SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
[ ] 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 0-6074
Nordstrom, Inc.
______________________________________________________
(Exact name of Registrant as specified in its charter)
Washington 91-0515058
_______________________________ ___________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1501 Fifth Avenue, Seattle, Washington 98101
____________________________________________________
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (206) 628-2111
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 X NO
_____ _____
Common stock outstanding as of November 26, 1996: 80,198,803 shares of
common stock.
1 of 9
NORDSTROM, INC. AND SUBSIDIARIES
--------------------------------
INDEX
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Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Statements of Earnings
Three and nine months ended
October 31, 1996 and 1995 3
Consolidated Balance Sheets
October 31, 1996 and 1995 and
January 31, 1996 4
Consolidated Statements of Cash Flows
Nine months ended October 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 9
2 of 9
NORDSTROM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands except per share amounts)
(unaudited)
Three Months Nine Months
Ended October 31, Ended October 31,
--------------------- ---------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Net sales $ 984,440 $ 906,848 $3,131,866 $2,871,685
Costs and expenses:
Cost of sales and related
buying and occupancy 665,378 612,284 2,144,378 1,945,802
Selling, general and
administrative 288,644 267,552 886,267 806,813
Interest, net 9,151 10,849 31,230 28,527
Service charge income
and other, net (34,469) (32,379) (102,723) (92,741)
---------- ---------- ---------- ----------
Total costs and
expenses 928,704 858,306 2,959,152 2,688,401
---------- ---------- ---------- ----------
Earnings before income taxes 55,736 48,542 172,714 183,284
Income taxes 21,700 19,100 68,000 72,300
---------- ---------- ---------- ----------
Net earnings $ 34,036 $ 29,442 $ 104,714 $ 110,984
========== ========== ========== ==========
Net earnings per average share
of common stock outstanding $ .42 $ .36 $ 1.29 $ 1.35
========== ========== ========== ==========
Cash dividends paid per share
of common stock outstanding $ .125 $ .125 $ .375 $ .375
========== ========== ========== ==========
These statements should be read in conjunction with the Notes to
Consolidated Financial Statements contained herein and in the Nordstrom
1995 Annual Report to Shareholders.
3 of 9
NORDSTROM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
October 31, January 31, October 31,
1996 1996 1995
---------- ---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 11,343 $ 24,517 $ 52,324
Accounts receivable, net 690,047 893,927 818,314
Merchandise inventories 976,488 626,303 877,772
Prepaid income taxes and other 67,755 68,029 63,644
---------- ---------- ----------
Total current assets 1,745,633 1,612,776 1,812,054
Property, buildings and
equipment, net 1,131,913 1,103,298 1,070,051
Other assets 16,875 16,545 15,838
---------- ---------- ----------
TOTAL ASSETS $2,894,421 $2,732,619 $2,897,943
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 190,890 $ 232,501 $ 258,057
Accounts payable 473,843 277,584 429,147
Accrued salaries, wages
and taxes 180,971 185,540 174,233
Accrued expenses 49,642 47,834 52,878
Accrued income taxes 6,662 14,644 2,746
Current portion
of long-term debt 25,220 74,210 99,997
---------- ---------- ----------
Total current liabilities 927,228 832,313 1,017,058
Long-term debt 379,750 365,733 390,122
Deferred lease credits and
other deferred items 125,893 111,601 103,558
Shareholders' equity:
Common stock, without par value:
250,000,000 shares authorized;
81,182,651, 81,113,144 and
81,319,601 shares issued
and outstanding 182,662 168,440 166,080
Retained earnings 1,278,888 1,254,532 1,221,125
---------- ---------- ----------
Total shareholders' equity 1,461,550 1,422,972 1,387,205
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $2,894,421 $2,732,619 $2,897,943
