SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 1, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-416
SEARS, ROEBUCK AND CO.
(Exact name of registrant as specified in its charter)
New York 36-1750680
(State of Incorporation) (I.R.S.Employer Identification No.)
Sears Tower, Chicago, Illinois 60684
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 312/875-2500
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 and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
As of April 30, 1995 the Registrant had 388,430,516 common shares, $.75
par value, outstanding.
<PAGE>
Sears, Roebuck and Co.
Index to Quarterly Report on Form 10-Q
April 1, 1995
Page
Part I - Financial Information.
Item 1. Financial Statements.
Condensed Consolidated Statements of Income (unaudited) -
Three Months Ended April 1, 1995 and April 2, 1994. 1
Condensed Consolidated Balance Sheets (unaudited) -
April 1, 1995, April 2, 1994 and December 31, 1994. 2
Condensed Consolidated Statements of Cash Flows (unaudited) -
Three Months Ended April 1, 1995 and April 2, 1994. 3
Notes to Condensed Consolidated Financial Statements
(unaudited). 4
Independent Certified Public Accountants' Review Report. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 7
Part II - Other Information.
Item 1. Legal Proceedings. 11
Item 4. Submission of Matters to a Vote of Security-Holders. 11
Item 6. Exhibits and Reports on Form 8-K. 11
<PAGE>
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 1, April 2,
1995 1994
(millions, except per common share data)
<S>
Revenues <C> <C>
Merchandise sales and services $ 6,502 $ 6,217
Credit revenues 947 878
Total revenues 7,449 7,095
Costs and expenses
Cost of sales, buying and occupancy 4,896 4,616
Selling and administrative 1,680 1,673
Depreciation and amortization 138 122
Provision for uncollectible accounts 198 179
Interest 336 321
Total costs and expenses 7,248 6,911
Operating income 201 184
Other income 4 15
Income before income taxes 205 199
Income taxes 81 81
Income from continuing operations 124 118
Income (loss) from discontinued operations, less
income taxes expense (benefit) of $151 and $(291) 435 (216)
Net income (loss) $ 559 $ (98)
Income from continuing operations consists of:
Domestic operations $ 139 $ 136
International operations (14) (6)
Corporate (1) (12)
Income from continuing operations $ 124 $ 118
Earnings (loss) per common share, after
allowing for dividends on preferred shares:
Income from continuing operations $ 0.30 $ 0.29
Discontinued operations 1.11 (0.56)
Net income (loss) $ 1.41 $ (0.27)
Cash dividends declared per common share $ 0.40 $ 0.40
Average common and common
equivalent shares outstanding 389.9 386.5
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
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SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(millions) April 1, April 2, Dec. 31,
1995 1994 1994
<S>
Assets
Current assets <C> <C> <C>
Cash and invested cash $ 457 $ 702 $ 548
Retail customer receivables 17,453 15,831 18,201
Other receivables 244 988 321
Inventories 4,178 3,521 4,044
Prepaid expenses and deferred charges 412 436 303
Deferred income taxes 1,057 1,281 998
Total current assets 23,801 22,759 24,415
Property and equipment
Land 374 405 371
Buildings and improvements 3,981 4,324 4,041
Furniture, fixtures and equipment 3,801 3,698 3,777
Capitalized leases 232 232 229
8,388 8,659 8,418
Less accumulated depreciation 4,211 4,373 4,165
Total property and equipment, net 4,177 4,286 4,253
Deferred income taxes 612 624 607
Other assets 798 881 806
Net assets of discontinued operations 8,198 7,552 7,231
Total assets $ 37,586 $ 36,102 $ 37,312
Liabilities
Current liabilities
Short-term borrowings $ 5,582 $ 4,880 $ 6,190
Current portion of long-term debt and
capitalized lease obligations 1,141 2,214 1,141
Accounts payable and other liabilities 5,548 5,384 5,787
Unearned revenues 788 721 795
Total current liabilities 13,059 13,199 13,913
Long-term debt and capitalized lease obligations 9,008 8,617 8,844
Postretirement benefits 2,819 2,738 2,810
Minority interest and other liabilities 902 1,026 944
Total liabilities 25,788 25,580 26,511
Shareholders' Equity
8.88% Preferred Shares, First Series 325 325 325
Series A Mandatorily Exchangeable Preferred Shares - 1,236 1,236
Common shares 321 294 294
Capital in excess of par value 3,606 2,365 2,385
Retained income (note 2) 9,305 7,890 8,918
Treasury stock (at cost) (1,682) (1,699) (1,690)
Deferred ESOP expense (552) (608) (558)
Unrealized net capital gains 635 810 32
Cumulative translation adjustments (160) (91) (141)
Total shareholders' equity 11,798 10,522 10,801
Total liabilities and shareholders' equity $ 37,586 $ 36,102 $ 37,312
Total common shares outstanding (including Series A
Mandatorily Exchangeable Preferred Shares) 388.0 388.0 389.3
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
