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<INCOME-TAX> 34,900,000
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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 28, 1996
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: 302/888-3100
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, 1996, 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 28, 1996
Page No.
PART 1. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statements of Financial Position
September 28, 1996 and September 30, 1995
(unaudited) and December 30, 1995 (audited) 1
Statements of Income (unaudited)
Three and Nine Months ended
September 28, 1996 and September 30, 1995 2
Statements of Cash Flows (unaudited)
Nine Months ended September 28, 1996
and September 30, 1995 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)
(audited)
millions Sept. 28, Sept. 30, Dec. 30,
1996 1995 1995
--------- --------- ---------
Assets
Notes of Sears $11,677.3 $ 7,981.5 $ 8,396.4
Customer receivable balances
purchased from Sears 95.5 85.5 81.2
Cash and invested cash 342.0 230.7 143.0
Other assets 84.9 14.0 13.7
--------- --------- ---------
Total assets $12,199.7 $ 8,311.7 $ 8,634.3
========= ========= =========
Liabilities
Commercial paper (net of
unamortized discount of
$22.8, $29.6 and $23.8) $ 4,660.2 $ 4,974.7 $ 4,450.6
Agreements with bank
trust departments 70.6 185.2 137.0
Intermediate-term loans 945.0 895.0 895.0
Medium-term notes 3,772.7 515.0 1,383.5
Discrete underwritten debt 998.2 498.9 498.9
Accrued interest and
other liabilities 93.2 17.7 24.5
--------- --------- ---------
Total liabilities 10,539.9 7,086.5 7,389.5
--------- --------- ---------
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 350.1 -- --
Retained income 1,274.7 1,190.2 1,209.8
--------- --------- ---------
Total stockholder's equity 1,659.8 1,225.2 1,244.8
--------- --------- ---------
Total liabilities and
stockholder's equity $12,199.7 $ 8,311.7 $ 8,634.3
========= ========= =========
See notes to financial statements.
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
(unaudited)
millions Three Months Ended Nine Months Ended
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
1996 1995 1996 1995
------- ------- ------- -------
Revenues
Earnings on notes of Sears $ 171.7 $ 126.6 $ 472.5 $ 346.5
Earnings on customer receivable
balances purchased from Sears 1.9 2.0 5.3 5.4
Earnings on invested cash 3.0 2.9 7.9 10.1
------- ------- ------- -------
Total revenues 176.6 131.5 485.7 362.0
------- ------- ------- -------
Expenses
Interest and amortization of debt
discount and expense 139.5 103.6 384.7 287.1
Operating expenses 0.4 0.6 1.2 1.8
------- ------- ------- -------
Total expenses 139.9 104.2 385.9 288.9
------- ------- ------- -------
Income before income taxes 36.7 27.3 99.8 73.1
Income taxes 12.8 9.6 34.9 25.6
------- ------- ------- -------
Net income $ 23.9 $ 17.7 $ 64.9 $ 47.5
======= ======= ======= =======
Ratio of earnings
to fixed charges 1.26 1.26 1.26 1.25
See notes to financial statements.
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
millions Nine Months Ended
Sept. 28, Sept. 30,
1996 1995
--------- ---------
Cash flows from operating activities:
Net income $ 64.9 $ 47.5
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and other
noncash items 3.0 0.6
Increase in other assets (58.8) (1.2)
Increase in other liabilities 68.7 9.5
--------- ---------
Net cash provided by operating activities 77.8 56.4
Cash flows from investing activities:
(Increase) in notes of Sears (3,280.9) (1,139.0)
(Increase) in receivable balances
purchased from Sears (14.3) (4.0)
--------- ---------
Net cash (used in) investing activities (3,295.2) (1,143.0)
Cash flows from financing activities:
Increase in commercial paper,
primarily 90 days or less 209.6 61.8
(Decrease) increase in agreements with
bank trust departments (66.4) 97.8
Proceeds from issuance of
intermediate-term loans, medium-term
notes, and discrete underwritten debt 2,948.2 1,055.6
Payments for redemption of
intermediate-term loans, medium-term
notes, and discrete underwritten debt (25.0) --
Proceeds from capital infusions 350.0 --
--------- ---------
Net cash provided by financing activities 3,416.4 1,215.2
--------- ---------
Net increase in cash and invested cash 199.0 128.6
Cash and invested cash at beginning
of period 143.0 102.1
--------- ---------
Cash and invested cash at end of period $ 342.0 $ 230.7
========= =========
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 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 30, 1995, 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 28, 1996
Expiration Date (millions)
- -------------------------------------------------------------
June 2001 $5,000
December 1996 40
- -------------------------------------------------------------
Total credit facilities $5,040
=============================================================
3. Intermediate-term loans
At the close of the third quarter of 1996, SRAC had $945.0 million in
intermediate-term loans outstanding with private institutions compared with
$895.0 million in the comparable 1995 period. The rates on most of these
floating 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 1996 was 5.83% compared to 6.28% in the comparable 1995
period.
As of September 28, 1996, intermediate-term loans maturing in the next five
years were as follows:
(millions) 1996 1997 1998 1999 2000
- ---------------------------------------------------------------
Total $200.0 $295.0 $25.0 $375.0 $25.0
- ---------------------------------------------------------------
4. Medium-term notes
SRAC issued $2,389.2 million of medium-term notes in the first nine months of
1996 compared to $515.0 million in the 1995 comparable period. At the close of
the third quarter of 1996, SRAC had $3,772.7 million of medium-term notes
outstanding compared to $515.0 million in the 1995 comparable period. Medium-
term notes were issued with either a floating rate indexed to LIBOR or a fixed
rate. The average weighted rate on medium-term notes in the first nine months
of 1996 was 6.21% compared to 6.30% in 1995. These notes have terms ranging
from one to ten years.
