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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 APRIL 1, 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 April 30, 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 ENDED APRIL 1, 2000
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statements of Financial Position
April 1, 2000 and April 3, 1999 (unaudited)
and January 1, 2000 (audited) 1
Statements of Income (unaudited)
13 Weeks Ended April 1, 2000
and April 3, 1999 2
Statements of Cash Flows (unaudited)
13 Weeks Ended April 1, 2000
and April 3, 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) April 1, April 3, Jan. 1,
2000 1999 2000
Assets
Cash and cash equivalents $ 135 $ 46 $ 454
Notes of Sears 17,195 17,695 16,806
Commercial customer receivable
balances purchased from Sears - 87 -
Other assets 60 73 64
Total assets $ 17,390 $ 17,901 $ 17,324
Liabilities
Commercial paper (net of
unamortized discount of
$8, $22 and $12) $ 2,619 $ 4,166 $ 2,675
Medium-term notes (net of
unamortized discount of
$9, $0 and $0) 5,738 5,614 5,716
Discrete underwritten debt(net
of unamortitized discount of
$22, $16 and $23) 5,828 5,084 5,827
Accrued interest and
other liabilities 232 222 173
Total liabilities 14,417 15,086 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 1,788 1,630 1,748
Total stockholder's equity 2,973 2,815 2,933
Total liabilities and
stockholder's equity $ 17,390 $ 17,901 $ 17,324
See notes to financial statements.
1
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
(unaudited)
(millions,except ratios)
13 Weeks Ended
April 1, April 3,
2000 1999
Revenues
Earnings on notes of Sears $ 299 $ 305
Earnings on commercial customer
receivable balances purchased
from Sears - 2
Earnings on cash equivalents 3 1
Total revenues 302 308
Expenses
Interest expense and amortization of
debt discount/premium 240 245
Operating expenses 1 1
Total expenses 241 246
Income before income taxes 61 62
Income taxes 21 22
Net income $ 40 $ 40
Ratio of earnings to fixed charges 1.25 1.25
See notes to financial statements.
2
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
(millions) 13 Weeks Ended
April 1, April 3,
2000 1999
Cash flows from operating activities:
Net income $ 40 $ 40
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and other
noncash items 4 3
Increase in other assets - (3)
Increase in other liabilities 59 53
Net cash provided by operating activities 103 93
Cash flows from investing activities:
(Increase)decrease in notes of Sears (389) 295
Decrease in commercial customer receivable
balances purchased from Sears - 3
Net cash(used in) provided by
investing activities (389) 298
Cash flows from financing activities:
Decrease in commercial paper,
primarily 90 days or less (56) (77)
Proceeds from issuance of long-term debt 86 25
Payments for redemption of long-term debt (63) (387)
Net cash used in
financing activities (33) (439)
Net decrease in cash and
cash equivalents (319) (48)
Cash and cash equivalents at beginning
of period 454 94
Cash and cash equivalents at end of period $ 135 $ 46
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 outstanding
commercial paper through its investment portfolio and committed
credit facilities. SRAC's investment portfolio fluctuated from a
low of $5 million to a high of $628 million in the first quarter
of 2000. Credit facilities as of April 1, 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; term in years)
ISSUANCE
Avg. Avg.
2000 Avg. Orig. 1999 Avg. Orig.
Volume Rate Term Volume Rate Term
------ ------ ---- ------ ------ ----
First Quarter:
Medium-term notes $ 95 6.58% 3.6 $ 25 5.90% 10.0
GROSS OUTSTANDING
Avg. Avg.
04/01/00 Avg. Remain. 04/03/99 Avg. Remain.
Balance Coupon Term Balance Coupon Term
-------- ------ ------ ------- ------ -------
Medium-term notes $5,747 6.51% 2.2 $5,614 6.59% 2.9
Discrete debt $5,850 6.59% 11.4 $5,100 6.69% 12.8
MATURITIES
Medium-term Discrete
Year notes debt
- ---------------------------------
2000 $1,337 $ 250
2001 2,018 -
2002 863 600
2003 1,071 1,250
2004 201 -
Thereafter 257 3,750
- ---------------------------------
Total $5,747 $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 April 1, 2000 and
April 3, 1999, and the related statements of income and cash
flows for the 13 week periods then ended. These financial
statements are the responsibility of the 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 generally accepted accounting
principles.
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
April 12, 2000
6
SEARS ROEBUCK ACCEPTANCE CORP.
ITEM 2. ANALYSIS OF RESULTS OF OPERATIONS
During the first quarter of 2000, Sears Roebuck Acceptance
Corp.'s ("SRAC") revenues decreased to $302 million from
$308 million in the comparable 1999 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 resulted
from a $1 billion decrease in SRAC's average earning assets.
SRAC's investment in the Notes of Sears decreased as a result
of reduced funding requirements of Sears. Cash inflows from the
reduced investments in the notes of Sears, allowed SRAC to reduce
the level of its debt outstanding.
SRAC's interest and related expenses decreased to $240 million
for the first quarter of 2000 from $245 million for the first
quarter of 1999. SRAC's cost of short-term funds averaged 6.07%
in the first quarter of 2000, a 99 basis point increase from
5.08% for the first three months of last year. SRAC's short-term
borrowings averaged $2.9 billion in the first quarter of 2000, a
37% decrease from the 1999 first quarter average of $4.6 billion.
Decreases in short-term debt levels were partially offset by
increases in long term debt levels. Average outstanding long-term
debt of $11.6 billion in the first quarter of 2000 increased
$.7 billion compared to $10.9 billion in the first quarter of
1999. SRAC's cost of long-term funds averaged 6.60% in the first
quarter of 2000 compared to 6.63% for the first quarter of 1999.
SRAC's net income was $40 million for the first quarter of 2000
and 1999. SRAC's ratio of earnings to fixed charges was 1.25 for
the first quarter of 2000 and 1999.
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
(authorized officer of
Registrant)
May 12, 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
February 6, 1996 [Incorporated by reference to
Exhibit 3(b)to the Registrant's Annual Report on
Form 10-K for the year ended December 30, 1995].
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 May 12, 2000, concerning unaudited financial
information.
27 Financial Data Schedule.
10
Exhibit 12
SEARS ROEBUCK ACCEPTANCE CORP.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
13 Weeks Ended
April 1, April 3,
(millions) 2000 1999
INCOME BEFORE INCOME TAXES $ 61 $ 62
PLUS FIXED CHARGES:
Interest 236 242
Amortization of debt
discount/premium 4 3
Total fixed charges 240 245
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES $ 301 $ 307
RATIO OF EARNINGS TO FIXED
CHARGES 1.25 1.25
1
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 April 1, 2000 and
April 3, 1999, as indicated in our report dated April 12, 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
April 1, 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 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
May 12, 2000
12
