<PAGE>
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 0-12994
Nordstrom Credit, Inc.
______________________________________________________
(Exact name of Registrant as specified in its charter)
Colorado 91-1181301
______________________________ ________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
13531 East Caley, Englewood, Colorado 80111
____________________________________________________
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 303-397-4700
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
____ ____
On December 10, 1996 Registrant had 10,000 shares of Common stock
($.50 par value) outstanding; all such shares are owned by Registrant's
parent, Nordstrom, Inc.
The Registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this
form with the reduced disclosure format.
page 1 of 8
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NORDSTROM CREDIT, INC.
----------------------
INDEX
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<TABLE>
<CAPTION>
Page
Number
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Statements of Earnings
Three and nine months ended October 31, 1996
and 1995 3
Balance Sheets
October 31, 1996 and 1995
and January 31, 1996 4
Statements of Cash Flows
Nine months ended October 31, 1996
and 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
</TABLE>
page 2 of 8
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<TABLE>
<CAPTION>
NORDSTROM CREDIT, INC.
STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
Three Months Nine Months
Ended October 31, Ended October 31,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Service charge income $28,510 $32,716 $ 99,447 $87,374
Rental income from Nordstrom
National Credit Bank 322 261 904 783
-------- -------- -------- --------
Total revenue 28,832 32,977 100,351 88,157
Expenses:
Interest, net 9,354 11,191 31,288 29,842
Service fees paid to
Nordstrom National
Credit Bank 6,609 6,906 21,870 22,212
Bad debts - 2,695 7,520 6,864
Other general and
administrative 387 353 1,169 1,059
-------- -------- -------- --------
Total expenses 16,350 21,145 61,847 59,977
-------- -------- -------- --------
Earnings before income
taxes and extraordinary
item 12,482 11,832 38,504 28,180
Income taxes 4,300 4,310 13,900 10,200
-------- -------- -------- --------
Earnings before
extraordinary item 8,182 7,522 24,604 17,980
Extraordinary charge related
to the early extinguishment
of debt, net of income
taxes of $900 - - 1,452 -
------- ------- ------- -------
Net earnings $ 8,182 $ 7,522 $ 23,152 $17,980
======== ======== ======== ========
Ratio of earnings
available for fixed
charges to fixed charges 2.33 2.06 2.14 1.94
======== ======== ======== ========
<FN>
These statements should be read in conjunction with the Notes to
Financial Statements contained herein and in the Nordstrom Credit, Inc.
Annual Report on Form 10-K for the year ended January 31, 1996.
</TABLE>
page 3 of 8
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NORDSTROM CREDIT, INC.
BALANCE SHEETS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
October 31, January 31, October 31,
1996 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 639 $ 91 $ 2
Customer accounts receivable
net of holdback allowance
of $22,075, $29,393 and
$22,595 659,920 874,858 802,997
Other accounts receivable 2,668 7,217 947
Property and equipment, net 5,155 5,396 5,480
Other assets 1,611 2,122 2,243
---------- ---------- ----------
$669,993 $889,684 $811,669
========== ========== ==========
LIABILITIES AND INVESTMENT OF NORDSTROM, INC.
- ---------------------------------------------
Commercial paper $ 95,890 $182,501 $183,057
Notes payable to bank 50,000 50,000 50,000
Notes payable to
Nordstrom, Inc. 14,000 86,000 8,000
Accrued interest, taxes
and other 9,292 9,424 13,358
Long-term debt 335,000 369,100 369,100
---------- ---------- ----------
Total liabilities 504,182 697,025 623,515
Investment of
Nordstrom, Inc. 165,811 192,659 188,154
---------- ---------- ----------
$669,993 $889,684 $811,669
========== ========== ==========
<FN>
These statements should be read in conjunction with the Notes to
Financial Statements contained herein and in the Nordstrom Credit, Inc.
Annual Report on Form 10-K for the year ended January 31, 1996.
</TABLE>
page 4 of 8
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NORDSTROM CREDIT, INC.
STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended October 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Earnings before extraordinary item $ 24,604 $ 17,980
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Extraordinary charge related to early
extinguishment of debt, net of
income taxes of $900 (1,452) -
Depreciation and amortization 995 563
Change in:
Other accounts receivable 4,549 3,860
Accrued interest, taxes and other (132) 2,395
-------- --------
Net cash provided by operating activities 28,564 24,798
-------- --------
INVESTING ACTIVITIES:
Decrease (increase) in investment in
customer accounts receivable, net 12,050 (146,733)
Additions to property and equipment, net (2) (33)
-------- --------
Net cash provided by (used in)
investing activities 12,048 (146,766)
-------- --------
FINANCING ACTIVITIES:
Sale of customer accounts
receivable to Nordstrom, Inc. 202,888 -
(Decrease) increase in commercial paper (86,611) 145,669
Decrease in notes payable to
Nordstrom, Inc. (72,000) (140,000)
Proceeds from issuance of long-term
debt 57,759 140,861
Principal payments on long-term debt (92,100) (25,000)
Cash dividend paid to Nordstrom, Inc. (50,000) -
-------- --------
Net cash (used in) provided by
financing activities (40,064) 121,530
-------- --------
Net increase (decrease) in cash and
cash equivalents 548 (438)
Cash and cash equivalents
at beginning of period 91 440
-------- --------
Cash and cash equivalents at end of period $ 639 $ 2
======== ========
<FN>
These statements should be read in conjunction with the Notes to
Financial Statements contained herein and in the Nordstrom Credit, Inc.
Annual Report on Form 10-K for the year ended January 31, 1996.
</TABLE>
page 5 of 8
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NORDSTROM CREDIT, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
Note 1:
The balance sheets of Nordstrom Credit, Inc. (the "Company") as of October 31,
1996 and 1995, and the related statements of earnings and cash flows for the
periods then ended, have been prepared from the accounts without audit.
The 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 statements should be
read in conjunction with the Notes to Financial Statements contained in
the Nordstrom Credit, Inc. Annual Report on Form 10-K for the year ended
January 31, 1996.
In the opinion of management, the financial information includes all
adjustments (consisting only of normal, recurring adjustments) necessary
to present fairly the financial position of Nordstrom Credit, Inc. as of
October 31, 1996 and 1995, and the results of its 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:
During the first quarter of 1996, the Company elected to prepay $43,100
of its 9.375% sinking fund debentures in order to take advantage of lower
short-term interest rates. This resulted in an extraordinary charge of
$1,452, net of applicable income taxes of $900. The premium paid has not
been included as a fixed charge for the calculation of the ratio of
earnings available for fixed charges to fixed charges.
page 6 of 8
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Note 3:
On August 15, 1996, the Company sold substantially all of its outstanding VISA
receivables (approximately $203,000) to Nordstrom, Inc. ("Nordstrom") in
connection with a securitization of the receivables. Nordstrom then sold the
receivables to Nordstrom National Credit Bank ("the Bank"), which transferred
the receivables to the Nordstrom Credit Card Master Trust ("the Trust") in
return 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 was purchased by the Company at an approximate
market value of $9,000. The Class B certificate has a stated principal amount
of $9,900, bears interest at 6.5%, and is subordinated to the Class A
certificate. The Company also purchased from the Bank a portion of its
investment in the Trust (the "Seller's Interest") at an approximate market
value of $4,100. The Bank retains the remaining Seller's Interest, and will
continue to service all of the receivables on behalf of the Trust.
As a result of the securitization of the receivables, the VISA Operating
Agreement dated May 1, 1994 between the Company and the Bank has been
terminated, and the Company no longer purchases and finances VISA receivables
generated through the use of the Bank's VISA card, except to the extent of its
investment in the Class B certificate and the Seller's Interest. The Bank
securitizes all new VISA receivables through the Trust, and may from time to
time sell to the Company additional portions of the Seller's Interest,
depending on its cash flow needs. The Company's investment in the Class B
certificate and the Seller's Interest totals approximately $16,000 at October
31, 1996, and is included in customer 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
Service charge income increased for the nine month period when compared to the
same period in 1995, primarily due to a larger volume of receivables
outstanding. Service charge income decreased for the quarter when compared to
the same period in 1995, primarily due the securitization of the VISA
receivables which is described in Note 3 to the financial statements, under
Part 1, Item 1.
Interest expense decreased for the quarter when compared to the same period in
1995, due primarily to lower levels of debt outstanding.