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SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 1, April 2,
1995 1994
(millions)
<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
<C> <C>
Net income (loss) $ 559 $ (98)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation, amortization and other noncash items 148 153
Provision for uncollectible accounts 198 179
Gain on sales of property and investments - (1)
Change in deferred income taxes (47) 27
Decrease (increase) in retail customer receivables 489 (168)
Increase in merchandise inventories (155) (32)
Increase in other operating assets (31) (66)
Decrease in other operating liabilities (244) (663)
Discontinued operations (435) 216
Net cash provided by (used in) operating activities 482 (453)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment purchases (1) (1)
Proceeds from sales of property and equipment - 1
Purchases of property and equipment (107) (69)
Discontinued operations - net 71 64
Net cash used in investing activities (37) (5)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 427 711
Repayments of long-term debt (242) (644)
Increase (decrease) in short-term borrowings,
primarily 90 days or less (583) 263
Repayments from ESOP 45 69
Common shares issued for employee stock plans 20 16
Dividends paid to shareholders (199) (319)
Net cash provided by (used in) financing activities (532) 96
Effect of exchange rate changes on cash and invested cash (4) (2)
Net decrease in cash and invested cash (91) (364)
Cash and invested cash at December 31, 1994 and 1993 548 1,066
Cash and invested cash at April 1, 1995 and April 2, 1994 $ 457 $ 702
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
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SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Condensed Consolidated Financial Statements
The Condensed Consolidated Balance Sheets as of April 1,
1995 and April 2, 1994 and the related Condensed Consolidated
Statements of Income and Condensed Consolidated Statements of
Cash Flows for the three months then ended are unaudited.
The interim financial statements reflect all adjustments
(consisting only of normal recurring accruals) which are, in
the opinion of management, necessary for a fair statement of
the results for the interim periods presented. The condensed
consolidated financial statements should be read in
conjunction with the consolidated financial statements and
notes thereto included in the Sears, Roebuck and Co. 1994
consolidated financial statements for the three years ended
December 31, 1994 in the Report on Form 8-K dated May 15,
1995. The results of operations for the interim periods
should not be considered indicative of results to be expected
for the full year.
Earnings per common share is computed based on the
weighted average number of common and common equivalent
shares (dilutive stock options) outstanding and after
adjustment for dividends of $7 million for the three months
ended April 1, 1995 and April 2, 1994 on the 8.88% Preferred
Shares. The Series A Mandatorily Exchangeable Preferred
Shares (PERCS) were considered common shares due to their
mandatory exchange into common shares, and the dividends
thereon were not deducted from net income for purposes of
calculating earnings per common share. On March 20, 1995,
the Company exchanged all of the 28.8 million PERCS for 35.7
million common shares of the Company. The exchange did not
dilute earnings per share as the PERCS were reflected in the
Company's earnings per share calculation.
Certain reclassifications have been made in the 1994
financial statements to conform to current accounting
classifications.
2. Dividend Restrictions
Under terms of indentures entered into in 1981 and
thereafter, Sears cannot take specified actions, including
the declaration of cash dividends, which would cause its
consolidated unencumbered assets, as defined, to fall below
150% of its consolidated liabilities, as defined. At April
1, 1995, approximately $9.0 billion could be paid in
dividends to shareholders under the most restrictive
indentures. If the proposed distribution referred to in Note 3
had occurred on April 1, 1995, approximately $1.0 billion
could be paid in dividends.
3. Discontinued Operations
On November 10, 1994, the Company announced its intention
to distribute in a tax-free dividend to the Company's common
shareholders its 80.3% ownership interest in The Allstate
Corporation. The distribution was approved by shareholders
at a special meeting on March 31, 1995, and further
considered by the Company's Board of Directors at their May
1995 meeting. The declaration of the distribution by the
Company's Board of Directors is expected to occur in mid-
1995, but is subject to market conditions, a favorable tax
ruling or opinion on the tax-free nature of the distribution
and certain other conditions.
