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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
For Annual and Transition Reports pursuant to Sections 13 or
15(d) of the Securities Exchange Act of 1934
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 1999
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
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of each class Which Registered
------------------- ----------------------
Common Shares, par value $0.75 per share New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Extendable Notes due April 15, 1999 New York Stock Exchange
9-1/2% Notes due June 1, 1999 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
On January 29, 1999, the Registrant had 383,478,878 common
shares outstanding. Of these, 324,906,480 common shares, having
an aggregate market value (based on the closing price of these
shares as reported in a summary of composite transactions in The
Wall Street Journal for stocks listed on the New York Stock
Exchange on January 29, 1999) of approximately $13.04 billion,
were owned by shareholders other than (i) directors and executive
officers of the Registrant and (ii) any person known by the
Registrant as of the date thereof to beneficially own five
percent or more of Registrant's common shares. (Information
relating to five percent owners is based upon most recent filings
made by such owners with the Securities and Exchange Commission.)
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Indicate by check mark whether the 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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Documents Incorporated By Reference
Parts I and II of this Form 10-K incorporate by reference
certain information from the Registrant's 1998 Annual Report to
Shareholders (the "1998 Annual Report"). Part III of this Form
10-K incorporates by reference certain information from the
Registrant's definitive Proxy Statement, dated
March 26, 1999, for its Annual Meeting of Shareholders to be held
on May 13, 1999 (the "1999 Proxy Statement").
2
PART I
Item 1. Business
Sears, Roebuck and Co. ("Sears") originated from an
enterprise established in 1886 and was incorporated under the
laws of New York in 1906. Its principal executive offices are
located at 3333 Beverly Road, Hoffman Estates, Illinois. Sears
(together with its consolidated subsidiaries, the "Company") is a
multi-line retailer that provides a wide array of merchandise and
services through five segments - Retail, Services, Credit,
Corporate and International. The Company is among the largest
retailers of merchandise and services in the world.
The Company's domestic segments in the United States
and Puerto Rico are Retail (comprised of Full-line Stores and
Specialty Stores), Services (comprised of Home Services and Sears
Direct), Credit (comprised of the domestic credit operations) and
Corporate (comprised of activities which are of a holding company
nature).
The International segment consists of similar retail,
services, credit and corporate operations conducted through a
majority-owned subsidiary in Canada.
For further information, see "Retail," "Services,"
"Credit," "Corporate" and "International" below and "Management's
Analysis of Consolidated Operations" and "Management's Analysis
of Consolidated Financial Condition" beginning on pages 19 and
27, respectively, of the 1998 Annual Report, incorporated herein
by reference in response to Item 7 hereof.
________________________________
Information regarding revenues, operating income and
assets of the Company's Retail, Services, Credit, Corporate and
International segments for each of the three fiscal years ended
January 2, 1999, January 3, 1998 and December 28, 1996 is in Note
15 of the Notes to Consolidated Financial Statements on page 41
of the 1998 Annual Report, incorporated herein by reference in
response to Item 8 hereof. Information on the components of
revenues is included in the "Management's Analysis of
Consolidated Operations" beginning on page 19 of the 1998 Annual
Report, incorporated herein by reference in response to Item 7
hereof.
The Company employs approximately 324,000 people
worldwide.
3
RETAIL
The Company's Retail operations consist of the
following:
Full-line Stores
At January 2, 1999, the Full-line Store operations
consist primarily of mall-based retail stores selling the
following categories of merchandise:
- Softlines, which consist of women's, children's
and men's apparel and home fashions, and are positioned as the
price/value leader among mall-based stores.
- Hardlines, which consist of appliances,
electronics and computers for the home, home improvement
products, sporting goods, lawn and garden equipment and seasonal
items. The Hardlines departments compete with off-the-mall
competitors, which are typically specialty stores in the same
product category.
- Licensed Businesses, which consist of third
party concessions primarily operated within the Full-line Stores,
include portrait studios, optical and other licensees.
Specialty Stores
At January 2, 1999, the Specialty Store operations
consist of:
- Home Stores, which are comprised of specialty
store formats designed to offer the Company's hardlines
merchandise through outlets other than the Full-line Stores. The
specific store formats are as follows:
- 653 Sears Dealer Stores that are
primarily independently owned and operated and offer KENMORE and
other major national brand appliances and electronics for the
home, CRAFTSMAN tools, lawn and garden equipment and DIEHARD
batteries. Dealer Stores are primarily located in smaller, rural
markets.
- 265 free-standing Hardware stores,
operating under the name of Sears Hardware and Orchard Supply
Hardware, that offer convenient neighborhood locations and Sears
proprietary brands such as CRAFTSMAN tools, as well as a wide
assortment of national brands and other home repair products.
- 128 Sears HomeLife furniture stores which
offer popular furniture brands at value prices and are located
within select major metropolitan markets. There are 100
freestanding HomeLife stores and an additional 28 located within
Sears Full-line Stores. Effective January 30, 1999, Sears sold
its HomeLife business.
- - The Great Indoors, which currently has
one test store in operation, is a home decorating and remodeling
superstore.
- - Commercial Sales, which primarily targets home
builders, remodelers and property managers for appliance
purchases, as well as vocational schools,
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factory maintenance and service companies for industrial tool
purchases. Commercial Sales has also introduced the Appliance
Select program in 64 Full-line Stores. This program targets the
new home buyer and offers a full selection of KENMORE and other
major national brand kitchen and home appliances.
- Auto Stores, which consists of 789 Sears Auto
Centers primarily located at the mall-based Full-line Stores and
347 NTB National Tire & Battery stores. These stores sell and
install tires, DIEHARD and other automotive batteries and related
goods and services. The Auto Stores, which are the country's
largest seller of tires and auto batteries, are positioned to
compete effectively with the strongest competitors that
specialize in tires, batteries and related services. In November
1998, Sears sold its Parts Group, consisting primarily of the
Company's Western Auto and Parts America stores.
SERVICES
At January 2, 1999, the Services operations consist of:
Home Services, which includes:
- Product Services (repair services), which
provides product repair on all major brands of appliances,
consumer electronics and heating and air conditioning systems,
regardless of where purchased.
- Service Contracts, which provide extended
warranty coverage through maintenance agreements.
- Installed Home Improvements, which includes the
following services provided by Sears associates and outside
contractors:
- Home Improvement Services, which sells
and installs siding, windows, roofing, cabinet refacing and other
home improvements and provides services such as pest control,
carpet cleaning, home security and plumbing services.
- Air Conditioning and Heating Systems,
which sells and installs heating, ventilation and air
conditioning for homes.
- Installation Services, which installs
water heaters, dishwashers and other products purchased at Sears
retail stores.