Bad debt expense decreased for the quarter when compared to the same period in
1995, due to the securitization of the VISA receivables.
page 7 of 8
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PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
(10.1) Agreement to terminate the Operating Agreement for VISA
Accounts and Receivables dated May 1, 1994 between
Registrant and Nordstrom National Credit Bank, dated
August 14, 1996.
(10.2) Amendment to the Credit Agreement dated June 23, 1995 between
Registrant and a group of commercial banks, dated June 30, 1996.
(10.3) 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.
(27.1) Financial Data Schedule is filed herewith electronically.
(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 CREDIT, INC.
(Registrant)
/s/ John A. Goesling
__________________________________________
John A. Goesling, Executive Vice President
and Treasurer
(Principal Financial and Accounting Officer)
Date: December 12, 1996
___________________
page 8 of 8
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<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- --------------------------------- ------------------------------
<S> <C> <C>
10.1 Termination Agreement dated Filed herewith electronically.
August 14, 1996 between
Registrant and Nordstrom
National Credit Bank.
10.2 Amendment to the Credit Agree- Filed herewith electronically.
ment dated June 23, 1995
between Registrant and a group
of commercial banks, dated
June 30, 1996.
10.3 Series 1996-A Supplement to Master P Filed in paper format under
Pooling and Servicing Agreement Form SE.
27.1 Financial Data Schedule Filed herewith electronically.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> OCT-31-1996
<CASH> 639
<SECURITIES> 0
<RECEIVABLES> 681995
<ALLOWANCES> 22075
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5155
<DEPRECIATION> 0
<TOTAL-ASSETS> 669993
<CURRENT-LIABILITIES> 0
<BONDS> 335000
0
0
<COMMON> 0
<OTHER-SE> 165811
<TOTAL-LIABILITY-AND-EQUITY> 669993
<SALES> 0
<TOTAL-REVENUES> 100351
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 61847
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31288
<INCOME-PRETAX> 38504
<INCOME-TAX> 13900
<INCOME-CONTINUING> 24604
<DISCONTINUED> 0
<EXTRAORDINARY> 1452
<CHANGES> 0
<NET-INCOME> 23152
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
AGREEMENT TO TERMINATE
THE OPERATING AGREEMENT FOR
VISA ACCOUNTS AND RECEIVABLES
BETWEEN
NORDSTROM NATIONAL CREDIT BANK
AND
NORDSTROM CREDIT, INC.
It is hereby agreed that the Operating Agreement for Visa Accounts
and
Receivables (the Agreement) dated May 1, 1994 between Nordstrom
National Credit
Bank (the Bank) and Nordstrom Credit, Inc. (Credit) is terminated
effective August
14, 1996, upon agreement of both parties.
IN WITNESS WHEREOF, the Bank and Credit have caused this Agreement
to be terminated by their respective officers thereunto duly authorized
as of August 14, 1996.
Nordstrom National Credit Bank
By /s/ John A. Goesling
-----------------------------
John A. Goesling, Chairman
By /s/ John C. Walgamott
-----------------------------
John C. Walgamott, President
Nordstrom Credit, Inc.
By /s/ John C. Walgamott
----------------------------
John C. Walgamott, President
<PAGE>
AMENDMENT TO CREDIT AGREEMENT
among
NORDSTROM CREDIT, INC.,
THE LENDERS LISTED HEREIN,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Co-Agents,
and
WELLS FARGO BANK FORMERLY KNOWN AS
FIRST INTERSTATE BANK OF DENVER, N.A.
as Agent
June 30, 1996
$300,000,000
<PAGE>
AMENDMENT TO CREDIT AGREEMENT
This AMENDMENT TO CREDIT AGREEMENT, dated as of June 30, 1996
the "Amendment"), is by and among NORDSTROM CREDIT, INC., a Colorado
corporation (the "Borrower"), the banks and other financial institutions
that either now or in the future are parties hereto (collectively the
"Lenders" and each individually a "Lender"), MORGAN GUARANTY TRUST
COMPANY OF NEW YORK and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Co-Agents (the "Co-Agents"), and WELLS FARGO BANK
(formerly known as FIRST INTERSTATE BANK OF DENVER, N.A.) as agent and
representative for the Lenders referred to herein as the "Agent). The
Lenders, the Agent and the Co-Agents are collectively referred to herein
as the "Lender Parties" and each individually as a "Lender Party".
