<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-1-2000
<PERIOD-END> OCT-2-1999
<CASH> 60000000
<SECURITIES> 0
<RECEIVABLES> 17323000000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17391000000<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 17453000000
<CURRENT-LIABILITIES> 3289000000
<BONDS> 11271000000
0
0
<COMMON> 35000000
<OTHER-SE> 2858000000
<TOTAL-LIABILITY-AND-EQUITY> 17453000000
<SALES> 0
<TOTAL-REVENUES> 898000000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3000000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 714000000
<INCOME-PRETAX> 181000000
<INCOME-TAX> 63000000
<INCOME-CONTINUING> 118000000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 118000000
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Current assets consist of cash and cash equivalents, notes of Sears,
receivable balances purchased from Sears and other assets, excluding the
non-current portion of deferred capitalized issuance costs and fixed assets.
</FN>
</TABLE>
UNITED STATES
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 OCTOBER 2, 1999
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: 302/434-3100
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, 1999, 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 the reduced disclosure format.
DOCUMENTS INCORPORATED BY REFERENCE
Part I of this Form 10-Q incorporates by reference certain
information from Sears, Roebuck and Co.'s third quarter 1999
Form 10-Q.
SEARS ROEBUCK ACCEPTANCE CORP.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
13 WEEKS AND 39 WEEKS ENDED OCTOBER 2, 1999
PART I. FINANCIAL INFORMATION: Page No.
Item 1. Financial Statements
Statements of Financial Position
October 2, 1999 and October 3, 1998 (unaudited)
and January 2, 1999 (audited) 1
Statements of Income (unaudited)
13 Weeks and 39 Weeks ended October 2, 1999
and October 3, 1998 2
Statements of Cash Flows (unaudited)
39 Weeks ended October 2, 1999
and October 3, 1998 3
Notes to Financial Statements (unaudited) 4,5
Independent Accountants' Report 6
Item 2. Analysis of Results of Operations 7-9
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 10
SEARS ROEBUCK ACCEPTANCE CORP.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION
(unaudited)
(millions, except share data) Oct. 2, Oct. 3, Jan. 2,
1999 1998 1999
Assets
Cash and cash equivalents $ 60 $ 3 $ 94
Notes of Sears 17,316 18,592 17,990
Receivable balances
purchased from Sears 7 94 90
Other assets 70 67 73
Total assets $ 17,453 $ 18,756 $ 18,247
Liabilities
Commercial paper (net of
unamortized discount of
$16, $20 and $25) $ 3,068 $ 5,129 $ 4,243
Medium-term notes 5,444 6,385 5,976
Discrete underwritten debt (net
of unamortized discount of
$23, $8 and $16) 5,827 4,542 5,084
Accrued interest and
other liabilities 221 217 169
Total liabilities $ 14,560 $ 16,273 $ 15,472
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 1,150 900 1,150
Retained income 1,708 1,548 1,590
Total stockholder's equity 2,893 2,483 2,775
Total liabilities and
stockholder's equity $ 17,453 $ 18,756 $ 18,247
See notes to financial statements.
1
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
(unaudited)
(millions) 13 Weeks Ended 39 Weeks Ended
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
1999 1998 1999 1998
Revenues
Earnings on notes of Sears $ 293 $ 302 $ 891 $ 905
Earnings on receivable
balances purchased from Sears 1 1 4 5
Earnings on cash equivalents 1 1 3 4
Total revenues 295 304 898 914
Expenses
Interest expense and amortization
of debt discount/premium 234 241 714 725
Operating expenses 1 1 3 3
Total expenses 235 242 717 728
Income before income taxes 60 62 181 186
Income taxes 21 22 63 65
Net income $ 39 $ 40 $ 118 $ 121
Ratio of earnings
to fixed charges 1.26 1.26 1.25 1.26
See notes to financial statements.
2
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
(millions) 39 Weeks Ended
Oct. 2, Oct.3,
1999 1998
Cash flows from operating activities:
Net income $ 118 $ 121
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and other
noncash items 9 9
Decrease in other assets - 2
Increase in other liabilities 52 94
Net cash provided by operating activities 179 226
Cash flows from investing activities:
Decrease(increase)in notes of Sears 674 (2,031)
Decrease(increase)in receivable balances
purchased from Sears 83 (5)
Net cash provided by(used in)
investing activities 757 (2,036)
Cash flows from financing activities:
Decrease in commercial paper,
primarily 90 days or less (1,175) (120)
Proceeds from issuance of long-term debt 772 1,939
Payments for redemption of long-term debt (562) (195)
Issue costs paid to issue debt (5) (16)
Proceeds from capital infusion - 200
Net cash (used in)provided by
financing activities (970) 1,808
Net decrease in cash and
cash equivalents (34) (2)
Cash and cash equivalents at beginning
of period 94 5
Cash and cash equivalents at end of period $ 60 $ 3
See notes to financial statements.
