<PAGE>
This Prospectus and Prospectus Supplement filed pursuant to Rule 424(b)(2),
relate to Registration Statement No. 333-9817
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 13, 1997)
$300,000,000
Sears Roebuck Acceptance Corp.
6.95% NOTES DUE MAY 15, 2002
----------------
Interest payable May 15 and November 15
----------------
THE 6.95% 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 99.808% 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.............................. 99.808% .550% 99.258%
Total................................. $299,424,000 $1,650,000 $297,774,000
</TABLE>
- --------
(1) Plus accrued interest, if any, from May 16, 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(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 Cleary,
Gottlieb, Steen & Hamilton, counsel for the Underwriters. It is expected that
delivery of the Notes will be made in New York, New York, on or about May 16,
1997 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.
J.P. MORGAN & CO.
May 13, 1997
<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 AND THE ACCOMPANYING
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO
WHICH THEY RELATE 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 ACCOMPANYING 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
THEREOF OR THAT THE INFORMATION IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Notes.
Specifically, the Underwriters may overallot in connection with the offering,
and may bid for, and purchase, the Notes in the open market. For a description
of these activities, see "Underwriting."
----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Recent Financial Information............................................... S-3
Description of Notes....................................................... S-4
Underwriting............................................................... S-5
Legal Opinions............................................................. S-6
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....................................................... 10
Legal Opinion.............................................................. 10
Experts.................................................................... 10
</TABLE>
S-2
<PAGE>
RECENT FINANCIAL INFORMATION
The following table sets forth certain summary financial information of
Sears Roebuck Acceptance Corp. (the "Company" or "SRAC") for the three-month
periods ended March 29, 1997 and March 30, 1996. 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 29, 1997 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 29, MARCH 30,
1997 1996
--------- ---------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Operating Results
Total revenues............ $ 208 $ 149
Expenses
Interest and related
expenses............... 166 117
Total expenses.......... 167 118
Income taxes.............. 14 11
Net income................ 27 20
Financial Position
Assets
Notes of Sears.......... $12,525 $8,824
Customer receivable
balances purchased from
Sears.................. 79 69
Total assets............ 12,713 9,338
Liabilities
Commercial paper........ 3,625 4,381
Agreements with bank
trust departments...... 92 124
Intermediate-term loans. 715 870
Medium-term notes....... 4,822 1,894
Discrete underwritten
debt................... 1,603 748
Total liabilities....... 11,000 8,073
Sears investment in the
Company
Capital stock (including
capital in excess of
par value)............. 385 35
Retained income......... 1,328 1,230
Other Pertinent Data
Contractual Credit
Facilities (quarter-end). 5,000 5,720
</TABLE>
S-3
<PAGE>
During the first quarter of 1997, the Company's revenues increased 40% to
$208 million from $149 million in the comparable 1996 period. The increase in
revenue is attributable to a $3.2 billion or 34% increase in SRAC's average
earning assets compared to the first quarter of 1996 in response to Sears
funding requirements.
The Company's interest and related expenses increased 42% to $166 million
from $117 million for the first quarter of 1997 as compared to the comparable
1996 period. The Company's cost of short-term funds averaged 5.47% compared to
5.57% for the same period in 1996. The Company's short-term borrowings
averaged $3.9 billion compared to the first quarter of 1996 level of $4.8
billion. The Company's long-term debt averaged $6.9 billion compared with $3.2
billion in the first quarter of 1996.
The Company's net income of $27 million for the first quarter of 1997
reflects an increase of 35% from the comparable 1996 period amount of $20
million. The Company's ratio of earnings to fixed charges was 1.25 compared to
1.26 for the comparable 1996 period.
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 accompanying Prospectus, to which description
reference is hereby made. Reference should be made to the Prospectus and the
Indenture under which the Notes will be issued for the definitions of certain
capitalized terms used herein.
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. A copy of
the Indenture has been filed with the Commission and is hereby incorporated by
reference as part of the Registration Statement.
The Notes will mature on May 15, 2002 (the "Maturity Date") and will be
limited in aggregate principal amount to $300,000,000. The Notes will
constitute a single series of Debt Securities under the Indenture. The Notes
will be issued in fully registered form only, without coupons, 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 and including May 16, 1997 or from and including the most
recent Interest Payment Date to which interest has been paid or provided for,
payable semi-annually on May 15 and November 15 of each year, commencing
November 15, 1997 (each, an "Interest Payment Date"), to the person in whose
name the Note is registered (the "Holder") at the close of business on the May
1 or November 1, respectively, next preceding such Interest Payment Date (the
"Regular Record Date").
