. As the impact of COVID-19 began to unfold in March, we took immediate steps to increase liquidity, reduce inventory and minimize cash burn in order to strengthen our financial flexibility, including the following:
Reduced inventory by more than 25% from last year, allowing us to bring in new product in June
Executing on our planned expense savings of $200 to $250 and further net cash savings of more than $500 in operating expenses, capital expenditures, and working capital
Suspended quarterly cash dividends beginning in the second quarter of 2020 and share repurchases
Drew down $800 on our Revolver and issued $600 in secured debt financing
Based on our actions we increased our cash from $853 at the beginning of the year to $1,355 by the end of the first quarter. We reduced cash burn by more than 40% from March into April and currently expect to reach break-even on our cash burn by the end of the second quarter.
Strategy
The impact of COVID-19 is only accelerating the changes that were already well underway with our customers, including how they want to engage with digital and physical experiences. The flexibility of our business model allows us to stay ahead of these changes as we serve customers through two distinctive brands — Nordstrom and Nordstrom Rack — across stores and online.
We believe that our unique mix of assets is a competitive advantage. In 2019, Off-Price and e-commerce accounted for nearly 60% of sales, and our U.S. mall-based full-line stores accounted for 38% while contributing positive cash flows. As we anticipate an acceleration of these longer-term customer trends, we are taking proactive steps to move faster in executing our strategic plans, including optimizing the mix of our digital and physical assets, and as a result we permanently closed 16 FLS and three Jeffrey specialty boutiques.
Our market strategy remains a priority for us to gain market share and increase inventory efficiencies in our top markets. We are bringing greater merchandise selection and faster delivery to customers while increasing engagement through our services. Having a mix of full-line stores, Racks, and Nordstrom Locals and connecting these physical assets seamlessly with an online experience gives us a distinct advantage in serving customers on their terms.
We are also creating a leaner and more flexible organization by combining our Full-Price and Off-Price teams, reducing the size of our corporate teams, and investing in critical capabilities across technology, data analytics, and supply chain.
Store Reopenings
In May 2020, we began reopening stores by applying a phased market-by-market approach, where allowed by state and local governments, when we are prepared with the right safety measures and protocols, and when we believe we can provide for the safety and wellbeing of our employees and customers. We currently have more than 60% of our stores open, including stores that were damaged from the civil unrest, and we offer contactless curbside pickup service in most full-line stores.
Summary
We have accelerated our long-term strategic plans by adjusting the mix of our physical and digital assets and increasing our agility through a leaner organization. As we emerge from this crisis, our focus remains on gaining market share while driving top-line growth and improving profitability. Our financial flexibility, coupled with our business model to serve customers on their terms, positions us for success over the medium and long-term.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Amounts in millions except per share amounts)


RESULTS OF OPERATIONS
In our ongoing effort to enhance the customer experience, we are focused on providing a seamless experience across our businesses. We invested early in our omni-channel capabilities, integrating our operations, merchandising and technology across our stores and online, in both our Full-Price and Off-Price businesses. While our customers may engage with us through multiple businesses, we know they value the overall Nordstrom brand experience and view us simply as Nordstrom, which is ultimately how we view our company. We have one Retail reportable segment and analyze our results on a total company basis, using customer, market share, operational and net sales metrics.
Net Sales
The following table summarizes net sales by business:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Net sales by business:
 
 
 
Full-Price

$1,357

 

$2,127

Off-Price
669

 
1,222

Total net sales

$2,026

 

$3,349

 
 
 
 
Net sales decrease by business:
 
 
 
Full-Price
(36.2
%)
 
(5.1
%)
Off-Price
(45.2
%)
 
(0.6
%)
Total Company
(39.5
%)
 
(3.5
%)
 
 
 
 
Digital sales as a % of total net sales
54
%
 
31
%
Digital sales increase
5
%
 
7
%
Total Company net sales decreased 40% for the first quarter of 2020, compared with the same period in fiscal 2019, driven by temporary store closures beginning on March 17, 2020 related to COVID-19. Total Company digital sales increased 5% in the first quarter of 2020, compared with the same period in 2019, driven by increased marketing and promotional activity to stimulate demand and clear excess inventory. During the quarter ended May 2, 2020, we closed one Nordstrom Rack and integrated a Dallas Clubhouse location into the NorthPark Center FLS in Dallas.
Total Company, Full-Price, Off-Price and Digital sales include the impact of the sales return reserve. The sales return reserve for all channels increased in the first quarter of 2020, compared with the same period in fiscal 2019, as a result of the temporary closure of our stores beginning on March 17, 2020 (see Note 1: Basis of Presentation in Item 1).
Full-Price net sales decreased 36% percent for the first quarter of 2020, compared with the same period in 2019. These declines resulted from temporary store closures beginning March 17, 2020. Kids’ was the top-performing merchandise category in Full-Price.
Off-Price net sales decreased 45% percent for the first quarter of 2020, compared with the same period in 2019. These declines resulted from temporary store closures beginning March 17, 2020. Accessories was the top-performing merchandise category in Off-Price.
Credit Card Revenues, Net
Credit card revenues, net include our portion of the ongoing credit card revenue, net of credit losses, pursuant to our program agreement with TD. TD is the exclusive issuer of our consumer credit cards and we perform the account servicing functions. Credit card revenues, net was $93 for the quarter ended May 2, 2020, which was flat to the same period in 2019.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Amounts in millions except per share amounts)


Gross Profit
The following table summarizes gross profit:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Gross profit

$216

 

$1,121

Gross profit as a % of net sales
10.7
%
 
33.5
%
Inventory turnover rate
4.81

 
4.68

Gross profit decreased $905 and 23%, as a percentage of net sales, during the first quarter of 2020, compared with the same period in fiscal 2019. These decreases were driven by $75 of incremental markdowns to clear excess inventory and deleverage from lower sales volume. Gross profit also included approximately $30 of COVID-19 related restructuring charges, premium pay and benefits, partially offset by payroll tax credits from the CARES Act.
Ending inventory as of May 2, 2020 decreased 26% compared with the prior year, primarily due to our aggressive actions to reduce receipts and clear inventory through increased marketing and promotional activities and store fulfillment capabilities.
Selling, General and Administrative Expenses 
SG&A is summarized in the following table:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

SG&A expenses

$1,122

 

$1,138

SG&A expenses as a % of net sales
55.4
%
 
34.0
%
SG&A decreased $16 during the first quarter of 2020, compared with the same period in fiscal 2019. Excluding approximately $250 of COVID-19 charges related to asset impairment from the store closures, premium pay and benefits, restructuring charges and partially offset by payroll tax credits from the CARES Act, SG&A decreased $266 primarily due to lower sales volume in addition to reduced overhead labor costs in response to temporary store closures.
(Loss) Earnings Before Interest and Income Taxes 
EBIT is summarized in the following table:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

EBIT

($813
)
 

$77

EBIT as a % of net sales
(40.1
%)
 
2.3
%
EBIT decreased $890 during the first quarter of 2020, compared with the same period in fiscal 2019. The decrease was due to lower sales volume from temporary store closures beginning on March 17, 2020, increased markdowns and net charges of $280 related to the impact of COVID-19.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Amounts in millions except per share amounts)


Interest Expense, Net
Interest expense, net was $34 for the first quarter of 2020, compared with $24 for the same period in 2019. The increase was primarily due to lower capitalized interest in 2020 as well as additional interest related to the Revolver drawdown and the new Senior Secured Note in the first quarter of 2020.
Income Tax Expense
Income tax expense is summarized in the following table:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Income tax (benefit) expense

($326
)
 

$16

Effective tax rate
38.4
%
 
31.0
%
The effective tax rate increased in the first quarter of 2020, compared with the same period in 2019, primarily due to the CARES Act that allows us to carry back expected 2020 losses at the higher tax rate in previous years. The increase was partially offset by reduced federal credits and increased nondeductible stock compensation.
Earnings Per Share
EPS is as follows:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Basic

($3.33
)
 

$0.24

Diluted

($3.33
)
 

$0.23

Earnings per diluted share decreased $3.56 for the first quarter of 2020, compared with the same period in 2019, primarily due to lower sales as a result of COVID-19.

