UNITED STATES
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 JUNE 29, 1996
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.)
3333 Beverly Road, Hoffman Estates, Illinois 60179
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 847/286-2500
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 July 31, 1996 the Registrant had 391,426,704 common
shares, $.75 par value, outstanding.
<PAGE>
Sears, Roebuck and Co.
Index to Quarterly Report on Form 10-Q
June 29, 1996
Page
Part I - Financial Information.
Item 1. Financial Statements.
Condensed Consolidated Statements of Income (unaudited) -
Three and Six Months Ended June 29, 1996 and July 1, 1995. 1
Condensed Consolidated Balance Sheets -
June 29, 1996 (unaudited), July 1, 1995 (unaudited)
and December 30, 1995. 2
Condensed Consolidated Statements of Cash Flows (unaudited) -
Six Months Ended June 29, 1996 and July 1, 1995. 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 4. Submission of Matters to a Vote of Security-Holders. 11
Item 6. Exhibits and Reports on Form 8-K. 12
<PAGE>
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 29, July 1, June 29, July 1,
(millions, except per 1996 1995 1996 1995
common share data) <C> <C> <C> <C>
<S>
Revenues
Merchandise sales and services $ 8,056 $ 7,303 $ 14,964 $ 13,839
Credit revenues 1,076 923 2,163 1,850
Total revenues 9,132 8,226 17,127 15,689
Costs and expenses
Cost of sales, buying and
occupancy 5,946 5,428 11,195 10,402
Selling and administrative 1,976 1,812 3,726 3,440
Depreciation and amortization 171 139 329 277
Provision for uncollectible
accounts 270 156 508 334
Interest 333 346 687 682
Total costs and expenses 8,696 7,881 16,445 15,135
Operating income 436 345 682 554
Other income 23 15 27 11
Income before income taxes 459 360 709 565
Income taxes 185 142 284 223
Income from continuing operations 274 218 425 342
Income from discontinued operations,
less income tax expense of
$98 and $249 - 341 - 776
Net income $ 274 $ 559 $ 425 $ 1,118
Income from continuing operations
consists of:
Domestic operations $ 288 $ 220 $ 453 $ 358
International operations (14) (2) (28) (16)
Income from continuing operations $ 274 $ 218 $ 425 $ 342
Earnings per common share:
Income from continuing operations,
after allowing for dividends on
preferred shares $ 0.67 $ 0.54 $ 1.03 $ 0.84
Discontinued operations - 0.87 - 1.98
Net income $ 0.67 $ 1.41 $ 1.03 $ 2.82
Cash dividends declared
per common share $ 0.23 $ 0.40 $ 0.46 $ 0.80
Average common and common
equivalent shares outstanding 400.1 392.5 399.8 391.2
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
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<TABLE>
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION> (Unaudited)
June 29, July 1, Dec. 30,
(millions) 1996 1995 1995
<S> <C> <C> <C>
Assets
Current assets
Cash and invested cash $ 514 $ 492 $ 606
Retail customer receivables 19,896 17,662 20,106
Other receivables 358 203 444
Merchandise inventories 4,441 4,206 4,033
Prepaid expenses and deferred
charges 419 465 360
Deferred income taxes 904 1,055 892
Total current assets 26,532 24,083 26,441
Property and equipment
Land 371 367 387
Buildings and improvements 4,616 4,124 4,382
Furniture, fixtures and equipment 4,038 4,011 3,775
Capitalized leases 335 235 313
9,360 8,737 8,857
Less accumulated depreciation 4,081 4,342 3,780
Total property and equipment, net 5,279 4,395 5,077
Deferred income taxes 840 607 879
Other assets 758 796 733
Net assets of discontinued operations - 472 -
Total assets $ 33,409 $ 30,353 $ 33,130
Liabilities
Current liabilities
Short-term borrowings $ 4,252 $ 5,697 $ 5,349
Current portion of long-term debt
and capitalized leases 2,054 1,016 1,730
Accounts payable and other
liabilities 6,220 5,652 6,641
Unearned revenues 940 796 887
Total current liabilities 13,466 13,161 14,607
Long-term debt and capitalized
leases 11,212 9,331 10,044
Postretirement benefits 2,808 2,818 2,825
Minority interest and other
liabilities 1,287 902 1,269
Total liabilities 28,773 26,212 28,745
Shareholders' Equity
8.88% Preferred Shares, First Series 325 325 325
Common shares 323 322 322
Capital in excess of par value 3,624 3,625 3,634
Retained income (note 2) 2,674 1,955 2,444
