UNITED STATES Washington, D.C. 20549 |
X | SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001 | |||
Commission file number 1-416
SEARS, ROEBUCK AND CO.
(Exact name of registrant as specified in its charter)
(State of Incorporation) | (I.R.S. Employer Identification No.) | |||||||||||
(Address of principal executive offices) | (Zip Code) | |||||||||||
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 | |||||||||||
SEARS, ROEBUCK AND CO.
INDEX TO QUARTERLY REPORT ON FORM 1O-Q
13 AND 26 WEEKS ENDED JUNE 30, 2001
PART I - FINANCIAL INFORMATION | Page | |
Item 1. | Financial Statements | |
Condensed Consolidated Statements of Operations (Unaudited) 13 Weeks and 26 Weeks Ended June 30, 2001 and July 1, 2000 | 1 | |
Condensed Consolidated Balance Sheets June 30, 2001 (Unaudited), July 1, 2000 (Unaudited) and December 30, 2000 | 2 | |
Condensed Consolidated Statements of Cash Flows (Unaudited) 26 Weeks Ended June 30, 2001 and July 1, 2000 | 3 | |
Notes to Condensed Consolidated Financial Statements (Unaudited) | 4 | |
Independent Accountants' Review Report | 13 | |
Item 2. | Management's Discussion and Analysis of Operations, Financial Condition and Liquidity | 14 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 22 |
PART II - OTHER INFORMATION
Item 1. | Legal Proceedings | 23 |
Item 4. | Submission of Matters to a Vote of Security-Holders | 24 |
Item 6. | Exhibits and Reports on Form 8-K | 25 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(millions, except per share data) | ||||||||||||
Merchandise sales and services | $ | 8,877 | $ | 8,903 | $ | 16,631 | $ | 16,641 | ||||
Credit and financial products revenues | 1,349 | 1,142 | 2,452 | 2,329 | ||||||||
Total revenues | 10,226 | 10,045 | 19,083 | 18,970 | ||||||||
Costs and expenses | ||||||||||||
Cost of sales, buying and occupancy | 6,482 | 6,528 | 12,318 | 12,311 | ||||||||
Selling and administrative | 2,256 | 2,156 | 4,287 | 4,145 | ||||||||
Depreciation and amortization | 225 | 213 | 440 | 425 | ||||||||
Provision for uncollectible accounts | 361 | 215 | 552 | 460 | ||||||||
Provision for previously securitized receivables | 522 | -- | 522 | -- | ||||||||
Interest | 404 | 310 | 716 | 626 | ||||||||
Special charges and impairments | 287 | -- | 287 | -- | ||||||||
Total costs and expenses | 10,537 | 9,422 | 19,122 | 17,967 | ||||||||
Operating income (loss) | (311) | 623 | (39) | 1,003 | ||||||||
Other income | 7 | 5 | 8 | 6 | ||||||||
Income (loss) before income taxes and minority interest | (304) | 628 | (31) | 1,009 | ||||||||
Income taxes | 112 | (232) | 14 | (372) | ||||||||
Minority interest | (5) | (8) | (4) | (14) | ||||||||
Net income (loss) | $ | (197) | $ | 388 | $ | (21) | $ | 623 | ||||
Earnings (loss) per share: | ||||||||||||
Basic | $ | (0.60) | $ | 1.12 | $ | (0.06) | $ | 1.77 | ||||
Diluted | $ | (0.60) | $ | 1.11 | $ | (0.06) | $ | 1.76 | ||||
Cash dividends declared per share | $ | 0.23 | $ | 0.23 | $ | 0.46 | $ | 0.46 | ||||
Average common and common equivalent shares outstanding | 326.6 | 348.4 | 329.2 | 354.2 | ||||||||
See accompanying notes. |
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SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions) | |||||||||
Assets | |||||||||
Current assets | |||||||||
Cash and cash equivalents | $ | 476 | $ | 345 | $ | 842 | |||
Retained interest in transferred credit card receivables | -- | 2,077 | 3,105 | ||||||
Credit card receivables, net | 26,486 | 17,125 | 17,317 | ||||||
Other receivables | 628 | 311 | 506 | ||||||
Merchandise inventories | 5,596 | 5,628 | 5,618 | ||||||
Prepaid expenses and deferred charges | 585 | 469 | 486 | ||||||
Deferred income taxes | 1,170 | 764 | 920 | ||||||
Total current assets | 34,941 | 26,719 | 28,794 | ||||||
Property and equipment, net | 6,604 | 6,345 | 6,653 | ||||||
Deferred income taxes | 232 | 318 | 174 | ||||||
Other assets | 990 | 1,487 | 1,278 | ||||||
Total assets | $ | 42,767 | $ | 34,869 | $ | 36,899 | |||
Liabilities | |||||||||
Current liabilities | |||||||||
Short-term borrowings | $ | 3,326 | $ | 2,557 | $ | 4,280 | |||
Current portion of long-term debt and capitalized lease obligations | 3,243 | 2,338 | 2,560 | ||||||
Accounts payable and other liabilities | 6,488 | 6,319 | 7,336 | ||||||
Unearned revenues | 1,131 | 1,086 | 1,058 | ||||||
Other taxes | 475 | 462 | 562 | ||||||
Total current liabilities | 14,663 | 12,762 | 15,796 | ||||||
Long-term debt and capitalized lease obligations | 18,870 | 12,245 | 11,020 | ||||||
Post-retirement benefits | 1,867 | 2,070 | 1,951 | ||||||
Minority interest and other liabilities | 1,334 | 1,343 | 1,363 | ||||||
Total liabilities | 36,734 | 28,420 | 30,130 | ||||||
Commitments and Contingent Liabilities | |||||||||
Shareholders' Equity | |||||||||
Common shares | 323 | 323 | 323 | ||||||
Capital in excess of par value | 3,523 | 3,542 | 3,538 | ||||||
Retained earnings | 6,806 | 6,414 | 6,979 | ||||||
Treasury stock - at cost | (4,071) | (3,418) | (3,726) | ||||||
Deferred ESOP expense | (77) | (113) | (96) | ||||||
Accumulated other comprehensive loss | (471) | (299) | (249) | ||||||
Total shareholders' equity | 6,033 | 6,449 | 6,769 | ||||||
