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 APRIL 4, 1998
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 March 31, 1998 the Registrant had 391,052,503 common shares, $.75
par value, outstanding.
<PAGE>
Sears, Roebuck and Co.
Index to Quarterly Report on Form 10-Q
13 Weeks Ended April 4, 1998
Page
Part I - Financial Information.
Item 1. Financial Statements.
Condensed Consolidated Statements of Income (Unaudited) -
13 Weeks Ended April 4, 1998 and March 29, 1997. 1
Condensed Consolidated Balance Sheets -
April 4, 1998 (Unaudited), March 29, 1997 (Unaudited)
and January 3, 1998. 2
Condensed Consolidated Statements of Cash Flows (Unaudited) -
13 Weeks Ended April 4, 1998 and March 29, 1997. 3
Notes to Condensed Consolidated Financial Statements
(Unaudited). 4
Independent Accountants' Review Report. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 8
Part II - Other Information.
Item 1. Legal Proceedings. 14
Item 5. Other Information. 15
Item 6. Exhibits and Reports on Form 8-K. 16
<PAGE>
-1-
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
13 Weeks Ended
April 4, March 29,
(millions, except per share and common 1998 1997
share data)
<S> <C> <C>
Revenues
Merchandise and services $ 7,955 $ 7,543
Credit revenues 1,208 1,189
Total revenues 9,163 8,732
Costs and expenses
Cost of sales, buying and occupancy 6,034 5,691
Selling and administrative 1,929 1,896
Depreciation and amortization 208 182
Provision for uncollectible accounts 394 254
Interest 376 352
Total costs and expenses 8,941 8,375
Operating income 222 357
Other income (loss) 6 (11)
Income before income taxes and minority interest 228 346
Income taxes 92 165
Minority interest (3) 1
Net income $ 133 $ 182
Net income (loss) consists of:
Domestic operations $ 133 $ 227
International operations -- (45)
Net income $ 133 $ 182
Earnings per share:
Basic $ 0.34 $ 0.46
Diluted $ 0.34 $ 0.46
Cash dividends declared per share $ 0.23 $ 0.23
Average common and common equivalent
shares outstanding 394.5 398.6
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
-2-
<TABLE>
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Unaudited)
(millions) April 4, March 29, Jan. 3,
1998 1997 1998
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 344 $ 248 $ 358
Retained interest in transferred credit
card receivables 3,113 2,138 3,316
Credit card receivables, net 18,962 18,921 19,843
Other receivables 403 355 335
Merchandise inventories 5,465 4,939 5,044
Prepaid expenses and deferred charges 568 414 518
Deferred income taxes 773 856 830
Total current assets 29,628 27,871 30,244
Property and equipment, net 6,391 5,777 6,414
Deferred income taxes 659 901 666
Other assets 1,376 1,080 1,376
Total assets $ 38,054 $ 35,629 $ 38,700
Liabilities
Current liabilities
Short-term borrowings $ 4,095 $ 3,693 $ 5,208
Current portion of long-term debt and
capitalized leases 2,723 2,349 2,561
Accounts payable and other liabilities 6,009 6,610 6,637
Unearned revenues 828 885 830
Other taxes 393 465 554
Total current liabilities 14,048 14,002 15,790
Long-term debt and capitalized leases 14,161 12,401 13,071
Postretirement benefits 2,516 2,715 2,564
Minority interest and other liabilities 1,418 1,369 1,413
Total liabilities 32,143 30,487 32,838
Commitments and Contingent Liabilities (note 5)
Shareholders' Equity
Common shares 323 323 323
Capital in excess of par value 3,593 3,611 3,598
Retained income (note 2) 4,201 3,422 4,158
Treasury stock - at cost (1,699) (1,632) (1,702)
Minimum pension liability (217) (277) (217)
Deferred ESOP expense (198) (225) (204)
Cumulative translation adjustments (92) (80) (94)
Total shareholders' equity 5,911 5,142 5,862
Total liabilities and shareholders'
equity $ 38,054 $ 35,629 $ 38,700
Total common shares outstanding 391.1 392.0 390.9
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
-3-
<TABLE>
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
13 Weeks Ended
April 4, March 29,
(millions) 1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 133 $ 182
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, amortization and other noncash items 226 196
Provision for uncollectible accounts 394 254
Loss (gain) on sales of property and investments (6) 32
Change in (net of acquisitions):
Deferred income taxes 63 44
Retained interest in transferred credit
card receivables 203 123
Credit card receivables 484 (39)
Merchandise inventories (419) (357)
Other operating assets (117) (79)
Other operating liabilities (739) (622)
Net cash provided by (used in) operating activities 222 (266)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired -- (115)
Proceeds from sales of property and investments 7 6
Purchases of property and equipment (285) (159)
Net cash used in investing activities (278) (268)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 1,782 725
Repayments of long-term debt (558) (866)
Increase (decrease) in short-term borrowings,
primarily 90 days or less (1,113) 319
Repayments of ESOP note receivable 23 16
Common shares purchased for employee stock plans (24) (14)
Common shares issued for employee stock plans 22 30
Dividends paid to shareholders (90) (88)
Net cash provided by financing activities 42 122
Net decrease in cash and cash equivalents (14) (412)
Balance at beginning of year 358 660
Balance at end of period $ 344 $ 248
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
-4-
SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Condensed Consolidated Financial Statements
The Condensed Consolidated Balance Sheets as of April 4, 1998 and March
29, 1997 and the related Condensed Consolidated Statements of Income and
Condensed Consolidated Statements of Cash Flows for the 13 weeks 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. 1997
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.