Treasury stock - at cost (1,619) (1,658) (1,634)
Minimum pension liability (285) - (285)
Deferred ESOP expense (239) (267) (253)
Cumulative translation adjustments (167) (161) (168)
Total shareholders' equity 4,636 4,141 4,385
Total liabilities and
shareholders' equity $ 33,409 $ 30,353 $ 33,130
Total common shares outstanding 392.1 389.4 390.5
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
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<TABLE>
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
June 29, July 1,
(millions) 1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 425 $ 1,118
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, amortization and other noncash items 434 335
Provision for uncollectible accounts 508 334
Gain on sales of property and investments (27) (12)
Change in:
Deferred income taxes 26 (44)
Retail customer receivables (347) 133
Merchandise inventories (406) (169)
Other operating assets (35) (36)
Operating liabilities (351) (223)
Discontinued operations - (777)
Net cash provided by operating activities 227 659
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and investments 45 13
Purchases of property and equipment (550) (370)
Discontinued operations - net - (310)
Net cash used in investing activities (505) (667)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 1,952 923
Repayments of long-term debt (502) (580)
Decrease in short-term borrowings,
primarily 90 days or less (1,098) (475)
Repayment of ESOP note receivable 21 372
Common shares purchased for employee stock plans (92) -
Common shares issued for employee stock plans 100 63
Dividends paid to shareholders (195) (347)
Net cash provided by (used in) financing activities 186 (44)
Effect of exchange rate changes on cash
and invested cash - (4)
Net decrease in cash and invested cash (92) (56)
Cash and invested cash at beginning of year 606 548
Cash and invested cash at June 29, 1996
and July 1, 1995 $ 514 $ 492
<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 June 29, 1996
and July 1, 1995 and the related Condensed Consolidated
Statements of Income for the three and six months then ended and
Condensed Consolidated Statements of Cash Flows for the six
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. 1995 Annual Report to Shareholders and Annual
Report on Form 10-K. 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 and $15 million for the three- and six-month periods
ended June 29, 1996 and July 1, 1995, respectively, on the 8.88%
Preferred Shares.
Certain reclassifications have been made in the 1995 financial
statements to conform with current year presentation.
2. Shareholders' Equity and 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 June 29, 1996,
approximately $1.83 billion could be paid in dividends to
shareholders under the most restrictive indentures.
On March 13, 1996, the Board of Directors approved a common
share repurchase program for the purpose of acquiring shares for
distribution under employee stock-based incentive plans. The
Company plans on acquiring up to 10 million Sears common shares
on the open market over the next two years. Through June 29,
1996, 1.8 million common shares had been acquired under the
repurchase program.
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. On June 20, 1995, the
Company's Board of Directors approved the distribution to Sears
shareholders in a tax-free dividend. Sears shareholders of
record on June 30, 1995 received, effective June 30, 1995,
.927035 share of The Allstate Corporation for each Sears common
share. This transaction resulted in a non-cash dividend to
Sears shareholders totaling $8.98 billion.
In conjunction with the Allstate spin-off, The Savings and
Profit Sharing Fund of Sears Employees, which includes an
Employee Stock Ownership Plan (the ESOP), was split into two
different plans, a plan for employees of the Company and its
affiliates other than Allstate and a plan for Allstate
employees. The ESOP was split with 50% of the unallocated
shares in the ESOP and 50% of the ESOP debt being transferred to
the Allstate plan. In connection with this transfer, Allstate
purchased from the Company 50% of the Company's remaining loan
to the ESOP at a purchase price of $327 million.