3
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 52 weeks ended January 2, 1999, 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. Back-up Liquidity
SRAC continued to provide support for 100% of its commercial
paper outstanding through its investment portfolio and credit
facilities. SRAC's investment portfolio fluctuated from a low
of $3 million to a high of $393 million in the third quarter
of 1999. Credit facilities as of October 2, 1999 were as follows:
Expiration Date (millions)
- ------------------------------------------------------------
April 2003 $4,185
April 2002 875
November 1999 500
November 1999 40
- ------------------------------------------------------------
$5,600
============================================================
4
3. Medium-term Notes and Discrete Underwritten Debt
Medium-term notes and discrete underwritten debt are issued with
either a floating rate indexed to LIBOR or a fixed rate.
(dollars in millions; terms in years)
ISSUANCE
Avg. Avg.
1999 Avg. Orig. 1998 Avg. Orig.
Volume Coupon Term Volume Coupon Term
------ ------ ---- ------ ------ ----
13 Weeks Ended:
Medium-term notes $ - -% - $ 45 6.27% 11.9
Discrete debt $ - -% - $ - -% -
39 Weeks Ended:
Medium-term notes $ 30 5.92% 10.0 $ 498 6.00% 5.1
Discrete debt $ 750 6.25% 10.0 $1,450 6.40% 14.5
GROSS OUTSTANDING
Avg. Avg.
10/02/99 Avg. Remain. 10/03/98 Avg. Remain.
Balance Coupon Term Balance Coupon Term
-------- ------ ------ ------- ------ -------
Medium-term notes $5,444 6.54% 2.5 $6,385 6.47% 3.9
Discrete debt $5,850 6.65% 11.9 $4,550 6.69% 10.7
MATURITIES
Medium-term Discrete
Year notes debt
- ---------------------------------
1999 $ 48 $ -
2000 1,231 250
2001 2,018 -
2002 813 600
2003 900 1,250
Thereafter 434 3,750
- ---------------------------------
Total $5,444 $5,850
=================================
5
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 October 2, 1999 and
October 3, 1998, and the related statements of income for the
13 week and 39 week periods then ended and cash flows for the
39 week 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 January 2, 1999 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, 1999, 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
January 2, 1999 is fairly stated, in all material respects, in
relation to the statement of financial position from which it has
been derived.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Philadelphia, Pennsylvania
October 14, 1999
6
SEARS ROEBUCK ACCEPTANCE CORP.
ITEM 2. ANALYSIS OF RESULTS OF OPERATIONS
During the third quarter of 1999, Sears Roebuck Acceptance
Corp.'s ("SRAC") revenues decreased 3% to $295 million from
$304 million in the comparable 1998 period. For the first nine
months of 1999, revenues declined 2% to $898 million from
$914 million for the comparable 1998 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 decrease in revenue is attributable to lower
interest rates on SRAC's average earning assets.
SRAC's interest and related expenses decreased 3% to
$234 million from $241 million and 2% to $714 million from
$725 million for the third quarter and first 39 weeks of 1999,
respectively, as compared to the comparable 1998 periods.
Interest and related expenses decreased due to decreases in
average short-term borrowings and cost of short-term funds.
SRAC's cost of short-term funds averaged 5.26% in the third
quarter and 5.10% in the first nine months of 1999 compared to
5.59% and 5.61% for the same periods in 1998. SRAC's short-term
borrowings averaged $3.4 billion and $3.9 billion for the third
quarter and first nine months of 1999; respectively, compared to
$4.0 billion and $4.3 billion for the respective 1998 periods.
Interest expense reductions from short-term borrowings were partially
offset by increased interest expense related to increased long-term
debt levels. SRAC's average long-term debt of $11.3 billion in the
third quarter of 1999 and $11.1 billion in the first nine months of
1999 reflect increases of 3% and 6%, respectively, compared with
$11.0 billion and $10.5 billion for the same periods in 1998.
SRAC's net income of $39 million and $118 million for the
third quarter and first nine months of 1999, respectively, reflects
decreases from the comparable 1998 period amounts of $40 million
and $121 million. SRAC's ratio of earnings to fixed charges for
the third quarter and first nine months of 1999 was 1.26 and 1.25
compared to 1.26 for the comparable 1998 periods.
