|ANAYLSIS OF CONSOLIDATED FINANCIAL CONDITION|
The Company's significant financial capacity and flexibility are exemplified by the quality and liquidity of its assets and by its ability to access multiple sources of capital.
The owned credit card receivables balance of $18.95 billion excludes credit card receivables transferred to a securitization Master Trust ("Trust"). Through its subsidiary, SRFG, Inc., the Company sells securities backed by a portion of the receivables in the Trust to provide funding. In addition to the receivables in the Trust which back securities sold to third parties, the Company transfers additional receivables to the Trust in accordance with the terms of the securitization transactions and to have receivables readily available for future securitizations.
A summary of these balances at year end is as follows:
Inventories are primarily valued on the last-in, first-out or LIFO method. Inventories would have been $679 million higher if valued on the first-in, first-out or FIFO method at January 2, 1999. Inventories on a FIFO basis totaled $5.50 billion at January 2, 1999, compared to $5.76 billion at January 3, 1998. The decrease in inventory levels reflects the November 2, 1998, sale of Western Auto. Excluding the Western Auto inventory at year-end 1997, inventory increased $91 million due to additional inventory needed to support the addition of new Full-line and Specialty Stores.
To aid in the management of repricing risk, the Company uses
off-balance sheet financial instruments, such as interest rate swaps. The
Company has policies that centrally govern the use of such off-balance
sheet financial instruments.
The current ratings of the Company's debt securities appear in the table below:
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