Sears Direct, which includes:
- Direct Response, which markets various goods and
services through multiple media, includes specialty catalogs,
insurance (credit protection and traditional life and health
products), clubs and services and impulse and continuity
merchandise. Sears Shop at Home Services, Inc., a wholly-owned
subsidiary of Sears, licenses to third-party distributors of
specialty catalogs and merchandisers of shop-at-home services use
of the Sears name and customer lists for use in marketing
products to Sears customers.
5
- Sears Online, which consists of the Company's online
businesses.
The pricing strategy for the Retail and Services businesses
is to offer customers good values every day, as well as to have
special sales events and promotions offering additional values.
Through these operations, the Company offers a mixture of
national brands and high quality private label merchandise.
CREDIT
The products the Company's domestic credit operations
("Credit") offer make it more attractive for customers to
purchase goods and services from the Retail and Services
businesses. As of January 2, 1999, Credit had approximately 26
million active customer credit accounts (accounts with balances
as of the beginning or end of December 1998) with an average
balance of $1,076. Sears Card, the traditional credit card,
accounted for approximately 90% of total receivables. There were
approximately 42 million Sears Card customers with accounts that
carried a balance during any month in 1998.
Sears stores also accept third party credit and debit cards
such as VISA, MasterCard, American Express and Discover Card.
Sears Card sales as a percentage of total sales in Full-line
Stores and the majority of the Specialty Store formats was
approximately 51.6%, 55.1% and 56.6% for fiscal years 1998, 1997
and 1996, respectively. Since August 1, 1993, when Sears began
to accept VISA, MasterCard and American Express cards at all
Sears stores, the Company has focused intensely on marketing and
other initiatives that are designed to maintain the penetration
of Credit products in all sales and service channels, as well as
to increase the revenues of the Retail and Services businesses.
Sears has an ongoing securitization program through which a
wholly-owned subsidiary of Sears transfers a portion of the
Company's domestic customer receivable balances to a master trust
(the "Master Trust") that issues credit account pass-through
certificates to public and private investors. To the extent the
pass-through certificates are sold to third parties, the related
transferred balances qualify as sales for financial statement
purposes and as such the receivables are removed from the
Company's consolidated balance sheet. The balance of the
receivables in the Master Trust for which pass-through
certificates are not sold to third parties, is presented as
retained interest in transferred credit card receivables.
Pursuant to contractual agreements, Sears remains the servicer on
the accounts and receives a fee for the services performed. See
"Management's Analysis of Consolidated Operations," "Management's
Analysis of Consolidated Financial Condition" and Notes
1 and 8 of the Notes to Consolidated Financial Statements
beginning on pages 19, 27, 32 and 38, respectively, of the 1998
Annual Report, incorporated herein by reference in response to
Items 7 and 8 hereof.
Credit's operations are subject to federal and state
legislation and regulation. From time to time, such legislation,
as well as competitive conditions, may affect, among other
things, credit card finance charges. While the Company cannot
predict the effect of future competitive conditions and
legislation or the measures the Company might take in response
thereto, a significant reduction in the finance charges imposed
by Credit would have an adverse effect on the Company. In
addition, changes in general U.S. economic conditions, including,
but not limited to, higher interest rates and
increases in delinquencies, charge-offs and personal bankruptcies
could have an adverse effect on the Company.
6
Sears National Bank (the "Bank"), a wholly-owned subsidiary
of Sears based in Arizona, is a limited purpose credit card bank
engaging in credit card operations. The Bank is subject to
certain other restrictions applicable to credit card banks under
federal law, as well as Arizona credit card lending guidelines.
The Bank originates Sears Card accounts in all fifty states.
Certain of the Company's other customer credit accounts have also
been transferred to or are being originated by the Bank.
CORPORATE
Corporate operations include activities that are of an
overall holding company nature, primarily consisting of
administrative activities, the costs of which are not allocated
to the Company's businesses.
INTERNATIONAL
The Company conducts similar retail, services, credit and
corporate operations in Canada through Sears Canada Inc., a
consolidated, 54.7% owned subsidiary of Sears ("Sears Canada").
Sears Canada is the largest single full-line retailer of general
merchandise and home-related services in Canada. Sears Canada
operates 109 Full-line Stores, 20 Sears Furniture Stores and 12
outlet stores, and has 1,898 independent catalog merchant agents
operating under local ownership, 93 independently operated dealer
stores and seven active warehouses. During fiscal 1998, Sears
Canada opened 12 new Sears Furniture Stores and 14 dealer stores
and opened four new and relocated two outlet stores. Sears
Canada currently plans to open one new and relocate one Full-line
Store during fiscal 1999, and continues to seek opportunities for
expansion in desirable locations. In 1999, subject to the
availability of suitable store locations on appropriate terms,
Sears Canada plans to open ten new and relocate two Sears
Furniture Stores, open 17 dealer stores and open 113 catalog
merchant agent locations, as well as renovate 17 Full-line
Stores. As of January 2, 1999, Sears Canada employed
approximately 42,000 full and part-time employees.
Sears Canada has an ongoing securitization program pursuant
to which undivided co-ownership interests in its pool of customer
charge account receivables are sold to trusts established to
issue debt and trust units (representing the residual equity
interest in the trust) to third parties. Effective January 1,
1997, these securitizations do not qualify as sales under United
States generally accepted accounting principles. Therefore, the
customer charge account receivables are maintained on the
Company's balance sheet and related proceeds are recorded as
debt. Sears Canada acts as servicer of the customer charge
account receivables.
Strategic Initiatives
The Company's strategic initiatives form the framework for
competing in the continually changing retail landscape. The
Company's objective is to implement five strategic initiatives.
First, make the Company a compelling place to shop anytime
and anywhere. The Company will position its businesses to create
a multi-channel retailer of merchandise and services, reaching
customers through its Full-line Stores, Specialty Stores,
catalogs and the Internet. The Company will strive to serve all
customers throughout all stages of their lives via any delivery
channel they select. The Company's ability to sell, finance,
deliver, install and service a wide array of consumer products
help make it a compelling place to shop anytime and anywhere.
Second, the Company will focus on winning with the
customers by communicating and delivering the Company's unique
value proposition. The Company offers a competitive price and
7
strong assortment of national brands complemented with
outstanding proprietary brands such as KENMORE and CRAFTSMAN.
The Company combines this value with a high level of customer
service, excellent credit offerings, installation and service.
This value proposition should retain existing customers and also
attract new customers into a long-term relationship with Sears.
Third, the Company will continue to stress a localized
focus via the utilization of its customer data warehouse. With
nearly 60 million households in the data warehouse, the Company
can execute merchandising and marketing programs on a highly
targeted basis.
