UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-K
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 2005
OR
___TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
6.75% Notes due September 15, 2005 New York Stock Exchange
7.00% Notes due July 15, 2042 New York Stock Exchange
7.40% Notes due February 1, 2043 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 .
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[X]
Indicate by check mark whether Registrant is an accelerated filer (as defined
in Exchange Act Rule 12b-2). Yes [ ] No [ X ]
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of Registrant computed by reference to the price at
which the common equity was last sold, or the average of the bid and asked
price of such common equity, as of the last business day of Registrant's
most recently completed second fiscal quarter: $0.00.
As of January 29, 2005, 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 I (1)(a)
and (b) of Form 10-K and is therefore filing this form with a reduced
disclosure format.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Business.
Sears Roebuck Acceptance Corp.("SRAC") is a wholly-owned finance subsidiary
of Sears, Roebuck and Co.("Sears"). To meet certain capital requirements of
its businesses, Sears borrows on a short-term basis through the issuance of
notes to SRAC. SRAC obtains funds through the issuance of unsecured commercial
paper and long-term debt, which includes medium-term notes and discrete
underwritten debt.
SRAC's income is derived primarily from the earnings on its investment in
the Notes of Sears. Under a letter agreement between SRAC and Sears, the
interest rate on Sears notes is calculated so that SRAC maintains an earnings
to fixed charges ratio of at least 1.25. The yield on the investment in the
Notes of Sears is related to SRAC's borrowing costs and, as a result, SRAC's
earnings fluctuate in response to movements in interest rates and changes in
Sears borrowing requirements.
As of January 1, 2005, SRAC's commercial paper ratings were P-2 from Moody's
Investors Service,("Moody's"), A-2 from Standard & Poor's Ratings
Services ("S&P"),and F-3 from Fitch Ratings ("Fitch") and its
long-term debt ratings were Baa2 from Moody's, BBB from S&P, and
BBB- from Fitch. The respective rating agencies currently have SRAC's
commercial paper and long-term debt ratings under consideration for
a downgrade.
SRAC provides liquidity support for its outstanding commercial paper
through its investment portfolio and committed credit facilities. As of
January 1, 2005, SRAC commercial paper was supported by a $2.1 billion
investment portfolio, which consists of cash and cash equivalents and
a $2.0 billion unsecured, three-year revolving credit facility
expiring May 2007.
SRAC and Sears have entered into agreements for the benefit of certain
debt holders and lenders of SRAC under which Sears, for so long as
required by the applicable documents, will continue to own all of
the outstanding voting stock of SRAC and will pay SRAC such amounts
that, when added to other available earnings, will be sufficient
for SRAC to maintain an earnings to fixed charges ratio of not
less than 1.10 (1.15 in the case of the agreement for the benefit
of the credit facility lenders). In addition, Sears has guaranteed:
(1) SRAC's debt securities issued or to be issued under the
indenture dated as of May 15, 1995 between SRAC and JP Morgan
Chase Bank, as trustee and the indenture dated as of October 1, 2002
between SRAC and BNY Midwest Trust Company, as trustee;
(2)SRAC's commercial paper notes issued or to be issued under
its commercial paper program; and (3)SRAC's $2.0 billion three-year
credit facility dated as of May 17, 2004.
As of February 23, 2005 SRAC had nine employees.
SRAC's Web site address is www.sracweb.com. SRAC makes available
through its Web site its annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and all
amendments to those reports, if any, as soon as reasonably
practicable after such material is electronically filed with
or furnished to the Securities and Exchange Commission.
2
Item 2. Properties.
SRAC leases 4,065 square feet of office space located in
Greenville, Delaware.
Item 3. Legal Proceedings.
On June 17, 2003, an action was filed in the Northern
District of Illinois against Sears and certain of its
officers, purportedly on behalf of a class of all persons who,
between June 21, 2002 and October 17, 2002, purchased the
7% notes that SRAC issued on June 21, 2002.
An amended complaint has been filed, naming as additional
defendants certain former Sears officers, SRAC and certain
of its officers and several investment banking firms who
acted as underwriters for SRAC's March 18, May 21 and
June 21, 2002 notes offerings. The amended complaint
alleges that the defendants made misrepresentations or
omissions concerning its credit business during the class
period and in the registration statements and prospectuses
relating to the offerings. The amended complaint alleges
that these misrepresentations and omissions violated
Sections 10(b) and 20(a) of the Securities Exchange Act and
Rule 10b-5 promulgated thereunder, and Sections 11, 12 and 15
of the Securities Act of 1933 and purports to be brought on
behalf of a class of all persons who purchased any security
of SRAC between October 24, 2001 and October 17, 2002, inclusive.
The defendants filed motions to dismiss the action. On
September 24, 2004, the court granted these motions in part,
and denied them in part. The court dismissed the claims related
to the March 18 and May 21, 2002 note offerings because the
plaintiff did not purchase notes in those offerings.
The court dismissed the Section 10(b) and Rule 10b-5 claims
against several of the individual defendants because the
plaintiff failed to adequately plead such claims. The court
sustained the remaining claims. By leave of court, the plaintiffs
filed a second amended complaint on November 15, 2004.
Defendants (other than one of the underwriter defendants)
filed motions to partially dismiss the second amended complaint
on January 10, 2005. The defendant that did not move to partially
dismiss filed an answer to the second amended complaint on
January 28, 2005, denying all liability.
The consequences of this matter are not presently determinable
but, in the opinion of SRAC's management after consulting with
legal counsel and taking into account applicable third party
Insurance coverage, the ultimate liability is not expected to
have a material adverse effect on annual results of operations,
financial position, liquidity or capital resources of SRAC.
No amounts have been accrued for this matter in the financial
statements.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
None.
Item 6. Selected Financial Data.
Not applicable.
3
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
SRAC's investment in the Notes of Sears decreased in 2004 as Sears' need
for funding declined following the 2003 sale of its Credit and Financial
Products business. SRAC retired a portion of its debt with the funds
received from Sears as payment on the Notes, resulting in reduced levels
of both assets and debt during the year. Lower average asset and debt levels
coupled with a reduction in average interest rates reduced both earnings
and interest expense in 2004. SRAC expects earning asset and debt levels
to decline in the future as Sears continues to retire its debt.