7
YEAR 2000
This description updates the full description of SRAC's
Year 2000 project included beginning on page 5 of SRAC's
filing on Form 10-K for the fiscal year ended January 2, 1999
(the "10-K"), beginning on page 8 of its Form 10-Q quarterly
report for the quarter ended April 3, 1999 and page 8 of its
Form 10-Q for the quarter ended July 3, 1999.
SRAC is implementing its Year 2000 plan in coordination with
Sears for information systems, equipment and third party
relationships that are specific to SRAC and not otherwise used
corporate-wide at Sears. Pursuant to an agreement between SRAC
and Sears, SRAC is relying on Sears implementation of Sears Year
2000 effort as to information systems, equipment and third party
relationships that SRAC uses in conjunction with Sears. For a
detailed description of Sears Year 2000 plan see "Year 2000"
beginning on page 17 of Sears filing on Form 10-Q for the
fiscal quarter ending October 2, 1999.
STATE OF READINESS
SRAC completed the inventorying, assessment, remediation and
initial testing of information systems that are specific to SRAC
in the second quarter of 1999. SRAC completed final certification
of its mission critical information systems during the third
quarter of 1999. The results of certification did not indicate
that key business systems will encounter any material problems in
the year 2000 due to the inability to recognize dates in the year
2000.
SRAC has reviewed public disclosures regarding Year 2000 made by
key external parties including banks, issuing agents, and transfer
agents. No matter has come to SRAC's attention concerning the
state of readiness of these key third parties that causes
management to believe any of these parties will be unable to
provide continuous service to SRAC.
COSTS
SRAC's costs related to its Year 2000 efforts have not been
material.
CONTINGENCY PLANS
SRAC has for many years had in place a continuity plan to address
business interruptions. SRAC, with assistance from Sears, has
modified its continuity plan to address the particular challenges
that would arise if critical systems, equipment or third parties
were not Year 2000 compliant. SRAC finalized these modifications
in the third quarter of 1999.
8
RISKS
SRAC believes that its most significant Year 2000 risk factor is
the failure of any of the following to be Year 2000 compliant: the
securities depository through which trades in SRAC securities are
settled; the participant bank that is SRAC's conduit to the
securities depository; or the federal reserve wire system (which
SRAC's banks use to transfer activities). The most likely worst
case scenario that SRAC would face is that computer operations
would be suspended for up to a week commencing on January 1, 2000.
SRAC's contingency plan provides for these scenarios including a
complete backup of all key data on December 31, 1999 and both
electronic and printed reports generated for all critical data up
to and including December 31, 1999.
Although the occurrence of any of these scenarios could have a
material adverse affect on SRAC, SRAC does not believe that any of
these scenarios or any other Year 2000 compliance issues that would
materially affect SRAC's operations are reasonably likely to occur.
CAUTIONARY STATEMENT
The foregoing statements relating to SRAC's expectations as to its
Year 2000 efforts include forward looking statements and are made
in reliance on the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. As such, they involve risks and
uncertainties that could cause actual results to differ materially.
The forward-looking statements are based on SRAC's best estimates
and on assumptions about many important factors, including the
technical skills of employees and independent contractors of SRAC
and Sears and the representations and preparedness of third
parties. While SRAC believes that these estimates and assumptions
are reasonable, SRAC cautions that it is impossible to predict the
impact of certain facts that could cause actual results to differ
from expected results.
9
SEARS ROEBUCK ACCEPTANCE CORP.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits listed in the "Exhibit
Index" are filed as part of this
report.
(b) Reports on Form 8-K:
There were no reports filed on
Form 8-K
10
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, Finance
and Assistant Secretary
(principal financial
officer and authorized
officer of Registrant)
November 9, 1999
11
EXHIBIT INDEX
3(a) Certificate of Incorporation of the Registrant, as in
effect at November 13, 1987 [Incorporated by reference to
Exhibit 28(c)to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1987].
3(b) By-laws of the Registrant, as in effect at
October 20, 1999.*
4 The Registrant hereby agrees to furnish the Commission,
upon request, with each instrument defining the rights
of holders of long-term debt of the Registrant with
respect to which the total amount of securities
authorized does not exceed 10% of the total assets of
the Registrant.
