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Item 2. Acquisition or Disposition of Assets.

As previously reported in the Sears, Roebuck and Co. (the "Company") Quarterly Report on Form 10-Q filed on November 5, 2003, the Company completed the sale of its domestic Credit and Financial Products business, including its clubs and services business, to Citicorp on November 3, 2003. This Current Report on Form 8-K is filed to provide the pro forma financial information required under Item 7.

A copy of the Purchase, Sale and Servicing Transfer Agreement dated July 15, 2003 was attached to the Current Report on Form 8-K filed July 17, 2003 as Exhibit 10.1. A copy of Amendment No. 1 to the Purchase, Sale and Servicing Transfer Agreement was attached to the Quarterly Report on Form 10-Q filed November 5, 2003 as Exhibit 2(b).

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

(b) Pro Forma Financial Information

The following Unaudited Pro Forma Consolidated Financial Statements give effect to the sale of the Company's domestic Credit and Financial products business and the entering into of a strategic alliance (the "Transaction") with Citicorp. The Unaudited Pro Forma Consolidated Balance Sheet is derived from the unaudited consolidated balance sheet of the Company as of September 27, 2003 and assumes the Transaction was consummated on September 27, 2003 (as of the last day of the 39-week period ended September 27, 2003). The Unaudited Pro Forma Consolidated Statements of Income give effect to the disposition of the Credit and Financial Products business for the 39-week periods ended September 27, 2003 and September 28, 2002, and for the fiscal year ended December 28, 2002 as if the disposition occurred on December 30, 2001 (as of the first day of the Company's 2002 fiscal year).

The Unaudited Pro Forma Consolidated Financial Statements are presented for illustrative purposes only, and therefore are not necessarily indicative of the operating results and financial position that might have been achieved had the transaction occurred as of an earlier date, nor are they necessarily indicative of operating results and financial position that may occur in the future.

The Unaudited Pro Forma Consolidated Financial Statements do not reflect the use of the net cash proceeds on the Company's ongoing results of operations and its future financial position. The Company anticipates that the net cash proceeds will be used to retire debt that supported the domestic credit card receivables, return cash to the Company's shareholders, and for general corporate purposes, including an incremental contribution to the Company's domestic pension plan.

Under the long-term marketing and servicing alliance (the "Program Agreement"), Citibank (USA) N.A. will provide credit and customer services benefits to the Company's proprietary and Gold MasterCard holders. In addition, Citibank (USA) N.A. will continue to support the Company's current zero-percent financing program. As part of the alliance, the Company will receive annual performance payments from Citibank (USA) N.A. based upon the level of new account and credit sales generation activities as well as other activities.

The Unaudited Pro Forma Consolidated Financial Statements should be read in conjunction with the historical consolidated financial statements and notes thereto in (1) the Annual Report on Form 10-K for the year ended December 28, 2002 and (2) the Quarterly Reports on Form 10-Q for the periods ended March 29, 2003, June 28, 2003 and September 27, 2003.

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This report contains "forward-looking statements" concerning the use of cash proceeds of the sale of the Company's Credit and Financial Products business and the future impact of the Program Agreement on the Company. These statements are subject to risks and uncertainties that may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

Following are some of these risks and uncertainties: Citicorp's ability to successfully integrate and operate the Credit and Financial Products business and the ability of the Company to successfully integrate its retail businesses with a third-party credit card program, which involves training and the integration of complex systems and processes; competitive conditions in retail and credit; changes in consumer confidence and spending; the success of the Full-line Store strategy and other strategies; the possibility that the Company will identify new business and strategic options for one or more of its business segments, potentially including selective acquisitions, dispositions, restructurings, joint ventures and partnerships; the outcome of pending legal proceedings; anticipated cash flow; social and political conditions such as war, political unrest and terrorism or natural disasters; the possibility of negative investment returns in the Company's pension plan; changes in interest rates; the volatility in financial markets; changes in the Company's debt ratings, credit spreads and cost of funds; the possibility of interruptions in systematically accessing the public debt markets; general economic conditions and normal business uncertainty. While the Company believes that its forecasts and assumptions are reasonable, it cautions that actual results may differ materially. The Company intends the forward-looking statements to speak only as of the time first made and does not undertake to update or revise them as more information becomes available.

