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 30, 2002
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, 2002 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 30, 2002
PART I. FINANCIAL INFORMATION: PAGE NO.
Item 1. Financial Statements
Statements of Financial Position
March 30, 2002(unaudited)and March 31, 2001(unaudited)
and December 29, 2001 1
Statements of Income (unaudited)
13 Weeks ended March 30, 2002
and March 31, 2001 2
Statements of Cash Flows (unaudited)
13 Weeks ended March 30, 2002
and March 31, 2001 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 30, March 31, Dec.29,
2002 2001 2001
Assets ------- -------- --------
Cash and cash equivalents $ 548 $ 219 $ 599
Notes of Sears 16,343 16,688 16,014
Other assets 46 50 125
-------- -------- --------
Total assets $ 16,937 $ 16,957 $ 16,738
======== ======== ========
Liabilities
Commercial paper (net of
unamortized discount of
$6, $15 and $9) $ 3,319 $ 2,977 $ 3,225
Medium-term notes (net of
unamortized discount of
$6, $7 and $6) 2,566 4,266 2,762
Discrete underwritten debt(net
of unamortitized discount of
$32, $27 and $29) 7,618 6,373 7,321
Accrued interest and
other liabilities 164 207 192
-------- -------- --------
Total liabilities 13,667 13,823 13,500
-------- -------- --------
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 2,085 1,949 2,053
-------- -------- --------
Total shareholder's equity 3,270 3,134 3,238
-------- -------- --------
Total liabilities and
shareholder's equity $ 16,937 $ 16,957 $ 16,738
======== ======== ========
See notes to financial statements.
1
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
(unaudited)
(millions, except ratios)
13 Weeks Ended
March 30, March 31,
2002 2001
Revenues -------- ---------
Earnings on notes of Sears $ 234 $ 300
Earnings on cash equivalents 3 4
------- -------
Total revenues 237 304
------- -------
Expenses
Interest expense and amortization of
debt discount/premium 188 241
Operating expenses - 1
------- -------
Total expenses 188 242
------- -------
Income before income taxes 49 62
Income taxes 17 22
------- -------
Net income $ 32 $ 40
======= =======
Ratio of earnings to fixed charges 1.26 1.26
See notes to financial statements.
2
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
(millions) 13 Weeks Ended
March 30, March 31,
2002 2001
-------- --------
Cash flows from operating activities:
Net income $ 32 $ 40
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and other
noncash items 4 4
Decrease(increase)in other assets 79 (5)
(Decrease)increase in other liabilities (28) 56
------ ------
Net cash provided by operating activities 87 95
------ ------
Cash flows from investing activities:
(Increase)decrease in notes of Sears (329) 191
------ ------
Net cash (used in) provided by
investing activities (329) 191
------ ------
Cash flows from financing activities:
Increase(decrease) in commercial paper,
primarily 90 days or less 94 (957)
Proceeds from issuance of long-term debt 611 793
Payments for redemption of long-term debt (511) (342)
Issue costs paid to issue debt (3) (3)
------ ------
Net cash provided by (used in)
financing activities 191 (509)
------ ------
Net decrease in cash and
cash equivalents (51) (223)
Cash and cash equivalents at beginning
of period 599 442
------ ------
Cash and cash equivalents at end of period $ 548 $ 219
====== ======
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 29, 2001, 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 $135 million to a high of $1,045 million in the first
quarter of 2002. Credit facilities as of March 30, 2002 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.
2002 Avg. Orig. 2001 Avg. Orig.
Volume Rate Term Volume Rate Term
------ ------ ---- ------ ------ ----
First Quarter:
Medium-term notes $ 15 4.50% 2.7 $ - - -
Discrete debt $ 600 6.70% 10.0 $ 800 7.00% 10.0
GROSS OUTSTANDING
Avg. Avg.
03/30/02 Avg. Remain. 03/31/01 Avg. Remain.
Balance Coupon Term Balance Coupon Term
-------- ------ ------ ------- ------ -------
Medium-term notes $2,572 5.97% 1.6 $4,273 6.61% 1.6
Discrete debt $7,650 6.67% 10.1 $6,400 6.65% 10.8
MATURITIES
Medium-term Discrete
Year notes debt
---------------------------------
2002 $ 747 $ 300
2003 1,246 1,250
2004 317 -
2005 36 250
2006 40 550
Thereafter 186 5,300
---------------------------------
Total $2,572 $7,650
=================================
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 30, 2002 and
March 31, 2001, 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 29, 2001, 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 17, 2002, 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 29, 2001 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 9, 2002
6
SEARS ROEBUCK ACCEPTANCE CORP.
ITEM 2. ANALYSIS OF RESULTS OF OPERATIONS
During the first quarter of 2002, Sears Roebuck Acceptance
Corp.'s ("SRAC") revenues decreased to $237 million from
$304 million in the comparable 2001 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 decrease in revenue resulted primarily from a 134 basis point
decrease in the average rates on earning assets in the first
quarter of 2002 compared to the 2001 period.
SRAC's interest and related expenses decreased to $188 million
for the first quarter of 2002 from $241 million for the first
quarter of 2001 as a result of lower interest rates and debt
levels. SRAC's cost of short-term funds averaged 2.50% in the
first quarter of 2002, a 415 basis point decrease from 6.65% for
the first three months of last year. SRAC's cost of long-term
funds averaged 6.54% in the first quarter of 2002, a 16 basis
decrease from 6.70% for the first quarter of 2001. SRAC's short-
term borrowings averaged $3.6 billion in the first quarter of
2002, a slight increase from the 2001 first quarter average of
$3.5 billion. Average outstanding long-term debt of $9.9 billion
in the first quarter of 2002 decreased $700 million compared to
$10.6 billion in the first quarter of 2001.
On March 25, 2002, SRAC issued a $600 million ten-year discrete
underwritten bond with a 6.7% coupon.
SRAC's net income was $32 million for the first quarter of 2002
and $40 million for the first quarter of 2001. SRAC's ratio of
earnings to fixed charges was 1.26, respectively for both the
first quarter of 2002 and 2001.
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 a current report on
Form 8-K dated March 18, 2002
[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 8, 2002
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 Acknowledgement of awareness from Deloitte & Touche LLP,
dated May 8, 2002, concerning unaudited financial
information.
10
Exhibit 12
SEARS ROEBUCK ACCEPTANCE CORP.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
13 Weeks Ended
March 30, March 31,
(millions) 2002 2001
------- --------
INCOME BEFORE INCOME TAXES $ 49 $ 62
PLUS FIXED CHARGES:
Interest 184 237
Amortization of debt
discount/premium 4 4
------- -------
Total fixed charges 188 241
------- -------
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES $ 237 $ 303
======= =======
RATIO OF EARNINGS TO FIXED
CHARGES 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 March 30, 2002 and
March 31, 2001, as indicated in our report dated April 9, 2002;
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 30, 2002, is incorporated by reference in Registration
Statement Nos. 333-62847 and 333-30879 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.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Philadelphia, Pennsylvania
May 8, 2002
12