Fourth, the Company will further emphasize cost and asset
productivity. This initiative involves ongoing improvements in
cost containment and inventory leverage throughout the Company.
It also involves the allocation and redeployment of assets to
uses that enhance shareholder value.
Fifth, the Company will continue to build a winning
culture. This will be accomplished by focusing on associate
satisfaction, reducing turnover and increasing diversity in the
workforce.
Sources of Merchandise
At January 2, 1999, the Retail and Services businesses
purchased goods primarily from approximately 4,800 domestic
suppliers, most of whom have been suppliers for many years. For
further information concerning the Company's requirements of Year
2000 readiness for its sources, see "Management's Analysis of
Financial Condition - Year 2000" beginning on page 29 of the 1998
Annual Report incorporated herein by reference in response to
Item 7 hereof.
Seasonality
Due to holiday buying patterns, merchandise sales are
traditionally higher in the fourth quarter than in the other
quarterly periods and the Company typically earns a
disproportionate share of operating income in the fourth quarter.
Similarly, sales and operating income are generally lowest in the
first quarter.
Trademarks
The name "SEARS" is used extensively in the Company's
domestic operations and other businesses. The Company's right to
the name "SEARS" domestically continues so long as it uses the
name. The name is also the subject of numerous renewable United
States and foreign trademark registrations. This trademark is
material to the Company's domestic operations and other related
businesses.
The Company sells private label merchandise under a number
of brand names which are important to its domestic operations.
Sears KENMORE(r), CRAFTSMAN(r) and DIEHARD(r) brands are among
the strongest private label brands in retailing. These names are
the subject of numerous renewable United States and foreign
trademark and service mark registrations. Other important and
well-recognized Company trademarks and service marks include
BRAND CENTRAL(r), CIRCLE OF BEAUTY(tm), CANYON RIVER BLUES(r),
WISHBOOK(r), NTB(r), ORCHARD(r) and the "SIDES" family of marks
(e.g. The Softer Side of Sears). The Company's right to all of
its brand names continues so long as it uses the names.
8
Competition
The domestic retail, services and credit businesses are
highly competitive. The principal factors which differentiate
competitors include convenience of shopping facilities, quality
of merchandise, competitive prices, brand names and availability
of services such as credit, product delivery, repair and
installation. The Company believes it is able to compete very
effectively despite strong competitive pressures in recent years.
Employees
The Company employs approximately 282,000 people in the
United States and Puerto Rico, and 42,000 people in Canada,
including part-time employees.
FINANCE SUBSIDIARIES
To meet certain capital requirements of its businesses,
Sears borrows on a short-term basis through the issuance of notes
to, and from time to time sells receivable balances to, Sears
Roebuck Acceptance Corp. ("SRAC"), a wholly-owned finance
subsidiary. SRAC obtains funds primarily by issuing commercial
paper and through intermediate-term loans, medium-term notes and
discrete underwritten debt. Sears and SRAC have also borrowed
through Sears Overseas Finance N.V. ("SOFNV"), a wholly-owned
international finance subsidiary, which has obtained funds from
the issuance of long-term debt, primarily in Europe. All of the
remaining SOFNV debt matured in 1998 and no future borrowings are
planned.
Sears DC Corp. ("SDC"), a wholly-owned finance subsidiary
of Sears, was formed to borrow in domestic and foreign debt
markets and lend the proceeds of such borrowings to Sears and
certain of its direct and indirect subsidiaries in exchange for
their unsecured notes. SDC raised funds through the sale of its
medium-term notes and direct placement of commercial paper with
corporate and institutional investors. The only outstanding debt
of SDC is two series of outstanding medium-term notes. SDC does
not plan to issue additional debt.
Substantially all the debt and related interest expense of
SDC, SRAC and SOFNV support the Company's credit card receivables
portfolio.
In addition, various direct and indirect subsidiaries of
Sears have engaged in securitization programs in which credit
card receivables are sold in public or private transactions. See
"Credit," and "International," beginning on pages 6 and 7
hereof, respectively, and "Management's Analysis of Consolidated
Operations," "Management's Analysis of Consolidated Financial
Condition" and Notes 1 and 8 of the Notes to Consolidated
Financial Statements beginning on pages 19, 27, 32 and 38,
respectively, in the 1998 Annual Report, incorporated herein by
reference to Items 7 and 8 hereof.
RECENT DEVELOPMENTS
On March 16, 1999, the Company announced the realignment of
certain of its businesses. The Auto Stores will become part of
the Home Stores group. Additionally, the Sears Direct business
will be divided and realigned; The specialty catalog business
will move to the Marketing organization, the direct response
business will move to the Credit organization and the Sears
Online business will move to the Home Services organization. For
additional information concerning the realignment, see Exhibit
99. (iv) hereto, which is incorporated herein by reference.
9
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
Certain statements made in this Annual Report on Form 10-K
are forward looking statements made in reliance on the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. As such, they involve risks and uncertainties that
could cause actual results to differ materially. The
Company's forward looking statements are based on assumptions
about many important factors, including ongoing competitive
pressures in the retail industry, changes in consumer spending,
general North American economic conditions (such as interest
rates and consumer confidence) and normal business uncertainty.
While the Company believes that its assumptions are reasonable,
it cautions that it is impossible to predict the impact of
certain factors which could cause actual results to differ
materially from expected results.
10
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names of the executive
officers of the Company, the current positions and offices with
the Company held by them, the date they first became officers of
the Company and their current ages:
Date First
Became
Name Position Officer Age
- ---- -------- ---------- -----
Arthur C. Martinez Chairman of
the Board of
Directors, President
and Chief Executive
Officer 1992 59
Paul A. Baffico President,
Automotive Group 1992 52
James R. Clifford President and Chief
Operating Officer,
Full-Line Stores 1993 53
Mark A. Cohen Executive Vice
President, Marketing 1998 50
Anastasia D. Kelly Executive Vice President,
General Counsel
and Secretary 1999 49
Alan J. Lacy Chief Financial Officer
and President, Credit 1994 45
Robert L. Mettler President, Merchandising
- Full Line Stores 1993 58
Gerald N. Miller Senior Vice President,
Chief Information
Officer 1995 51
William G. Pagonis Executive Vice President,
Logistics 1993 57
William L. Salter President, Home Stores 1995 55
John T. Sloan Senior Vice President,
Human Resources 1996 47
Richard J. Srednicki President, Sears
Home Services 1998 51
Allan B. Stewart President, Stores -
Full Line Stores 1984 56
Jane J. Thompson President, Sears Direct 1988 47
- --------------------
Messrs. Martinez, Baffico, Clifford, Mettler, Miller,
Pagonis, Salter and Stewart and Ms. Thompson have held the
positions set forth in the above tables for at least the last
five years or have served the Company in various executive or
administrative capacities for at least that length of time. The
positions held by the remaining executive officers for such five-
year period are as follows:
Mr. Cohen has been Executive Vice President, Marketing
since January 1999. He joined Sears in February 1998 as Senior
Vice President, Cosmetics, Accessories, Fine Jewelry, Footwear
and Home Fashions. Prior to Sears, he had been Chairman and
Chief Executive Officer of Bradlees, Inc., which through its
subsidiary operates discount department stores, since 1994 and
Chairman and Chief Executive Officer of Lazarus Department
Stores, Inc., a division of Federated Department Stores, Inc.,
from 1988-1994.