Total liabilities and shareholders' equity | $ | 42,767 | $ | 34,869 | $ | 36,899 | |||
Total common shares outstanding | 324.3 | 343.0 | 333.2 | ||||||
See accompanying notes. | |||||||||
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SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(millions) | June 30 , 2001 | July 1, 2000 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income (loss) | $ | (21) | $ | 623 | ||
Adjustments to reconcile net income (loss) to net cash | ||||||
provided by operating activities: | ||||||
451 | 466 | |||||
552 | 460 | |||||
522 | -- | |||||
287 | -- | |||||
(1) | (1) | |||||
7 | 3 | |||||
(153) | (2) | |||||
receivables | (759) | 1,134 | ||||
1,732 | 437 | |||||
11 | (564) | |||||
(299) | 95 | |||||
(1,133) | (822) | |||||
1,196 | 1,829 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Acquisition of businesses, net of cash acquired | -- | (1) | ||||
Proceeds from sales of property and investments | 14 | 19 | ||||
Purchases of property and equipment | (579) | (395) | ||||
Purchases of long-term investments | (12) | (17) | ||||
Net cash used in investing activities | (577) | (394) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Proceeds from long-term debt | 1,821 | 307 | ||||
Repayments of long-term debt | (1,371) | (766) | ||||
Decrease in short term borrowings, primarily 90 days or less | (950) | (432) | ||||
Repayments of ESOP note receivable | 21 | 100 | ||||
Common shares purchased | (400) | (901) | ||||
Common shares issued for employee stock plans | 32 | 38 | ||||
Dividends paid to shareholders | (152) | (164) | ||||
Net cash used in financing activities | (999) | (1,818) | ||||
Effect of exchange rate on cash and invested cash | 14 | (1) | ||||
Net decrease in cash and cash equivalents | (366) | (384) | ||||
Balance at beginning of year | 842 | 729 | ||||
Balance at end of period | $ | 476 | $ | 345 | ||
See accompanying notes. | ||||||
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SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Condensed Consolidated Financial Statements
Certain reclassifications have been made to the 2000 financial statements to conform with the current year presentation.
On August 9, 2000, the Board of Directors approved a common share repurchase program to acquire $1.0 billion of the Company's common shares by December 31, 2002. During the second quarter of 2001, the Company repurchased 6.1 million shares at a cost of $232 million under this program. The shares are purchased on the open market or through privately negotiated transactions. As of June 30, 2001, approximately 16.5 million common shares have been acquired under this repurchase program at a cost of approximately $598 million, and $402 million is available for future repurchases.
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SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Earnings (Loss) Per Share
The following table sets forth the computations of basic and diluted earnings per share:
(millions, except per share data) | |||||||||||
Basic: | |||||||||||
Net income (loss) | $ | (197) | $ | 388 | (21) | $ | 623 | ||||
Average shares outstanding | 326.6 | 346.6 | 329.2 | 352.9 | |||||||
Earnings (loss) per share - basic | $ | (0.60) | $ | 1.12 | (0.06) | $ | 1.77 | ||||
Diluted: | |||||||||||
Net income (loss) | $ | (197) | $ | 388 | (21) | $ | 623 | ||||
Average shares outstanding | 326.6 | 346.6 | 329.2 | 352.9 | |||||||
Dilutive effect of stock options | -- | 1.8 | -- | 1.3 | |||||||
Average shares and equivalent shares outstanding | 326.6 | 348.4 | 329.2 | 354.2 | |||||||
Earnings (loss) per share - diluted | $ | (0.60) | $ | 1.11 | (0.06) | $ | 1.76 |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss
(millions) | June 30 , | July 1 , | June 30, | |||||||||
2001 | 2000 | 2001 | ||||||||||
Net income (loss) | $ | (197) | $ | 388 | 623 | |||||||
Other comprehensive income (loss): | ||||||||||||
After tax cumulative effect of a change in accounting for derivatives | -- | -- | (262) | -- | ||||||||
Derivative losses reclassified into interest expense from OCI | 4 | -- | 8 | -- | ||||||||
Change in fair value of derivatives | 38 | -- | 34 | -- | ||||||||
Unrealized gain (loss) on investments | 3 | (5) | 5 | (9) | ||||||||
Foreign currency translation adjustments | 20 | (10) | (7) | (3) | ||||||||
Total other comprehensive income (loss) | 65 | (15) | (222) | (12) | ||||||||
Total comprehensive income (loss) | $ | (132) | $ | 373 | $ | (243) | $ | 611 |
June 30, | July 1, | , | December 30, | |||||
2001 | 2000 | 2000 | ||||||
Accumulated derivative loss | $ | (220) | $ - -- | $ - -- | ||||
Foreign currency translation adjustments | (125) | (114) | (118) | |||||
Minimum pension liability (1) | (132) | (195) | (132) | |||||
Unrealized gain on investments | 6 | 10 | 1 | |||||
Accumulated other comprehensive loss | $ | (471) | $ (299) | $ (249) |
time. |
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SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Segment Disclosures
The following tables set forth revenue, expenses, operating income (loss) and total assets by segment:
For the 13 weeks ended June 30, 2001:
(millions) | Other | |||||||||||||||||||||||||
