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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, 2000
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 March 1, 2038 New York Stock Exchange
6.95% Notes due October 23, 2038 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]
As of February 29, 2000, 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 II(a) and
(b) of Form 10-K and is therefore filing this report 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, and from time to time sells receivable balances to, SRAC.
SRAC obtains funds through the issuance of 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 and receivable balances 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 Sears notes 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.
SRAC's commercial paper ratings are F-1 from Fitch IBCA, Inc.,
D-1- from Duff & Phelps Credit Rating Co, P-2 from Moody's Investor Services,
Inc., and A-2 from Standard & Poor's, . Long-term ratings are A from Fitch
IBCA, Inc., A- from Duff & Phelps Credit Rating Co., A3 from Moody's Investor
Services, Inc., and A- from Standard & Poor's.
SRAC and Sears have entered into agreements for the benefit of
certain debtholders 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.
SRAC provides backup support for its commercial paper portfolio
through its committed credit facilities. SRAC manages its credit facilities
and associated costs in response to changes in its projected short-term
funding requirements. In April 1999, SRAC reduced the commitment amount on
the $1 billion revolving credit facility to $500 million. This agreement
terminated November 1999. The $40 million credit facililty with 42-minority
owned banks expired in November 1999. As of January 1, 2000, SRAC had backup
facilities totaling $5.06 billion that continued to provide support for 100%
of commercial paper outstanding.
Pursuant to the syndicated credit agreements between SRAC and
various banks, the letter agreement between SRAC and Sears concerning SRAC's
investment in Sears notes may not be amended, waived, terminated, or modified
(except that SRAC's fixed charge coverage ratio may be reduced to as low as
1.15) without the approval of such banks.
2
SRAC ended 1999 with an equity position of $2.9 billion and a debt-to-equity
ratio of 4.9:1 compared to 5.5:1 at the end of 1998.
As of March 1, 2000 SRAC had 10 employees.
Item 2. Properties.
SRAC leases 5,865 square feet of an office building located in
Greenville, Delaware.
Item 3. Legal Proceedings.
None.
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.
Financial Condition
SRAC's investment in Sears notes decreased to $16.8 billion at
year-end 1999 from $18.0 billion at the end of 1998. Short-term borrowings
at the end of 1999 were $2.7 billion, a $1.6 billion decrease from the prior
year. Total debt outstanding decreased in 1999 to $14.2 billion from
$15.3 billion. SRAC's investment in the Notes of Sears decreased as a result
of reduced funding requirements of Sears. In response to its lower
investments, SRAC reduced the level of its debt outstanding.
Results of Operations
SRAC's total revenues of $1,201 million for 1999 decreased
from $1,234 million in 1998 and increased from $960 million in 1997. The
revenue decrease for 1999 resulted from a 21 basis point reduction in the
average rates on earning assets from 1998 to 1999. Higher levels of
average earning assets in 1998 resulted in increased revenues from 1997.
SRAC's interest and related expenses were $955 million for 1999,
$979 million in 1998 and $763 million in 1997. In 1999, SRAC's average cost of
short-term funds decreased 33 basis points to 5.25%. Average outstanding
short-term debt of $3.7 billion in 1999 decreased nearly $800 million from the
1998 level. Decreases in short-term debt levels were partially offset by
increases in long term debt levels. Average outstanding term debt in 1999 was
$11.2 billion compared to $10.6 billion in 1998. SRAC's average cost of term
debt of 6.59% was relatively flat compared to 1998.
During 1999, SRAC issued $1.1 billion in term debt securities
as follows:
*$99 million of fixed-rate medium-term notes, with an average coupon of 6.51%
and an average term of 4.3 years
*$250 million of variable-rate medium-term notes, with an average term of
1.8 years and
*$750 million of 6.25%, 10-year global notes, at a yield of 6.43%.
SRAC's management of the debt portfolio during 1999 resulted in a
$200 million reduction from 1998 average debt levels and a 2 basis point
reduction in average cost. This resulted in decreases in interest and
related expenses throughout 1999.
SRAC's net income was $158 million in 1999, $163 million in
1998 and $125 million in 1997.
