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. 1 of 9
NORDSTROM, INC. AND SUBSIDIARIES -------------------------------- INDEX ----- <TABLE> <CAPTION> Page Number <S> <C> 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 </TABLE> 2 of 9
NORDSTROM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (dollars in thousands except per share amounts) (unaudited) <TABLE> <CAPTION> Three Months Six Months Ended July 31, Ended July 31, --------------------- --------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> 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. </TABLE> 3 of 9
NORDSTROM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands) (unaudited) <TABLE> <CAPTION> July 31, January 31, July 31, 1997 1997 1996 ---------- ---------- ---------- <S> <C> <C> <C> 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. </TABLE> 4 of 9
NORDSTROM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited) <TABLE> <CAPTION> Six Months Ended July 31, ------------------ 1997 1996 -------- -------- <S> <C> <C> 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. </TABLE> 5 of 9
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: <TABLE> <CAPTION> Three Months Six Months Ended July 31, Ended July 31, 1997 1996 1997 1996 ------- ------- ------- ------- <S> <C> <C> <C> <C> 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 </TABLE> 6 of 9
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. 7 of 9
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. 8 of 9
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 - ------------------------ 9 of 9
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