On November 17, 2004, Sears and Kmart Holding Corporation ("Kmart") announced
that they had signed a definitive merger agreement that will combine Sears
and Kmart into a major new retail company named Sears Holdings
Corporation ("Holdings"). This announcement led to rating agency action related
to SRAC's debt and initiated a process to syndicate a new credit agreement to
replace the existing $2 billion facility upon completion of the merger.
The new facility is expected to be a $4.0 billion, five-year senior secured
revolving credit facility for SRAC and KMART.
Financial Condition
SRAC's investment in the Notes of Sears decreased to $5.3 billion at
year-end 2004 from $7.7 billion at year-end 2003, as Sears continued
to utilize the proceeds from the November 2003 sale of its Credit and
Financial Products business to pay down its promissory Note with SRAC.
SRAC retired a portion of its debt with the funds received from Sears as
payment on the Notes. Total debt outstanding decreased in 2004 to
$3.7 billion from $5.3 billion in 2003. SRAC plans to repay $297 million
of its outstanding term debt in 2005 either at maturity or through early
retirement.
SRAC ended 2004 with an equity position of $3.7 billion and a
debt-to-equity ratio of 1.0:1 compared to 1.5:1 at the end of 2003.
Results of Operations
SRAC's total revenues of $288 million for 2004 decreased from
$1,876 million in 2003 and from $984 million in 2002. The revenue
decrease in 2004 resulted from a $9.2 billion reduction in average
earning asset levels in 2004 coupled with a 730 basis point reduction
in average rates throughout 2004 as compared to 2003. The revenue
increase in 2003 resulted primarily from an increase in the interest
rate applied to the Notes of Sears to provide adequate fixed charge
coverage for the pretax loss of $746 million related to debt retirement
activities. Consequently, average rates on earning assets rose to 11.01%
in 2003 compared to 5.59% in 2002, resulting in increased revenues.
SRAC's interest and related expenses were $225 million, $746 million
and $782 million in 2004, 2003, and 2002, respectively. Reductions in
interest and related expenses resulted from significantly lower debt
levels. SRAC's average daily outstanding short-term debt of $0.8 billion
in 2004 decreased 73% from the $3.0 billion average level in 2003.
Average daily outstanding term debt decreased $7.3 billion to $3.3 billion
in 2004 compared to $10.6 billion in 2003. Average debt levels were
reduced from 2003 resulting from the retirement of $6.2 billion of term
debt in the November 2003 tender offer and $1.8 billion of term debt
called or matured in 2004. SRAC recognized a pretax loss of
$2 million in 2004 related to retirement of debt activities
compared to $746 million in 2003. SRAC's average cost of short-term
funds declined to 1.46% in 2004 from 1.52% in 2003. SRAC's average
cost of term debt decreased 18 basis points to 6.06% in 2004 from
6.24% in 2003.
During 2003, SRAC's total debt portfolio experienced a $600 million
decrease from 2002 average debt and a 21 basis point decrease in
average cost. This resulted in decreases in interest and related
expenses throughout 2003.
The ratings on SRAC's debt as of January 1, 2005 appear in the
table below:
Moody's Standard &
Investors Poor's Ratings Fitch
Service Services Ratings
-------------------------------------------------------------
Unsecured term debt Baa2 BBB BBB-
Unsecured commercial paper P-2 A-2 F3
4
On November 17, 2004, Moody's lowered SRAC's long-term debt
rating from Baa1 to Baa2, keeping this rating on review for
possible downgrade,and placed SRAC's short-term rating on
review for possible downgrade. Fitch placed SRAC's debt
ratings on Ratings Watch negative. These actions are primarily
a result of the announcement of Sears' proposed merger with
Kmart. Standard & Poor's Rating Services("Standard & Poor's")
also announced on this date that SRAC's short-term and
long-term debt ratings will remain on CreditWatch with
negative implications where they were initially placed
October 21, 2004.
A downgrade of SRAC's short-term rating by either Standard & Poor's
or Moody's would reduce its flexibility to issue ommercial paper,
affecting the cost, placement term and, potentially, the amount
of short-term debt available. However, SRAC believes that it
has cash, short-term investments, and funding capability through
its backup facility and recourse on its investment in Notes of
Sears to refund all commercial paper outstanding as well as to
meet near-term working capital needs.
SRAC does not expect that a one notch downgrade of its long-term
debt by either Standard & Poor's or Moody's would substantially
affect its ability to access the term debt capital markets. However,
depending upon market conditions, the amount, timing, and pricing
of new borrowings could be adversely affected. If two or more
of SRAC's domestic long-term debt ratings are downgraded to
below BBB-/Baa3, SRAC's flexibility to access the term debt
capital markets would be reduced. In the event of a downgrade
of long-term debt, the cost of borrowing and fees payable under
SRAC's current credit facility could increase.
None of SRAC's borrowing arrangements have provisions that would
require repayment of principal prior to maturity due to a ratings
downgrade.
Sears has been advised that, upon completion of the pending
merger with Kmart, Holdings'unsecured long-term debt will
e rated Ba1, BB+, and BB by Moody's, Standard & Poor's, and
Fitch, respectively. These ratings are below these rating
agencies' investment grade ratings. In addition, SRAC has
been advised that its long-term debt securities will be
rated BB+ and BB by Standard & Poor's and Fitch, respectively,
and continues to be reviewed for possible downgrade by Moody's.
Such rating actions will reduce SRAC's flexibility to access
the term debt capital markets and increase the cost of such
borrowings. In addition, SRAC expects its commercial paper
ratings will no longer be investment grade, and as such, SRAC
would not expect to be able to access the commercial paper
market following the merger.
SRAC syndicated an unsecured, three-year revolving credit
facility in the amount of $2.0 billion in 2004. This
facility provides support for SRAC's direct-issue commercial
paper program and is available for other general purposes.
Sears has guaranteed all obligations under this facility.
