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 3, 2004
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 February 29, 2004, 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 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.
As of February 29, 2004, SRAC's commercial paper ratings were F-2
from Fitch Ratings("Fitch"), P-2 from Moody's Investors Service,("Moody's"),
and A-2 from Standard & Poor's Ratings Services ("S&P") and its long-term debt
ratings were BBB+ from Fitch, Baa1 from Moody's, and BBB from S&P.
SRAC provides liquidity support for its outstanding commercial
paper through its investment portfolio and committed credit facilities. As
of January 3, 2004, SRAC commercial paper was supported by a $1.3 billion
investment portfolio, which consists of cash and cash equivalents and a
$2.5 billion unsecured 364-day revolving credit facility expiring May 2004.
This facility includes the option to extend the repayment of borrowings, if
any, through November 2004.
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 $2.5 billion 364-day facility dated as of
February 24, 2003 and expiring May 2004.
As of February 29, 2004 SRAC had ten 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 Sears' 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.
Motions to dismiss the amended complaint are pending.
The consequences of this matter are not presently
determinable but, in the opinion of management of SRAC
after consulting with legal counsel and taking into account
applicable third party insurance coverage, the ultimate
liability is not expected to have a material 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 raises funds through the issuance of debt and
uses the proceeds to meet the funding requirements of Sears. As
a result of Sears' sale of its credit business in 2003, Sears used
certain proceeds of the sale to pay down its note with SRAC.
Additional cash was used by SRAC for the early retirement of debt,
resulting in reduced asset and debt levels in 2003. Fixed charges
rose in 2003 from losses on early retirement of debt, driving earnings
higher in order to maintain an earnings to fixed charges ratio of at
least 1.25.
Financial Condition
SRAC's investment in Sears notes decreased to $7.7 billion
at year-end 2003 from $15.4 billion at year-end 2002, as Sears paid
down a significant amount of the noteswith a portion of the proceeds
from the sale by Sears of its domestic Credit and Financial Products
business to Citicorp on November 3, 2003. Sears has allocated
additional funds to further reduce its note with SRAC as SRAC redeems
its outstanding public debt. In November 2003, SRAC concluded a cash
tender offer to purchase any and all of its public term debt securities
maturing after 2003, resulting in the retirement of $6.2 billion of
its outstanding term debt. SRAC's short-term borrowings at the end of
2003 were $774 million, a $2.1 billion decrease from the prior year.
SRAC's term debt on January 3, 2004 was $4.5 billion compared to
$10.7 billion at year-end 2002. SRAC plans to repay $1.8 billion of
its outstanding term debt in 2004 either at maturity or through optional
early retirement.
In connection with the sale of Sears' Credit and Financial
Products business, Sears was required to issue a guarantee 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 SRAC's outstanding debt including interest,
principal, and borrowings, if any, under the credit facility, in the event
SRAC defaults on its obligations.
SRAC ended 2003 with an equity position of $3.6 billion and
a debt-to-equity ratio of 1.5:1 compared to 4.1:1 at the end of 2002.
Results of Operations
SRAC's total revenues of $1,876 million for 2003 increased
from $984 million in 2002 and from $1,089 million in 2001. The rise
in 2003 revenue resulted primarily from an increase in the interest
rate applied to the Sears Note in the latter part of the year to provide
adequate fixed charge coverage for the pretax loss of $746 million related
to debt retirement activities. The loss consisted of premiums paid for
early debt retirement and the write-off of unamortized debt discount and
issue costs. Consequently, average rates on earning assets rose to 11.01%
in 2003 compared to 5.59% in 2002 resulting in increased revenues.
In 2002, the revenue decrease resulted primarily from a 78 basis
point decrease in the average rates on earning assets from 2001 to 2002.
SRAC's interest and related expenses were $746 million,
$782 million and $866 million in 2003, 2002, and 2001, respectively.
Reductions in interest and related expenses resulted from lower average
rates and lower average short-term debt levels. SRAC's average cost of
short-term funds decreased 69 basis points from 2.21% in 2002 to 1.52%.
SRAC's average cost of term debt decreased to 6.24% in 2003 from 6.53%
in 2002. Average daily outstanding short-term debt of $3.0 billion in
2003 decreased nearly $700 million from the $3.7 billion average level
in 2002. Average daily outstanding term debt was $10.6 billion and
$10.5 billion for 2003 and 2002. During 2002, SRAC's total debt
portfolio experienced a $400 million increase from 2001 average
debt levels offset by a 75 basis point decrease in average
cost. This resulted in decreases in interest and related expenses
throughout 2002.
