<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 28, 1996)
$250,000,000
Sears Roebuck Acceptance Corp.
6.90% NOTES DUE AUGUST 1, 2003
----------------
Interest payable February 1 and August 1 commencing on February 1, 1997
----------------
THE 6.90% NOTES ARE NOT REDEEMABLE BY SEARS ROEBUCK ACCEPTANCE CORP.
(THE "COMPANY") PRIOR TO MATURITY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------
PRICE 99.975% AND ACCRUED INTEREST, IF ANY
----------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND COMPANY
PUBLIC (1) COMMISSIONS (2) (1)(3)
------------ --------------- ------------
<S> <C> <C> <C>
Per Note.............................. 99.975% .600% 99.375%
Total................................. $249,937,500 $1,500,000 $248,437,500
</TABLE>
- --------
(1) Plus accrued interest, if any, from August 9, 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deduction of expenses payable by the Company, estimated to be
$137,500.
----------------
The Notes are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Wachtell,
Lipton, Rosen & Katz, counsel for the Underwriters. It is expected that
delivery of the Notes will be made in New York, New York, on or about August
9, 1996 against payment therefor in immediately available funds. The Notes
will be issued only in fully registered form.
----------------
MORGAN STANLEY & CO.
Incorporated
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
August 2, 1996
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE
PROSPECTUS CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Recent Financial Information............................................... S-3
Description of Notes....................................................... S-4
Underwriting............................................................... S-4
Legal Opinions............................................................. S-5
PROSPECTUS
Available Information...................................................... 3
Reports to Holders of Debt Securities...................................... 3
Incorporation of Certain Documents by Reference............................ 3
Sears Roebuck Acceptance Corp.............................................. 4
Use of Proceeds............................................................ 4
Summary Financial Information.............................................. 5
Ratio of Earnings to Fixed Charges......................................... 6
Description of Debt Securities............................................. 6
Plan of Distribution....................................................... 9
Legal Opinion.............................................................. 10
Experts.................................................................... 10
</TABLE>
----------------
THE UNDERWRITERS AND THE COMPANY HAVE AGREED THAT THE CLOSING OF THE SALE OF
THE NOTES WILL OCCUR FIVE BUSINESS DAYS AFTER THE DATE OF THIS PROSPECTUS
SUPPLEMENT OR AT SUCH LATER DATE AS THEY MAY MUTUALLY AGREE.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
RECENT FINANCIAL INFORMATION
The following table sets forth certain summary financial information of
Sears Roebuck Acceptance Corp. (the "Company") for the three-month periods
ended March 30, 1996 and March 31, 1995. The summary information is unaudited,
but in the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the results of operations of
the Company have been included. The operating results for the three-month
period ended March 30, 1996 are not necessarily indicative of results to be
expected for the full year. The summary information should be read in
conjunction with the financial statements incorporated in the Prospectus by
reference.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(UNAUDITED)
-------------------
MARCH 30, MARCH 31,
1996 1995
--------- ---------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Operating Results
Total revenues............ $ 148.8 $ 105.8
Expenses
Interest and related
expenses............... 117.6 84.2
Total expenses.......... 118.1 84.8
Income taxes.............. 10.7 7.3
Net income................ 20.0 13.7
Financial Position
Assets
Notes of Sears.......... $8,824.3 $6,072.0
Customer receivables
balances purchased from
Sears.................. 68.9 82.6
Total assets............ 9,338.1 6,435.3
Liabilities
Commercial paper........ 4,380.9 4,221.4
Agreements with bank
trust departments...... 124.1 139.4
Intermediate-term loans. 870.0 870.0
Medium-term notes....... 1,893.7 --
Discrete underwritten
debt................... 748.1 --
Total liabilities....... 8,073.3 5,243.9
Sears investment in the
Company
Capital stock (including
capital in excess of
par value)............. 35.0 35.0
Retained income......... 1,229.8 1,156.4
Other Pertinent Data
Contractual Credit
Facilities (quarter-end). 5,720 5,082
</TABLE>
During the first quarter of 1996, the Company's revenues increased 40.6% to
$148.8 million from $105.8 million in the comparable 1995 period. The increase
in revenue is attributable to a $2.7 billion or 40.9% increase in the
Company's average earning assets compared to the first quarter of 1995 as a
result of Sears, Roebuck and Co.'s ("Sears") increased funding requirements.
