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</TABLE>
1 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 MARCH 29, 1997
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 March 29, 1997, 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.
<PAGE>
SEARS ROEBUCK ACCEPTANCE CORP.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
MARCH 29, 1997
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statements of Financial Position
March 29, 1997 and March 30, 1996 (unaudited)
and December 28, 1996 (audited) 1
Statements of Income (unaudited)
Three Months ended March 29, 1997
and March 30, 1996 2
Statements of Cash Flows (unaudited)
Three Months ended March 29, 1997
and March 30, 1996 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
<PAGE>
SEARS ROEBUCK ACCEPTANCE CORP.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION
(unaudited)
millions March 29, March 30, Dec. 28,
1997 1996 1996
Assets
Notes of Sears $ 12,525 $ 8,824 $ 11,609
Commercial receivable balances
purchased from Sears 79 69 76
Cash and invested cash 8 428 228
Other assets 101 17 91
Total assets $ 12,713 $ 9,338 $ 12,004
Liabilities
Commercial paper (net of
unamortized discount of
$13, $24 and $18) $ 3,625 $ 4,381 $ 3,324
Agreements with bank
trust departments 92 124 82
Intermediate-term loans 715 870 715
Medium-term notes 4,822 1,894 4,834
Discrete underwritten debt 1,603 748 1,298
Accrued interest and
other liabilities 143 56 64
Total liabilities 11,000 8,073 10,317
Stockholder's Equity
Capital stock, par value $100 per share:
500,000 shares authorized
350,000 shares issued and
outstanding 35 35 35
Capital in excess of par value 350 -- 350
Retained income 1,328 1,230 1,302
Total stockholder's equity 1,713 1,265 1,687
Total liabilities and
stockholder's equity $ 12,713 $ 9,338 $ 12,004
See notes to financial statements.<PAGE>
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
(unaudited)
millions Three Months Ended
March 29, March 30,
1997 1996
Revenues
Earnings on notes of Sears $ 205 $ 145
Earnings on receivable
balances purchased from Sears 2 1
Earnings on invested cash 1 3
Total revenues 208 149
Expenses
Interest and amortization of debt
discount and expense 166 117
Operating expenses 1 1
Total expenses 167 118
Income before income taxes 41 31
Income taxes 14 11
Net income $ 27 $ 20
Ratio of earnings to fixed charges 1.25 1.26
See notes to financial statements.
<PAGE>
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
millions Three Months Ended
March 29, March 30,
1997 1996
Cash flows from operating activities:
Net income $ 27 $ 20
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and other
noncash items 2 1
Increase in other assets (5) -
Increase in other liabilities 78 32
Net cash provided by operating activities 102 53
Cash flows from investing activities:
Increase in notes of Sears (916) (428)
(Increase) decrease in receivable balances
purchased from Sears (3) 12
Net cash used in
investing activities (919) (416)
Cash flows from financing activities:
Increase (decrease) in commercial paper,
primarily 90 days or less 301 (70)
Increase (decrease)in agreements with
bank trust departments 10 (13)
Proceeds from issuance of long-term debt 448 755
Payments for redemption of long-term debt (162) (25)
Net cash provided by
financing activities 597 647
Net (decrease) increase in cash and
invested cash (220) 284
Cash and invested cash at beginning
of period 228 143
Cash and invested cash at end of period $ 8 $ 427
See notes to financial statements
<PAGE>
SEARS ROEBUCK ACCEPTANCE CORP.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Significant Accounting Policies
The unaudited interim financial statements of Sears Roebuck
Acceptance Corp. ("SRAC"), a wholly-owned subsidiary of Sears,
Roebuck and Co. ("Sears"), reflect all adjustments (consisting
only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair statement of the results for the
interim periods presented.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
The significant accounting policies used in the presentation of
these financial statements are consistent with the summary of
significant accounting policies set forth in SRAC's Annual Report
on Form 10-K for the year ended December 28, 1996, 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 March 29, 1997
SRAC continued to provide support for 100% of commercial paper
outstanding through its investment portfolio and a syndicated
$5.0 billion credit facility with a five year term through
June 2001.
3. Intermediate-term loans
At the end of the first quarter of 1997, $715 million in
intermediate-term loans were outstanding compared to $870 million
at the end of the first quarter of 1996. The rates on most of
these variable rate intermediate-term loans are indexed to LIBOR
with a set basis point spread. The average weighted rate on the
intermediate-term loans in the first quarter of 1997 was 5.88%
compared to 5.78% in the comparable 1996 period.