Certain reclassifications have been made in the 1997 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 April 4, 1998
approximately $3.5 billion could be paid in dividends to shareholders under
the most restrictive indentures.
On February 3, 1998 the Board of Directors extended for an additional two
years the common share repurchase program which is used to acquire shares
for distribution in connection with the expected exercise of stock options,
the grant of restricted shares and the exchange of deferred shares under
the Company's stock plans. The program authorizes the Company to acquire
up to 20 million Sears common shares on the open market. Through April 4,
1998 7.4 million common shares had been acquired under the repurchase
program.
3. Earnings Per Share
The following table sets forth the computations of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
13 Weeks Ended
(millions, except per share data) April 4, March 29,
1998 1997
<S> <C> <C>
Basic:
Net income $ 133 $ 182
Average shares outstanding 390.9 391.7
Earnings per share -basic $ 0.34 $ 0.46
Diluted:
Net income $ 133 $ 182
Average shares outstanding 390.9 391.7
Dilutive stock options 3.6 6.9
Average shares and equivalent
shares outstanding 394.5 398.6
Earnings per share -diluted $ 0.34 $ 0.46
</TABLE>
<PAGE>
-5-
SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Options to purchase 3.8 million and .1 million shares of stock at prices
ranging from $52 to $64 and $53 to $57 per share were outstanding at
April 4, 1998 and March 29, 1997, respectively, but were not included
in the computation of diluted earnings per share because they would have
been antidilutive.
4. Effect of New Accounting Standards and Statements
Effective January 4, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income."
This statement requires that the Company report the change in its net
assets during the period from nonowner sources. For the 13 weeks ended
April 4, 1998, components of other comprehensive loss include foreign
currency translation adjustments related to Sears Canada. For the 13 weeks
ended March 29, 1997, components of other comprehensive income primarily
related to the foreign currency translation adjustment recognized on the
sale of Sears Mexico.
<TABLE>
<CAPTION>
13 Weeks Ended
(millions) April 4, March 29,
1998 1997
<S> <C> <C>
Net income $ 133 $ 182
Other comprehensive income (loss) (2) 84
Total comprehensive income $ 131 $ 266
</TABLE>
Effective January 4, 1998, the Company adopted AICPA Statement of Position
(SOP) 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." SOP 98-1 requires certain software development
costs to be capitalized. Generally, once the capitalization criteria of
the SOP have been met, external direct costs of materials and services
used in development of internal-use software, payroll and payroll related
costs for employees directly involved in the development of internal-use
software, and interest costs incurred when developing software for internal
use are to be capitalized. The adoption of this SOP did not have a
material effect on the Company's consolidated financial position, results
of operations or cash flows in the first quarter of 1998.
In February 1998 the Financial Accounting Standards Board (FASB) issued
SFAS No. 132, "Employers Disclosures about Pensions and Other Postretirement
Benefits", which is effective for fiscal years beginning after December 15,
1997. The new statement will change disclosure requirements related to
pension and other postretirement benefit obligations. The new statement
will be implemented in 1998 and will not impact the Company's consolidated
financial position, results of operations or cash flows. The effect of the
new statement will be limited to the form and content of disclosures.
<PAGE>
-6-
SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Legal Proceedings
On June 3, 1997, the Company entered into a settlement of the consolidated
debtor class action lawsuits filed in the United States Bankruptcy and
District Courts for the District of Massachusetts by certain current and
former credit card holders of the Company who had declared personal
bankruptcy (the "Settlement"). These lawsuits alleged that the Company
had violated the United States Bankruptcy Code and consumer protection laws
in various states through activities related to certain debt reaffirmation
agreements. A federal civil and criminal investigation of these matters
is ongoing.
As previously reported, the Company has reached an agreement in principle
to settle six purported shareholders' derivative actions filed on behalf
of the Company against its directors and certain of its officers, alleging
breach of fiduciary duty for failing to prevent the improper handling of
certain of the Company's debt reaffirmation agreements. On May 7, 1998,
the court approved the settlement, which is conditioned upon satisfactory
resolution of the securities class action lawsuits referred to below.
On October 9, 1997, the Company reached an agreement in principle to
settle several consolidated securities class action lawsuits against the
Company and one of its officers in the United States District Court for
the Northern District of Illinois. The amended consolidated complaint
alleges violations of the Securities Exchange Act of 1934 for failure to
disclose the bankruptcy collection practices described above in periodic
filings with the Securities and Exchange Commission prior to April 10,
1997. The settlement agreement is subject to court approval at a hearing
which has been set for August 6, 1998.