20 of 28




Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Amounts in millions except per share amounts)


Adjusted ROIC (Non-GAAP financial measure)
We believe that Adjusted ROIC is a useful financial measure for investors in evaluating the efficiency and effectiveness of the capital we have invested in our business to generate returns over time. In addition, we have incorporated it in our executive incentive measures and we believe it is an important indicator of shareholders’ return over the long term.
For 2019, income statement activity for adjusted net operating profit and balance sheet amounts for average invested capital are comprised of one quarter of activity under the Lease Standard for 2019, and three quarters of 2018 under the previous lease standard. Under the previous lease standard, we estimated the value of our operating leases as if they met the criteria for capital leases or we had purchased the properties. This provided additional supplemental information that estimated the investment in our operating leases. Estimated depreciation on capitalized operating leases and average estimated asset base of capitalized operating leases are not calculated in accordance with, nor an alternative for, GAAP and should not be considered in isolation or as a substitution for our results as reported under GAAP.
Adjusted ROIC is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, return on assets, net earnings, total assets or other GAAP financial measures. Our method of determining non-GAAP financial measures may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Adjusted ROIC is return on assets.
The following is a reconciliation of return on assets to Adjusted ROIC:
 
Four Quarters Ended
 
May 2, 2020


May 4, 2019

Net (loss) earnings

($62
)
 

$513

Add: income tax (benefit) expense
(156
)
 
147

Add: interest expense
121

 
115

(Loss) earnings before interest and income tax expense
(97
)
 
775

 
 
 
 
Add: operating lease interest1
102

 
23

Add: rent expense, net

 
189

Less: estimated depreciation on capitalized operating leases2

 
(101
)
Adjusted net operating profit
5

 
886

 
 
 
 
Less: estimated income tax expense
(4
)
 
(198
)
Adjusted net operating profit after tax

$1

 

$688

 
 
 
 
Average total assets

$9,811

 

$8,591

Add: average estimated asset base of capitalized operating leases2

 
1,508

Less: average deferred property incentives and deferred rent liability

 
(459
)
Less: average deferred property incentives in excess of ROU assets3
(303
)
 
(77
)
Less: average non-interest-bearing current liabilities
(3,324
)
 
(3,438
)
Average invested capital

$6,184

 

$6,125

 
 
 
 
Return on assets4
(0.6
%)
 
6.0
%
Adjusted ROIC4
%
 
11.3
%
1 As a result of the adoption of the Lease Standard, we add back the operating lease interest to reflect how we manage our business. Operating lease interest is a component of operating lease cost recorded in occupancy costs and is calculated in accordance with the Lease Standard.
2 Capitalized operating leases is our best estimate of the asset base we would record for our leases that are classified as operating under the previous lease standard if they had met the criteria for a finance lease or we had purchased the property. The asset base for each quarter is calculated as the trailing four quarters of rent expense multiplied by eight, a commonly used method to estimate the asset base we would record for our capitalized operating leases.  
3 For leases with property incentives that exceed the ROU assets, we reclassify the amount from assets to other current liabilities and other liabilities. As a result of the adoption of the Lease Standard, we reduce average total assets, as this better reflects how we manage our business.  
4  Results for the four quarters ended May 4, 2019 included the $72 impact related to the Estimated Non-recurring Charge, which negatively impacted return on assets by approximately 60 basis points and Adjusted ROIC by approximately 70 basis points. Integration charges, primarily related to Trunk Club, of $32 in the fourth quarter of 2019, were primarily non-cash related and negatively impacted return on assets by approximately 30 basis points and Adjusted ROIC by approximately 20 basis points for the four quarters ended May 2, 2020. COVID-19 related charges in the first quarter of 2020 negatively impacted return on assets by approximately 180 basis points and Adjusted ROIC by approximately 130 basis points.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Amounts in millions except per share amounts)


LIQUIDITY AND CAPITAL RESOURCES
In response to the uncertainty related to the COVID-19 pandemic, we have taken action to provide further liquidity and flexibility during these unprecedented times. We temporarily closed all of our stores beginning on March 17, 2020. We will assess the situation market by market for reopenings and have currently opened more than 60% of our stores. We continue to review state and local legal requirements and conditions and may need to close some or all of the stores currently open as COVID-19 and other uncertainties, including the civil unrest, continue to unfold. We remain open and ready to serve our customers through our apps and online at Nordstrom.com, Nordstrom.ca, Nordstromrack.com, HauteLook.com and TrunkClub.com, including digital styling, online order pickup and curbside services at certain FLS. Our business model serves us well as we fulfill digital orders through our FLS and we recently enabled Off-Price digital sales to be fulfilled by our Nordstrom Rack stores. We have taken the following actions to date to increase our cash position and preserve financial flexibility:
Drew down $800 on our Revolver and issued $600 in secured debt financing, ending the quarter with $1,355 in cash and cash equivalents on-hand
Suspended quarterly cash dividends beginning in the second quarter of 2020 and share repurchases
Planned expense savings of $200 to $250 and further net cash savings of more than $500 in operating expenses, capital expenditures and working capital in fiscal year 2020
We strive to maintain a level of liquidity sufficient to allow us to cover our seasonal cash needs and to maintain appropriate levels of short-term borrowings. While this is a time of great uncertainty, we believe that our operating cash flows are sufficient to meet our cash requirements for the next 12 months and beyond, even excluding the impacts of any potential future borrowings.
Over the long term, we manage our cash and capital structure to maximize shareholder return, maintain our financial position, manage refinancing risk and allow flexibility for strategic initiatives. We regularly assess our debt and leverage levels, capital expenditure requirements, debt service payments, dividend payouts, potential share repurchases and other future investments.
The following is a summary of our cash flows by activity:
 
Quarter Ended

May 2, 2020

 
May 4, 2019

Net cash used in operating activities

($778
)
 

($31
)
Net cash used in investing activities
(126
)
 
(248
)
Net cash provided by (used in) financing activities
1,417

 
(230
)
Operating Activities
Net cash used in operating activities increased $747 for the quarter ended May 2, 2020, compared with the same period in 2019, primarily due to a reduction in net earnings as a result of temporary store closures and the charges associated with the impacts of COVID-19.
Investing Activities
Net cash used in investing activities decreased $122 for the quarter ended May 2, 2020, compared with the same period in 2019, primarily due to a decrease in capital expenditures, as we prioritized investments in supply chain and technology, while reducing non-critical spend on store remodels.
Capital Expenditures
Our capital expenditures, net are summarized as follows:
 
Quarter Ended
Fiscal year
May 2, 2020

 
May 4, 2019

Capital expenditures

$131

 

$249

Less: deferred property incentives1
(8
)
 
(29
)
Capital expenditures, net

$123

 

$220

 
 
 
 
Capital expenditures % of net sales
6.4
%
 
7.4
%
1 Deferred property incentives are included in our cash provided by operations in our Consolidated Statements of Cash Flows in Item 1. We operationally view the property incentives we receive from our developers and vendors as an offset to our capital expenditures.
Financing Activities
The change in financing activities for the quarter ended May 2, 2020, compared with the same period in 2019, was $1,647, primarily due to the proceeds from the Revolver and Secured Notes and decreased share repurchases, which were paused beginning in the second quarter of 2019.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Amounts in millions except per share amounts)


Free Cash Flow (Non-GAAP financial measure)
Free Cash Flow is one of our key liquidity measures, and when used in conjunction with GAAP measures, we believe it provides investors with a meaningful analysis of our ability to generate cash from our business.
Free Cash Flow is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, operating cash flows or other financial measures prepared in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Free Cash Flow is net cash used in operating activities. The following is a reconciliation of net cash used in operating activities to Free Cash Flow:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Net cash used in operating activities

($778
)
 

($31
)
Less: capital expenditures
(131
)
 
(249
)
Add: change in cash book overdrafts
83

 
40

Free Cash Flow

($826
)


($240
)
Adjusted EBITDA and Adjusted EBITDAR (Non-GAAP financial measures)
Adjusted EBITDA is one of our key financial metrics to reflect our view of cash flow from net earnings. Adjusted EBITDA excludes significant items which are non-operating in nature in order to evaluate our core operating performance against prior periods. The financial measure calculated under GAAP which is most directly comparable to Adjusted EBITDA is net earnings.
Adjusted EBITDAR is also one of our key financial metrics as it will be used to measure compliance with one of our Revolver covenants beginning in the third quarter of 2020. Adjusted EBITDAR reflects the items in Adjusted EBITDA, excludes rent expense as defined by the Revolver agreement, and captures other differences between the contractual requirements in the Revolver agreement and Adjusted EBITDA, including the inclusion or exclusion of certain non-cash charges. The financial measure calculated under GAAP which is most directly comparable to Adjusted EBITDAR is net earnings.
Adjusted EBITDA and Adjusted EBITDAR are not measures of financial performance under GAAP and should be considered in addition to, and not as a substitute for net earnings, overall change in cash or liquidity of the business as a whole. Our method of determining non-GAAP financial measures may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The following is a reconciliation of net earnings to Adjusted EBITDA and Adjusted EBITDAR:
 
Quarter Ended
 
May 2, 2020

 
May 4, 2019

Net (loss) earnings

($521
)
 

$37

Add: income tax (benefit) expense
(326
)
 
16

Add: interest expense, net
34

 
24

(Loss) earnings before interest and income taxes
(813
)
 
77

 
 
 
 
Add: depreciation and amortization expenses
176

 
163

Less: amortization of developer reimbursements
(19
)
 
(19
)
Add: asset impairments
117

 

Adjusted EBITDA

($539
)
 

$221

 
 
 
 
Add: rent expense1
61

 
65

Add: other Revolver covenant adjustments2
2

 
3

Adjusted EBITDAR

($476
)
 

$289

1 Rent expense, exclusive of amortization of developer reimbursements, is added back for consistency with our debt covenant calculation requirements, and is calculated under the previous lease standard.
2  Other adjusting items to reconcile Adjusted EBITDA to Adjusted EBITDAR as defined by our Revolver covenant includes interest income, and certain non-cash charges where relevant.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Amounts in millions except per share amounts)


Credit Capacity and Commitments
During the first quarter of 2020, we amended our existing Revolver and borrowed $800. As of May 2, 2020, we had $800 outstanding under the credit facility. The Revolver contains customary representations, warranties, covenants and terms, including paying 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. Provided that we obtain written consent from our lenders, we have the option to increase the Revolver by up to $200, to a total of $1,000, and two options to extend the Revolver by one year. For more information about our credit facilities, see Note 3: Debt and Credit Facilities in Item 1.
Impact of Credit Ratings
Changes in our credit ratings may impact our costs to borrow, whether our personal property secures our Revolver and the debt covenants we follow.
For our Revolver, the interest rate applicable to any borrowings we may enter into depends upon the type of borrowing incurred plus an applicable margin, which is determined based on our credit ratings. At the time of this report, our credit ratings and outlook were as follows:
 
