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 30, 1995 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: 302/888-3100 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered 6 3/4 Notes due September 15, 2005 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of February 29, 1996, the Registrant had 350,000 shares of capital stock outstanding, all of which was held by Sears, Roebuck and Co. Registrant meets the conditions set forth in General Instruction (J)(1)(a) and (b) of Form 10-K and is therefore filing this report with a reduced disclosure format. DOCUMENTS INCORPORATED BY REFERENCE Part of Form 10-K None PART I Item 1. Business. Sears Roebuck Acceptance Corp. ("SRAC") is a wholly-owned finance subsidiary of Sears, Roebuck and Co. ("Sears"). To meet certain capital requirements of its businesses, Sears borrows on a short-term basis through the issuance of notes to, and, from time to time, sells customer receivables balances to, SRAC. SRAC obtains funds through the issuance of short-term and long-term debt. Short-term borrowings include commercial paper and agreements with bank trust departments. Long-term debt includes intermediate-term loans, medium-term notes and discrete underwritten debt. SRAC's income is derived primarily from the earnings on its investment in the notes and receivable balances of Sears. Under a letter agreement between SRAC and Sears, the interest rate on Sears notes is calculated so that SRAC maintains an earnings to fixed charges ratio of at least 1.25. The yield on the investment in Sears notes is related to SRAC's borrowing costs and, as a result, SRAC's earnings fluctuate in response to movements in interest rates and changes in Sears borrowing requirements. SRAC's commercial paper ratings provide for first tier eligibility under the Securities and Exchange Commission regulation 2a-7. Ratings are P-1 from Moody's, F-1 from Fitch, and D-1 from Duff and Phelps. SRAC's commercial paper is also rated A-2 by Standard & Poor's. SRAC returned to the public term debt market in 1995 and has current long-term ratings of A2 from Moody's, A from Fitch, A from Duff and Phelps and BBB from Standard & Poor's. In January 1996, Standard & Poor's placed SRAC's BBB rating on watch with positive implications. In March 1995, SRAC filed a $3 billion shelf registration statement with the Securities and Exchange Commission for the public issuance of term debt securities. This expansion of securities offered allows SRAC to leverage its direct relationships with investors and benefit from direct issuance opportunities across the entire term interest rate spectrum. Subsequently, SRAC launched its return to the public term debt market with a $250 million underwritten transaction and the introduction of a continuously offered medium-term note program. SRAC and Sears have entered into agreements for the benefit of certain debtholders of SRAC under which Sears will, for so long as required by the applicable indentures, pay SRAC such amounts that, when added to other available earnings, will be sufficient for SRAC to maintain a fixed charge ratio of no less than 1.10 and will continue to own all of the outstanding voting stock of SRAC. In June of 1995, SRAC amended its existing $4.5 billion syndicated credit agreement maturing in 1999, increasing the amount to $4.7 billion and extending the maturity to the year 2000. The facility is composed of 56 valued relationship banks. At year-end, 95% of the aggregate commitments of the credit facility were extended by banks rated at least A2 by Moody's or A from Standard & Poor's. Simultaneously, SRAC replaced $550 million of uniform credit agreements with a $1.0 billion 364-day syndicated credit agreement. In December, Sears and SRAC jointly entered into a $40 million credit facility with 48 minority-owned banks. This action demonstrated a continuation of the strong commitment by the companies to support local communities across the country. These new facilities provide increased support and extend for a longer term when compared to the previous agreements. SRAC continued to provide support for 100% of commercial paper outstanding through its credit lines and highly liquid investment portfolio. Pursuant to the syndicated credit agreements between SRAC and various banks, the letter agreement between SRAC and Sears concerning SRAC's investment in Sears notes may not be amended, waived, terminated or modified (except that SRAC's fixed charge coverage ratio may be reduced to 1.15) without the approval of such banks. SRAC continues to be a strongly capitalized company, with an equity position of $1.2 billion. The company's debt-to-equity ratio was 5.9:1 at the end of 1995 compared to 5.0:1 at the end of 1994. At February 29, 1996, SRAC had 11 employees. Item 2. Properties. None. 