The Company recorded a pretax charge of $475 million ($320 million on an
after-tax basis) in the second quarter of 1997 for the estimated cost of
the matters referred to above, including other related expenses. This
estimate is based on management's assumptions as to the ultimate outcome
of future events and actual results could differ from this estimate. As
such, it is possible that additional costs relating to the civil and
criminal investigation referred to above could be incurred. However,
management believes that its current reserves adequately provide for the
costs relating to the matters referred to above and does not expect such
costs to have a material effect on the annual results of operations,
financial position, liquidity or capital resources of the Company.
The Company is subject to various other legal and governmental proceedings
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 annual results of operations, financial position,
liquidity or capital resources of the Company.
<PAGE>
-7-
SEARS, ROEBUCK AND CO.
INDEPENDENT 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 April 4, 1998 and March 29, 1997, and the
related Condensed Consolidated Statements of Income for the 13-week periods
ended April 4, 1998 and March 29, 1997, and the Condensed Consolidated
Statements of Cash Flows for the 13-week periods ended April 4, 1998 and
March 29, 1997. 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 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
January 3, 1998, 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 20, 1998, 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 January 3, 1998, 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 13, 1998
<PAGE>
-8-
ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
13 WEEKS ENDED APRIL 4, 1998 AND MARCH 29, 1997
Operating Results
Domestic operations include the Company's operations in the United States and
Puerto Rico. Domestic operations are comprised of:
Retail - consisting of: Credit - which manages Sears Card
- Full-line Stores operations.
- Specialty stores (Home Stores
and Auto Stores) Corporate - administrative acitivities
of a holding company
Services - consisting of: nature, the cost of which
- Home Services are not allocated to the
- Direct Response Marketing Company's businesses.
International operations consist of similar retail, services and credit
operations conducted in Canada through Sears Canada, Inc. ("Sears Canada"), a
54.8% owned consolidated subsidiary. International operations were also
conducted through Sears, Roebuck de Mexico, S.A. de C.V. ("Sears Mexico"), a
previously 75.5% owned subsidiary until March 29, 1997. At that time, the
Company sold 60% of the outstanding shares of Sears Mexico to Grupo Carso S.A.
de C.V. Thereafter, Sears Mexico's results are no longer included in the
Company's consolidated operations.
For the 13 weeks ended April 4, 1998, net income declined 26.6% to $133
million, or $0.34 per share, from $182 million, or $0.46 per share for
the comparable prior year period. Consistent with Company expectations, the
decline in net income was primarily due to the increase in the provision for
uncollectible accounts over the prior-year period. The domestic retail
business performance was also below prior year because of the shift of the
Easter holiday selling season to the second quarter and increased clearance
markdowns. Partially offsetting these declines was a strong performance by
the services businesses coupled with a favorable comparison to prior year
within the international segment. The first quarter of 1998 includes the
positive impact of $0.06 per share due to SFAS No. 125 accounting. The first
quarter of 1997 included the positive impact of $0.10 per share due to SFAS
No. 125, which was offset by a $0.09 per share loss from the sale of the
Company's controlling interest in Sears Mexico.
Due to holiday buying patterns, merchandise sales are traditionally higher
in the fourth quarter than other quarterly periods and a disproportionate
share of operating income is typically earned in the fourth quarter.
Similarly, traditional business patterns generally result in the lowest sales
and operating income in the first quarter.
<PAGE>
-9-
ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
13 WEEKS ENDED APRIL 4, 1998 AND MARCH 29, 1997
Domestic Operations
Merchandise and services revenues increased 6.3% to $7.3 billion for the 13
weeks ended April 4, 1998 from the comparable 1997 period. Merchandise and
services revenues and related information are as follows:
<TABLE>
<CAPTION>
13 Weeks Ended
(millions, except number of stores) April 4, March 29,
1998 1997 Change
<S> <C> <C> <C>
Revenues:
Full-line Stores $ 4,936 $ 4,586 7.6%
Specialty stores 1,669 1,635 2.1
Total retail 6,605 6,221 6.2
Services 692 640 8.1
Merchandise and services $ 7,297 $ 6,861 6.3%
Number of Full-line Stores 834 823
Number of specialty stores 2,726 2,558
Total retail stores 3,560 3,381
Comparable store sales percentage
increase 4.9% 2.5%
</TABLE>
Full-line Stores revenues increased 7.6% over first quarter 1997.
Apparel revenues gained 5.4% during the first quarter after a 16.9% gain
in 1997. Women's ready to wear, especially sportswear and special sizes,
as well as home fashions, fine jewelry and footwear posted strong sales
increases. Children's and men's apparel sales were even in the first
quarter compared with the prior year.
Hardlines revenues, comprised of Home Electronics, Home Appliances, and
Home Improvement merchandise sales, increased 8.4% for the first quarter
with gains in Home Appliances and Home Electronics. Home Improvement
sales were approximately even with the prior year.