4
Effective November 3, 2003, SRAC amended its $3.5 billion
unsecured, 364-day revolving credit facility by extending the
termination date to May 2004 for consenting lenders and modifying
the option to extend the repayment of any borrowings to November 2004.
SRAC also agreed to reduce the commitment amounts under the facility to
$2.5 billion on December 3, 2003. This facility provides liquidity
support for SRAC's commercial paper program. At year-end 2003, no
borrowings were outstanding under this committed facility.
SRAC is beginning the renewal process of its domestic
credit facility and is targeting a new facility in the range of
$1.0 billion to $2.0 billion.
SRAC's net income was $248 million in 2003, $130 million
in 2002 and $144 million in 2001.
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'sinvestment in Sears notes
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.
Item 7A. Market Risk
The primary market risk exposure faced by SRAC is interest
rate risk and arises from SRAC's debt obligations. SRAC'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 2003 and 2002, 41% and 24%, respectively,
of the funding portfolio was variable rate. Based on SRAC's
variable rate funding portfolio at year-end 2003 and 2002,
which totaled $2.2 billion and $3.3 billion, respectively,
an immediate 100 basis point change in interest rates would
have affected pre-tax funding costs by approximately $22 million
and $33 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. As a result of Sears sale of its
Credit and Financial Products business to Citicorp on
November 3, 2003, Sears funding requirements have declined
such that it is unlikely that SRAC's current maturities of
term debt will be refinanced and are therefore not considered
variable rate in the calculation above. Prior to Sears sale
of its Credit business, it was assumed that these current
maturities of fixed rate term debt would be refinanced and
were considered variable rate due to the refunding risk upon
refinancing. Under the methodology used prior to the sale,
at year-end 2002, interest rate exposure totaled $55 million
for a 100 basis point change in interest rates. The effect on
SRAC's 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 AND COMPREHENSIVE INCOME
(millions, except ratio of earnings to fixed charges)
2003 2002 2001
------ ------ ------
Revenues
- --------
Earnings on notes of Sears $1,848 $ 971 $1,075
Earnings on cash equivalents 28 13 14
----- ----- -----
Total revenues 1,876 984 1,089
Expenses
- --------
Interest expense and amortization of
debt discount/premium 746 782 866
Loss on early retirement of debt 746 - -
Operating expenses 2 2 2
----- ----- -----
Total expenses 1,494 784 868
----- ----- -----
Income before income taxes 382 200 221
Income taxes 134 70 77
----- ----- -----
Net income $ 248 $ 130 $ 144
----- ----- -----
Total other comprehensive income(loss)
-------------------------------------
Reclassification adjustment included
in loss on early retirement of debt,
net of tax 3 (3) -
----- ----- -----
Total comprehensive income $ 251 $ 127 $ 144
===== ===== =====
Ratio of earnings to fixed charges 1.26 1.26 1.26
See notes to financial statements.
6
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF FINANCIAL POSITION
(millions, except share data) 2003 2002
------- -------
Assets
- ------
Cash and cash equivalents $ 1,286 $ 1,563
Notes of Sears 7,743 15,352
Other assets 28 139
--------- ---------
Total assets $ 9,057 $17,054
========= =========
Liabilities
- -----------
Commercial paper (net of unamortized
discount of $1 and $5) $ 774 $ 2,869
Medium-term notes (net of unamortized
discount of $3 and $5) 2,701 2,118
Discrete underwritten debt (net of
unamortized discount of $8 and $58) 1,838 8,542
Accrued interest and other liabilities 128 160
--------- ---------
Total liabilities 5,441 13,689
--------- ---------
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 - (3)
Retained earnings 2,431 2,183
--------- --------
Total shareholder's equity 3,616 3,365
--------- --------
Total liabilities and
shareholder's equity $9,057 $17,054
========= ========
See notes to financial statements.
7
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF SHAREHOLDER'S EQUITY
(millions) 2003 2002 2001
-------- -------- --------
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 $2,183 $2,053 $1,909
Net income 248 130 144
-------- -------- --------
End of year $2,431 $2,183 $2,053
-------- -------- --------
Total shareholder's equity $3,616 $3,365 $3,238
======== ======== ========
See notes to financial statements.