Credit Ratings
 
Outlook
Moody’s
Baa3
 
Negative
Standard & Poor’s
BBB-
 
Negative
Should the ratings assigned to our long-term debt improve, the applicable margin associated with any borrowings under the Revolver may decrease, resulting in a lower borrowing cost under this facility. Conversely, should the ratings assigned to our long-term debt worsen, the applicable margin associated with any borrowings under the Revolver may increase, resulting in a higher borrowing cost under this facility.
Debt Covenants
As of May 2, 2020, our borrowings under the Revolver were classified as secured as our Leverage Ratio exceeded four, and we met our asset coverage and minimum liquidity covenants. For more information about our debt covenants, see Note 3: Debt and Credit Facilities in Item 1.
Contractual Obligations
As of May 2, 2020, there have been no material changes to our contractual obligations as disclosed in our 2019 Annual Report except as disclosed in Note 3: Debt and Credit Facilities and Note 5: Commitments and Contingencies of Item 1.
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. We believe that the estimates, assumptions and judgments involved in the accounting policies referred to in our 2019 Annual Report have the greatest potential effect on our financial statements, so we consider these to be our critical accounting policies and estimates. Our management has discussed the development and selection of these critical accounting estimates with the Audit & Finance Committee of our Board of Directors.
Except as disclosed in Note 1: Basis of Presentation of Item 1, pertaining to the impact of COVID-19, there have been no material changes to our significant accounting policies or critical accounting estimates as described in our 2019 Annual Report.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We discussed our interest rate risk and our foreign currency exchange risk in our 2019 Annual Report. There have been no material changes to these risks since that time.
Item 4. Controls and Procedures.
DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this Quarterly Report on Form 10-Q, we performed an evaluation under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the design and effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective in the timely and accurate recording, processing, summarizing and reporting of material financial and non-financial information within the time periods specified within the SEC’s rules and forms. Our principal executive officer and principal financial officer also concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the quarter ended May 2, 2020, we implemented a new payroll system and modified our payroll processes and related internal controls.
There were no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
We are subject from time to time to various claims and lawsuits arising in the ordinary course of business, including lawsuits alleging violations of state and/or federal wage and hour and other employment laws, privacy and other consumer-based claims. Some of these lawsuits include certified classes of litigants, or purport or may be determined to be class or collective actions and seek substantial damages or injunctive relief, or both, and some may remain unresolved for several years. We believe the recorded accruals in our Condensed Consolidated Financial Statements are adequate in light of the probable and estimable liabilities. As of the date of this report, we do not believe any currently identified claim, proceeding or litigation, either alone or in the aggregate, will have a material impact on our results of operations, financial position or cash flows. Since these matters are subject to inherent uncertainties, our view of them may change in the future.
Item 1A. Risk Factors.
There have been no material changes to the risk factors we discussed in our Form 8-K filed with the SEC on April 8, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(c) SHARE REPURCHASES
(Dollar and share amounts in millions, except per share amounts)
In August 2018, our Board of Directors authorized a program to repurchase up to $1,500 of our outstanding common stock, with no expiration date. On March 23, 2020, in response to uncertainty from the COVID-19 pandemic, we announced that we were suspending share repurchases. During the first quarter of 2020, we did not repurchase any shares of our common stock and we had $707 remaining in share repurchase capacity as of May 2, 2020. The actual timing, price, manner and amounts of future share repurchases, if any, will be subject to market and economic conditions, certain financial covenants and applicable SEC rules.
Item 6. Exhibits.
Exhibits are incorporated herein by reference or are filed or furnished with this report as set forth in the Exhibit Index on page 27 hereof.

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NORDSTROM, INC.
Exhibit Index
Exhibit
 
Method of Filing
3.1
 
 
Incorporated by reference from the Registrant’s Form 8-K filed on May 26, 2020, Exhibit 3.1
 
 
 
 
 
4.1
 
 
Filed herewith electronically
 
 
 
 
 
 
 
Incorporated by reference to Appendix B to the Registrant’s Form DEF 14A filed on April 7, 2020
 
 
 
 
 
 
 
Filed herewith electronically
 
 
 
 
 
 
 
Filed herewith electronically
 
 
 
 
 
 
 
Filed herewith electronically
 
 
 
 
 
 
 
Filed herewith electronically
 
 
 
 
 
 
 
Filed herewith electronically
 
 
 
 
 
 
 
Filed herewith electronically
 
 
 
 
 
 
 
Furnished herewith electronically
 
 
 
 
 
101.INS
 
Inline XBRL Instance Document
 
Filed herewith electronically
 
 
 
 
 
101.SCH
 
Inline XBRL Taxonomy Extension Schema Document
 
Filed herewith electronically
 
 
 
 
 
101.CAL
 
Inline XBRL Taxonomy Extension Calculation Linkbase Document
 
Filed herewith electronically
 
 
 
 
 
101.LAB
 
Inline XBRL Taxonomy Extension Labels Linkbase Document
 
Filed herewith electronically
 
 
 
 
 
101.PRE
 
Inline XBRL Taxonomy Extension Presentation Linkbase Document
 
Filed herewith electronically
 
 
 
 
 
101.DEF
 
Inline XBRL Taxonomy Extension Definition Linkbase Document
 
Filed herewith electronically
 
 
 
 
 
104
 
Cover Page Interactive Data File (Inline XBRL)
 
Filed herewith electronically

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Table of Contents



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NORDSTROM, INC.
(Registrant)
 
 
/s/ Anne L. Bramman
Anne L. Bramman
Chief Financial Officer
(Principal Financial Officer)
 
 
Date:
June 10, 2020

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Exhibit 4.1

____________________
NORDSTROM, INC.,
as Issuer,
the GUARANTORS party hereto
AND
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
$600,000,000 8.750% Senior Secured Notes due 2025
____________________
INDENTURE
Dated as of April 16, 2020
____________________


CONTENTS
Page
1
Definitions    1
Other Definitions    24
Rules of Construction    25
Inapplicability of the Trust Indenture Act    26
26
Form, Dating and Terms    26
Execution and Authentication    32
Registrar and Paying Agent    33
Paying Agent to Hold Money in Trust    33
Holder Lists    34
Transfer and Exchange    34
Mutilated, Destroyed, Lost or Stolen Notes    38
Outstanding Notes    39
Temporary Notes    39
Cancellation    40
Section 2.11.
Payment of Interest; Defaulted Interest    40
CUSIP and ISIN Numbers    41
41
Payment of Notes    41
Maintenance of Office or Agency    42
Stay, Extension and Usury Laws    42
Compliance Certificate    42
Limitation on Asset Dispositions    43
Limitation on Liens    45
Subsidiaries    45
Section 3.8.
Limitation on Restricted Payments    45
Limitation on PropCo    49
Suspension of Certain Covenants    49
Change of Control Triggering Event    50
Reports    51
Limitation on Guarantor Indebtedness    52
Statement by Officers as to Default    54
Master Leases and Other Leases.    54
Operation and Maintenance of Properties    55
Compliance with Laws and Insurance Requirements    55
Casualty or Condemnation.    55
Material Notices    56
Title to the Designated Real Estate Assets    56
Alterations    56
56
Consolidation, Merger or Sale of Assets    56
Successor Corporation Substituted    58
58
Notices and Opinions to Trustee    58
Selection of Notes to Be Redeemed or Purchased    58
Notice of Redemption    58
Effect of Notice of Redemption    60
Deposit of Redemption Price    60
Notes Redeemed in Part    60
Optional Redemption    61
Mandatory Redemption    62
62
Events of Default    62
Acceleration    64
Other Remedies    65
Section 6.4.
Waiver of Past or Existing Defaults    65
Control by Majority    65
Limitation on Suits    65
Rights of Holders to Receive Payment    66
Collection Suit by Trustee    66
Trustee May File Proofs of Claim    66
Priorities    67
Undertaking for Costs    67
67
Duties of Trustee    67
Rights of Trustee    69
Individual Rights of Trustee    70
Trustee’s Disclaimer    70
Notice of Defaults    71
[Reserved]    71
Compensation and Indemnity    71
Replacement of Trustee    72
Successor Trustee by Merger    73
Eligibility; Disqualification    73
Section 7.11.
Security Documents; Collateral Trust Agreement    73
74
Option to Effect Defeasance    74
Defeasance and Discharge    74
Conditions to Defeasance    74
Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions    75
Repayment to the Issuer    76
Reinstatement    76
76
Without Consent of Holders    76
With Consent of Holders    78
[Reserved]    79
Revocation and Effect of Consents and Waivers    79
Notation on or Exchange of Notes    80
Trustee to Sign Amendments    80
81
Guarantee    81
Limitation on Liability; Termination, Release and Discharge    82
Right of Contribution    83
No Subrogation    83
Article XI. SATISFACTION AND DISCHARGE
84
Satisfaction and Discharge    84
Application of Trust Money    85
86
Security    86
Collateral Trust Agreement    88
Section 12.3.
Release of Liens in Respect of Notes    89
Collateral Access Agreement    89
Relative Rights.    90
Further Assurances; Maintenance of Properties; Compliance with Laws; Insurance.    90
Article XIII. MISCELLANEOUS
91
Notices    91
[Reserved]    93
Section 13.3.
Certificate and Opinion as to Conditions Precedent    93
Statements Required in Certificate or Opinion    93
When Notes Disregarded    93
Rules by Trustee, Paying Agent and Registrar    94
Legal Holidays    94
Section 13.8.
Governing Law    94
Jurisdiction    94
Waivers of Jury Trial    94
USA PATRIOT Act    94
No Recourse Against Others    95
Successors    95
Section 13.14.
Multiple Originals    95
Table of Contents; Headings    95
Force Majeure    95
Severability    95
Appointment of Co-Trustee    96