Specialty stores revenues increased 2.1% over first quarter 1997.
Home Stores revenues increased 16.3% over 1997 due to the addition of new
stores and strong comparable store sales increases. Hardware and Sears
Dealer stores had solid revenue increases from a year ago benefiting from
136 net new store openings. HomeLife furniture stores revenues increased
slightly despite having five fewer stores than a year ago.
Auto Stores, consisting of the Sears Tire Group and Parts Group, experienced
a 9.1% decline in revenue from 1997 as the Sears Tire Group experienced weak
comparable store sales and the Parts Group revenue decreased primarily as a
result of a change in store format. The new Parts America format sells
automotive merchandise and no longer provides repair services.
<PAGE>
-10-
ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
13 WEEKS ENDED APRIL 4, 1998 AND MARCH 29, 1997
Services revenues, which are generated by the Home Services and Direct
Response Marketing businesses, were up 8.1% in the first quarter of 1998
versus the 1997 comparable period primarily due to strong revenue gains by
Home Services on increased service contract sales and growth in major home
improvement services.
Domestic credit revenues for the 13 weeks ended April 4, 1998 were $1.1
billion, an increase of 2.8% from the prior year period. A summary of credit
information (for the managed portfolio) is as follows:
<TABLE>
<CAPTION>
13 Weeks Ended
April 4, March 29,
1998 1997
<S> <C> <C>
Sears Card as a % of sales 53.2% 55.5%
Average account balance (dollars) $ 1,071 $ 1,020
Average managed credit card receivables (millions) $ 28,425 $ 26,815
</TABLE>
The percentage of merchandise sales and services transacted with the Sears
Card in the first quarter of 1998 declined to 53.2% compared to 55.5% a year
ago due primarily to fewer new accounts.
Gross margin as a percentage of domestic merchandise and services revenues
for the first quarter was 24.2% versus 24.6% in the comparable prior year
period. The improved services gross margin was more than offset by the
decline in retail gross margin due to the later Easter holiday selling season
and increased clearance markdowns.
Selling and administrative expense as a percentage of total revenues for
domestic operations improved to 20.9% in the first quarter of 1998 from 21.6%
in the comparable prior year period. The improvement was primarily due to the
leveraging of employee-related costs and marketing expense.
The domestic provision for uncollectible accounts and related information
is as follows:
<TABLE>
<CAPTION>
13 Weeks Ended
(millions) April 4, March 29,
1998 1997
<S> <C> <C>
Provision for uncollectible accounts $ 387 $ 242
Net credit charge-offs as a percentage of
average managed credit card receivables 8.12% 4.97%
Allowance for uncollectible credit card
receivables $ 1,091 $ 773
Delinquency rates (as of Apr. 4, 1998 and
Mar. 29, 1997) 6.97% 5.61%
</TABLE>
The provision for uncollectible accounts was $387 million in the first quarter,
a 59.6% increase from the same period last year. The increase was primarily
attributable to the higher delinquency and charge-off rates of the credit card
portfolio in the first quarter of 1998 versus the prior-year first quarter. If
the Company's current level of delinquency and charge-off rates continues, the
Company will face difficult year-over-year comparisons in the second and third
quarters of 1998.
<PAGE>
-11-
ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
13 WEEKS ENDED APRIL 4, 1998 AND MARCH 29, 1997
Domestic operations depreciation and amortization expense was $192 million in
the first quarter, an increase of $27 million from the comparable 1997 period.
The increase reflects the continuation of the Full-line Stores remodeling
program and the growth in the number of specialty stores in operation.
Interest expense, as presented on the statements of income, is combined with
the funding costs on receivables sold through securitizations to represent
total funding costs as follows:
<TABLE>
<CAPTION>
13 Weeks Ended
(millions) April 4, March 29,
1998 1997
<S> <C> <C>
Interest expense $ 349 $ 311
Funding cost on securitized receivables (1) 106 108
Total funding costs $ 455 $ 419
% of revenues 5.4% 5.3%
<FN>
(1) Funding cost on securitized receivables represents the interest paid
on securitized receivables and is presented as a reduction of credit
revenues in the statements of income at the time receivables are sold.
</FN>
</TABLE>
Total domestic funding costs as a percentage of revenues were 5.4% in 1998
compared to 5.3% in 1997. The increase in funding costs reflects higher
funding requirements due to a larger managed credit card receivables
portfolio, partially offset by lower effective funding rates.
Operating income in the first quarter of 1998 declined 41.4% from the
comparable 1997 period primarily due to the decline in credit and retail
results, partially offset by improved services results.