The Company is also pursuing the divestiture of Homart
Development Co. and affiliated entities. The Company
anticipates that the divestiture will be completed by
December 30, 1995 and no loss is expected to be incurred.
Revenues of the discontinued operations were $5.64 and
$5.29 billion for the three months ended April 1, 1995 and
April 2, 1994, respectively.
<PAGE>
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SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Legal Proceedings
Various legal and governmental proceedings are pending
against the Company, many involving routine litigation
incidental to the businesses. Other matters contain allegations
which are nonroutine and involve compensatory, punitive or
antitrust treble damage claims in very large amounts, as well
as other types of relief.
The consequences of these matters are not presently
determinable but, in the opinion of management, the ultimate
liability in excess of reserves currently recorded will not have
a material effect on the results of operations, financial
position, liquidity or capital resources of the Company, except
for possibly the class action suit described below.
On March 31, 1995, a former employee filed a lawsuit seeking
recovery of purported deficiencies in lump sum pension payouts,
on behalf of himself and a class consisting of each participant
in Sears Pension Plan (the Plan) who received a lump sum pension
payout since January 1, 1986 based on a Pension Benefit Guaranty
Corporation (PBGC) interest rate in effect at the beginning of
the distribution year that was higher than the interest rate in
effect at the time the payout was actually made, which plaintiff
alleges violated the terms of the Plan. The lawsuit also seeks
injunctive relief requiring that future lump sum payouts be made
in accordance with plaintiff's interpretation of the Plan, on
behalf of all Plan participants who may become entitled or
required to receive a lump sum payout at a time when the PBGC
interest rate is lower than the rate in effect at the beginning
of the year in which such payout is made. The Company and the
Plan deny the material allegations of the complaint, assert that
the Plan Administrator has consistently complied with applicable
law in determining the appropriate PBGC interest rates for lump
sum payouts and plan to vigorously contest the claims. Due to
the early stage of development of these proceedings, the
Company's ultimate exposure to loss, if any, cannot presently
be predicted.
<PAGE>
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SEARS, ROEBUCK AND CO.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REVIEW REPORT
To the Shareholders and Board of Directors
of Sears, Roebuck and Co.:
We have reviewed the accompanying Condensed Consolidated Balance
Sheet of Sears, Roebuck and Co. as of April 1, 1995 and April
2, 1994, and the related Condensed Consolidated Statements of
Income and Cash Flows for the quarterly periods then ended.
These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and of making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to such condensed consolidated
financial statements for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the Consolidated Balance Sheet of
Sears, Roebuck and Co. as of December 31, 1994, and the related
Consolidated Statements of Income, Shareholders' Equity, and
Cash Flows for the year then ended (not presented herein); and
in our report dated February 24, 1995 (May 10, 1995 as to Note
4), we expressed an unqualified opinion on those consolidated
financial statements and included an explanatory paragraph
relating to the Company changing its method of accounting for
postretirement benefits in 1992. In our opinion, the
information set forth in the accompanying Condensed Consolidated
Balance Sheet as of December 31, 1994, is fairly stated, in all
material respects, in relation to the Consolidated Balance Sheet
from which it has been derived.
Deloitte & Touche LLP
Chicago, Illinois
May 15, 1995
<PAGE>
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ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 1, 1995 AND APRIL 2, 1994
Operating Results
Consolidated revenues were $7.45 billion for the first
three months of 1995, an increase of 5.0% from the comparable
1994 period. Consolidated revenues consist of revenues from
domestic operations and international operations. Domestic
operations are comprised of domestic merchandising and domestic
credit operations. Domestic merchandising includes the core
merchandising, product services and direct response businesses
in the United States and Puerto Rico. International operations
consists of similar merchandising and credit operations
conducted in Canada through Sears Canada Inc. (Sears Canada),
an indirect 61.1% owned subsidiary, and in Mexico through Sears
Roebuck de Mexico, S.A. de C.V. (Sears Mexico), an indirect
75.2% owned subsidiary.
