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 JUNE 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-4040
SEARS ROEBUCK ACCEPTANCE CORP.
(Exact name of registrant as specified in its charter)
Delaware 51-0080535
(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 July 31, 1994, the Registrant had 350,000 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 ROEBUCK ACCEPTANCE CORP.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
JUNE 30, 1994
Page No.
PART 1. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statements of Financial Position
June 30, 1994 and 1993 (unaudited)
and December 31, 1993 1
Statements of Income
Three and Six Months ended
June 30, 1994 and 1993 (unaudited) 2
Statements of Cash Flows
Six Months ended June 30, 1994
and 1993 (unaudited) 3
Notes to Financial Statements (unaudited) 4
Independent Accountants' Report 5
Item 2. Analysis of Results of Operations 6
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 7
SEARS ROEBUCK ACCEPTANCE CORP.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION
millions June 30, December 31,
1994 1993 1993*
--------- --------- ---------
(unaudited)
Assets
Notes of Sears $ 4,772.3 $ 4,809.9 $ 3,403.9
Customer receivable balances
purchased from Sears 73.0 903.6 88.0
Cash and invested cash 335.8 647.0 650.7
Other assets 3.0 8.4 3.2
--------- --------- ---------
Total assets $ 5,184.1 $ 6,368.9 $ 4,145.8
========= ========= =========
Liabilities
Commercial paper (net of
unamortized discount of
$12.7, $3.5 and $5.1) $ 3,678.3 $ 2,403.5 $ 2,475.0
Agreements with bank
trust departments 98.1 436.8 139.8
Zero coupon notes -- 356.0 379.8
Intermediate-term notes 250.0 -- --
Accrued interest and
other liabilities 6.5 11.8 10.7
Deferred federal income taxes -- 6.5 3.0
--------- --------- ---------
Total liabilities 4,032.9 3,214.6 3,008.3
--------- --------- ---------
Stockholder's Equity
Capital stock, par value $100 per share:
500,000 shares authorized
350,000 shares issued and
outstanding 35.0 35.0 35.0
Capital in excess of par value -- 330.2 --
Retained income 1,116.2 2,789.1 1,102.5
--------- --------- ---------
Total stockholder's equity 1,151.2 3,154.3 1,137.5
--------- --------- ---------
Total liabilities and
stockholder's equity $ 5,184.1 $ 6,368.9 $ 4,145.8
========= ========= =========
*The Statement of Financial Position at December 31, 1993 has
been taken from the audited financial statements at that date.
See notes to financial statements
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
(unaudited)
millions Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
------- ------- ------- -------
Revenues
Earnings on notes of Sears $ 52.6 $ 45.9 $ 98.5 $ 140.3
Earnings on customer receivable
balances purchased from Sears 1.3 27.7 3.0 57.0
Earnings on invested cash 3.1 5.3 6.6 14.6
Other revenues 0.1 0.1 0.1 0.3
------- ------- ------- -------
Total revenues 57.1 79.0 108.2 212.2
------- ------- ------- -------
Expenses
Interest and amortization of debt
discount and expense 45.2 54.7 85.5 151.4
Provision for credit losses -- 9.2 -- 9.0
Operating expenses 0.5 1.1 1.3 2.3
------- ------- ------- -------
Total expenses 45.7 65.0 86.8 172.7
------- ------- ------- -------
Income before income taxes 11.4 14.0 21.4 39.5
Income taxes 4.1 4.7 7.7 13.4
------- ------- ------- -------
Net Income $ 7.3 $ 9.3 $ 13.7 $ 26.1
======= ======= ======= =======
Ratio of earnings to fixed charges 1.25 1.26 1.25 1.26
See notes to financial statements
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
millions Six Months Ended
June 30,
1994 1993
--------- ---------
Cash flows from operating activities:
Net income $ 13.7 $ 26.1
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and other
noncash items 20.6 27.3
Earnings amortization on retail
customer receivable balances discount -- (49.5)
Provision for credit losses -- 19.0
Decrease in deferred federal income
taxes (3.2) (3.6)
Increase in other assets (0.2) --
Decrease in other liabilities (4.0) (19.7)
--------- ---------
Net cash provided by (used in) operating activities 26.9 (0.4)
Cash flows from investing activities:
(Increase) decrease in notes of Sears (1,368.4) 5,683.7
Decrease in customer receivable balances
purchased from Sears 15.0 90.1
--------- ---------
Net cash (used in) provided by
investing activities (1,353.4) 5,773.8
Cash flows from financing activities:
Increase (decrease) in commercial paper,
primarily 90 days or less 1,203.3 (6,111.8)
(Decrease) increase in agreements with
bank trust departments ( 41.7) 38.9
Proceeds from issuance of intermediate-term
notes 250.0 --
Payments for redemption of zero coupon notes (400.0) --
--------- ---------
Net cash provided by (used in)
financing activities 1,011.6 (6,072.9)
--------- ---------
Net decrease in cash and
invested cash (314.9) (299.5)
Cash and invested cash at beginning
of period 650.7 946.5
--------- ---------
Cash and invested cash at end of period $ 335.8 $ 647.0
========= =========
See notes to financial statements
SEARS ROEBUCK ACCEPTANCE CORP.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Significant Accounting Policies
The unaudited interim financial statements of Sears Roebuck Acceptance
Corp. (SRAC), a wholly-owned subsidiary of Sears, Roebuck and Co. (Sears),
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.
