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 0-6074
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 August 26, 1996: 81,132,088 shares of
common stock.
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NORDSTROM, INC. AND SUBSIDIARIES
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INDEX
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Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Statements of Earnings
Three and six months ended
July 31, 1996 and 1995 3
Consolidated Balance Sheets
July 31, 1996 and 1995 and
January 31, 1996 4
Consolidated Statements of Cash Flows
Six months ended July 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 8
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
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NORDSTROM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands except per share amounts)
(unaudited)
Three Months Six Months
Ended July 31, Ended July 31,
--------------------- ---------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Net sales $1,241,464 $1,149,239 $2,147,426 $1,964,838
Costs and expenses:
Cost of sales and related
buying and occupancy 861,888 779,784 1,479,000 1,333,518
Selling, general and
administrative 328,836 299,838 597,623 539,261
Interest, net 10,333 9,639 19,727 17,679
Service charge income
and other, net (33,674) (29,087) (68,254) (60,362)
---------- ---------- ---------- ----------
Total costs and
expenses 1,167,383 1,060,174 2,028,096 1,830,096
---------- ---------- ---------- ----------
Earnings before income taxes
and extraordinary item 74,081 89,065 119,330 134,742
Income taxes 29,300 35,200 47,200 53,200
---------- ---------- ---------- ----------
Earnings before
extraordinary item 44,781 53,865 72,130 81,542
Extraordinary charge related to
the early extinguishment of
debt, net of income taxes
of $900 - - 1,452 -
---------- ---------- ---------- ----------
Net earnings $ 44,781 $ 53,865 $ 70,678 $ 81,542
========== ========== ========== ==========
Earnings before extraordinary
item per average share of
common stock outstanding $ .55 $ .65 $ .89 $ .99
========== ========== ========== ==========
Net earnings per average share
of common stock outstanding $ .55 $ .65 $ .87 $ .99
========== ========== ========== ==========
Cash dividends paid per share
of common stock outstanding $ .125 $ .125 $ .25 $ .25
========== ========== ========== ==========
<FN>
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.
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NORDSTROM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
July 31, January 31, July 31,
1996 1996 1995
---------- ---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 50,322 $ 24,517 $ 35,564
Accounts receivable, net 935,859 893,927 837,833
Merchandise inventories 756,501 626,303 696,224
Prepaid income taxes and other 66,324 68,029 59,721
---------- ---------- ----------
Total current assets 1,809,006 1,612,776 1,629,342
Property, buildings and
equipment, net 1,124,358 1,103,298 1,040,483
Other assets 16,315 16,545 15,929
---------- ---------- ----------
TOTAL ASSETS $2,949,679 $2,732,619 $2,685,754
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 295,918 $ 232,501 $ 97,207
Accounts payable 414,393 277,584 369,634
Accrued salaries, wages
and taxes 177,536 185,540 170,493
Accrued expenses 50,596 47,834 48,423
Accrued income taxes 13,165 14,644 19,669
Current portion
of long-term debt 74,220 74,210 50,997
---------- ---------- ----------
Total current liabilities 1,025,828 832,313 756,423
Long-term debt 321,943 365,733 439,297
Deferred lease credits and
other deferred items 119,390 111,601 88,438
Shareholders' equity:
Common stock, without par value:
250,000,000 shares authorized;
81,365,397, 81,113,144 and
82,174,647 shares issued
and outstanding 181,668 168,440 165,158
Retained earnings 1,300,850 1,254,532 1,236,438
---------- ---------- ----------
Total shareholders' equity 1,482,518 1,422,972 1,401,596
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $2,949,679 $2,732,619 $2,685,754
========== ========== ==========
<FN>
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.
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NORDSTROM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Six Months
Ended July 31,
------------------
1996 1995
-------- --------
OPERATING ACTIVITIES:
Earnings before extraordinary item $ 72,130 $ 81,542
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Extraordinary charge related to the
early extinguishment of debt, net
of income taxes of $900 (1,452) -
Depreciation and amortization 76,191 61,311
Change in:
Accounts receivable, net (41,932) (161,942)
Merchandise inventories (130,198) (68,294)
Prepaid income taxes and other 1,705 1,674
Accounts payable 136,809 96,550
Accrued salaries, wages and taxes (8,004) (20,008)
Accrued expenses 2,762 7,433
Income tax liabilities and other (3,651) (4,320)
Deferred lease credits 9,961 25,317
-------- --------
Net cash provided by operating
activities 114,321 19,263
-------- --------
INVESTING ACTIVITIES:
Additions to property, buildings
and equipment, net (96,596) (117,331)
Other (425) (240)
-------- --------
Net cash used in investing activities (97,021) (117,571)
-------- --------
FINANCING ACTIVITIES:
Increase in notes payable 63,417 9,819
Proceeds from issuance of common stock 13,228 1,823
Proceeds from issuance of long-term debt, net - 140,919
Principal payments on long-term debt (43,780) (25,616)
Cash dividends paid (20,312) (20,566)
Purchase and retirement of common stock (4,048) (5,004)
-------- --------
Net cash provided by
financing activities 8,505 101,375
-------- --------
Net increase in cash and cash equivalents 25,805 3,067
Cash and cash equivalents at
beginning of period 24,517 32,497
-------- --------
Cash and cash equivalents at end of period $ 50,322 $ 35,564
======== ========
<FN>
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.
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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 July 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 July 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 July 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:
During the first quarter of 1996, the Company elected to prepay $43,100
of Nordstrom Credit, Inc. 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 ($0.02 per share).