Ms. Kelly joined Sears as Executive Vice President, General
Counsel and Secretary in March 1999. Prior to Sears, she had
been Senior Vice President of Fannie Mae, a financial services
company, since 1995 and had been Fannie Mae's General Counsel and
Secretary since 1996. Prior to Fannie Mae, she was a partner in
the law firm of Wilmer, Cutler & Pickering.
Mr. Lacy has been Chief Financial Officer since August 1998
and President, Credit since December 1997. Effective March 22,
1999, the Registrant has named Julian Day its Executive Vice
President and Chief Financial Officer. From September 1995 until
December 1997, Mr. Lacy was Executive Vice President and Chief
Financial Officer. He joined Sears in December 1994 as Senior
Vice
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President, Finance, of the Merchandise Group. Prior to joining
Sears, he had been Vice President, Financial Services and
Systems, of Philip Morris Companies Inc. and President of Philip
Morris Capital Corporation since 1993.
Mr. Sloan has been Senior Vice President, Human Resources
since April 1998. He joined Sears in September 1996 as Vice
President, Human Resources, Mall Store Operations. Prior to
joining Sears, he had been Senior Vice President, Administration,
of Tribune Company, a diversified media company, since 1993.
Mr. Srednicki joined Sears in June 1998 as President, Sears
Home Services. Prior to joining Sears, he had been President and
Chief Executive Officer, Universal Card Services, of AT&T Corp.
from 1997 to 1998. From 1983 to 1996, he was a Business Manager
of Citicorp with responsibility for Citibank Germany.
Sears recently announced the following executive changes:
Effective March 22, 1999, Julian Day has been named Executive
Vice President and Chief Financial Officer. Prior to joining
Sears, he had been executive vice president and chief financial
officer of Safeway, Inc. Mr. Lacy will continue as President,
Credit. On March 16, 1999, the Company announced that Ms.
Thompson is leaving the Company and Mr. Baffico is retiring from
the Company.
12
Item 2. Properties
The Company's principal executive offices are located
on a 200-acre site owned by the Company at Prairie Stone, in
Hoffman Estates, Illinois. The complex consists of six
interconnected office buildings totaling approximately two
million gross square feet of office space.
The following table sets forth information concerning
stores operated by the Company's domestic Retail operations.
Full-line Auto Stores Home Stores
Stores Tire Parts HomeLife(a)(b) Hardware Dealer Other(c) Total
--------- ---- ----- -------- -------- ------ ----- -----
Stores at
January 2, 1999
Owned 470 637 - 32 14 1 18 1,172
Leased (d) 375 499 - 68 251 - 26 1,219
Independently
Owned and
Operated Dealer
Stores - - - - - 652 - 652
Total Stores at
Fiscal Year-End
1995 806 1,031 582 97 108 375 71 3,070
Stores opened during
Fiscal 1996 27 40 67 12 136(e) 120 9 411
Stores closed during
Fiscal 1996 (12) (13) (22) (2) (15) (26) (20) (110)
1996 821 1,058 627 107 229 469 60 3,371
Stores opened during
Fiscal 1997 21 68 90 3 33 124 - 339
Stores closed during
Fiscal 1997 (9) (20) (102) (9) (7) (17) (16) (180)
1997 833 1,106 615 101 255 576 44 3,530
Stores opened during
Fiscal 1998 23 50 43 4 18 101 1 240
Stores closed during
Fiscal 1998 (11) (20) (658)(f) (5) (8) (24) (1) (727)
1998 845 1,136 0 100 265 653 44 3,043
Gross Retail Area at
Fiscal Year-End
(square feet in
millions)
1998 112.4 16.2 0.0 3.6 8.8 5.4 1.9 148.3
1997 110.3 15.9 6.6 3.6 8.2 4.7 1.7 151.0
1996 108.4 15.2 6.9 3.8 6.1 3.8 2.0 146.2
Retail Selling Area at
Fiscal Year-End
(square feet in
millions)
1998 73.3 2.3 0.0 3.0 6.9 3.6 1.3 90.4
1997 71.9 2.2 4.7 3.0 6.5 3.1 1.3 92.7
1996 69.9 2.1 4.9 3.2 5.6 2.6 1.5 89.8
13
Retail Store Revenues per Selling Square Foot
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $317
1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$318
1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$321
(a) Excludes 28 HomeLife Stores located in Full-line Stores.
(b) Effective January 30, 1999, Sears sold its HomeLife
business.
(c) Consists of small-size appliance stores, retail outlet
stores and The Great Indoors store. Excludes other facilities
owned or leased as part of Full-line Store properties.
(d) Many of the leases contain renewal options and contingent
rentals (for additional information, see Note 7 of the Notes to
Consolidated Financial Statements beginning on page 37 of the
1998 Annual Report, incorporated herein by reference to Item 8
hereof).
(e) Includes 61 Orchard Supply Hardware Stores which were
acquired in September 1996.
(f) Includes 652 Western Auto stores which were sold in
November 1998.
In addition, at January 2, 1999, there were 859 other sales
offices and service facilities, most of which are occupied under
short-term leases or are a part of other Sears facilities
included in the above table. There were also 86 distribution
facilities, most of which are leased for terms ranging from one
to 20 years.
Credit principally services its accounts at nine regional
credit card operations centers ("RCCOCs"), one national account
authorization center ("NAAC"), four Credit Processing Centers,
the headquarters of the Bank in Phoenix, Arizona and at the
Company's headquarters at Prairie Stone. The Company owns one of
the RCCOCs and leases eight for remaining terms ranging from four
to ten years. The Company leases the NAAC for a remaining term
of three years. The Company owns one of the Credit Processing
Centers and leases three for remaining terms ranging from one to
six years.