No borrowings were outstanding under this committed credit
facility in 2004. The facility and other debt agreements
require SRAC to maintain specified fixed charge coverage
ratios and the credit facility requires Sears domestic
segment to maintain a minimum level of tangible net
worth and a minimum interest coverage ratio. SRAC
and Sears were in compliance with these covenants at
January 1, 2005. This credit facility does not contain
provisions that would restrict borrowings based on
material adverse changes or credit ratings.
In connection with Sears' pending merger with Kmart,
SRAC and Kmart are in the process of obtaining a
$4.0 billion, five-year senior secured revolving
credit facility. This new facility would be guaranteed
by Holdings, Sears, Kmart and certain of their respective
subsidiaries, and would be secured by the inventory and
credit card receivables of Sears and Kmart Corporation
and certain of their respective subsidiaries. The facility is
expected to be effective upon the closure of the merger
and is not expected to contain provisions that would
restrict borrowings based on material adverse changes
or credit ratings. This credit facility would replace
SRAC's existing $2.0 billion credit facility.
SRAC's net income was $39 million in 2004, $248 million
in 2003 and $130 million in 2002.
The financial information appearing in this annual
report on Form 10-K is presented in historical
dollars, which do not reflect the decline in
purchasing power that results from inflation.
As is the case for most financial companies,
substantially all of SRAC's assets and liabilities
are monetary in nature. Interest rates on SRAC's
investment in the Notes of Sears are set to provide
fixed charge coverage of at least 1.25 times,
thereby mitigating the effects of inflation-based
interest rate increases to SRAC.
5
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements made in this Annual Report on Form 10-K
contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements
include, but are not limited to, statements about expected events
that will transpire as a result of Sears' pending merger transaction
with Kmart. Such statements are based upon the current beliefs
and expectations of SRAC's, Sears', and Kmart's management and are
subject to significant risks and uncertainties. Actual results
may differ from those set forth in the forward-looking statements.
The following factors, among others, could cause actual results
to differ from those set forth in the forward-looking statements:
the timing of receipt of regulatory approvals in connection with
the merger transaction; the failure of Kmart and Sears stockholders
to approve the transaction; anticipated cash flow; changes in interest
rates; the outcome of pending legal proceedings and bankruptcy claims;
social and political conditions such as war, political unrest and
terrorism or natural disasters; volatility in financial markets;
the terms and availability of debt financing; changes in debt ratings,
credit spreads and cost of funds; the possibility of interruptions in
systematically accessing the public debt markets; and general economic
conditions and normal business uncertainty. These forward-looking
statements speak only as of the time first made, and no undertaking
has been made to update or revise them as more information becomes
available.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The primary market risk exposure faced by SRAC is interest rate
risk which arises from SRAC's debt obligations. SRAC's policy is
to manage interest rate risk through the use of fixed and variable
rate funding. All debt securities are considered non-trading.
At year-end 2004 and 2003, 36% and 41%, respectively, of the
funding portfolio was variable rate. Based on SRAC's variable rate
funding portfolio at year-end 2004 and 2003, which totaled $1.1 billion
and $2.2 billion, respectively, an immediate 100 basis point change
in interest rates would have affected pre-tax funding costs by
approximately $11 million and $22 million, respectively. These
estimates do not take into account the effect on revenue resulting
from invested cash or the returns on assets being funded. These estimates
also assume that the variable rate funding portfolio remains constant for
an annual period and that the interest rate change occurs at the
beginning of the period.
6
Item 8. Financial Statements and Supplementary Data.
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(millions, except ratio of earnings to fixed charges)
2004 2003 2002
------ ------ ------
Revenues
--------
Earnings on notes of Sears $ 275 $1,848 $ 971
Earnings on cash equivalents 13 28 13
----- ----- -----
Total revenues 288 1,876 984
Expenses
--------
Interest expense and amortization of
debt discount/premium 225 746 782
Loss on early retirement of debt 2 746 -
Operating expenses 1 2 2
----- ----- -----
Total expenses 228 1,494 784
----- ----- -----
Income before income taxes 60 382 200
Income taxes 21 134 70
----- ----- -----
Net income $ 39 $ 248 $ 130
----- ----- -----
Total other comprehensive income(loss)
-------------------------------------
Reclassification adjustment included
in loss on early retirement of debt,
net of tax - 3 (3)
----- ----- -----
Total comprehensive income $ 39 $ 251 $ 127
===== ===== =====
Ratio of earnings to fixed charges 1.26 1.26 1.26
See notes to financial statements.
7
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF FINANCIAL POSITION
(millions, except share data) 2004 2003
------- -------
Assets
------
Cash and cash equivalents $ 2,112 $ 1,286
Notes of Sears 5,313 7,743
Other assets 20 28
--------- ---------
Total assets $ 7,445 $ 9,057
========= =========
Liabilities
-----------
Commercial paper (net of unamortized
discount of $1 and $1) $ 721 $ 774
Medium-term notes (net of unamortized
discount of $1 and $3) 1,182 2,701
Discrete underwritten debt (net of
unamortized discount of $7 and $8) 1,839 1,838
Accrued interest and other liabilities 48 128
--------- ---------
Total liabilities 3,790 5,441
--------- ---------
Commitments and contingent liabilities
Shareholder's Equity
--------------------
Common share, par value $100 per share
500,000 shares authorized
350,000 shares issued and outstanding 35 35
Capital in excess of par value 1,150 1,150
Accumulated other
comprehensive loss - -
Retained earnings 2,470 2,431
--------- --------
Total shareholder's equity 3,655 3,616
--------- --------
Total liabilities and
shareholder's equity $7,445 $ 9,057
========= ========
See notes to financial statements.
8
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF SHAREHOLDER'S EQUITY
(millions) 2004 2003 2002
------ ------ ------
Common share $ 35 $ 35 $ 35
------ ------ ------
Capital in excess of par value $1,150 $1,150 $1,150
------ ------ ------
Accumulated other comprehensive loss,
net of tax:
Beginning of year $ - $ (3) $ -
Cash flow hedge loss - - (3)
Reclassification adjustment included
in loss on early retirement of debt,
net of tax - 3 -
------ ------ ------
End of year $ - $ - $ (3)
------ ------ ------
Retained earnings:
Beginning of year $2,431 $2,183 $2,053
Net income 39 248 130
------ ------ ------
End of year $2,470 $2,431 $2,183
------ ------ ------
Total shareholder's equity $3,655 $3,616 $3,365
====== ====== ======
See notes to financial statements.
