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 SEPTEMBER 30, 2000
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, 2000, the Registrant had 350,000 shares of
capital stock outstanding, all of which were held by Sears,
Roebuck and Co.
Registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing
this Form with a reduced disclosure format.
SEARS ROEBUCK ACCEPTANCE CORP.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
13 WEEKS AND 39 WEEKS ENDED SEPTEMBER 30, 2000
PART I. FINANCIAL INFORMATION: Page No.
Item 1. Financial Statements
Statements of Financial Position
September 30, 2000 and October 2, 1999 (unaudited)
and January 1, 2000 (audited) 1
Statements of Income (unaudited)
13 Weeks and 39 Weeks ended September 30, 2000
and October 2, 1999 2
Statements of Cash Flows (unaudited)
39 Weeks ended September 30, 2000
and October 2, 1999 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
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF FINANCIAL POSITION
(unaudited)
(millions, except share data) Sept.30, Oct. 2, Jan. 1,
2000 1999 2000
Assets
Cash and cash equivalents $ 209 $ 60 $ 454
Notes of Sears 17,618 17,316 16,806
Commercial customer receivable
balances purchased from Sears - 7 -
Other assets 52 70 64
Total assets $ 17,879 $ 17,453 $ 17,324
Liabilities
Commercial paper (net of
unamortized discount of
$22, $16 and $12) $ 3,891 $ 3,068 $ 2,675
Medium-term notes (net of
unamortized discount of
$8, $0 and $0) 5,151 5,444 5,716
Discrete underwritten debt (net
of unamortized discount of
$22, $23 and $23) 5,578 5,827 5,827
Accrued interest and
other liabilities 207 221 173
Total liabilities $ 14,827 $ 14,560 $ 14,391
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 1,150 1,150
Retained income 1,867 1,708 1,748
Total stockholder's equity 3,052 2,893 2,933
Total liabilities and
stockholder's equity $ 17,879 $ 17,453 $ 17,324
See notes to financial statements.
1
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
(unaudited)
(millions, except ratio) 13 Weeks Ended 39 Weeks Ended
Sept. 30, Oct. 2, Sept.30, Oct. 2,
2000 1999 2000 1999
Revenues
Earnings on notes of Sears $ 298 $ 293 $ 893 $ 891
Earnings on commercial customer
receivable balances purchased
from Sears - 1 - 4
Earnings on cash equivalents 2 1 8 3
Total revenues 300 295 901 898
Expenses
Interest expense and amortization
of debt discount/premium 239 234 716 714
Operating expenses - 1 2 3
Total expenses 239 235 718 717
Income before income taxes 61 60 183 181
Income taxes 21 21 64 63
Net income $ 40 $ 39 $ 119 $ 118
Ratio of earnings
to fixed charges 1.26 1.26 1.26 1.25
See notes to financial statements.
2
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
(millions) 39 Weeks Ended
Sept. 30, Oct.2,
2000 1999
Cash flows from operating activities:
Net income $ 119 $ 118
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and other
noncash items 12 9
Decrease in other assets 2 -
Increase in other liabilities 34 52
Net cash provided by operating activities 167 179
Cash flows from investing activities:
(Increase)decrease in notes of Sears (812) 674
Decrease in commercial customer
receivable balances purchased from Sears - 83
Net cash (used in)provided by
investing activities (812) 757
Cash flows from financing activities:
Increase (decrease) in commercial paper,
primarily 90 days or less 1,216 (1,175)
Proceeds from issuance of long-term debt 86 772
Payments for redemption of long-term debt (902) (562)
Issue costs paid to issue debt - (5)
Net cash provided by (used in)
financing activities 400 (970)
Net decrease in cash and
cash equivalents (245) (34)
Cash and cash equivalents at beginning
of period 454 94
Cash and cash equivalents at end of period $ 209 $ 60
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 1, 2000, 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 $5 million to a
high of $450 million in the third quarter of 2000. Available credit
facilities as of September 30, 2000 were as follows:
Expiration Date (millions)
------------------------------------------------------------
April 2003 $4,185
April 2002 875
------------------------------------------------------------
$5,060
============================================================
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.
2000 Avg. Orig. 1999 Avg. Orig.
Volume Rate Term Volume Rate Term
------ ------ ---- ------ ------ ----
13 Weeks Ended:
Medium-term notes $ - -% - $ - -% -
Discrete debt $ - -% - $ - -% -
39 Weeks Ended:
Medium-term notes $ 95 6.58% 3.6 $ 30 5.92% 10.0
Discrete debt $ - -% - $ 750 6.25% 10.0
GROSS OUTSTANDING
Avg. Avg.