<PAGE>
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SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In July 1995, the Company completed the sale of Homart's
commercial office building portfolio to an operating partnership
composed of The Morgan Stanley Real Estate Fund II, L.P. and
Hines Interests Limited Partnership. In December 1995, the
Company completed the sale of the retail shopping center and
community development businesses of Homart to a wholly-owned
subsidiary of General Growth Properties, Inc. No gain or loss
to the Company resulted from these transactions.
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 of the Company
after consulting with legal counsel, the ultimate liability in
excess of reserves currently recorded is not expected to have a
material effect on the results of operations, financial
position, liquidity or capital resources of the Company.
<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
Sheets of Sears, Roebuck and Co. as of June 29, 1996 and July 1,
1995, and the related Condensed Consolidated Statements of
Income for the three and six-month periods ended June 29, 1996
and July 1, 1995, and the Condensed Consolidated Statements of
Cash Flows for the six-month periods ended June 29, 1996 and
July 1, 1995. These financial statements are the responsibility
of the Company's management.
We conducted our reviews 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 reviews, 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 30, 1995, 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 15, 1996, we expressed an
unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying
Condensed Consolidated Balance Sheet as of December 30, 1995, 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
August 13, 1996
<PAGE>
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ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE- AND SIX-MONTH PERIODS ENDED JUNE 29, 1996 AND JULY 1, 1995
Operating Results
Revenues increased 11.0% to $9.1 billion and 9.2% to $17.1
billion for the three- and six-month periods ended June 29,
1996, respectively, from the comparable 1995 periods. Revenues
are generated from domestic operations and international
operations. Domestic operations include department stores,
off-the-mall stores (comprised of Home stores and Automotive
stores), Home Services, Direct Response and Credit. Credit
primarily relates to the Sears Card, the largest proprietary
credit card in the United States. The domestic operations
conduct business in the United States and Puerto Rico.
International operations consist of similar merchandising and
credit operations conducted in Canada through Sears Canada Inc.,
a consolidated, 61.1% owned subsidiary of Sears ("Sears
Canada"), and in Mexico through Sears Roebuck de Mexico, S.A. de
C.V., a consolidated, 75.4% owned subsidiary ("Sears Mexico").
<TABLE>
Revenues Three Months Ended Six Months Ended
<CAPTION>
(millions, except June 29, July 1, June 29, July 1,
number of stores) 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Domestic operations:
Department stores $ 5,099 $ 4,579 11.4% $ 9,415 $ 8,704 8.2%
Off-the-mall stores 1,536 1,311 17.2 2,899 2,506 15.7
Service and other revenues 724 720 0.5 1,333 1,317 1.2
Merchandise sales and services 7,359 6,610 11.3 13,647 12,527 8.9
Credit revenues 996 829 20.1 1,995 1,668 19.6
Total domestic operations 8,355 7,439 12.3 15,642 14,195 10.2
International operations 777 787 (1.3) 1,485 1,494 (0.7)
Total revenues $ 9,132 $ 8,226 11.0% $ 17,127 $ 15,689 9.2%
Domestic comparable store
sales increase 9.4% 3.2% 7.1% 3.7%
Number of domestic department stores 808 801
Number of domestic off-the-mall stores 1,550 1,218
Total 2,358 2,019
</TABLE>
Department store revenues increased 11.4% for the second
quarter, as the Company posted strong comparable store sales
increases across all departments despite the competitive retail
industry environment.
. Apparel revenues gained 14.1% during the second quarter
reflecting the positive response to new spring and summer
merchandise. Women's ready to wear, especially dresses and
junior fashions, men's fashions, and footwear posted mid-teen
sales increases.
. Hardlines merchandise revenues increased 10.6% for the
second quarter and were driven by double-digit gains in home
appliance sales from a year ago. Also, lawn and garden sales
were brisk, up 10.2% for the second quarter.
