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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, 1995
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, 1995, 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, 1995
Page No.
PART 1. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statements of Financial Position
September 30, 1995 and 1994
and December 31, 1994 (unaudited) 1
Statements of Income
Three and Nine Months ended
September 30, 1995 and 1994 (unaudited) 2
Statements of Cash Flows
Nine Months ended September 30, 1995
and 1994 (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
(unaudited)
millions September 30, December 31,
1995 1994 1994
--------- --------- ---------
Assets
Notes of Sears $ 7,981.5 $ 5,771.1 $ 6,842.5
Customer receivable balances
purchased from Sears 85.5 70.7 81.5
Cash and invested cash 230.7 410.0 102.1
Other assets 14.0 3.0 5.1
--------- --------- ---------
Total assets $ 8,311.7 $ 6,254.8 $ 7,031.2
========= ========= =========
Liabilities
Commercial paper (net of
unamortized discount of
$29.6, $20.7 and $22.3) $ 4,974.7 $ 4,223.7 $ 4,912.9
Agreements with bank
trust departments 185.2 111.1 87.4
Term Debt 1,908.9 745.0 845.0
Accrued interest and
other liabilities 17.7 10.7 8.2
--------- --------- ---------
Total liabilities 7,086.5 5,090.5 5,853.5
--------- --------- ---------
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 -- -- --
Retained income 1,190.2 1,129.3 1,142.7
--------- --------- ---------
Total stockholder's equity 1,225.2 1,164.3 1,177.7
--------- --------- ---------
Total liabilities and
stockholder's equity $ 8,311.7 $ 6,254.8 $ 7,031.2
========= ========= =========
See notes to financial statements
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
(unaudited)
millions Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------- ------- ------- -------
Revenues
Earnings on notes of Sears $ 126.6 $ 70.8 $ 346.5 $ 169.3
Earnings on customer receivable
balances purchased from Sears 2.0 1.5 5.4 4.5
Earnings on invested cash 2.9 4.0 10.1 10.7
------- ------- ------- -------
Total revenues 131.5 76.3 362.0 184.5
------- ------- ------- -------
Expenses
Interest and amortization of debt
discount and expense 103.6 55.0 287.1 140.5
Operating expenses 0.6 0.8 1.8 2.1
------- ------- ------- -------
Total expenses 104.2 55.8 288.9 142.6
------- ------- ------- -------
Income before income taxes 27.3 20.5 73.1 41.9
Income taxes 9.6 7.4 25.6 15.1
------- ------- ------- -------
Net Income $ 17.7 $ 13.1 $ 47.5 $ 26.8
======= ======= ======= =======
Ratio of earnings
to fixed charges 1.26 1.37 1.25 1.30
See notes to financial statements
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
millions Nine Months Ended
September 30,
1995 1994
--------- ---------
Cash flows from operating activities:
Net income $ 47.5 $ 26.8
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and other
noncash items 0.6 20.6
Decrease in deferred federal income
taxes -- (3.0)
Increase in other assets (1.2) --
Increase in other liabilities 9.5 --
--------- ---------
Net cash provided by operating activities 56.4 44.4
Cash flows from investing activities:
Increase in notes of Sears (1,139.0) (2,367.2)
(Increase) decrease in receivable balances
purchased from Sears (4.0) 17.3
--------- ---------
Net cash used in
investing activities (1,143.0) (2,349.9)
Cash flows from financing activities:
Increase in commercial paper,
primarily 90 days or less 61.8 1,748.7
Increase (decrease) in agreements with
bank trust departments 97.8 (28.7)
Proceeds from issuance of
term debt 1,055.6 744.8
Payments for redemption of SOFNV -- (400.0)
--------- ---------
Net cash provided by
financing activities 1,215.2 2,064.8
--------- ---------
Net increase (decrease) in cash and
invested cash 128.6 (240.7)
Cash and invested cash at beginning
of period 102.1 650.7
--------- ---------
Cash and invested cash at end of period $ 230.7 $ 410.0
========= =========
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 reclassifications have been made in the 1994 financial
statements to conform to current accounting classifications.
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, 1994, 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.
2. Credit Facilities as of September 30, 1995
Expiration Date (millions)
- ---------------------------------------------------------------
June 2000 $4,680
June 1996 1,000
October 1995 32
- -------------------------------------------------------------
Total credit facilities $5,712
=============================================================
3.Term Debt
Term Debt includes intermediate-term loans, discrete
underwritten debt and medium-term notes.
As of September 30, 1995, $895 million in intermediate-term
loans are outstanding with private institutions. The rates on
most of these variable rate intermediate-term loans are indexed
to Libor with a set basis point spread. The average weighted
rate on the intermediate-term loans in the first nine months of
1995 was 6.28%
In the first nine months of 1995, SRAC issued two discrete
underwritten notes, both with face values of $250 million and
coupon rates of 6 1/2% and 6 3/4%, respectively. These notes
mature on June 15, 2000 and September 15, 2005 and pay interest
semiannually.