8
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(millions) 2003 2002 2001
-------- -------- --------
Cash Flows From Operating Activities
- ------------------------------------
Net income $ 248 $ 130 $ 144
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and
other noncash items 23 14 13
Loss on early retirement of debt 746 - -
Decrease (increase) in other assets 59 2 (80)
(Decrease) increase in other liabilities (38) (32) 41
-------- -------- --------
Net cash provided by
operating activities 1,038 114 118
Cash Flows From Investing Activities
- ------------------------------------
Decrease in notes of Sears 7,609 662 865
-------- -------- --------
Net cash provided by
investing activities 7,609 662 865
Cash Flows From Financing Activities
- ------------------------------------
Decrease in commercial paper,
primarily 90 days or less (2,095) (356) (709)
Proceeds from issuance of long-term debt 3,845 2,129 2,009
Payments for redemption of long-term debt (10,653) (1,558) (2,117)
Issue cost paid to issue debt (21) (27) (9)
-------- -------- --------
Net cash (used in) provided by
financing activities (8,924) 188 (826)
-------- -------- --------
Net (decrease) increase
in cash and cash equivalents (277) 964 157
Cash and cash equivalents, beginning of year 1,563 599 442
-------- -------- --------
Cash and cash equivalents, end of year $1,286 $ 1,563 $ 599
======== ======== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year
Interest paid $823 $791 $842
Loss on early retirement of debt 635 - -
Income taxes 75 87 61
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 using proceeds from its unsecured
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. Sears also has executed guarantees
to support all public indebtedness of SRAC. These guarantees cover
outstanding commercial paper, term debt and borrowings 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 3, 2004(53 weeks), December 28, 2002(52 weeks), and
December 29, 2001(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 November 2002, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others." FIN 45 elaborates on the disclosures to
be made by a guarantor in its interim and annual financial statements
about its obligations under certain guarantees it has issued. It
also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. The recognition
and measurement provisions of FIN 45 were applicable to guarantees
issued or modified after December 31, 2002. The disclosure requirements
were effective for financial statements ending after December 15, 2002.
SRAC has adopted FIN 45 and provided disclosures regarding its
guarantees in Note 7 of the Notes to Financial Statements.
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 contracted 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 2003.
2. FEDERAL INCOME TAXES
Federal income taxes provided for by SRAC amounted to $134 million,
$70 million and $77 million for the fiscal years 2003, 2002 and 2001,
respectively. These amounts represent current income tax provisions
calculated at an effective income tax rate of 35%. Deferred taxes
are not material.
10
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) 2003 2002
-------- --------
Commercial paper outstanding $ 775 $2,874
Less: Unamortized discount 1 5
-------- --------
Commercial paper outstanding (net) $ 774 $2,869
-------- --------
Average and Maximum Balances (net) 2003 2002
------------------- -------------------
Maximum Maximum
(millions) Average (month-end) Average (month-end)
------------------- -------------------
Commercial paper $3,007 $3,498 $3,721 $4,135
------------------- -------------------
Weighted Average Interest Rates 2003 2002
------------------- -------------------
Average Year-end Average Year-end
------------------- -------------------
Commercial paper 1.52% 1.18% 2.21% 2.05%
------------------- -------------------
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 Avg. Avg.
2003 Avg. Orig. 2002 Avg. Orig.
Volume Coupon Term Volume Coupon Term
------ ------ ---- ------ ------ ----
Fourth Quarter:
Medium-term notes $ 650 1.66% 5.0 $ 298 6.80% 6.6
Discrete debt $ - - - $ - - -
Year:
Medium-term notes $3,595 4.00% 3.4 $ 313 6.69% 6.4
Discrete debt $ 250 7.40% 40.0 $1,850 6.90% 24.9
GROSS OUTSTANDING Avg. Avg.
1/3/04 Avg. Remain. 12/28/02 Avg. Remain.
Balance Coupon Term Balance Coupon Term
-------- ------ ----- ------- ------ ------
Medium-term notes $2,704 3.37% 1.5 $2,123 5.75% 2.1
Discrete debt $1,846 6.80% 11.9 $8,600 6.71% 13.0
11
MATURITIES
Medium-term Discrete
Year notes debt Total
- --------------------------------------------
2004 $1,763 $ - $1,763
2005 127 112 239
2006 265 190 455
2007 67 269 336
2008 317 - 317
Thereafter 165 1,275 1,440
- --------------------------------------------
Total $2,704 $1,846 $4,550
============================================
On September 1, 2003, SRAC redeemed the entire outstanding principal
amount of its $250 million 7% notes due March 1, 2038. On
October 23, 2003, SRAC also redeemed the entire principal amount
of its $250 million 6.95% notes due October 23, 2038.