EXHIBIT A    Form of Global Restricted Note
EXHIBIT B    Form of Supplemental Indenture
EXHIBIT C
Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S
EXHIBIT D
Designated Real Estate Assets

INDENTURE, dated as of April 16, 2020, among NORDSTROM, INC., a Washington corporation (the “Issuer”), the Guarantors party hereto from time to time and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as trustee (in such capacity, the “Trustee”).
W I T N E S S E T H:
WHEREAS, the Issuer and the Guarantors have duly authorized the execution and delivery of this Indenture to provide for the issuance and guarantee, respectively, of (i) the Issuer’s $600,000,000 8.750% Senior Secured Notes due 2025 (the “Initial Notes”), as issued on the date hereof, and (ii) any additional 8.750% Senior Secured Notes due 2025 issued pursuant to this Indenture (the “Additional Notes,” and together with the Initial Notes, the “Notes” or the “Securities”) from time to time after the Issue Date.
NOW, THEREFORE, in consideration of the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders, as follows:
Article I.

DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1.    Definitions.
“Access Period” means, for each parcel of real estate Collateral, the period, which begins on the day on which the applicable Credit Agreement Agent provides the collateral trustee with notice of its exercise of its access rights in accordance with collateral access agreement following either (a) delivery by the collateral trustee to the applicable Credit Agreement Agent of a notice that it has either obtained possession or control of such parcel of real estate Collateral or sold or otherwise disposed of such parcel of real estate Collateral or (b) delivery of an enforcement notice by the applicable Credit Agreement Agent to the collateral trustee, and ends on the earliest of (A) the 180th day after such date (subject to customary tolling provisions); (B) the date on which all or substantially all of the Credit Agreement Collateral located on such parcel of real estate Collateral is collected and removed from such parcel of real estate Collateral; and (C) the repayment in full of all Credit Agreement Obligations (other than contingent indemnification obligations for which no claim has been made).
2     “Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
3    “Appraised Value” of any Real Estate Asset subject to a Mortgage in favor of the Collateral Trustee shall mean the appraised value thereof as set out in an Officer’s Certificate and determined pursuant to a customary appraisal conducted by any appraiser of nationally recognized standing that is not an Affiliate of the Issuer that is selected by the Issuer; provided that such appraisal has been conducted within 12 months prior to the date of determination of the Collateral Coverage Ratio.
4    “Asset Disposition” means the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions, of Designated Real Estate Assets or Collateral (including by way of a Sale/ Leaseback Transaction) by the Issuer or PropCo including the issuance or sale of Equity Interests of PropCo, whether in a single transaction or a series of related transactions (each referred to in this definition as a “disposition”), in each case, other than:
(1)    dispositions of Designated Real Estate and/or Collateral by the Issuer to PropCo;
(2)    the issuance or sale of Equity Interests by PropCo to the Issuer; and
(3)    to the extent constituting a disposition, the creation, incurrence or assumption of Permitted Liens or other Liens not prohibited by this Indenture.
5    “Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now and hereafter in effect, or any successor statute.
6    “Below Investment Grade Rating Event” means the ratings on the Notes are lowered by each of the Rating Agencies and the Notes are rated below Investment Grade by each of the Rating Agencies on any date from the date of the public notice of an arrangement that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of a Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies); provided that a Below Investment Grade Rating Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for purposes of the definition of Change of Control Repurchase Event hereunder) if any of the Rating Agencies making the reduction in rating to which this definition would otherwise apply does not announce or publicly confirm or inform the Trustee in writing at its request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the Below Investment Grade Rating Event).
7    “Board of Directors” means (1) with respect to the Issuer or any corporation, the board of directors or managers, as applicable, of the corporation, or any duly authorized committee thereof; (2) with respect to any partnership, the board of directors or other governing body of the general partner of the partnership or any duly authorized committee thereof; and (3) with respect to any other Person, the board or any duly authorized committee of such Person serving a similar function. Whenever any provision requires any action or determination to be made by, or any approval of, a Board of Directors, such action, determination or approval shall be deemed to have been taken or made if approved by a majority of the directors on any such Board of Directors (whether or not such action or approval is taken as part of a formal board meeting or as a formal board approval).
8    “Business Day” means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York, United States or the jurisdiction of the place of payment are authorized or required by law to close.
9    “Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.
10    “Casualty Event” means any taking under power of eminent domain or similar proceeding and any insured loss, in each case relating to property or other assets that constituted Collateral.
11    “Change of Control” means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the Issuer’s properties or assets and those of the Company’s subsidiaries taken as a whole to any “person” or “group” (as that term is used in Section 13(d)(3) of the Exchange Act), other than the Issuer or one of its subsidiaries; (2) the adoption of a plan relating to the Issuer’s liquidation or dissolution; or (3) the consummation of any transaction or series of related transactions (including, without limitation, any merger or consolidation) the result of which is that any “person” or “group” (as that term is used in Section 13(d)(3) of the Exchange Act), other than the Company or any of its wholly-owned subsidiaries, becomes the beneficial owner, directly or indirectly, of more than 50% of the then outstanding number of shares of its voting stock, measured by voting power rather than number of shares.
12    “Change of Control Triggering Event” means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.
13    “Collateral” means all properties and assets of the Issuer and the Guarantors now owned or hereafter acquired in which Liens have been granted, or purported to be granted, or required to be granted, to the Collateral Trustee to secure any or all of the Parity Lien Obligations, except:
(1)    any properties and assets in which the Collateral Trustee is required to release its Liens pursuant to the provisions in Section 3.2 of the Collateral Trust Agreement; and
(2)    any properties and assets that no longer secure the Notes or any Obligations in respect thereof pursuant to the provisions in Section 12.3 of this Indenture provided that, in the case of clauses (1) and (2), if such Liens are required to be released as a result of the sale, transfer or other disposition of any properties or assets of the Issuer or any Guarantor, such assets or properties will cease to be excluded from the Collateral if the Issuer or any Guarantor thereafter acquires or reacquires such assets or properties.
14    “Collateral Coverage Ratio” means, as of any date of determination, the ratio of (a) the aggregate Appraised Value of all Real Estate Assets that are subject to a Mortgage to secure the Parity Lien Obligations on such date to (b) the aggregate principal amount of the Parity Lien Obligations then outstanding as of such date.
15    “Collateral Trust Agreement” means the collateral trust agreement, dated as of the date hereof, among the Issuer, the other grantors party from time to time thereto, the Trustee, and the Collateral Trustee and the other parties thereto from time to time, as such agreement may be amended, supplemented, amended and restated or otherwise modified from time to time.
16    “Collateral Trustee” means Wells Fargo Bank, National Association, in its capacity as collateral trustee under the Collateral Trust Agreement, together with its successors and assigns in such capacity.
17    “Consolidated Adjusted EBITDA” means, for any period, Consolidated Net Income for such period (disregarding any non-cash charges or credits related to any Plan, any non-qualified supplemental pension plan maintained, sponsored or contributed by the Issuer or any ERISA Affiliate, or any Multiemployer Plan) plus:
(a)    without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of:
(i)    consolidated interest expense for such period, plus
(ii)    consolidated income tax expense for such period, plus
(iii)    all amounts attributable to depreciation and amortization for such period, plus
(iv)    any extraordinary, unusual or non-recurring charges for such period, plus
(v)    any fees, expenses or charges related to any equity offering, permitted acquisition or other investment, Asset Disposition or other disposition, or incurrence or refinancing of (or amendment or other modification to the documents evidencing any) Indebtedness (in each case, whether or not successful or consummated) permitted to be made or incurred under this Indenture, including fees, expenses or charges relating to the offering and the use of proceeds hereof, as well as the amendment to the Revolving Credit Facility described in the offering memorandum to which the Notes relate, plus
(vi)    any premium, make-whole or penalty payments that are required to be made in connection with any prepayment of Indebtedness, plus
(vii)    any non-cash charges for such period; provided that in the event the Issuer or any Subsidiary makes any cash payment in respect of any such non-cash charge, such cash payment shall be deducted from Consolidated Adjusted EBITDA in the period in which such payment is made, plus
(viii)    the amount of cash restructuring charges and curtailments and modifications to pension and post-retirement employee benefit plans incurred during such period;
and minus:
(b)    without duplication and to the extent included in determining such Consolidated Net Income, the sum of:
(i)    any extraordinary, unusual or non-recurring gains for such period, plus
(ii)    non-cash gains for such period,
all determined on a consolidated basis in accordance with GAAP.
18    “Consolidated Net Income” means, for any period, the net income or loss of the Issuer and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or loss) of any Person in which any other Person (other than the Issuer or any Subsidiary or any director holding qualifying shares in compliance with applicable law) owns an Equity Interest, except to the extent of the amount of dividends or other distributions actually paid to the Issuer or any of the Subsidiaries during such period, and (b) the income or loss of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Issuer or any Subsidiary or the date that such Person’s assets are acquired by the Issuer or any Subsidiary.