In the third quarter of 1995, SRAC issued $460 million of
medium-term notes with either a floating rate indexed to Libor or
a fixed rate. As of September 30, 1995, SRAC had $515 million of
medium term notes outstanding with an average weighted rate of
6.30%.
Total term debt balances were as follows at September 30,
1995:
Maturity (millions)
- --------------------------------------------------------------
1996 $200.0
1997 425.0
1998 150.5
1999 413.0
2000 470.6
2005 249.8
- --------------------------------------------------------------
Total $1,908.9
==============================================================
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, 1995
and 1994, and the related Statements of Income for the three-
month and nine-month periods then ended and 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 condensed 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, 1994, and the related
Statements of Income, Stockholder's Equity and Cash Flows for the
year then ended (not presented herein); and in our report dated
January 26, 1995, 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, 1994 is fairly stated, in all material respects, in
relation to the Statement of Financial Position from which it has
been derived.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
October 12, 1995
SEARS ROEBUCK ACCEPTANCE CORP.
ITEM 2. ANALYSIS OF RESULTS OF OPERATIONS
During the third quarter of 1995, Sears Roebuck Acceptance
Corp.'s (SRAC) revenues increased 72% to $131.5 million from
$76.3 million in the comparable 1994 period. For the first nine months of
1995, revenues were up 96% to $362.0 million from $184.5 million for the
comparable period in 1994. SRAC's revenues are derived from earnings on
its investments in the notes and customer receivable balances of Sears,
Roebuck and Co. (SEARS) and invested cash. The increase in revenue is
attributable to both the increase in short-term interest rates and SRAC's
higher average earning assets as a result of Sears increased funding
requirements. In the third quarter of 1995, the average rate on earning
assets was 6.61% compared to 5.63% in the comparable 1994 period. In the
first nine months of 1995, the average rate on earning assets was 6.59%
compared to 4.94% in 1995. SRAC's average assets were $2.5 billion higher
in the third quarter and $2.3 billion higher in the first nine months of
1995 when compared to the same periods in 1994.
SRAC's interest and related expenses increased 88% to $103.6 million
from $55.0 million and 104% to $287.1 million from $140.5 million for the
third quarter and first nine months of 1995, respectively, as compared to
the comparable 1994 periods. SRAC's cost of short-term funds averaged
6.00% in the third quarter and 6.13% in the first nine months of 1995
compared to 4.68% and 4.15% for the same periods in 1994. SRAC's short-
term borrowings averaged $5.2 billion and $5.0 billion for the third
quarter and first nine months of 1995, a 30% and 47% increase from the 1994
levels of $4.0 billion and $3.4 billion.
SRAC's net income of $17.7 million and $47.5 million for the third
quarter and first nine months of 1995 reflects increases of 35% and 77%
from the comparable 1994 period amounts of $13.1 million and $26.8 million.
SRAC's ratio of earning to fixed charges was 1.26 for the third quarter and
1.25 for the first nine months as compared to the amounts for the
comparable 1994 periods of 1.37 and 1.30.
In June 1995, SRAC issued $250.0 million of discrete underwritten debt
with a coupon rate of 6 1/2% and a term of five years. In September 1995,
an additional $250.0 million of discrete underwritten debt was issued with
a coupon rate of 6 3/4% and a term of 10 years. Additionally, SRAC has
issued $515 million of medium-term notes as of September 30, with an
average maturity of 3.7 years. SRAC, a direct issuer of medium-term notes,
complements the four named agents in this medium-term note program. The
offering provides for a fixed or variable rate option with terms of greater
than nine months. SRAC anticipates that borrowings will increase during
1995 as Sears continues to refinance a portion of its maturing long-term
borrowings and meet other funding requirements.
SEARS ROEBUCK ACCEPTANCE CORP.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits listed in the "Exhibit
Index" are filed as part of this
report.
(b) Reports on Form 8-K:
There were no reports on Form 8-K
filed during the three month period
ended September 30, 1995.
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:
------------------
Stephen D. Carp
Vice President, Finance
and Assistant Secretary
(principal financial and accounting
officer and authorized officer of
Registrant)
November 9, 1995
EXHIBIT INDEX
12 - Calculation of ratio of earnings to fixed charges
27 - Financial Data Schedule
Exhibit 12
SEARS ROEBUCK ACCEPTANCE CORP.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
Nine Months Ended
September 30,
(Millions) 1995 1994
INCOME BEFORE INCOME TAXES $ 73.1 $ 41.9
PLUS FIXED CHARGES:
Interest 282.7 114.1
Amortization of debt
discount and expense 4.4 26.4
------- -------
287.1 140.5
------- -------
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES $ 360.2 $182.4
======= =======
RATIO OF EARNINGS TO FIXED
CHARGES 1.25 1.30