On November 17, 2003, SRAC completed cash tender offers to purchase
any and all of its public term debt securities maturing after 2003,
resulting in the retirement of $6.2 billion of its outstanding term
debt.
On December 19, 2003, SRAC repurchased and retired $825 million of
outstanding medium term notes from related Sears affiliates a
portion of which was at a premium and is included in the loss on
early retirement of debt.
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 issue 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 credit
facilities. SRAC's investment portfolio, which consists of cash
and cash equivalents, fluctuated from a low of $1,097 million
to a high of $3,559 million in 2003. Committed credit facilities
as of January 3, 2004 were as follows:
Expiration Date (millions)
- ---------------------------------------------------------------------
February 2004 $ 29
May 2004 2,471
- ---------------------------------------------------------------------
Total $2,500*
====================================================================
*Effective November 3, 2003, SRAC amended its $3.5 billion unsecured,
364-day revolving credit facility by extending the termination date
to May 2004 for consenting lenders and modifying the option to extend
the repayment of any borrowings to November 2004 The commitment
amount under this facility was reduced to $2.5 billion on
December 3, 2003. Lenders with commitment amounts totaling
approximating nearly $29 million declined to extend beyond the
February 2004 termination date.
SRAC pays commitment fees on the unused portions of its credit
facilities. The annualized fees at January 3, 2004 on these credit
lines were $3.2 million.
SRAC is beginning the renewal process of its domestic credit facility
and is targeting a new facility in the range of $1.0 billion to
$2.0 billion.
In connection with the sale of Sears' Credit and Financial Products
business, Sears was required to issue a guarantee 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 SRAC's outstanding debt including
interest, principal, and borrowings, if any, under the credit facility,
in the event SRAC defaults on its obligations.
12
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 Sears' 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.
Motions to dismiss the amended complaint are pending.
The consequences of this matter are not presently determinable
but, in the opinion of management of SRAC after consulting
with legal counsel and taking into account applicable
third party insurance coverage, the ultimate liability is not
expected to have a material 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.
7. LETTERS OF CREDIT AND OTHER COMMITMENTS
At January 3, 2004, standby letters of credit totaling
$989 million were outstanding, of which $983 million were
issued to beneficiaries on behalf of Sears and its subsidiaries.
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 3, 2004, SRAC's obligation for
the remaining lease payments totaled $3.1 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.
SRAC issues import letters of credit to facilitate Sears
purchase of goods from foreign suppliers. At January 3, 2004,
letters of credit totaling $155 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.
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 989 957 2 - 30
Guarantees 3 2 1 - -
Import Letters of Credit 155 155 - - -
------- ------ -------- ------ ------
Total Commitments $ 1,147 $ 1,114 $ 3 $ - $ 30
======= ====== ======== ====== ======
The accompanying statement of financial position does not reflect any
liabilities in connection with the commitments presented above.
13
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 2003 and 2002 are as follows:
- ---------------------------------------------------------------------------
2003 2002
Carrying Fair Carrying Fair
(millions) Value Value Value Value
- ---------------------------------------------------------------------------
Medium-term notes (net) $2,701 $2,790 $2,118 $2,091
Discrete underwritten debt(net) 1,838 1,913 8,542 8,024
9. QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
2003 2002 2003 2002 2003 2002 2003 2002 2003 2002
(millions) ---------- ---------- ----------- ----------- -----------
Operating Results
Total revenues $258 $237 $257 $245 $262 $257 $1,099 $245 $1,876 $984
Interest & related
expenses 206 188 204 195 201 205 135 194 746 782
Loss on early
retirement of
debt** - - - - 7 - 739 - 746 -
Total expenses 206 188 205 196 208 205 875 195 1,494 784
Income before
income taxes 52 49 52 49 54 52 224 50 382 200
Net income 34 32 34 32 35 34 145 32 248 130
Ratio of
earnings to
fixed charges 1.25 1.26 1.25 1.25 1.26 1.25 1.26 1.25 1.26 1.26
(billions)
- --------
Averages
Earning assets*$17.9 $16.9 $18.3 $17.5 $18.8 $18.5 $13.5 $17.6 $17.0 $17.6
Short-term debt 3.1 3.6 3.2 3.7 3.4 4.1 1.0 3.6 3.0 3.7
Long-term debt 1.3 9.9 11.6 10.4 11.9 11.0 5.0 10.6 10.6 10.5
Cost of
short-term debt1.77% 2.50% 1.60% 2.18% 1.35% 2.13% 1.23% 2.06% 1.52% 2.21%
long-term debt 6.57% 6.54% 6.40% 6.54% 6.14% 6.53% 5.19% 6.52% 6.24% 6.53%
* Notes of Sears and invested cash.