12 Calculation of ratio of earnings to fixed charges.*
15 Acknowledgment of awareness from Deloitte & Touche LLP,
dated November 5, 1999 concerning unaudited financial
information.*
27 Financial Data Schedule.*
99 Pages 17, 18 and 19 of the Sears, Roebuck and Co. Quarterly
Report on Form 10-Q for the quarter ended October 2, 1999.*
* Filed herewith.
EXHIBIT 3(b)
By-Laws
of
SEARS ROEBUCK
ACCEPTANCE CORP.
as amended to
October 20, 1999
ARTICLE I
OFFICES
Section 1. The corporation may have offices at such places within the
State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders shall be held at the office
of the corporation in Wilmington, Delaware, or at such other place
within or without the State of Delaware and the United
States of America as shall be designated in the notice of the meeting or
in a duly executed waiver of notice thereof.
Section 2. Annual Meetings of Stockholders for the election of Directors
and for transaction of such other business as may properly be brought before
the meeting shall be held on the second Tuesday of December in each year if
not a legal holiday, and if a legal holiday, then on the next secular day
following at 10:00 A.M., or at such time and on such other date as the Board
of Directors shall each year fix.
Section 3. Special Meetings of the Stockholders, for any purpose or
purposes, may be called to be held at any time by a majority of the members
of the Board of Directors then in office, or at the request in writing,
addressed to the President or the Secretary, of stockholders owning a
majority in amount of the entire capital stock of the corporation issued
and outstanding and entitled to vote. Such request shall state the purpose
or purposes of the proposed meeting.
Section 4. Written notice of the time and place of each Annual Meeting of
Stockholders, and of the time, place and purpose or purposes of each Special
Meeting of Stockholders, shall be given by the Secretary, either personally
or by mail, to each stockholder entitled to vote at such meeting, not less
than ten nor more than sixty days before the date of such meeting, except
when otherwise required by law. If mailed, the notice shall be addressed to
each stockholder entitled to vote at such meeting at his address.
13
Section 5. Business transacted at all Special Meetings shall be confined to
the objects stated in the call.
Section 6. The holders of a majority of the total number of outstanding
shares of the stock of the corporation entitled to vote, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote, present in person or represented by proxy,
shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present or represented. At any adjourned meeting at which a quorum is
present or represented, any business may be transacted that
might have been transacted at the meeting as originally convened.
Section 7. If a quorum is present at any meeting of stockholders, the vote
of the holders of a majority of the stock then outstanding and entitled to
vote present in person or represented by proxy shall be sufficient for the
transaction of any business, unless otherwise provided by law.
Section 8. At each meeting of the stockholders, each stockholder having the
right to vote shall be entitled to vote in person, or by proxy appointed by
an instrument in writing subscribed by such stockholder and bearing a date
not more than three years prior to said meeting, unless said instrument
provides for a longer period. At all elections of directors of the
corporation, each stockholder shall be entitled to as many votes as shall
equal the number of votes which (except for such provision as to
cumulative voting) he would be entitled to cast for the election of
directors with respect to his shares of stock multiplied by the number of
directors to be elected, and he may cast all of such votes for a single
director or may distribute them among the number to be voted for, or for
any two or more of them as he may see fit.
Section 9. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by
any provisions of the statutes or of the certificate of incorporation or of
these By-Laws, the meeting and vote of stockholders may be dispensed with,
if all the stockholders who would have been entitled to vote upon the action
if such meeting were held, shall consent in writing to such corporate action
being taken.
ARTICLE III
DIRECTORS
Section 1. The business, property and officers of the Company shall be
managed and controlled by a Board of Directors. The number of directors of
the Company shall be fixed and may from time to time be increased or
decreased by the Board of Directors or the stockholders but in no event
shall the number of directors be less than five or more than twelve. The
directors shall be elected at the Annual Meeting of the Stockholders, except
as provided in Section 2 of this Article, and each director elected
shall hold office until his successor shall be elected and shall qualify.
Directors may be removed at any time by the vote of the holders of a
majority of the stock then outstanding and entitled to vote. Directors
need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the number of directors may be filled by a majority of the
directors then in office, though less than a quorum, or by the stockholders,
and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify,
unless sooner displaced.
14
Section 3. Any director may resign at any time by giving written notice to
the President or to the Secretary of the Company. Such resignation shall
take effect at the date of receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance
of such resignation by the Board of Directors shall not be necessary to make
it effective.
MEETINGS OF THE BOARD
Section 4. The Board of Directors may hold its meetings, both regular and
special, either within or without the State of Delaware, as the Board of
Directors may from time to time determine.
