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 October 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 November 25, 1997: 77,317,994 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 nine months ended October 31, 1997 and 1996 3 Consolidated Balance Sheets October 31, 1997 and 1996 and January 31, 1997 4 Consolidated Statements of Cash Flows Nine months ended October 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 Nine Months Ended October 31, Ended October 31, --------------------- --------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Net sales $1,089,784 $ 984,440 $3,396,876 $3,131,866 Costs and expenses: Cost of sales and related buying and occupancy 724,081 665,378 2,294,946 2,144,378 Selling, general and administrative 326,193 288,644 950,843 886,267 Interest, net 7,659 9,151 23,572 31,230 Service charge income and other, net (27,794) (34,469) (82,165) (102,723) ---------- ---------- ---------- ---------- Total costs and expenses 1,030,139 928,704 3,187,196 2,959,152 ---------- ---------- ---------- ---------- Earnings before income taxes 59,645 55,736 209,680 172,714 Income taxes 23,500 21,700 82,600 68,000 ---------- ---------- ---------- ---------- Net earnings $ 36,145 $ 34,036 $ 127,080 $ 104,714 ========== ========== ========== ========== Net earnings per average share of common stock outstanding $ .47 $ .42 $ 1.64 $ 1.29 ========== ========== ========== ========== Cash dividends paid per share of common stock outstanding $ .14 $ .125 $ .39 $ .375 ========== ========== ========== ========== <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> October 31, January 31, October 31, 1997 1997 1996 ---------- ---------- ---------- <S> <C> <C> <C> ASSETS Current Assets: Cash and cash equivalents $ 19,239 $ 28,284 $ 11,343 Accounts receivable, net 648,802 714,589 690,047 Merchandise inventories 1,134,212 719,919 976,488 Prepaid income taxes and other 76,538 69,607 67,755 ---------- ---------- ---------- Total current assets 1,878,791 1,532,399 1,745,633 Property, buildings and equipment, net 1,229,354 1,152,454 1,131,913 Other assets 18,163 17,654 16,875 ---------- ---------- ---------- TOTAL ASSETS $3,126,308 $2,702,507 $2,894,421 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes payable $ 241,348 $ 163,770 $ 190,890 Accounts payable 555,042 310,430 473,843 Accrued salaries, wages and taxes 203,703 192,750 180,971 Accrued expenses 49,508 56,080 49,642 Accrued income taxes 10,992 13,045 6,662 Current portion of long-term debt 151,343 51,302 25,220 ---------- ---------- ---------- Total current liabilities 1,211,936 787,377 927,228 Long-term debt 320,701 329,330 379,750 Deferred lease credits and other deferred items 109,642 112,608 125,893 Shareholders' equity: Common stock, without par value: 250,000,000 shares authorized; 77,314,199, 79,634,977 and 80,182,651 shares issued and outstanding 200,241 183,398 182,662 Retained earnings 1,283,788 1,289,794 1,278,888 ---------- ---------- ---------- Total shareholders' equity 1,484,029 1,473,192 1,461,550 ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,126,308 $2,702,507 $2,894,421 ========== ========== ========== <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> Nine Months Ended October 31, ------------------ 1997 1996 -------- -------- <S> <C> <C> OPERATING ACTIVITIES: Net earnings $127,080 $104,714 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 116,364 116,878 Change in: Accounts receivable, net 65,787 17,280 Merchandise inventories (414,293) (350,185) Prepaid income taxes and other (6,931) 274 Accounts payable 244,612 196,259 Accrued salaries, wages and taxes 10,953 (4,569) Accrued expenses (6,572) 1,808 Income tax liabilities (4,093) (16,304) Deferred lease credits (926) 22,614 -------- -------- Net cash provided by operating activities 131,981 88,769 -------- -------- INVESTING ACTIVITIES: Additions to property, buildings and equipment, net (192,697) (144,672) Other (373) (910) -------- -------- Net cash used in investing activities (193,070) (145,582) -------- -------- FINANCING ACTIVITIES: Proceeds from accounts receivable securitization --- 186,600 Increase (decrease) in notes payable 77,578 (41,611) Proceeds from issuance of long-term debt, net 91,647 57,759 Principal payments on long-term debt (938) (92,973) Proceeds from issuance of common stock 16,843 14,222 Cash dividends paid (30,344) (30,447) Purchase and retirement of common stock (102,742) (49,911) -------- -------- Net cash provided by financing activities 52,044 43,639 -------- -------- Net decrease in cash and cash equivalents (9,045) (13,174) Cash and cash equivalents at beginning of period 28,284 24,517 -------- -------- Cash and cash equivalents at end of period $ 19,239 $ 11,343 ======== ======== <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 October 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 October 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 October 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: The summarized unaudited combined results of operations of Nordstrom Credit, Inc. and Nordstrom National Credit Bank are as follows: <TABLE> <CAPTION> Three Months Nine Months Ended October 31, Ended October 31, 1997 1996 1997 1996 -------- -------- -------- -------- <S> <C> <C> <C> <C> Total revenue $30,841 $34,780 $93,262 $113,144 Earnings before income taxes 12,487 14,663 32,160 36,589 Net earnings 7,853 9,573 20,256 23,429 </TABLE> Note 3: 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. 6 of 9