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Unaudited Pro Forma Consolidated Balance Sheet

 

	millions					Sept. 27, 2003 Balance Sheet						Pro Forma Adjustments						Pro Forma Sept. 27, 2003 Balance Sheet
	ASSETS
	Current assets
	Cash and cash equivalents			$	1,546					$		21,270		1			$	22,816
	Sears Canada credit card receivables				1,939													1,939
	Less allowance for uncollectible accounts				51													51
	Net credit card receivables				1,888													1,888
	Other receivables				632													632
	Merchandise inventories				6,243													6,243
	Prepaid expenses and deferred charges				517													517
	Deferred income taxes				818							(300		)2				518
	Assets held for sale				27,818							(27,622		)3				196
	Total current assets				39,462							(6,652		)				32,810
	Property and equipment, net				6,660													6,660
	Deferred income taxes				443													443
	Goodwill				945													945
	Tradenames and other intangible assets				710													710
	Other assets				870													870
	TOTAL ASSETS			$	49,090					$		(6,652		)			$	42,438
	LIABILITIES
	Current liabilities
	Short-term borrowings			$	6,179					$							$	6,179
	Current portion of long-term debt and capitalized lease obligations				2,595													2,595
	Accounts payable and other liabilities				7,058							1,325		4				8,383
	Unearned revenues				1,245													1,245
	Other taxes				472													472
	Liabilities held for sale				10,602							(10,573		)5				29
	Total current liabilities				28,151							(9,248		)				18,903
	Long-term debt and capitalized lease obligations				12,121													12,121
	Pension and postretirement benefits				2,010													2,010
	Minority interest and other liabilities				1,319													1,319
	Total Liabilities				43,601							(9,248		)				34,353
	SHAREHOLDERS' EQUITY
	Common shares				323													323
	Capital in excess of par				3,503													3,503
	Retained earnings				8,945							2,596		6				11,541
	Treasury stock - at cost				(6,306			)										(6,306	)
	Deferred ESOP expense				(27			)										(27	)
	Accumulated other comprehensive loss				(949			)										(949	)
	Total Shareholders' Equity				5,489							2,596						8,085
	TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	49,090					$		(6,652		)			$	42,438
	Notes to Unaudited Pro Forma Consolidated Balance Sheet
	1 To reflect the net cash proceeds resulting from the transaction assuming the transaction closed on    September 27, 2003. 2 To reflect the estimated impact of the transaction on deferred taxes. 3 To reflect the assets of the Credit and Financial Products business, including clubs and services classified as held    for sale per the reported balance sheet. 4 To reflect estimated current income taxes payable and other costs directly related to the transaction. 5 To reflect the liabilities of the Credit and Financial Products business, including clubs and services as    held for sale per the reported balance sheet. 6 To reflect the estimated after-tax net gain on the transaction.

 

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Unaudited Pro Forma Consolidated Statement of Income

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Unaudited Pro Forma Consolidated Statement of Income

	millions, except per share data		52 Weeks  Ended Dec. 28, 2002				Remove  Historical Amounts 1				Pro Forma  Adjustments					Pro Forma 52 Weeks Ended Dec. 28, 2002
	Merchandise sales and services		$	35,698			$	(41	)		$	167	2		$	35,824
	Credit and financial products revenues			5,668				(5,392	)							276
	Total revenues			41,366				(5,433	)			167				36,100
	Cost of sales, buying and occupancy			25,646				(13	)			--				25,633
	Depreciation and amortization			875				(19	)			--				856
	Selling and administrative			9,249				(1,190	)			18	3			8,077
	Provision for uncollectible accounts			2,261				(2,203	)			--				58
	Special charges and impairments			111				--				--				111
	Interest expense			1,143				(1,014	)			436 5				565
	Total costs and expenses			39,285				(4,439	)			454				35,300
	Operating income (loss)		$	2,081			$	(994	)		$	(287	)		$	800
	Other income			372				--				--				372
	Income before income taxes and minority interest and cumulative effect of change in accounting principle			2,453				(994	)			(287	)			1,172
	Income (taxes) benefit			(858	)			353				104 4				(401	)
	Minority interest			(11	)			--				--				(11	)
	Income (loss) before cumulative effect of change in accounting principle		$	1,584			$	(641	)		$	(182	)		$	760
	Earnings per common share:
	Basic before cumulative effect of accounting change			4.99												2.39
	Diluted before cumulative effect of accounting change			4.94												2.37
	Weighted average common shares:
	Basic			317.4												317.4
	Diluted			320.7												320.7

