Item 1. Business. - ------------------
In 1994, Nordstrom National Credit Bank (the "Bank") intends to issue a VISA card. It is anticipated that receivables generated through the use of the card will be purchased by Nordstrom Credit, Inc. (the "Company"), without recourse, except for sales occurring at Nordstrom, Inc. stores. This is expected to increase the external financing needs of the Company. Service charges earned on these receivables are expected to be sufficient to offset additional expenses generated through this activity. All other operations of the Company will remain substantially the same.
Certain other information required under this item is included in Note 1 to the Financial Statements on page 12 of this report, which is incorporated herein by reference.
Item 2.
Item 2. Properties. - --------------------
The Company owns an office building in Englewood, Colorado where it locates its principal offices.
Item 3.
Item 3. Legal Proceedings. - ---------------------------
The Company is not a party to any material legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders. - -------------------------------------------------------------
Not required under reduced disclosure format.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. - ------------------------------------------------------------------------------
The class of securities registered is the Company's Common Stock, $.50 par value per share. There are 100,000 shares of authorized Common Stock, of which 10,000 shares were issued and outstanding as of March 22, 1994. The Company's common stock is owned entirely by Nordstrom. The stock has not been traded and, accordingly, no market value has been established. In addition, no dividends have been paid or declared.
Item 6.
Item 6. Selected Financial Data. - ---------------------------------
Not required under reduced disclosure format.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations. - -------------------------------------------------------------------------
Service charge income decreased in 1993 primarily because of a decrease in the average amount of customer accounts receivable purchased.
Interest expense decreased in 1993 due to lower levels of debt and decreased short-term interest rates.
Certain other information required under this item is included in Note 1 to the Financial Statements on page 12 of this report, which is incorporated herein by reference. 2 of 16 Item 8.
Item 8. Financial Statements and Supplementary Data. - ----------------------------------------------------
A) Financial Statements and Supplementary Data
The financial statements listed in the Index to Financial Statements and Schedules on page 6 of this Report are incorporated herein by reference.
B) Other Financial Statements and Schedules
Schedules required under Regulation S-X are filed pursuant to Item 14 of this Report.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. - ------------------------------------------------------------------------
None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant. - ------------------------------------------------------------
Not required under reduced disclosure format.
Item 11.
Item 11. Executive Compensation. - --------------------------------
Not required under reduced disclosure format.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management. - ------------------------------------------------------------
Not required under reduced disclosure format.
Item 13.
Item 13. Certain Relationships and Related Transactions. - -------------------------------------------------------- Not required under reduced disclosure format.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. - ---------------------------------------------------------------------
(a)1. Financial Statements --------------------
The following financial statements of the Company and the Independent Auditors' Report are incorporated by reference in Part II, Item 8:
Independent Auditors' Report Statements of Earnings Balance Sheets Statements of Investment of Nordstrom, Inc. Statements of Cash Flows Notes to Financial Statements
3 of 16 (a)2. Financial Statement Schedules ----------------------------- The financial statement schedules listed in the Index to Financial Statements and Schedules on page 6 of this Report are incorporated herein by reference.
(a)3. Exhibits -------- (3.1) Articles of Incorporation of the Registrant are hereby incorporated by reference from the Registrant's Form 10-K for the year ended January 31, 1991, Exhibit 3.1.
(3.2) By-laws of the Registrant are hereby incorporated by reference from the Registrant's Form 10-K for the year ended January 31, 1991, Exhibit 3.2.
(4.1) Indenture between Registrant and First Interstate Bank of Washington , N.A. dated November 15, 1984, the First Supplement thereto dated January 15, 1988, the Second Supplement thereto dated June 1, 1989 and the Third Supplement thereto dated October 19, 1990 are hereby incorporated by reference from Registration No. 33-3765, Exhibit 4.2; Registration No. 33-19743, Exhibit 4.2; Registration No. 33-29193, Exhibit 4.3; and Registrant's Form 10-K for the year ended January 31, 1991, Exhibit 4.2, respectively.
(10.1) Investment Agreement dated October 8, 1984 between Registrant and Nordstrom, Inc. is hereby incorporated by reference from the Registrant's Form 10, Exhibit 10.1.
(10.2) Operating Agreement dated August 30, 1991 between Registrant and Nordstrom National Credit Bank is hereby incorporated by reference from the Registrant's Form 10-Q for the quarter ended July 31, 1991, Exhibit 10.1.
(10.3) Credit Agreement dated June 30, 1992, as amended January 1, 1993, between Registrant and Seattle-First National Bank of Washington is hereby incorporated by reference from the Registrant's Form 10-K for the year ended January 31, 1993, Exhibit 10.5
(10.4) Second Amendment to the Credit Agreement dated June 30, 1992, as amended January 1, 1993, between Registrant and Seattle-First National Bank of Washington dated June 29, 1993 is filed herein as an Exhibit.