<TABLE>
<CAPTION>
Revenues Three Months Ended
April 1, April 2,
(millions) 1995 1994 Change
<S>
Domestic operations: <C> <C> <C>
Merchandise sales and services $ 5,882 $ 5,542 6.1 %
Credit 859 795 8.0
Total domestic operations 6,741 6,337 6.4
International operations 708 758 (6.6)
Total revenues $ 7,449 $ 7,095 5.0 %
<CAPTION>
Domestic Merchandise Sales and Services Three Months Ended
April 1, April 2,
(millions, except number of stores) 1995 1994
<S> <C> <C>
Department stores $ 4,620 $ 4,379
Free-standing stores 823 728
Core merchandising revenues 5,443 5,107
Other revenues 439 435
Merchandise sales and services $ 5,882 $ 5,542
Domestic comparable store sales increase 4.2 % 13.0 %
Number of domestic department stores 801 799
Number of domestic free-standing stores 1,176 1,026
Total 1,977 1,825
</TABLE>
Department store revenues grew 5.5% in 1995, which came
on top of a 12.3% increase in 1994. Despite the Easter
holiday shopping season falling in the second quarter this
year versus the first quarter in 1994, the Company continued
to post a solid domestic comparable store sales gain of 4.2%
due in part to several successful promotional programs.
Brand Central and the home improvement business contributed
the greatest share of the revenue growth. The robust growth
trends in these departments have moderated since 1994, but
still remain strong across most merchandise lines. Sales of
apparel merchandise increased 2.8% in the first three months
of 1995, as revenue growth was tempered by the timing of the
Easter holiday and a comparison to a very strong performance
in 1994.
<PAGE>
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ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 1, 1995 AND APRIL 2, 1994
Free-standing store revenues increased 13.1% for the
quarter, on top of the 30.3% increase posted in 1994. Dealer
stores, which are independently owned and operated and focus on
a home-related product assortment, contributed the largest
portion of the free-standing revenue growth, as 93 stores have
been opened since the first quarter of 1994. Free-standing
Homelife furniture stores also experienced strong sales growth,
as 31 new stores have been opened during the past year. Net
openings of free-standing stores during the first quarter of
1995 were as follows:
Dealer Stores 14
Homelife 10
Western Auto 9
Retail Outlet 2
Sears Hardware 1
Total 36
The growth in credit revenues for the first quarter
reflected higher owned receivable balances, which was driven by
the growth in merchandise sales and services over the past year
and a slightly slower customer repayment rate. The percentage
of merchandise sales and services transacted with the Sears Card
increased in the first three months of 1995 due in part to
successful promotional programs.
International revenues decreased 6.6% for the first quarter
primarily due to unfavorable exchange rates. In local currency,
revenues at Sears Mexico were significantly higher as consumers
responded to the recent Mexican peso devaluation by making
purchases before inflationary price increases took effect.
Local currency revenues at Sears Canada declined 0.9%.
Gross margin as a percentage of domestic merchandise sales
and services for the first quarter was 25.3% versus 26.4% in the
comparable prior year period. The decline in domestic gross
margin reflects a very competitive retail environment and a
modest shift in the sales mix toward home-related merchandise,
which have narrower margins. International gross margins
dropped to 19.5% in the first quarter from 20.8% in 1994 due
primarily to lower margins at Sears Canada on lower initial
mark-ups and higher promotional markdowns.
Selling and administrative expense as a percentage of
revenues for domestic operations improved to 22.4% from 23.5%
in 1994. The improvement in the selling and administrative
expense ratio reflects the Company's continued emphasis on
controlling expenses and leveraging its fixed cost base.
International selling and administrative expenses declined to
21.6% from 23.0% in the first quarter of 1994. The improvement
reflects significantly higher expense leveraging at Sears Mexico
on local currency revenue growth and continued cost reductions
at Sears Canada.
Depreciation and amortization expense rose $16 million in
the first quarter of 1995. The increase is attributable to
higher capital expenditures made in 1994 as part of the
Company's store remodeling program.
The provision for uncollectible accounts was $198 million
in the first quarter of 1995 as compared to $179 million in the
comparable 1994 period. The increase is attributable to the
growth in the domestic receivable portfolio and increases in net
write-offs as a result of higher customer delinquencies.