19    “Consolidated Total Debt” means, as of any date of determination, the aggregate stated balance sheet amount of all Indebtedness of the Issuer and its Subsidiaries (or, if higher, the par value or stated face amount outstanding of all such Indebtedness (other than zero coupon Indebtedness)) determined on a consolidated basis in accordance with GAAP.
20    “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
“Corporate Trust Office” means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, as of the date of this Indenture, located at 333 S. Grand Avenue, 5th Floor, Suite 5A, Los Angeles, California 90071 Attn: Nordstrom, Inc. Administrator; with respect to registration for transfer or exchange, presentation at maturity or for redemptions, such office shall also mean the office or agency of the Trustee located at the date hereof at Corporate Trust Operations, MAC N9300-070, 600 South Fourth Street, Minneapolis, MN 55415.
21    “Credit Agreement Agent” means, at any time, the Person serving at such time as the “Agent” or “Administrative Agent” under the Credit Agreement or any other representative then most recently designated in accordance with the applicable provisions of the Credit Agreement, together with its successors in such capacity.
22    “Credit Agreement Collateral” means any assets of the Issuer or any Guarantor that are subject to a lien or security interest in favor of a Credit Agreement Agent in order to secure the Credit Agreement Obligations; provided that, in no event shall the Credit Agreement Collateral include the Collateral.
23    “Credit Agreement Obligations” means all “Obligations,” “Secured Obligations” or similar term as defined in any Credit Agreement.
24    “Credit Facilities” means, with respect to the Issuer or any of its Subsidiaries, one or more debt facilities, indentures or other arrangements (including any credit facility, commercial paper facilities and overdraft facilities) with banks, other financial institutions or investors providing for revolving credit loans, term loans, notes receivables financing, letters of credit or other Indebtedness, including all agreements, instruments and documents executed and delivered pursuant thereto.
“Deed” means, with respect to each Designated Real Estate Asset, a special warranty deed, limited warranty deed or other local equivalent, transferring fee simple title to such Designated Real Estate Asset from Issuer to PropCo free and clear of any Liens other than Permitted Encumbrances.
25    “Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default; provided that any Default that results solely from the taking of an action that would have been permitted but for the continuation of a previous Default will be deemed to be cured if such previous Default is cured prior to becoming an Event of Default.
26    “Designated Non-Cash Consideration” means the fair market value (as determined in good faith by the Issuer) of non-cash consideration received by the Issuer or any Subsidiary in connection with an Asset Disposition that is so designated as “Designated Non-Cash Consideration pursuant to an Officer’s Certificate, less the amount of cash, cash equivalents or other Permitted Investments received in connection with a subsequent sale of or collection on such Designated Non-Cash Consideration.
27    “Designated Preferred Stock” means Preferred Stock of the Issuer, as applicable (other than Excluded Equity), that is issued after the Issue Date for cash and is so designated as Designated Preferred Stock, pursuant to an Officer’s Certificate, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in Section 3.8(b) of this Indenture.
28    “Designated Real Estate Assets” means, initially, the Real Estate Assets listed on Exhibit D attached hereto, and any Substitute Designated Real Estate Asset pursuant to Section 12.1(e) of this Indenture.
29     “Disqualified Stock” means, with respect to any Person, any Equity Interests of such Person that, by its terms (or by the terms of any security into which it is convertible or for which it is puttable, redeemable or exchangeable), in each case, at the option of the holder thereof or upon the happening of any event:
(1)    matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise (other than as a result of a change of control or asset sale; provided that the relevant change of control provisions, taken as a whole, are no more favorable in any material respect to holders of such Equity Interests than the change of control provisions applicable to the Notes and any purchase requirement triggered thereby may not become operative until compliance with the change of control provisions applicable to the Notes (including the purchase of any Notes tendered pursuant thereto));
(2)    is convertible or exchangeable for Indebtedness or Disqualified Stock, or
(3)    is redeemable at the option of the holder thereof, in whole or in part,
in each case, prior to the date that is 91 days after the earlier of the maturity date of the Notes and the date the Notes are no longer outstanding; provided that only the portion of Equity Interests that so mature or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date shall be deemed to be Disqualified Stock; provided, further, that if such Equity Interests are issued to any employee or to any plan for the benefit of employees of the Issuer or its Subsidiaries or a direct or indirect parent of the Issuer or by any such plan to such employees, such Equity Interests shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Issuer or its Subsidiaries or a direct or indirect parent of the Issuer in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability; provided, further, that any class of Equity Interests of such Person that by its terms authorizes such Person to satisfy its obligations thereunder by delivery of Equity Interests that are not Disqualified Stock shall not be deemed to be Disqualified Stock.
30    “Dollars” or “$” means the lawful money of the United States of America.
“Domestic Subsidiary” means any Subsidiary that is not a Foreign Subsidiary.
31    “DTC” means The Depository Trust Company or any successor securities clearing agency.
32    “Equity Interests” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing (but excluding Indebtedness convertible or exchangeable into Equity Interests).
33    “Equity Offering” means a public or private offering or sale for cash by the Issuer of its Equity Interests (other than Disqualified Equity Interests).
34    “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the final rules and regulations promulgated thereunder, as from time to time in effect.
35    “ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Issuer, is treated as a single employer under Section 414(b) or (c) of the Internal Revenue Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Internal Revenue Code, is treated as a single employer under Section 414 of the Internal Revenue Code.
36    “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder, as amended.
37    “Excluded Contribution” means the net cash proceeds and cash equivalents, or the Fair Market Value of other assets, received by the Issuer after the Issue Date from:
(1)    contributions to its common equity capital, and
(2)    the sale of Capital Stock (other than Excluded Equity) of the Issuer,
38    in each case designated as Excluded Contributions pursuant to an Officer’s Certificate, or that are utilized to make a Restricted Payment pursuant to Section 3.8(c)(v) of this Indenture. Excluded Contributions will be excluded from the calculation set forth in Section 3.8(b) of this Indenture.
39    “Excluded Equity” means (i) Disqualified Stock, (ii) any Equity Interests issued or sold to a Subsidiary or any employee stock ownership plan or trust established by the Issuer or any of its Subsidiaries or a direct or indirect parent of the Issuer (to the extent such employee stock ownership plan or trust has been funded by the Issuer or any Subsidiary or a direct or indirect parent of the Issuer) and (iii) any Equity Interest that has already been used or designated as (or the proceeds of which have been used or designated as) a Cash Contribution Amount, Designated Preferred Stock, an Excluded Contribution or Refunding Capital Stock.
40    “Fair Market Value” means the consideration received or paid in any transaction or series of transactions, a value that is fair and on market terms as determined by an Officer or the Board of Directors in good faith.
41    “Fitch” means Fitch Ratings, or any successor thereto.
42    “Four Quarter Period” means the period of the most recent four full consecutive Fiscal Quarters.
43    “Funded Debt” means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables), whether or not contingent:
(1)    in respect of borrowed money or advances, and
(2)    evidenced by loan agreements, bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof), whether or not then available or drawn.
44    For the avoidance of doubt, “Funded Debt” shall not include Hedging Obligations.
45    “GAAP” means the United States generally accepted accounting principles in effect as of the Issue Date. For purposes of determining compliance with any covenant contained herein, whether a lease constitutes a capitalized lease, and whether obligations arising under such lease are required to be capitalized on the balance sheet of the lessee thereunder and/or recognized as interest expense in such lessee’s financial statements, shall be determined in accordance with GAAP as in effect on February 3, 2018 notwithstanding any modification or interpretive change occurring thereafter.
46    “Governmental Approval” means any Permit, ruling or determination by any Governmental Authority required to be obtained with respect to any Designated Real Estate Asset or the ownership, occupation, testing, operation or maintenance thereof.
47    “Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
48    “Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person, including any such obligation, direct or indirect, contingent or otherwise, of such Person:
(1)    to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or
(2)    entered into primarily for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term “Guarantee” will not include endorsements for collection or deposit in the ordinary course of business or consistent with past practice. The term “Guarantee” used as a verb has a corresponding meaning.
49    “Guaranteed Ratio Debt” means an amount of Indebtedness incurred by any of the Guarantors if on the date of such incurrence and after giving pro forma effect thereto (including pro forma application of the proceeds thereof) the Total Guaranteed Leverage Ratio of the Issuer and its Subsidiaries does not exceed 2.75 to 1.00.
50    “Guarantors” means any Subsidiary that Guarantees the Notes, until such Note Guarantee is released in accordance with the terms of this Indenture.
51    “Hedge Agreement” means any Swap Contract; provided that the counterparty thereto has delivered a joinder to the Collateral Trust Agreement in the form required under the Collateral Trust Agreement in respect thereof and the other requirements of the Collateral Trust Agreement have been complied with. “Hedge Agreement” shall include both any Swap Contract constituting a “master agreement” and any related Swap Transaction; provided, however, that such joinder to the Collateral Trust Agreement referred to in this definition shall only be required once for each master agreement and shall not be required for each individual Swap Transaction thereunder.
52    “Hedge Provider” means the counterparty to the Issuer or any Guarantor under any Hedge Agreement.