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. There is no established public trading market for SRAC's common stock. As of February 29, 1996, Sears owned all outstanding shares of SRAC's common stock. SRAC does not intend to pay any cash or other dividends on its common stock in the foreseeable future. Item 6. Selected Financial Data. Not applicable. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Financial Condition SRAC's investment in Sears notes increased to $8.4 billion at year-end 1995, from $6.8 billion at the end of 1994, due to increased funding requirements of Sears. In addition to commercial paper and intermediate-term loans, in 1995, SRAC began to issue continuously offered medium-term notes and underwritten unsecured term debt. By the close of 1995, SRAC had issued $1.4 billion in medium-term notes and $500 million in discrete underwritten transactions against a $3 billion shelf registration. As a result of these issuances, term debt increased from $845 million at the beginning of the year to $2.8 billion at the close of 1995. The sharp decline in long-term interest rates in 1995 allowed SRAC to satisfy Sears maturing debt and increased borrowing needs by extending maturities and issuing low cost fixed rate debt. In November 1995, in anticipation of future funding requirements, SRAC filed a second registration statement for an additional $2 billion in public term debt securities. The filing was amended and became effective in early March 1996. As of March 28, 1996, there has been no debt issued against this registration. Short-term borrowings decreased from $5.0 billion at the end of 1994 to $4.6 billion at the close of 1995. SRAC had investments in highly liquid short-term securities of $142.0 million at the end of 1995, as part of its liability management program. In January 1996, SRAC issued $250 million of discrete underwritten debt with a coupon of 6 1/8% and a term of 10 years. Results of Operations Under an agreement with Sears, SRAC is presently earning a rate on the notes of Sears providing a ratio of earnings to fixed charges of at least 1.25. SRAC's total revenues of $510.3 million increased $227.6 million from $282.7 million in 1994, due to increases in both the average Sears note balances and the level of interest rates during 1995. In 1995, SRAC's average cost of short-term funds increased 149 basis points to 6.06% from 4.57% in 1994. Average outstanding short- term debt of $5,116.8 million increased $1,377.1 million from $3,739.7 million in 1994. In 1995, SRAC's average cost of long-term funds increased 98 basis points to 6.31% compared to 5.33% in 1994, due primarily to the issuance in 1995 of long-term debt with extended maturities. Average outstanding long-term debt of $1,211.2 million increased $851.1 million compared to $360.1 million in 1994. The increase in average outstanding debt and the higher level of interest rates during 1995, resulted in a $186.1 million, or 85%, increase in interest and related expenses to $404.6 million in 1995 from $218.5 million in 1994. SRAC's 1995 net income increased $26.9 million, or 67%, to $67.1 million from $40.2 million in 1994. 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 combined investment in Sears notes (set to provide a fixed charge coverage of at least 1.25 times) and customer receivable balances help insulate SRAC from the effects of inflation-based interest rate increases. Item 8. Financial Statements and Supplementary Data. SEARS ROEBUCK ACCEPTANCE CORP. STATEMENTS OF INCOME Year Ended December 31 millions 1995 1994 1993 ------- ------- ------- Revenues - -------- Earnings on notes of Sears $490.7 $257.9 $209.1 Earnings on receivable balances purchased from Sears (Note 3) 7.1 6.2 105.4 Earnings on invested cash 12.3 18.4 22.6 Other revenues 0.2 0.2 0.4 ------- ------- ------- Total revenues 510.3 282.7 337.5 Expenses - -------- Interest and amortization of debt discount and expense 404.6 218.5 236.1 Provision for credit losses -- -- 33.8 Operating expenses 2.4 1.9 6.8 ------- ------- ------- Total expenses 407.0 220.4 276.7 ------- ------- ------- Income before income taxes 103.3 62.3 60.8 Income taxes (Note 2) 36.2 22.1 21.3 ------- ------- ------- Net income $67.1 $40.2 $39.5 ------- ------- ------- Ratio of earnings to fixed charges 1.26 1.29 1.26 See notes to financial statements. SEARS ROEBUCK ACCEPTANCE CORP. STATEMENTS OF FINANCIAL POSITION December 31 millions 1995 1994 --------- --------- Assets - ------ Notes of Sears $8,396.4 $6,842.5 Customer receivable balances purchased from Sears (Note 3) 81.2 81.5 Cash and invested cash 143.0 102.1 Other assets 13.7 5.1 --------- --------- Total assets $8,634.3 $7,031.2 --------- --------- Liabilities - ----------- Commercial paper (net of unamortized discount of $23.8 and $22.3) $4,450.6 $4,912.9 Agreements with bank