<PAGE>
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ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 1, 1995 AND APRIL 2, 1994
Interest expense increased $15 million to $336 million in
the first three months of 1995 due primarily to the larger
owned-receivable portfolio, which was partially offset by the
elimination of Sears Tower's debt. Total funding costs,
comprised of interest expense and the funding cost of
securitized receivables, increased $1 million as compared to the
prior year to $431 million. The increase was due to a larger
gross receivable portfolio, which was mostly offset by a change
in the funding mix that replaced higher, fixed-rate funding with
lower, floating-rate funding.
Other income declined $11 million for the first three
months of 1995. The decrease was primarily due to a foreign
exchange loss for Sears Mexico from the devaluation of the
Mexican peso.
Income tax expense for the three-month periods of 1995 and
1994 was 39.5% and 40.9% of pretax income, respectively.
Income from continuing operations increased $6 million, or
$0.01 per common share, in the first quarter of 1995 compared
to 1994. Income from discontinued operations for the first
three months of 1995 was $435 million, or $1.11 per common
share, compared to a loss of $216 million, or $0.56 per common
share, in the respective 1994 period. The loss in 1994
reflected catastrophe losses of $495 million, after taxes and
minority interest, from insurance claims related to the
California earthquake.
Holiday buying patterns generally result in the lowest
merchandising sales in the first quarter and the highest
merchandising sales in the fourth quarter. This business
seasonality results in performance for the first quarter which
is not necessarily indicative of performance for the balance of
the year.
Financial Condition
As of April 1, 1995, domestic merchandise inventories on
the first-in, first-out (FIFO) basis were $4.44 billion,
compared with $3.80 billion at April 2, 1994 and $4.28 billion
at December 31, 1994. The increase in the inventory level
reflected the expansion of selling space in the department
stores, the growth of the free-standing store businesses, higher
Brand Central and home improvement inventories, and the timing
of the Easter holiday.
Net cash provided by the Company's operating activities
totaled $482 million for the first three months of 1995,
compared with cash used in operating activities of $453 million
for the same period in 1994. The change was primarily
attributable to a decrease in retail customer receivables and
a change in other operating liabilities. The decrease in retail
customer receivables was associated with the issuance of $827
million in credit account pass-through trust certificates in the
first quarter of 1995. The change in other operating
liabilities was due to the timing of payments in the first
quarter of 1994 related to interest and restructuring items.
Gross domestic retail customer receivables were $21.11
billion at April 1, 1995, compared to $21.33 billion at December
31, 1994. Sears, through its wholly-owned subsidiary, Sears
Receivables Financing Group, Inc., had $4.31 and $3.95 billion
of credit account pass-through trust certificates outstanding
at April 1, 1995 and December 31, 1994, respectively. Sales and
liquidations of outstanding credit account pass-through
certificates increased (decreased) owned receivables by $362 and
($557) million during the three-month periods of 1995 and 1994,
respectively.
<PAGE>
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SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 1, 1995 AND APRIL 2, 1994
Net cash used in investing activities totaled $37 million
for the first three months of 1995 compared to $5 million in
1994. The change in cash was primarily due to higher purchases
of property and equipment due to the Company's store remodeling
program.
Net cash used in financing activities totaled $532 million
for the 1995 three-month period compared to net cash provided
by financing activities of $96 million in 1994. In 1995,
proceeds from securitizations were used to pay down short-term
borrowings. Financing activities in 1994 were primarily short-
term borrowings supporting larger owned receivable balances and
dividends paid to shareholders included an additional dividend
payment due to the timing of the payout.
<PAGE>
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In proceedings entitled In Re: Insurance Antitrust Litigation
(U.S. District Court, N.D. Calif., 1988), Allstate Insurance
Company and a number of other insurers and various related
entities were sued by various states on the grounds that
defendants conspired to reduce the coverage under revised
commercial general liability forms filed with state insurance
regulators by the Insurance Services office, a rating bureau.
On March 29, 1995, the court signed an order approving a
settlement agreement which the court had tentatively approved
in January 1995. An objection period has not yet expired and
there are certain administrative matters that must be completed
before the settlement becomes final.