The Company's interest and related expenses increased 39.7% to $117.6
million from $84.2 million for the first quarter of 1995 due to an increase in
average outstanding debt. The Company's short-term borrowings averaged $4.8
billion, a 4.3% increase from the 1995 first quarter average of $4.6 billion.
The Company's cost of short-term funds averaged 5.57%, a 57 basis point
decrease from 6.14% for the first three months of last year. Average
outstanding long-term debt of $3.2 billion in the first quarter of 1996
increased $2.3 billion compared to $0.9 billion in the comparable 1995 period.
S-3
<PAGE>
In April 1996, in anticipation of future borrowings, the Company received a
capital infusion of $150 million from Sears which provides additional strength
to the Company's balance sheet.
The Company's net income increased 46.0% for the first quarter of 1996 to
$20.0 million from $13.7 million in 1995. The Company's ratio of earnings to
fixed charges was 1.26 and 1.25 for the first quarter of 1996 and 1995,
respectively.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered hereby
(referred to in the Prospectus as the "Offered Debt Securities") supplements
the description of the general terms and provisions of Debt Securities set
forth in the Prospectus, to which description reference is hereby made.
The Notes are to be issued under an Indenture, dated as of May 15, 1995,
between the Company and The Chase Manhattan Bank, N.A., as Trustee.
The Notes will mature on August 1, 2003 and will be limited in aggregate
principal amount to $250,000,000. The Notes will be issued in fully registered
form only, in denominations of $1,000 and integral multiples thereof. Each Note
will bear interest at the rate per annum shown on the cover page of this
Prospectus Supplement from August 9, 1996, or from the most recent Interest
Payment Date to which interest has been paid or provided for, payable semi-
annually on February 1 and August 1 of each year, commencing February 1, 1997,
to the person in whose name the Note is registered at the close of business on
the January 15 or July 15, respectively, next preceding such Interest Payment
Date.
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
dated the date hereof, the Underwriters named below have severally agreed to
purchase from the Company the respective principal amounts of Notes set forth
opposite their names in the table below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
----------- ------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... $ 62,500,000
Goldman, Sachs & Co......................................... 62,500,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................... 62,500,000
Salomon Brothers Inc........................................ 62,500,000
------------
Total................................................... $250,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to pay for and accept delivery of the Notes are subject to approval of certain
legal matters by their counsel and to certain other conditions. The
Underwriters are committed to take and pay for all of the Notes if any are
taken.
The Company has been advised by the Underwriters that they propose to offer
part of the Notes directly to the public at the public offering price and on
the terms set forth on the cover page of this Prospectus Supplement and part to
certain dealers at a price that represents a concession not in excess of .375%
of the principal amount of the Notes. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of .250% of the principal
amount of the Notes to certain other dealers. After the initial offering of the
Notes, the offering price and other selling terms may be varied by the
Underwriters.
S-4
<PAGE>
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Notes as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Notes and any such market-making may be discontinued at any time at the
sole discretion of the Underwriters. Accordingly, no assurance can be given as
to the liquidity of, or trading market for, the Notes.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in the future in transactions with the Company and
its affiliates.
LEGAL OPINIONS
The legality of the Notes is being passed upon for the Company by Robert J.
Pence, Vice President, Law of Sears. At June 30, 1996, Mr. Pence owned 564
Sears common shares, including shares credited to his account in The Savings
and Profit Sharing Fund of Sears Employees as of June 30, 1996, and had options
granted under Sears employee stock plans relating to 4,720 Sears common shares.
The legality of the Notes is being passed upon for the Underwriters by
Wachtell, Lipton, Rosen & Katz. Wachtell, Lipton, Rosen & Katz from time to
time performs legal services for Sears.
S-5
<PAGE>
SEARS ROEBUCK ACCEPTANCE CORP.