53    “Hedging Obligations” means, with respect to any specified Person and with respect to any Series of Parity Lien Debt, the obligations of such Person under any Hedge Agreement, which Obligations constitute “Obligations” or “Secured Obligations” as defined in the Parity Lien Documents of such Series of Parity Lien Debt, in each case that are designated by the Issuer to the Collateral Trustee and each Parity Lien Representative as Hedging Obligations by written notice in accordance with the terms of the Collateral Trust Agreement.
54    “Holder” means each Person in whose name the Notes are registered on the registrar’s books, which shall initially be the respective nominee of DTC.
55    “Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding (i) accounts payable incurred in the ordinary course of business and consignment purchases, (ii) any earn-out obligation contingent upon performance of an acquired business, except to the extent such obligation would be required to be reflected on a consolidated balance sheet of the Issuer prepared in accordance with GAAP and (iii) accruals for payroll and other liabilities accrued in the ordinary course of business), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed (provided that with respect to Indebtedness that is nonrecourse to the credit of that Person, such Indebtedness shall be taken into account only to the extent of the lesser of (x) the fair market value of the asset(s) subject to such Lien and (y) the amount of Indebtedness secured), (f) all Guarantees by such Person of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (i) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, (j) all Off-Balance Sheet Liabilities and (k) Disqualified Equity Interests. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. For the avoidance of doubt, any preferred Equity Interests (other than any Disqualified Equity Interests) of any Person that are convertible into common Equity Interests (other than any Disqualified Equity Interests) of such Person shall not constitute Indebtedness of such Person. For the avoidance of doubt, obligations in respect of Swap Agreements shall not constitute Indebtedness.
56    “Insolvency or Liquidation Proceeding” means:
(1)    any voluntary or involuntary case commenced by or against the Issuer or any Guarantor under Title 11, U.S. Code or any similar federal or state law for the relief of debtors, any other proceeding for the reorganization, recapitalization, receivership, liquidation or adjustment or marshaling of the assets or liabilities of the Issuer or any Guarantor, any receivership or assignment for the benefit of creditors relating to the Issuer or any Guarantor or any similar case or proceeding relative to the Issuer or any Guarantor or its creditors, in each case whether or not voluntary; or
(2)    any liquidation, dissolution, marshaling of assets or liabilities or other winding up of or relating to the Issuer or any Guarantor, in each case whether or not voluntary and whether or not involving bankruptcy or insolvency; or
(3)    any other proceeding of any type or nature in which substantially all claims of creditors of the Issuer or any Guarantor are determined and any payment or distribution is or may be made on account of such claims.
57    “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.
58    “Investment Grade” means a rating of BBB- or better by Fitch (or its equivalent under any successor rating categories of Fitch), Baa3 or better by Moody’s (or its equivalent under any successor rating categories of Moody’s) and BBB- or better by S&P (or its equivalent under any successor rating categories of S&P) or the equivalent investment grade credit rating from any additional Rating Agency or Rating Agencies selected by the Company.
59    “Issue Date” means April 16, 2020.
60    “Leasehold Property” means any leasehold interest of the Issuer or any Guarantor as lessee under any lease of real property.
61    “Lien” means with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset, excluding operating leases.
62    “Lien Sharing and Priority Confirmation” means, as to any Series of Parity Lien Debt, the written agreement of the holders of such Series of Parity Lien Debt, as set forth in this Indenture, credit agreement or other agreement governing such Series of Parity Lien Debt, for the enforceable benefit of each other current and future Parity Lien Representative and each current and future Parity Lien Secured Party:
(1)    that all Parity Lien Obligations will be and are secured equally and ratably by all Parity Liens at any time granted by the Issuer or any Guarantor to secure any Obligations in respect of such Series of Parity Lien Debt and that all such Parity Liens will be enforceable by the Collateral Trustee for the benefit of all Parity Lien Secured Parties equally and ratably; provided, however, that notwithstanding the foregoing, (x) this provision will not be violated with respect to any particular Collateral and any particular Series of Parity Lien Debt if the Parity Lien Debt Documents in respect thereof prohibit the applicable Parity Lien Representative from accepting the benefit of a Lien on any particular asset or property or such Parity Lien Representative otherwise expressly declines in writing to accept the benefit of a Lien on such asset or property and (y) this provision will not be violated with respect to any particular Hedging Obligations if the Hedge Agreement prohibits the applicable Hedge Provider from accepting the benefit of a Lien on any particular asset or property or such Hedge Provider otherwise expressly declines in writing to accept the benefit of a Lien on such asset or property; and
(2)    that the holders of Obligations in respect of such Series of Parity Lien Debt are bound by the provisions of the Collateral Trust Agreement, including the provisions relating to the ranking of Parity Liens and the order of application of proceeds from the enforcement of Parity Liens.
63    “Master Lease” means, collectively or individually, as the context may require, (i) that certain Nordstrom Master Lease (Distribution Center) between PropCo and the Issuer, dated as of April 16, 2020, and (ii) that certain Nordstrom Master Lease (FLS) between PropCo and the Issuer, dated as of April 16, 2020.
64    “Material Real Property Document” means, with respect to any Designated Real Estate Asset, any agreement, document or instrument relating to such Designated Real Estate Asset that is material in relation to the use, business or operation of the applicable Designated Real Property Asset.
65    “Moody’s” means Moody’s Investors Service, Inc., or any successor thereto.
66    “Mortgage” means a mortgage, deed of trust, deed to secure debt, security deed, trust deed or spreader of lien, as it may be amended, restated supplemented or otherwise modified from time to time.
67    “Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA maintained, sponsored or contributed by the Issuer or any ERISA Affiliate.
68    “Net Available Cash” means, with respect to any Asset Disposition or Casualty Event, an amount equal to: (i) cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received by the Issuer or any of its Subsidiaries from such Asset Disposition or Casualty Event, minus (ii) any bona fide direct costs incurred in connection with such Asset Disposition or Casualty Event, including (a) income or gains taxes payable by the seller as a result of any gain recognized in connection with such Asset Disposition, (b) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Notes and Indebtedness that is secured by a Lien on the Collateral on a basis that is pari passu with or junior to the Notes) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Disposition or Casualty Event and (c) a reasonable reserve for any indemnification payments (fixed or contingent) attributable to seller’s indemnities and representations and warranties to purchaser in respect of such Asset Disposition undertaken by the Issuer or any of its Subsidiaries in connection with such Asset Disposition; provided that upon release of any such reserve to the Issuer or any of its Subsidiaries, the amount released shall be considered Net Available Cash.
69    “Net Tangible Assets” means the aggregate amount at which the assets of the Issuer and its Subsidiaries are reflected, in accordance with GAAP as in effect on the Issue Date, on the asset side of the consolidated balance sheet of the Issuer and its Subsidiaries, as of the end of the most recent Fiscal Quarter for which financial statements shall at such time have been delivered pursuant to Section 3.12 or otherwise prepared (or prior to delivery of such financial statements, as of the end of the most recent Fiscal Quarter (or Fiscal Year) with respect to which historical financial statements have been delivered or otherwise prepared) (after deducting all valuation and qualifying reserves relating to such assets), except any of the following described items that may be included among such assets: (a) trademarks, patents, goodwill and similar intangibles, (b) investments in and advances to Subsidiaries, and (c) capital lease property rights, after deducting from such amount current liabilities (other than deferred Tax effects) as reflected, in accordance with GAAP as in effect on the Issue Date, on such balance sheet.
70    “Non-Guarantor” means any Subsidiary of the Issuer that is not a Guarantor.
71    “Note Documents” means this Indenture, the Notes and the Parity Lien Security Documents securing the Obligations in respect thereof.
72    “Obligations” means any principal, interest, (including Post-Petition Interest or entitlement to fees or expenses or other charges accruing on or after the filing of any petition or application in bankruptcy or insolvency case or proceeding or for reorganization relating to the Issuer or any Guarantor whether or not a claim for Post-Petition Interest is allowed or allowable in such proceedings), penalties, fees, expenses, indemnifications, reimbursements (including, without limitation, reimbursement obligations with respect to letters of credit and bankers’ acceptances), damages and other liabilities payable under the documentation governing any Indebtedness.
73    “Off-Balance Sheet Liability” of a Person means (a) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person or (b) any indebtedness, liability or obligation under any so-called “synthetic lease” transaction entered into by such Person. For the avoidance of doubt, any preferred Equity Interests (other than any Disqualified Equity Interests) of any Person that are convertible into common Equity Interests (other than any Disqualified Equity Interests) of such Person shall not constitute an Off-Balance Sheet Liability of such Person.
74    “Officer” means, with respect to any Person, the Chairman of the Board, any Vice Chairman of the Board, the Chief Executive Officer, the President, any Executive Vice President, any Senior Vice President, the Chief Financial Officer, the Treasurer or Corporate Treasurer, any Assistant Treasurer or Assistant Corporate Treasurer, the Controller or Corporate Controller, any Assistant Controller or Assistant Corporate Controller, the General Counsel, any Vice President, the Secretary or Corporate Secretary or any Assistant Secretary or Assistant Corporate Secretary of such Person.
75    “Officer’s Certificate” means, with respect to any Person, a certificate signed by one Officer of such Person.
    “Opinion of Counsel” means a written opinion from legal counsel, who may be an employee of, or counsel to, the Issuer, or other counsel who is acceptable to the Trustee.