On December 15, 1999, Moody's Investor Services, Inc. lowered its
rating on SRAC's commercial paper to P2 from P1 and SRAC's long-term rating
to A-3 from A-2. On February 24, 2000, Duff & Phelps lowered its ratings on
SRAC's commercial paper to D-1- from D-1 and SRAC's long-term debt to A- from A.
With a Fitch IBCA F-1 rating and the rating from Duff & Phelps, SRAC's
commercial paper remains top tier eligible under SEC Rule 2a-7.
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 Sears notes are
set to provide fixed charge coverage of at least 1.25 times, thereby insulating
SRAC from the effects of inflation-based interest rate increases.
4
Year 2000
Year 2000 compliance is the ability of information systems to recognize and
process dates and date-sensitive information including the year 2000 and
beyond (commonly referred to as Year 2000 or Y2K). Year 2000 compliance is
critical to SRAC because SRAC and many of its service providers, as well as
other third parties that facilitate trades in SRAC securities, rely on
information systems to operate their businesses.
SRAC used only internal resources and Sears resources to complete its Year 2000
compliance initiatives. The costs associated with this effort, together with
SRAC's share of the costs relating to Sears corporate-wide Year 2000 effort,
were not material.
SRAC did not experience any significant Y2K problems. SRAC's facilities opened
as planned and systems were operational continuously.
Cautionary Statement Regarding Forward Looking Information
Certain statements made in this Annual Report on Form 10-K are forward looking
statements and are made in reliance on the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. As such, they involve risks
and uncertainties that could cause actual results to differ materially. SRAC's
forward looking statements are based on assumptions about many important
factors, including ongoing competitive conditions in the capital markets,
economic conditions such as interest rates, and normal business uncertainty.
While SRAC believes its assumptions are reasonable, it cautions that it is
impossible to predict the impact of certain factors which could cause actual
results to differ materially from expected results.
Item 7A. Market Risk
SRAC's outstanding debt securities are subject to repricing risk. The
Company's policy is to manage interest rate risk through the strategic use
of fixed and variable rate debt. All debt securities are considered
non-trading. At year-end 1999 and 1998, 31% and 32%, respectively of the
funding portfolio was variable rate (including current maturities of
fixed-rate long-term debt that will reprice in the next 12 months). Based
on SRAC's funding portfolio as of year-end 1999 and 1998, which totaled
$14.2 billion and $15.3 billion, respectively, a 100 basis point change in
interest rates would affect annual pre-tax funding cost by approximately
$44 million and $49 million, respectively. This calculation assumes the
funding portfolio balance at year end remains constant for an annual
period and that the 100 basis point change occurs at the beginning of
the annual period. The effect on net earnings is mitigated by the fixed
charge coverage agreement with Sears.
5
Item 8. Financial Statements and Supplementary Data.
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
(millions, except ratio of earnings to fixed charges)
1999 1998 1997
------ ------ ------
Revenues
- --------
Earnings on notes of Sears $1,189 $1,221 $948
Earnings on commercial customer
receivable balances purchased
from Sears 4 8 7
Earnings on cash equivalents 8 5 5
----- ----- -----
Total revenues 1,201 1,234 960
Expenses
- --------
Interest expense and amortization of
debt discount/premium 955 979 763
Operating expenses 3 4 4
----- ----- -----
Total expenses 958 983 767
----- ----- -----
Income before income taxes 243 251 193
Income taxes 85 88 68
----- ----- -----
Net income $158 $163 $125
----- ----- -----
Ratio of earnings to fixed charges 1.25 1.26 1.25
See notes to financial statements.
6
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF FINANCIAL POSITION
(millions, except share data) 1999 1998
------- -------
Assets
- ------
Cash and cash equivalents $ 454 $ 94
Notes of Sears 16,806 17,990
Commercial customer receivable
balances purchased from Sears - 90
Other assets 64 73
--------- ---------
Total assets $17,324 $18,247
--------- ---------
Liabilities
- -----------
Commercial paper (net of unamortized
discount of $12 and $25) $2,675 $4,243
Medium-term notes 5,716 5,976
Discrete underwritten debt(net of
unamoritized discount of $23 and $16) 5,827 5,084
Accrued interest and other liabilities 173 169
--------- ---------
Total liabilities 14,391 15,472
--------- ---------
Commitments and Contingent Liabilities
Stockholder's Equity
- --------------------
Capital stock, 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
Retained income 1,748 1,590
--------- ---------
Total stockholder's equity 2,933 2,775
--------- ---------
Total liabilities and
stockholder's equity $17,324 $18,247
--------- ---------
See notes to financial statements.