** For details on loss on early retirement of debt refer to Note 4 appearing
in the Notes to Financial Statements
14
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 (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 3, 2004
that was materially affected, or is reasonably likely to materially affect,
the Company's internal control over financial reporting.
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.
Item 14. Principal Accounting Fees and Services.
Aggregate fees billed to the company for the fiscal years ended
January 3, 2004 ("2003") and December 28, 2002 ("2002") by SRAC's
principal accounting firm, Deloitte & Touche LLP, the member firms
of Deloitte Touche Tohmatsu, and their respective affiliates
(collectively, "Deloitte & Touche") were as follows:
2003 2002
--------------------------------------------
(1)Audit Fees $207,692 $146,000
(2)Audit-Related Fees - -
(3)Tax Fees - -
(4)All Other Fees - -
--------------------------------------------
Total $207,692 $146,000
============================================
15
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 auditor, 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 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:
Registrant filed Current Reports on Form 8-K dated
October 16, 2003, October 30, 2003, November 6, 2003 and
November 17, 2003 [Items 5 and 7].
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
and Assistant Secretary
March 10, 2004
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 10, 2004
and Assistant Secretary )
(Principal Financial and )
Accounting Officer) )
)
Michael J. Graham* Director )
)
)
Larry R. Raymond* Director )
)
)
Glenn R. Richter* Director )
*/S/ George F. Slook, Individually and as Attorney-in-Fact
17
SEARS ROEBUCK ACCEPTANCE CORP.
INDEX TO FINANCIAL STATEMENTS
PAGE
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME 6
STATEMENTS OF FINANCIAL POSITION 7
STATEMENTS OF SHAREHOLDER'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 Shareholder 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 3, 2004 and December 28, 2002, 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 3, 2004. 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 auditing standards
generally accepted in the United States of America. 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 3, 2004 and December 28, 2002, and the results of its operations
and its cash flows for each of the three years in the period ended
January 3, 2004 in conformity with accounting principles generally
accepted in the United States of America.
/S/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Philadelphia, Pennsylvania
March 9, 2004
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 Fixed-Rate Medium-Term Note Series VI [Incorporated by
reference to Exhibit 4(a) to the Registrant's Current Report on
Form 8-K dated November 20, 2002*].
4(gg) Form of Floating Rate Medium-Term Note Series VI [Incorporated
by reference to Exhibit 4(b) to the Registrant's Current Report
on Form 8-K dated November 20, 2002*]
4(hh) 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(ii) 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(jj) 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(kk) 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(ll) 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(mm) 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(nn) 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(oo) 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) $3,500,000,000 364-day Credit Agreement dated as of
February 24, 2003 among the Registrant, the banks,
financial institutions and other institutional
lenders listed on the signature pages thereof,
BANK ONE, NA, as syndication agent, BARCLAYS
BANK PLC and BANK OF AMERICA, N.A. as documentation
agents, SALOMON SMITH BARNEY INC. and BANC ONE CAPITAL
MARKETS, INC., as joint lead arrangers and joint
bookrunners, and CITIBANK, N.A., as agent for
the lenders.[Incorporated by reference to Exhibit 10(a)
to the Registrant's Current Report on Form 8-K dated
February 24, 2003*].
10(d) Credit Agreement Support Letter dated February 24, 2003
between Sears, Roebuck and Co. and the Registrant[Incorporated
by reference to Exhibit 10(b) to the Registrant's Current
Report on Form 8-K dated February 24, 2003*].
10(e) Acknowledgement and Extension Agreement, dated as of
August 19, 2003, among Sears, Roebuck and Co. ("Sears"),
Registrant, and Certain Lenders that are parties to the
364-DayCredit Agreement dated as of February 24, 2003
[Incorporated by reference to Exhibit 10(c) to Sears'
Quarterly Report on Form 10-Q for the quarter ended
September 27, 2003(SEC File No 1-416)].
10(f) 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)].
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