Note 3: The summarized unaudited combined results of operations of
Nordstrom Credit, Inc. and Nordstrom National Credit Bank are
as follows:
Three Months Six Months
Ended July 31, Ended July 31,
1996 1995 1996 1995
------- ------- ------- -------
Total revenue $39,152 $32,315 $78,364 $61,838
Earnings before income taxes
and extraordinary item 10,746 5,749 24,278 14,475
Extraordinary charge related
to the early extinguishment
of debt, net of income taxes
of $900 - - 1,452 -
Net earnings 6,746 3,674 13,856 9,260
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NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
Note 4:
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. Class A
certificates with a market value of $186,600 were sold to a third party, and
Class B certificates, which are subordinated to the Class A certificates, were
retained by the Company. As a result of these transactions, the Company will
recognize a gain of $3,300. Cash flows generated from the receivables in the
trust will be allocated 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. Excess cash flows revert to the Company. The Company owns the
remaining undivided interests in the trust not represented by the Class A and
Class B certificates, and will continue to service the receivables for 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
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 second quarter of 1996, sales increased 8.0% when compared with the
same quarter in 1995. For the six-month period, sales increased 9.3% compared
to the same period in 1995. Comparable store sales increased by 1.1% for the
quarter and 2.3% for the six-month period, with the remainder of the increase
coming from new units. Comparable store sales increases softened during the
second quarter as a result of slowing consumer demand. 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 the quarter and the six-month period as compared to the
corresponding periods in 1995, due primarily to lower merchandise margins
resulting from increased markdowns. Markdowns in the second quarter were
higher than expected primarily due to a reassessment and realignment of the
merchandise mix between various women's apparel departments. Occupancy costs
increased as a percentage of sales for the quarter and six-month period due to
depreciation related to new stores and remodeling projects.
Selling, general and administrative expenses increased as a percentage of
sales during the second quarter and for the six-month period as compared to
the corresponding periods in 1995 primarily due to higher bad debt expenses.
This resulted from growth in the Company's VISA card program as well as an
increase in the general level of bad debt write-offs. Direct selling expenses
also increased. These increases were partially offset by lower distribution
costs for the Company's direct sales division, decreased spending on
development of a new payroll system which was implemented in early 1996, and
lower employee benefit costs.
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Item. 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.)
For the quarter and the six-month period, interest expense increased as a
percentage of sales when compared to the corresponding period in 1995, due to
higher levels of short-term debt outstanding to finance customer accounts
receivable. The increase was partially offset by a decrease in interest
rates.
Service charge income and other, net increased as a percentage of sales for
the second quarter and for the six-month period when compared to the
corresponding period in 1995. Net revenues from the Company's VISA and
proprietary card programs increased significantly as a result of growth in
these programs. The impact of this increase in the six-month period was
partially offset by the effect of one-time gains in the prior year on the sale
of a closed distribution facility and a full-line store, totaling $6.3 million
($0.05 per share after income taxes).
Financial Condition:
- --------------------
The Company's working capital at July 31, 1996 decreased when compared to
July 31, 1995 due primarily to increased levels of short-term debt. In August
of 1996, the Company completed a securitization of it's VISA receivables. Net
proceeds from the transaction were primarily used to reduce short-term and
long-term debt. Certain other information regarding this securitization of
receivables is included in Note 4 to the financial statements under Part I,
Item 1. The Company intends to seek additional external capital in the third
quarter to fund its general working capital needs.
In August 1996, 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 four new stores scheduled to open in 1997.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Sandy Rios, Clare Romanus and Annette Russell v. Nordstrom, Inc.,
U.S. District Court for the Central District of California, Cause No.
CV-96-4927 JSL.
- ---------------------------------------------------------------------
On May 28, 1996, a class action lawsuit was filed in the California Superior
Court for the County of Santa Barbara on behalf of three former employees and
on behalf of all other similarly situated current and former California
employees of the Company. The lawsuit was removed by the Company to the
United States District Court for the Central District of California, in Los
Angeles. The Plaintiffs allege that the Company's commission compensation
system in California violated California labor laws from May 1993 to the
present, and claim that the Company improperly decreased its employees'
commissions by holding the employees responsible for: (i) merchandise returns
that occur after the pay period in which the merchandise was purchased, and
(ii) merchandise returns where the employee had no involvement in the sale.
Plaintiffs seek monetary damages for the alleged decreases in commissions,
statutory penalties, including up to 30 days' wages for each employee
separated from the Company during the class period, injunctive relief,
attorneys' fees and punitive damages. The matter has not yet been certified
by the Court as a class action, and the Company has denied any liability for
the claims. Management believes that the Company has meritorious defenses to
these claims, and the Company intends to defend this lawsuit vigorously.
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Item 5. Other Information
- --------------------------
On August 29, 1996, the Company announced the retirement of Co-Chairman
Raymond A. Johnson effective September 6, 1996. Mr. Johnson will remain
on the Board of Directors of the Company. Co-Chairman John J. Whitacre
will continue to serve in the position of Chairman.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
(3.2) By-laws of the Registrant, as amended, are filed herein as an
Exhibit.
(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: September 4, 1996
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NORDSTROM, INC. AND SUBSIDIARIES
Exhibit Index
Exhibit Method of Filing
- ------- ----------------
3.2 By-laws of the Registrant Filed herewith electronically
27.1 Financial Data Schedule Filed herewith electronically