Operating income by business format is as follows:
<TABLE>
<CAPTION>
13 Weeks Ended
(millions) April 4, March 29,
1998 1997
<S> <C> <C>
Retail $ (60) $ (29)
Services 80 67
Credit 252 382
Corporate (60) (58)
Total domestic operating income $ 212 $ 362
</TABLE>
<PAGE>
-12-
ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
13 WEEKS ENDED APRIL 4, 1998 AND MARCH 29, 1997
International Operations
International operations in 1998 include only the Company's 54.8% interest in
Sears Canada. In the first quarter of 1997, the Company sold 60% of the
outstanding shares of Sears Mexico to Grupo Carso S.A. de C.V. The
transaction reduced the Company's ownership in Sears Mexico to 15.5 percent.
Proceeds from the sale were $103 million and resulted in a loss of $21 million
which was recorded in the consolidated statements of income as other income
(loss). Additionally, tax expense of $15 million was recorded which resulted
in a net after-tax loss of $36 million. Excluding the impact of this
transaction, the Company's first quarter 1997 consolidated effective tax rate
would have been 40.7% versus 47.4% as reported.
International revenues for the first quarter of 1998 decreased 4.6% from the
same period a year ago as revenues from Sears Mexico are no longer included.
Revenues improved 9.7% at Sears Canada due to the strong retail and catalog
sales performance.
Gross margins as a percentage of merchandise and services revenues decreased
to 23.5% in the first quarter from 23.6% in 1997. Sears Canada gross margin
rates declined 20 basis points in 1998 reflecting higher retail promotional
markdowns compared to the prior year.
Selling and administrative expense as a percentage of total revenues decreased
to 22.4% in 1998 from 23.2% in the first quarter of 1997. The improvement was
primarily due to leveraging employee-related costs and marketing expense.
Financial Condition
The consolidated owned net credit card receivables balance of $18.96 billion
excludes credit card receivables transferred to a securitization Master Trust
as follows:
<TABLE>
<CAPTION>
(millions) April 4, March 29, January 3,
1998 1997 1998
<S> <C> <C> <C>
Domestic:
Managed credit card receivables $ 27,875 $ 26,562 $ 28,945
Securitized balances sold (6,255) (6,248) (6,404)
Retained interest in transferred
credit card receivables (3,113) (2,138) (3,316)
Other customer receivables 189 188 161
Domestic owned credit card
receivables 18,696 18,364 19,386
International credit card receivables 1,393 1,363 1,570
Consolidated credit card receivables $ 20,089 $ 19,727 $ 20,956
Less: Allowance for uncollectible
accounts 1,127 806 1,113
Credit card receivables, net $ 18,962 $ 18,921 $ 19,843
</TABLE>
Consolidated credit card receivables (before allowance for uncollectible
accounts) increased $362 million in 1998 compared with first quarter 1997.
The increase is primarily from higher sales volume in the retail stores. As
compared to 1997 year-end, consolidated credit card receivables (before
allowance for uncollectible accounts) decreased $867 million due to the normal
seasonal nature of the retail industry.
<PAGE>
-13-
ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
13 WEEKS ENDED APRIL 4, 1998 AND MARCH 29, 1997
As of April 4, 1998, consolidated merchandise inventories on the first-in,
first-out (FIFO) basis were $6.19 billion, compared with $5.68 billion at
March 29, 1997 and $5.76 billion at January 3, 1998. The increase in the
inventory levels reflects the additional inventory to support higher sales
volume and the addition of new Full-line and specialty stores.
Total property and equipment, net of accumulated depreciation, was $6.39
billion at April 4, 1998 compared with $5.78 billion a year earlier. The
increase is primarily due to the net addition of 11 Full-line Stores and 168
specialty stores.
Total net funding for the Company at April 4, 1998 was $27.23 billion compared
with $24.69 billion a year earlier and was used primarily to fund the managed
credit card receivables portfolio. Net funding includes debt recorded on the
balance sheet and investor certificates related to credit card receivables
sold through securitizations as follows:
<TABLE>
<CAPTION>
(millions) April 4, March 29, January 3,
1998 1997 1998
<S> <C> <C> <C>
Short-term borrowings $ 4,095 $ 3,693 $ 5,208
Long-term debt and capitalized
lease obligations 16,884 14,750 15,632
Securitized balances sold 6,255 6,248 6,404
Total funding $ 27,234 $ 24,691 $ 27,244
</TABLE>
<PAGE>
-14-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On June 3, 1997, the Company entered into a settlement of the consolidated
debtor class action lawsuits filed in the United States Bankruptcy and
District Courts for the District of Massachusetts by certain current and
former credit card holders of the Company who had declared personal
bankruptcy (the "Settlement"). These lawsuits alleged that the Company
had violated the United States Bankruptcy Code and consumer protection laws
in various states through activities related to certain debt reaffirmation
agreements. A federal civil and criminal investigation of these matters
is ongoing.
As previously reported, the Company has reached an agreement in principle
to settle six purported shareholders' derivative actions filed on behalf
of the Company against its directors and certain of its officers, alleging
breach of fiduciary duty for failing to prevent the improper handling of
certain of the Company's debt reaffirmation agreements. On May 7, 1998,
the court approved the settlement, which is conditioned upon satisfactory
resolution of the securities class action lawsuits referred to below.