7
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF STOCKHOLDER'S EQUITY
(millions) 1999 1998 1997
-------- -------- --------
Capital stock $35 $35 $35
-------- -------- --------
Capital in excess of par value:
Beginning of year 1,150 700 350
Capital contribution - 450 350
-------- -------- --------
End of year $1,150 $1,150 $700
-------- -------- --------
Retained income:
Beginning of year $1,590 $1,427 $1,302
Net income 158 163 125
-------- -------- --------
End of year $1,748 $1,590 $1,427
-------- -------- --------
Total stockholder's equity $2,933 $2,775 $2,162
-------- -------- --------
See notes to financial statements.
8
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(millions) 1999 1998 1997
-------- -------- --------
Cash Flows From Operating Activities
- ------------------------------------
Net income $158 $163 $125
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and
other noncash items 12 11 8
Decrease in other assets 4 6 47
Increase in other liabilities 4 46 59
-------- -------- --------
Net cash provided by
operating activities 178 226 239
Cash Flows From Investing Activities
- ------------------------------------
Decrease (increase) in notes of Sears 1,184 (1,429) (4,952)
Decrease (increase) in commercial customer
receivable balances purchased from Sears 90 (1) (13)
-------- -------- --------
Net cash provided by (used in)
investing activities 1,274 (1,430) (4,965)
Cash Flows From Financing Activities
- ------------------------------------
(Decrease)increase in commercial paper,
primarily 90 days or less (1,568) (1,006) 1,925
Decrease in agreements with bank
trust departments - - (82)
Proceeds from issuance of long-term debt 1,091 2,511 3,467
Payments for redemption of long-term debt (610) (634) (1,132)
Issue cost paid to issue debt (5) (28) (25)
Proceeds from capital contribution - 450 350
-------- -------- --------
Net cash (used in) provided by
financing activities (1,092) 1,293 4,503
-------- -------- --------
Net increase (decrease)
in cash and cash equivalents 360 89 (223)
Cash and cash equivalents, beginning of year 94 5 228
-------- -------- --------
Cash and cash equivalents, end of year $454 $94 $ 5
-------- -------- --------
Supplemental Disclosure of Cash Flow Information
Cash paid during the year
Interest paid $936 $947 $694
Income taxes 84 93 66
See notes to financial statements
9
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 and, to a lesser extent, purchasing receivable
balances from Sears, using proceeds from its short-term borrowing programs
(primarily the direct placement of commercial paper) and the issuance of
long-term debt (medium-term notes and discrete underwritten 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.
Cash and cash equivalents is defined to include all highly liquid investments
with maturities of three months or less. Receivables purchased from Sears are
purchased at par and are interest-bearing.
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 closest to December 31. Fiscal
year-ends were January 1, 2000 (52 weeks), January 2, 1999 (52 weeks) and
January 3, 1998 (53 weeks).
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities".
In May 1999, the FASB voted to delay the adoption of SFAS No.133 by one year.
This statement is now required to be adopted in years beginning after
June 15, 2000. SRAC is currently evaluating the effect this statement might
have on its financial position or results of operations.
Certain reclassifications have been made in the 1998 and 1997 financial
statements to conform with the current year presentation.
2. FEDERAL INCOME TAXES
Federal income taxes provided for by SRAC amounted to $85 million,
$88 million and $68 million for the fiscal years 1999, 1998 and 1997,
respectively. These amounts represent current income tax provisions
calculated at an effective income tax rate of 35%. No deferred tax
provisions were necessary.
3. COMMERCIAL CUSTOMER RECEIVABLE BALANCES
SRAC purchases commercial customer receivable balances ("CCRB") from Sears.