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
SRAC's Annual Report on Form 10-K for the year ended December 31, 1993, and
these financial statements should be read in conjunction with the financial
statements and notes found therein. The results of operations for the
interim periods should not be considered indicative of the results to be
expected for the full year.
Certain reclassifications have been made in the 1993 Financial Statements
to conform to current accounting classifications.
2. Credit Facilities as of June 30, 1994
SRAC's credit facilities were as follows on June 30, 1994:
Contractual Credit Facilities Expires (millions)
- ---------------------------------------------------------------
Credit Agreement dated as of
June 7, 1994 June, 1999 $4,500
Credit Agreements dated as of
October 1, 1993 September, 1994 200
------
Total compensated credit facilities $4,700
======
3. Intermediate-term Notes
In the second quarter of 1994, SRAC borrowed $150 million under two
five-year, privately-placed variable rate notes. The rates on these notes
are set periodically at Libor plus a set basis point spread. SRAC also has
a $100 million, two-year, privately-placed variable interest rate note.
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholder of
Sears Roebuck Acceptance Corp.:
We have reviewed the accompanying Statements of Financial Position of Sears
Roebuck Acceptance Corp. (a wholly owned subsidiary of Sears, Roebuck and
Co.) as of June 30, 1994 and 1993, and the related Statements of Income for
the three-month and six-month periods ended June 30, 1994 and 1993, and the
related Statements of Cash Flows for the six-month periods then ended.
These financial statements are the responsibility of the Corporation's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and of making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to such financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the Statement of Financial Position of Sears Roebuck Acceptance
Corp. as of December 31, 1993, and the related Statements of Income and
Retained Income and Cash Flows for the year then ended (not presented
herein); and in our report dated February 11, 1994, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying Statement of Financial Position
as of December 31, 1993 is fairly stated, in all material respects, in
relation to the Statement of Financial Position from which it has been
derived.
Deloitte & Touche
July 13, 1994
Philadelphia, Pennsylvania
SEARS ROEBUCK ACCEPTANCE CORP.
ITEM 2. ANALYSIS OF RESULTS OF OPERATIONS
Sears Roebuck Acceptance Corp.'s (SRAC) revenues are derived from
earnings on its investments in the notes and customer receivable balances
of Sears, Roebuck and Co. and invested cash. During the second quarter of
1994, SRAC's revenues declined 27.7% to $57.1 million from $79.0 million
for the second quarter of 1993. For the first six months of 1994, revenues
were down 49.0% to $108.2 million from $212.2 million for the comparable
period in 1993. The decreases in revenues are primarily attributed to
SRAC's lower average earning assets in 1994 as a result of Sears paying
down its notes in 1993 with the proceeds from its strategic repositioning.
SRAC's average assets were $2.6 billion lower in the second quarter and
$4.6 billion lower in the first half of 1994 when compared to the same
periods in 1993.
SRAC's interest and related expenses declined 17.4% to $45.2 million
from $54.7 million and 43.5% to $85.5 million from $151.4 million for the
second quarter and first half of 1994, respectively, as compared to the
comparable 1993 periods. SRAC's cost of short-term funds averaged 4.11% in
the second quarter and 3.80% in the first six months of 1994 compared to
3.57% and 3.84% for the same periods in 1993. SRAC's short-term borrowings
averaged $3.2 billion and $3.1 billion for the second quarter and first
half of 1994, a 17.9% and 46.6% decrease from the 1993 levels of
$3.9 billion and $5.8 billion. Commercial paper outstanding was
$3.7 billion at June 30, 1994 and $2.4 billion at June 30, 1993. SRAC
anticipates that commercial paper borrowings will increase during 1994 as
Sears continues to refinance a portion of its maturing long-term borrowings
with commercial paper.
On June 7, 1994, SRAC replaced its existing $4 billion revolving
credit facilities with a $4.5 billion facility with a term of five years.
The new facility provides increased support, a longer term and reduced
commitment payments over the previous agreement.
SRAC's net income of $7.3 million and $13.7 million for the second
quarter and first half of 1994 reflects decreases of 21.5% and 47.5% from
the comparable period amounts of $9.3 million and $26.1 million in 1993.
SRAC's ratio of earnings to fixed charges for both the second quarter and
first half of 1994 was 1.25 compared to 1.26 for the comparable 1993
periods.
SEARS ROEBUCK ACCEPTANCE CORP.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
A report on Form 8-K was filed
by the Registrant dated
June 7, 1994 (Items 5 and 7).
SEARS ROEBUCK ACCEPTANCE 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 ROEBUCK ACCEPTANCE CORP.
(Registrant)
By: /s/ Keith E. Trost
------------------
Keith E. Trost
Vice President-
Finance and Administration
(principal financial officer and
authorized officer of Registrant)
August 12, 1994