On October 9, 1997, the Company reached an agreement in principle to
settle several consolidated securities class action lawsuits against the
Company and one of its officers in the United States District Court for
the Northern District of Illinois. The amended consolidated complaint
alleges violations of the Securities Exchange Act of 1934 for failure to
disclose the bankruptcy collection practices described above in periodic
filings with the Securities and Exchange Commission prior to April 10,
1997. The settlement agreement is subject to court approval at a hearing
which has been set for August 6, 1998.
The Company recorded a pretax charge of $475 million ($320 million on an
after-tax basis) in the second quarter of 1997 for the estimated cost of
the matters referred to above, including other related expenses. This
estimate is based on management's assumptions as to the ultimate outcome
of future events and actual results could differ from this estimate. As
such, it is possible that additional costs relating to the civil and
criminal investigation referred to above could be incurred. However,
management believes that its current reserves adequately provide for the
costs relating to the matters referred to above and does not expect such
costs to have a material effect on the annual results of operations,
financial position, liquidity or capital resources of the Company.
The Company is subject to various other legal and governmental proceedings
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 annual results of operations, financial position,
liquidity or capital resources of the Company.
<PAGE>
-15-
PART II. OTHER INFORMATION
Item 5. Other Information
The following discussion and analysis of the Company's conversion to a new
credit card receivables processing system contains forward-looking statements
that involve risks and uncertainties. The actual timing and effects of this
conversion could differ materially from those anticipated in the forward-
looking statements as a result of certain factors including, but not limited
to, operational and logistical developments with respect to the conversion
and changes in social and economic factors and credit policies that affect
delinquencies, charge-offs and customer payment behaviors. In addition,
numerous other social and economic factors and credit policies may also
affect delinquency and charge-off levels following the conversion.
In May 1998, the Company entered into an agreement with Total System Services,
Inc. to provide certain processing services related to the Company's domestic
credit card receivables portfolio. The new system will enable the Company
to enhance its customer relationships and to improve service suport of the
Company's multiple business formats. The Company currently plans to convert
to the new processing system in three phases, beginning with the first phase
in late 1998, and ending with the last phase ending in the second quarter of
1999. The new processing system will also enable the Company to change its
methodology for aging and charging off accounts. The new aging methodology
will differ from that used currently by the Company in that it will determine
delinquency levels based on the number of billing cycles that have commenced
since the customer failed to make a required payment. Under the Company's
current credit system, an account is generally considered delinquent when the
past due balance is three times the scheduled minimum monthly payment. As a
result, certain accounts generally will be considered delinquent earlier and
charged off sooner than is currently the case. These changes will reflect a
reclassification of account status rather than a change in actual performance
of the accounts.
To assess the potential effect of the new aging methodology, the Company used
historical account activity for a 10% random sample of accounts to simulate
the differences between the current methodology and the new methodolgy.
Under the simulations, delinquencies as a percentage of managed receivables
at the conversion date were approximately 275 to 300 basis points higher than
under the Company's current methodology. After a transition period of
approximately eight months, the change in delinquency levels decreased to
approximately 200 basis points above the levels reported under the current
methodology. Based on the simulations, the Company believes that delinquency
trends over the past three years would have been consistent under either aging
methodology.
The simulations also modeled the gross charge-offs that would have been
reported under the new methodology based upon the actual transaction activity
of the 10% sample of accounts. Under the simulation, using historical account
activity, the percentage of account balances charged off as uncollectible
increased in the range of 75 to 100 basis points during the eight-month
period after the conversion date. This increase then declined over the next
four months. An increase in gross charge-off levels in the range of 15 to 25
basis points remained after a twelve month period. The actual effect of the
new aging methodology on charge-offs cannot be predicted with precision, and
may be offset in part by benefits of earlier collection efforts due to an
earlier recognition of delinquencies, and improved authorization and line
management strategies. In addition, this accelertion of charge-offs reflects
a timing change rather than a change in account performance; accordingly, the
Company believes that the current allowance for uncollectible accounts
remains appropriate.
The Company believes that the change in aging methodology and the resultant
change in delinquency and charge-off levels will not have a material effect
on the results of operations, financial position, liquidity or capital
resources of the Company.
<PAGE>
-16-
PART II. OTHER INFORMATION
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 on Form 8-K dated January 22,
1998 and February 18, 1998 (Item 5).
<PAGE>
-17-
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 14, 1998 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.
13 WEEKS ENDED APRIL 4, 1998
Exhibit No.
3(a). Restated Certificate of Incorporation as in effect on May 13, 1996
(incorporated by reference to Exhibit 3(a) to Registrant's
Statement No. 333-8141).
3(b.) By-laws, as amended to February 3, 1998 (incorporated by reference
to Exhibit 3.(ii) to the Registrants Annual Report on Form 10-K
for the year ended January 3, 1998).
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.
10. Description of Registrant's Non-Employee Director Life Insurance
Plan (incorporated by reference to the first paragraph on page 10
of the Registrant's proxy statement dated March 26, 1998).
