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 SEPTEMBER 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 October 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
SEPTEMBER 30, 1994
Page No.
PART 1. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statements of Financial Position
September 30, 1994 and 1993 (unaudited)
and December 31, 1993 1
Statements of Income
Three and Nine Months ended
September 30, 1994 and 1993 (unaudited) 2
Statements of Cash Flows
Nine Months ended June 30, 1994
and 1993 (unaudited) 3
Notes to Financial Statements (unaudited) 4,5
Independent Accountants' Report 6
Item 2. Analysis of Results of Operations 7
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 8
SEARS ROEBUCK ACCEPTANCE CORP.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION
millions September 30, December 31,
1994 1993 1993*
--------- --------- ---------
(unaudited)
Assets
Notes of Sears $ 5,771.1 $ 4,887.3 $ 3,403.9
Customer receivable balances
purchased from Sears 70.7 879.3 88.0
Cash and invested cash 410.0 384.0 650.7
Other assets 3.0 3.5 3.2
--------- --------- ---------
Total assets $ 6,254.8 $ 6,154.1 $ 4,145.8
========= ========= =========
Liabilities
Commercial paper (net of
unamortized discount of
$20.7, $2.5 and $5.1) $ 4,223.7 $ 2,195.8 $ 2,475.0
Agreements with bank
trust departments 111.1 408.2 139.8
Zero coupon notes -- 367.9 379.8
Intermediate-term notes 745.0 -- --
Accrued interest and
other liabilities 10.7 16.4 10.7
Deferred federal income taxes -- 4.9 3.0
--------- --------- ---------
Total liabilities 5,090.5 2,993.2 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 1,129.3 2,795.7 1,102.5
--------- --------- ---------
Total stockholder's equity 1,164.3 3,160.9 1,137.5
--------- --------- ---------
Total liabilities and
stockholder's equity $ 6,254.8 $ 6,154.1 $ 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 Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
------- ------- ------- -------
Revenues
Earnings on notes of Sears $ 70.8 $ 36.2 $ 169.3 $ 176.5
Earnings on customer receivable
balances purchased from Sears 1.5 27.2 4.5 84.2
Earnings on invested cash 4.0 3.5 10.6 18.1
Other revenues -- 0.1 0.1 0.4
------- ------- ------- -------
Total revenues 76.3 67.0 184.5 279.2
------- ------- ------- -------
Expenses
Interest and amortization of debt
discount and expense 55.0 44.9 140.5 196.3
Provision for credit losses -- 9.3 -- 28.3
Operating expenses 0.8 1.5 2.1 3.8
------- ------- ------- -------
Total expenses 55.8 55.7 142.6 228.4
------- ------- ------- -------
Income before income taxes 20.5 11.3 41.9 50.8
Income taxes 7.4 4.7 15.1 18.1
------- ------- ------- -------
Net Income $ 13.1 $ 6.6 $ 26.8 $ 32.7
======= ======= ======= =======
Ratio of earnings to fixed charges 1.37 1.25 1.30 1.26
See notes to financial statements
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
millions Nine Months Ended
September 30,
1994 1993
--------- ---------
Cash flows from operating activities:
Net income $ 26.8 $ 32.7
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and other
noncash items 20.6 46.6
Earnings amortization on retail
customer receivable balances discount -- (72.8)
Provision for credit losses -- 28.3
Decrease in deferred federal income
taxes (3.0) (5.3)
Increase in other assets (0.2) (2.5)
Increase in other liabilities -- (15.1)
--------- ---------
Net cash provided by operating activities 44.2 11.9
Cash flows from investing activities:
(Increase) decrease in notes of Sears (2,367.2) 5,606.3
Decrease in customer receivable balances
purchased from Sears 17.3 128.5
--------- ---------
Net cash (used in) provided by
investing activities (2,349.9) 5,734.8
Cash flows from financing activities:
Increase (decrease) in commercial paper,
primarily 90 days or less 1,748.7 (6,319.5)
(Decrease) increase in agreements with
bank trust departments ( 28.7) 10.3
Proceeds from issuance of intermediate-term
notes 745.0 --
Payments for redemption of zero coupon notes (400.0) --
--------- ---------
Net cash provided by (used in)
financing activities 2,065.0 (6,309.2)
--------- ---------
Net decrease in cash and
invested cash (240.7) (562.5)
Cash and invested cash at beginning