Total revenues | 7,803 | 1,276 | 112 | 1,035 | 10,226 | -- | $ | -- | $ | 10,226 | ||||||||||||||||
Costs and expenses | ||||||||||||||||||||||||||
Cost of sales, buying and occupancy | 5,717 | -- | 46 | 719 | 6,482 | -- | -- | 6,482 | ||||||||||||||||||
Selling and administrative | 1,677 | 212 | 122 | 245 | 2,256 | -- | -- | 2,256 | ||||||||||||||||||
Depreciation and amortization | 185 | 4 | 15 | 21 | 225 | -- | -- | 225 | ||||||||||||||||||
Provision for uncollectible accounts | -- | 350 | -- | 11 | 361 | -- | -- | 361 | ||||||||||||||||||
Provision for previously securitized receivables | -- | -- | -- | -- | -- | -- | 522 | 522 | ||||||||||||||||||
Interest | 11 | 365 | -- | 28 | 404 | -- | -- | 404 | ||||||||||||||||||
Special charges and impairments | -- | -- | -- | -- | -- | -- | 287 | 287 | ||||||||||||||||||
Total costs and expenses | 7,590 | 931 | 183 | 1,024 | 9,728 | -- | 809 | 10,537 | ||||||||||||||||||
Operating income (loss) | 213 | 345 | (71) | 11 | 498 | -- | $ | (809) | $ | (311) | ||||||||||||||||
Total assets | 11,245 | 25,857 | 2,273 | 3,392 | 42,767 | -- | -- | $ | 42,767 |
For the 13 weeks ended July 1, 2000:
(millions) | Other | |||||||||||||||||||||||||
Total revenues | 7,892 | 1,282 | 93 | 990 | 10,257 | (212) | $ | -- | $ | 10,045 | ||||||||||||||||
Costs and expenses | ||||||||||||||||||||||||||
Cost of sales, buying and occupancy | 5,831 | -- | 37 | 660 | 6,528 | -- | -- | 6,528 | ||||||||||||||||||
Selling and administrative | 1,649 | 193 | 102 | 244 | 2,188 | (32) | -- | 2,156 | ||||||||||||||||||
Depreciation and amortization | 179 | 4 | 12 | 18 | 213 | -- | -- | 213 | ||||||||||||||||||
Provision for uncollectible accounts | -- | 321 | -- | 9 | 330 | (115) | -- | 215 | ||||||||||||||||||
Provision for previously securitized receivables | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||
Interest | 8 | 375 | -- | 29 | 412 | (102) | -- | 310 | ||||||||||||||||||
Special charges and impairments | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||
Total costs and expenses | 7,667 | 893 | 151 | 960 | 9,671 | (249) | -- | 9,422 | ||||||||||||||||||
Operating income (loss) | 225 | 389 | (58) | 30 | 586 | 37 | $ | -- | $ | 623 | ||||||||||||||||
Total assets | 11,134 | 18,521 | 2,008 | 3,206 | 34,869 | -- | -- | $ | 34,869 |
-7-
SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the 26 weeks ended June 30, 2001:
(millions) | items | |||||||||||||||||||||||
Total revenues | 14,609 | 2,576 | 196 | 1,977 | 19,358 | (275) | $ | -- | $ | 19,083 | ||||||||||||||
Costs and expenses | ||||||||||||||||||||||||
Cost of sales, buying and occupancy | 10,870 | -- | 83 | 1,365 | 12,318 | -- | -- | 12,318 | ||||||||||||||||
Selling and administrative | 3,207 | 406 | 222 | 491 | 4,326 | (39) | -- | 4,287 | ||||||||||||||||
Depreciation and amortization | 361 | 9 | 29 | 41 | 440 | -- | -- | 440 | ||||||||||||||||
Provision for uncollectible accounts | -- | 684 | -- | 21 | 705 | (153) | -- | 552 | ||||||||||||||||
Provision for previously securitized receivables | -- | -- | -- | -- | -- | -- | 522 | 522 | ||||||||||||||||
Interest | 14 | 767 | -- | 58 | 839 | (123) | -- | 716 | ||||||||||||||||
Special charges and impairments | -- | -- | -- | -- | -- | -- | 287 | 287 | ||||||||||||||||
Total costs and expenses | 14,452 | 1,866 | 334 | 1,976 | 18,628 | (315) | 809 | 19,122 | ||||||||||||||||
Operating income (loss) | 157 | 710 | (138) | 1 | 730 | 40 | $ | (809) | $ | (39) | ||||||||||||||
Total assets | 11,245 | 25,857 | 2,273 | 3,392 | 42,767 | -- | -- | $ | 42,767 |
For the 26 weeks ended July 1, 2000:
(millions) | Other | ||||||||||||||||||||||||
Total revenues | 14,718 | $ | 2,643 | 165 | 1,908 | 19,434 | (464) | $ | -- | $ | 18,970 | ||||||||||||||
Costs and expenses | |||||||||||||||||||||||||
Cost of sales, buying and occupancy | 10,952 | -- | 70 | 1,289 | 12,311 | -- | -- | 12,311 | |||||||||||||||||
Selling and administrative | 3,151 | 395 | 202 | 461 | 4,209 | (64) | -- | 4,145 | |||||||||||||||||
Depreciation and amortization | 358 | 8 | 24 | 35 | 425 | -- | -- | 425 | |||||||||||||||||
Provision for uncollectible accounts | -- | 692 | -- | 19 | 711 | (251) | -- | 460 | |||||||||||||||||
Provision for previously securitized receivables | -- | -- | -- | -- | -- | -- | -- | -- | |||||||||||||||||
Interest | 11 | 764 | -- | 56 | 831 | (205) | -- | 626 | |||||||||||||||||
Special charges and impairments | -- | -- | -- | -- | -- | -- | -- | -- | |||||||||||||||||
Total costs and expenses | 14,472 | 1,859 | 296 | 1,860 | 18,487 | (520) | -- | 17,967 | |||||||||||||||||
Operating income (loss) | $ | 246 | $ | 784 | $ | (131) | $ | 48 | $ | 947 | $ | 56 | $ | -- | $ | 1,003 | |||||||||
Total assets | $ | 11,134 | $ | 18,521 | $ | 2,008 | $ | 3,206 | $ | 34,869 | -- | -- | $ | 34,869 |
Effective in the first quarter of 2001, the Company modified its externally reported segments to reflect the Company's integrated Retail and Related Services strategy and to align externally reported business segments with changes in the Company's internal structure. Segmented financial data for the 13 and 26 weeks ended July 1, 2000 has been restated to reflect the new segment reporting structure.