The receivables were purchased, with recourse, and SRAC earns interest on the
outstanding balance. The receivables were made up of credit accounts Sears
has established with merchants and contractors for bulk purchases from Sears
and are predominantly paid within 30 days.
Each month, SRAC purchases new receivables and receives collections on
previously purchased receivables. SRAC discontinued this program as of the
end of 1999.
10
4. COMMERCIAL PAPER AND OTHER SHORT-TERM BORROWINGS
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) 1999 1998
-------- --------
Commercial paper outstanding $2,687 $4,268
Less: Unamortized discount 12 25
-------- --------
Commercial paper outstanding (net) $2,675 $4,243
-------- --------
Average and Maximum Balances(net) 1999 1998
------------------- -------------------
Maximum Maximum
(millions) Average (month-end) Average (month-end)
------------------- -------------------
Commercial paper $3,740 $4,697 $4,514 $5,366
------------------- -------------------
Weighted Average Interest Rates 1999 1998
------------------- -------------------
Average Year-end Average Year-end
------------------- -------------------
Commercial paper 5.25% 6.21% 5.58% 5.40%
------------------- -------------------
11
5. 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.
1999 Avg. Orig. 1998 Avg. Orig.
Volume Coupon Term Volume Coupon Term
------ ------ ---- ------ ------ ----
Fourth Quarter:
Medium-term notes $ 319 6.42% 1.9 $ 30 5.73% 7.3
Discrete debt $ - - - $ 550 6.86% 34.6
Year:
Medium-term notes $ 349 6.38% 2.4 $ 528 6.00% 5.3
Discrete debt $ 750 6.25% 10.0 $2,000 6.53% 20.0
GROSS OUTSTANDING
Avg. Avg.
01/01/00 Avg. Remain. 01/02/99 Avg. Remain.
Balance Coupon Term Balance Coupon Term
-------- ------ ------ ------- ------ -------
Medium-term notes $5,716 6.53% 2.2 $5,976 6.55% 3.9
Discrete debt $5,850 6.64% 11.7 $5,100 6.70% 14.0
MATURITIES
Medium-term Discrete
Year notes debt
- ---------------------------------
2000 $1,400 $ 250
2001 2,018 -
2002 863 600
2003 1,000 1,250
2004 202 -
Thereafter 233 3,750
- ---------------------------------
Total $5,716 $5,850
=================================
12
6. BACK-UP LIQUIDITY
SRAC continued to provide support for 100% of its outstanding commercial paper
through its investment portfolio and credit facilities. SRAC's investment
portfolio fluctuated from a low of $3 million to a high of $767 million in 1999.
Committed credit facilities as of January 1, 2000 were as follows:
Expiration Date (millions)
- ----------------------------------------------------------------
April 2003 $4,185
April 2002 875
- ----------------------------------------------------------------
$5,060
================================================================
SRAC pays commitment fees on the unused portions of its credit
facilities. The annualized fees at January 1, 2000 on these credit lines
were $3.7 million.
7. LETTERS OF CREDIT AND OTHER COMMITMENTS
SRAC is the guarantor of a $70 million promissory note issued by Sears, Roebuck
de Puerto Rico, Inc. under the terms of a July 1998 private placement. The
note is renewable on a nine-month cycle.
SRAC issues import letters of credit to facilitate Sears purchase of goods from
foreign suppliers. At January 1, 2000, letters of credit totaling $168 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 automatically converted
into demand borrowings by Sears from SRAC. To date, all SRAC disbursements
have been reimbursed on a same-day basis. SRAC also issues irrevocable letters
of credit to third parties on behalf of Sears. At January 1, 2000, irrevocable
letters of credit totaling $25 million were outstanding.
13
8. FINANCIAL INSTRUMENTS
In the normal course of business, SRAC invests in certain notes of Sears and
from time to time, purchases commercial customer receivable balances from Sears.
