Sears Lowers 4Q Results
February 21, 2005-- Home Textiles Today,
Hoffman Estates, Ill. — Sears, Roebuck and Co. has made two filings of clarification with the Securities and Exchange Commission regarding its finances.
Sears is filing an amended Form 10-K and several amended Form 10-Qs for the fiscal year ended Jan. 3, 2004 to correct an error in its consolidated statements of cash flows. The restatement has to do with cash flows from the company's domestic credit card business, which was divested in November 2003.
The SEC has requested that instead of reporting cash flows from the Sears Card and Sears Gold Card as cash flows from operating activities, the company report the cash as being generated from investing activities.
As such, the company has amended its Form 10-K and Form 10-Qs by restating its consolidated statements of cash flows for the fiscal years ended Jan. 3, 2004, Dec. 28, 2002 and Dec. 29, 2001 and for the 13, 26 and 39 weeks ended March 29, 2003, June 28, 2003 and Sept. 27, 2003, respectively.
Also, the company stated that it has found an error in its accounting practices associated with construction allowances. The allowances had been classified on the balance sheet as a reduction of property and equipment and were amortized as a reduction of depreciation expense over the estimated useful life of the property and equipment. To correct this error, Sears will record construction allowances as deferred credits, which will be amortized as a reduction of rent expense over the lease term.
Sears says the impact on the fourth quarter 2004 results will be to reduce its previously reported earnings per share by between 5 and 10 cents. The reduction in earnings per share results from amortizing construction allowances over a longer period of time than historically had been the practice. The change will affect income statement classification by increasing depreciation expense and reducing cost of sales, buying and occupancy.