For the Company's operations, the capital expenditures for
expansion and remodeling and other improvements (excluding
capitalized financing leases) amounted to $1.2 billion for the
fiscal year ended January 2, 1999. In fiscal 1999, planned
capital expenditures of approximately $1.2 billion include the
remodeling and upgrading of merchandise presentations in
approximately 55 existing Full-line Stores and the opening of 18
to 25 new Full-line Stores and over 250 Specialty Stores. The
Company's ability to attain this growth will depend on, among
other things, the availability of suitable store locations on
appropriate terms. The Company may also pursue selective
strategic acquisitions.
For additional information, see "International" above and
"Management's Analysis of Consolidated Financial Condition"
beginning on page 27 of the 1998 Annual Report, incorporated
herein by reference in response to Item 7 hereof.
14
Item 3. Legal Proceedings
The Company has been subject to a federal civil and
criminal investigation in connection with activities relating to
certain debt reaffirmation agreements with current and former
credit card holders of the Company who had declared personal
bankruptcy. Under the reaffirmation provisions of the United
States Bankruptcy Code, a debtor seeking Chapter 7 protection may
agree to repay his or her debts to creditors. This reaffirmation
agreement must be filed with the bankruptcy court to be valid.
On February 19, 1999, Sears Bankruptcy Recovery Management
Services, Inc., a subsidiary of Sears, pleaded guilty in federal
district court to one count of bankruptcy fraud and was fined $60
million. The fine will have no effect on the Company's earnings
because the Company recorded a pretax charge of $475 million
against earnings for the settlement of lawsuits, fines and
related matters stemming from the improper handling of certain
debt reaffirmation agreements and other related matters in the
second quarter of 1997. The plea agreement does not require any
change in the day-to-day operations of Sears or the subsidiary.
In a separate civil action related to the reaffirmation
matter dating from April 17, 1997, Sears reached a settlement
agreement with the U.S. Attorney for the District of
Massachusetts, which was approved by the federal district court
on February 23, 1999. Under the terms of that agreement, the
Company will continue to file all reaffirmation agreements
obtained in Chapter 7 bankruptcies as required by the United
States Bankruptcy Code.
On March 9, 1999, the Company reached an agreement to
settle a class action lawsuit stemming from an increase in the
annual percentage rate assessed on certain balances of some Sears
credit customers. This settlement, which is subject to formal
approval by the United States District Court for the Northern
District of Illinois, is also expected to resolve related
lawsuits in Illinois and Washington. The lawsuit was brought on
behalf of a nationwide class of Sears credit customers who had
outstanding balances when their accounts were transferred to the
Bank during a period from 1994 through 1996, and who had not
fully paid off those balances as of the effective dates of an
April 1997 Notice of Change in Credit Terms. Under the terms of
the settlement, the Company will provide to the class members
cash and coupons with a face value totaling approximately $156
million. The Company previously reserved for the estimated cost
of the settlement; therefore, the settlement will not have a
material effect on the Company's annual results of operations,
financial position, liquidity or capital resources. The
settlement does not require any change in the Company's credit
practices.
On January 13, 1999, ten "Doe" plaintiffs filed a putative
class action in the United States District Court for the Central
District of California against eighteen domestic clothing
retailers, including the Company, and eleven foreign clothing
suppliers (the "Federal Action"). The Doe plaintiffs allege that
they have worked in garment factories on the island of Saipan in
the Commonwealth of the Northern Mariana Islands, and they
purport to represent a class of other current and former workers.
The plaintiffs allege that class members were forced to work
under illegal labor conditions in the Saipan factories used by
the suppliers, and they assert against the Company claimed
violations of the Racketeering Influenced Corrupt Organizations
Act, the Anti-Peonage Act, the Thirteenth Amendment to the U.S.
Constitution and the Law of Nations. The central allegation of
the Federal Action is that the Company and the other retailer
defendants who purchased garments manufactured in the Saipan
factories used by suppliers are liable to the plaintiff class for
any alleged unlawful working conditions imposed upon them by
their employers. The case seeks injunctive and declaratory
relief, unspecified treble damages, interest and attorneys' fees
and expenses. On January 13, 1999, a related case was also filed
against seventeen named domestic clothing retailers, including
the Company, and additional unnamed
15
retailers, in San Francisco County Superior Court (the "State
Action"), alleging violations of the California Business and
Professions Code. The named Plaintiffs in the State Action are
the Union of Needletrades Industrial and Textile Employees, AFL-
CIO, Global Exchange, Sweatshop Watch and the Asian Law Caucus,
who purport to bring the action on behalf of the general public
of the State of California. The central allegation in the State
Action is that the Company and the other defendants engaged in
unlawful and unfair business practices in the selling and
advertising in California of garments that had been manufactured
under allegedly illegal labor conditions on Saipan. The case
seeks injunctive relief, restitution and disgorgement of profits,
interest and attorneys' fees and costs. The Company intends to
vigorously defend these cases. The consequences of these actions
are not presently determinable but, in the opinion of management
of the Company, the ultimate liability is not expected 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.
Item 4. Submission of Matters to a Vote of Security Holders
None
16
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
DESCRIPTION OF SEARS COMMON SHARES
The summary contained herein of certain provisions of the
Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), of Sears does not purport to be
complete and is qualified in its entirety by reference to the
provisions of such Certificate of Incorporation filed as Exhibit
3.(i) hereto and incorporated by reference herein.
The Certificate of Incorporation authorizes the issuance of
1,000,000,000 common shares, par value $0.75 per share, and
50,000,000 preferred shares, par value $1.00 per share. As of the
date hereof, there are no preferred shares outstanding.
Preferred shares may be issued in series with rights and
privileges as authorized by the Board of Directors.
Subject to the restrictions on dividends mentioned below
and the rights of the holders of any preferred shares which may
hereafter be issued, each holder of common shares is entitled to
one vote per share, to vote cumulatively for the election of
directors, to dividends declared by the Board of Directors, and,
upon liquidation, to share in the assets of Sears pro rata in
accordance with his, her or its holdings after payment of all
liabilities and obligations. The holders of common shares have
no preemption, redemption, subscription or conversion rights.
Sears Board of Directors is divided into three classes
serving staggered three-year terms. Because the Board is
classified, shareholders wishing to exercise cumulative voting
rights to assure the election of one or more directors must own
approximately three times as many shares as would be required if
the Board were not classified. Directors may be removed only for
cause upon the affirmative vote of at least 75% of the shares
entitled to vote. Such a vote is also required to alter, amend
or repeal, or to adopt any provision inconsistent with, Article 5
of the Certificate of Incorporation concerning directors, or to
fix the number of directors by shareholder vote.