Section 5. A meeting of the Board of Directors to be known as the annual
meeting of the Board of Directors shall be held following the meeting of the
stockholder at which such Board of Directors is elected, at the same place
as the annual meeting of the stockholder is held or as shall otherwise be
fixed by the Board of Directors, for the purpose of electing the officers of
the Corporation and the standing committees of the Board of Directors, and
of transacting such other business as may properly come before the meeting.
It shall not be necessary to give notice of this meeting.
Section 6. Regular meetings of the Board of Directors may be held without
notice at such time and place as shall from time to time be determined by
the board.
Section 7. Special meetings of the Board of Directors may be called by
the President or Secretary on the written request of two directors. Written
notice of special meetings of the Board of Directors shall be given to each
director at least two days before the date of the meeting.
Section 8. At all meetings of the Board of Directors, the presence of a
majority of all directors in office at the time (but not less than one-third
of the total number of directors) shall constitute a quorum for the
transaction of business and the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of
the Board of Directors. If a quorum is not present at any meeting of the
Board of Directors, a majority of the directors present may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Any action that may be taken at a meeting of the Board of
Directors or of any Committee thereof, may be taken as follows: (i) without
a meeting if all members of the Board or of a committee of the Board, as
the case may be, consent thereto in writing; or (ii) by means of a telephone
conference or similar communications equipment by which all persons
participating in the meeting can hear each other -- provided a majority of
such members consent in writing to the recording of such communications in
the corporate records -- in which case such participation shall constitute
presence in person at a meeting.
15
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be
in writing and delivered personally or mailed to the directors or
stockholders at their addresses bearing on the books of the corporation.
Notice by mail shall be deemed to be given at the time when
the same shall be mailed. Notice to directors may also be given by
telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation, or of
these By-Laws, a waiver thereof in writing signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. Officers. The officers of the corporation shall be elected by
the Board of Directors at the annual meeting and shall consist of a
President, a Vice President, Finance, one or more additional
Vice Presidents, a Secretary, and one or more Assistant Secretaries.
Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these By-Laws otherwise provide. The
Board of Directors may appoint such other officers or agents as it shall
deem necessary, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be
determined from time to time by the Board.
Section 2. The Board of Directors, at its first meeting after each annual
meeting of stockholders, shall choose the officers of the Corporation.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy shall be
filled by the Board of Directors.
PRESIDENT
Section 5. The President shall be elected from among the directors and
shall be the chief executive officer of the corporation. He shall preside
at meetings of the Board of Directors. He shall have general and active
management of the business of the corporation, and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
16
Section 6. The President shall execute bonds, mortgages and other contracts
requiring a seal,under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board
of Directors to some other officer or agent of the corporation.
VICE PRESIDENTS
Section 8. The Vice Presidents shall perform such duties as the Board of
Directors shall prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The Secretary shall attend all sessions of the Board of
Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or President, under
whose supervision he or she shall be. The Secretary shall keep in safe
custody the seal of the corporation and, when authorized by the Board of
Directors, affix the same to any instrument requiring it and, when so
affixed, it shall be attested by his or her signature or by the signature
of an Assistant Secretary.
Section 10. The Assistant Secretaries in order of their seniority shall, in
the absence or disability of the Secretary, perform the duties and exercise
the powers of the Secretary and shall perform such other duties as the Board
of Directors shall prescribe.
THE VICE PRESIDENT, FINANCE
Section 11. The Vice President, Finance shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit
of the corporation in such depositories as may be designated by the Board of
Directors.
Section 12. The Vice President, Finance shall disburse the funds of the
corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the President and the
Board of Directors, at its regular meetings, or when the Board of Directors
so requires, an account of all his transactions as Vice President, Finance
and of the financial condition of the corporation.
Section 13. If required by the Board of Directors, the Vice President,
Finance shall give the corporation a bond (which shall be renewed every six
years) in such sum and with such surety or sureties as shall be satisfactory
to the Board of Directors for the faithful performance of the duties of his
office and for the restoration to the corporation, in case of his death,
resignation, retirement or removal
17
From office, of all books, papers, vouchers money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 14. The Vice President, Finance shall have general charge, control
and supervision over the accounting and auditing affairs of the corporation.