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 January 3, 1998 and for the three- and twelve-
month periods ended April 4, 1998.
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 four years: 1996, 1995,
1994, and 1993.
15. Acknowledgment of awareness from Deloitte & Touche LLP, dated
May 13, 1998, concerning unaudited interim financial information.
27(a). Financial Data Schedule.
27(b). Restated Financial Data Schedules.
27(c). Restated Financial Data Schedules.
<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 4, April 4,
1998 1998
(millions, except ratios) (unaudited) (unaudited) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest and amortization of debt
discount and expense on all
indebtedness $1,433 $ 376 $1,409 $1,365 $1,373 $1,279 $1,318
Add interest element implicit in rentals 147 38 147 121 119 114 105
1,580 414 1,556 1,486 1,492 1,393 1,423
Interest Capitalized 4 1 3 5 4 1 3
Total fixed charges $1,584 $ 415 $1,559 $1,491 $1,496 $1,394 $1,426
Income
Income from continuing operations $1,139 $ 133 $1,188 $1,271 $1,025 $ 857 $ 625
Deduct undistributed net income
of unconsolidated companies 7 2 13 8 9 (7) 6
1,132 131 1,175 1,263 1,016 864 619
Add
Fixed charges (excluding interest
capitalized) 1,580 414 1,556 1,486 1,492 1,393 1,423
Income taxes 839 92 912 834 703 614 329
Income before fixed charges and
income taxes $3,552 $ 637 $3,643 $3,583 $3,211 $2,871 $2,371
Ratio of income to fixed charges 2.24 1.54 2.34 2.40 2.15 2.06 1.66
</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>
Year Ended
(millions, except ratios) 1996 1995 1994 1993
<S> <C> <C> <C> <C>
Fixed Charges
Interest and amortization of debt discount
and expense on all indebtedness $1,365 $1,373 $1,279 $1,318
Add interest element implicit in rentals 121 119 114 105
1,486 1,492 1,393 1,423
Preferred dividend factor 41 89 234 209
Interest capitalized 5 4 1 3
Total fixed charges $1,532 $1,585 $1,628 $1,635
Income
Income from continuing operations $1,271 $1,025 $ 857 $ 625
Deduct undistributed net income
of unconsolidated companies 8 9 (7) 6
1,263 1,016 864 619
Add
Fixed charges (excluding interest capitalized
and preferred dividend factor) 1,486 1,492 1,393 1,423
Income taxes 834 703 614 329
Income before fixed charges and income taxes $3,583 $3,211 $2,871 $2,371
Ratio of income to combined fixed charges
and preferred share dividends 2.34 2.03 1.76 1.45
<FN>
(A) In 1996, all the outstanding 8.88% Preferred Shares, First Series were redeemed and
thereafter the Company made no other preferred share dividend payments.
</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 13-week periods ended
April 4, 1998 and March 29, 1997, as indicated in our report dated May 13,
1998; 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 13-week period ended April 4, 1998,
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,
33-64345, 333-8141 and 333-38131 of Sears, Roebuck and Co.; Registration
Statement Nos. 33-58139, 333-9817, 33-64215 and 333-30879 of Sears, Roebuck
and Co. and Sears Roebuck Acceptance Corp.; Registration Statement Nos.
33-64775, 333-18591, and 333-43309 of Sears, Roebuck and Co. and Sears,
Roebuck and Co. Deferred Compensation Plan; Registration Statement Nos.
33-57205 and 333-11973, and the Registration Statement on Form S-8 to be
filed on or about May 15, 1998 of Sears, Roebuck and Co. and the Sears 401(k)
Profit Sharing Plan (formerly, 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 are also 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
May 13, 1998
<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> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> APR-04-1998
<CASH> 344
<SECURITIES> 3,113<F1>
<RECEIVABLES> 20,089
<ALLOWANCES> 1,127
<INVENTORY> 5,465
<CURRENT-ASSETS> 29,628
<PP&E> 11,434
<DEPRECIATION> 5,043
<TOTAL-ASSETS> 38,054
<CURRENT-LIABILITIES> 14,048
<BONDS> 14,161
0
0
<COMMON> 323
<OTHER-SE> 5,588
<TOTAL-LIABILITY-AND-EQUITY> 38,054
<SALES> 7,955
<TOTAL-REVENUES> 9,163
<CGS> 6,034
<TOTAL-COSTS> 6,034
<OTHER-EXPENSES> 1,929
<LOSS-PROVISION> 394
<INTEREST-EXPENSE> 376
<INCOME-PRETAX> 228
<INCOME-TAX> 92
<INCOME-CONTINUING> 133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133
<EPS-PRIMARY> 0.34<F2><F3>
<EPS-DILUTED> 0.34<F3>
<FN>
<F1>Represents retained interest in transferred credit card receivables
<F2>Represents basic earnings per share
<F3>Restated to reflect the Company's adoption of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share".
