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 December 28, 2002
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
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 28, 2003, 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 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.
As of February 28, 2003, 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 December 28, 2002, SRAC commercial paper was supported by a $1.6 billion
investment portfolio, which consists of cash and cash equivalents and a
$4.4 billion syndicated credit agreement which was due to expire in
April 2003. On February 24, 2003, SRAC, through a syndicate of banks,
replaced its existing credit facility with an unsecured 364-day revolving
credit facility in the amount of $3.5 billion. This new facility includes
the option to extend the repayment of borrowings, if any, through
February 2005.
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).
As of February 28, 2003 SRAC had ten employees.
SRAC's Web site address is www.sracweb.com. SRAC makes available
free of charge 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 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 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 $15.4 billion
at year-end 2002 from $16.0 billion at year-end 2001, as a result of
decreased funding requirements of Sears. Short-term borrowings
at the end of 2002 were $2.9 billion, a $356 million decrease from the prior
year. Total debt outstanding increased to $13.5 billion at year-end 2002 from
$13.3 billion at year-end 2001.
SRAC ended 2002 with an equity position of $3.4 billion and
a debt-to-equity ratio of 4.1:1 compared to 4.2:1 at the end of 2001.
Results of Operations
SRAC's total revenues of $984 million for 2002 decreased
from $1,089 million in 2001 and from $1,216 million in 2000.
The revenue decrease for 2002 resulted primarily from a 78 basis point
decrease in the average rates on earning assets from 2001 to 2002. The
revenue decrease for 2001 resulted primarily from a 61 basis point decrease
in the average rate on earning assets from 2000 to 2001 and a $400 million
reduction in average earning asset levels during 2001 versus 2000.
SRAC's interest and related expenses were $782 million,
$866 million and $966 million in 2002, 2001, and 2000, respectively.
In 2002, SRAC's average cost of short-term funds decreased 254 basis
points from 4.75% in 2001 to 2.21%. SRAC's average cost of term debt
remained relatively flat at 6.52% in 2002 and 6.60% in 2001. Reductions in
interest and related expenses attributed to decreases in the cost of funds which
were partially offset by increases in debt levels. Average daily outstanding
short-term debt of $3.7 billion in 2002 increased nearly $400 million from the
$3.3 billion average level in 2001. Average daily outstanding term debt
remained at $10.5 billion for 2002 and 2001.
Term debt consists of medium-term notes and discrete underwritten
debt. Medium term notes are sold to institutional and retail investors.
During 2002, SRAC issued the following securities:
*$1.9 billion of discrete underwritten notes with a weighted average
coupon of 6.90% and a weighted average term of 24.9 years; and
*$313 million of fixed-rate medium-term notes with a weighted average
coupon of 6.69% and a weighted average term of 6.4 years.
In November 2002, SRAC executed a distribution agreement that
provides for the issuance of up to $1 billion of medium term notes to be
sold to institutional investors. In December 2002, SRAC executed a selling
agent agreement that provides for the continuous issuance of up to
$2 billion of medium term notes targeted at retail investors.
SRAC has $2.5 billion of term debt maturing in 2003, a portion of
which it intends to refinance using unsecured term debt. In the period
December 29, 2002 through March 7, 2003, SRAC issued $1.6 billion of long-term
debt consisting of $452 million of medium-term notes sold to institutional
investors, $905 million of medium-term notes sold to retail investors and a
$250 million discrete underwritten note.
During 2001, SRAC's total debt portfolio experienced a $600 million
reduction from 2000 average debt levels and a 46 basis point decrease in
average cost. This resulted in decreases in interest and related expenses
throughout 2001.
4
On February 24, 2003, SRAC replaced its $4.4 billion syndicated
credit agreement with a $3.5 billion unsecured 364-day revolving facility.
This new facility includes the option to extend the repayment of
borrowings, if any, through February 2005. This new facility provides
liquidity support for SRAC's commercial paper program.
SRAC's net income was $130 million in 2002, $144 million in
2001 and $161 million in 2000.
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.
Item 7A. Market Risk
The primary market risk exposure faced by SRAC is interest
rate risk and arises from SRAC's debt obligations. 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 2002 and 2001, 40% and 39%, 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 debt portfolio as of year-end 2002 and 2001, which
totaled $13.5 billion and $13.3 billion, respectively, a 100 basis
point change in interest rates would affect annual pre-tax interest
costs by approximately $55 million and $52 million, respectively.