There are no restrictions on repurchases or redemption of
shares by Sears which do not impair its capital, except that the
indentures relating to certain of Sears long-term debt and an
agreement pursuant to which Sears has provided a credit facility
in support of certain tax increment revenue bonds issued by the
Village of Hoffman Estates, Illinois, in connection with the
construction of its headquarters facility, provide that Sears
will not take certain actions, including the declaration of cash
dividends and the repurchase of shares, which would cause
Unencumbered Assets plus certain Capitalized Rentals to drop
below 150% of Liabilities plus such Capitalized Rentals (as such
terms are defined in the indentures and the agreement). The
amount by which such Unencumbered Assets plus Capitalized Rentals
exceeds 150% of such Liabilities plus Capitalized Rentals, as
computed under certain of the indenture provisions, is set forth
in Note 13 of the Notes to Consolidated Financial Statements on
page 40 of the 1998 Annual Report.
Information regarding the principal market for Sears common
shares, the number of shareholders and the prices of, and
dividends paid on, Sears common shares is incorporated herein by
reference to the section headed "Common Stock Market Information
and Dividend Highlights" on page 46 of the 1998 Annual Report and
to the information under the heading "Shareholders' equity -
Dividend payments" contained in Note 13 of the Notes to
Consolidated Financial Statements on page 40 of the 1998 Annual
Report.
17
Item 6. Selected Financial Data
The material under the caption "Five-Year Summary of
Consolidated Financial Data" on page 44 of the 1998 Annual Report
is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The information contained under the captions "Management's
Analysis of Consolidated Operations" on pages 19 - 25 and
"Management's Analysis of Consolidated Financial Condition" on
pages 27, 29 and 31, of the 1998 Annual Report, is incorporated
herein by reference.
Item 7a. Quantitative and Qualitative Disclosures About Market
Risk
The information contained under the caption "Market Risk"
on page 45 of the 1998 Annual Report is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements of the Company,
including the notes to all such statements, and other information
on pages 18 - 46 (other than that incorporated by reference to
Item 7 hereof) of the 1998 Annual Report is incorporated herein
by reference.
Item 9. Changes in and Disagreements with Independent
Auditors on Accounting and Financial Disclosure
None
18
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding directors and executive officers of
Sears is incorporated herein by reference to the descriptions
under "Item 1: Election of Directors" on pages 5 - 7 of the 1999
Proxy Statement and to Item 1 of this Report under the caption
"Executive Officers of the Registrant" on pages 12 - 13.
Item 11. Executive Compensation
Information regarding executive compensation is
incorporated by reference to the material under the captions
"Item 1: Election of Directors," "Directors' Compensation and
Benefits," "Executive Compensation," "Stock Options," "Long-Term
Performance Plan," "Pension Plan Table," "Termination and Change
in Control Arrangements" and "Compensation Committee Interlocks
and Insider Participation" on pages 5 - 7, 9, 12 - 13, 14 - 15,
15, 16, 17 - 18 and 22, respectively, of the 1999 Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information regarding security ownership of certain
beneficial owners and management is incorporated herein by
reference to the material under the heading "Beneficial
Ownership" on pages 10 - 11 of the 1999 Proxy Statement.
Item 13. Certain Relationships and Related Transactions
None
19
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a)1 and 2 - An "Index to Financial Statements and
Financial Statement Schedules" has been filed as a part of this
Report beginning on page S-1 hereof.
(a)3 - Exhibits:
An "Exhibit Index" has been filed as a part of this
Report beginning on page E-1 hereof and is incorporated herein by
reference.
(b) - Reports on Form 8-K:
A Current Report on Form 8-K dated October 22, 1998
was filed with the Securities and Exchange Commission (the
"Commission") on October 23, 1998 to report, under Item 5, that
the Company issued a press release to report its third quarter
earnings and to file, under Item 7, a copy of such press release.
A Current Report on Form 8-K dated December 2, 1998
was filed with the Commission on December 2, 1998 to report,
under Item 5, that the Company issued a press release to announce
its November domestic revenues and to file, under Item 7, a copy
of such press release.
20
SIGNATURES
Pursuant to the requirements of Section 13 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SEARS, ROEBUCK AND CO.
(Registrant)
*/S/Jeffrey N. Boyer
By: Jeffrey N. Boyer
Vice President and
Controller
March 18, 1999
Pursuant to the requirements of the Exchange Act, this
report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates
indicated.
Signature Title Date
*/S/Arthur C. Martinez
Arthur C. Martinez Director, Chairman
of the Board of
Directors, President
and Chief Executive
Officer
*/S/Alan J. Lacy
Alan J. Lacy Chief Financial
Officer and President,
Credit (Principal
Financial Officer)
*/S/Jeffrey N. Boyer
Jeffrey N. Boyer Vice President and
Controller(Principal
Accounting Officer)
*/S/Hall Adams, Jr.
Hall Adams, Jr. Director March 18, 1999
*/S/Brenda C. Barnes
Brenda C. Barnes Director
*/S/Warren L. Batts
Warren L. Batts Director
*/S/Alston D. Correll, Jr.
Alston D. Correll, Jr. Director
*/S/Michael A. Miles
Michael A. Miles Director
*/S/Richard C. Notebaert
Richard C. Notebaert Director
*/S/Hugh B. Price
Hugh B. Price Director
*/S/Clarence B. Rogers
Clarence B. Rogers, Jr. Director
*/S/Patrick G. Ryan
Patrick G. Ryan Director
*/S/Dorothy A. Terrell
Dorothy A. Terrell Director
*By: /S/Jeffrey N. Boyer Individually and as Attorney-in-fact
-------------------
Jeffrey N. Boyer
SEARS, ROEBUCK AND CO.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Year Ended January 2, 1999
The following consolidated financial statements, notes thereto
and related information of Sears, Roebuck and Co., are
incorporated herein by reference to the Company's 1998 Annual
Report.
Incorporated by reference in Item 8 herein: Page*
Consolidated Statements of Income 18
Consolidated Balance Sheets 26
Consolidated Statements of Cash Flows 28
Consolidated Statements of Shareholder's Equity 30
Notes to Consolidated Financial Statements 32
Independent Auditors' Report 43
Five-Year Summary of Consolidated Financial Data 44
Quarterly Results 46
Incorporated by reference in Item 5 herein:
Common Stock Market Information and Dividend Highlights 46
Incorporated by reference in Item 7a herein:
Market Risk 45
*Refers to page number in Company's Annual Report
S-1
SEARS, ROEBUCK AND CO.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Year Ended January 2, 1999
The following additional statement schedules, Independents
Auditors' Report and Consent of Independent Auditors are
furnished herewith pursuant to the requirements of Form 10-K.
Page
Schedule required to be filed under the provisions of
regulation S-X Article 5:
Schedule II - Valuation and Qualifying Accounts S-3
Independent Auditors' Report S-4
Consent of Independent Auditors S-5
All other schedules are omitted because they are not applicable
or not required.