========== ========== ==========
These statements should be read in conjunction with the Notes to
Consolidated Financial Statements contained herein and in the Nordstrom
1995 Annual Report to Shareholders.
4 of 9
NORDSTROM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Nine Months
Ended October 31,
------------------
1996 1995
-------- --------
OPERATING ACTIVITIES:
Net earnings $104,714 $110,984
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization 116,878 96,468
Change in:
Accounts receivable, net 17,280 (142,423)
Merchandise inventories (350,185) (249,842)
Prepaid income taxes and other 274 (2,249)
Accounts payable 196,259 156,063
Accrued salaries, wages and taxes (4,569) (16,268)
Accrued expenses 1,808 11,888
Income tax liabilities (16,304) (26,013)
Deferred lease credits 22,614 45,207
-------- --------
Net cash provided by (used in) operating
activities 88,769 (16,185)
-------- --------
INVESTING ACTIVITIES:
Additions to property, buildings
and equipment, net (144,672) (181,900)
Other (910) (248)
-------- --------
Net cash used in investing activities (145,582) (182,148)
-------- --------
FINANCING ACTIVITIES:
Proceeds from accounts receivable
securitization 186,600 ---
(Decrease) increase in notes payable (41,611) 170,669
Proceeds from issuance of long-term debt 57,759 140,861
Principal payments on long-term debt (92,973) (25,791)
Proceeds from issuance of common stock 14,222 2,746
Cash dividends paid (30,447) (30,848)
Purchase and retirement of common stock (49,911) (39,477)
-------- --------
Net cash provided by
financing activities 43,639 218,160
-------- --------
Net (decrease) increase in
cash and cash equivalents (13,174) 19,827
Cash and cash equivalents at
beginning of period 24,517 32,497
-------- --------
Cash and cash equivalents at end of period $ 11,343 $ 52,324
======== ========
These statements should be read in conjunction with the Notes to
Consolidated Financial Statements contained herein and in the Nordstrom
1995 Annual Report to Shareholders.
5 of 9
NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
Note 1:
The consolidated balance sheets of Nordstrom, Inc. and subsidiaries (the
"Company") as of October 31, 1996 and 1995, and the related consolidated
statements of earnings and cash flows for the periods then ended, have been
prepared from the accounts without audit.
The consolidated financial information is applicable to interim periods
and is not necessarily indicative of the results to be expected for the
year ending January 31, 1997.
It is not considered necessary to include detailed footnote information
as of October 31, 1996 and 1995. The financial information should be read
in conjunction with the Notes to Consolidated Financial Statements
contained in the Nordstrom 1995 Annual Report to Shareholders.
In the opinion of management, the consolidated financial information
includes all adjustments (consisting only of normal, recurring
adjustments) necessary to present fairly the financial position of
Nordstrom, Inc. and subsidiaries as of October 31, 1996 and 1995, and the
results of their operations and cash flows for the periods then ended,
in accordance with generally accepted accounting principles applied on a
consistent basis.
Certain reclassifications of prior year balances have been made for
consistent presentation.
Note 2: The summarized unaudited combined results of operations of
Nordstrom Credit, Inc. and Nordstrom National Credit Bank are
as follows:
Three Months Nine Months
Ended October 31, Ended October 31,
1996 1995 1996 1995
-------- -------- -------- --------
Total revenue $34,780 $36,338 $113,144 $98,176
Earnings before income
taxes 14,663 12,589 36,589 27,064
Net earnings 9,573 8,004 23,429 17,264
6 of 9
NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
Note 3:
On August 15, 1996, the Company transferred substantially all of its VISA
credit card receivables (approximately $203,000) to a trust in exchange for
certificates representing undivided interests in the trust. A Class A
certificate with a market value of $186,600 was sold to a third party, and a
Class B certificate, which is subordinated to the Class A certificate, was
retained by the Company. The Company owns the remaining undivided interests
in the trust not represented by the Class A and Class B certificates (the
"Seller's Interest"). These transactions had no significant impact on the
Company's earnings in the quarter ended October 31, 1996.
Cash flows generated from the receivables in the trust are, to the extent
allocable to the investors, applied to the payment of interest on the Class A
and Class B certificates, absorption of credit losses, and payment of
servicing fees to the Company, which will continue to service the receivables
for the trust. Excess cash flows revert to the Company. The Company's
investment in the Class B certificate and the Seller's Interest totals $28,423
at October 31, 1996, and is included in accounts receivable.
Pursuant to the terms of operative documents of the trust, in certain events
the Company may be required to fund certain amounts pursuant to a recourse
obligation for credit losses. Based on current cash flow projections, the
Company does not believe any additional funding will be required.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Management
Discussion and Analysis section of the Nordstrom 1995 Annual Report to
Shareholders.
Results of Operations:
- ----------------------
During the third quarter of 1996, sales increased 8.6% when compared with the
same quarter in 1995. For the nine-month period, sales increased 9.1%
compared to the same period in 1995. Sales for comparable stores decreased
.3% during the quarter and increased 1.5% for the nine-month period, with the
remainder of the increase coming from new units. Comparable store sales
results continued to soften during the third quarter, and the Company
remains cautious with respect to sales projections for the remainder of the
year.