9
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(millions) 2004 2003 2002
-------- -------- --------
Cash Flows From Operating Activities
------------------------------------
Net income $ 39 $ 248 $ 130
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and
other noncash items 8 23 14
Loss on early retirement of debt 2 746 -
Decrease in other assets - 59 2
(Decrease) in other liabilities (74) (38) (32)
-------- -------- --------
Net cash(used in) provided by
operating activities (25) 1,038 114
Cash Flows From Investing Activities
------------------------------------
Decrease in notes of Sears 2,430 7,609 662
-------- -------- --------
Net cash provided by
investing activities 2,430 7,609 662
Cash Flows From Financing Activities
------------------------------------
Decrease in commercial paper,
primarily 90 days or less (53) (2,095) (356)
Proceeds from issuance of long-term debt 242 3,845 2,129
Payments for redemption of long-term debt (1,768) (10,653) (1,558)
Issue cost paid to issue debt - (21) (27)
-------- -------- --------
Net cash (used in) provided by
financing activities (1,579) (8,924) 188
-------- -------- --------
Net increase (decrease)
in cash and cash equivalents 826 (277) 964
Cash and cash equivalents, beginning of year 1,286 1,563 599
-------- -------- --------
Cash and cash equivalents, end of year $2,112 $ 1,286 $ 1,563
======== ======== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year
Interest paid $229 $823 $791
Early retirement of debt 6 635 -
Income taxes 81 75 87
See notes to financial statements
10
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Sears Roebuck Acceptance Corp. ("SRAC"), a wholly-owned
subsidiary of Sears, Roebuck and Co. ("Sears"), is principally
engaged in the business of acquiring short-term notes of
Sears using proceeds from its unsecured short-term borrowing
programs and the issuance of long-term debt.
Under a letter agreement between SRAC and Sears, the
interest rate on the Sears notes is presently calculated
so that SRAC maintains an earnings to fixed charges ratio of
at least 1.25. Sears also has executed guarantees to support
all public indebtedness of SRAC. These guarantees cover
outstanding commercial paper, term debt and obligations
under the credit facility.
Cash and cash equivalents include all highly liquid
investments with original maturities of three months or
less at the date of purchase. Such investments may
include, but are not limited to, commercial paper,
United States federal, state and municipal government
securities, floating rate notes, repurchase agreements using
the previously mentioned securities as collateral, and money
market funds.
The results of operations of SRAC are included in the
consolidated federal income tax return of Sears. Tax
liabilities and benefits are allocated as generated by SRAC,
regardless of whether such benefits would be currently available
on a separate return basis.
SRAC's fiscal year ends on the Saturday nearest December 31.
Fiscal year-ends were January 1, 2005(52 weeks),
January 3, 2004(53 weeks), and December 28, 2002(52 weeks).
The preparation of financial statements in accordance with
accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
In April 2003, the FASB issued SFAS 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging
Activities." SFAS 149 amends and clarifies financial
accounting and reporting for derivative instruments,
including certain derivative instruments embedded
in other contracts and for hedging activities under
SFAS 133. The statement was effective for contracts entered
into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The adoption
of SFAS 149 did not have a material impact on SRAC's
financial position or results of operations in 2004.
2. FEDERAL INCOME TAXES
Federal income taxes provided for by SRAC amounted to
$21 million, $134 million and $70 million for the fiscal
years 2004, 2003 and 2002, respectively. These amounts
represent current income tax provisions calculated at an
effective income tax rate of 35%. Deferred taxes are not
material.
3. COMMERCIAL PAPER
SRAC obtains funds through the direct placement of
commercial paper issued in maturities of One to 270 days.
Selected details of SRAC's borrowings are shown below.
Weighted-average interest rates are based on the actual
number of days in the year, and borrowings are net of
unamortized discount.
(millions) 2004 2003
-------- --------
Commercial paper outstanding $ 722 $ 775
Less: Unamortized discount 1 1
-------- --------
Commercial paper outstanding (net) $ 721 $ 774
-------- --------
11
Average and Maximum Balances (net) 2004 2003
------------------- -------------------
Maximum Maximum
(millions) Average (month-end) Average (month-end)
------------------- -------------------
Commercial paper $ 776 $ 868 $3,007 $3,498
------------------- -------------------
Weighted Average Interest Rates 2004 2003
------------------- -------------------
Average Year-end Average Year-end
------------------- -------------------
Commercial paper 1.46% 2.50% 1.52% 1.18%
------------------- -------------------
4. 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)
ISSUANCES 2004 2003
------------------------ --------------------------
Avg. Avg.
Avg. Orig. Avg. Orig.
Principal Coupon Term Principal Coupon Term
------------------------ ---------------------------
Fourth Quarter:
Medium-term notes $ 151 3.51% 5.0 $ 650 1.66% 5.0
Year:
Medium-term notes $ 242 3.15% 5.0 $3,595 4.00% 3.4
Discrete debt $ - - - $ 250 7.40% 40.0
GROSS OUTSTANDING 2004 2003
--------------------- ------------------------
Avg. Avg.
1/1/05 Avg. Remain. 1/3/04 Avg. Remain.
Balance Coupon Term Balance Coupon Term
--------------------- ------------------------
Medium-term notes $1,183 5.22% 3.0 $2,704 3.37% 1.5
Discrete debt $1,846 6.80% 10.9 $1,846 6.80% 11.9
MATURITIES
Medium-term Discrete
Year notes debt Total
----------------------------------------------------
2005 $ 185 $ 112 $ 297
2006 265 190 455
2007 67 269 336
2008 317 - 317
2009 263 262 525
Thereafter 86 1,013 1,099
----------------------------------------------------
Total $1,183 $1,846 $3,029
====================================================
Maturities include debt that management intends to
call for early redemption within one year
----------------------------------------------------
12
During 2004, SRAC issued $242 million of variable rate medium term notes.