	Notes to Pro Forma Consolidated Statement of Income
	1 To reflect the removal of the historical operating results of the Company's Credit and Financial Products business, including    clubs and services. 2 To reflect the estimated ongoing revenue earned under the Program Agreement entered into with Citigroup. 3 To reflect the estimated operating expenses related to the Company's administration of the Program Agreement. 4 To reflect the tax effect of the above items at the Company's annual effective income tax rate of 36.5%. 5 To reflect an estimate of the interest expense which would remain excluding the results of the Company's debt tender. As previously    filed in the Form 8-K dated November 17, 2003, the Company repaid $6.4 billion of term debt. An additional $3.6 billion of    asset-backed   borrowings were repaid as a result of the Company's sale of its Credit and Financial Products business. The Company    estimates the loss   on these debt extinguishment activities to be approximately $300 million after-tax. Also, as a result of the    retirement of debt which supported domestic credit card receivables, the Company expects to  write-off the accumulated derivative loss    of approximately $180   million after-tax recorded within accumulated other comprehensive loss in the Condensed Consolidated    Balance Sheet at September 27,   2003. The impact of these items has not been included above.

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Unaudited Pro Forma Consolidated Statement of Income

	millions, except per share data		39 Weeks  Ended Sept. 28, 2002				Remove  Historical  Amounts 1				Pro Forma  Adjustments			Pro Forma 39 Weeks  Ended Sept. 28, 2002
	Merchandise sales and services		$	24,639			$	(31	)		$	115	2	$	24,723
	Credit and financial products revenues			4,209				(4,002	)						207
	Total revenues			28,848				(4,033	)			115			24,930
	Cost of sales, buying and occupancy			17,902				(13	)			--			17,889
	Depreciation and amortization			650				(14	)			--			636
	Selling and administrative			6,637				(899	)			12	3		5,750
	Provision for uncollectible accounts			1,685				(1,652	)			--			33
	Special charges and impairments			111				--				--			111
	Interest expense			866				(772	)			343	5		437
	Total costs and expenses			27,851				(3,350	)			355			24,856
	Operating income (loss)		$	997			$	(683	)		$	(240	)	$	74
	Other income			98				--				--			98
	Income before income taxes and minority interest and cumulative effect of change in accounting principle			1,095				(683	)			(240	)		172
	Income (taxes) benefit			(382	)			243				87	4		(52	)
	Minority interest			23				--				--			23
	Income (loss) before cumulative effect of change in accounting principle		$	736			$	(440	)		$	(153	)	$	143
	Earnings per common share:
	Basic before cumulative effect of accounting change			2.32											0.45
	Diluted before cumulative effect of accounting change			2.29											0.44
	Weighted average common shares:
	Basic			317.4											317.4
	Diluted			321.7											321.7

Notes to Pro Forma Consolidated Statement of Income

1 To reflect the removal of the historical operating results of the Company's Credit and Financial Products business, including clubs and services. 2 To reflect the estimated ongoing revenue earned under the Program Agreement entered into with Citigroup. 3 To reflect the estimated ongoing operating expenses related to the Company's administration of the Program Agreement. 4 To reflect the tax effect of the above items at the Company's annual effective income tax rate of 36.5%. 5 To reflect an estimate of the interest expense which would remain excluding the results of the Company's debt tender. As previously    filed in the Form 8-K dated November 17, 2003, the Company repaid $6.4 billion of term debt. An additional $3.6 billion of    asset-backed borrowings were repaid as a result of the Company's sale of its Credit and Financial Products business. The Company    estimates the loss on these debt extinguishment activities to be approximately $300 million after-tax. Also, as a result of the    retirement of debt which supported domestic credit card receivables, the Company expects to write-off the accumulated derivative loss    of approximately $180 million after-tax recorded within accumulated other comprehensive loss in the Condensed Consolidated    Balance Sheet at September 27, 2003. The impact of these items has not been included above.

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SIGNATURES

 

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, ROEBUCK AND CO.
Date: December 18, 2003	By: /s/ Glenn R. Richter Glenn R. Richter Senior Vice President and Chief Financial Officer