This calculation assumes the 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 AND COMPREHENSIVE INCOME
(millions, except ratio of earnings to fixed charges)
2002 2001 2000
------ ------ ------
Revenues
--------
Earnings on notes of Sears $ 971 $1,075 $1,204
Earnings on cash equivalents 13 14 12
----- ----- -----
Total revenues 984 1,089 1,216
Expenses
--------
Interest expense and amortization of
debt discount/premium 782 866 966
Operating expenses 2 2 2
----- ----- -----
Total expenses 784 868 968
----- ----- -----
Income before income taxes 200 221 248
Income taxes 70 77 87
----- ----- -----
Net income $ 130 $ 144 $ 161
----- ----- -----
Total other comprehensive income(loss)
-------------------------------------
Losses on cash flow hedge,
net of tax (3) - -
----- ----- -----
Total comprehensive income $ 127 $ 144 $ 161
===== ===== =====
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) 2002 2001
------- -------
Assets
------
Cash and cash equivalents $ 1,563 $ 599
Notes of Sears 15,352 16,014
Other assets 139 125
--------- ---------
Total assets $17,054 $16,738
========= =========
Liabilities
-----------
Commercial paper (net of unamortized
discount of $5 and $9) $ 2,869 $ 3,225
Medium-term notes (net of unamortized
discount of $5 and $6) 2,118 2,762
Discrete underwritten debt (net of
unamortized discount of $58 and $29) 8,542 7,321
Accrued interest and other liabilities 160 192
--------- ---------
Total liabilities 13,689 13,500
--------- ---------
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 2,183 2,053
--------- --------
Total shareholder's equity 3,365 3,238
--------- --------
Total liabilities and
shareholder's equity $17,054 $16,738
========= ========
See notes to financial statements.
7
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF SHAREHOLDER'S EQUITY
(millions) 2002 2001 2000
-------- -------- --------
Common share $ 35 $ 35 $ 35
-------- -------- --------
Capital in excess of par value $1,150 $1,150 $1,150
-------- -------- --------
Accumulated other comprehensive loss:
Beginning of year $ - $ - $ -
Cash flow hedge loss (3) - -
-------- -------- --------
End of year $ (3) $ - $ -
-------- -------- --------
Retained earnings:
Beginning of year $2,053 $1,909 $1,748
Net income 130 144 161
-------- -------- --------
End of year $2,183 $2,053 $1,909
-------- -------- --------
Total shareholder's equity $3,365 $3,238 $3,094
======== ======== ========
See notes to financial statements.
8
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS
(millions) 2002 2001 2000
-------- -------- --------
Cash Flows From Operating Activities
------------------------------------
Net income $ 130 $ 144 $ 161
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and
other noncash items 14 13 15
Decrease (increase) in other assets 2 (80) 7
(Decrease) increase in other liabilities (32) 41 (22)
-------- -------- --------
Net cash provided by
operating activities 114 118 161
Cash Flows From Investing Activities
------------------------------------
Decrease (increase) in notes of Sears 662 865 (73)
-------- -------- --------
Net cash provided by (used in)
investing activities 662 865 (73)
Cash Flows From Financing Activities
------------------------------------
(Decrease) increase in commercial paper,
primarily 90 days or less (356) (709) 1,259
Proceeds from issuance of long-term debt 2,129 2,009 286
Payments for redemption of long-term debt (1,558) (2,117) (1,645)
Issue cost paid to issue debt (27) (9) -
-------- -------- --------
Net cash provided by (used in)
financing activities 188 (826) (100)
-------- -------- --------
Net increase (decrease)
in cash and cash equivalents 964 157 (12)
Cash and cash equivalents, beginning of year 599 442 454
-------- -------- --------
Cash and cash equivalents, end of year $1,563 $ 599 $ 442
======== ======== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year
Interest paid $791 $842 $972
Income taxes 87 61 86
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.
Cash and cash equivalents is defined to include all highly liquid investments
with maturities of three months or less.
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 December 28, 2002(52 weeks), December 29, 2001(52 weeks),
and December 30, 2000(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.
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities, is effective for all fiscal
years beginning after June 15, 2000. SFAS 133, as amended, establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts and for hedging
activities. Under SFAS 133, certain contracts that were not formerly
considered derivatives now meet the definition of a derivative. SRAC
adopted SFAS 133 effective December 31, 2000. The adoption of SFAS 133
resulted in no transition adjustment.