In the second quarter of 2001, the Company adjusted its segment income statements to exclude securitization income and non-comparable items.
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SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- Special Charges and Impairments
HomeLife Closure and Other
The Company sold its HomeLife furniture division to Citicorp Venture Capital, Ltd. in early 1999. As part of the sale, Sears took a 19 percent equity interest in the new HomeLife Corporation. Additionally, the Company assigned certain store leases to HomeLife in connection with the sale. Subsequently, the Company has guaranteed certain indebtedness related to the new HomeLife Corporation, and also has obtained secured interests in certain HomeLife assets. In the second quarter of 2001, HomeLife's financial condition deteriorated and in early July, Homelife ceased operations and subsequently filed for Chapter 11 bankruptcy protection on July 16, 2001. The Company recorded a special pretax charge of approximately $185 million ($116 million after-tax) in the second quarter to reflect the Company's estimated potential obligations and asset impairments relative to HomeLife. The pretax charge includes an accrual for net future lease obligations ($150 million) reduced by estimated sublease income, early terminations and lease mitigation costs ($50 million), indebtedness guarantees, contingent obligations, and other costs ($69 million), and asset write-offs ($16 million). While the timing of any cash outlays related to these charges is uncertain, management does not expect that such payments will have a material impact on the liquidity or financial condition of the Company. The Company also recorded a pretax impairment of $20 million to write-off an investment unrelated to HomeLife.
Exit of Cosmetics Business
During the second quarter, the Company committed to a plan to exit its skin care and color cosmetics business. A special pretax charge of $82 million ($53 million after-tax) was recorded in the second quarter. The charge includes asset write-downs associated with the Company's Circle of Beauty brand and store cosmetics fixtures, as well as vendor contract cancellation fees.
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SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The addition to the securitization trust of previously uncommitted assets in April 2001 required the Company to consolidate the securitization structure for financial reporting purposes on a prospective basis. Accordingly, the Company recognized approximately $8.1 billion of previously off-book securitized credit card receivables and $8.1 billion of related debt. In addition, approximately $3.9 billion of assets were reclassified to credit card receivables from retained interest in transferred credit card receivables. All future securitization activity will be accounted for as secured borrowings. This accounting is reflected in the Company's consolidated statement of cash flows as a non-cash transaction.
In connection with the consolidation of the securitization structure, the Company's second quarter results include a one-time, non-cash, pretax charge of $522 million to establish an allowance for uncollectible accounts related to the $8.1 billion of previously sold receivables and the $3.9 billion of receivables that were previously accounted for as securities (retained interest in transferred credit card receivables).
As of June 30, 2001 $11.9 billion of credit card receivables included in the balance sheet are segregated in a trust as collateral for $7.6 billion of trust certificates included in long-term debt.
Effective for the first quarter of 2001, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities". SFAS No. 133 sets forth accounting and reporting standards for derivative instruments and hedging activities, requiring the recognition of all derivative instruments (including certain derivatives embedded in other contracts) as either assets or liabilities in the balance sheet measured at fair value. SFAS No. 133 also establishes criteria for a derivative to qualify as a hedge for accounting purposes.
The adoption of SFAS No. 133 did not affect earnings. The cumulative effect of this change in accounting principle reduced other comprehensive income (OCI) by $262 million of which $228 million ($389 million pretax) related to previously terminated swaps and $34 million ($56 million pretax) related to a cash flow hedge. Consistent with prior years, approximately $16 million ($25 million pretax) of the deferred losses on the previously terminated swaps will be amortized into earnings during 2001. During the second quarter of 2001, the Company terminated its cash flow hedge. This termination had no impact on earnings.
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SEARS, ROEBUCK AND CO.
(Unaudited)
9. Effect of Accounting Standards not Adopted
In July 2001, the FASB issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets". The guidance in SFAS No. 141 supercedes APB 16 and is applicable to business combinations initiated after June 30, 2001. Upon adoption of SFAS No. 142, goodwill will cease to be amortized and will instead be subject to periodic impairment reviews as set forth in the new standard. The Company is currently evaluating the Statement's impairment provisions and has not yet determined what effect, if any, they might have on the consolidated financial position and results of operations of the Company.
The Company has approximately $502 million in positive goodwill and $94 million in negative goodwill recorded in its consolidated balance sheet as of June 30, 2001. Amortization of both positive and negative goodwill is generally not subject to taxes. Under the provisions of SFAS No. 142, positive goodwill will cease to be amortized for fiscal years beginning after December 15, 2001 (fiscal 2002 for the Company) and any existing negative goodwill will be recognized as a one-time increase to income as the cumulative effect of a change in accounting principle upon adoption of the Statement. The Company recorded approximately $11 million in amortization expense related to positive goodwill and $13 million (before minority interest of $6 million) of income from negative goodwill amortization for the six months ended June 30, 2001. The Company intends to adopt SFAS No. 142 for the 2002 fiscal year.
Following is a summary of the activity in the reserves established for store closures:
12/30/00 | Other Adjustments | |||||||||||
Lease and holding costs | $ | 57 | $ | 3 | $ | (10) | $ | 50 | ||||
Inventory liquidation losses | 14 | (14) | -- | -- | ||||||||
Severance Costs | 3 | -- | (3) | -- | ||||||||
Total Costs | $ | 74 | $ | (11) | $ | (13) | $ | 50 |
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SEARS, ROEBUCK AND CO.