On March 31, 1995, a former employee filed a lawsuit (Mathews
v. Sears Pension Plan and Sears, Roebuck and Co., United States
District Court for the Northern District of Illinois, Eastern
Division) seeking recovery of purported deficiencies in lump sum
pension payouts, on behalf of himself and a class consisting of
each participant in Sears Pension Plan (the Plan) who received
a lump sum pension payout since January 1, 1986 based on a
Pension Benefit Guaranty Corporation (PBGC) interest rate in
effect at the beginning of the distribution year that was higher
than the interest rate in effect at the time the payout was
actually made, which plaintiff alleges violated the terms of the
Plan. The lawsuit also seeks injunctive relief requiring that
future lump sum payouts be made in accordance with plaintiff's
interpretation of the Plan, on behalf of all Plan participants
who may become entitled or required to receive a lump sum payout
at a time when the PBGC interest rate is lower than the rate in
effect at the beginning of the year in which such payout is
made. The Company and the Plan deny the material allegations
of the complaint, assert that the Plan Administrator has
consistently complied with applicable law in determining the
appropriate PBGC interest rates for lump sum payouts and plan
to vigorously contest the claims. Due to the early stage of
development of these proceedings, the Company's ultimate
exposure to loss, if any, cannot presently be predicted.
Item 4. Submission of Matters to a Vote of Security-Holders.
On March 31, 1995, the Company held a special meeting of
shareholders at the Chicago Historical Society, in Chicago,
Illinois. The purpose of the meeting was to vote on the
proposal recommended by the Board of Directors to approve the
distribution to the Company's common shareholders of the
remaining 360,500,000 shares of common stock of The Allstate
Corporation still owned by the Company. The results of the vote
were as follows:
For Against Abstain Broker-Non Votes
287,615,461 1,927,387 1,502,435 N/A
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
An Exhibit Index has been filed as part of this Report on
Page E-1.
(b) Reports on Form 8-K.
Registrant filed Current Reports dated January 17 and
February 7, 1995 (Items 5 and 7).
<PAGE>
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SIGNATURE
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.
Sears, Roebuck and Co.
(Registrant)
May 15, 1995 By /s/ James A. Blanda
James A. Blanda
Vice President and Controller
(Principal Accounting
Officer and duly authorized
Officer of Registrant)
<PAGE>
E-1
EXHIBIT INDEX
SEARS, ROEBUCK AND CO.
THREE MONTHS ENDED APRIL 1, 1995
Exhibit No.
4. Registrant hereby agrees to furnish the Commission, upon
request, with the instruments defining the rights of holders
of each issue of long-term debt of the Registrant and its
consolidated subsidiaries.
12 (a). Computation of ratio of income to combined fixed charges for
Sears, Roebuck and Co. and consolidated subsidiaries for each
of the five years ended December 31, 1994, and for the three-
and twelve-month periods ended April 1, 1995.
12 (b). Computation of ratio of income to combined fixed charges and
preferred share dividends for Sears, Roebuck and Co. and
consolidated subsidiaries for each of the five years ended
December 31, 1994, and for the three- and twelve-month periods
ended April 1, 1995.
15. Acknowledgement of awareness from Deloitte & Touche LLP,
dated May 15, 1995, concerning unaudited interim financial
information.
<PAGE>
<TABLE>
Exhibit 12. (a)
COMPUTATION OF RATIO OF INCOME TO FIXED CHARGES
SEARS, ROEBUCK AND CO. AND CONSOLIDATED SUBSIDIARIES
<CAPTION>
Twelve Three
Months Months
Ended Ended
April 1, April 1,
1995 1995 Year Ended December 31
(unaudited) (unaudited) 1994 1993 1992 1991 1990
<S> (millions, except ratios)
Fixed Charges
Interest and amortization of debt discount <C> <C> <C> <C> <C> <C> <C>
and expense on all indebtedness $1,294 $336 $1,279 $1,318 $1,389 $1,568 $1,651
Add interest element implicit in rentals 113 28 114 105 165 155 147
1,407 364 1,393 1,423 1,554 1,723 1,798
Interest capitalized 1 1 1 3 23 22 16
Total fixed charges $1,408 $365 $1,394 $1,426 $1,577 $1,745 $1,814
Income (loss)
Income (loss) from continuing operations $863 $124 $857 $625 ($1,812) $160 ($45)
Deduct undistributed net income (loss)
of unconsolidated companies (8) (1) (7) 6 (5) (11) (8)
871 125 864 619 (1,807) 171 (37)
Add
Fixed charges (excluding interest capitalized) 1,407 364 1,393 1,423 1,554 1,723 1,798
Income taxes (benefit) 614 81 614 329 (1,039) 126 (13)
Income (loss) before fixed charges and
income taxes $2,892 $570 $2,871 $2,371 ($1,292) $2,020 $1,748
Ratio of income to fixed charges 2.05 1.56 2.06 1.66 (A) 1.16 0.96
<FN>
(A) As a result of the loss for the year ended December 31, 1992, earnings did not cover fixed charges by $2,869 million.