For the six-month period, department store sales grew 8.2% over
1995 as Apparel achieved an 11.5% increase and Hardlines gained
7.2%.
<PAGE>
-8-
ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE- AND SIX-MONTH PERIODS ENDED JUNE 29, 1996 AND JULY 1, 1995
Off-the-mall store revenues increased 17.2% for the second
quarter, which came on top of a 13.2% gain in 1995.
. Home store revenues increased over 1995 as HomeLife furniture,
Sears Hardware and Sears dealer stores each achieved
double-digit comparable store sales growth in the second
quarter. Home store revenues also benefited from 108 net new
store openings since the second quarter of 1995.
. Automotive stores, consisting of the Sears Tire Group and
Parts Group, also experienced significant revenue growth driven
by strong tire and battery sales at the Sears Tire Group and the
expansion of the Parts Group, which has added over 200 stores
since the second quarter of 1995.
Off-the-mall store revenues increased 15.7% for the six-month
period as compared to 1995 and benefited largely from the
expansion of Home stores and Automotive stores.
Service and other revenues, which are generated by the home
services and direct response businesses, were flat in the second
quarter and first half of 1996 versus the 1995 comparable
periods primarily due to the loss of a licensee.
The approximate 20% growth in domestic credit revenues for the
three- and six- month periods reflected higher owned receivable
balances and the positive impact of uniform pricing. The
increase in owned receivable balances was driven by the
continued growth in merchandise sales and services, and the
Sears Card's dominant market share of credit retail sales
generated in both the department stores and off-the-mall stores.
International revenues for the second quarter of 1996 fell 1.3%
from the same period a year ago. Revenues were flat at Sears
Canada and declined at Sears Mexico reflecting the difficult
local economic conditions and competitive pressures. For the
six-month period, International revenues were $1.5 billion, down
$9 million from prior year.
Gross margin as a percentage of domestic merchandise sales and
services for the second quarter was 26.4% versus 25.8% in the
comparable prior year period. The increase in domestic gross
margin was broad-based across both the department stores and
off-the-mall stores as improved markdown trends, and lower
logistics, occupancy and buying expenses as a percentage of
sales contributed to the 60 basis point improvement. For the
six-month period, 1996 domestic gross margins rose 40 basis
points to 25.5%. International gross margins decreased to 23.7%
in the second quarter from 24.3% in 1995. For the six-month
period, International gross margins fell 60 basis points to
22.0%.
Selling and administrative expense as a percentage of revenues
for domestic operations decreased to 21.3% in the second quarter
of 1996 from 21.8% resulting from the strong growth in
merchandise sales and credit revenue and the Company's continued
emphasis on controlling expenses. For the six-month period, the
selling and administrative rate for domestic operations improved
20 basis points to 21.6%. International selling and
administrative expenses increased to 24.9% from 24.1% in the
second quarter due to restructuring charges recorded for Sears
Canada. On July 23, 1996, Sears Canada announced its intention
to eliminate certain positions and close a warehouse and other
support facilities as part of its ongoing cost containment
initiative. The total restructuring cost is projected to be $30
million (before minority interest), of which $10 million was
recorded in the second quarter. As the restructuring plan is
finalized, the balance will be recorded in the second half of
1996. The restructuring items are projected to generate
annualized pre-tax savings of $35 to $45 million (before
minority interest). For the six-month period, the selling and
administrative expense as a percentage of revenues at
International increased 50 basis points to 23.9%.
<PAGE>
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ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE- AND SIX-MONTH PERIODS ENDED JUNE 29, 1996 AND JULY 1, 1995
Depreciation and amortization expense was $171 million in the
second quarter and $329 million for the six-month period, an
increase of $32 million and $52 million, respectively, from the
comparable 1995 periods. The increase is attributable to higher
capital expenditures as part of the Company's department store
remodeling program and off-the-mall store expansion.