(Unaudited)
11. Commitments and Contingent Liabilities
The Company leases certain stores, office facilities, warehouses, computers and office equipment for which it has contractual obligations that span several years. Additionally, the Company has outstanding obligations relating to certain store leases and indebtedness in conjunction with the HomeLife matter. The Company also has secured interests in certain HomeLife assets. As discussed in Note 6, HomeLife filed for bankruptcy protection on July 16, 2001, and the Company recorded a pretax charge of $185 million related to HomeLife in the second quarter of 2001.
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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 June 30, 2001 and July 1, 2000, and the Condensed Consolidated Statements of Operations for the 13-week and 26-week periods ended June 30, 2001 and July 1, 2000 and the Condensed Consolidated Statements of Cash Flows for the 26-week periods ended June 30, 2001 and July 1, 2000. These condensed consolidated 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 auditing standards generally accepted in the United States of America, 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 accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the Consolidated Balance Sheet of Sears, Roebuck and Co. as of December 30, 2000, 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 12, 2001, 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, 2000, 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 2, 2001
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SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY FOR THE
13 and 26 WEEKS ENDED JUNE 30, 2001 AND JULY 1, 2000
Operating results for the Company are reported for three domestic segments and one international segment. The domestic segments include the Company's operations in the United States and Puerto Rico. The Company's segments are defined as follows:
Retail and Related Services consisting of:
| Corporate and Other consisting of:
| |||
| Sears Canada consisting of retail, services, credit, corporate and online operations conducted in Canada through Sears Canada, Inc. ("Sears Canada"), a 54.4% owned consolidated subsidiary | |||
Credit and Financial Products includes domestic credit card operations and related financial product offerings (credit protection and insurance products). |
Results of Operations
For the 13 weeks ended June 30, 2001, the Company reported a net loss of $197 million or a loss of $0.60 per share, as compared to net income of $388 million or $1.11 per share for the comparable 2000 period. For the 26 weeks ended June 30, 2001, the Company reported a net loss of $21 million or a loss of $0.06 per share compared to net income of $623 million or $1.76 per share for the comparable 2000 period. Results for these periods were affected by non-comparable items including changes in securitization accounting. The effects of non-comparable items on net income and earnings per share are summarized in the table below.
Millions, except per share data | ||||||||||||||||||||||||||||||
(loss) | per share | per share | ||||||||||||||||||||||||||||
Excluding non-comparable items | $ | 316 | $ | 0.96 | $ | 365 | $ | 1.05 | $ | 466 | $ | 1.41 | $ | 588 | $ | 1.66 | ||||||||||||||
Provision for previously securitized receivables | (331) | (1.01) | -- | -- | (331) | (1.00) | -- | -- | ||||||||||||||||||||||
Securitization income | -- | -- | 23 | 0.06 | 26 | 0.08 | 35 | 0.10 | ||||||||||||||||||||||
HomeLife closure and other | (129) | (0.39) | -- | -- | (129) | (0.39) | -- | -- | ||||||||||||||||||||||
Exit of cosmetics business | (53) | (0.16) | -- | -- | (53) | (0.16) | -- | -- | ||||||||||||||||||||||
As reported | $ | (197) | $ | (0.60) | $ | 388 | $ | 1.11 | $ | (21) | $ | (0.06) | $ | 623 | $ | 1.76 |
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SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY FOR THE
13 and 26 WEEKS ENDED JUNE 30, 2001 AND JULY 1, 2000
Description of Non-Comparable Items
Second quarter 2001 results include a non-cash pretax charge of $522 million ($331 million after-tax) to establish an allowance for uncollectible accounts related to approximately $12 billion of securitized credit card receivables reinstated on the Company's balance sheet as a result of the Company's adoption of SFAS No. 140 in April 2001. In addition, effective in the second quarter of 2001, the Company's securitization transactions are accounted for as secured borrowings and the Company ceased recording securitization income. Second quarter 2001 results include no after-tax securitization income as compared with $23 million after-tax income in second quarter 2000.
During the second quarter of 2001, the Company recorded a pretax charge of $185 million ($116 million after-tax) relating to the formerly owned HomeLife business which was sold to Citicorp Venture Capital, Ltd. in early 1999. HomeLife filed for bankruptcy on July 16, 2001. The charge reflects the net estimated costs associated with certain property leases assigned to HomeLife and other obligations related to HomeLife in connection with which Sears may incur losses. The Company also recorded a pretax charge of $20 million ($13 million after-tax) to recognize the impairment of another unrelated investment.
During the second quarter of 2001, the Company recorded a pretax charge of $82 million ($53 million after-tax) in connection with its exit of the skin care and color cosmetics business. The charge includes asset write-downs and vendor cancellation payments.
Analysis of Consolidated Results Excluding Non-comparable Items
For the 13 weeks ended June 30, 2001, net income excluding non-comparable items was $316 million or $0.96 per share, as compared to $365 million or $1.05 per share for the comparable 2000 period. For the 26 weeks ended June 30, 2001, net income excluding non-comparable items was $466 million or $1.41 per share compared to $588 million or $1.66 per share for the comparable 2000 period. The decrease in earnings per share for the quarter and year-to-date is due to decreased operating income across all segments partially offset by a reduction in shares outstanding due to the Company's share repurchase program.
The Company's consolidated effective tax rate for the 13 and 26 weeks ended June 30, 2001 was 36.8% and 45.2%, respectively, compared to 36.9% and 36.9%, respectively, in the comparable prior year periods. Excluding non-comparable items and securitization income, the effective tax rates for the 13 and 26 weeks ended June 30, 2001 would have been 36.4% and 36.3%, respectively. The decreases in the effective tax rates versus last year are primarily due to lower effective tax rates on Sears Canada.
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. This business seasonality results in performance for the 13 and 26 weeks ended June 30, 2001 which is not necessarily indicative of performance for the balance of the year. The Company makes available by phone a recorded message on the sales performance of its domestic stores. The message is updated weekly and can be heard by calling (847) 286-6111.
