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 29, 2001
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, 2001, 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 29, 2001
PART I. FINANCIAL INFORMATION: Page No.
Item 1. Financial Statements
Statements of Financial Position
September 29, 2001 and September 30, 2000 (unaudited)
and December 30, 2000(audited) 1
Statements of Income (unaudited)
13 Weeks and 39 Weeks ended September 29, 2001
and September 30, 2000 2
Statements of Cash Flows (unaudited)
39 Weeks ended September 29, 2001
and September 30, 2000 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. 29, Sept.30, Dec. 30,
2001 2000 2000
Assets
Cash and cash equivalents $ 153 $ 209 $ 442
Notes of Sears 16,729 17,618 16,879
Other assets 47 52 45
Total assets $ 16,929 $ 17,879 $ 17,366
Liabilities
Commercial paper (net of
unamortized discount of
$9, $22 and $25) $ 3,062 $ 3,891 $ 3,934
Medium-term notes (net of
unamortized discount of
$6, $8 and $7) 3,143 5,151 4,608
Discrete underwritten debt (net
of unamortized discount of
$30, $22 and $21) 7,320 5,578 5,579
Accrued interest and
other liabilities 199 207 151
Total liabilities 13,724 14,827 14,272
Shareholder's Equity
Common 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 2,020 1,867 1,909
Total shareholder's equity 3,205 3,052 3,094
Total liabilities and
shareholder's equity $ 16,929 $ 17,879 $ 17,366
See notes to financial statements.
1
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
(unaudited)
(millions, except ratio) 13 Weeks Ended 39 Weeks Ended
Sept.29, Sept.30, Sept.29, Sept.30,
2001 2000 2001 2000
Revenues
Earnings on notes of Sears $ 256 $ 298 $ 830 $ 893
Earnings on cash equivalents 4 2 10 8
Total revenues 260 300 840 901
Expenses
Interest expense and amortization
of debt discount/premium 207 239 668 716
Operating expenses - - 1 2
Total expenses 207 239 669 718
Income before income taxes 53 61 171 183
Income taxes 19 21 60 64
Net income $ 34 $ 40 $ 111 $ 119
Ratios of earnings
to fixed charges 1.26 1.26 1.26 1.26
See notes to financial statements.
2
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
(millions) 39 Weeks Ended
Sept. 29, Sept. 30,
2001 2000
Cash flows from operating activities:
Net income $ 111 $ 119
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and other
noncash items 10 12
(Increase)decrease in other assets (2) 2
Increase in other liabilities 48 34
Net cash provided by operating activities 167 167
Cash flows from investing activities:
Decrease (increase) in notes of Sears 150 (812)
Net cash provided by (used in)
investing activities 150 (812)
Cash flows from financing activities:
(Decrease)increase in commercial paper,
primarily 90 days or less (872) 1,216
Proceeds from issuance of long-term debt 1,739 86
Payments for redemption of long-term debt (1,466) (902)
Issue costs paid to issue debt (7) -
Net cash (used in) provided by
financing activities (606) 400
Net decrease in cash and
cash equivalents (289) (245)
Cash and cash equivalents at beginning
of period 442 454
Cash and cash equivalents at end of period $ 153 $ 209
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 accounting
principles generally accepted in the United States of America 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 December 30, 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 credit
facilities. SRAC's investment portfolio fluctuated from a low of
$49 million to a high of $855 million in the third quarter of 2001.
Available credit facilities as of September 29, 2001 were as follows:
Expiration Date (millions)
------------------------------------------------------------
April 2002 875
April 2003 $4,185
------------------------------------------------------------
$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.
2001 Avg. Orig. 2000 Avg. Orig.
Volume Rate Term Volume Rate Term
------ ------ ---- ------ ------ ----
13 Weeks Ended:
Medium-term notes $ - -% - $ - -% -
Discrete debt $ 950 6.80% 9.9 $ - -% -
39 Weeks Ended:
Medium-term notes $ - -% $ 95 6.58% 3.6
Discrete debt $1,750 6.89% 10.0 $ - -% -
GROSS OUTSTANDING
Avg. Avg.
09/29/01 Avg. Remain. 09/30/00 Avg. Remain.