Statement of Financial Accounting Standards (SFAS) No. 145, dealing with
Rescission of FASB Statement No. 4, 44, and 64, is effective for all
financial statements issued on or after May 15, 2002. SFAS 145, eliminates
Statement 4, which required all gains and losses from debt extinguishment
to be aggregated, and if material, classified as an extraordinary item,
net of tax. Under SFAS 145, debt extinguishments used as part of an entity's
risk management strategy do not meet the criteria for classification as
extraordinary items. SRAC adopted SFAS 145 effective December 28, 2002. The
adoption of the standard did not have an impact on the financial statements
of SRAC.
10
2. FEDERAL INCOME TAXES
Federal income taxes provided for by SRAC amounted to $70 million,
$77 million and $87 million for the fiscal years 2002, 2001 and 2000,
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 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) 2002 2001
-------- --------
Commercial paper outstanding $2,874 $3,234
Less: Unamortized discount 5 9
-------- --------
Commercial paper outstanding (net) $2,869 $3,225
-------- --------
Average and Maximum Balances (net) 2002 2001
------------------- -------------------
Maximum Maximum
(millions) Average (month-end) Average (month-end)
------------------- -------------------
Commercial paper $3,721 $4,135 $3,328 $3,872
------------------- -------------------
Weighted Average Interest Rates 2002 2001
------------------- -------------------
Average Year-end Average Year-end
------------------- -------------------
Commercial paper 2.21% 2.05% 4.75% 2.98%
------------------- -------------------
11
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.
2002 Avg. Orig. 2001 Avg. Orig.
Volume Coupon Term Volume Coupon Term
------ ------ ---- ------ ------ ----
Fourth Quarter:
Medium-term notes $ 298 6.80% 6.6 $ 270 3.45% 2.3
Discrete debt $ - - - $ - - -
Year:
Medium-term notes $ 313 6.69% 6.4 $ 270 3.45% 2.3
Discrete debt $1,850 6.90% 24.9 $1,750 6.89% 10.0
GROSS OUTSTANDING
Avg. Avg.
12/28/02 Avg. Remain. 12/29/01 Avg. Remain.
Balance Coupon Term Balance Coupon Term
-------- ------ ----- ------- ------ ------
Medium-term notes $2,123 5.75% 2.1 $2,768 5.95% 1.7
Discrete debt $8,600 6.71% 13.0 $7,350 6.67% 10.0
MATURITIES
Medium-term Discrete
Year notes debt
---------------------------------
2003 $1,246 $1,250
2004 317 -
2005 115 250
2006 40 550
2007 103 -
Thereafter 302 6,550
---------------------------------
Total $2,123 $8,600
=================================
12
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 $83 million to a high of $2,291 million in 2002. Committed credit
facilities as of December 28, 2002 were as follows:
Expiration Date (millions)
----------------------------------------------------------------
April 2003 $4,360*
----------------------------------------------------------------
*On February 24, 2003, this facility was replaced by a $3.5 billion 364-day
revolving facility which includes an option to extend the repayment of
borrowings, if any, through February 2005.
SRAC pays commitment fees on the unused portions of its credit facilities.
The annualized fees at December 28, 2002 on these credit lines were
$3.2 million.
6. LETTERS OF CREDIT AND OTHER COMMITMENTS
SRAC issues standby letters of credit to third parties on behalf of
Sears and its subsidiaries. At December 28, 2002, standby letters of
credit totaling $340 million were outstanding.
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
December 28, 2002, SRAC's obligation for the remaining lease payments
totaled $4.6 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 December 28, 2002, letters of credit totaling
$146 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
thousands Committed 1 Year 1-3 Years 4-5 Years Years
--------- -------- --------- --------- -------
Other Commercial Commitments
Standby Letters of Credit 340 308 1 1 30
Guarantees 5 2 3 - -
Import Letters of Credit 146 146 - - -
------- ------ -------- ------ ------
Total Commitments $ 491 $ 456 $ 4 $ 1 $ 30
======= ====== ======== ====== ======
13
7. 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 2002 and 2001 are as follows:
---------------------------------------------------------------------------
2002 2001
Carrying Fair Carrying Fair
(millions) Value Value Value Value
---------------------------------------------------------------------------
Medium-term notes (net) $2,118 $2,091 $2,762 $2,816
Discrete underwritten debt(net) 8,542 8,024 7,321 7,326
8. QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
2002 2001 2002 2001 2002 2001 2002 2001 2002 2001
(millions) ------------ ---------- --------- ---------- ----------
Operating Results
Total revenues $237 $304 $245 $276 $257 $260 $245 $249 $984 $1,089
Interest & related
expenses 188 241 195 220 205 207 194 198 782 866
Total expenses 188 242 196 220 205 207 195 199 784 868
Income before
income taxes 49 62 49 56 52 53 50 50 200 221
Net income 32 40 32 37 34 34 32 33 130 144
Ratio of earnings to
fixed charges 1.26 1.26 1.25 1.26 1.25 1.26 1.25 1.25 1.26 1.26
(billions)
--------
Averages
Earning assets* $16.9 $17.5 $17.5 $17.2 $18.5 $16.9 $17.6 $17.0 $17.6 $17.1
Short-term debt 3.6 3.5 3.7 3.4 4.1 3.2 3.6 3.3 3.7 3.3
Long-term debt 9.9 10.6 10.4 10.5 11.0 10.5 10.6 10.3 10.5 10.5
Cost of
short-term debt 2.50% 6.65% 2.18% 5.08% 2.13% 4.02% 2.06% 3.15% 2.21% 4.75%
long-term debt 6.54% 6.70% 6.54% 6.64% 6.53% 6.56% 6.52% 6.50% 6.53% 6.60%
*Notes 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.