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SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY FOR THE
13 AND 26 WEEKS ENDED JUNE 30, 2001 AND JULY 1, 2000
The following segment discussions exclude non-comparable items.
Retail and Related Services
Retail and Related Services revenues decreased 1.1% to $7.8 billion and 0.7% to $14.6 billion for the 13 and 26 weeks ended June 30, 2001, respectively, from the comparable 2000 periods. Retail and Related Services revenues and related information are as follows:
Revenues: | |||||||||||||||||
Full-line stores (includes sears.com) | $ | 5,478 | $ | 5,652 | -3.1% | $ | 10,373 | $ | 10,595 | -2.1% | |||||||
Specialty stores | 1,727 | 1,638 | 5.4% | 3,120 | 3,008 | 3.7% | |||||||||||
Repair Services and Direct to Customer | 598 | 602 | -0.7% | 1,116 | 1,115 | 0.1% | |||||||||||
Total Retail and Related Services revenues | $ | 7,803 | $ | 7,892 | -1.1% | $ | 14,609 | $ | 14,718 | -0.7% | |||||||
Number of Full-line stores | 861 | 858 | |||||||||||||||
Number of Specialty stores | 2,134 | 2,174 | |||||||||||||||
Total Retail stores | 2,995 | 3,032 | |||||||||||||||
Comparable store sales percentage increase/decrease | -0.9% | 2.7% | -1.2% | 2.7% |
For the 13 week period, Full-line stores revenues decreased 3.1% compared with the second quarter of 2000.
- Hardlines revenues decreased 0.5% in the second quarter of 2001. Revenue increases in appliances and lawn and garden were more than offset by declines in electronics, home office, air conditioners and seasonal sporting goods revenues.
For the 13 week period ended June 30, 2001, Specialty stores revenues increased 5.4% from the comparable 2000 period primarily due to revenue increases in Automotive stores, The Great Indoors, Dealer stores and Hardware stores, which were partially offset by a revenue decline in Commercial Sales. Automotive store revenues were favorably affected by operational improvements as well as the recall of certain Firestone tires. The Great Indoors produced comparable store revenue gains over the 2000 period and added four new stores since second quarter 2000. Sears Dealer stores revenues benefited from 23 net new store openings since second quarter 2000 and comparable store revenue gains over the prior year period. Hardware stores also experienced comparable store revenue gains over the 2000 period.
For the 26 week period ended June 30, 2001, Specialty stores revenues increased 3.7% from the comparable 2000 period primarily due to revenue increases in The Great Indoors, Automotive stores, Dealer stores and Hardware stores, which were partially offset by a decline in Commercial Sales.
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SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY FOR THE
13 AND 26 WEEKS ENDED JUNE 30, 2001 AND JULY 1, 2000
For the 13 week period ended June 30, 2001, revenue increases in Sears Repair Services were offset by a decline in Direct to Customer revenues. For the 26 week period ended June 30, 2001, revenues for Sears Repair Services and Direct to Customer were essentially flat as increases in Sears Repair Services were largely offset by a decline in Direct to Customer.
Retail and Related Services gross margin as a percentage of Retail and Related Services revenues for the second quarter of 2001 improved to 26.7%, an increase of 60 basis points from the second quarter of 2000. The increase is primarily due to improvement within Automotive stores, Full-line stores and Hardware stores. For the 26 week period, Retail and Related Services gross margin was flat.
Retail and Related Services selling and administrative expense as a percentage of Retail and Related Services revenues for the second quarter of 2001 increased 60 basis points from the second quarter of 2000. Lower than anticipated revenues constrained expense leverage. Investment in The Great Indoors also contributed to higher selling and administrative expenses. For the 26 week period, Retail and Related Services selling and administrative expense rate increased 60 basis points.
Retail and Related Services depreciation and amortization expense for the second quarter increased 3.4% or $6 million from the comparable 2000 period. For the 26 week period, Retail and Related Services depreciation and amortization expense increased 0.8% or $3 million.
For the 13 and 26 week periods, operating income declined by $12 million and $89 million, respectively, from the prior year primarily because of lower than anticipated revenues, pressures on expense leverage, and investment in The Great Indoors.
Credit and Financial Products
Credit and Financial Products revenues decreased 0.5% to $1.3 billion and 2.5% to $2.6 billion, respectively, for the 13 and 26 weeks ended June 30, 2001 from the comparable prior year periods. The decrease in revenues in the second quarter was primarily attributable to lower managed portfolio yields partially offset by a 2.3% increase in average credit receivables. The portfolio yield declined in the quarter by 59 basis points primarily reflecting a lower yield on the Sears Card, largely due to lower late fees, as well as promotional introductory rates and the lower annual percentage rate for the Sears Gold MasterCard product launched in the second half of 2000. The Company has notified customers of planned changes to its terms on certain Sears Card and SearsCharge Plus accounts effective in the third quarter of 2001 and anticipates that the new terms will enhance portfolio yields. A summary of Credit information (for the managed portfolio) is as follows:
Sears credit cards as a % of sales | 47.0% | 46.5% | 47.0% | 46.8% | ||||||||
Average account balance (as of June 30, 2001 and July 1, 2000) | $ | 1,174 | $ | 1,163 | ||||||||
Average managed credit card receivables (millions) | $ | 25,831 | $ | 25,244 | $ | 26,141 | $ | 25,700 |
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SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY FOR THE
13 AND 26 WEEKS ENDED JUNE 30, 2001 AND JULY 1, 2000
Credit and Financial Products selling and administrative expense as a percentage of Credit and Financial Products revenues increased to 16.6%, an increase of 150 basis points in the second quarter of 2001 from the comparable 2000 period. The increase was primarily due to the continued rollout of the Sears Gold MasterCard and customer notification costs.