DEBT SECURITIES
----------------
Sears Roebuck Acceptance Corp. ("SRAC") from time to time may offer up to
$2,356,300,000 aggregate initial offering price of its debt securities
consisting of debentures, notes and/or other unsecured evidences of
indebtedness (the "Debt Securities"). If so provided in the accompanying
Prospectus Supplement, the Debt Securities of any series may be represented in
whole or in part by one or more Global Securities ("Global Securities")
registered in the name of a depository's nominee and, if so represented,
beneficial interests in such Global Securities will be shown on, and transfers
thereof will be effected only through, records maintained by the depository
and its participants. The Debt Securities may be offered as separate series in
amounts, at prices and on terms to be set forth in supplements to this
Prospectus. It is anticipated that SRAC will sell Debt Securities directly to
institutional investors and may sell Debt Securities to or through
underwriters, and also may sell Debt Securities directly to other purchasers
or through agents. See "Plan of Distribution." The accompanying Prospectus
Supplement or Prospectus Supplements (the "Prospectus Supplement") sets forth
the names of any underwriters or agents involved in the sale of the Debt
Securities in respect of which this Prospectus is being delivered, the
principal amounts, if any, to be purchased by underwriters and the
compensation, if any, of such underwriters or agents.
The terms of the Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, denominations, maturity, premium, if
any, rate (which may be fixed or variable) and time of payment of interest, if
any, terms for redemption at the option of SRAC or the Holder, terms for
sinking fund payments, the initial public offering price, the names of, and
the principal amounts, if any, to be purchased by underwriters and the
compensation of such underwriters, deferred pricing arrangements, if any, and
the other terms in connection with the offering and sale of the Debt
Securities in respect of which this Prospectus is being delivered, are set
forth in the accompanying Prospectus Supplement.
As used herein, Debt Securities shall include securities denominated in U.S.
dollars or, at the option of SRAC if so specified in the applicable Prospectus
Supplement, in any other currency or in composite currencies or in amounts
determined by reference to an index.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
March 28, 1996
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Reports to Holders of Debt Securities...................................... 3
Incorporation of Certain Documents by Reference............................ 3
Sears Roebuck Acceptance Corp.............................................. 4
Use of Proceeds............................................................ 4
Summary Financial Information.............................................. 5
Ratio of Earnings to Fixed Charges......................................... 6
Description of Debt Securities............................................. 6
Plan of Distribution....................................................... 9
Legal Opinion.............................................................. 10
Experts.................................................................... 10
</TABLE>
2
<PAGE>
AVAILABLE INFORMATION
SRAC and Sears, Roebuck and Co. ("Sears"), SRAC's parent, are subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and in accordance therewith file reports and other
information with the Securities and Exchange Commission (the "Commission").
Sears also files proxy statements with the Commission. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission in Room 1024, 450 Fifth Street N.W.,
Washington, D.C. 20549; 7 World Trade Center, 13th Floor, New York, New York
10048; and Suite 1400, Citicorp Center, 500 W. Madison Street, Chicago,
Illinois 60661; and copies of such materials can be obtained from the public
reference section of the Commission at 450 Fifth Street N.W., Washington, D.C.
20549, at prescribed rates. Reports and other information concerning SRAC can
also be inspected at the office of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005. Reports, proxy statements and other
information concerning Sears can also be inspected at the offices of the New
York Stock Exchange, Inc., the Chicago Stock Exchange Incorporated, 440 South
LaSalle Street, Chicago, Illinois 60605, and the Pacific Stock Exchange, Inc.,
301 Pine Street, San Francisco, California 94104.
Additional information regarding SRAC, Sears and the Debt Securities is
contained in the Registration Statement and the exhibits relating thereto,
filed with the Commission under the Securities Act of 1933, as amended (the
"Act"). For further information pertaining to SRAC, Sears and the Debt
Securities, reference is made to the Registration Statement, and the exhibits
thereto, which may be inspected without charge at the office of the Commission
at 450 Fifth Street N.W., Washington, D.C. 20549, and copies thereof may be
obtained from the Commission at prescribed rates.
REPORTS TO HOLDERS OF DEBT SECURITIES
Holders of Debt Securities will receive annual reports containing
information, including financial information that has been audited and reported
on by independent public accountants, about SRAC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Reports on Form 10-K for the year ended December 30, 1995 filed by
SRAC and Sears, and the Current Reports on Form 8-K for February 7, 1996 filed
by Sears and for January 23, 1996 filed by SRAC with the Commission pursuant to
Section 13 of the Exchange Act, are incorporated in and made part of this
Prospectus by reference.
All documents filed by SRAC or Sears with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Debt Securities
(other than those portions of such documents described in paragraphs (i), (k)
and (l) of Item 402 of Regulation S-K promulgated by the Commission) shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents.