In 2004, SRAC repaid $1.8 billion of medium term notes either at maturity
or through early retirement. As a result of the early retirement of debt,
a pretax loss of $2 million was recorded in 2004. This loss consisted of
the write-off of unamortized issuance fees and related costs associated
with the retirement of debt.
In 2003, SRAC repaid approximately $10.0 billion of term debt securities
which consisted of $2.5 billion debt at maturity and $7.5 billion through
early retirement. Early retirement of debt consisted of the call of
$500 million of discrete underwritten debt, the repurchase of $825 million
of outstanding medium notes from Sears related affiliates, and the
completion of a cash tender offer in November 2003 that resulted in the
retirement of $6.2 billion. As a result of the early retirement of
debt, a pretax loss of $746 million was recorded in 2003. This loss
consisted of premiums paid on early retirement of debt, the write-off
of unamortized discount and issuance fees and related costs associated
with the retirement of debt.
5. 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, which consists of cash and cash equivalents,
fluctuated from a low of $119 million to a high of $2.2 billion in 2004.
SRAC has an unsecured, three-year revolving credit facility in the amount
of $2.0 billion. This facility does not contain provisions that would
restrict borrowings based on a material adverse change in SRAC's business
or a change in its credit ratings. No borrowings were outstanding under
this committed credit facility at January 1, 2005. Sears has guaranteed
the repayment of any borrowings under this facility. This facility
and related debt agreements require SRAC to maintain specified fixed
charge coverage ratios, and the credit facility requires Sears to
maintain a minimum level of tangible net worth and minimum interest
coverage ratio for the Sears' domestic segment. SRAC and Sears were
in compliance with these covenants at January 1, 2005.
Sears has issued guarantees in support of SRAC's outstanding public
debt in order to maintain SRAC's exemption from being deemed an
"investment company" under the Investment Company Act of 1940, as
amended. These guarantees are continuous, have no recourse provisions
and require Sears to repay all of SRAC's outstanding debt, including
interest and principal, and any obligations under the credit
facility, in the event SRAC defaults on its payment obligations.
SRAC pays commitment fees on the unused portions of its credit
facilities. The annualized fees at January 1, 2005 on these credit
lines were $3.0 million.
6. LEGAL PROCEEDINGS
On June 17, 2003, an action was filed in the Northern District of
Illinois against Sears and certain of its officers, purportedly on
behalf of a class of all persons who, between June 21, 2002 and
October 17, 2002, purchased the 7% notes that SRAC issued on
June 21, 2002.
An amended complaint has been filed, naming as additional defendants
certain former Sears officers, SRAC and certain of its officers
and several investment banking firms who acted as underwriters for
SRAC's March 18, May 21 and June 21, 2002 notes offerings. The
amended complaint alleges that the defendants made misrepresentations
or omissions concerning its credit business during the class
period and in the registration statements and prospectuses
relating to the offerings. The amended complaint alleges that
these misrepresentations and omissions violated Sections 10(b) and
20(a) of the Securities Exchange Act and Rule 10b-5 promulgated
thereunder, and Sections 11, 12 and 15 of the Securities Act of
1933 and purports to be brought on behalf of a class of all
persons who purchased any security of SRAC between October 24, 2001
and October 17, 2002, inclusive. The defendants filed
motions to dismiss the action. On September 24, 2004, the court
granted these motions in part, and denied them in part. The court
dismissed the claims related to the March 18 and May 21, 2002 note
offerings because the plaintiff did not purchase notes in those
offerings. The court dismissed the Section 10(b) and Rule 10b-5
claims against several of the individual defendants because the
plaintiff failed to adequately plead such claims. The court
sustained the remaining claims. By leave of court, the plaintiffs
filed a second amended complaint on November 15, 2004.
Defendants (other than one of the underwriter defendants) filed
motions to partially dismiss the second amended complaint
on January 10, 2005. The defendant that did not move to partially
dismiss filed an answer to the second amended complaint on
January 28, 2005, denying all liability.
The consequences of this matter are not presently determinable
but, in the opinion of SRAC's management after consulting with
legal counsel and taking into account applicable third party
insurance coverage, the ultimate liability is not expected to
have a material adverse effect on annual results of operations,
financial position, liquidity or capital resources of SRAC.
No amounts have been accrued for this matter in the financial
statements.
13
7. LETTERS OF CREDIT AND OTHER COMMITMENTS
At January 1, 2005, standby letters of credit totaling
$1,297 million were outstanding, of which $1,292 million
were issued to beneficiaries on behalf of Sears and subsidiaries.
SRAC issues import letters of credit to facilitate Sears purchase
of goods from foreign suppliers. At January 1, 2005, letters of
credit totaling $140 million were outstanding. SRAC has no
liabilities with respect to this program other than the obligation
to pay drafts under the letters of credit that, if not reimbursed
by Sears on the day of the disbursement, are converted into demand
borrowings by Sears from SRAC. To date, all SRAC disbursements
have been reimbursed on a same-day basis.
SRAC is the guarantor of an office lease entered into by
GlobalNetXchange, LLC(GNX) as of October 6, 2000 and expiring on
January 31, 2006. At January 1, 2005, SRAC's obligation for
the remaining lease payments totaled $1.5 million. SRAC's
exposure is mitigated by an indemnification agreement dated as of
February 12, 2001 by which certain members of GNX have
severally agreed to indemnify SRAC in connection with its
liability under the lease guaranty. Furthermore, GNX has
provided for a letter of credit with SRAC as beneficiary to
cover the exposure of a member who is not a party to the
indemnification agreement.
To facilitate an understanding of SRAC's commitments the
following data is provided:
Amount of Commitment Expiration Per Period
------------------------------------------
Total
Amounts Less than After 5
(millions) Committed 1 Year 1-3 Years 4-5 Years Years
--------- -------- --------- --------- ------
Other Commercial Commitments
Standby Letters of Credit $ 1,297 $ 1,291 $ 1 $ - $ 5
Import Letters of Credit 140 140 - - -
Guarantees 2 2 - - -
------- ------ -------- ------ ------
Total Commitments $ 1,439 $ 1,433 $ 1 $ - $ 5
======= ====== ======== ====== ======
The accompanying statement of financial position does not reflect any
liabilities in connection with the commitments presented above.