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 are as follows:
- ---------------------------------------------------------------------------
1999 1998
Carrying Fair Carrying Fair
(millions) Value Value Value Value
- ---------------------------------------------------------------------------
Medium-term notes $ 5,716 $5,628 $ 5,976 $6,135
Discrete underwritten debt(net) 5,827 5,323 5,084 5,308
9. QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1999 1998 1999 1998 1999 1998 1999 1998
(millions) ------------ ------------ ----------- ------------
Operating Results
Combined earnings from
Sears notes and CCRB $307 $302 $294 $305 $294 $303 $298 $319
Total revenues 308 304 295 306 295 304 303 320
Interest & related
expenses 245 241 235 243 234 241 241 254
Total expenses 246 242 236 244 235 242 241 255
Income before
income taxes 62 62 59 62 60 62 62 65
Net income 40 40 39 41 39 40 40 42
Ratio of earnings to
fixed charges 1.25 1.26 1.25 1.26 1.26 1.26 1.26 1.26
(billions)
Averages
- --------
Earning assets* $18.6 $17.6 $17.9 $17.5 $17.7 $17.6 $17.8 $19.0
Short-term debt 4.6 5.1 3.7 3.9 3.4 4.0 3.3 5.1
Long-term debt 10.9 9.7 11.1 10.9 11.3 11.0 11.4 10.9
Cost of
short-term debt 5.08% 5.63% 4.97% 5.56% 5.26% 5.59% 5.82% 5.35%
long-term debt 6.63% 6.58% 6.59% 6.56% 6.55% 6.52% 6.57% 6.58%
*Notes and receivable balances of Sears and invested cash.
14
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
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.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(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.
(b) Reports on Form 8-K:
A current report on Form 8-K dated December 15, 1999
was filed with the Securities and Exchange Commission
on December 16, 1999 [Item 5].
15
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
and Assistant Secretary
March 22, 2000
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 ) March 22, 2000
and Assistant Secretary )
(Principal Financial and )
Accounting Officer) )
)
)
Jeffrey N. Boyer* Director )
)
)
Joseph E Laughlin* Director )
)
)
Larry R. Raymond* Director )
*\S\ George F. Slook, Individually and as Attorney-in-Fact
16
SEARS ROEBUCK ACCEPTANCE CORP.
INDEX TO FINANCIAL STATEMENTS
PAGE
STATEMENTS OF INCOME 6
STATEMENTS OF FINANCIAL POSITION 7
STATEMENTS OF STOCKHOLDER'S EQUITY 8
STATEMENTS OF CASH FLOWS 9
NOTES TO FINANCIAL STATEMENTS 10-14
INDEPENDENT AUDITORS' REPORT S-2
S-1
INDEPENDENT AUDITORS' REPORT
To the Stockholder and Board of Directors of
Sears Roebuck Acceptance Corp.
Greenville, Delaware
We have audited the accompanying statements of financial position of Sears
Roebuck Acceptance Corp. (a wholly-owned subsidiary of Sears, Roebuck and
Co.) as of January 1, 2000 and January 2, 1999, and the related statements of
income, stockholder's equity, and cash flows for each of the three years in
the period ended January 1, 2000. These financial statements are the
responsibility of Sears Roebuck Acceptance Corp.'s management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes 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, 2000 and January 2, 1999, and the results of its operations and
its cash flows for each of the three years in the period ended
January 1, 2000 in conformity with generally accepted accounting principles.
/S/ Deloitte & Touche LLP
Deloitte & Touche LLP
Philadelphia, Pennsylvania
January 14, 2000
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 for the quarter ended
October 2, 1999*].
4(a) $5,000,000,000 Credit Agreement dated as of April 28, 1997
among the Registrant, the Banks listed on the signature pages
thereof, the Agent, the Senior Managing Agent, the Managing
Agents, Co-Arrangers, Co-Agents and Lead Managers
referred to therein [Incorporated by reference to
Exhibit 4(a) to the Registrant's Current Report on Form 8-K
dated April 28, 1997*].
4(b) Form of Registrant's Investment Note Agreement [Incorporated
by reference to Exhibit 4(c) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1991*].
4(c) 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(d) Form of 6.90% Note [Incorporated by reference to Exhibit 4 to
the Registrant's Current Report on Form 8-K dated
August 2, 1996*].
