[TEXT]
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 SEPTEMBER 28, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-17955
SEARS DC CORP.
(Exact name of registrant as specified in its charter)
Delaware 36-3533346
(State of Incorporation) (I.R.S. Employer Identification No.)
3711 Kennett Pike
Greenville, Delaware 19807
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 302/888-3114
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 October 31, 1996, the Registrant had 1,000 shares of
capital stock outstanding, all of which were held by Sears,
Roebuck and Co.
Registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing
this form with a reduced disclosure format.
<PAGE>
SEARS DC CORP.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 28, 1996
PART I. FINANCIAL INFORMATION: Page No.
Item 1. Financial Statements
Statements of Financial Position (unaudited)
September 28, 1996, September 30, 1995
and December 30, 1995 1
Statements of Income (unaudited)
Three and Nine Months ended September 28, 1996
and September 30, 1995 2
Statements of Cash Flows (unaudited)
Nine Months ended September 28, 1996
and September 30, 1995 3
Notes to Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 5
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 6
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<TABLE>
SEARS DC CORP.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
<CAPTION>
Sept. 28, Sept. 30, Dec. 30,
millions 1996 1995 1995
<S> <C> <C> <C>
Assets
Notes of Sears $ 825.5 $ 1,299.4 $ 1,258.1
Cash and invested cash 0.1 0.1 0.1
Accrued interest and
other assets 1.5 2.5 2.2
Total assets $ 827.1 $ 1,302.0 $ 1,260.4
Liabilities
Medium-term notes $ 788.5 $ 1,243.7 $ 1,228.7
Accrued interest and
other liabilities 33.7 53.7 27.0
Total liabilities 822.2 1,297.4 1,255.7
Stockholder's equity
Capital stock,
par value $1.00 per share
1,000 shares authorized and
outstanding - - -
Retained income 4.9 4.6 4.7
Total stockholder's equity 4.9 4.6 4.7
Total liabilities and
stockholder's equity $ 827.1 $ 1,302.0 $ 1,260.4
<FN>
See notes to financial statements.
</FN>
</TABLE>
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<TABLE>
SEARS DC CORP.
STATEMENTS OF INCOME
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
millions 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues
Earnings on notes of Sears $ 19.3 $ 27.8 $ 68.2 $ 89.9
Total revenues 19.3 27.8 68.2 89.9
Expenses
Interest and related expenses 19.2 27.6 67.8 89.4
Total expenses 19.2 27.6 67.8 89.4
Income before income taxes 0.1 0.2 0.4 0.5
Income taxes - - 0.2 0.2
Net income $ 0.1 $ 0.2 $ 0.2 $ 0.3
Ratio of earnings
to fixed charges 1.005 1.005 1.005 1.005
<FN>
See notes to financial statements.
</FN>
</TABLE>
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<TABLE>
SEARS DC CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Nine Months Ended
Sept. 28, Sept. 30,
millions 1996 1995
<S> <C> <C>
Cash flows from operating activities
Net income $ 0.2 $ 0.3
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities
Net change in accrued interest income and
other assets and accrued interest expense
and other liabilities 7.4 24.2
Net cash provided by operating activities 7.6 24.5
Cash flows from investing activities
Decrease in notes of Sears 432.6 253.2
Net cash provided by investing activities 432.6 253.2
Cash flows from financing activities
Repayments of medium-term notes (440.2) (277.7)
Net cash (used in) financing activities (440.2) (277.7)
Net increase (decrease) in cash and
invested cash - -
Cash and invested cash at beginning of period 0.1 0.1
Cash and invested cash at end of period $ 0.1 $ 0.1
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE>
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SEARS DC CORP.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Financial Statements
Sears DC Corp. ("SDC"), a wholly-owned subsidiary of Sears,
Roebuck and Co. (Sears), was principally engaged in borrowing in
domestic and foreign debt markets and lending the proceeds of
such borrowings to Sears and certain direct and indirect
subsidiaries of Sears in exchange for their unsecured notes.
Under an agreement between SDC and Sears, the interest rate paid
by Sears is designed to produce earnings sufficient to cover
SDC's fixed charge coverage at least 1.005 times. Required
payments of principal and interest to SDC under the Sears
borrowing agreement are intended to be sufficient to allow SDC
to make timely payments of principal and interest to the holders
of its securities.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
The significant accounting policies used in the presentation of
these financial statements are consistent with the summary of
significant accounting policies set forth in SDC's Annual Report
on Form 10-K for the year ended December 30, 1995, and these
financial statements should be read in conjunction with the
financial statements and notes found therein. 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 results of operations for
the interim periods should not be considered indicative of the
results to be expected for the full year.
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SEARS DC CORP.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SDC has invested funds in the promissory notes of Sears, which
pay interest sufficient to cover SDC's fixed charges at least
1.005 times, and in highly liquid short-term investments.
The $789 million in outstanding medium-term notes as of
September 28, 1996 are not redeemable prior to their stated
maturity except for notes having a stated maturity at the time
of issue of more than seven years which may be redeemed under
certain circumstances in the event of declining Discover Card
receivables of Sears former subsidiary, Dean Witter, Discover &
Co.
Results of Operations
Due to the significant reduction in SDC's outstanding debt,
interest and related expenses decreased 30.4% to $19.2 million
and 24.2% to $67.8 million for the three- and nine month periods
ended September 28, 1996, respectively, from the comparable 1995
periods. Earnings covered fixed charges 1.005 times for the
three and nine months ended September 28, 1996 and September 30,
1995.
<PAGE>
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SEARS DC CORP.
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.
None
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SEARS DC CORP.
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 DC Corp.
(Registrant)
By: /s/ William K. Phelan
William K. Phelan
Vice President and Controller
(authorized officer of
Registrant)
November 8, 1996
<PAGE>
E-1
EXHIBIT INDEX
SEARS DC CORP.
Quarter Ended September 28, 1996
Exhibit No.
4 The Registrant hereby agrees to furnish the commission,
upon request, with each instrument defining the rights of
holders of long-term debt of the Registrant with respect to
which the total amount of securities authorized does not
exceed 10% of the total assets of the Registrant.
27 Financial data schedule.
28(a) Current report on Form 8-K of Sears, Roebuck and Co., for
October 16, 1996. [Incorporated by reference, File No. 1-416]
28(b) Quarterly Report on Form 10-Q of Sears, Roebuck and Co.,
for the quarter ended September 28, 1996. [Incorporated by
reference, File No. 1-416]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS OF FINANCIAL POSITION, INCOME AND CASH FLOWS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 0
<SECURITIES> 0<F1>
<RECEIVABLES> 826
<ALLOWANCES> 0<F1>
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 0<F1>
<PP&E> 0<F1>
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 827
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 789
0<F1>
0<F1>
<COMMON> 0<F1>
<OTHER-SE> 5
<TOTAL-LIABILITY-AND-EQUITY> 827
<SALES> 0<F1>
<TOTAL-REVENUES> 19
<CGS> 0<F1>
<TOTAL-COSTS> 0<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0<F1>
<EXTRAORDINARY> 0<F1>
<CHANGES> 0<F1>
<NET-INCOME> 0
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>Not applicable
</FN>
</TABLE>