SRAC WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (NOT
INCLUDING EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). WRITTEN OR TELEPHONE REQUESTS FOR
SUCH COPIES SHOULD BE DIRECTED TO SEARS ROEBUCK ACCEPTANCE CORP., 3711 KENNETT
PIKE, GREENVILLE, DELAWARE 19807, ATTENTION: VICE PRESIDENT, FINANCE (302/888-
3100).
3
<PAGE>
SEARS ROEBUCK ACCEPTANCE CORP.
SRAC is a wholly-owned subsidiary of Sears and was incorporated in 1956 under
the laws of Delaware. Its general offices are located at 3711 Kennett Pike,
Greenville Delaware 19807 (302/888-3100). SRAC raises funds primarily from the
direct placement of commercial paper with corporate and institutional investors
and through intermediate-term loans, discrete underwritten debt and medium-term
notes. SRAC uses borrowing proceeds to acquire short-term notes of Sears and
purchase outstanding customer receivable balances from Sears. Sears, which is a
multi-line retailer that conducts Domestic and International merchandising
operations, uses the funds obtained from SRAC for general funding purposes.
SRAC, and not Sears, will be the sole obligor on the Debt Securities.
SRAC's income is derived primarily from the earnings on its investment in the
notes and receivable balances of Sears. The interest rate on Sears notes is
presently calculated so that SRAC maintains an earnings to fixed charge ratio
of at least 1.25. The yield on the investment in Sears notes is related to
SRAC's borrowing costs and, as a result, SRAC's earnings fluctuate in response
to movements in interest rates and changes in Sears short-term borrowing
requirements. Subject to the provisions of the Indenture relating to the Debt
Securities, SRAC will be required to maintain a ratio of earnings to fixed
charges (determined in accordance with Item 503(d) of Regulation S-K
promulgated by the Commission) of not less than 1.10 for any fiscal quarter and
cause Sears to maintain ownership of all voting stock of SRAC as long as any
Debt Securities are outstanding, and Sears has agreed to pay SRAC such amounts
as may be necessary for such purpose and to maintain such ownership. See
"Description of Debt Securities."
At February 29, 1996, SRAC had eleven employees.
USE OF PROCEEDS
The net proceeds to be received by SRAC from the sale of the Debt Securities
offered hereby will be added to its general funds and initially used to reduce
short-term indebtedness. As indicated under "Sears Roebuck Acceptance Corp.,"
SRAC's principal business is the purchase of short-term notes of Sears; also,
on occasion, SRAC purchases customer receivable balances from Sears Domestic
credit operations. SRAC expects to incur additional indebtedness, but the
amount and nature thereof have not yet been determined and will depend on
economic conditions and certain capital requirements of Sears. It is
anticipated that Sears and its subsidiaries will continue their practice of
short-term borrowing and will, from time to time, incur additional long-term
debt and engage in securitization programs in which credit card receivables are
sold in public or private transactions. Sears also may, from time to time,
issue equity securities.
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth certain summary financial information of SRAC
for the five fiscal years ended December 30, 1995. The summary information
should be read in conjunction with the financial statements of SRAC and the
notes thereto incorporated herein by reference.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Operating Results
Total revenues............. $ 510.3 $ 282.7 $ 337.5 $ 696.5 $ 1,100.8
Expenses
Interest and related
expenses................ 404.6 218.5 236.1 482.8 825.9
Total Expenses........... 407.0 220.4 276.7 532.3 894.1
Income taxes............... 36.2 22.1 21.3 56.1 70.3
Net income................. 67.1 40.2 39.5 108.1 136.4
Financial Position
Assets
Notes of Sears........... $8,396.4 $6,842.5 $3,403.9 $10,493.6 $12,214.5
Customer receivable
balances purchased from
Sears................... 81.2 81.5 88.0 963.4 1,042.8
Total assets............. 8,634.3 7,031.2 4,145.8 12,415.2 14,676.2
Liabilities
Debt payable within one
year
Commercial paper....... $4,450.6 $4,912.9 $2,475.0 $ 8,515.3 $10,205.8
Agreements with bank
trust departments..... 137.0 87.4 139.8 397.9 510.1
Debentures and notes..... 2,777.4 845.0 -- -- 204.0
Loan agreements with
SOFNV................... -- -- 379.8 332.1 683.2
Total liabilities........ 7,389.5 5,853.5 3,008.3 9,287.0 11,656.1
Sears, Roebuck and Co.
