<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 July 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 August 22, 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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Page
Number
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Statements of Earnings
Three and six months ended July 31, 1996
and 1995 3
Balance Sheets
July 31, 1996 and 1995
and January 31, 1996 4
Statements of Cash Flows
Six months ended July 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
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page 2 of 8
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NORDSTROM CREDIT, INC.
STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Six Months
Ended July 31, Ended July 31,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
Service charge income $35,221 $28,341 $70,937 $54,658
Rental income from Nordstrom
National Credit Bank 321 261 582 522
-------- -------- -------- --------
Total revenue 35,542 28,602 71,519 55,180
Expenses:
Interest, net 11,122 9,896 21,934 18,651
Service fees paid to
Nordstrom National
Credit Bank 8,744 9,104 15,261 15,306
Bad debts 4,249 3,579 7,520 4,169
Other general and
administrative 410 354 782 706
-------- -------- -------- --------
Total expenses 24,525 22,933 45,497 38,832
-------- -------- -------- --------
Earnings before income
taxes and extraordinary
item 11,017 5,669 26,022 16,348
Income taxes 4,100 2,050 9,600 5,890
-------- -------- -------- --------
Earnings before
extraordinary item 6,917 3,619 16,422 10,458
Extraordinary charge related
to the early extinguishment
of debt, net of income
taxes of $900 - - 1,452 -
-------- -------- -------- --------
Net earnings $ 6,917 $ 3,619 $14,970 $10,458
======== ======== ======== ========
Ratio of earnings
available for fixed
charges to fixed charges 1.99 1.57 2.06 1.87
======== ======== ======== ========
<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.
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page 3 of 8
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NORDSTROM CREDIT, INC.
BALANCE SHEETS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
July 31, January 31, July 31,
1996 1996 1995
-------- ----------- --------
<S> <C> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 584 $ 91 $ 2
Customer accounts receivable
net of holdback allowance
of $26,347, $29,393 and
$24,090 917,181 874,858 815,143
Other accounts receivable 552 7,217 467
Property and equipment, net 5,234 5,396 5,536
Other assets 2,856 2,122 2,309
-------- ----------- --------
$926,407 $889,684 $823,457
======== =========== ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND INVESTMENT OF NORDSTROM, INC.
- ---------------------------------------------
<S> <C> <C> <C>
Notes payable to
Nordstrom, Inc. $ 88,200 $ 86,000 $155,000
Notes payable to bank 50,000 50,000 50,000
Commercial paper 245,918 182,501 47,207
Accrued interest, taxes
and other 8,660 9,424 21,518
Long-term debt 326,000 369,100 369,100
-------- ----------- --------
Total liabilities 718,778 697,025 642,825
Investment of
Nordstrom, Inc. 207,629 192,659 180,632
-------- ----------- --------
$926,407 $889,684 $823,457
======== =========== ========
<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>
Six Months
Ended July 31,
----------------------
1996 1995
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Earnings before extraordinary item $ 16,422 $10,458
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 785 360
Change in:
Other accounts receivable 6,665 4,340
Other assets (1,357) -
Accrued interest, taxes and other (764) 10,555
-------- -------
Net cash provided by operating activities 20,299 25,713
-------- -------
INVESTING ACTIVITIES:
Increase in investment in
customer accounts receivable, net (42,323) (158,880)
Additions to property and
equipment, net - (9)
-------- --------
Net cash used in investing activities (42,323) (158,889)
-------- --------
FINANCING ACTIVITIES:
Increase in notes payable
to Nordstrom, Inc. 2,200 7,000
Increase in commercial paper 63,417 9,819
Proceeds from issuance of
long-term debt, net - 140,919
Principal payments on long-term debt (43,100) (25,000)
-------- -------
Net cash provided by financing activities 22,517 132,738
-------- -------
Net increase (decrease) in cash
and cash equivalents 493 (438)
Cash and cash equivalents
at beginning of period 91 440
-------- -------
Cash and cash equivalents at end of period $ 584 $ 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
(dollars in thousands)
(unaudited)
Note 1:
The balance sheets of Nordstrom Credit, Inc. as of July 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 July 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
July 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.
Note 3:
On August 13, 1996, the Company's Board of Directors declared a dividend of
$5,000 per share payable to Nordstrom, Inc. (holder of all 10,000 outstanding
shares) on August 30, 1996.
page 6 of 8
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Note 4:
On August 15, 1996 the Company sold substantially all of its outstanding
VISA receivables (approximately $203,000) through Nordstrom, Inc. to Nordstrom
National Credit Bank ("the Bank") in connection with a securitization of the
receivables. The Bank then transferred the receivables to the Nordstrom Credit
Card Master Trust ("the Trust") in return for certificates representing
undivided interests in the Trust. Class A certificates with a market value of
$186,600 were sold to a third party, and Class B certificates were purchased by
the Company at an approximate market value of $8,700. Class B certificates have
a stated principal amount of $9,900, bear interest at 6.5%, and are subordinated
to the Class A certificates. Of the remaining interests in the Trust (the
"Seller Interest"), the Company purchased from the Bank a portion at an
approximate market value of $4,100. The Bank retained the remaining Seller
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 will no longer purchase and finance VISA Accounts
generated through the use of the Bank's VISA card. The Bank intends to
securitize all new VISA Accounts through the Trust.
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 quarter and the six month period when
compared to the same periods in 1995, primarily due to a higher volume of both
Nordstrom and VISA receivables outstanding.
Interest expense increased for the quarter and the six month period when
compared to the same periods in 1995, due primarily to higher levels of debt
outstanding.
Bad debt expense increased for the quarter and the six month period when
compared to the same periods in 1995, due to an increase in the level of
VISA bad debt write-offs.
page 7 of 8
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PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
(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 CREDIT, INC.
(Registrant)
/s/ John A. Goesling
------------------------------------------
John A. Goesling
Executive Vice President and Treasurer
(Principal Financial and Accounting Officer)
Date: August 22, 1996
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page 8 of 8
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<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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<S> <C> <C>
27.1 Financial Data Schedule Filed herewith electronically.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1996
<CASH> 584
<SECURITIES> 0
<RECEIVABLES> 943528
<ALLOWANCES> 26347
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5234
<DEPRECIATION> 0
<TOTAL-ASSETS> 926407
<CURRENT-LIABILITIES> 0
<BONDS> 326000
<COMMON> 0
0
0
<OTHER-SE> 207629
<TOTAL-LIABILITY-AND-EQUITY> 926407
<SALES> 0
<TOTAL-REVENUES> 71519
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 45497
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21934
<INCOME-PRETAX> 26022
<INCOME-TAX> 9600
<INCOME-CONTINUING> 16422
<DISCONTINUED> 0
<EXTRAORDINARY> 1452
<CHANGES> 0
<NET-INCOME> 14970
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