(10.5) Loan Agreement dated November 24, 1992 between Registrant and Nordstrom, Inc. is hereby incorporated by reference from the Registrant's Form 10-K for the year ended January 31, 1993, Exhibit 10.6.
(10.6) Loan Agreement dated June 28, 1993 between Registrant and a group of commercial banks is filed herein as an Exhibit.
(12.1) Statement regarding computation of ratio of earnings available for fixed charges to fixed charges is filed herein as an Exhibit.
All other exhibits are omitted because they are not applicable, or not required, or because the required information is included in the Financial Statements or notes thereto.
(b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the last quarter of the period for which this report is filed.
4 of 16 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
NORDSTROM CREDIT, INC. (Registrant)
Date March 29, 1994 by /s/ John A. Goesling ________________________________ _________________________________ John A. Goesling Executive Vice President and Treasurer (Principal Accounting and Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
/s/ John A. McMillan /s/ James F. Nordstrom _____________________________________ _________________________________ John A. McMillan James F. Nordstrom Co-Chairman of the Board of Directors Co-Chairman of the Board of Directors
/s/ Bruce A. Nordstrom /s/ John N. Nordstrom _____________________________________ _________________________________ Bruce A. Nordstrom John N. Nordstrom Co-Chairman of the Board of Directors Co-Chairman of the Board of Directors
/s/ John Walgamott /s/ John A. Goesling _____________________________________ _________________________________ John Walgamott John A. Goesling President Executive Vice President and (Principal Executive Officer) Treasurer (Principal Accounting and Financial Officer)
Date March 29, 1994 ______________________
5 of 16 NORDSTROM CREDIT, INC. INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page Number ------
Independent Auditors' Report 7
Statements of Earnings 8
Balance Sheets 9
Statements of Investment of Nordstrom, Inc. 10
Statements of Cash Flows 11
Notes to Financial Statements 12
Additional financial information required to be furnished-
Schedules:
VIII - Valuation and Qualifying Accounts 15
IX - Short-term Borrowings 16
All other schedules have been omitted because they are inapplicable, not required, or the information is included elsewhere in the financial statements or notes thereto.
6 of 16 INDEPENDENT AUDITORS' REPORT
Board of Directors Nordstrom Credit, Inc. Englewood, Colorado
We have audited the accompanying balance sheets of Nordstrom Credit, Inc. as of January 31, 1994 and 1993, and the related statements of earnings, investment of Nordstrom, Inc. and cash flows for each of the three years in the period ended January 31, 1994. Our audits also included the financial statement schedules listed in Item 14(a)2. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Nordstrom Credit, Inc. as of January 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
Deloitte & Touche Seattle, Washington March 11, 1994
7 of 16 NORDSTROM CREDIT, INC STATEMENTS OF EARNINGS (Dollars in thousands)
See notes to financial statements.
8 of 16 NORDSTROM CREDIT, INC. BALANCE SHEETS (Dollars in thousands)
See notes to financial statements.
9 of 16 NORDSTROM CREDIT, INC. STATEMENTS OF INVESTMENT OF NORDSTROM, INC. (Dollars in thousands except per share amount)
See notes to financial statements.
10 of 16 NORDSTROM CREDIT, INC. STATEMENTS OF CASH FLOWS (Dollars in thousands)
See notes to financial statements.
11 of 16 NORDSTROM CREDIT, INC. NOTES TO FINANCIAL STATEMENTS (Dollars in thousands)
NOTE 1 - DESCRIPTION OF BUSINESS
Nordstrom Credit, Inc. (the "Company"), a wholly-owned subsidiary of Nordstrom, Inc. ("Nordstrom") was incorporated in the State of Washington in 1982 and reincorporated in the State of Colorado in 1990. The primary business of the Company is to finance customer accounts receivable generated through sales of merchandise in Nordstrom stores ("Accounts"). The Accounts are originated through the use of credit cards issued by Nordstrom National Credit Bank, a national banking association organized as a wholly-owned subsidiary of Nordstrom (the "Bank"), effective August 30, 1991.
The Company and the Bank are parties to an Operating Agreement dated August 30, 1991 (the "Operating Agreement") pursuant to which the Company purchases Accounts from the Bank for a price equal to the amount of Accounts originated less an allowance for amounts to be written off (the "holdback allowance"). Under the terms of the Operating Agreement, the Bank performs the servicing functions for the Accounts and the Company pays the Bank a servicing fee which was initially established at 1.75% of credit card sales. On February 1, 1993, the servicing fee increased to 1.82% and on November 1, 1993, it decreased to 1.59%.