investment in SRAC
Capital stock (including
capital in excess of par
value).................. 35.0 35.0 35.0 365.2 365.2
Retained income.......... 1,209.8 1,142.7 1,102.5 2,763.0 2,654.9
Debt as percentage of
equity.................... 592% 496% 263% 296% 384%
Other Pertinent Data
Commercial paper
Average daily
outstandings............ $ 4,963 $ 3,615 $ 3,812 $ 9,328 $ 10,543
Agreements with bank trust
departments
Average daily
outstandings............ 154 124 402 747 643
Contractual Credit
Facilities (year-end)..... 5,720 5,132 4,200 10,812 11,801
</TABLE>
5
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for SRAC for each of the years ended
December 30, 1995, and December 31, 1994, 1993, 1992 and 1991 was 1.26, 1.29,
1.26, 1.34 and 1.25, respectively. Earnings consist of net income plus fixed
charges and income taxes. Fixed charges consist of interest costs and
amortization of debt discount and expense; rental expense is insignificant with
no effect on the calculation. The interest rate paid by Sears to SRAC on its
investment in Sears notes is presently calculated to produce earnings
sufficient to cover SRAC's fixed charges at least 1.25 times.
The ratio of income to fixed charges for Sears and its consolidated
subsidiaries for each of the years ended December 30, 1995, and December 31,
1994, 1993, and 1991 was 2.15, 2.06, 1.66, and 1.16, respectively. For the year
ended December 31, 1992, earnings did not cover fixed charges by $2,869
million. In the computation of the ratio of income to fixed charges for Sears
and its consolidated subsidiaries, income consists of income from continuing
operations less undistributed net income of unconsolidated subsidiaries plus
fixed charges (excluding capitalized interest) and federal and state income
taxes. Fixed charges consist of interest costs plus the portion of operating
lease rentals which is estimated to represent the interest element in such
rentals.
DESCRIPTION OF DEBT SECURITIES
The following descriptions of the terms of the Debt Securities set forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Debt Securities") and the
extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating
to such Offered Debt Securities.
The Debt Securities are to be issued under one of the Indentures (each, an
"Indenture") referred to in the following sentence, a copy of the form of which
has been filed as an exhibit to the Registration Statement. SRAC has entered
into an Indenture with The Chase Manhattan Bank, N.A., as Trustee, and may
enter into Indentures with one or more other Trustees eligible to act as
Trustee under an Indenture pursuant to the Trust Indenture Act of 1939, as
amended (each, a "Trustee"). The particular Indenture under which any series of
Debt Securities is to be issued, and the identity of the Trustee under such
Indenture, will be identified in the Prospectus Supplement relating to such
series of Debt Securities. The following summaries of certain provisions of the
Debt Securities and the Indenture do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all the provisions of
the Indenture, including the definitions therein of certain terms. Whenever
particular provisions or defined terms in the Indenture are referred to herein,
such provisions or defined terms are incorporated by reference.
GENERAL
The Debt Securities will be unsecured obligations of SRAC.
The Indenture does not limit the amount of Debt Securities that may be issued
thereunder and provides that Debt Securities may be issued thereunder from time
to time in one or more series.