If any Interest Payment Date falls on a day that is not a Business Day, the
interest payment shall be made on the next day that is a Business Day, and no
interest on such payment shall accrue for the period from and after the
Interest Payment Date. The term "Business Day" as used herein means each
Monday, Tuesday, Wednesday, Thursday or Friday that is not a legal holiday for
banking institutions in any of the City of Wilmington, Delaware, the City of
Chicago, Illinois, The City of New York, New York or the city in which the
principal corporate trust office of the Trustee is located. If the Maturity
Date is not a Business Day, the payment of interest and principal may be made
on the next succeeding Business Day with the same force and effect as if made
on the Maturity Date, and no interest on such payment shall accrue for the
period from and after the Maturity Date.
Payments of interest on any Note with respect to any Interest Payment Date
or the Maturity Date will include interest accrued to but excluding such
Interest Payment Date or Maturity Date. Interest on the Notes will be computed
on the basis of a 360-day year of twelve 30-day months.
S-4
<PAGE>
Payment of principal and interest will be made by wire transfer to any
Holder of $10,000,000 or more in aggregate principal amount of Notes, if the
Holder thereof shall have designated in writing to the Trustee an account with
a bank located in the United States. If any payment of interest is to be made
by wire transfer, such information must be received by the Trustee at its
corporate trust office in The City of New York on or prior to the Regular
Record Date for an Interest Payment Date. The Trustee will, subject to
applicable laws and regulations and until it receives notice to the contrary,
make such payment to such Holder by wire transfer to the designated account.
If a payment of interest is not made by wire transfer for any reason, payment
will be made by check. Checks for payment of interest on an Interest Payment
Date will be mailed to the Holder at the address of such Holder appearing on
the Security Register on the applicable Regular Record Date.
To receive payment of principal and interest on the Maturity Date, a Holder
must make presentation and surrender of such Note on or before the Maturity
Date. Payment will be by check unless proper wire transfer instructions are on
file with the Trustee or are received at presentment.
SRAC will pay any administrative costs imposed by banks in connection with
sending payments by wire transfer, but any tax, assessment or governmental
charge imposed upon payments will be borne by the Holders of the Notes in
respect of which payments are made.
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
and Pricing Agreement dated the date hereof, the Company has agreed to sell to
each of the Underwriters named below, and each of the Underwriters has
severally agreed to purchase from the Company the respective principal amounts
of Notes set forth opposite its name in the table below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
NAME NOTES
---- ------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... $ 75,000,000
Goldman, Sachs & Co......................................... 75,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................... 75,000,000
J.P. Morgan Securities Inc.................................. 75,000,000
------------
Total................................................... $300,000,000
============
</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 initial 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 .35% of the principal amount of the Notes. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of .25% 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.
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.
S-5
<PAGE>
In order to facilitate the offering of the Notes, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price
of the Notes. Specifically, the Underwriters may overallot in connection with
the offering, creating a short position in the Notes for their own account. In
addition, to cover overallotments or to stabilize the price of the Notes, the
Underwriters may bid for, and purchase, the Notes in the open market. Finally,
the underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the Notes in the offering, if the
syndicate repurchases previously distributed Notes in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Notes above
independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriters may be required to make
in respect thereof.
In the ordinary course of business, certain of 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 Nancy K.
Bellis, Assistant General Counsel of Sears. As of May 13, 1997, Ms. Bellis
owned 100 shares of Sears stock. The legality of the Notes is being passed
upon for the Underwriters by Cleary, Gottlieb, Steen & Hamilton. Cleary,
Gottlieb, Steen & Hamilton from time to time performs legal services for
Sears.
S-6
<PAGE>
SEARS ROEBUCK ACCEPTANCE CORP.
DEBT SECURITIES
----------------
Sears Roebuck Acceptance Corp. ("SRAC") from time to time may offer up to
$2,546,685,000 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.