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 third quarter of 1997, sales increased 10.7% when compared with the same quarter in 1996. For the nine-month period, sales increased 8.5% compared to the same period in 1996. Comparable store sales increased by 4.7% for the quarter and 3.6% for the nine-month period, with the remainder of the increase coming from new units and from the Company's direct sales catalog division. The positive trend in comparable store sales results reflects steady improvements in the Company's women's apparel departments. Comparable store sales increases have remained strong in the fourth quarter. Cost of sales and related buying and occupancy costs decreased as a percentage of sales for the quarter and nine-month period as compared to the corresponding periods in 1996. For the quarter and nine-month period, the decrease was due primarily to higher merchandise margins resulting from higher markups and lower markdowns. Occupancy costs decreased as a percentage of sales for the quarter and nine-month period, due primarily to leverage achieved through comparable store sales growth, which was partially offset by increases attributable to new store openings. Selling, general and administrative expenses increased as a percentage of sales during the quarter as compared to the corresponding period in 1996 due primarily to higher sales promotion costs for the Company's direct sales catalog division as well as new store openings. The increase was partially offset by decreased employee benefit costs and credit expenses. Selling, general and administrative expenses decreased as a percentage of sales during the nine-month period as compared to the corresponding period in 1996. The decrease is due primarily to reduced bad debt expense as a result of the securitization of the Company's VISA credit card receivables in August 1996 and a decrease in employee benefit costs. These decreases were partially offset by higher sales promotion costs for the Company's direct sales catalog division. For the quarter and the nine-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. Service charge income and other, net decreased as a percentage of sales for the quarter compared to the corresponding period in 1996. The decrease is due primarily to net losses from market value adjustments to the portions of the securitized VISA receivables owned by the Company, compared to net gains in the prior year. Also, in 1996 there was a gain on the sale of equipment totaling $3.1 million ($.02 per share after income taxes). For the nine-month period, service charge income and other, net decreased as a percentage of sales when compared to the corresponding period 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. 7 of 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.) 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 October 31, 1997. On October 2, 1997, the Company established a new $200 million commercial paper program. The revolving line of credit is available as liquidity support for the commercial paper program. The Company's working capital at October 31, 1997 decreased when compared to October 31, 1996 due primarily to an increase in the current portion of long- term debt and short-term debt. 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 purchased $24.6 million of a third $100 million stock repurchase authorized in February, 1997. During the quarter, the Company opened three new full-line stores at Roosevelt Field on Long Island, New York, Westfarms Mall in West Hartford, Connecticut and Beachwood Place in Cleveland, Ohio. The Company also opened a Rack at The Mall at the Source in Hempstead, New York, and two Faconnable boutiques; one in Beverly Hills, California and another in Costa Mesa, California. Construction is progressing as planned on new stores scheduled to open 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) Commercial Paper Dealer Agreement dated October 2, 1997 between Registrant and Bancamerica Securities, Inc. is filed herein as an Exhibit. (10.2) Commercial Paper Agreement dated October 2, 1997 between Registrant and Credit Suisse First Boston Corporation is filed herein as an Exhibit. (10.3) Issuing and Paying Agency Agreement dated October 2, 1997 between Registrant and First Trust of New York, N.A. is 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: December 9, 1997 - ------------------------ 9 of 9
NORDSTROM, INC. AND SUBSIDIARIES <TABLE> <CAPTION> Exhibit Index Exhibit Method of Filing - ------- ---------------- <S> <C> 10.1 Commercial Paper Dealer Filed herewith electronically Agreement dated October 2, 1997 between Registrant and Bancamerica Securities, Inc. 10.2 Commercial Paper Agreement Filed herewith electronically dated October 2, 1997 between Registrant and Credit Suisse First Boston Corporation 10.3 Issuing and Paying Agency Agreement Filed herewith electronically dated October 2, 1997 between Registrant and First Trust of New York, N.A. 27.1 Financial Data Schedule Filed herewith electronically </TABLE>