The Vice President, Finance shall have the responsibility for the preparation
and maintenance of the books of account (but shall not have access to
make direct entries to these books) and of the accounting records and papers
of the corporation; shall have responsibility for the custody and safekeeping
of all permanent records and papers of the corporation; shall supervise the
preparation of all financial statements and reports on the operation and
condition of the business; shall have responsibility for the establishment
of financial procedures, records, and forms used by the corporation; shall
have responsibility for the filing of all financial and tax reports and
returns required by law; shall render to the President, Vice President, or
the Board of Directors, whenever they may require, an account of his
transactions as Vice President, Finance; and in general shall have such other
powers and perform such other duties as are incident to the office of a
treasurer and a controller and as from time to time may be prescribed by the
Board of Directors or the President.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
President or a Vice President and the Secretary or an Assistant Secretary of
the Corporation, certifying the number of shares owned by him in the
corporation. If the corporation shall be authorized to issue more than one
class of stock, the designations, preferences and relative, participating,
optional or other special rights of each class and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class of stock.
Section 2. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent or (2) by a transfer clerk acting on behalf of the
corporation and a registrar, the signature of any such President, Vice
President, Secretary or Assistant Secretary may be facsimile. In case any
officer or officers who have signed, or whose facsimile signature or
signatures have been used on any such certificate or certificates shall
cease to be such officer or officers of the corporation, whether because of
death, resignation or otherwise, before such certificate or certificates
have been delivered by the corporation, such certificate or certificates
may nevertheless be adopted by the corporation and be issued and delivered
as though the person or persons who signed such certificate or certificates
or whose facsimile signature or signatures have been used thereon had not
ceased to be such officer or officers of the corporation.
TRANSFERS OF STOCK
Section 3. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon
its books.
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ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to
law. Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such
other purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each Annual Meeting and
when called for by vote of the stockholders at any Special Meeting of the
Stockholders, a full and clear statement of the business and condition of
the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons
as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Company shall begin on January 1 in 1995,
and thereafter shall begin on the day after the Saturday closest to
December 31 in each year, and shall end on the Saturday closest to
December 31 in 1995 and each year thereafter.
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ARTICLE VIII
AMENDMENTS
Section 1. These By-Laws may be altered or repealed at any regular meeting
of the stockholders or of the Board of Directors or at any Special Meeting
of the Stockholders or of the Board of Directors if notice of such alteration
or repeal be contained in the notice of such Special Meeting. No change of
the time or place of the meeting for the election of directors shall be made
within sixty days next before the day on which such meeting is to be held,
and in case of any change of such time or place, notice thereof
shall be given to each stockholder in person or by letter mailed to his last
known post office address at least twenty days before the meeting is held.
ARTICLE IX
COMMITTEES
Section 1. The Board of Directors, at its annual meeting, shall, or any
adjournment thereof, shall elect from among its members, by the vote of a
majority of its members, an Executive Committee, a Compensation Committee
and an Audit Committee, which shall be the standing committees of the
corporation. The Board of Directors also shall designate the chairman of
each such committee.
The Board of Directors, by the vote of a majority of its members, may
remove the chairman or any member of any committee, and may fill from among
the directors vacancies in any committee caused by the death, resignation,
or removal of any person elected thereto.
Each standing committee may determine its own rules of procedure, consistent
with these By-Laws. Meetings of any standing committee may be called upon
direction of the President, or the chairman of the committee. Written,
facsimile or electronic notice of each meeting, except meetings of
the Executive Committee, shall be given to each member of the committee, by
personal delivery, or by mail addressed to him at his usual business address,
or by facsimile or electronic means at any facsimile
number or electronic address provided by him to the corporation, at least
three days (excluding Saturdays, Sundays, and holidays) prior to the meeting
in case of notice by mail, and at least two days (excluding Saturdays,
Sundays, and holidays) prior to the meeting in case of notice by telegram or
by personal delivery. Notice of each meeting of the Executive Committee
shall be given to each member of that committee, by personal delivery, or by
telephone, or by mail addressed to him at his usual business
address, or by facsimile or electronic means at any facsimile number or
electronic address provided by him to the corporation, at least twenty-four
hours prior to the meeting in the case of notice by telephone,
telegram, or personal delivery, and at least two days (excluding Saturdays,
Sundays, and holidays) prior to the meeting in case of notice by mail. All
notices which are mailed shall be deemed to have been given when deposited
in the United States mail, postage prepaid. Notice of meetings of any
standing committee may be waived by any member of the committee. At
meetings of each standing committee,the presence of a majority of the members
of such committee shall be necessary to constitute a quorum
for the transaction of business, and, if a quorum is present at any meeting
the action taken by a majority of the members present shall be the act of the
committee. Each standing committee shall keep a record
of its acts and proceedings - and all action shall be reported to the Board
of Directors at the next meeting of the Board of Directors following such
action.