14
8. FINANCIAL INSTRUMENTS
SRAC's financial instruments (both assets and liabilities), with the
exception of medium-term notes and discrete underwritten debt, are
short-term or variable in nature and as such their carrying value
approximates fair value. Medium-term notes and discrete underwritten
debt are valued based on quoted market prices when available or
discounted cash flows, using interest rates currently available to
SRAC on similar borrowings. The fair values of these financial
instruments at year-end 2004 and 2003 are as follows:
---------------------------------------------------------------------------
2004 2003
Carrying Fair Carrying Fair
(millions) Value Value Value Value
---------------------------------------------------------------------------
Medium-term notes (net) $1,182 $1,212 $2,701 $2,790
Discrete underwritten debt(net) 1,839 1,923 1,838 1,913
9. QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
(millions) ---------- --------- ---------- ---------- ----------
Operating Results
Total revenues $ 81 $258 $ 72 $257 $ 67 $262 $ 68 $1,099 $288 $1,876
Interest & related
expenses 64 206 55 204 53 201 53 135 225 746
Loss on early
retirement of debt - - 1 - - 7 1 739 2 746
Total expenses 64 206 57 205 53 208 54 875 228 1,494
Income before
income taxes 17 52 15 52 14 54 14 224 60 382
Net income 11 34 10 34 9 35 9 145 39 248
Ratio of earnings to
fixed charges 1.26 1.25 1.27 1.25 1.26 1.26 1.26 1.26 1.26 1.26
(billions)
--------
Averages
Earning assets* $ 8.5 $17.9 $7.7 $18.3 $7.6 $18.8 $7.4 $13.5 $ 7.8 $17.0
Short-term debt 0.8 3.1 0.7 3.2 0.8 3.4 0.8 1.0 0.8 3.0
Long-term debt 4.0 11.3 3.2 11.6 3.0 11.9 3.0 5.0 3.3 10.6
Cost of
short-term debt 1.12% 1.77% 1.11% 1.60% 1.55% 1.35% 2.06% 1.23% 1.46% 1.52%
long-term debt 5.74% 6.57% 6.15% 6.40% 6.22% 6.14% 6.31% 5.19% 6.06% 6.24%
* Notes of Sears and invested cash.
15
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 9A. Controls and Procedures
The Company's management, including Keith E. Trost, President
(principal executive officer) and George F. Slook, Vice President,
Finance, Treasurer and Assistant Secretary (principal financial officer),
have evaluated the effectiveness of the Company's "disclosure controls
and procedures," as such term is defined in Rules 13a-15(e) promulgated
under the Securities Exchange Act of 1934, as amended,(the "Exchange Act").
Based upon their evaluation, the principal executive officer and principal
financial officer concluded that, as of the end of the period covered by
this report, the Company's disclosure controls and procedures were
effective for the purpose of ensuring that the information required to
be disclosed in the reports that the Company files or submits under
the Exchange Act with the Securities and Exchange Commission (the "SEC")
(1) is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and (2) is accumulated
and communicated to the Company's management, including its principal
executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure. In addition, based on
that evaluation, no change in the Company's internal control over
financial reporting occurred during the fiscal year ended
January 1, 2005 that was materially affected, or is reasonably
likely to materially affect, the Company's internal control
over financial reporting.
SRAC believes the financial statements, which require the use
of certain estimates and judgements, fairly and accurately reflect
the financial position and operating results of SRAC in accordance
with accounting principles generally accepted in the
United States of America.
Item 9B. Other Information
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Not applicable.
Item 11. Executive Compensation.
Not applicable.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Not applicable.
Item 13. Certain Relationships and Related Transactions.
Not applicable.
16
Item 14. Principal Accounting Fees and Services.
Aggregate fees billed to SRAC for the fiscal years ended
January 1, 2005 ("2004") and January 3, 2004 ("2003") by it's
principal accounting firm, Deloitte & Touche LLP, the member
firms of Deloitte Touche Tohmatsu, and their respective affiliates
(collectively, "Deloitte & Touche") were as follows:
2004 2003
------------------------------------------------
(1)Audit Fees $ 89,000 $207,692
(2)Audit-Related Fees - -
(3)Tax Fees - -
(4)All Other Fees - -
------------------------------------------------
Total $ 89,000 $207,692
================================================
(1) Includes fees for professional services
provided in conjunction with the audit of
the financial statements, review
of the quarterly financial statements,
comfort letters and attestation services
normally provided in connection with statutory
and regulatory filings and engagements.
-------------------------------------------------
Sears' Audit Committee must pre-approve all engagements of the
independent auditor by Sears and its subsidiaries, including SRAC,
as required by Sears' Audit Committee's charter and the rules
of the Securities and Exchange Commission. Prior to the beginning
of each fiscal year, Sears' Audit Committee will approve an annual
estimate of fees for engagements by Sears and its subsidiaries,
taking into account whether the services are permissible under
applicable law and the possible impact of each non-audit service
on the independent auditor's independence from management. In
addition, the Audit Committee will evaluate known potential
engagements of the independent registered public accountants,
including the scope of the proposed work to be performed and the
proposed fees, and approve or reject each service. Management may
present additional services for approval at subsequent committee
meetings. The Audit Committee has delegated to the Audit Committee
Chairman the authority to evaluate and approve engagements on
behalf of the Audit Committee in the event a need arises for
pre-approval between Committee meetings and in the event the
engagement for services was within the annual estimate but not
specifically approved. If the Chairman so approves any such
engagements, he will report that approval to the full Committee
at the next Committee meeting.
Since the effective date of the Securities and Exchange Commission's
rules regarding strengthening auditor independence, all of the audit,
audit-related, and tax services provided by Deloitte & Touche to
Sears and its subsidiaries were pre-approved in accordance with the
Audit Committee's policies and procedures.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as a part of this report:
1. An "Index to Financial Statements" has been filed as a part
of this report on page S-1 hereof.
2. No financial statement schedules are included herein because
they are not required or because the information is
contained in the financial statements and notes thereto, as
noted in the "Index to Financial Statements" filed as part
of this report.