The provision for uncollectible accounts was $270 million in
the second quarter and $508 million for the six-month period as
compared to $156 million and $334 million in the prior year
periods. The increase is attributable to a larger gross
receivable portfolio and an industry-wide trend of increased
bankruptcies and account write-offs. In response to this trend,
the Company has implemented an aggressive action plan designed
to mitigate the increase in write-offs. Components of the
action plan include increases in collection staffing levels and
additional investments in technology.
Interest expense decreased $13 million to $333 million in the
second quarter of 1996 resulting from lower effective funding
rates partially offset by higher funding requirements due to a
larger gross receivable portfolio. For the six-month period,
interest expense increased $5 million to $687 million.
Due to holiday buying patterns, merchandise sales are
traditionally higher in the fourth quarter than other quarterly
periods. As such, a disproportionate share of operating income
is typically earned in the fourth quarter.
Financial Condition
As of June 29, 1996, domestic merchandise inventories on the
first-in, first-out (FIFO) basis were $4.74 billion, compared
with $4.50 billion at July 1, 1995 and $4.32 billion at December
30, 1995. The increase in the inventory levels reflects the
expansion of selling space in the department stores and the
growth of the off-the-mall store businesses.
Net cash provided by the Company's operating activities totaled
$227 million for the first six months of 1996, compared to net
cash provided of $659 million for the same period in 1995. The
decrease in operating cash flow was largely attributable to the
increase in inventory levels and higher owned retail customer
receivables in 1996 as compared to 1995.
Gross domestic retail customer receivables were $24.01 billion
at June 29, 1996, compared to $21.29 billion at July 1, 1995.
Sears, through its wholly-owned subsidiary, Sears Receivables
Financing Group, Inc., had $4.97 and $4.55 billion of credit
account pass-through certificates ("securitized receivables")
outstanding at June 29, 1996 and December 30, 1995,
respectively. The change in the balance of securitized
receivables generated cash of $420 million during the six months
ended June 29, 1996, compared to $415 million during the
comparable 1995 period.
In June 1996, SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities" was issued and is effective for transfers and
servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996. The statement provides
consistent standards for distinguishing transfers
(securitizations) of financial assets that are sales from
transfers that are secured borrowings. The Company is currently
assessing the provisions of Statement No. 125; therefore, no
estimate of it's impact on the future financial results of the
Company is available.
<PAGE>
-10-
ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE- AND SIX-MONTH PERIODS ENDED JUNE 29, 1996 AND JULY 1, 1995
Net cash used in investing activities totaled $505 million for
the first six months of 1996 compared to $667 million in 1995.
The decrease in net cash used resulted from a prior year use
related to discontinued operations offset by higher capital
expenditures in 1996 related to the Company's department store
remodeling program and the expansion of its store base. As part
of its growth strategy, the Company may pursue strategic
acquisitions.
Net cash provided by financing activities totaled $186 million
in the first half of 1996 as compared to net cash used in
financing activities of $44 million in 1995. Financing
activities in 1996 were primarily long-term borrowings to
support the growth in retail customer receivables. The Company
uses proceeds from securitizations to pay down short-term
borrowings. Dividends paid to shareholders in 1995 included the
final dividend payment on the Series A Mandatorily Exchangeable
Preferred Shares ("PERCS(Trade Mark)") which were exchanged into common
shares on March 20, 1995, and a higher common dividend as
compared to 1996. In the first half of 1995, the common share
dividend payment was based on a quarterly payout rate of $0.40
per common share, reflective of the Company's structure prior to
the spin-off of Allstate, as compared to the quarterly dividend
payout rate of $0.23 per common share for the first two quarters
of 1996.
<PAGE>
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders.
On May 9, 1996, the Company held its annual meeting of
shareholders at The Art Institute of Chicago in Chicago,
Illinois.
1) Michael A. Miles, Donald H. Rumsfeld and Dorothy A. Terrell
were elected to Class B of the Board for three year terms
expiring at the 1999 annual meeting of shareholders. Richard C.
