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 28, 1997
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) (ZipCode)
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 July 21, 1997, 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
June 28, 1997
PART I. FINANCIAL INFORMATION: Page No.
Item 1. Financial Statements
Statements of Income (unaudited)
Six Months ended June 28, 1997
and June 29, 1996 1
Statements of Financial Position
June 28, 1997 (unaudited) and June 29, 1996
(unaudited), and December 28, 1996 2
Statements of Cash Flows (unaudited)
Six Months ended June 28, 1997
and June 29, 1996 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
<PAGE>
- 1 -
<TABLE>
SEARS DC CORP.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF INCOME
(unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
millions 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues
Earnings on notes of Sears $ 11.4 $ 23.0 $ 27.4 $ 48.9
Total revenues 11.4 23.0 27.4 48.9
Expenses
Interest and related expenses 11.3 22.9 27.3 48.6
Total expenses 11.3 22.9 27.3 48.6
Income before income taxes 0.1 0.1 0.1 0.3
Income taxes - - - 0.1
Net income $ 0.1 $ 0.1 $ 0.1 $ 0.2
Ratio of earnings to fixed charges 1.005 1.005 1.005 1.005
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE>
- 2 -
<TABLE>
SEARS DC CORP.
STATEMENTS OF FINANCIAL POSITION
(Unaudited)
<CAPTION>
June 28, June 29, December 28,
millions 1997 1996 1996
<S> <C> <C> <C>
Assets
Notes of Sears $ 462.5 $ 1,064.5 $ 799.2
Cash and invested cash 0.1 0.1 0.1
Accrued interest and other assets 1.0 1.6 1.3
Total assets $ 463.6 $ 1,066.2 $ 800.6
Liabilities
Medium-term notes $ 447.8 $ 1,038.9 $ 778.9
Accrued interest and other
liabilities 10.7 22.4 16.7
Total liabilities 458.5 1,061.3 795.6
Stockholder's equity
Capital stock, par value $1.00 per
share 1,000 shares authorized and
outstanding - - -
Capital in excess of par - - -
Retained income 5.1 4.9 5.0
Total stockholder's equity 5.1 4.9 5.0
Total liabilities and stockholder's
equity $ 463.6 $ 1,066.2 $ 800.6
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE>
- 3 -
<TABLE>
SEARS DC CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
June 28, June 29,
millions 1997 1996
<S> <C> <C>
Cash flows from operating activities
Net income $ 0.1 $ 0.2
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 expenseand other
liabilities (5.7) (4.1)
Net cash used in operating activities (5.6) (3.9)
Cash flows from investing activities
Decrease in notes of Sears 336.7 193.7
Net cash provided by investing activities 336.7 193.7
Cash flows from financing activities
Repayments of medium-term notes (331.1) (189.8)
Net cash used in financing activities (331.1) (189.8)
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>
- 4 -
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 28, 1996, 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.
<PAGE>
- 5 -
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 $448 million in outstanding medium-term notes as of June 28, 1997 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, now known
as Morgan Stanley Dean Witter, Discover and Company.
Results of Operations
Interest and related expenses decreased 50.6% to $11.3 million and 43.8% to
$27.3 million for the three and six-months period ended June 28, 1997,
respectively, from the comparable 1996 periods, primarily as a result of the
decrease in Mediumn Term Notes outstanding since the prior year. Earnings
covered fixed charges 1.005 and 1.005 times for the three and six months
ended June 28, 1997 and June 29, 1996, respectively.
<PAGE>
- 6 -
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
<PAGE>
- 7 -
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:_____________________________
William K. Phelan
Vice President and Controller
(authorized officer of
Registrant)
July 25, 1997
<PAGE>
E-1
EXHIBIT INDEX
SEARS DC CORP.
Quarter Ended June 28, 1997
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 April 10,
1997. [Incorporated by reference, File No. 1-416]
28(b) Current report on Form 8-K of Sears, Roebuck and Co., for June 3,
1997. [Incorporated by reference, File No. 1-416]
28(c) Current report on Form 8-K of Sears, Roebuck and Co., for June 5,
1997. [Incorporated by reference, File No. 1-416]
28(d) Current report on Form 8-K of Sears, Roebuck and Co., for June 11,
1997. [Incorporated by reference, File No. 1-416]
28(e) Quarterly Report on Form 10-Q of Sears, Roebuck and Co., for the
quarter ended June 28, 1997. [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> 6-MOS
<FISCAL-YEAR-END> JAN-3-1998
<PERIOD-END> JUN-28-1997
<CASH> 0
<SECURITIES> 0<F1>
<RECEIVABLES> 463
<ALLOWANCES> 0<F1>
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 0<F1>
<PP&E> 0<F1>
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 464
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 448
0<F1>
0<F1>
<COMMON> 0<F1>
<OTHER-SE> 11
<TOTAL-LIABILITY-AND-EQUITY> 464
<SALES> 0<F1>
<TOTAL-REVENUES> 27
<CGS> 0<F1>
<TOTAL-COSTS> 0<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 27
<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 APPICABLE
</FN>
</TABLE>