3. An "Exhibit Index" has been filed as part of this report
beginning on page E-1 hereof.
1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
/S/ George F. Slook
---------------------------
By George F. Slook*
Vice President, Finance, Treasurer
and Assistant Secretary
February 23, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
Keith E. Trost* Director and President )
(Principal Executive )
Officer) )
)
)
George F. Slook* Director and )
Vice President, Finance, ) February 23, 2005
Treasurer, and Assistant )
Secretary(Principal Financial )
and Accounting Officer) )
)
Michael J. Graham* Director )
)
)
Michael Coyne* Director )
)
)
Glenn R. Richter* Director )
*/S/ George F. Slook, Individually and as Attorney-in-Fact
18
SEARS ROEBUCK ACCEPTANCE CORP.
INDEX TO FINANCIAL STATEMENTS
PAGE
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME 7
STATEMENTS OF FINANCIAL POSITION 8
STATEMENTS OF SHAREHOLDER'S EQUITY 9
STATEMENTS OF CASH FLOWS 10
NOTES TO FINANCIAL STATEMENTS 11-15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM S-2
S-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
Sears Roebuck Acceptance Corp.
Greenville, Delaware
We have audited the accompanying statements of financial position
of Sears Roebuck Acceptance Corp. (the "Company") (a wholly-owned
subsidiary of Sears, Roebuck and Co.) as of January 1, 2005 and
January 3, 2004, and the related statements of income and
comprehensive income, shareholder's equity, and cash flows for
each of the three years in the period ended January 1, 2005.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits
in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit includes consideration of internal control over financial
reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Sears Roebuck Acceptance Corp. as of
January 1, 2005 and January 3, 2004, and the results of its operations
and its cash flows for each of the three years in the period ended
January 1, 2005, in conformity with accounting principles generally
accepted in the United States of America.
/S/ Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP
Philadelphia, Pennsylvania
February 23, 2005
S-2
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/A for the quarter ended
October 2, 1999*].
4(a) 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.
4(b) Fixed Charge Coverage and Ownership Agreement dated
May 15, 1995 between Sears, Roebuck and Co. and the
Registrant [Incorporated by reference to Exhibit 4(e)
to the Registrant's Current Report on Form 8-K
dated June 8, 1995*].
4(c) Fixed Charge Coverage and Ownership Agreement dated
as of September 24, 2002 between Sears Roebuck
Acceptance Corp. and Sears, Roebuck and Co.
[Incorporated by reference to Exhibit 4(f)
of Registration Statement No. 333-92082].
4(d) Indenture dated as of May 15, 1995 between the Registrant
and The Chase Manhattan Bank [Incorporated by reference
to Exhibit 4(b) to Amendment No. 1 to Registration
Statement No. 33-64215].
4(e) Indenture dated as of October 1, 2002 between the Registrant
and BNY Midwest Trust Company.[Incorporated by reference to
Exhibit4(b) to Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 28, 2002*].
4(f) Extension Agreement dated August 22, 1996, between Sears,
Roebuck and Co. and the Registrant [Incorporated by reference
to Exhibit 4(c) to the Registrant's Current Report on Form 8-K
dated August 22, 1996*].
4(g) Extension Agreement dated September 18, 1997, between Sears,
Roebuck and Co and the Registrant. [Incorporated
by reference to Exhibit 4(t) to the Registrant's
Annual Report on Form 10-K for the year ended
January 1, 2000*].
4(h) Extension Agreement dated October 23, 1998, between Sears,
Roebuck and Co and the Registrant. [Incorporated
by reference to Exhibit 4(u) to the Registrant's
Annual Report on Form 10-K for the year ended
January 1, 2000*].
---------------------
*Sec File No. 1-4040
E-1
EXHIBIT INDEX (cont'd)
4(i) Extension Agreement dated July 16, 2002 between
Sears, Roebuck and Co. and the Registrant [Incorporated
by reference to Exhibit 4(c) of Registration
Statement No. 333-92082].
4(j) Form of Fixed-Rate Medium-Term Note Series I [Incorporated by
reference to Exhibit 4(b) to the Registrant's Current Report on
Form 8-K dated June 8, 1995*].
4(k) Form of Fixed-Rate Put Option Medium-Term Note Series I
[Incorporated by reference to Exhibit 4 to the Registrant's
Current Report on Form 8-K dated November 4, 1995*].
4(l) Form of 6 3/4% Note [Incorporated by reference to Exhibit 4(d)
to the Registrant's Current Report on Form 8-K dated
June 8, 1995*].
4(m) Form of 6 1/8% Note [Incorporated by reference to Exhibit 4
to the Registrant's Current Report on Form 8-K
dated January 23, 1996*].
4(n) Form of Fixed-Rate Medium-Term Note Series III Incorporated
by reference to Exhibit 4(a) to the Registrant's Current Report
on Form 8-K dated August 22, 1996*].
4(o) Form of 6.70% Note [Incorporated by reference to Exhibit 4
to the Registrant's Current Report on Form 8-K
dated November 19, 1996*].
4(p) Form of 7.00% Note [Incorporated by reference to Exhibit 4.4
to the Registrant's Current Report on Form 8-K dated
May 13, 1997*].
4(q) Form of Fixed-Rate Medium-Term Note Series IV [Incorporated by
reference to Exhibit 4.2 to the Registrant's Current Report on
Form 8-K dated May 13, 1997*].
4(r) Form of 6.70% Note [Incorporated by reference to Exhibit 4(a)
to the Registrant's Current Report on Form 8-K dated
September 18, 1997*].
4(s) Form of 7.50% Note [Incorporated by reference to Exhibit 4(b)
to the Registrant's Current Report on Form 8-K dated
September 18, 1997*].
4(t) Form of 6.875% Note [Incorporated by reference to Exhibit 4(c)
to the Registrant's Current Report on Form 8-K dated
September 18, 1997*].
4(u) Form of 6.75% Note [Incorporated by reference to Exhibit 4(a)
to the Registrant's Current Report on Form 8-K dated
January 8, 1998*].
