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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 April 30, 2002
[ ] 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 May 31, 2002 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. AND SUBSIDIARY
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INDEX
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Page
Number
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Statements of Earnings
Three months ended April 30, 2002 and 2001 3
Condensed Consolidated Balance Sheets
April 30, 2002 and 2001 and
January 31, 2002 4
Condensed Consolidated Statements of Cash Flows
Three months ended April 30, 2000 and 2001 5
Notes to Condensed Consolidated 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
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page 2 of 8
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NORDSTROM CREDIT, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands)
(unaudited)
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Three Months
Ended April 30,
------------------
2002 2001
-------- --------
<s> <c> <c>
Revenue:
Service charge income $27,116 $28,807
Rental income from affiliates 510 510
-------- --------
Total revenue 27,626 29,317
Expenses:
Interest, net 6,366 6,626
Servicing and marketing fees
paid to Nordstrom fsb 2,402 8,176
Selling, general and administrative 708 5,905
-------- --------
Total expenses 9,476 20,707
-------- --------
Earnings before income taxes 18,150 8,610
Income taxes 6,620 3,200
-------- --------
Net earnings $11,530 $ 5,410
======== ========
Ratio of earnings available for fixed
charges to fixed charges 3.70 2.30
======== ========
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These statements should be read in conjunction with the Notes to
Condensed Consolidated Financial Statements contained herein.
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page 3 of 8
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NORDSTROM CREDIT, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
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<caption>
April 30, January 31, April 30,
2002 2002 2001
----------- ----------- ----------
<s> <c> <c> <c>
ASSETS
- ------
Cash and cash equivalents $ 156 $ 3,368 $ 611
Customer accounts receivable, net
of allowance for doubtful accounts
of $22,786, $23,022 and $17,232 582,662 620,921 612,467
Receivable from affiliates and
other receivables 21,850 49,169 6,532
Land, buildings and
equipment, net (at cost) 5,068 5,204 4,894
Other assets 2,301 2,316 543
-------- -------- --------
$612,037 $680,978 $625,047
======== ======== ========
LIABILITIES AND INVESTMENT OF NORDSTROM, INC.
- ---------------------------------------------
Note payable to Nordstrom, Inc. $ 16,110 - $256,680
Payable to affiliates - 20,264 3,731
Accrued interest, taxes and other 7,513 7,080 9,321
Long-term debt 400,000 476,750 187,750
-------- -------- --------
Total liabilities 423,623 504,094 457,482
Investment of Nordstrom, Inc. 188,414 176,884 167,565
-------- -------- --------
$612,037 $680,978 $625,047
======== ======== ========
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These statements should be read in conjunction with the Notes to
Condensed Consolidated Financial Statements contained herein.
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page 4 of 8
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NORDSTROM CREDIT, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
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Three Months
Ended April 30,
----------------------
2002 2001
-------- --------
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OPERATING ACTIVITIES:
Net earnings $ 11,530 $ 5,410
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 191 302
Change in:
Receivable from Affiliates and other 29,851 6,439
Other assets (40) -
Payable to Affiliates (22,796) 3,317
Accrued interest, taxes and other 433 (2,245)
-------- --------
Net cash provided by operating activities 19,169 13,223
-------- --------
INVESTING ACTIVITIES:
Decrease in customer
accounts receivable, net 38,259 32,657
Additions to property and equipment, net - (671)
-------- --------
Net cash provided by investing activities 38,259 31,986
-------- --------
FINANCING ACTIVITIES:
Borrowings (repayments) under note payable
to Nordstrom, Inc., net 16,110 (44,750)
Principal payments on long-term debt (76,750) -
-------- --------
Net cash used in financing activities (60,640) (44,750)
-------- --------
Net (decrease) increase in cash and
cash equivalents (3,212) 459
Cash and cash equivalents
at beginning of period 3,368 152
-------- --------
Cash and cash equivalents at end of period $ 156 $ 611
======== ========
<fn>
These statements should be read in conjunction with the Notes to
Condensed Consolidated Financial Statements contained herein.