Cost of sales and related buying and occupancy costs increased as a
percentage of sales for both the quarter and the nine-month period as compared
to the corresponding periods in 1995. For the quarter, the increase was due
primarily to higher buying costs, as the Company's merchandise margins
improved in the quarter as a result of lower markdowns. For the nine-month
period, the increase was due to lower merchandise margins which resulted from
increased markdowns and a lower markup. Occupancy costs also increased as a
percentage of sales for the nine-month period as a result of new stores and
remodeling projects.
7 of 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.)
Selling, general and administrative expenses decreased as a percentage of
sales during the third quarter as compared to the corresponding period in 1995
primarily due to management's efforts to control costs, as well as an
acceleration of certain sales promotion expenses from the third to the first
quarter in 1996. The decrease was partially offset by higher bad debt
expenses resulting from continuing increases in the level of bad debt write-
offs. Higher bad debts were also a major factor in the increase in selling,
general and administrative expenses as a percentage of sales for the nine-
month period as compared to the corresponding period in 1995. Direct selling
expenses also increased in the nine-month period. These increases were
partially offset by lower distribution costs for the Company's direct sales
division and decreased spending on development of a new payroll system which
was implemented in early 1996.
For the quarter, interest expense decreased as a percentage of sales when
compared to the corresponding period in 1995, primarily due to lower levels of
debt outstanding.
Service charge income and other, net decreased as a percentage of sales for
the quarter when compared to the corresponding period in 1995 primarily due to
a reduction in net revenues from the Company's VISA card program, as a result
of the securitization of these receivables in the third quarter. Certain
other information regarding this securitization of receivables is included in
Note 3 to the financial statements under Part I, Item 1. The decrease was
partially offset by a gain on the sale of equipment totaling $3.1 million
($.02 per share after income taxes). For the nine-month period, service
charge income and other, net increased as a percentage of sales when compared
to the corresponding period in 1995 primarily due to an increase in net
revenues resulting from the growth of the Company's VISA and proprietary
credit card programs.
Financial Condition:
- --------------------
The Company completed a securitization of its VISA card portfolio on August
15, 1996. Substantially all of the net proceeds from the transaction were
used to reduce short-term. Certain other information regarding this
securitization of receivables is included in Note 3 to the financial
statements under Part I, Item 1. Also during the third quarter, the Company
issued $58 million in medium-term notes to replace maturing medium-term notes.
In October 1996, the Company completed its repurchase of $100 million of the
Company's outstanding stock as approved by the Board of Directors at the May
1995 meeting. At its regular meeting on November 19, 1996, the Board of
Directors of the Company authorized another repurchase of up to $100 million
of the Company's outstanding stock.
During the third quarter the Company opened two full-line stores at Somerset
Collection North in Troy, Michigan and at Park Meadows Mall in Denver,
Colorado. This completes the store opening schedule for 1996. Construction
is progressing as planned on the three new stores scheduled to open in 1997.
8 of 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
The Company is not involved in any material pending legal proceedings, other
than routine litigation in the ordinary course of business.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
(10.1) Master Pooling and Servicing Agreement dated August 14, 1996
between Nordstrom National Credit Bank and Norwest Bank
Colorado, National Association is filed in paper format under
Form SE.
(10.2) Series 1996-A Supplement to Master Pooling and Servicing
Agreement dated August 14, 1996 between Nordstrom National
Credit Bank, Nordstrom Credit, Inc. and Norwest Bank Colorado,
National Association is filed in paper format under Form SE.
(10.3) Transfer and Administration Agreement dated August 14, 1996
between Nordstrom National Credit Bank, Enterprise Funding
Corporation and Nationsbank, N.A. is filed in paper format
under Form SE.
(27.1) Financial Data Schedule is filed herein as an Exhibit.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter for which this
report is filed.
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/ John A. Goesling
------------------------------------------
John A. Goesling, Executive Vice President
and Treasurer
(Principal Financial and Accounting Officer)
Date: December 12, 1996
- ------------------------
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NORDSTROM, INC. AND SUBSIDIARIES
Exhibit Index
Exhibit Method of Filing
- ------- ----------------
10.1 Master Pooling and Servicing Agreement P Filed in paper format under
Form SE
10.2 Series 1996-A Supplement to Master
Pooling and Servicing Agreement P Filed in paper format under
Form SE
10.3 Transfer and Administration Agreement P Filed in paper format under
Form SE
27.1 Financial Data Schedule Filed herewith electronically
5
1,000
9-MOS
JAN-31-1997
OCT-31-1996
11,343
0
690,047
0
976,488
1,745,633
1,131,913
0
2,894,421
927,228
379,750
0
0
182,662
1,278,888
2,894,421
3,131,866
3,131,866
2,144,378
2,959,152
0
0
31,230
172,714
68,000
0
0
0
0
104,714
1.29
1.29
