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 MARCH 30, 1996
( ) 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 April 30, 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.
SEARS DC CORP.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 30, 1996
PART I. FINANCIAL INFORMATION: Page No.
Item 1. Financial Statements
Statements of Financial Position (unaudited)
March 30, 1996 and March 31, 1995
and December 30, 1995 1
Statements of Income (unaudited)
Three Months ended March 30, 1996
and March 31, 1995 2
Statements of Cash Flows (unaudited)
Three Months ended March 30, 1996
and March 31, 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
- 1 -
SEARS DC CORP.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
March 30, March 31, December 30,
millions 1996 1995 1995
--------- --------- ---------
Assets
Notes of Sears $ 1,139.9 $ 1,574.8 $ 1,258.1
Cash and invested cash 0.1 0.1 0.1
Accrued interest and
other assets 1.9 3.2 2.2
--------- --------- ---------
Total assets $ 1,141.9 $ 1,578.1 $ 1,260.4
========= ========= =========
Liabilities
Medium-term notes $ 1,090.2 $ 1,515.4 $ 1,228.7
Accrued interest and
other liabilities 46.9 58.3 27.0
--------- --------- ---------
Total liabilities 1,137.1 1,573.7 1,255.7
--------- --------- ---------
Stockholder's equity
Capital stock,
par value $1.00 per share
1,000 shares authorized and
outstanding - - -
Retained income 4.8 4.4 4.7
--------- --------- ---------
Total stockholder's equity 4.8 4.4 4.7
--------- --------- ---------
Total liabilities and
stockholder's equity $ 1,141.9 $ 1,578.1 $ 1,260.4
========= ========= =========
See notes to financial statements.
- 2 -
SEARS DC CORP.
STATEMENTS OF INCOME
(unaudited)
Three Months Ended
March 30, March 31,
millions 1996 1995
------- -------
Revenues
Earnings on notes of Sears $ 25.9 $ 31.7
------- -------
Total revenues 25.9 31.7
------- -------
Expenses
Interest and related expenses 25.7 31.5
------- -------
Total expenses 25.7 31.5
------- -------
Income before income taxes 0.2 0.2
Income taxes 0.1 0.1
------- -------
Net income $ 0.1 $ 0.1
======= =======
Ratio of earnings
to fixed charges 1.005 1.005
See notes to financial statements.
- 3 -
SEARS DC CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 30, March 31,
millions 1996 1995
--------- ---------
Cash flows from operating activities
Net income $ 0.1 $ 0.1
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 20.2 28.1
-------- --------
Net cash provided by operating activities 20.3 28.2
-------- --------
Cash flows from investing activities
Decrease (increase) in notes of Sears 118.2 (22.2)
-------- --------
Net cash provided by (used in) investing
activities 118.2 (22.2)
-------- --------
Cash flows from financing activities
Repayments of medium-term notes (138.5) (6.0)
-------- --------
Net cash (used in) financing activities (138.5) (6.0)
-------- --------
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
======== ========
See notes to financial statements.
- 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. In the last quarter of 1992, SDC stopped selling medium-term notes and
in March 1993, SDC discontinued issuing commerical paper.
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.
- 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.
SDC discontinued the sale of medium-term notes in the last quarter of 1992.
The $1.09 billion in outstanding medium-term notes as of March 30, 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 18.4% to $25.7 million for the three months ended
March 30, 1996 from $31.5 million for the three months ended March 31, 1995.
Earnings covered fixed charges 1.005 times for the three months ended March 30,
1996 and March 31, 1995.
- 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
- 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: /s/ Paul D. Melancon
-----------------------
Paul D. Melancon
Vice President and Controller
(authorized officer of
Registrant)
May 14, 1996
E-1
EXHIBIT INDEX
SEARS DC CORP.
Quarter Ended March 30, 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 date schedule.
28 Quarterly Report on Form 10-Q of Sears, Roebuck and Co.,
for the quarter ended March 30, 1996. [Incorporated by
reference, File No. 1-416]