Item 14. 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-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended, within 90 days of the
filing date of this Annual Report on Form 10-K. Based
upon their evaluation, the principal executive officer
and principal financial officer concluded that the
Company's disclosure controls and procedures are effective.
There were no significant changes in the Company's internal
controls or in other factors that could significantly
affect these controls, since the date the controls were
evaluated.
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
November 20, 2002 and December 6, 2002[Items 5 and 7].
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 12, 2003
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 12, 2003
and Assistant Secretary )
(Principal Financial and )
Accounting Officer) )
)
Thomas E. Bergmann* Director )
)
)
Larry R. Raymond* Director )
)
)
Glenn R. Richter* Director )
*/S/ George F. Slook, Individually and as Attorney-in-Fact
16
SEARS ROEBUCK ACCEPTANCE CORP
CERTIFICATIONS
I, Keith E. Trost, President of Sears Roebuck Acceptance Corp.,
certify that:
1. I have reviewed this annual report on Form 10-K of Sears Roebuck
Acceptance Corp.
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior
to the filing date of this annual report (the "Evaluation Date");
and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and;
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: March 12, 2003
By: /s/ Keith E. Trost
-----------------------
Keith E. Trost
President (principal executive officer)
17
SEARS ROEBUCK ACCEPTANCE CORP
I, George F. Slook, Vice President, Finance of Sears Roebuck Acceptance Corp.,
certify that:
1. I have reviewed this annual report on Form 10-K of Sears Roebuck
Acceptance Corp.
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior
to the filing date of this annual report (the "Evaluation Date");
and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and;
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: March 12, 2003
By: /s/ George F. Slook
----------------------
George F. Slook
Vice President, Finance (principal
financial officer)
18
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 December 28, 2002 and
December 29, 2001, 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
December 28, 2002. 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 December 28, 2002 and
December 29, 2001, and the results of its operations and
its cash flows for each of the three years in the period
ended December 28, 2002 in conformity with accounting
principles generally accepted in the United States of America.
/S/ Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP
Philadelphia, Pennsylvania
February 14, 2003, except for Note 5,
as to which the date is February 24, 2003
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 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 for the year ended
December 30, 1995*].
4(g) 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*].
----------------------------------
*Sec File No. 1-4040
E-1
EXHIBIT INDEX (cont'd)
4(h) 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(i) 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*].
4(j) 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(k) 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(l) 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(m) 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(n) 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(o) 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(p) 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(q) 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(r) 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(s) 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*].
--------------------
SEC File No. 1-4040.
E-2
EXHIBIT INDEX (cont'd)
4(t) 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(u) 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(v) 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(w) 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(x) 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(y) 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*]
4(z) 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(aa) 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(bb) 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(cc) 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(dd) 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(ee) 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(ff) 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(gg) 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*].
----------------------
* SEC File No. 1-4040.
E-3
EXHIBIT INDEX (cont'd)
4(hh) 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(ii) 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(jj) 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(kk) 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(ll) 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(mm) 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(nn) Form of Fixed-Rate InterNote [Incorporated by
reference to Exhibit 4 to the Registrant's Current Report on
Form 8-K dated December 6, 2002*].
4(oo) 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*].
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 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*].
12 Calculation of ratio of earnings to fixed charges.**
23 Consent of Deloitte & Touche LLP.**
24 Power of attorney.**
99(a) Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002(18 U.S.C.1350)**
99(b) Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002(18 U.S.C.1350)**
----------------------
* SEC File No. 1-4040.
** Filed herewith.
E-5