As of March 29, 1997, intermediate-term loans maturing in the
next five years were as follows:
millions 1997 1998 1999 2000 2001
Total $245 $25 $375 $25 $45
4. Medium-term notes
SRAC issued $150 million of medium-term notes in the first
quarter of 1997 with either a floating rate indexed to LIBOR or a
fixed rate. The average weighted rate on medium-term notes in
the first quarter of 1997 was 6.43% compared to 6.08% in the
first quarter of 1996. Medium term notes outstanding have terms
ranging from one to ten years.
As of March 29, 1997, medium-term notes maturing in the next five
years were as follows:
millions 1997 1998 1999 2000 2001
Total $305 $585 $560 $723 $1,760
5. Discrete underwritten debt
During the first quarter of 1997, SRAC completed its first
discrete unsecured underwritten debt offering in Europe of
$300 million. As of March 29, 1997, SRAC had six discrete
underwritten issues outstanding in an aggregate principal amount
of $1,600 million and original terms ranging from five to ten
years. Discrete underwritten debt pays interest annually or
semiannually.
As of March 29, 1997, discrete underwritten debt is comprised of
the following:
millions
6.50% Notes, due 2000 $250
6.625% Notes, due 2002 $300
6.90% Notes, due 2003 $250
6.75% Notes, due 2005 $250
6.125% Notes, due 2006 $250
6.70% Notes, due 2006 $300
<PAGE>
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 March 29, 1997 and
March 30, 1996, and the related Statements of Income and Cash
Flows for the three-month periods then ended. These financial
statements are the responsibility of the Corporations 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 28, 1996, 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 22, 1997, 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 28, 1996 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
April 10, 1997<PAGE>
SEARS ROEBUCK ACCEPTANCE CORP.
ITEM 2. ANALYSIS OF RESULTS OF OPERATIONS
During the first quarter of 1997, Sears Roebuck Acceptance
Corp.'s ("SRAC") revenues increased 40% to $208 million from
$149 million in the comparable 1996 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 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.
SRAC's interest and related expenses increased 42% to $166
million from $117 million for the first quarter of 1996 due to an
increase in average outstanding long-term debt. SRAC's short-term
borrowings averaged $3.9 billion, a 19% decrease from the 1996
first quarter average of $4.8 billion. SRAC's cost of short-term
funds averaged 5.47%, a 10 basis point decrease from 5.57% for
the first three months of last year. Average outstanding
long-term debt of $6.9 billion in the first quarter of 1997
increased $3.7 billion compared to $3.2 billion in the first
quarter of 1996 period. SRACs cost of long-term funds averaged
6.43% in the first quarter of 1997 compared to 6.40% for the
first quarter of 1996.
In March 1997, SRAC completed its first discrete unsecured
underwritten debt offering in Europe. The $300 million five-year
offering pays a coupon of 6.625% annually. This introduction of
the SRAC name in Europe is intended to establish a foundation
that will allow SRAC to issue future debt systematically overseas
as a complement to its domestic funding strategy. SRAC
anticipates that borrowings will increase during 1997 as Sears
continues to refinance a portion of its maturing long-term
borrowings and fund its asset growth.
SRAC's net income increased 35% for the first quarter of 1997 to
$27 million from $20 million in 1996. SRAC's ratio of earnings
to fixed charges was 1.25 and 1.26 for the first quarter of 1997
and 1996, respectively.<PAGE>
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:
Registrant filed a current report on
Form 8-K dated February 25, 1997
[Item 5].
<PAGE>
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/ George F. Slook
-------------------
George F. Slook
Vice President,
and Assistant Secretary
(authorized officer of
Registrant)
April 21, 1997
<PAGE>
EXHIBIT INDEX
12 - Calculation of ratio of earnings to fixed charges
15 - Acknowledgment of awareness from Deloitte & Touche LLP,
dated April 17, 1997, concerning unaudited financial
information.
27 - Financial Data Schedule <PAGE>
Exhibit 12
SEARS ROEBUCK ACCEPTANCE CORP.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended
March 29, March 30,
millions 1997 1996
INCOME BEFORE INCOME TAXES $ 41 $ 31
PLUS FIXED CHARGES:
Interest 163 115
Amortization of debt
discount and expense 3 2
Total fixed charges 166 117
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES $ 207 $ 148
RATIO OF EARNINGS TO FIXED
CHARGES 1.25 1.26
<PAGE>
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 29, 1997 and
March 30, 1996, as indicated in our report dated April 10, 1997;
because we did not perform an audit, we expressed no opinion on
that information.
We are aware that our report referred to above, which is included
in your Quarterly Report on Form 10-Q for the quarter ended
March 29, 1997, is incorporated by reference in Registration
Statement No. 333-9817 on Form S-3.
We are also aware that the aforementioned report, 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
April 14, 1997