RECITALS
A. Borrower desires to extend the term of the Credit Agreement
dated June 23, 1995 by and among the parties hereto ("Credit Agreement")
for an additional period of one year, and the Lender Parties have agreed
to this extension.
B. Subsequent to the execution of the Credit Agreement, Agent
Bank was acquired by Wells Fargo Bank, and the parties desire formally
to acknowledge hereby that Wells Fargo Bank is the successor to First
Interstate Bank of Denver, N.A. as the Agent Bank under the Credit
Agreement.
C. Swiss Bank Corporation San Francisco Branch has agreed to
assign one hundred percent (100%) of its Revolving Commitments and Loans
to Bank of Montreal pursuant to Section 9.6.2 of the Credit Agreement.
NOW THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree to amend the Credit
Agreement as follows:
AMENDMENT
1. Extension of Term. The Credit Agreement is modified to extend
the term thereof for a period of one year
1.1 The definition of "Maturity Date" in Section 1.1 of the
Credit Agreement shall be deleted and replaced in its entirety with the
following new definition:
""Maturity Date" means June 30, 2001.
<PAGE>
1.2 All other references to the date "June 30, 2000" which
are contained in the Credit Agreement shall be deleted and replaced with
the date "June 30, 2001."
1.3 The parties acknowledge that the Maturity Date of each of
the Revolving Loan Notes and each of the Bid Loan Notes made by Borrower
and payable to each of the Lenders respectively is automatically
extended upon the execution of this Amendment without the necessity of
any additional documentation.
2. Successor to Agent Bank
2.1 All references to "First Interstate Bank of Denver, N.A."
contained in the Credit Agreement, in any Exhibit or Schedule thereto or
in any of the other Loan Documents shall be deleted and replaced with a
reference to "Wells Fargo Bank."
2.2 All references in any of the Loan Documents to the
"Agent" or the "Agent Bank" shall refer to Wells Fargo Bank.
2.3 All addresses for the Agent or Agent Bank contained in
any of the Loan Documents shall be deleted and replaced with references
to "Bank of Montreal."
3. Assignment of Swiss Bank Corporation San Francisco Branch to
Bank of Montreal. Because of the assignment of Swiss Bank Corporation
San Francisco Branch of one hundred percent (100%) of its Revolving
Commitments and Loans to Bank of Montreal pursuant to an Assignment and
acceptance substantially in the form of Exhibit H to the Credit
Agreement, which Assignment and Acceptance shall be executed
contemporaneously with or prior to the execution of this Amendment, all
references in the Loan Documents to "Swiss Bank Corporation San
Francisco Branch" shall be deleted and replaced with references to "Bank
of Montreal."
4. Amendment of Schedules. The Schedules to the Credit Agreement
are amended as follows: Schedule 1.1B to the Credit Agreement shall be
deleted and replaced in its entirety with the new Schedule 1.1B attached
hereto.
5. Affirmation of Representations and Warranties. Borrower
expressly affirms that all of the representations and warranties made in
the Credit Agreement are true and correct as of the date hereof.
6. No Default. Borrower expressly affirms that there exist no
Events of Default under the Credit Agreement as of the date hereof.
7. No Novation. The parties intend that this Amendment shall be
an amendment and restatement of Borrower's obligations to the Lenders
and shall not constitute a novation.
<PAGE>
8. Expenses. Borrower shall pay all of Agent's expenses in the
negotiation and preparation of this Amendment, including, without
limitation, Agent's legal fees.
9. Status of Loan Documents. Except as expressly amended hereby,
all provisions of the Credit Agreement and all other of the Loan
Documents shall remain unmodified and in full force and effect.
10. Definitions. All terms used but not defined herein shall have
the meanings ascribed to them in the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed and delivered as of the date first set forth above.
Borrower:
NORDSTROM CREDIT, INC.
a Colorado corporation
By:/s/ John C. Walgamott
---------------------
Name: John C. Walgamott
-------------------
Title:President
------------------
Agent:
WELLS FARGO BANK, As Agent
By:/s/ Jack W. Haye
---------------------
Name:Jack W. Haye
-------------------
Title:Vice President
------------------
Lenders and Co-Agents:
WELLS FARGO BANK, as Lender
By:/s/ Jack W. Haye
---------------------
Name:Jack W. Haye
-------------------
Title:Vice President
------------------