Balance Coupon Term Balance Coupon Term
-------- ------ ------ ------- ------ -------
Medium-term notes $3,149 6.30% 1.6 $5,159 6.58% 1.9
Discrete debt $7,350 6.68% 10.2 $5,600 6.60% 11.4
MATURITIES
Medium-term Discrete
Year notes debt
---------------------------------
2001 $ 652 $ -
2002 958 600
2003 1,075 1,250
2004 202 -
2005 36 250
Thereafter 226 5,250
---------------------------------
Total $3,149 $7,350
=================================
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 29, 2001
and September 30, 2000, 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
December 30, 2000 and the related statements of income, shareholder's
equity and cash flows for the year then ended (not presented herein);
and in our report dated January 19, 2001, 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 30, 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 18, 2001
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 2001, SRAC revenues decreased to $260 million from $300 million
in the comparable 2000 period. For the first nine months of 2001, SRAC's
revenues decreased to $840 million from $901 million for the comparable 2000
period. The decrease in revenue resulted from a decrease in average rates on
earning assets and lower average earning asset balances.
SRAC's interest and related expenses decreased to $207 million from
$239 million and to $668 million from $716 million for the third quarter
and first nine months of 2001, respectively, when compared to the same
periods in 2000. Interest and related expenses decreased during the third
quarter and first nine months of 2001 primarily due to decreases in both the
cost of short-term funds and average long-term debt levels. The reduction
generated by the decrease in SRAC's average cost of short-term funds to 4.02%
in the third quarter and 5.29% in the first nine months of 2001 compared to
6.87% and 6.49% for the same periods in 2000 was partially offset by an
increase in SRAC's average short-term borrowings to $3.2 billion and
$3.3 billion in the third quarter and first nine months of 2001 compared to
$3.1 billion and $2.9 billion for the same 2000 periods. SRAC's average
long-term debt balances of $10.5 billion in both the third quarter and first
nine months of 2001 reflect decreases of 5% and 8%, respectively, compared
with $11.0 billion and $11.4 billion for the same periods in 2000. SRAC's
cost of long-term funds averaged 6.56% and 6.63% in the third quarter and
first nine months 2001 compared to 6.58% and 6.59% for the same periods in
2000. The average weighted maturity on SRAC's long-term debt portfolio was
7.6 years as of the end of the third quarter of 2001 compared to 7.8 years at
the same point in 2000.
In October 2001, SRAC issued $245 million of medium-term notes with a
floating rate indexed to Libor and with terms ranging from one to three
years.
On October 16, 2001, SRAC initiated a $75 million overnight test borrowing
(the minimum amount permissible) from the syndicate of banks under its
$5.0 billion revolving credit facility. SRAC considers it prudent to test
the administrative process periodically, especially in light of the recent
terrorist activity.
SRAC's net income of $34 million and $111 million for the third quarter
and first nine months of 2001, respectively, decreased from $40 million and
$119 million for the comparable 2000 period amounts.
SRAC's ratio of earnings to fixed charges for both the third quarter and
first nine months of 2001 was 1.26 compared to 1.26 for the comparable 2000
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:
Registrant filed current reports on
Forms 8-K dated August 8, 2001 and
September 5, 2001 [Items 5 and 7].
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 9, 2001
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 ratios of earnings to fixed charges.*
15 Acknowledgment of awareness from Deloitte & Touche LLP,
dated November 9, 2001 concerning unaudited financial
information.*
* Filed herewith.
10
Exhibit 12
SEARS ROEBUCK ACCEPTANCE CORP.
CALCULATION OF RATIOS OF EARNINGS TO FIXED CHARGES
13 Weeks Ended 39 Weeks Ended
Sept.29, Sept.30, Sept.29, Sept.30,
(millions) 2001 2000 2001 2000
INCOME BEFORE INCOME TAXES $ 53 $ 61 $ 171 $ 183
PLUS FIXED CHARGES:
Interest 202 236 658 704
Amortization of debt
discount/premium 5 3 10 12
Total fixed charges 207 239 668 716
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES $ 260 $ 300 $ 839 $ 899
RATIOS OF EARNINGS TO FIXED
CHARGES 1.26 1.26 1.26 1.26
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 29, 2001 and
September 30, 2000, as indicated in our report dated October 18,
2001; 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 29, 2001, 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 9, 2001
12
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