4(e) Form of 6 1/2% Note [Incorporated by reference to Exhibit 4(a)
to the Registrant's Current Report on Form 8-K dated
June 8, 1995*].
4(f) 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(g) Form of Floating Rate Medium-Term Note Series I [Incorporated
by reference to Exhibit 4(c) to the Registrant's Current Report
on Form 8-K dated June 8, 1995*].
4(h) 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*].
- ----------------------------------
*Sec File No. 1-4040
E-1
EXHIBIT INDEX (cont'd)
4(i) 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(j) Fixed Charge Coverage and Ownership Agreement dated
February 20, 1997 between Sears, Roebuck and Co. and the
Registrant [Incorporated by reference to Exhibit 4(b)
to the Registrant's Current Report on Form 8-K
dated April 28, 1997*].
4(k) 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(l) 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(m) Form of Fixed-Rate Medium-Term Note Series II [Incorporated by
reference to Exhibit 4(a) to the Registrant's Current Report on
Form 8-K dated March 28, 1996*].
4(n) Form of Floating Rate Medium-Term Note Series II [Incorporated
by reference to Exhibit 4(b) to the Registrant's Current Report
on Form 8-K dated March 28, 1996*].
4(o) 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(p) Form of Floating Rate Medium-Term Note Series III [Incorporated
by reference to Exhibit 4(b) to the Registrant's Current
Report on Form 8-K dated August 22, 1996*].
4(q) 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(r) Extension Agreement dated March 1, 1996, between Sears,
Roebuck and Co. and the Registrant [Incorporated
by reference to Exhibit 4(k) to the Registrant's
Annual Report on Form 10-K dated December 30, 1995*].
________________________
* SEC File No. 1-4040.
E-2
EXHIBIT INDEX (cont'd)
4(s) 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(t) Extension Agreement dated September 18, 1997, between Sears,
Roebuck and Co and the Registrant.**
4(u) Extension Agreement dated October 23, 1998, between Sears,
Roebuck and Co and the Registrant.**
4(v) Form of 6.625% Note [Incorporated by reference to Exhibit 4
to the Registrant's Current Report on Form 8-K dated
February 27, 1997*].
4(w) Form of 6.95% Note [Incorporated by reference to Exhibit 4.1
to the Registrant's Current Report on Form 8-K dated
July 9, 1997*].
4(x) Form of 7.00% Note [Incorporated by reference to Exhibit 4.4
to the Registrant's Current Report on Form 8-K dated
July 9, 1997*].
4(y) 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 July 9, 1997*].
4(z) Form of Floating Rate Medium-Term Note Series IV [Incorporated
by reference to Exhibit 4.3 to the Registrant's Current Report
on Form 8-K dated July 9, 1997*].
4(aa) Form of 6.70% Note [Incorporated by reference to Exhibit 4(a)
to the Registrant's Current Report on Form 8-K dated
October 14, 1997*].
4(bb) Form of 7.50% Note [Incorporated by reference to Exhibit 4(b)
to the Registrant's Current Report on Form 8-K dated
October 14, 1997*].
4(cc) Form of 6.875% Note [Incorporated by reference to Exhibit 4(c)
to the Registrant's Current Report on Form 8-K dated
October 14, 1997*].
4(dd) 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(ee) 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.
** Filed herewith.
E-3
EXHIBIT INDEX (cont'd)
4(ff) 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(gg) Form of Global 7.00% Note [Incorporated by reference to Exhibit
4(c)to the Registrant's Current Report on Form 8-K dated
February 23, 1998*].
4(hh) Form of Global 6.00% Note [Incorporated by reference to Exhibit
4(c)to the Registrant's Current Report on Form 8-K dated
March 13, 1998*].
4(ii) Form of Global 6.95% Note [Incorporated by reference to Exhibit
4(c)to the Registrant's Current Report on Form 8-K dated
October 16, 1998*].
4(jj) 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(kk) 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(ll) Form of Extension Agreement extending the term of aggregate
commitments of $4,125 million under the Amended and Restated
$5,000,000,000 Credit Agreement dated as of April 28, 1997.