20
EXECUTIVE COMMITTEE
Section 2. The Executive Committee shall consist of not less than three
members, including the President, as from time to time shall be prescribed
by the Board of Directors and shall hold office until
their respective successors are elected.
The Executive Committee, unless otherwise provided by resolution of the
Board of Directors,shall have and may exercise, during the time between
meetings of the Board of Directors, all the powers
and perform all the duties of the Board of Directors except that said
Committee shall have no authority as to the following matters: (i) the
submission to shareholders of any action that needs shareholders'
authorization under the Delaware General Business Corporation Act;
(ii) the amendment or repeal of these By-Laws or the adoption of new By-Laws;
(iii) the amendment or repeal of any resolution of the
Board of Directors which by its terms shall not be so amendable or
repealable; (iv) action in respect of dividends to shareholders; (v) election
of officers or the designation of members of committees of the
Board of Directors or the filling of vacancies in the Board of Directors or
in any committee of the Board of Directors; and (vi) any action which the
President shall by written instrument filed with the Secretary
designate as a matter which should be considered by the Board of Directors.
Action taken by the Executive Committee shall be subject to revision or
alteration by the Board of Directors, provided that rights or acts of third
parties vested or taken in reliance on such action prior to any such revision
or alteration shall not be adversely affected by such revision or alteration.
The secretary of the corporation or in his absence any person as may be
designated by the Chairman of the Executive Committee, shall act as secretary
of the Executive Committee and keep the minutes of all meetings.
COMPENSATION COMMITTEE
Section 3. The Compensation Committee shall consist of such number of
directors, not less than two, as shall from time to time be prescribed by the
Board of Directors. As authorized by the Board of Directors, the Compensation
Committee shall make recommendations to the Board of Directors with respect
to the number of employees of the Company and the administration of the
salaries, bonuses, and other compensation to be paid to the employees of the
Company, including the terms and conditions of their employment.
AUDIT COMMITTEE
Section 4. The Audit Committee shall consist of not less than two directors
who are not engaged in the day to day operations of the corporation, as from
time to time shall be prescribed by the Board of Directors, who shall hold
office until their respective successors are elected.
The Audit Committee shall report to the Board of Directors annually the
independent public accountants that it recommends the Board appoint to audit
the books, records, and accounts of the corporation and to perform such other
duties as the Board of Directors may from time to time prescribe.
The Committee shall review all recommendations made by the corporation's
independent public accountants to the Board of Directors with respect to the
accounting methods used, the system of internal control followed by the
corporation and in connection with non-audit services, and shall advise
the Board of Directors with respect thereto. The Committee shall also have
authority to examine into and make recommendations to the Board of Directors
with respect to the scope of the audit conducted by the corporation's
independent public accountants and with respect to non-audit services.
21
The Audit Committee shall review the audit plans and results of the
Corporation's internal audit function and shall report to the Board of
Directors with respect thereto.
22
Exhibit 12
SEARS ROEBUCK ACCEPTANCE CORP.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
13 Weeks Ended 39 Weeks Ended
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
(millions) 1999 1998 1999 1998
INCOME BEFORE INCOME TAXES $ 60 $ 62 $ 181 $ 186
PLUS FIXED CHARGES:
Interest 231 238 706 717
Amortization of debt
discount/premium 3 3 8 8
Total fixed charges 234 241 714 725
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES $ 294 $ 303 $ 895 $ 911
RATIO OF EARNINGS TO FIXED
CHARGES 1.26 1.26 1.25 1.26
23
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 October 2, 1999 and
October 3, 1998, as indicated in our report dated October 14, 1999;
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 October 2, 1999, is incorporated by reference in Registration
Statement Nos.333-30879 and 333-62847 on Forms 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
November 5, 1999
24
Exhibit 99
Year 2000
This description updates the description of the Company's Year 2000 project
contained in the Company's 1998 Annual Report to Shareholders and its
Quarterly Reports for the quarters ended April 3, 1999 and July 3, 1999 and
should be read in conjunction with such descriptions.
State of Readiness
Information Systems
The Company has completed the inventory and assessment of its mission
critical (vital to business operations) information systems. During the
period covered by this Report, the Company completed the remediation and
testing of those mission critical systems requiring remediation. As of
October 20, 1999, the Company has completed certification (final testing
and validation) for approximately 80% of its mission critical or retired
mission critical systems, and the Company expects to complete such
certification by the end of November 1999.