trust departments 137.0 87.4 Intermediate-term loans 895.0 845.0 Medium-term notes 1,383.5 - Discrete underwritten debt 498.9 - Accrued interest and other liabilities 24.5 8.2 --------- --------- Total liabilities 7,389.5 5,853.5 --------- --------- Commitments (Note 9) Stockholder's Equity - -------------------- Capital stock, par value $100 per share 500,000 shares authorized 350,000 shares issued and outstanding 35.0 35.0 Capital in excess of par value - - Retained income 1,209.8 1,142.7 --------- --------- Total stockholder's equity 1,244.8 1,177.7 --------- --------- Total liabilities and stockholder's equity $8,634.3 $7,031.2 --------- --------- See notes to financial statements. SEARS ROEBUCK ACCEPTANCE CORP. STATEMENTS OF STOCKHOLDER'S EQUITY Year Ended December 31 millions 1995 1994 1993 -------- -------- -------- Capital stock $35.0 $35.0 $35.0 -------- -------- -------- Capital in excess of par value: Beginning of year - - $330.2 Return of capital paid to Sears* - - (330.2) -------- -------- -------- End of year $- $- $- -------- -------- -------- Retained income: Beginning of year $1,142.7 $1,102.5 $2,763.0 Net income 67.1 40.2 39.5 Dividend paid to Sears - - (1,700.0) -------- -------- -------- End of year $1,209.8 $1,142.7 $1,102.5 -------- -------- -------- Total stockholder's equity $1,244.8 $1,177.7 $1,137.5 -------- -------- -------- * Characterized as a dividend under Delaware General Corporation Law. See notes to financial statements. SEARS ROEBUCK ACCEPTANCE CORP. STATEMENTS OF CASH FLOWS Year Ended December 31 millions 1995 1994 1993 -------- -------- -------- Cash Flows From Operating Activities - ------------------------------------ Net income $67.1 $40.2 $39.5 Adjustments to reconcile net income to net cash provided by operating activities: Earnings amortization on retail customer receivable balances discount - - (125.9) Provision for credit losses - - 33.8 Depreciation, amortization and other noncash items 1.2 20.9 58.7 Decrease in deferred federal income taxes - (3.0) (7.1) Decrease (increase) in other assets 2.4 (2.2) (2.5) Increase (decrease) in other liabilities 16.3 (2.5) (20.9) -------- -------- -------- Net cash provided by (used in) operating activities 87.0 53.4 (24.4) Cash Flows From Investing Activities - ------------------------------------ (Increase) decrease in notes of Sears (1,553.9) (3,438.6) 5,059.5 Decrease in receivable balances purchased from Sears 0.3 6.5 967.5 -------- -------- -------- Net cash (used in) provided by investing activities (1,553.6) (3,432.1) 6,027.0 Cash Flows From Financing Activities - ------------------------------------ (Decrease) increase in commercial paper, primarily 90 days or less (462.3) 2,437.9 (6,040.3) Increase (decrease) in agreements with bank trust departments 49.6 (52.4) (258.1) Payments for redemption of zero coupon notes - (400.0) - Proceeds from issuance of long-term debt 1,920.2 844.6 - -------- -------- -------- Net cash provided by (used in) financing activities 1,507.5 2,830.1 (6,298.4) -------- -------- -------- Net increase (decrease) in cash and invested cash 40.9 (548.6) (295.8) Cash and invested cash, beginning of year 102.1 650.7 946.5 -------- -------- -------- Cash and invested cash, end of year $143.0 $102.1 $650.7 -------- -------- -------- Supplemental Disclosure of Cash Flow Information Cash paid during the year Interest $361.5 $231.1 $200.5 Income taxes 36.8 21.7 37.1 See notes to financial statements. NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Sears Roebuck Acceptance Corp. ("SRAC"), a wholly-owned subsidiary of Sears, Roebuck and Co. ("Sears"), is principally engaged in the business of acquiring short-term notes of Sears and to a lesser extent purchasing outstanding customer receivable balances from Sears, using proceeds from its short-term borrowing programs (primarily the direct placement of commercial paper), and issuance of intermediate-term loans, 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 charge ratio of at least 1.25. Cash and invested cash is defined to include all highly liquid investments with maturities of three months or less. Customer receivables purchased from Sears are purchased at par and are interest-bearing. Debt discount and issue expenses are amortized on a straight-line basis over the terms of the related obligation. 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, whether or not such benefits would be currently available on a separate return basis. Certain reclassifications have been made in the 1994 cash flow statement to conform to current accounting classifications. No reclassifications were necessary to be made in the 1993 cash flow statement. For 1995, SRAC changed its fiscal year-end from December 31 to a 52 or 53 week year ending on the Saturday closest to December 31. 