<PAGE>
UNITED STATES
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, 1998
[ ] 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 September 8, 1998 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
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Statements of Earnings
Three and six months ended July 31, 1998
and 1997 3
Balance Sheets
July 31, 1998 and 1997
and January 31, 1998 4
Statements of Cash Flows
Six months ended July 31, 1998
and 1997 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 7
</TABLE>
page 2 of 8
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NORDSTROM CREDIT, INC.
STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended July 31, Ended July 31,
------------------ ------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
-------- -------- -------- --------
Service charge income $26,203 $26,386 $53,770 $54,207
Rental income from Nordstrom
National Credit Bank 322 322 643 643
-------- -------- -------- --------
Total revenue 26,525 26,708 54,413 54,850
Expenses:
Interest, net 8,132 9,192 16,245 17,945
Service fees paid to
Nordstrom National
Credit Bank 8,273 8,478 14,009 14,425
Other general and
administrative 371 435 729 770
-------- -------- -------- --------
Total expenses 16,776 18,105 30,983 33,140
-------- -------- -------- --------
Earnings before income taxes 9,749 8,603 23,430 21,710
Income taxes 3,542 3,200 8,514 8,000
-------- -------- -------- --------
Net earnings $ 6,207 $ 5,403 $14,916 $13,710
======== ======== ======== ========
Ratio of earnings
available for fixed
charges to fixed charges 2.20 1.93 2.44 2.21
======== ======== ======== ========
<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, 1998.
</TABLE>
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,
1998 1998 1997
-------- ----------- --------
<S> <C> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 83 $ 157 $ 298
Customer accounts receivable
net of holdback allowance
of $29,745, $30,384 and
$26,234 630,551 636,420 690,542
Other accounts receivable 56 6,138 -
Property and equipment, net 4,660 4,786 4,920
Other assets 14,285 13,641 10,425
-------- ----------- --------
$649,635 $661,142 $706,185
======== =========== ========
LIABILITIES AND INVESTMENT OF NORDSTROM, INC.
- ---------------------------------------------
Notes payable to
Nordstrom, Inc. $ 70,200 $ - $ 10,000
Note payable to bank 50,000 50,000 50,000
Commercial paper 73,377 108,020 86,260
Accrued interest, taxes
and other 12,950 24,930 20,082
Long-term debt 303,350 353,350 403,350
-------- ----------- --------
Total liabilities 509,877 536,300 569,692
Investment of
Nordstrom, Inc. 139,758 124,842 136,493
-------- ----------- --------
$649,635 $661,142 $706,185
======== =========== ========
<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, 1998.
</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,
----------------------
<S> <C> <C>
1998 1997
-------- --------
OPERATING ACTIVITIES:
Net earnings $ 14,916 $ 13,710
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 374 433
Change in:
Other accounts receivable 6,082 13,874
Other assets (886) 1,952
Accrued interest, taxes and other (11,980) 974
-------- --------
Net cash provided by operating activities 8,506 30,943
-------- --------
INVESTING ACTIVITIES:
Increase (decrease) in investment in
customer accounts receivable, net 5,869 (992)
Additions to property and
equipment, net (6) (6)
-------- --------
Net cash provided by (used in)
investing activities 5,863 (998)
-------- --------
FINANCING ACTIVITIES:
Increase (decrease) in notes payable
to Nordstrom, Inc. 70,200 (44,000)
Decrease in commercial paper (34,643) (27,510)
Proceeds from issuance of
long-term debt, net - 91,758
Principal payments on long-term debt (50,000) -
Cash dividend paid to Nordstrom, Inc. - (50,000)
-------- --------
Net cash used in financing activities (14,443) (29,752)
-------- --------
Net (decrease) increase in cash
and cash equivalents (74) 193
Cash and cash equivalents
at beginning of period 157 105
-------- --------
Cash and cash equivalents at end of period $ 83 $ 298
======== ========
<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, 1998.
</TABLE>
page 5 of 8
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NORDSTROM CREDIT, INC.
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
Note 1 - Basis of Presentation
The balance sheets of Nordstrom Credit, Inc. (the "Company") as of July 31,
1998 and 1997, 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, 1999.
It is not considered necessary to include detailed footnote information
as of July 31, 1998 and 1997. 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, 1998.
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, 1998 and 1997, 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 period balances have been made for
consistent presentation with the current period.
Note 2 - New Accounting Rules
In March 1998 the Accounting Standards Executive Committee of the AICPA
issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," which
requires that certain software costs be capitalized and amortized over
the period of use. The Company adopted SOP 98-1 during the first quarter
of 1998. The effect of adopting SOP 98-1 was not material to net earnings
for the quarter or six-month period ended July 31, 1998.
As of February 1, 1998, the Company has adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," which
establishes standards for the reporting and display of comprehensive
income and its components. Adoption of this standard did not impact
the Company's financial position, results of operations or cash flows.
Note 3 - Subsequent Event
On August 31, 1998, the Company's Board of Directors declared a dividend
of $2,500 per share payable to Nordstrom, Inc. (holder of all 10,000
outstanding shares) on September 15, 1998.
page 6 of 8
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Service charge income decreased for the quarter and the six-month period
when compared to the same periods in 1997, primarily due to a reduction
in the accounts receivable balances on which the Company earns service
fees, which was partially offset by an increase in finance charge rates
effective in July 1997.
Interest expense decreased for the quarter when compared to the same period
in 1997, due primarily to lower levels of long-term debt outstanding.
Interest expense decreased for the six-month period when compared to the
same period in 1997, due primarily to lower levels of short-term debt
outstanding.
The Company recognizes that its operations may be negatively affected by
Year 2000 software issues, primarily from its interactions with Nordstrom
National Credit Bank (the "Bank"), which services all customer accounts
receivable for the Company. The Bank is currently replacing or upgrading
its computer systems to make them Year 2000 compliant, and expects to have
remediation completed by the end of 1998 for all significant computer
systems, with testing to occur in 1999. The costs of the Company's Year
2000 remediation program have not been material and future costs are not
expected to be significant. The Company has a contingency plan in place
which will allow primary operations to continue if the Company's or the
Bank's significant systems are not Year 2000 compliant by December 31, 1999.
PART II - OTHER INFORMATION
---------------------------
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.
page 7 of 8
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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
Vice President and Treasurer
(Principal Financial and Accounting Officer)
Date: September 10, 1998
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page 8 of 8
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- --------------------------------------- ---------------------------
27.1 Financial Data Schedule Filed herewith electronically.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 83
<SECURITIES> 0
<RECEIVABLES> 660,296
<ALLOWANCES> 29,745
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,660
<DEPRECIATION> 0
<TOTAL-ASSETS> 649,635
<CURRENT-LIABILITIES> 0
<BONDS> 303,350
0
0
<COMMON> 0
<OTHER-SE> 139,758
<TOTAL-LIABILITY-AND-EQUITY> 649,635
<SALES> 0
<TOTAL-REVENUES> 54,413
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,738
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,245
<INCOME-PRETAX> 23,430
<INCOME-TAX> 8,514
<INCOME-CONTINUING> 14,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,916
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