</FN>
</TABLE>
<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> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> JAN-03-1998 JAN-03-1998 JAN-03-1998 JAN-03-1998
<PERIOD-END> MAR-29-1997 JUN-28-1997 SEP-27-1997 JAN-03-1998
<CASH> 248 247 247 358
<SECURITIES> 2,138<F1> 2,088<F1> 3,212<F1>
3,316<F1>
<RECEIVABLES> 19,727 20,162 19,172 20,956
<ALLOWANCES> 806 825 865 1,113
<INVENTORY> 4,939 4,954 5,669 5,044
<CURRENT-ASSETS> 27,871 28,279 29,076 30,244
<PP&E> 10,272 10,526 10,857 11,324
<DEPRECIATION> 4,495 4,637 4,795 4,910
<TOTAL-ASSETS> 35,629 36,016 36,866 38,700
<CURRENT-LIABILITIES> 14,002 14,125 14,936 15,790
<BONDS> 12,401 12,661 12,523 13,071
0 0 0 0
0 0 0 0
<COMMON> 323 323 323 323
<OTHER-SE> 4,819 4,815 5,082 5,539
<TOTAL-LIABILITY-AND-EQUITY> 35,629 36,016 36,866 38,700
<SALES> 7,543 16,089 24,618 36,371
<TOTAL-REVENUES> 8,732 18,432 28,214 41,296
<CGS> 5,691 11,970 18,303 26,779
<TOTAL-COSTS> 5,691 11,970 18,303 26,779
<OTHER-EXPENSES> 1,896 3,893 5,872 8,321
<LOSS-PROVISION> 254 542 897 1,532
<INTEREST-EXPENSE> 352 693 1,021 1,409
<INCOME-PRETAX> 346 613 1,207 2,138
<INCOME-TAX> 165 308 542 912
<INCOME-CONTINUING> 182 299 652 1,188
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 182 299 652 1,188
<EPS-PRIMARY> 0.46<F2><F3> 0.76<F2><F3> 1.66<F2><F3>
3.03<F2><F3>
<EPS-DILUTED> 0.46<F3> 0.75<F3> 1.64<F3>
2.99<F3>
<FN>
<F1>Represents retained interest in transferred credit card receivables
<F2>Represents basic earnings per share
<F3>Restated to reflect the Company's adoption of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share".
</FN>
</TABLE>
<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> <C> <C> <C>
<C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
12-MOS
<FISCAL-YEAR-END> DEC-28-1996 DEC-28-1996 DEC-28-1996 DEC-28-1996
DEC-30-1995
<PERIOD-END> MAR-30-1996 JUN-29-1996 SEP-28-1996 DEC-28-1996
DEC-30-1995
<CASH> 823 514 649 660
606
<SECURITIES> 4,612<F1> 4,595<F1> 2,958<F1>
2,260<F1> 5,579<F1>
<RECEIVABLES> 15,891 16,103 18,026 20,104
15,346
<ALLOWANCES> 796 802 795 801
819
<INVENTORY> 4,419 4,441 5,260 4,646
4,033
<CURRENT-ASSETS> 26,533 33,409 27,826 28,447
26,441
<PP&E> 8,913 9,360 9,602 10,237
8,857
<DEPRECIATION> 3,790 4,081 4,095 4,359
3,780
<TOTAL-ASSETS> 33,361 33,409 35,120 36,167
33,130
<CURRENT-LIABILITIES> 14,186 13,466 14,981 14,950
14,607
<BONDS> 10,580 11,212 11,355 12,170
10,044
0 0 0 0
0
325 325 325 0
325
<COMMON> 323 323 323 323
322
<OTHER-SE> 3,844 3,988 4,139 4,622
3,738
<TOTAL-LIABILITY-AND-EQUITY> 33,361 33,409 35,120 36,167
33,130
<SALES> 6,893 14,935 22,884 33,751
31,133
<TOTAL-REVENUES> 7,945 17,028 26,053 38,064
34,835
<CGS> 5,237 11,186 17,081 24,909
23,160
<TOTAL-COSTS> 5,237 11,186 17,081 24,909
23,160
<OTHER-EXPENSES> 1,761 3,732 5,669 8,038
7,428
<LOSS-PROVISION> 189 413 659 971
589
<INTEREST-EXPENSE> 354 687 1,013 1,365
1,373
<INCOME-PRETAX> 250 709 1,172 2,105
1,728
<INCOME-TAX> 99 284 468 834
703
<INCOME-CONTINUING> 151 425 704 1,271
1,025
<DISCONTINUED> 0 0 0 0
776
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 151 425 704 1,271
1,801
<EPS-PRIMARY> .037<F2><F3> 1.05<F2><F3> 1.74<F2><F3>
3.18<F2><F3> 4.55<F2><F3>
<EPS-DILUTED> 0.36<F3> 1.03<F3> 1.71<F3>
3.12<F3> 4.50<F3>
<FN>
<F1>Represents retained interest in transferred credit card receivables
<F2>Represents basic earnings per share
<F3>Restated to reflect the Company's adoption of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share".
</FN>
</TABLE>