Reference is made to the Prospectus Supplement relating to the particular
series of Offered Debt Securities offered thereby for the following terms of
the Offered Debt Securities: (i) the title of the Offered Debt Securities; (ii)
any limit on the aggregate principal amount of the Offered Debt Securities;
(iii) the date or dates on which the Offered Debt Securities will mature; (iv)
the price (expressed as a percentage of the aggregate principal amount thereof)
at which the Offered Debt Securities will be issued; (v) the rate or rates
(which may be fixed or variable) per annum at which the Offered Debt Securities
will bear interest, if any; (vi) the date from which such interest, if any, on
the Offered Debt Securities will accrue, the dates on which such interest, if
any, will be payable, the date on which payment of such interest, if any, will
commence and the Regular Record Dates for such Interest
6
<PAGE>
Payment Dates, if any; (vii) the date or dates, if any, after or on which and
the price or prices at which the Offered Debt Securities may, pursuant to any
optional or mandatory redemption, conversion or exchange provisions, be
redeemed, converted or exchanged at the option of SRAC or of the Holder thereof
and the other detailed terms and provisions of such optional or mandatory
redemption; (viii) any subordination provisions; (ix) the dates, if any, on
which and the price or prices at which the Offered Debt Securities will,
pursuant to any mandatory sinking fund provisions, or may, pursuant to any
optional sinking fund provisions, be redeemed by SRAC, and the other detailed
terms and provisions of such sinking fund; (x) if other than the principal
amount thereof, the amount of Offered Debt Securities which shall be payable
upon declaration of acceleration of the Maturity thereof; (xi) the terms of any
warrants attached to the Offered Debt Securities; (xii) the currency or
currencies, including European Currency Units or other composite currencies, in
which Offered Debt Securities may be purchased and in which principal, premium,
if any, and interest, if any, on the Offered Debt Securities will be payable;
(xiii) any index used to determine the amount of payments of principal,
premium, if any, and interest, if any, on the Offered Debt Securities; (xiv)
whether the Offered Debt Securities are issuable in whole or in part as one or
more Global Securities and, in such case, the name of the Depository for such
Global Security or Global Securities; (xv) the place or places, if other than
as set forth in the Indenture, where the principal, premium, if any, and
interest, if any, on the Offered Debt Securities will be payable; and (xvi) any
other terms relating to the Offered Debt Securities not inconsistent with the
Indenture but which may modify or delete any provision of the Indenture insofar
as it applies to such series; provided that no term thereof shall be modified
or deleted if imposed under the Trust Indenture Act and that any modification
or deletion of the rights, duties or immunities of the Trustee shall have been
consented to in writing by the Trustee.
Principal, premium, if any, and interest, if any, will be payable, and the
Debt Securities (other than Debt Securities represented by Global Securities)
will be transferable, at the office or agency of SRAC maintained for such
purposes in the Borough of Manhattan of The City of New York, and at such other
places, if any, in the city in which the principal executive offices of SRAC or
the city in which the principal corporate trust office of the Trustee are
located, as SRAC may designate, which, except as otherwise specified in the
Prospectus Supplement relating to a particular series of Offered Debt
Securities, will initially include the principal corporate trust office of the
Trustee in the Borough of Manhattan of The City of New York and the principal
executive offices of SRAC in Greenville, Delaware. Unless other arrangements
are made, interest on the Debt Securities (other than Debt Securities
represented by Global Securities) will be paid by checks mailed to the Holders
at their registered addresses. (Sections 1.1, 2.5, 3.1, 3.2) Information with
respect to payment of principal, premium, if any, and interest, if any, on, and
transfers of beneficial interests in, Debt Securities represented by Global
Securities will be set forth in the Prospectus Supplement relating thereto.
If the principal, premium, if any, and interest, if any, will be payable in a
currency other than U.S. dollars, including European Currency Units or another
composite currency, and such currency is not available for payment due to the
imposition of exchange controls or other circumstances beyond the control of
SRAC, SRAC shall satisfy its payment obligations in U.S. dollars on the basis
of the Market Exchange Rate for such currency on the latest date for which such
rate was established on or before the date on which payment is due. (Section
2.12)
Unless otherwise indicated in the Prospectus Supplement relating thereto, the
Debt Securities will be issued only in fully registered form, without coupons,
in denominations of $1,000 or any integral multiple thereof. No service charge
will be made for any registration of transfer or exchange of the Offered Debt
Securities, but SRAC may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith. (Sections 2.2,
2.5)
Debt Securities may be issued under the Indenture as Original Issue Discount
Securities to be offered and sold at a substantial discount below their stated
principal amount. Federal income tax consequences and other special