of period 650.7 946.5
--------- ---------
Cash and invested cash at end of period $ 410.0 $ 384.0
========= =========
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 September 30, 1994
SRAC's credit facilities were as follows on September 30, 1994:
Contractual Credit Facilities Expires (millions)
- ---------------------------------------------------------------
Credit Agreement dated as of
June 7, 1994 June, 1999 $4,500
Credit Agreements dated as of
September 29, 1994 September, 1995 200
------
Total compensated credit facilities $4,700
======
3. Intermediate-term Notes
SRAC's Intermediate-term Notes were as follows at September 30, 1994:
Term (millions)
- -----------------------------------------------------------
Two year notes expiring in 1996 $200
Three year notes expiring in 1997 245
Five year notes expiring in 1999 300
----
Total Notes $745
====
The rates on most of these privately-placed variable rate term notes are
set periodically at Libor plus a set basis point spread.
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 September 30, 1994 and 1993, and the related Statements of
Income for the three-month and nine-month periods ended September 30, 1994
and 1993, and the related Statements of Cash Flows for the nine-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
October 12, 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 third quarter of
1994, SRAC's revenues increased 13.9% to $76.3 million from $67.0 million
for the third quarter of 1993. The increased revenue in the third quarter
was attributable to a higher average rate on its assets of 5.63% for 1994
compared to 3.70% in the comparable 1993 period which more than offset a
decline in assets. For the first nine months of 1994, revenues were down
33.9% to $184.5 million from $279.2 million for the comparable period in
1993. The decreased revenue is 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 $.8 billion lower in the third quarter and $3.3 billion lower
in the first nine months of 1994 when compared to the same periods in 1993.
SRAC's interest and related expenses increased 22.5% to $55.0 million
from $44.9 million and declined 28.4% to $140.5 million from $196.3 million
for the third quarter and first nine months of 1994, respectively, as
compared to the comparable 1993 periods. Higher short term interest rates
and Sears increased demand for funding in the third quarter resulted in
higher interest related expenses. SRAC's cost of short-term funds averaged
4.68% in the third quarter and 4.15% in the first nine months of 1994
compared to 3.31% and 3.74% for the same periods in 1993. SRAC's average
short-term borrowings increased 48.1% to $4.0 billion for the third quarter
of 1994 from $2.7 billion for the same period in 1993. For the first nine
months of 1994, average short term borrowings decreased 29.2% to
$3.4 billion from the 1993 average of $4.8 billion. Commercial paper
outstanding was $4.2 billion at September 30, 1994 and $2.2 billion at
September 30, 1993.
SRAC borrowed $495 million in the third quarter of 1994 and a total of
$745 million for the first nine months of 1994 under thirteen privately-
placed variable rate notes with terms from two to five years. SRAC's cost
on these intermediate-term notes averaged 5.14% in the third quarter and
5.03% for the first nine months of 1994.
SRAC's net income was $13.1 million and $26.8 million for the third
quarter and first nine months of 1994 compared to $6.6 million and
$32.7 million in 1993. The Company's net income increased in the third
quarter over the respective prior year period as a result of the rate on
the Sears note not being reduced until after the end of the quarter.
SRAC's ratio of earnings to fixed charges was 1.37 for the third quarter
and 1.30 for the first nine months as compared to the amounts for the
comparable 1993 periods of 1.25 and 1.26.
SEARS ROEBUCK ACCEPTANCE CORP.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) There were no reports on Form 8-K
filed during the three months ended
September 30, 1994
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)
November 12, 1994
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