76    “Paying Agent” means any Person authorized by the Issuer to pay the principal of (and premium, if any) or interest on any Note on behalf of the Issuer.
77    “Parity Lien” means a Lien granted, or purported to be granted, by a Security Document to the Collateral Trustee, at any time, upon any property of the Issuer or any Guarantor to secure Parity Lien Obligations.
78    “Parity Lien Debt” means:
(1)    the Notes issued on the date of this Indenture;
(2)    any other Funded Debt (including additional Notes), that is secured by a Parity Lien and that was permitted to be incurred and permitted to be so secured under each applicable Parity Lien Debt Document; provided, in the case of any Funded Debt referred to in clause (2) of this definition, that:
(i)    on or before the date on which such Funded Debt is incurred by the Issuer or by a Subsidiary, such Funded Debt is designated by the Issuer, in an officers’ certificate in the form required under the Collateral Trust Agreement delivered to each Parity Lien Representative and the Collateral Trustee, as “Parity Lien Debt” for the purposes of this Indenture and the Collateral Trust Agreement;
(ii)    unless such Funded Debt is issued under an existing Parity Lien Debt Document for any Series of Parity Lien Debt whose Parity Lien Debt Representative is already party to the Collateral Trust Agreement, the Parity Lien Representative for such Funded Debt executes and delivers a joinder in the form required under the Collateral Trust Agreement; and
(iii)    all other requirements set forth in the Collateral Trust Agreement as to the confirmation, grant or perfection of the Collateral Trustee’s Liens to secure such Funded Debt in respect thereof are satisfied (and the satisfaction of such requirements and the other provisions of this clause (c) will be conclusively established if the Issuer delivers to the Collateral Trustee an officers’ certificate and opinion of counsel in the form required under the Collateral Trust Agreement stating that such requirements and other provisions have been satisfied and that such Funded Debt is “Parity Lien Debt”).
For the avoidance of doubt, Hedging Obligations do not constitute Parity Lien Debt but may constitute Parity Lien Obligations.
79    “Parity Lien Documents” means, collectively, the Note Documents and any other indenture, credit agreement or other agreement pursuant to which any Parity Lien Debt is incurred and the Parity Lien Security Documents.
80    “Parity Lien Obligations” means Parity Lien Debt and all other Obligations in respect thereof including, without limitation interest and premium (if any) (including Post-Petition Interest whether or not allowable), together with all Hedging Obligations and all guarantees of any of the foregoing. In addition to the foregoing, all obligations owing to the Collateral Trustee in its capacity as such, whether pursuant to the Collateral Trust Agreement or one or more of the Priority Lien Obligations (with the obligations described in this sentence being herein referred to as the “Collateral Trustee Obligations”), which Collateral Trustee Obligations shall be entitled to the priority provided pursuant to the Collateral Trust Agreement.
81    “Parity Lien Representative” means:
(1)    in the case of the Notes, the Trustee; and
(2)    in the case of any other Series of Parity Debt, the trustee, agent or representative of the holders of such Series of Parity Lien Debt who maintains the transfer register for such Series of Parity Lien Debt and (A) is appointed as a representative for such Parity Lien Debt (for purposes related to the administration of the Security Documents) pursuant to this Indenture, credit agreement or other agreement governing such Series of Parity Lien Debt and (B) has become a party to the Collateral Trust Agreement by executing a joinder in the form required under the Collateral Trust Agreement, together with its successors and assigns in such capacity.
82    “Parity Lien Secured Parties” means the holders of Parity Lien Obligations and each Parity Lien Representative.
83    Parity Lien Security Documentsmeans all security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, collateral agency agreements, control agreements or other grants or transfers for security executed and delivered by the Issuer or any Guarantor creating or perfecting (or purporting to create or perfect) a Lien upon Collateral in favor of the Collateral Trustee, for the benefit of any of the Parity Lien Secured Parties, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms and pursuant to Sections 9.1 and 9.2 of this Indenture.
84    “Permit” means any license, certificate, action, approval, consent, waiver, exemption, variance, franchise, order, permit, authorization, right, registration, filing or submission filed with or obtained from a Governmental Authority.
85    “Permitted Encumbrances” means:
(a)    Liens imposed by law for Taxes, assessments or governmental charges or levies that, in each case, are not overdue by more than 30 days or are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves with respect thereto are maintained in accordance with GAAP;
(b)    carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days (or, in the case of a landlords’ Lien, beyond any notice and cure period under the applicable real property lease) or are being contested;
(c)    pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance, employers’ health taxes and other social security laws or regulations or similar legislation or to secure letters of credit, bank guarantees or similar instruments supporting such obligations;
(d)    pledges or deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds or obligations to insurance carriers and other obligations of a like nature, in each case in the ordinary course of business or to secure letters of credit, bank guarantees or similar instruments supporting such obligations;
(e)    judgment liens in respect of judgments that do not constitute an Event of Default;
(f)    easements, restrictions (including zoning restrictions), rights-of-way and other encumbrances, title defects and matters of record affecting real property that do not materially detract from the value of the Collateral, taken as a whole, or interfere with the ordinary conduct of business of the Issuer and its Subsidiaries, taken as a whole;
(g)    the special property interest of a consignor in respect of goods subject to consignment;
(h)    Liens (i) in favor of banks, other financial institutions, securities or commodities intermediaries or brokerage arising as a matter of law encumbering deposits of cash, securities, commodities and other funds maintained with such Persons (including rights of set off) and that are within the general parameters customary in such Person’s industry, (ii) deemed to exist in connection with investments in repurchase agreements described in clause (d) of the definition of “Permitted Investments,” (iii) attaching to commodity trading accounts or other brokerage accounts in the ordinary course of business securing obligations owed to the institutions with which such accounts are maintained, (iv) that are contractual rights of setoff (x) relating to the establishment of depository relations with banks or other deposit-taking financial institutions in the ordinary course of business and not given in connection with the issuance of Indebtedness or (y) relating to pooled deposit or sweep accounts of the Issuer or any of its Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business and (v) that are rights of set-off (or holdbacks or reserves established by a credit card issuer or processor) against credit balances of the Issuer or any of its Subsidiaries with credit card issuers or credit card processors or amounts owing by such credit card issuers or credit card processors to the Issuer or any of its Subsidiaries, or Liens on returned merchandise in favor of such issuers or processors, in each case in the ordinary course of business, but not rights of set-off against any other property or assets of the Issuer or any of its Subsidiaries pursuant to agreements with credit card issuers or credit card processors to secure the obligations of the Issuer or any of its Subsidiaries to credit card issuers or credit card processors as a result of fees and chargebacks;
(i)    Liens of a collecting bank under Section 4-210 of the UCC in effect in the relevant jurisdiction (or Section 4-208 in the case of the New York UCC) on items in the course of collection;
(j)    Liens of sellers of goods to the Issuer or a Subsidiary arising as a matter of law under Article 2 of the UCC in effect in the relevant jurisdiction or similar provisions of applicable law, in each case in the ordinary course of business;
(k)    licenses of patents, trademarks and other intellectual property rights of the Issuer or any of its Subsidiaries, in each case in the ordinary course of business and not materially interfering with the conduct of business by the Issuer and its Subsidiaries, taken as a whole;
(l)    Liens solely on any cash earnest money deposits made by the Issuer or any of its Subsidiaries in connection with any letter of intent or purchase agreement entered into by it;
(m)    Liens incurred in the ordinary course of business in connection with the shipping of goods on the related goods and proceeds thereof in favor of the shipper of such goods;
(n)    as to any Leasehold Property, any Lien encumbering the underlying fee estate or master or primary lease in connection therewith so long as such fee estate or landlord (or similar) interest is not held by a Person that is the Issuer or a Guarantor or an Affiliate of the Issuer or a Guarantor; and
(o)    any matters affirmatively insured over or exceptions noted in the final title polices issued in connection with the Mortgages;
provided that the term “Permitted Encumbrances” shall not include any Lien against Collateral securing Indebtedness for borrowed money.
86    “Permitted Indebtedness” means:
(a)    obligations incurred by any Guarantor arising from agreements providing for customary indemnification, earnouts, adjustment of purchase price, non-compete, consulting or other similar obligations, in each case arising in connection with acquisitions or dispositions of any business, assets or subsidiary of such Guarantor permitted under this Indenture;
(b)    Indebtedness in respect of (i) the financing of insurance premiums or (ii) take‑or‑pay or minimum buy obligations contained in supply agreements, in each case incurred in the ordinary course of business;
(c)    obligations in respect of deferred compensation to employees of any Guarantor in the ordinary course of business;
(d)    (i) obligations of any Guarantor incurred in the ordinary course of business in respect of performance guarantees, completion guarantees, performance bonds, bid bonds, appeal bonds, surety bonds, judgment bonds, replevin bonds and similar bonds, self-insurance and other similar obligations to the extent any such obligations constitute Indebtedness and (ii) obligations in respect of letters of credit, bank guarantees or similar instruments supporting any such obligations or obligations described in clauses (c) and (d) of the definition of “Permitted Encumbrances;”
(e)    customer deposits and advance payments received in the ordinary course of business from customers for goods purchased in the ordinary course of business; and
(f)    Indebtedness incurred in the ordinary course of business in respect of cash management; netting services; automatic clearinghouse arrangements; employee credit card, debit card, prepaid card, purchase card or other payment card programs; overdraft protections and other bank products and similar arrangements and Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument of a Guarantor drawn against insufficient funds in the ordinary course of business that is promptly repaid.
87    “Permitted Investments” means:
