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, 1997
[ ] 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, 1997: 77,216,093 shares of
common stock.
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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 six months ended
July 31, 1997 and 1996 3
Consolidated Balance Sheets
July 31, 1997 and 1996 and
January 31, 1997 4
Consolidated Statements of Cash Flows
Six months ended July 31, 1997 and 1996 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 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,
--------------------- ---------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Net sales $1,353,345 $1,241,464 $2,307,092 $2,147,426
Costs and expenses:
Cost of sales and related
buying and occupancy 924,354 861,888 1,570,865 1,479,000
Selling, general and
administrative 350,363 328,836 624,650 597,623
Interest, net 8,403 10,333 15,913 19,727
Service charge income
and other, net (26,461) (33,674) (54,371) (68,254)
---------- ---------- ---------- ----------
Total costs and expenses 1,256,659 1,167,383 2,157,057 2,028,096
---------- ---------- ---------- ----------
Earnings before income taxes
and extraordinary item 96,686 74,081 150,035 119,330
Income taxes 38,100 29,300 59,100 47,200
---------- ---------- ---------- ----------
Earnings before
extraordinary item 58,586 44,781 90,935 72,130
Extraordinary charge related to
the early extinguishment of
debt, net of income taxes
of $900 - - - 1,452
---------- ---------- ---------- ----------
Net earnings $ 58,586 $ 44,781 $ 90,935 $ 70,678
========== ========== ========== ==========
Earnings before extraordinary
item per average share of
common stock outstanding $ .76 $ .55 $ 1.17 $ .89
========== ========== ========== ==========
Net earnings per average share
of common stock outstanding $ .76 $ .55 $ 1.17 $ .87
========== ========== ========== ==========
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
1996 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,
1997 1997 1996
---------- ---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 39,837 $ 28,284 $ 50,322
Accounts receivable, net 718,573 714,589 935,859
Merchandise inventories 845,577 719,919 756,501
Prepaid income taxes and other 69,800 69,607 66,324
---------- ---------- ----------
Total current assets 1,673,787 1,532,399 1,809,006
Property, buildings and
equipment, net 1,212,967 1,152,454 1,124,358
Other assets 17,924 17,654 16,315
---------- ---------- ----------
TOTAL ASSETS $2,904,678 $2,702,507 $2,949,679
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 136,260 $ 163,770 $ 295,918
Accounts payable 461,422 310,430 414,393
Accrued salaries, wages
and taxes 203,634 192,750 177,536
Accrued expenses 54,715 56,080 50,596
Accrued income taxes 17,784 13,045 13,165
Current portion
of long-term debt 151,342 51,302 74,220
---------- ---------- ----------
Total current liabilities 1,025,157 787,377 1,025,828
Long-term debt 320,913 329,330 321,943
Deferred lease credits and
other deferred items 106,490 112,608 119,390
Shareholders' equity:
Common stock, without par value:
250,000,000 shares authorized;
77,169,027, 79,634,977 and
81,365,397 shares issued
and outstanding 193,662 183,398 181,668
Retained earnings 1,258,456 1,289,794 1,300,850
---------- ---------- ----------
Total shareholders' equity 1,452,118 1,473,192 1,482,518
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $2,904,678 $2,702,507 $2,949,679
========== ========== ==========
<FN>
These statements should be read in conjunction with the Notes to
Consolidated Financial Statements contained herein and in the Nordstrom
1996 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,
------------------
1997 1996
-------- --------
OPERATING ACTIVITIES:
Earnings before extraordinary item $ 90,935 $ 72,130
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 74,218 76,191
Change in:
Accounts receivable, net (3,984) (41,932)
Merchandise inventories (125,658) (130,198)
Prepaid income taxes and other (193) 1,705
Accounts payable 150,992 136,809
Accrued salaries, wages and taxes 10,884 (8,004)
Accrued expenses (1,365) 2,762
Income tax liabilities 45 (3,651)
Deferred lease credits (1,424) 9,961
-------- --------
Net cash provided by operating
activities 194,450 114,321
-------- --------
INVESTING ACTIVITIES:
Additions to property, buildings
and equipment, net (134,367) (96,596)
Other (42) (425)
-------- --------
Net cash used in investing activities (134,409) (97,021)
-------- --------
FINANCING ACTIVITIES:
(Decrease) increase in notes payable (27,510) 63,417
Proceeds from issuance of common stock 10,264 13,228
Proceeds from issuance of long-term debt, net 91,758 -
Principal payments on long-term debt (727) (43,780)
Cash dividends paid (19,531) (20,312)
Purchase and retirement of common stock (102,742) (4,048)
-------- --------
Net cash (used in) provided by
financing activities (48,488) 8,505
-------- --------
Net increase in cash and cash equivalents 11,553 25,805
Cash and cash equivalents at
beginning of period 28,284 24,517
-------- --------
Cash and cash equivalents at end of period $ 39,837 $ 50,322
======== ========
<FN>
These statements should be read in conjunction with the Notes to
Consolidated Financial Statements contained herein and in the Nordstrom
1996 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, 1997 and 1996, 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, 1998.