S-2
SEARS, ROEBUCK AND CO.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at Charged to Balance at
Beginning Cost and Deductions End of
(millions) of Period Expenses (Describe) Period
---------- ---------- ---------- ----------
Year Ended
January 2, 1999
Allowance for
uncollectible
accounts $ 1,113 $ 1,287 $ 1,426 (A) $ 974
Year Ended
January 3, 1998
Allowance for
uncollectible
accounts $ 801 $ 1,532 $ 1,220 (B) $ 1,113
Year Ended
December 28, 1996
Allowance for
uncollectible
accounts $ 819 $ 971 $ 989 (B) $ 801
(A) Represents uncollectible credit card receivable accounts which have been
charged off and $106 million transferred to retained interest in transferred
credit card receivables related to receivables which were transferred to the
Master Trust in 1998.
(B) Represents uncollectible credit card receivable accounts which have been
charged off.
S-3
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
Sears, Roebuck and Co.
We have audited the consolidated balance sheets of Sears, Roebuck
and Co. as of January 2, 1999 and January 3, 1998, and the
related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended
January 2, 1999, as set forth in the Index to Financial
Statements and Financial Statement Schedules on page S-1, and
have issued our report thereon dated February 11, 1999, except
for paragraphs 1 and 3 of Note 10, as to which the date is March
10, 1999; such consolidated financial statements and report are
included in your 1998 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the
financial statement schedule of Sears, Roebuck and Co., listed on
page S-1. This financial statement schedule is the
responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
We have also previously audited, in accordance with generally
accepted auditing standards, the Consolidated Statements of
Financial Position of Sears, Roebuck and Co. as of December 28,
1996, December 30, 1995 and December 31, 1994, and the related
Consolidated Statements of Income, Shareholders' Equity and Cash
Flows for the years ended December 30, 1995 and December 31, 1994
(none of which are presented herein); and we expressed
unqualified opinions on those consolidated financial statements.
Our audits were conducted for the purpose of forming an opinion
on the basic consolidated financial statements taken as a whole.
The additional information set forth under "Operating Results"
and "Financial Position" and on the lines captioned "Book value
per common share", "Average common and equivalent shares
outstanding", and "Earnings per common share - diluted" for each
of the five years in the period ended January 2, 1999, appearing
under the caption "Five Year Summary of Consolidated Financial
Data" on page 44 of your 1998 Annual Report to Shareholders is
presented for the purpose of additional analysis and is not a
required part of the basic consolidated financial statements.
This additional information is the responsibility of the
Company's management. Such information has been subjected to the
auditing procedures applied in our audits of the basic
consolidated financial statements and, in our opinion, is fairly
stated in all material respects when considered in
relation to the basic consolidated financial statements taken as
a whole.
/S/Deloitte & Touche LLP
Deloitte & Touche LLP
Chicago, Illinois
February 11, 1999
S-4
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation 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, 33-64215, 333-9817, 333-30879, and 333-62847 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, 333-11973, and 333-
53149 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.; of our report dated
February 11, 1999, except for paragraphs 1 and 3 of Note 10, as
to which the date is March 10, 1999, incorporated by reference in
the Annual Report on Form 10-K of Sears, Roebuck and Co. for the
year ended January 2, 1999.
/S/Deloitte & Touche LLP
Deloitte & Touche LLP
Chicago, Illinois
March 10, 1999
S-5
EXHIBIT INDEX
Sears, Roebuck and Co. Form 10-K
For the Year Ended January 2, 1999
3.(i) Restated Certificate of Incorporation, as amended to
May 13, 1996 (incorporated by reference to Exhibit
3(a) to Registration Statement No. 333-8141).
*3.(ii) By-Laws as amended to February 2, 1999.
4.(i) Forms of restricted stock grants under Registrant's
1990 Employees Stock Plan (incorporated by reference
to Exhibit 4.(i) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1993).**
4.(ii) Form of restricted stock grants under Registrant's
1994 Employees Stock Plan (incorporated by reference
to Exhibit 4.(ii) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994).**
4.(iii) Forms of Performance-Based Stock Options granted
under Registrant's 1994 Employees Stock Plan
(incorporated by reference to Exhibit 4.(iii) to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998).**
4.(iv) Forms of Performance-Based Restricted Stock grants
under Registrant's 1994 Employees Stock Plan
(incorporated by reference to Exhibit 4.(iv) to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998).**
*4.(v) Forms of stock options granted under Registrant's
1994 Employees Stock Plan.
4.(vi) Registrant hereby agrees to furnish to 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.(i)(a) Separation Agreement dated February 20, 1995 between
Registrant and The Allstate Corporation (incorporated
by reference to Exhibit 10(a) to The Allstate
Corporation's Current Report on Form 8-K dated
February 22, 1995).***
10.(i)(b) Marketing File Separation Agreement dated February
20, 1995 between Registrant and The Allstate
Corporation (incorporated by reference to Exhibit
10(b) to The Allstate Corporation's Current Report on
Form 8-K dated February 22, 1995).***
10.(i)(c) Research Services Agreement dated February 20, 1995
between Registrant and The Allstate Corporation
(incorporated by reference to Exhibit 10(c) to
The Allstate Corporation's Current Report on Form 8-K
dated February 22, 1995).***
10.(i)(d) Tax Sharing Agreement dated May 14, 1993 between
Registrant and its subsidiaries (incorporated by
reference to Exhibit 10.6 to Amendment No. 3
to The Allstate Corporation's Registration Statement
No. 33-59676).