As of September 28, 1996, medium-term notes maturing in the next five years
were as follows:
(millions) 1996 1997 1998 1999 2000
- ---------------------------------------------------------------
Total $-- $467.0 $335.0 $560.0 $577.0
- ---------------------------------------------------------------
5. Discrete underwritten debt
SRAC issued $500.0 million of discrete underwitten debt in the first nine
months of 1996. As of September 28, 1996, SRAC had four discrete underwritten
notes outstanding with face values totaling $1,000.0 million and terms ranging
from five to ten years. Discrete underwitten debt pays interest semiannually.
As of September 28, 1996, discrete underwritten debt is comprised of the
following:
(millions)
- -----------------------------------
6.50% Notes, due 2000 $250.0
6.90% Notes, due 2003 $250.0
6.75% Notes, due 2005 $250.0
6.125% Notes, due 2006 $250.0
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 28, 1996 and September 30, 1995, 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 Sears Roebuck Acceptance Corp.'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 30, 1995, 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 19, 1996, 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 30,
1995 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 10, 1996
SEARS ROEBUCK ACCEPTANCE CORP.
ITEM 2. ANALYSIS OF RESULTS OF OPERATIONS
During the third quarter of 1996, Sears Roebuck Acceptance Corp.'s
("SRAC") revenues increased 34.3% to $176.6 million from $131.5 million in the
comparable 1995 period. For the first nine months of 1996, revenues were up
34.2% to $485.7 million from $362.0 million for the comparable 1995 period.
SRAC's income is derived primarily from the earnings on its investment in the
notes and receivable balances of Sears, Roebuck and Co. ("Sears") and invested
cash. The increase in revenue is attributable to SRAC's higher average earning
assets due to Sears continued refinancing of its maturing borrowings and
funding of its business growth. SRAC's average assets were $2.9 billion higher
in the third quarter and $3.0 billion higher in the first nine months of 1996
when compared to the same periods in 1995.
SRAC's interest and related expenses increased 34.7% to $139.5 million
from $103.6 million and 34.0% to $384.7 million from $287.1 million for the
third quarter and first nine months of 1996, respectively, as compared to the
comparable 1995 periods. SRAC's cost of short-term funds averaged 5.51% in the
third quarter and 5.50% in the first nine months of 1996 compared to 6.00% and
6.13% for the same periods in 1995. SRAC's short-term borrowings averaged
$4.3 billion and $4.6 billion for the third quarter and first nine months of
1996 compared to the 1995 levels of $5.2 billion and $5.0 billion. Decreases
in interest expense from short-term borrowings were offset by interest related
to increased long-term debt levels. SRAC's long-term debt averaged $5.0 billion
and $4.1 billion in the third quarter and first nine months of 1996, compared
with $1.3 billion and $0.9 billion in the third quarter and first nine months
of 1995.
In September 1996, in anticipation of future borrowings, SRAC received a
capital infusion of $200 million from Sears. The capital infusion provides
additional strength to SRAC's balance sheet and allows SRAC to issue additional
debt given current covenant restrictions. During 1996, capital infusions
totaled $350.0 million.
SRAC's net income of $23.9 million and $64.9 million for the third quarter
and first nine months of 1996 reflects increases of 35.0% and 36.6% from the
comparable 1995 period amounts of $17.7 million and $47.5 million. SRAC's
ratio of earnings to fixed charges for both the third quarter and first nine
months of 1996 was 1.26 compared to 1.26 and 1.25 for the comparable 1995
periods.
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:
Reports on Form 8-K were filed by the
Registrant dated August 2, 1996 and
September 5, 1996.
(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/ Stephen D. Carp
-------------------
Stephen D. Carp
Vice President, Finance
and Assistant Secretary
(principal financial and accounting
officer and authorized officer of
Registrant)
November 8, 1996
EXHIBIT INDEX
12 - Calculation of ratio of earnings to fixed charges
15 - Acknowledgement of awareness from Deloitte & Touche, LLP, dated
November 8, 1996
27 - Financial Data Schedule
Exhibit 12
SEARS ROEBUCK ACCEPTANCE CORP.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
Nine Months Ended
Sept. 28, Sept. 30,
(MILLIONS) 1996 1995
--------- ---------
INCOME BEFORE INCOME TAXES $ 99.8 $ 73.1
PLUS FIXED CHARGES:
Interest 381.8 282.7
Amortization of debt
discount and expense 2.9 4.4
------- -------
Total fixed charges 384.7 287.1
------- -------
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES $484.5 $360.2
======= =======
RATIO OF EARNINGS TO FIXED
CHARGES 1.26 1.25
EXHIBIT 15
Sears Roebuck Acceptance Corp.
Greenville, Delaware
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Sears Roebuck Acceptance Corp. for the periods ended March 30,
1996 and March 31, 1995, June 29, 1996 and June 30, 1995, and September 28,
1996 and September 30, 1995 as indicated in our reports dated April 11, 1996,
July 10, 1996, and October 10, 1996 respectively; because we did not perform an
audit, we expressed no opinion on that information.
We are aware that our reports referred to above, which are included in your
Quarterly Reports on Form 10-Q for the quarters ended March 30, 1996,
June 29, 1996 and September 28, 1996 are incorporated by reference in
Registration Statement Nos.33-64215 and 333-9817 on Form S-3.
We are also aware that the aforementioned reports, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
November 8, 1996