Notebaert was elected to Class C of the Board for a term
expiring at the 1997 annual meeting of shareholders. The
shareholders approved the recommendation of the Audit Committee
that Deloitte & Touche LLP be appointed auditors for 1996,
adopted and approved a Non-Employee Director Stock Plan,
approved material terms of the performance goals under the
Annual and Long-Term Incentive Compensation Plans and approved a
proposed amendment to the Restated Certificate of Incorporation
to delete provisions concerning the Company's Series A
Mandatorily Exchangeable Preferred Shares ("PERCS(Trade Mark)"). One
shareholder proposal was voted on and defeated. The vote on
these matters was as follows:
Directors
Name For Withheld
Michael A. Miles 305,823,941 4,571,862
Donald H. Rumsfeld 305,823,941 4,525,597
Dorothy A. Terrell 305,823,941 4,800,861
Richard C. Notebaert 305,823,941 5,603,506
2) Approval of appointment of Deloitte & Touche LLP as
auditors for 1996.
For Against Abstain
308,229,595 1,254,963 1,214,840
3) Non-Employee Director Stock Plan.
For Against Abstain
291,774,461 15,579,103 3,345,834
4) Approval of material terms of the performance goals under
Annual Incentive Compensation Plan.
For Against Abstain
298,730,777 8,634,222 3,334,399
5) Approval of material terms of the performance goals under
Long-Term Incentive Compensation Plan.
For Against Abstain
298,407,459 8,948,580 3,343,359
<PAGE>
-12-
6) Amendment to Restated Certificate of Incorporation to
Delete PERCS.
For Against Abstain
301,297,259 5,060,225 4,341,914
Shareholder Proposals
7) De-classifying the Board of Directors.
For Against Abstain Broker-Non Votes
112,206,319 163,774,242 5,915,166 28,803,671
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.
None.
<PAGE>
-13-
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)
August 13, 1996 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 MONTH PERIOD ENDED JUNE 29, 1996
Exhibit No.
3. Restated Certificate of Incorporation as in effect
on May 13, 1996 (incorporated by reference to Exhibit 3(a)
to Registration Statement No. 33-8141).
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 fixed charges for
Sears, Roebuck and Co. and consolidated subsidiaries
for each of the five years ended December 30, 1995,
and for the six- and twelve-month periods ended
June 29, 1996.
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 30, 1995, and
for the six- and twelve-month periods ended June 29, 1996.
15. Acknowledgment of awareness from Deloitte & Touche LLP,
dated August 13, 1996, concerning unaudited interim
financial information.
27. Financial Data Schedule.
<PAGE>
<TABLE>
EXHIBIT 12(a)
COMPUTATION OF RATIO OF INCOME TO FIXED CHARGES
SEARS, ROEBUCK AND CO. AND CONSOLIDATED SUBSIDIARIES
<CAPTION>
Twelve Six
Months Months
Ended Ended
June 29, June 29, Year Ended
1996 1996
(millions, except ratios) (unaudited) (unaudited) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest and amortization of debt
discount and expense on all indebtedness $1,377 $687 $1,373 $1,279 $1,318 $1,389 $1,568
Add interest element implicit in rentals 101 42 119 114 105 165 155
1,478 729 1,492 1,393 1,423 1,554 1,723
Interest capitalized 4 2 4 1 3 23 22
Total fixed charges $1,482 $731 $1,496 $1,394 $1,426 $1,577 $1,745
Income (loss)
Income (loss) from continuing operations $1,109 $425 $1,025 $857 $625 ($1,812) $160
Deduct undistributed net income (loss)
of unconsolidated companies 19 8 9 (7) 6 (4) (11)
1,090 417 1,016 864 619 ( 1,808) 171
Add
Fixed charges (excluding interest
capitalized) 1,478 729 1,492 1,393 1,423 1,554 1,723
Income taxes (benefit) 763 283 703 614 329 ( 1,039) 126