09/30/00 Avg. Remain. 10/02/99 Avg. Remain.
Balance Coupon Term Balance Coupon Term
-------- ------ ------ ------- ------ -------
Medium-term notes $5,159 6.58% 1.9 $5,444 6.54% 2.5
Discrete debt $5,600 6.60% 11.4 $5,850 6.65% 11.9
MATURITIES
Medium-term Discrete
Year notes debt
---------------------------------
2000 $ 749 $ -
2001 2,018 -
2002 863 600
2003 1,071 1,250
2004 201 -
Thereafter 257 3,750
---------------------------------
Total $5,159 $5,600
=================================
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 September 30, 2000
and October 2, 1999, 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 auditing standards generally accepted in the
United States of America, 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 accounting principles generally
accepted in the United States of America.
We have previously audited, in accordance with auditing standards
generally accepted in the United States of America, the statement
of financial position of Sears Roebuck Acceptance Corp. as of
January 1, 2000 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 14, 2000, 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 1, 2000 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 17, 2000
6
SEARS ROEBUCK ACCEPTANCE CORP.
ITEM 2. ANALYSIS OF RESULTS OF OPERATIONS
Sears Roebuck Acceptance Corp.'s ("SRAC") 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. During the third
quarter of 2000, SRAC revenues increased to $300 million from $295 million
in the comparable 1999 period. For the first nine months of 2000, SRAC's
revenues increased to $901 million from $898 million for the comparable 1999
period. The increase in revenue resulted from an increase in average rates
on earning assets which were partially offset by lower average earning asset
balances.
SRAC's interest and related expenses increased to $239 million from
$234 million and to $716 million from $714 million for the third quarter
and first nine months of 2000, respectively, when compared to the same
periods in 1999. Interest and related expenses increased primarily as a
result of higher interest rates associated with borrowings. SRAC's average
cost of short-term funds increased to 6.87% in the third quarter and 6.49%
in the first nine months of 2000 compared to 5.26% and 5.10% for the same
periods in 1999. SRAC's average cost of long-term funds was 6.58% in the
third quarter and 6.59% in the first nine months of 2000 compared to 6.55%
and 6.59% for the same periods in 1999. Increases in interest and related
expenses attributable to higher interest rates were partially offset by a
reduction in average combined debt levels as compared to the prior year.
The combined average debt levels in the third quarter and first nine months
of 2000 were $14.1 billion and $14.3 billion compared to $14.7 billion and
$15.0 billion for the same periods in 1999. The reduction in average debt
levels resulted from changes in the funding requirements of Sears.
SRAC's net income of $40 million and $119 million for the third quarter
and first nine months of 2000, respectively, increased from $39 million and
$118 million for the comparable 1999 period amounts.
SRAC's ratio of earnings to fixed charges for both the third quarter and
first nine months of 2000 was 1.26 compared to 1.26 and 1.25 for the
comparable 1999 periods.
7
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.
8
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 3, 2000
9
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
[Incorporated by reference to Exhibit 3(b) to the
Registrant's Quarterly Report on Form 10-Q for the
Quarter ended October 2, 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 3, 2000 concerning unaudited financial
information.*
27 Financial Data Schedule.*
* Filed herewith.
10
Exhibit 12
SEARS ROEBUCK ACCEPTANCE CORP.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
13 Weeks Ended 39 Weeks Ended
Sept.30, Oct.2, Sept.30, Oct.2,
(millions) 2000 1999 2000 1999
INCOME BEFORE INCOME TAXES $ 61 $ 60 $ 183 $ 181
PLUS FIXED CHARGES:
Interest 236 231 704 706
Amortization of debt
discount/premium 3 3 12 8
Total fixed charges 239 234 716 714
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES $ 300 $ 294 $ 899 $ 895
RATIO OF EARNINGS TO FIXED
CHARGES 1.26 1.26 1.26 1.25
11
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 September 30, 2000 and
October 2, 1999, as indicated in our report dated October 17, 2000;
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 September 30, 2000, is incorporated by reference in
Registration Statement Nos.333-30879 and 333-62847 on Forms S-3.
We are also aware that the aforementioned reports, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered
a part of the Registration Statement prepared or certified by an
accountant or a report prepared or certified by an accountant
within the meaning of Sections 7 and 11 of that Act.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
November 3, 2000
12