10.(i)(e) Supplemental Tax Sharing Agreement dated January 27,
1995 between Registrant and The Allstate Corporation
(incorporated by reference to Exhibit 10(d) to The
Allstate Corporation's Current Report on Form 8-K
dated February 22, 1995).***
10.(i)(f) Supplemental Human Resources Allocation Agreement
dated January 27, 1995 between Registrant and The
Allstate Corporation (incorporated by
reference to Exhibit 10(e) to The Allstate
Corporation's Current Report on Form 8-K dated
February 22, 1995).***
10.(i)(g) Profit Sharing and Employee Stock Ownership Plan
Allocation Agreement dated January 27, 1995 between
Registrant and The Allstate Corporation
(incorporated by reference to Exhibit 10(f) to The
Allstate Corporation's Current Report on Form 8-K
dated February 22, 1995).***
10.(ii)(1) Registrant's 1979 Incentive Compensation Plan
(incorporated by reference to Exhibit
10.(iii)(1) to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31,
1985).** ****
10.(ii)(2) Registrant's 1978 Employes Stock Plan, as amended
(incorporated by reference to Exhibit 10.(iii)(2) to
the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989).** ****
10.(ii)(3) Registrant's Deferred Compensation Plan for
Directors, as amended and restated on October 9, 1996
(incorporated by reference to Exhibit 10(a) to
the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended September 28,
1996).** ****
10.(ii)(4) Registrant's Annual Incentive Compensation Plan,
amended and restated as of January 1, 1994
(incorporated by reference to Appendix B to the
Registrant's Proxy Statement dated March 23,
1994).** ****
10.(ii)(5) Registrant's Long-Term Incentive Compensation Plan,
amended and restated as of January 1, 1994
(incorporated by reference to Appendix C to
the Registrant's Proxy Statement dated March 23,
1994).** ****
10.(ii)(6) Registrant's 1982 Employees Stock Plan (incorporated
by reference to Exhibit 4(a)(1) to Registration
Statement No. 2-80037 of the Registrant).****
10.(ii)(7) Description of Registrant's Supplemental Life
Insurance Plan, amended as of December 31, 1986
(incorporated by reference to the second and third
full paragraphs on page 10 of the Registrant's Proxy
Statement dated March 26, 1987).** ****
10.(ii)(8) Registrant's Non-Employee Directors' Retirement Plan,
as amended and restated to March 13, 1996
(incorporated by reference to Exhibit 10. (iii)(8) to
Registrant's Annual Report on Form 10-K for the year
ended December 30, 1995).** ****
10.(ii)(9) 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).** ****
10.(ii)(10) Registrant's 1990 Employees Stock Plan, amended as of
May 12, 1994 (incorporated by reference to Exhibit
10.20 to The Allstate Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31,
1994).*** ****
10.(ii)(11) Registrant's Supplemental Retirement Income Plan, as
amended effective February 6, 1996 (incorporated by
reference to Exhibit 10.(iii)(11) to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995).** ****
10.(ii)(12) Amendment to Registrant's Supplemental Retirement
Income Plan, adopted by the Registrant's Board of
Directors on December 23, 1997 (incorporated
by reference to Exhibit 10.(iii)(12) to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998).** ****
10.(ii)(13) Registrant's 1986 Employees Stock Plan, amended as of
May 12, 1994 (incorporated by reference to Exhibit
10.19 to The Allstate Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31,
1994).*** ****
10.(ii)(14) Registrant's Transferred Executives Pension
Supplement (incorporated by reference to Exhibit
10.(iii)(13) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31,
1988).** ****
10.(ii)(15) Amendment to Registrant's Transferred Executives
Pension Supplement adopted on March 13, 1996
(incorporated by reference to Exhibit 10.(iii)(14)
to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995).** ****
10.(ii)(16) Registrant's Supplemental Long-Term Disability Plan
(incorporated by reference to Exhibit 10.d to the
Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1995).** ****
*10.(ii)(17) Registrant's Deferred Compensation Plan, as amended
and restated on October 14, 1998.
10.(ii)(18) Registrant's Management Supplemental Deferred Profit
Sharing Plan (incorporated by reference to Exhibit
10(b) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended October 1, 1994).** ****
10.(ii)(19) Registrant's Non-Employee Director Stock Plan
(incorporated by reference to Appendix B of the
Registrant's Proxy Statement dated March 20,
1996).** ****
10.(ii)(20) Registrant's 1994 Employees Stock Plan (incorporated
by reference to Appendix A to the Registrant's Proxy
Statement dated March 23, 1994).** ****
10.(ii)(21) Registrant's Associate Stock Ownership Plan
(incorporated by reference to Exhibit 10.(iii)(21) to
the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998).**
10.(ii)(22) Employment Agreement between Registrant and Arthur C.
Martinez dated August 10, 1992 (incorporated by
reference to Exhibit 10.(a) to the Registrant's
Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1992).** ****
10.(ii)(23) Agreement dated November 13, 1995 amending employment
contract of Arthur C. Martinez dated August 10, 1992
(incorporated by reference to Exhibit 10. (iii)(21)
to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995).** ****
10.(ii)(24) Extension of employment contract of Arthur C.
Martinez, dated August 9, 1995 (incorporated by
reference to Exhibit 10(c) to the Registrant's
Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1995).** ****
10.(ii)(25) Employment Agreement between the Registrant and
Robert L. Mettler, dated February 1, 1993
(incorporated by reference to Exhibit 10(b) to the
Registrant's Current Report on Form 8-K dated June
20, 1995).** ****
10.(ii)(26) Letter from the Registrant to Alan J. Lacy dated
December 14, 1994 relating to employment incorporated
by reference to Exhibit 10(d) to the Registrant's
Current Report on Form 8-K dated June 20,
1995).** ****
10.(ii)(27) Letter from the Registrant to William G. Pagonis
dated August 15, 1993 relating to employment
(incorporated by reference to Exhibit 10(e) to the
Registrant's Current Report on Form 8-K dated June
20, 1995).** ****
*10.(ii)(28) Letter from the Registrant to Richard J. Srednicki
dated June 4, 1998 relating to employment.
10.(ii)(29) Form of severance and non-compete agreement for
executive officers of the Registrant (incorporated by
reference to Exhibit 10(c) to the Registrant's
Quarterly Report on Form 10-Q for the quarterly
period ended September 28, 1996).** ****
10.(ii)(30) Sears Executive Retirement Plan Arrangements
(incorporated by reference to Exhibit 10(iii)(34) to
the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995).** ****
*12.(a) Computation of ratio of income to fixed charges for
Registrant and consolidated subsidiaries.
*12.(b) Computation of ratio of income to combined fixed
charges and preferred share dividends for Registrant
and consolidated subsidiaries.
*13.(ii) Portions of Registrant's Annual Report incorporated
by reference into Part I or Part II of Registrant's
Annual Report on Form 10-K for the fiscal year
ended January 2, 1999.
*21. Subsidiaries of the Registrant.
*23. Consent of Deloitte & Touche LLP.
*24. Power of Attorney of certain officers and directors
of the Registrant.
*27. Financial Data Schedules.
*99.(i) Sears 401(k) Profit Sharing Plan, as amended and
restated effective January 1, 1998.
*99.(ii) Amendment to the Sears 401(k) Profit Sharing Trust
dated June 26, 1998.
*99.(iii) Amendment to the Sears 401(k) Profit Sharing Trust
dated December 1, 1998.
*99.(iv) Press release of the Registrant dated March 16, 1999.
- ----------------
* Filed herewith
** SEC File No. 1-416
*** SEC File No. 1-11840
**** A management contract or compensatory plan or arrangement
required to be filed as an exhibit to this report pursuant to
Item 14(c) of Form 10-K.