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 MARCH 31, 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 April 30, 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 ENDED MARCH 31, 2001
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statements of Financial Position
March 31, 2001 and April 1, 2000 (unaudited)
and December 30, 2000 (audited) 1
Statements of Income (unaudited)
13 Weeks Ended March 31, 2001
and April 1, 2000 2
Statements of Cash Flows (unaudited)
13 Weeks Ended March 31, 2001
and April 1, 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) March 31, April 1, Dec.30,
2001 2000 2000
Assets
Cash and cash equivalents $ 219 $ 135 $ 442
Notes of Sears 16,688 17,195 16,879
Other assets 50 60 45
Total assets $ 16,957 $ 17,390 $ 17,366
Liabilities
Commercial paper (net of
unamortized discount of
$15, $8 and $25) $ 2,977 $ 2,619 $ 3,934
Medium-term notes (net of
unamortized discount of
$7, $9 and $7) 4,266 5,738 4,608
Discrete underwritten debt(net
of unamortitized discount of
$27, $22 and $21) 6,373 5,828 5,579
Accrued interest and
other liabilities 207 232 151
Total liabilities 13,823 14,417 14,272
Shareholder's Equity
Common share, 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 earnings 1,949 1,788 1,909
Total shareholder's equity 3,134 2,973 3,094
Total liabilities and
shareholder's equity $ 16,957 $ 17,390 $ 17,366
See notes to financial statements.
1
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
(unaudited)
(millions, except ratios)
13 Weeks Ended
March 31, April 1,
2001 2000
Revenues
Earnings on notes of Sears $ 300 $ 299
Earnings on cash equivalents 4 3
Total revenues 304 302
Expenses
Interest expense and amortization of
debt discount/premium 241 240
Operating expenses 1 1
Total expenses 242 241
Income before income taxes 62 61
Income taxes 22 21
Net income $ 40 $ 40
Ratio of earnings to fixed charges 1.26 1.25
See notes to financial statements.
2
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
(millions) 13 Weeks Ended
March 31, April 1,
2001 2000
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 4
Increase in other assets (5) -
Increase in other liabilities 56 59
Net cash provided by operating activities 95 103
Cash flows from investing activities:
Decrease(Increase)in notes of Sears 191 (389)
Net cash provided by (used in)
investing activities 191 (389)
Cash flows from financing activities:
Decrease in commercial paper,
primarily 90 days or less (957) (56)
Proceeds from issuance of long-term debt 793 86
Payments for redemption of long-term debt (342) (63)
Issue costs paid to issue debt (3) -
Net cash used in
financing activities (509) (33)
Net decrease in cash and
cash equivalents (223) (319)
Cash and cash equivalents at beginning
of period 442 454
Cash and cash equivalents at end of period $ 219 $ 135
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 committed
credit facilities. SRAC's investment portfolio fluctuated from a
low of $5 million to a high of $819 million in the first quarter
of 2001. Credit facilities as of March 31, 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; term in years)
ISSUANCE
Avg. Avg.
2001 Avg. Orig. 2000 Avg. Orig.
Volume Rate Term Volume Rate Term
------ ------ ---- ------ ------ ----
First Quarter:
Medium-term notes $ - - - $ 95 6.58% 3.6
Discrete debt $ 800 7.00% 10.0 $ - - -
GROSS OUTSTANDING
Avg. Avg.
03/31/01 Avg. Remain. 04/01/00 Avg. Remain.
Balance Coupon Term Balance Coupon Term
-------- ------ ------ ------- ------ -------
Medium-term notes $4,273 6.61% 1.6 $5,747 6.51% 2.2
Discrete debt $6,400 6.65% 10.8 $5,850 6.59% 11.4
MATURITIES
Medium-term Discrete
Year notes debt
---------------------------------
2001 $1,776 $ -
2002 958 600
2003 1,075 1,250
2004 202 -
2005 36 250
Thereafter 226 4,300
---------------------------------
Total $4,273 $6,400
=================================
5
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholder 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 March 31, 2001 and
April 1, 2000, 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 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
April 19, 2001
6
SEARS ROEBUCK ACCEPTANCE CORP.
ITEM 2. ANALYSIS OF RESULTS OF OPERATIONS
During the first quarter of 2001, Sears Roebuck Acceptance
Corp.'s ("SRAC") revenues increased to $304 million from
$302 million in the comparable 2000 period. SRAC's income
is derived primarily from the earnings on its investment in
the notes of Sears, Roebuck and Co. ("Sears") and invested cash.
The increase in revenue resulted primarily from a 5 basis point
increase in the average rates on earning assets in the first
quarter of 2001 compared to the 2000 period.
SRAC's interest and related expenses increased to $241 million
for the first quarter of 2001 from $240 million for the first
quarter of 2000. SRAC's cost of short-term funds averaged 6.65%
in the first quarter of 2001, a 58 basis point increase from
6.07% for the first three months of last year. SRAC's short-term
borrowings averaged $3.5 billion in the first quarter of 2001, a
21% increase from the 2000 first quarter average of $2.9 billion.
Increases in short-term debt levels were partially offset by
decreases in long term debt levels. Average outstanding long-term
debt of $10.6 billion in the first quarter of 2001 decreased
$1.0 billion compared to $11.6 billion in the first quarter of
2000. SRAC's cost of long-term funds averaged 6.70% in the first
quarter of 2001 compared to 6.60% for the first quarter of 2000.
On January 26, 2001, SRAC issued an $800 million ten-year
discrete underwritten bond with a 7% coupon.
SRAC's net income was $40 million for the first quarter of 2001
and 2000. SRAC's ratio of earnings to fixed charges was 1.26 and
1.25, respectively for the first quarter of 2001 and 2000.
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 a current report on
Form 8-K dated January 31, 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
(authorized officer of
Registrant)
May 11, 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
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 11, 2001, concerning unaudited financial
information.
10
Exhibit 12
SEARS ROEBUCK ACCEPTANCE CORP.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
13 Weeks Ended
March 30, April 1,
(millions) 2001 2000
INCOME BEFORE INCOME TAXES $ 62 $ 61
PLUS FIXED CHARGES:
Interest 237 236
Amortization of debt
discount/premium 4 4
Total fixed charges 241 240
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES $ 303 $ 301
RATIO OF EARNINGS TO FIXED
CHARGES 1.26 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 March 31, 2001 and
April 1, 2000, as indicated in our report dated April 19, 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
March 31, 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 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 11, 2001
12