4(v) Form of Fixed-Rate Medium-Term Note Series V [Incorporated
by reference to Exhibit 4(a) to the Registrant's Current
Report on Form 8-K dated February 23, 1998*]
------------------------
* SEC File No. 1-4040.
E-2
EXHIBIT INDEX (cont'd)
4(w) Form of Floating Rate Medium-Term Note Series V [Incorporated
by reference to Exhibit 4(b) to the Registrant's Current Report
on Form 8-K dated February 23, 1998*].
4(x) Form of Global 6.50% Note [Incorporated by reference to Exhibit
4(c) to the Registrant's Current Report on Form 8-K dated
November 24, 1998*].
4(y) Form of 6.25% Note [Incorporated by reference to Exhibit
4(c) to the Registrant's Current Report on Form 8-K dated
April 29, 1999*].
4(z) Form of 7.00% Note [Incorporated by reference to Exhibit
4 to the Registrant's Current Report on Form 8-K dated
January 19, 2001*].
4(aa) Form of 6.75% Note [Incorporated by reference to Exhibit
4 to the Registrant's Current Report on Form 8-K dated
August 8, 2001*].
4(bb) Form of 7.00% Note [Incorporated by reference to Exhibit
4 to the Registrant's Current Report on Form 8-K dated
September 5, 2001*].
4(cc) Form of 6.70% Note [Incorporated by reference to Exhibit 4
to the Registrant's Current Report on Form 8-K
dated March 18,2002*].
4(dd) Form of 7.00% Note [Incorporated by reference to Exhibit 4
to the Registrant's Current Report on Form 8-K
dated May 21,2002*].
4(ee) Form of 7.00% Note [Incorporated by reference to Exhibit 4
to the Registrant's Current Report on Form 8-K
dated June 27,2002*].
4(ff) Form of 7.40% Note [Incorporated by reference to Exhibit 4
to the Registrant's Current Report on Form 8-K
dated February 7, 2003*].
4(gg) Form of Fixed-Rate InterNotes [Incorporated by
reference to Exhibit 4 to the Registrant's Current Report on
Form 8-K dated April 23, 2003*].
4(hh) Form of Fixed-Rate Medium-Term Notes Series VII
[Incorporated by reference to Exhibit 4(a) to the Registrant's
Current Report on Form 8-K dated May 14, 2003*].
4(ii) Form of Floating Rate Medium-Term Notes Series VII
[Incorporated by reference to Exhibit 4(b) to the Registrant's
Current Report on Form 8-K dated May 14, 2003*].
-----------------------
*SEC File No. 1-4040.
E-3
EXHIBIT INDEX (cont'd)
4(jj) Supplemental Indenture dated as of November 3, 2003 among the
Registrant, Sears Roebuck and Co. and BNY Midwest Trust Company.
[Incorporated by reference to Exhibit 4(e) to Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 27, 2003*].
4(kk) Supplemental Indenture dated as of November 3, 2003 among the
Registrant, Sears Roebuck and Co. and J.P. Morgan Chase Bank
(successor to The Chase Manhattan Bank, N.A.)[Incorporated by
reference to Exhibit 4(f) to Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 27, 2003*].
4(mm) Guarantee executed by Sears, Roebuck and Co. under the
Indenture, dated as of May 15, 1995, between Registrant
and JPMorgan Chase Bank (successor to The Chase Manhattan
Bank, N.A.), as supplemented by the First Supplemental
Indenture, dated as of November 3, 2003[Incorporated by
reference to Exhibit 4(g) to Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 27, 2003*].
4(nn) Guarantee executed by Sears, Roebuck and Co. under the
Indenture,dated as of October 1, 2002, between Registrant
and BNY Midwest Trust Company, as supplemented by the First
Supplemental Indenture, dated as of November 3, 2003
[Incorporated by reference to Exhibit 4(h) to Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 27, 2003*].
10(a) Letter Agreement dated as of October 17, 1991 between
Registrant and Sears, Roebuck and Co. [Incorporated by
reference to Exhibit 10 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1991*].
10(b)(1) Agreement to Issue Letters of Credit dated December 3, 1985
between Sears, Roebuck and Co. and Registrant [Incorporated by
reference to Exhibit 10(i)(1) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1987*].
10(b)(2) Letter Agreement dated March 11, 1986 amending Agreement to
Issue Letters of Credit dated December 3, 1985 [Incorporated by
reference to Exhibit 10(i)(2) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1987*].
10(b)(3) Letter Agreement dated November 26, 1986 amending Agreement to
Issue Letters of Credit dated December 3, 1985 [Incorporated by
reference to Exhibit 10(i)(3) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1987*].
---------------------
* SEC File No. 1-4040.
E-4
EXHIBIT INDEX (cont'd)
10(c) Guarantee dated as of November 3, 2003 by Sears, Roebuck
and Co. of the commercial paper master notes of Registrant
[Incorporated by reference to Exhibit 10.38 to Sears'Annual
Report on Form 10-K for the year ended January 3, 2004
(SEC File No 1-416)].
10(d) Three-Year Credit Agreement dated as of May 17, 2004
among Sears Roebuck Acceptance Corp., the banks, financial
institutions and other institutional lenders (the "Lenders")
listed on the signature pages thereof, Barclays Bank PLC, as
syndication agent, Bank of America, N.A., Bank One, NA and
Wachovia Bank National Association, as documentation agents,
Citigroup Global Markets Inc. and Barclays Capital, the
Investment Banking Division of Barclays Bank PLC,
as joint lead arrangers and joint bookrunners, and
Citibank, N.A., as administrative agent for the Lenders
[Incorporated by reference to Exhibit 10(a) to Registrant's
Current Report on Form 8-K dated May 17, 2004*].
10(e) Guarantee, dated as of May 17, 2004, by Sears, Roebuck and
Co. in favor of the benefited Parties [Incorporated by reference
to Exhibit 10(b) to Registrant's Current Report on Form 8-K
dated May 17, 2004*]
12 Calculation of ratio of earnings to fixed charges.**
23 Consent of Deloitte & Touche LLP.**
24 Power of attorney.**
31(a) Certification of Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002**
31(b) Certification of Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002**
32 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002**
-----------------------
* SEC File No. 1-4040.
** Filed herewith.
E-5