It is not considered necessary to include detailed footnote information
as of July 31, 1997 and 1996. The financial information should be read
in conjunction with the Notes to Consolidated Financial Statements
contained in the Nordstrom 1996 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, 1997 and 1996, 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.
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,
1997 1996 1997 1996
------- ------- ------- -------
Total revenue $30,615 $39,152 $62,421 $78,364
Earnings before income taxes
and extraordinary item 8,030 10,746 19,673 24,278
Extraordinary charge related
to the early extinguishment
of debt, net of income taxes
of $900 - - - 1,452
Net earnings 5,030 6,746 12,403 13,856
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NORDSTROM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
Note 4:
Statement of Financial Accounting Standards No. 128, which will be effective
for earnings per share calculations after December 15, 1997, will not
significantly affect the calculation of the Company's earnings per share.
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 1996 Annual Report to
Shareholders.
Results of Operations:
- ----------------------
During the second quarter of 1997, sales increased 9.0% when compared with the
same quarter in 1996. For the six-month period, sales increased 7.4% compared
to the same period in 1996. Comparable store sales increased by 5.0% for the
quarter and 3.1% for the six-month period, with the remainder of the increase
coming from new units and from the Company's Catalog Division. The positive
trend in comparable store sales results in the second quarter reflects steady
improvements in the Company's women's apparel departments. These areas
performed very well during the Company's recent Anniversary Sale, which
started earlier in some of the Company's regions, in 1997. Management
estimates that the sales increases attributable to the earlier start date did
not significantly affect comparability. Comparable store sales increases have
remained strong into the third quarter.
Cost of sales and related buying and occupancy costs decreased as a percentage
of sales for the quarter and the six-month period as compared to the
corresponding periods in 1996, due primarily to higher merchandise margins
resulting from decreased markdowns. Occupancy costs decreased as a percentage
of sales for the quarter and six-month period as no new full-line stores were
opened.
Selling, general and administrative expenses decreased as a percentage of
sales during the quarter and for the six-month period as compared to the
corresponding periods in 1996 due to a combination of factors. First, bad
debt expense decreased as a result of the securitization of the Company's VISA
credit card receivables in August of last year. Second, expenses at the
Company's more mature stores continued to be well controlled, most notably,
direct selling costs. Additionally, in 1997 there were no major store
openings during the six-month period, compared to two major store openings
during the six-month period in 1996. The Company will open three new full-
line stores and a fulfillment center for its Catalog Division in the third
quarter. As a result, management anticipates that expenses in the third
quarter will increase at a higher rate than in the first six months.
For the quarter and the six-month period, interest expense decreased as a
percentage of sales when compared to the corresponding periods in 1996, due
primarily to lower levels of short-term debt outstanding as a result of the
securitization of the Company's VISA credit card receivables.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.)
Service charge income and other, net decreased as a percentage of sales for
the quarter and for the six-month period when compared to the corresponding
periods in 1996 due primarily to a reduction in revenues from the Company's
VISA card program as a result of the securitization of these receivables in
August 1996.
Financial Condition:
- --------------------
During the first quarter of 1997, Nordstrom Credit, Inc. filed a shelf
registration statement on Form S-3 to register up to $250 million in debt
securities, and issued $92.4 million in medium-term notes under the
registration.
On July 24, 1997, the Company entered into a revolving line of credit
agreement with a group of commercial banks which provides for borrowings of up
to $200 million and expires in July 2002. There are no borrowings on the line
of credit at July 31, 1997.
The Company's working capital at July 31, 1997 decreased when compared to
July 31, 1996 due primarily to a decrease in accounts receivable resulting
from the securitization of VISA receivables completed in the third quarter of
1996.
In April, 1997, the Company completed its second repurchase of $100 million of
its outstanding common stock as approved by the Board of Directors at its
November 1996 meeting. To date, the Company has bought $24.6 million of a
third $100 million stock repurchase authorized in February, 1997.
On August 15, 1997, the Company opened a full-line store on Long Island, New
York, and on September 5, 1997 the Company opened a full-line store in West
Hartford, Connecticut. Construction is progressing as planned on new stores
scheduled to open later this year and in 1998.
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.
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Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
(10.1) Credit Agreement dated July 24, 1997 between Registrant and a
group of commercial banks is filed herein as an Exhibit.
(10.2) Credit Agreement dated July 24, 1997 between Nordstrom Credit,
Inc. and a group of commercial banks is hereby incorporated by
reference from the Nordstrom Credit, Inc. Quarterly Report on
Form 10-Q for the quarter ended July 31, 1997, Exhibit 10.1.
(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 9, 1997
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NORDSTROM, INC. AND SUBSIDIARIES
Exhibit Index
Exhibit Method of Filing
- ------- ----------------
10.1 Credit Agreement dated July 24, Filed herewith electronically
1997 between Registrant and a
group of commercial banks
10.2 Credit Agreement dated July 24, Incorporated by reference
between, Nordstrom Credit, Inc. from the Nordstrom Credit,
and a group of commercial banks Inc. Quarterly Report on Form
10-Q for the quarter ended
July 31, 1997, Exhibit 10.1.
27.1 Financial Data Schedule Filed herewith electronically