considerations applicable to any such Original Issue Discount Securities will
be described in the Prospectus Supplement relating thereto. "Original Issue
Discount Security" means any security which provides for an amount less than
the principal amount thereof to be due and payable upon the declaration of
acceleration of the Maturity thereof upon the occurrence of a default and the
continuation thereof. (Sections 1.1, 6.1)
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CERTAIN RESTRICTIONS
The Indenture provides that SRAC will maintain a Fixed Charge Coverage Ratio
for any fiscal quarter of not less than 1.10 and that SRAC will cause Sears to
maintain ownership of all the voting stock of SRAC. "Fixed Charge Coverage
Ratio" means SRAC's ratio of earnings to fixed charges determined in accordance
with Item 503(d) of Regulation S-K promulgated by the Commission, as in effect
on the date of the Indenture. Pursuant to letter agreements between SRAC and
Sears (the "Fixed Charge Coverage and Ownership Agreement"), Sears has agreed,
for the benefit of holders of outstanding Debt Securities, that, (i) as long as
SRAC is so required to maintain such Fixed Charge Coverage Ratio, Sears will
pay SRAC such amounts which, together with any other earnings available
therefore, are sufficient for SRAC to maintain such Fixed Charge Coverage Ratio
and (ii) as long as SRAC is so required to cause Sears to maintain ownership of
SRAC, Sears will maintain such ownership. The Indenture provides that SRAC (i)
will cause Sears to observe and perform in all material respects all covenants
or agreements of Sears contained in the Fixed Charge Coverage and Ownership
Agreement and (ii) will not amend, waive, terminate or otherwise modify any
provision of the Fixed Charge Coverage and Ownership Agreement. (Sections 1.1,
3.6)
DEFAULTS
The following are defaults with respect to any series of Debt Securities: (a)
failure to pay the principal amount (and premium, if any) on such series when
due and payable; (b) failure to pay any interest on such series when due,
continued for 30 days (unless the entire amount of such payment is deposited by
SRAC with the Trustee or with a paying agent prior to the expiration of 30
days); (c) failure to perform any other covenant of SRAC in the Indenture
(other than a covenant included in the Indenture solely for the benefit of any
series of Debt Securities other than that series), continued for 60 days after
written notice; (d) acceleration of $100,000,000 or more in principal amount of
indebtedness for borrowed money of SRAC (including acceleration with respect to
Debt Securities other than that series) or Sears under the terms of the
instrument under which such indebtedness is issued or secured (including the
Indenture), if such indebtedness shall not have been discharged or such
acceleration is not annulled within 30 days after written notice or prior to
the time principal owed on the outstanding Debt Securities of that series shall
be declared due and payable, except as a result of compliance with applicable
laws, orders or decrees; and (e) certain events of bankruptcy, insolvency, or
reorganization. In addition, a particular series of Debt Securities may provide
for additional events of default, as may be described in the Prospectus
Supplement. If a default shall occur and be continuing with respect to any
series of Debt Securities, the Trustee or the Holders of a majority in
principal amount of the outstanding Debt Securities of that series may declare
the principal amount of such series (or, if the Debt Securities of that series
are Original Issue Discount Securities, such portion of the principal amount as
may be specified in the terms of that series) due and payable immediately,
which declaration may, in certain instances, be annulled by the Holders of a
majority of the principal amount of outstanding Debt Securities of that series.
In the case of such declaration, there would become due and payable such
principal amount plus any accrued interest or other periodic payments. (Section
6.1)
No Holder of any Debt Security of any series will have any right to institute
any proceeding with respect to the Indenture or for any remedy thereunder,
unless such Holder previously shall have given to the Trustee written notice of
a default and unless also the Holders of a majority of the principal amount of
outstanding Debt Securities of that series shall have made written request upon
the Trustee, offering reasonable indemnity, to institute such proceeding as
Trustee, and the Trustee shall have neglected or refused to institute such
proceeding within a reasonable time. However, the right of any Holder of any
Debt Security of that series to enforce the payment of principal and interest
on such Debt Security, on or after the due dates expressed in such Debt
Security, may not be impaired or affected. (Section 6.7)
SRAC is required to furnish annually to the Trustee statements as to the
performance or fulfillment of its covenants, agreements or conditions in the
Indenture and as to the absence of default. (Section 3.4)
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MODIFICATION OR AMENDMENT OF THE INDENTURE
Modifications and alterations of the Indenture may be made by SRAC with the
consent of the Holders of a majority of the aggregate principal amount of the
outstanding Debt Securities of each series affected by the modification or
alteration, provided that no such change shall be made without the consent of
the Holders of each Debt Security then outstanding affected thereby which will
(a) permit the extension of the time of payment of any payment on any such Debt