The domestic provision for uncollectible accounts and related information is as follows:
(millions) | ||||||||||||
Provision for uncollectible accounts (1) | $ | 350 | $ | 321 | $ | 684 | $ | 692 | ||||
Net credit charge-offs as a percentage of average managed credit card receivables (2) | 5.42% | 5.09% | 5.23% | 5.39% |
Domestic managed credit card receivables - delinquency rate (2) | 7.26% | 7.50% | 7.56% | 7.47% | 7.15% | ||||||||||
Allowance for uncollectible accounts (3) | $ | 1,089 | $ | 567 | $ | 649 | $ | 624 | $ | 725 | |||||
Allowance % of domestic on-book credit card receivables | 4.19% | 4.14% | 4.03% | 4.18% | 4.46% |
balance sheet.
(2) The net charge-off and delinquency rates are affected by seasonality, periodic sales of uncollectible accounts to third
parties, bankruptcy trends and other general economic factors.
(3) June 30, 2001 balances reflect the additional provision of $522 million recorded in April 2001.
The domestic provision for uncollectible accounts increased by $29 million to $350 million for the 13 weeks ended June 30, 2001 from the comparable prior year period. The increase in the provision for the quarter is due to an increase in the charge-off rate to 5.42% from 5.09% in the prior year largely reflecting higher credit customer bankruptcy filings in Spring, 2001. For the 26 weeks ended June 30, 2001, the domestic provision for uncollectible accounts decreased 1.2% to $684 million from the comparable prior year period.
The domestic allowance for uncollectible accounts increased to $1,089 million from $567 million at the end of first quarter 2001. The increase reflects the one-time, non-cash, pre-tax charge of $522 million recorded in the second quarter in conjunction with the Company's adoption of SFAS No. 140 to re-establish an allowance for uncollectible accounts related to approximately $8.1 billion of previously sold receivable balances and the $3.9 billion of receivables that were previously accounted for as securities.
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SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY FOR THE
13 AND 26 WEEKS ENDED JUNE 30, 2001 AND JULY 1, 2000
Interest expense is discussed within the Credit and Financial Products segment since the majority of the Company's interest expense is allocated to this segment. Interest expense is combined with the funding costs on receivables sold through securitizations to represent total funding costs as follows:
Consolidated interest expense (1) | $ | 404 | $ | 310 | $ | 716 | $ | 626 | ||||
Funding cost on securitized receivables(1) | -- | 102 | 124 | 205 | ||||||||
Total funding costs | $ | 404 | $ | 412 | $ | 840 | $ | 831 |
Total second quarter funding costs decreased by $8 million primarily due to lower rates. The average funding rate was 42 basis points below last year's quarter primarily due to lower prevailing interest rates for commercial paper and securitized receivables.
For the 13 week period, operating income from Credit and Financial Products excluding non-comparable items and securitization income declined by $44 million primarily due to the higher provision for uncollectible accounts and higher operating expenses. For the 26 week period, operating income from Credit and Financial Products excluding non-comparable items and securitization income declined by $74 million primarily due to the combination of lower revenues and higher operating expenses.
Corporate and Other
Revenues from the home services businesses included in the Corporate and Other segment increased by 20.4% to $112 million and 18.8% to $196 million, respectively, for the 13 and 26 weeks ended June 30, 2001 from the comparable prior year periods. Segment operating loss worsened $13 million and $7 million, respectively, for the 13 and 26 week periods, with improved profit from the segment's home services businesses partially offsetting higher corporate office expenses. Corporate headquarters spending increased $22 million and $23 million, respectively, for the 13 and 26 week periods due to higher second quarter consulting expenses, information systems expense and payroll related costs. The increase in consulting expenses relates to the Company's review of its full-line store strategy.
Sears Canada
Sears Canada revenues for the second quarter of 2001 increased 4.5% from the same period a year ago as sales increases from new stores were partially offset by a four percent decline in the value of the Canadian dollar relative to the U.S. dollar. For the 26 week period, revenues increased 3.6%.
Sears Canada gross margin as a percentage of Sears Canada merchandise and services revenues decreased 280 basis points in the second quarter of 2001 from the comparable prior year quarter. This decline is primarily due to the increased buying and occupancy costs due to additional square footage from the Eatons stores, as well as increased promotional activity to clear out Spring inventories. For the 26 week period, Sears Canada gross margin decreased 150 basis points.
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SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY FOR THE
13 AND 26 WEEKS ENDED JUNE 30, 2001 AND JULY 1, 2000
Sears Canada selling and administrative expense as a percentage of Sears Canada revenues improved 90 basis points in the second quarter of 2001 from the second quarter of 2000. SG&A as a percent of revenues decreased primarily due to the absence of prior year Eatons integration costs. For the 26 week period, Sears Canada selling and administrative rate increased 60 basis points.
Operating income declined by $19 million in the second quarter of 2001 from the second quarter of 2000 primarily due to increased markdowns and higher expenses to support stores opened in 2000. For the 26 week period, Sears Canada operating income declined by $47 million primarily due to higher expenses, as well as increased markdowns.
Financial Condition
(millions) | |||||||||
Domestic | |||||||||
Managed credit card receivables | $ | 25,966 | $ | 25,144 | $ | 27,001 | |||
Securitized balances sold | -- | (6,893) | (7,834) | ||||||
Retained interest in transferred credit card receivables (1) | -- | (1,985) | (3,051) | ||||||
Other customer receivables | 61 | 58 | 59 | ||||||
Domestic owned credit card receivables | 26,027 | 16,324 | 16,175 | ||||||
International credit card receivables | 1,588 | 1,557 | 1,828 | ||||||
Consolidated on-book credit card receivables | 27,615 | 17,881 | 18,003 | ||||||
Less: Allowance for uncollectible accounts | 1,129 | 756 | 686 | ||||||
Credit card receivables, net | $ | 26,486 | $ | 17,125 | $ | 17,317 |
Domestic managed credit card receivables increased $822 million from the second quarter of 2000 as growth from the Company's new Gold MasterCard product was partially offset by lower Sears Card receivables. The Gold MasterCard product, which was launched in the second quarter of 2000, had $2.3 billion in outstanding balances at June 30, 2001. Compared to 2000 year-end, domestic managed credit card receivables decreased $1.0 billion. This decrease in managed credit card receivables is largely due to seasonal factors which contributed to the decline in Sears Card receivables, and were partially offset by growth in Gold MasterCard receivables.