[Incorporated by reference to Exhibit 4(jj) to the Registrant's
Annual Report on form 10-K for the Year ended January 2, 1999.]
4(mm) Letter Agreement dated October 30, 1998 between the Registrant
and The Huntington National Bank relating to a $60 million
commitment under the Amended and Restated $5,000,000,000 Credit
Agreement dated April 28, 1997.
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*].
* SEC File No. 1-4040.
** Filed herewith.
E-4
EXHIBIT INDEX (cont'd)
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*].
12 Calculation of ratio of earnings to fixed charges.**
23 Consent of Deloitte & Touche LLP.**
24 Power of attorney.**
27 Financial Data Schedule.**
_______________________
* SEC File No. 1-4040.
** Filed herewith.
***SEC File No. 1-416
E-5
Exhibit 12
SEARS ROEBUCK ACCEPTANCE CORP.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
1999 1998 1997
(dollars in millions)
INCOME BEFORE INCOME TAXES $243 $251 $ 193
PLUS FIXED CHARGES:
Interest 943 968 755
Amortization of debt
discount/premium 12 11 8
------- ------- -------
TOTAL FIXED CHARGES 955 979 763
------- ------- -------
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES $1,198 $1,230 $956
======= ======= =======
RATIO OF EARNINGS TO FIXED
CHARGES 1.25 1.26 1.25
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
Nos. 333-30879 and 333-62847 of Sears Roebuck Acceptance Corp. on Forms S-3
of our report dated January 14, 2000, appearing in this Annual Report on
Form 10-K of Sears Roebuck Acceptance Corp. for the year ended January 1, 2000.
\s\Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 22, 2000
EXHIBIT 4(t)
SEARS, ROEBUCK AND CO.
3333 BEVERLY ROAD
HOFFMAN ESTATES, ILLINOIS 60179
September 18, 1997
Sears Roebuck Acceptance Corp.
3711 Kennett Pike
Greenville, Delaware 19807
Gentlemen:
This is to confirm our agreement ("Extension Agreement") that the term "Debt
Securities" as defined in the Fixed Charge Coverage and Ownership Agreement
dated as of May 15, 1995 between Sears Roebuck Acceptance Corp. ("SRAC"), and
Sears, Roebuck and Co. shall be expanded to include up to $4.5 billion
aggregate initial offering price of debt securities to be issued by SRAC
under Registration Statement No. 333-30879.
If the foregoing satisfactorily sets forth your understanding of our
agreement, please indicate your acceptance by the signature of a duly
authorized officer in the space provided below and on the duplicate
original of this letter which is enclosed.
Very truly yours,
SEARS, ROEBUCK AND CO.
By: /S/Alan J. Lacy
Alan J. Lacy
Executive Vice President and
Chief Financial Officer
Accepted:
SEARS ROEBUCK ACCEPTANCE CORP.
By: /S/Keith E. Trost
Keith E. Trost
President
EXHIBIT 4(u)
SEARS, ROEBUCK AND CO.
3333 BEVERLY ROAD
HOFFMAN ESTATES, ILLINOIS 60179
October 23, 1998
Sears. Roebuck Acceptance Corp.
3711 Kennett Pike
Greenville, Delaware 19807
Gentlemen:
This is to confirm our agreement ("Extension Agreement") that the term
"Debt Securities" as defined in the Fixed Charge Coverage and Ownership
Agreement dated as of May 15, 1995 between Sears Roebuck Acceptance Corp.
("SRAC"), and Sears, Roebuck and Co. shall be expanded to include up to
$5 billion aggregate initial offering price of debt securities to be
issued by SRAC under Registration Statement No. 333-62847.
If the foregoing satisfactorily sets forth your understanding of our
agreement, please indicate your acceptance by the signature of a duly
authorized officer in the space provided below and on the duplicate
original of this letter which is enclosed.
Very truly yours,
SEARS, ROEBUCK AND CO.
By: /S/Alan J. Lacy
Alan J. Lacy
Chief Financial Officer and
President, Credit
Accepted:
SEARS ROEBUCK ACCEPTANCE CORP.
By: /S/Keith E. Trost
Keith E. Trost
President