Income (loss) before fixed charges
and income taxes $3,331 $1,429 $3,211 $2,871 $2,371 ($1,293) $2,020
Ratio of income to fixed charges 2.25 1.96 2.15 2.06 1.66 (A) 1.16
<FN>
(A) As a result of the loss for the year ended December 31, 1992, earnings did not cover fixed charges by $2,870 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 Six
Months Months
Ended Ended
June 29, June 29, Year Ended
1996 1996
(millions, except ratios) (unaudited) (unaudited) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest and amortization of debt
discount and expense on all indebtedness $1,377 $687 $1,373 $1,279 $1,318 $1,389 $1,568
Add interest element implicit in rentals 101 42 119 114 105 165 155
1,478 729 1,492 1,393 1,423 1,554 1,723
Preferred dividend factor 49 24 89 234 209 120 7
Interest capitalized 4 2 4 1 3 23 22
Total fixed charges $1,531 $755 $1,585 $1,628 $1,635 $1,697 $1,752
Income (loss)
Income (loss) from continuing operations $1,109 $425 $1,025 $857 $625 ($1,812) $160
Deduct undistributed net income (loss)
of unconsolidated companies 19 8 9 (7) 6 (4) (11)
1,090 417 1,016 864 619 ( 1,808) 171
Add
Fixed charges (excluding interest
capitalized and preferred dividend factor) 1,478 729 1,492 1,393 1,423 1,554 1,723
Income taxes (benefit) 763 283 703 614 329 ( 1,039) 126
Income (loss) before fixed charges and
income taxes $3,331 $1,429 $3,211 $2,871 $2,371 ($1,293) $2,020
Ratio of income to combined fixed charges
and preferred share dividends 2.18 1.89 2.03 1.76 1.45 (A) 1.15
<FN>
(A) As a result of the loss for the year ended December 31, 1992, earnings did not cover fixed charges by $2,990 million.
</FN>
</TABLE>
<PAGE>
EXHIBIT 15
To the Shareholders and Board of Directors
of Sears, Roebuck and Co.
We have made a review, in accordance with standards established
by the American Institute of Certified Public Accountants, of
the unaudited interim financial information of Sears, Roebuck
and Co. for the three and six-month periods ended June 29, 1996
and July 1, 1995, as indicated in our report dated August 13,
1996; 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
three-month period ended June 29, 1996, is incorporated by
reference in Registration Statement Nos. 2-64879, 2-80037,
33-18081, 33-23793, 33-41485, 33-43459, 33-45479, 33-55825,
33-58851, 33-64215, 33-8141 and 33-64345 of Sears, Roebuck and
Co.; Registration Nos. 33-64215 and 33-9817 of Sears, Roebuck
and Co. and Sears Roebuck Acceptance Corp.; Registration
Statement No. 33-57205 of Sears, Roebuck and Co. and The Savings
and Profit Sharing Fund of Sears Employees; Registration
Statement No. 33-44671 of Sears, Roebuck and Co. and Sears DC
Corp.; and Registration Statement No. 33-64775 of Sears, Roebuck
and Co. and Sears, Roebuck and Co. Deferred Compensation Plan.
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 that Act.
Deloitte & Touche LLP
Chicago, Illinois
August 13, 1996
<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.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 514
<SECURITIES> 0
<RECEIVABLES> 20,746
<ALLOWANCES> 850
<INVENTORY> 4,441
<CURRENT-ASSETS> 26,532
<PP&E> 9,360
<DEPRECIATION> 4,081
<TOTAL-ASSETS> 33,409
<CURRENT-LIABILITIES> 13,466
<BONDS> 11,212
0
325
<COMMON> 323
<OTHER-SE> 3,988
<TOTAL-LIABILITY-AND-EQUITY> 33,409
<SALES> 8,056
<TOTAL-REVENUES> 17,127
<CGS> 11,195
<TOTAL-COSTS> 11,195
<OTHER-EXPENSES> 3,726
<LOSS-PROVISION> 508
<INTEREST-EXPENSE> 687
<INCOME-PRETAX> 709
<INCOME-TAX> 284
<INCOME-CONTINUING> 425
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 425
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 0.00<F1>
<FN>
<F1>Not applicable
</FN>
</TABLE>