Prior to the formation of the Bank, the Company and Nordstrom were parties to a Prior Operating Agreement, whereby the Company purchased from Nordstrom an undivided interest in the Accounts, which were generated through the use of credit cards issued by Nordstrom, rather than the Bank. Pursuant to the Prior Operating Agreement, the Company also provided servicing for the Accounts.
The Company and Nordstrom are parties to an Investment Agreement dated October 8, 1984 (the "Investment Agreement") which, among other things, governs ownership of Company stock and the financial relationships between Nordstrom and the Company. The Investment Agreement requires that Nordstrom maintain the Company's ratio of earnings available for fixed charges to fixed charges at not less than 1.25:1 and further requires that Nordstrom retain ownership of all the outstanding shares of stock of the Company. This agreement does not, however, represent a guarantee by Nordstrom of the payment of any obligation of the Company.
NOTE 2 - RENTAL INCOME
The Company owns an office building in Englewood, Colorado, and leases space in the building to the Bank under a month-to-month agreement for $87 per month.
NOTE 3 - INTEREST EXPENSE
12 of 16
NOTE 4 - INCOME TAXES
The Company files consolidated income tax returns with Nordstrom. Income taxes have been provided on a separate return basis, and the difference between the effective tax rate and the statutory Federal income tax rate is due to the provision for state and local income taxes. At January 31, 1994 and 1993, amount due to Nordstrom for income taxes totalled $1,592 and $1,460. The Company has no significant deferred taxes.
NOTE 5 - OTHER ACCOUNTS RECEIVABLE
Other accounts receivable consists primarily of amounts due from the Bank for net activity in Accounts, less service fees due the Bank. These amounts are settled on a second business day basis.
NOTE 6 - NOTES PAYABLE AND COMMERCIAL PAPER
The notes payable to bank represents amounts borrowed from a commercial bank as fiduciary under a master note agreement which provides for borrowings up to $25,000. Borrowings under the Agreement bear interest at floating rates based on a published short-term interest rate composite index (3.0% and 3.0% at January 31, 1994 and 1993) and mature up to six months from the date of borrowing or on demand.
The notes payable to Nordstrom, Inc. represent amounts borrowed from Nordstrom under an Agreement dated November 24, 1992 which provides for borrowings from time to time, depending on seasonal cash flow requirements. Borrowings under the Agreement bear interest at floating rates based on a published short-term interest rate composite index (3.1% and 3.0% at January 31, 1994 and 1993) and mature up to six months from the date of borrowing or on demand. A summary of notes payable to Nordstrom, Inc. is as follows:
The Company has $150,000 in unsecured lines of credit which are available as liquidity support for notes payable to bank and commercial paper issued by the Company. Under the terms of the line-of-credit agreements, the Company must, among other things, comply with the terms of the Investment Agreement between the Company and Nordstrom and the Operating Agreement between the Company and Nordstrom National Credit Bank, and maintain a ratio of total debt to tangible net worth no greater than 5 to 1. The Company pays commitment fees for the lines in lieu of compensating balance requirements.
The carrying amount of the notes payable and commercial paper approximates fair value because of the short maturity of these instruments.
13 of 16
NOTE 7 - LONG-TERM DEBT
Long-term debt consists of the following:
Aggregate principal payments on long-term debt for the next five fiscal years are as follows: 1994 - $51,000, 1995 - $25,000, 1996 - $73,000, 1997 - $3,750, and 1998 - $53,750.
The fair value of long-term debt at January 31, 1994, estimated using quoted market prices of the same or similar issues with the same remaining maturity, was $292,360.
NOTE 8 - SUPPLEMENTARY CASH FLOW INFORMATION
For purposes of the Statements of Cash Flows, the Company considers all short-term investments with a maturity at date of purchase of three months or less to be cash equivalents. The carrying amount approximates fair value because of the short maturity of these instruments.
Supplementary cash flow information is as follows:
14 of 16 NORDSTROM CREDIT, INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
* The Company purchases Accounts net of this amount which represents the allowance for uncollectible amounts. Bad debt expenses are reflected on the books of Nordstrom.
** Upon execution of the Operating Agreement between the Bank and the Company, all Accounts were sold back to Nordstrom and the corresponding withholding account was eliminated.
15 of 16 NORDSTROM CREDIT, INC.
SCHEDULE IX - SHORT-TERM BORROWINGS
(Dollars in thousands)
(A) The notes payable to banks and Nordstrom, Inc. have maturities of up to six months or on demand. Notes payable to holders of commercial paper generally have maturities ranging from one to two months.
(B) Average amount outstanding during the period is computed by dividing the total of daily outstanding principal balances by the number of days in the period.
(C) Average interest rate for the year is computed by dividing the actual short-term interest expense by the average short-term borrowings outstanding.
16 of 16 EXHIBIT INDEX