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SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY FOR THE
13 AND 26 WEEKS ENDED JUNE 30, 2001 AND JULY 1, 2000
As of June 30, 2001, consolidated merchandise inventories on the first-in, first-out (FIFO) basis were $6.2 billion, compared with $6.3 billion at July 1, 2000 and $6.2 billion at December 30, 2000. The decrease as compared with last year's second quarter primarily reflects lower domestic hardlines and softlines inventories. Sears Canada inventory increased due to the acquisition of Eaton's stores and continued revenue growth.
Total funding for the Company at June 30, 2001 was $25.4 billion compared with $24.0 billion a year earlier primarily resulting from increases in managed credit card receivable balances. Total funding includes debt recorded on the balance sheet and, prior to this quarter, investor certificates related to credit card receivables sold through securitizations as follows:
(millions) | 2001 | 2000 | 2000 | ||||||
Short-term borrowings | 3,326 | $ | 2,557 | $ | 4,280 | ||||
Long-term debt and capitalized lease obligations | 22,113 | 14,583 | 13,580 | ||||||
Securitized balances sold | -- | 6,893 | 7,834 | ||||||
Total funding | 25,439 | $ | 24,033 | $ | 25,694 |
The Company accesses a variety of capital markets to preserve flexibility and diversify its funding sources. The primary funding sources utilized include unsecured commercial paper, medium term notes, senior debt and credit card receivable securitizations.
Liquidity
Based upon the expected cash flow to be generated from future operations and the Company's ability to cost-effectively access multiple sources of funding, the Company believes sufficient resources will be available to maintain its planned level of operations, capital expenditures, dividends and share repurchases for the foreseeable future.
Outlook
The Company has announced that it is conducting a strategic review of its Full-line stores' product offerings and operations. The Company expects to complete its strategic review as well as an assessment of its Home Office structure in the third and fourth quarters of 2001. It is management's expectation that the outcome of the strategic review and Home Office review will be actions that may necessitate additional special charges, the amount and timing of which cannot yet be determined.
Cautionary Statement Regarding Forward-Looking Information
This Report contains forward-looking statements, including the Outlook. The statements are based on assumptions about the future, which are subject to risks and uncertainties, such as competitive conditions in retail, changes in consumer confidence, changes in interest rates, delinquency and charge-off trends in the credit card receivables portfolio, consumer reactions to changes in credit terms, the pacing of The Great Indoors development, the future course of HomeLife's bankruptcy and any related proceedings and costs, the outcomes of the Company's strategic review and Home Office review and normal business uncertainty. In addition, Sears typically earns a disproportionate share of its operating income in the fourth quarter due to seasonal buying patterns, which are difficult to forecast with certainty. The Company believes its forward-looking statements are reasonable but cautions that actual results could differ materially. The Company intends these forward-looking statements to speak only at the time of this report and does not undertake to revise or confirm them as more information becomes available.
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SEARS, ROEBUCK AND CO.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The nature of market risks faced by the Company at June 30, 2001 are disclosed in the Company's Form 10-K for the year ended December 30, 2000. As of June 30, 2001, 44% of the Company's funding portfolio was variable rate (including current maturities of fixed-rate long-term debt that will reprice in the next 12 months and the effect of derivative financial instruments). Based on the Company's funding portfolio as of June 30, 2001, which totaled $25.4 billion, a 100 basis point change in interest rates would have affected pretax funding cost by approximately $112 million per annum. The calculation assumes the funding portfolio balance at June 30, 2001, remains constant for a 12 month period and that the 100 basis point change occurs at the beginning of the period.
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SEARS, ROEBUCK AND CO.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-23-
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
Warren L. Batts, Donald J. Carty, Alan J. Lacy, and Hugh B. Price, were elected to Class A of the Board of Directors for three year terms expiring at the 2004 annual meeting of shareholders. The shareholders approved the recommendation of the Audit Committee that Deloitte & Touche LLP be appointed auditors for 2001. The shareholders approved the material terms of the performance goals under the Annual Incentive Compensation Plan. The Shareholders also approved the material terms of the performance goals under the Long-Term Incentive Compensation Plan. The votes on these matters were as follows:
Warren L. Batts | ||||
Donald J. Carty | ||||
Alan J. Lacy | ||||
Hugh B. Price |
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The Registrant filed a Current Report on Form 8-K dated April 19, 2001 to report, under Item 5, on the Registrant's analyst meeting and, under Item 7, to file excerpts from the presentation for the meeting (attached as Exhibit 99.1 thereto) and a first-quarter earnings release (attached as Exhibit 99.2 thereto).
The Registrant filed a Current Report on Form 8-K dated April 20, 2001, to report, under Item 5, that the Registrant made available the financial schedules attached as Exhibit 99 thereto.
SIGNATURE
Sears, Roebuck and Co. (Registrant) | ||
August 9, 2001 | By | /s/ Glenn R. Richter |
Glenn R. Richter Senior Vice President - Finance (Principal Accounting Officer and duly authorized officer of Registrant) |
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E-1
EXHIBIT INDEX
SEARS, ROEBUCK AND CO.
13 AND 26 WEEKS ENDED JUNE 30, 2001 AND JULY 1, 2000
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 14, 2001 (incorporated by reference to Exhibit 3.(ii) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 2000). |
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. | Computation of ratio of income to fixed charges for Sears and consolidated subsidiaries for each of the five years ended December 30, 2000 and for the six-month period ended June 30, 2001. |
*15. | Acknowledgement of awareness from Deloitte & Touche LLP, dated August 2, 2001, concerning unaudited interim financial information. |
*Filed herewith.