</FN>
</TABLE>
<PAGE>
<TABLE>
Exhibit 12. (b)
COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDENDS
SEARS, ROEBUCK AND CO. AND CONSOLIDATED SUBSIDIARIES
<CAPTION>
Twelve Three
Months Months
Ended Ended
April 1, April 1,
1995 1995 Year Ended December 31
(unaudited) (unaudited) 1994 1993 1992 1991 1990
<S> (millions, except ratios)
Fixed Charges
Interest and amortization of debt discount <C> <C> <C> <C> <C> <C> <C>
and expense on all indebtedness $1,294 $336 $1,279 $1,318 $1,389 $1,568 $1,651
Add interest element implicit in rentals 113 28 114 105 165 155 147
1,407 364 1,393 1,423 1,554 1,723 1,798
Preferred dividend factor 228 51 234 209 120 7 -
Interest capitalized 1 1 1 3 23 22 16
Total fixed charges $1,636 $416 $1,628 $1,635 $1,697 $1,752 $1,814
Income (loss)
Income (loss) from continuing operations $863 $124 $857 $625 ($1,812) $160 ($45)
Deduct undistributed net income (loss)
of unconsolidated companies (8) (1) (7) 6 (5) (11) (8)
871 125 864 619 (1,807) 171 (37)
Add
Fixed charges (excluding interest capitalized
and preferred dividend factor) 1,407 364 1,393 1,423 1,554 1,723 1,798
Income taxes (benefit) 614 81 614 329 (1,039) 126 (13)
Income (loss) before fixed charges and
income taxes $2,892 $570 $2,871 $2,371 ($1,292) $2,020 $1,748
Ratio of income to combined fixed charges
and preferred share dividends 1.77 1.37 1.76 1.45 (A) 1.15 0.96
<FN>
(A) As a result of the loss for the year ended December 31, 1992, earnings did not cover fixed charges and preferred share
dividends by $2,989 million.
</FN>
</TABLE>
<PAGE>
Exhibit 15
To the Shareholders and Board of Directors
of Sears, Roebuck and Co.:
We have reviewed, in accordance with standards established by the American
Institute of Certified Public Accountants, the unaudited interim financial
information of Sears, Roebuck and Co. for the periods ended April 1, 1995
and April 2, 1994, as indicated in our report dated May 15, 1995; because
we did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended April 1, 1995, is
incorporated by reference in Registration Statement Nos. 2-64879, 2-80037,
33-18081, 33-23793, 33-41485, 33-43459, 33-45479, 33-49992, 33-55825 and
33-58851 of Sears, Roebuck and Co., Registration Statement Nos. 33-51361 and
33-57205 of Sears, Roebuck and Co. and The Savings and Profit Sharing Fund
of Sears Employees and Registration Statement No. 33-44671 of Sears, Roebuck
and Co. and Sears DC Corp.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
Deloitte & Touche LLP
Chicago, Illinois
May 15, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEETS AND
STATEMENTS OF INCOME AND CASH FLOWS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> APR-1-1995
<CASH> 457
<SECURITIES> 0
<RECEIVABLES> 18,247
<ALLOWANCES> 794
<INVENTORY> 4,178
<CURRENT-ASSETS> 23,801
<PP&E> 8,388
<DEPRECIATION> 4,211
<TOTAL-ASSETS> 37,586
<CURRENT-LIABILITIES> 13,059
<BONDS> 9,008
<COMMON> 321
0
325
<OTHER-SE> 11,152
<TOTAL-LIABILITY-AND-EQUITY> 37,586
<SALES> 6,502
<TOTAL-REVENUES> 7,449
<CGS> 4,896
<TOTAL-COSTS> 4,896
<OTHER-EXPENSES> 1,818
<LOSS-PROVISION> 198
<INTEREST-EXPENSE> 336
<INCOME-PRETAX> 205
<INCOME-TAX> 81
<INCOME-CONTINUING> 124
<DISCONTINUED> 435
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 559
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 0<F1>
<FN>
<F1>Not applicable
</FN>
</TABLE>
