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 JUNE 30, 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 July 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 26 WEEKS ENDED JUNE 30, 2001
PART I. FINANCIAL INFORMATION: Page No.
Item 1. Financial Statements
Statements of Financial Position
June 30, 2001 and July 1, 2000 (unaudited)
and December 30, 2000 (audited) 1
Statements of Income (unaudited)
13 Weeks and 26 Weeks ended June 30, 2001
and July 1, 2000 2
Statements of Cash Flows (unaudited)
26 Weeks ended June 30, 2001
and July 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) June 30, July 1, Dec. 30,
2001 2000 2000
Assets
Cash and cash equivalents $ 163 $ 31 $ 442
Notes of Sears 16,210 16,505 16,879
Other assets 49 57 45
Total assets $ 16,422 $ 16,593 $ 17,366
Liabilities
Commercial paper (net of
unamortized discount of
$11, $9 and $25) $ 2,892 $ 2,284 $ 3,934
Medium-term notes (net of
unamortized discount of
$7, $8 and $7) 3,820 5,564 4,608
Discrete underwritten debt (net
of unamortized discount of
$26, $22 and $21) 6,374 5,578 5,579
Accrued interest and
other liabilities 165 155 151
Total liabilities 13,251 13,581 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 income 1,986 1,827 1,909
Total shareholder's equity 3,171 3,012 3,094
Total liabilities and
shareholder's equity $ 16,422 $ 16,593 $ 17,366
See notes to financial statements.
1
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
(unaudited)
(millions, except ratios) 13 Weeks Ended 26 Weeks Ended
June 30, July 1, June 30, July 1,
2001 2000 2001 2000
Revenues
Earnings on notes of Sears $ 274 $ 296 $ 574 $ 595
Earnings on cash equivalents 2 3 6 6
Total revenues 276 299 580 601
Expenses
Interest expense and amortization
of debt discount/premium 220 237 461 477
Operating expenses - 1 1 2
Total expenses 220 238 462 479
Income before income taxes 56 61 118 122
Income taxes 19 22 41 43
Net income $ 37 $ 39 $ 77 $ 79
Ratios of earnings
to fixed charges 1.25 1.26 1.26 1.26
See notes to financial statements.
2
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
(millions) 26 Weeks Ended
June 30, July 1,
2001 2000
Cash flows from operating activities:
Net income $ 77 $ 79
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and other
noncash items 5 9
Increase in other assets (4) -
Increase(decrease)in other liabilities 14 (18)
Net cash provided by operating activities 92 70
Cash flows from investing activities:
Decrease in notes of Sears 669 301
Net cash provided by
investing activities 669 301
Cash flows from financing activities:
Decrease in commercial paper,
primarily 90 days or less (1,042) (391)
Proceeds from issuance of long-term debt 793 86
Payments for redemption of long-term debt (788) (489)
Issue costs paid to issue debt (3) -
Net cash used in
financing activities (1,040) (794)
Net decrease in cash and
cash equivalents (279) (423)
Cash and cash equivalents at beginning
of period 442 454
Cash and cash equivalents at end of period $ 163 $ 31
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 short term liquid investments and
available credit facilities. SRAC's liquid investments fluctuated
from a low of $1 million to a high of $704 million in the second
quarter of 2001. Available credit facilities as of June 30, 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 $ - -% - $ - -% -
26 Weeks Ended:
Medium-term notes $ - -% - $ 95 6.58% 3.6
Discrete debt $ 800 7.00% 10.0 $ - -% -
GROSS OUTSTANDING
Avg. Avg.
06/30/01 Avg. Remain. 07/01/00 Avg. Remain.
Balance Coupon Term Balance Coupon Term
-------- ------ ------ ------- ------ -------
Medium-term notes $3,827 6.46% 1.5 $5,572 6.55% 2.2
Discrete debt $6,400 6.65% 10.5 $5,600 6.60% 11.7
MATURITIES
Medium-term Discrete
Year notes debt
---------------------------------
2001 $1,330 $ -
2002 958 600
2003 1,075 1,250
2004 202 -
2005 36 250
Thereafter 226 4,300
---------------------------------
Total $3,827 $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 June 30, 2001 and
July 1, 2000, and the related statements of income for the
13 week and 26 week periods then ended and cash flows for the
26 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
July 10, 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 second
quarter of 2001, SRAC revenues decreased to $276 million from $299 million
in the comparable 2000 period. For the first six months of 2001, SRAC's
revenues declined to $580 million from $601 million for the comparable 2000
period. The decrease in revenue resulted from a reduction in the average
rates on earning assets and lower asset balances from 2000 to 2001. Cash
inflows from the reduced investment in the Notes of Sears allowed SRAC to
reduce the level of its debt outstanding.
SRAC's interest and related expenses decreased 7% to $220 million from
$237 million and 3% to $461 million from $477 million for the second quarter
and first half of 2001, respectively, as compared to the comparable 2000
periods. Interest and related expenses decreased during the second quarter
and first half of 2001 due to decreases in both the cost of short-term funds
and average long-term debt levels. SRAC's cost of short-term funds averaged
5.08% in the second quarter and 6.18% in the first six months of 2001
compared to 6.49% and 6.27% for the same periods in 2000. SRAC's average
long-term debt of $10.5 billion in the second quarter of 2001 and $10.6
billion in the first six months of 2001 reflect decreases of 9% and 8%,
respectively, compared with $11.5 billion for the same periods in 2000.
Reductions in interest and related expenses were partially offset during
these periods by increases in average short-term debt levels and the average
cost of long-term funds. SRAC's short-term borrowings averaged $3.4 billion
for both the second quarter and first half of 2001, compared to $2.6 billion
and $2.7 billion for the respective 2000 periods. SRAC's cost of long-term
funds averaged 6.64% in the second quarter and 6.68% in the first six months
of 2001 compared to 6.59% and 6.60% for the same periods in 2000.
SRAC's net income of $37 million and $77 million for the second quarter
and first half of 2001, respectively, decreased from the comparable 2000
period amounts of $39 million and $79 million.
SRAC's ratio of earnings to fixed charges for the second quarter and
first half of 2001 was 1.25 and 1.26, respectively 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:
There were no reports filed on Form 8-K.
8
SEARS ROEBUCK ACCEPTANCE CORP.
SIGNATURE
Pursuant to the requirements of the
Securities Exchange Act of 1934,
the Registrant has duly caused this
report to be signed on its behalf by
the undersigned thereunto duly
authorized.
SEARS ROEBUCK ACCEPTANCE CORP.
(Registrant)
By: /s/ George F. Slook
-------------------
George F. Slook
Vice President, Finance
and Assistant Secretary
(principal financial
officer and authorized
officer of Registrant)
August 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 August 9, 2001 concerning unaudited financial
information.*
*Filed herewith.
1
Exhibit 12
SEARS ROEBUCK ACCEPTANCE CORP.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
13 Weeks Ended 26 Weeks Ended
June 30, July 1, June 30, July 1,
(millions) 2001 2000 2001 2000
INCOME BEFORE INCOME TAXES $ 56 $ 61 $ 118 $ 122
PLUS FIXED CHARGES:
Interest 219 232 456 468
Amortization of debt
discount/premium 1 5 5 9
Total fixed charges 220 237 461 477
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES $ 276 $ 298 $ 579 $ 599
RATIO OF EARNINGS TO FIXED
CHARGES 1.25 1.26 1.26 1.26
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 June 30, 2001 and
July 1, 2000, as indicated in our report dated July 10, 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 June 30, 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
August 9, 2001
12