May 13, 1997
<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 ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS AND ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO
WHICH THEY RELATE 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 OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT 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
THEREOF 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....................................................... 10
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, Suite 1300, New York, New York
10048; and Suite 1400, Citicorp Center, 500 W. Madison Street, Chicago,
Illinois 60661-2511; 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. The Commission also maintains a
web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
(http://www.sec.gov). 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
"Securities 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 28, 1996 filed
by SRAC and Sears, the Quarterly Reports on Form 10-Q for the quarter ended
March 29, 1997 filed by SRAC and Sears, and the Current Reports on Form 8-K
for January 7, January 23 and April 10, 1997 filed by Sears and for February
25 and May 9, 1997 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 commercial receivable balances of Sears. The interest rate on
Sears notes is presently calculated so that SRAC maintains an earnings to
fixed charges 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--Certain Restrictions."
At April 30, 1997, SRAC had nine 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 commercial 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 interests in pools of
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 28, 1996. The summary information
should be read in conjunction with the financial statements of SRAC and the
notes thereto incorporated herein by reference.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------- ------ ------ ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Operating Results
Total revenues....................... $ 689 $ 510 $ 283 $ 338 $ 697
Interest and related expenses........ 546 405 219 236 483
Total expenses....................... 548 407 221 277 532
Income taxes......................... 49 36 22 21 56
Net income........................... 92 67 40 40 108
Financial Position
Assets
Notes of Sears..................... $11,609 $8,397 $6,843 $3,404 $10,494
Receivable balances purchased from
Sears............................. 76 81 82 88 963
Total assets....................... 12,004 8,635 7,031 4,146 12,415
Liabilities
Commercial paper................... $ 3,324 $4,451 $4,913 $2,475 $ 8,515
Agreements with bank trust
departments....................... 82 137 87 140 398
Intermediate-term loans............ 715 895 845 -- --
Medium-term notes.................. 4,834 1,384 -- -- --
Discrete underwritten debt......... 1,298 499 -- -- --
Loan agreements with Sears Overseas
Finance N.V....................... -- -- -- 380 332
Total liabilities.................. 10,317 7,390 5,854 3,008 9,287
Sears, Roebuck and Co. investment in
SRAC
Capital stock (including capital in
excess of par value).............. 385 35 35 35 365
Retained income.................... 1,301 1,210 1,143 1,103 2,763
Debt as percentage of equity......... 608% 592% 496% 263% 296%
Other Pertinent Data
Commercial paper
Average daily outstandings......... $ 4,387 $4,963 $3,615 $3,812 $ 9,328
Agreements with bank trust
departments
Average daily outstandings......... 98 154 124 402 747
Contractual credit facilities (year-
end)................................ 5,000 5,720 5,132 4,200 10,812
</TABLE>
5
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for SRAC for the three-month period
ended March 29, 1997 was 1.25 and for the years ended December 28, 1996,
December 30, 1995, and December 31, 1994, 1993 and 1992 was 1.26, 1.26, 1.29,
1.26 and 1.34, 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 the three-month period ended March 29, 1997 was 1.87 and for
the years ended December 28, 1996, December 30, 1995, and December 31, 1994
and 1993 was 2.40, 2.15, 2.06 and 1.66, respectively. For the year ended
December 31, 1992, earnings did not cover fixed charges by $2,870 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 (each, a "Trustee") under an Indenture pursuant to the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). 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
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payment of such interest, if any, will commence and the Regular Record Dates
for such Interest 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)
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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)
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 therefor, 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
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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)
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. (Section 13.4) Under present ruling positions of the Internal
Revenue Service, such a ruling is not obtainable.
REGARDING THE TRUSTEE
The Chase Manhattan Bank, N.A., which is a Trustee under an Indenture,
performs other services for SRAC.
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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.
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 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, commissions or concessions 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 Securities Act.
LEGAL OPINION
Unless otherwise specified in the accompanying Prospectus Supplement, the
legality of the Debt Securities is being passed upon for SRAC by Nancy K.
Bellis, Assistant General Counsel of Sears.
EXPERTS
The annual financial statements incorporated by reference in this prospectus
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 auditors, 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 reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information which is
incorporated herein by reference, Deloitte & Touche LLP have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in the Quarterly
Reports on Form 10-Q for Sears and SRAC and incorporated by reference herein,
they did not audit and they did not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports on
such information should be restricted in light of the limited nature of the
review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act for their reports on
the unaudited interim financial information because those reports are not
"reports" or a "part" of the registration statement prepared or certified by
an accountant within the meaning of Sections 7 and 11 of the Securities Act.
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Sears Roebuck Acceptance Corp.