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page 5 of 8
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NORDSTROM CREDIT, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
- ---------------------
The accompanying condensed consolidated financial statements should
be read in conjunction with the Notes to Consolidated Financial
Statements contained in the Nordstrom Credit, Inc. Annual Report on
Form 10-K for the year ended January 31, 2002. The same accounting
policies are followed in preparing quarterly financial data as are
followed in preparing annual data. In the opinion of management, all
adjustments necessary for a fair presentation of the results of
operations, financial position and cash flows have been included
and are of a normal, recurring nature.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
The financial information is applicable to interim periods and is not
necessarily indicative of the results to be expected for the fiscal year.
Recent Accounting Pronouncements
- --------------------------------
In February 2002, the Company adopted SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144
retains the fundamental provisions of SFAS No. 121, but establishes
new criteria for asset classification and broadens the scope of
qualifying discontinued operations. The adoption of this statement
did not have a material impact on the Company's financial statements.
NOTE 2 - CUSTOMER ACCOUNTS RECEIVABLE
Customer accounts receivable, net, consists of the following:
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April 30, 2002 2001
- ----------- -------- --------
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Unrestricted accounts $2,201 $609,303
Restricted accounts 592,908 -
Master trust certificates 10,339 20,396
-------- --------
605,448 629,699
Holdback allowance (22,786) (17,232)
-------- --------
Customer accounts receivable, net $582,662 $612,467
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Restricted accounts back the $300 million of Class A notes and the
$200 million variable funding note issued by the Company in
November 2001.
Through April 30, 2002, the Company owned an undivided,
subordinate interest (Class B Certificate) in a pool of VISA
credit card receivables. External investors held the Class A
Certificates and the Bank owned the Seller Retained Certificate
and Interest Only Strip.
page 6 of 8
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NOTE 2 - CUSTOMER ACCOUNTS RECEIVABLE (Continued)
On May 1, 2002, the Class B Certificate was repaid. The
Company received cash in the amount of $11,060 representing
the face value of the note plus accrued interest and recognized
a gain on redemption of $661. The gain is the excess of cash
received over the carrying amount of the Class B Certificate,
and was recognized in the quarter ended July 31, 2002.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Service charge income decreased for the quarter ended April
30, 2002, compared to the same period in 2001, primarily due
to a decrease in the service charge rate, caused by a decline
in interest rates. The decrease was also due in part to a decline
in the outstanding balance of accounts receivables.
Net interest expense decreased slightly for the quarter ended April
30, 2002, compared to the same period in 2001, as a result of a
decrease in volume of short-term debt outstanding as well as the
decline in interest rates. The decrease was offset by an increase
in long-term debt outstanding.
Servicing and marketing fees paid to Nordstrom fsb decreased
for the quarter ended April 30, 2002, primarily due to a change
in the servicing fee structure between the Company and
Nordstrom fsb, which became effective during the fourth
quarter of 2001.
Selling, general and administrative expenses decreased for the
quarter ended April 30, 2002, compared to the same period in
2001, primarily as a result of a change in the expense structure,
effective February 1, 2002. Charges related to purchase incentives
associated with the Nordstrom credit cards, bad debt expense related
to returned checks, and gift card expenses are now taken by
Nordstrom, Inc. and not the Company.
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
(10.1) Loan Agreement dated February 1, 2002 between Registrant and
Nordstrom, Inc. is filed herein as an exhibit.
(10.2) Loan Agreement dated February 1, 2002 between Nordstrom, Inc.
and Registrant 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. AND SUBSIDIARY
(Registrant)
/s/ Michael G. Koppel
----------------------------------------------------
Michael G. Koppel
Executive Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
Date: June 7, 2002
- --------------------------
page 8 of 8
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NORDSTROM CREDIT INC. AND SUBSIDIARY
Exhibit Index
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Exhibit Method of Filing
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10.1 Loan Agreement dated February Filed herewith electronically
1, 2002 between Nordstrom,
Inc. and Registrant
10.2 Loan Agreement dated February Filed herewith electronically
1, 2002 between Registrant
and Nordstrom, Inc.
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