(a)    direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency or instrumentality thereof);
(b)    investments in commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a credit rating of at least A2 from S&P, P2 from Moody’s or F2 from Fitch;
(c)    investments in certificates of deposit, bankers’ acceptances and time deposits issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, (i) any domestic or offshore office of any commercial bank organized under the laws of the United States of America or any State thereof, (ii) any office located within the United States of America or in a foreign jurisdiction that has an income tax treaty with the United States of America of a commercial bank organized under the laws of another country or (iii) any office located in London of any commercial bank organized under the laws of the United States of America, any Asian country or any European country, in each case which, at the time of acquisition, has a combined capital and surplus and undivided profits of not less than $500,000,000; provided, however, that investments with any bank that has a combined capital and surplus and undivided profits of less than $500,000,000 are permitted if the Issuer maintains a banking relationship with such bank;
(d)    collateralized repurchase agreements with a term of not more than 365 days and entered into with a financial institution satisfying the criteria described in clause (c) above (i) that has a combined capital and surplus and undivided profits of not less than $500,000,000 or (ii) whose obligations under any such agreements is guaranteed by an entity that has a combined capital and surplus and undivided profits of not less than $500,000,000; and
(e)    money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940 (the “Investment Company Act”) and (ii) have portfolio assets of at least $3,000,000,000; provided that investments in any money market fund with portfolio assets of less than $3,000,000,000 are permitted if such fund has received a rating of AAA from S&P or Aaa from Moody’s.
88    “Permitted Liens” means each of the following:
(a)    Liens on the Collateral securing Parity Lien Obligations in respect of (i) Parity Lien Debt (and Parity Lien Obligations in respect thereof) so long as immediately after giving pro forma effect to the incurrence of such Indebtedness and the use of proceeds thereof, the Collateral Coverage Ratio shall be at least 2.00 to 1.00 and (ii) refinancings, extensions, renewals and replacements of Indebtedness secured by Liens described in subclauses (i) that do not increase the outstanding principal amount thereof, other than in respect of any accrued interest, premium, fees, costs or expenses payable in connection with such extension, renewal or replacement;
(b)    Liens on the Collateral in favor of the Collateral Trustee securing Parity Lien Obligations in respect of (i) Notes and related Note Guarantees issued on the Issue Date, (ii) refinancings, extensions, renewals and replacements of Indebtedness secured by Liens described in subclauses (i) above that do not increase the outstanding principal amount thereof, other than in respect of any accrued interest, premium, fees, costs or expenses payable in connection with such extension, renewal or replacement;
(c)    Permitted Encumbrances;
(d)    any Lien on any property or asset that constitutes Collateral of the Issuer or any Subsidiary existing on the Issue Date; provided that (i) such Lien shall not apply to any other property or asset of the Issuer or any Subsidiary and (ii) such Lien shall secure only those obligations which it secured on the Issue Date and refinancings, extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof, other than in respect of any accrued interest, premium, fees, costs or expenses payable in connection with such extension, renewal or replacement;
(e)    [Reserved];
(f)    [Reserved];
(g)    Liens in respect of leases, subleases, licenses and any other occupancy rights or agreements granted to other Persons in the ordinary course of business and not materially interfering with the conduct of business of the Issuer and its Subsidiaries, taken as a whole;
(h)    Liens in favor of customs and revenue authorities arising as a matter of law securing payment of customs duties in connection with the importation of goods;
(i)    the sale or discount, in the ordinary course of business, of accounts receivable in connection with the compromise or collection thereof and not in connection with any financing or factoring arrangement;
(j)    [Reserved];
(k)    to the extent constituting a Lien, sales or assignments of any litigation claims or rights to receive payments with respect to any such claims;
(l)    to the extent constituting a Lien, sales or assignments of any right to receive rental payments permitted pursuant to Section 3.5 of this Indenture;
(m)    Liens on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances or trade letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(n)    other Liens securing obligations (including Parity Lien Obligations) that do not exceed $100,000,000.
89    “Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities.
90    “Plan” means any pension plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Internal Revenue Code or Section 302 of ERISA that is maintained, sponsored or contributed to by the Issuer or any ERISA Affiliate.
91    “Post-Petition Interest” means any interest, fees, expenses or other amount that accrues or would have accrued after the commencement of any Insolvency or Liquidation Proceeding, whether or not allowed or allowable in any such Insolvency or Liquidation Proceeding.
92    “Preferred Stock” means any Equity Interest with preferential right of payment of dividends or upon liquidation, dissolution or winding up.
93    “Pro Forma Basis” means, with respect to the calculation of any test, financial ratio, basket or covenant under this Indenture, including the Total Guaranteed Leverage Ratio and the Collateral Coverage Ratio and the calculation of Net Tangible Assets, of any Person and its Subsidiaries, as of any date, that pro forma effect will be given to any acquisition, merger, amalgamation, consolidation, Investment, any issuance, Incurrence, assumption or repayment or redemption of Indebtedness (including Indebtedness issued, Incurred or assumed or repaid or redeemed as a result of, or to finance, any relevant transaction and for which any such test, financial ratio, basket or covenant is being calculated, including, without limitation, the issuance of the Notes, the use of proceeds thereof and the amendment to the Revolving Credit Facility), any issuance or redemption of Preferred Stock or Disqualified Stock, all sales, transfers and other dispositions or discontinuance of any Subsidiary, line of business, division, segment or operating unit, any operational change, in each case that have occurred during the four consecutive fiscal quarter period of such Person being used to calculate such test, financial ratio, basket or covenant (the “Reference Period”), or subsequent to the end of the Reference Period but prior to such date or prior to or substantially simultaneously with the event for which a determination under this definition is made (including any such event occurring at a Person who became a Subsidiary of the subject Person or was merged, amalgamated or consolidated with or into the subject Person or any other Subsidiary of the subject Person after the commencement of the Reference Period), as if each such event occurred on the first day of the Reference Period. In the event that the Issuer shall classify Indebtedness or Liens Incurred on the date of determination as Incurred in part as Guaranteed Ratio Debt or under the Collateral Coverage Ratio, respectively, and in part pursuant to one or more clauses of the definition of “Permitted Debt” or one or more clauses of the definition of “Permitted Liens,” as applicable, any calculation of Consolidated Total Debt or of Parity Lien Obligations, as applicable, in each case pursuant to this definition on such date (but not in respect of any future calculation following such date) shall not include any such Indebtedness or Liens, as applicable (and shall not give effect to any repayment, repurchase, redemption, defeasance or other acquisition, retirement or discharge of Indebtedness or Liens, as applicable, from the proceeds thereof) to the extent Incurred pursuant to any such other clause of such definitions, respectively.
94    For purposes of making any computation referred to above:
(1)    if any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date for which a determination under this definition is made had been the applicable rate for the entire period (taking into account any Swap Contracts applicable to such Indebtedness if such Swap Contracts have a remaining term in excess of 12 months);
(2)    interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer, in his or her capacity as such and not in his or her personal capacity, of the Issuer or a direct or indirect parent of the Issuer to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP;
(3)    interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Issuer may designate;
(4)    interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period; and
(5)    to the extent not already covered above, any such calculation may include adjustments calculated in accordance with Regulation S-X under the Securities Act.
95    “PropCo” means Nordstrom Real Estate Holdings, LLC.
96    “Rating Agency” means (1) each of Fitch, Moody’s and S&P; and (2) if any of Fitch, Moody’s or S&P ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of the Company’s control, a “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by the Company as a replacement agency for Fitch, Moody’s or S&P, as the case may be.
97    “Real Estate Asset” means, at any time of determination, any interest (fee, leasehold or otherwise) then owned by the Issuer or any Guarantor in any real property.
98    “S&P” means S&P Global Ratings, the credit ratings business operated by S&P Global Inc. and its subsidiaries.
99    “SEC” means the Securities and Exchange Commission or any successor thereto.
100    “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder, as amended.
101    “Security Documents” means the Collateral Trust Agreement, each Lien Sharing and Priority Confirmation, and each Parity Lien Security Document, in each case, as amended, modified, renewed or restated, in whole or in part, from time to time, in accordance with its terms and pursuant to Sections 9.1 and 9.2 of this Indenture.
102    “Series of Parity Lien Debt” means, severally, the Notes and each other issue or series of Parity Lien Debt for which a single transfer register is maintained. For the avoidance of doubt, all reimbursement obligations in respect of letters of credit issued pursuant to a Parity Lien Document shall be part of the same Series of Parity Lien Debt as all other Parity Lien Debt incurred pursuant to such Parity Lien Document.
103    “Significant Subsidiary” means any Subsidiary that would constitute a “significant subsidiary” of the Issuer as defined in Rule 1-02(w) of Regulation S-X under the Securities Act and the Exchange Act as in effect on the Issue Date.
104    “Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision, but shall not include any contingent obligations to repay, redeem or repurchase any such principal prior to the date originally scheduled for the payment thereof.
105    “Subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned or held; provided that Excluded Subsidiaries shall not be considered “Subsidiaries” of the Issuer for purposes hereof. Unless the context requires otherwise, any reference to a “Subsidiary” contained herein shall refer to a Subsidiary of the Issuer.
106    “Substitute Designated Real Estate Asset” has the meaning ascribed to such term in Section 10.1(d) herein.