Security, or a reduction in any such payment or (b) reduce the above-stated
percentage of Holders of any series of Debt Securities whose consent is
required to modify or alter the Indenture. (Article XI)
DEFEASANCE
Unless otherwise provided for in the accompanying Prospectus Supplement, SRAC
may discharge the Indenture with respect to Debt Securities of any series
(except for certain obligations to register the transfer or exchange of Debt
Securities of such series, replace mutilated, destroyed, lost and stolen Debt
Securities of such series, maintain paying agencies and hold moneys for payment
in trust) upon the deposit with the Trustee or a paying agent, in trust, of (1)
money in an amount sufficient, or (2) U.S. Government Obligations (if the Debt
Securities are denominated in U.S. dollars) or Eligible Obligations (if the
Debt Securities are denominated in a Foreign Currency) which through the
payment of interest and principal in respect thereof in accordance with their
terms will provide money in an amount sufficient, or (3) any combination
thereof in an amount sufficient, to pay the principal, premium, if any, and
each installment of interest on the Debt Securities of such series on the dates
such payments are due in accordance with the terms of the Indenture and such
Debt Securities. Such a trust may only be established if, among other things,
SRAC has received a ruling from the Internal Revenue Service or an opinion of
recognized counsel who is not an employee of SRAC, in either case to the effect
that, among other things, the Holders of the Debt Securities of such series
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance of the Indenture and will be subject to
federal income tax on the same amount and in the same manner and at the same
times, as would have been the case if such deposit and defeasance had not
occurred. Notwithstanding such deposit, the obligations of SRAC under the
Indenture to pay interest and principal shall remain in full force and effect
until the Debt Securities of such series have been paid in full. (Section 13.4)
If and when a ruling from the Internal Revenue Service or an opinion of
recognized counsel can be provided without reliance upon the continuation of
SRAC's obligations regarding the payment of interest and principal, then such
obligations of SRAC shall cease upon delivery to the Trustee of such ruling or
opinion and compliance with the other conditions precedent provided for in the
Indenture. Under present ruling positions of the Internal Revenue Service, such
a ruling is not obtainable. (Section 13.4)
REGARDING THE TRUSTEE
The Chase Manhattan Bank, N.A., which is a Trustee under an Indenture,
performs other services for SRAC.
PLAN OF DISTRIBUTION
General. SRAC may sell Debt Securities to or through underwriters, and also
may sell Debt Securities directly to other purchasers or through agents. It is
anticipated that SRAC will offer Debt Securities directly to brokers or
dealers, investment companies, insurance companies, banks, savings and loan
associations, trust companies or similar institutions, and trusts for which a
bank, savings and loan association, trust company or investment adviser is the
trustee or authorized to make investment decisions.
The distribution of the Debt Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Prospectus Supplement
will describe the method of distribution of the Offered Debt Securities.
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In connection with the sale of Debt Securities, underwriters may receive
compensation from SRAC or from purchasers of Debt Securities for whom they may
act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agent. Underwriters, dealers and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them and any profit on the resale of Debt
Securities by them may be deemed to be underwriting discounts and commissions,
under the Act. Any such underwriter or agent will be identified, and any such
compensation will be described, in the Prospectus Supplement.
Under agreements which may be entered into by SRAC, underwriters, dealers and
agents who participate in the distribution of Debt Securities may be entitled
to indemnification by SRAC against certain liabilities, including liabilities
under the Act.
LEGAL OPINION
Unless otherwise specified in the accompanying Prospectus Supplement, the
legality of the Debt Securities is being passed upon for SRAC by Barbara E.
Rohde, Counsel, Law Department, of Sears. At February 29, 1996, Ms. Rohde owned
408 Sears common shares, including shares credited to her account in The
Savings and Profit Sharing Fund of Sears Employees as of January 31, 1996, and
had options granted under the Sears employees stock plans relating to 2,122
shares.
EXPERTS
The financial statements and Summary Financial Information incorporated by
reference and included in this prospectus, respectively, and the financial
statements from which the Summary Financial Information included in this
Prospectus have been derived, have been audited by Deloitte & Touche LLP,
independent certified public accountants, as stated in their reports
incorporated by reference herein, and with respect to the Summary Financial
Information has been included as Exhibit 99 to the Registration Statement. Such
financial statements and Summary Financial Information have been incorporated
by reference and included herein, respectively, in the Registration Statement
in reliance upon the reports of such firm and given upon their authority as
experts in accounting and auditing.
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