To assist in completing certification, the Company has issued a moratorium
on deploying any changes into its systems production environment from
July 1, 1999 through April 1, 2000 (subject to business critical changes)
that are not related to the Year 2000 compliance project. A formal process
has been developed for managing business critical changes implemented during
the moratorium, including a retesting and recertification process where
necessary.
25
SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY FOR THE
13 AND 39 WEEKS ENDED OCTOBER 2, 1999 AND OCTOBER 3, 1998
Business Management
There have been no changes in the Company's assessment of its equipment and
systems that contain embedded computer technology, its resale merchandise,
or its mission critical, non-information systems service providers -- the
Company believes that these areas do not pose a substantial Year 2000
compliance risk to the Company.
Merchandise Vendors
The Company currently rates its vendors as either green or red. The green
category consists of vendors that have represented to the Company that they
are compliant, including the development of contingency plans, subject to
the possible failure of the vendors' third party providers. The green
category also includes vendors in the third tier that previously reported
that they would be compliant by August 1, 1999. All other vendors are rated
in the red category.As of November 1, 1999, one first tier vendor (less than
1% of merchandise sales), two second tier vendors (less than 1% of
merchandise sales) and 162 third tier vendors (approximately 2% of
merchandise sales) were rated in the red category. The Company continues
to monitor vendors rated in the red category, including reviewing follow-up
progress reports and conducting electronic data interchange testing. For
first and second tier vendors rated in the red category, the Company also
continues to engage in further discussions with the vendors regarding their
compliance and review available information, such as the vendors' filings with
the Securities and Exchange Commission.
Contingency Plans
Each of the Company's business units has substantially completed the
development of contingency plans that identify what actions need to be
taken if a critical system, merchandise vendor or service is not available.
These plans are based on existing emergency response plans, business
continuity plans and the results of the Year 2000 compliance project. The
business units have considered various contingencies, such as alternative
merchandise vendors and service providers and operational alternatives
(include procedures focus on assuring that key personnel - including
managerial, operational and technical support functions - will be available
to identify and seek to remedy as promptly as possible any disruption that
may occur during the century rollover. The Company expects to complete the
formulation of these century rollover event management plans in
November 1999 and to test, rehearse and refine these plans throughout the
remainder of 1999.
Risks
The Company believes that its most significant Year 2000 risk factors are:
* Failure of either of its two mission critical information systems service
providers to make their systems Year 2000 compliant, despite such
providers' own Year 2000 compliance efforts and their assurances to the
Company that their systems are Year 2000 compliant; and
* Failure of a first tier mission critical merchandise vendor, or multiple
merchandise vendors or service providers, to supply merchandise or services
for an extended period of time.
26
SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY FOR THE
13 AND 39 WEEKS ENDED OCTOBER 2, 1999 AND OCTOBER 3, 1998
Although the occurrence of either of these scenarios could have a material
adverse effect on the Company, the Company does not believe that any of
these scenarios or any other Year 2000 compliance issues that would
materially affect the Company's operations are reasonably likely to occur.
Costs
The Company estimates total costs (including external costs and the costs of
internal personnel) related to its Year 2000 effort to be approximately
$67 million, of which the Company (including Sears Canada) has incurred
approximately $55 million through September 30, 1999. In addition, the
Company has accelerated the planned development of new systems with improved
business functionality to replace systems that were not Year 2000 compliant,
including the Company's new payroll processing system. The Company expects
these systems will cost approximately $82 million, of which the Company
has incurred approximately $78 million through September 30, 1999
The Company funds Year 2000 costs with cash flows from operations.
Cautionary Statement Regarding Forward-Looking Information
Certain statements made in this Report are forward-looking statements made
in reliance on the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. As such, they involve risks and
uncertainties that could cause actual results to differ materially.
The Company's forward-looking statements are based on assumptions
about many important factors, including ongoing competitive pressures
in the retail industry, changes in consumer spending, delinquency and
charge-off trends in the credit card receivables portfolio, general
North American economic conditions (such as interest rates and
consumer confidence), anticipated cash flow, the Company's ability to
cost-effectively access multiple sources of funding, the ability of
the Company to implement its new marketing plan and cost reduction
efforts, and normal business uncertainty. In particular, the
discussion of Year 2000 matters above is based on assumptions about
a variety of factors, including the technical skills of employees
and independent contractors, the representations and preparedness of
third parties, vendors' delivery of merchandise and performance of
services required by the Company and the collateral effects of
Year 2000 compliance issues on the Company's business partners and
customers. While the Company believes that its assumptions are
reasonable, it cautions that it is impossible to predict the impact
of certain factors which could cause actual results to differ
materially from expected results.
27