2. FEDERAL INCOME TAXES millions 1995 1994 1993 ------- ------- ------- Current $36.6 $25.5 $28.4 Deferred (0.4) (3.4) (7.1) ------- ------- ------- Financial statement income tax provision $36.2 $22.1 $21.3 ------- ------- ------- Effective income tax rates 35% 35% 35% 3. CUSTOMER RECEIVABLE BALANCES SRAC has purchased customer receivable balances ("CRB") from Sears. CRB are purchased with recourse at par, with SRAC earning interest on the receivables. CRB are made up of credit accounts Sears has established with merchants and contractors for bulk purchases from Sears. The CRB are predominately paid within 30 days. Each month, SRAC purchases the balance increases in the CRB accounts attributable to additional credit sales and receives the collections related to the previously purchased balances. Sears pays interest to SRAC on the balances in these accounts at a rate equivalent to the prime rate. 4. COMMERCIAL PAPER AND OTHER SHORT-TERM BORROWINGS SRAC obtains funds through the direct placement of commercial paper (issued in maturities of one to 270 days) and borrowings under agreements with bank trust departments. Selected details of SRAC's borrowings are shown below. Weighted interest rates are based on the actual number of days in the year and borrowings net of unamortized discount. millions 1995 1994 -------- -------- Commercial paper outstanding $4,474.4 $4,935.2 Less: Unamortized discount 23.8 22.3 -------- -------- Commercial paper outstanding (net) 4,450.6 4,912.9 Agreements with bank trust departments 137.0 87.4 -------- -------- Total short-term borrowings $4,587.6 $5,000.3 -------- -------- Average and Maximum Balances 1995 1994 ------------------- ------------------- Maximum Maximum millions Average (month-end) Average (month-end) ------------------- ------------------- Commercial paper $4,962.8 $5,776.6 $3,615.3 $4,912.9 Agreements with bank trust dept. 154.0 185.2 124.4 142.2 ------------------- ------------------- Weighted Interest Rates 1995 1994 ------------------- ------------------- Average Year-End Average Year-End ------------------- ------------------- Commercial paper 6.07% 5.89% 4.58% 5.82% Agreements with bank trust dept. 6.01% 5.87% 4.38% 6.06% ------------------- ------------------- 5. INTERMEDIATE-TERM LOANS As of December 30, 1995, $895 million in intermediate-term loans were outstanding with private institutions compared to $845 million at year-end 1994. The rates on most of these variable rate intermediate-term loans are indexed to LIBOR with a set basis point spread. The average weighted rate on the intermediate-term loans in 1995 was 6.23% compared to 5.41% in 1994. As of December 30, 1995, intermediate-term loans maturing in the next five years were as follows: (millions) 1996 1997 1998 1999 2000 ------ ------ ------ ------ ------ $200.0 $320.0 $25.0 $325.0 $25.0 6. MEDIUM-TERM NOTES SRAC issued $1,383.5 million of medium-term notes with either a floating rate indexed to Libor or a fixed rate. As of December 30, 1995, SRAC had medium-terms notes outstanding with an average weighted rate of 6.25% and terms ranging from two to ten years. As of December 30, 1995, medium-term notes maturing in the next five years were as follows: (millions) 1996 1997 1998 1999 2000 ------ ------ ------ ------ ------ - $255.0 $285.0 $88.0 $722.8 7. DISCRETE UNDERWRITTEN DEBT During 1995, SRAC issued two discrete underwritten notes, both with face values of $250 million and coupon rates of 6 1/2% and 6 3/4%, respectively. These notes mature on June 15, 2000 and September 15, 2005 and pay interest semiannually. 8. BACK-UP LIQUIDITY SRAC continued to provide support for 100% of commercial paper outstanding through its investment portfolio and credit lines. SRAC's investment portfolio fluctuated from zero to a high of $987.7 million throughout 1995. Credit facilities as of December 30, 1995 were as follows: Expiration Date (millions) - ------------------------------------------------------------------ June 2000 $4,680.0 June 1996 1,000.0 December 1996 40.0 - ------------------------------------------------------------------ Total credit facilities $5,720.0 ================================================================== Commitment fees are paid on the unused portions of the above credit facilities. The annualized fees at December 30, 1995 on these lines were $4.9 million. 9. LETTERS OF CREDIT AND OTHER COMMITMENTS SRAC issues import letters of credit to facilitate Sears purchase of goods from foreign suppliers. At December 30, 1995, letters of credit totaling $121.0 million were outstanding. SRAC has no liabilities with respect to this program other than the obligation to pay drafts under the letters of credit which, if not reimbursed by Sears on the day of the disbursement, are automatically converted into demand borrowings by Sears from SRAC. To date, all SRAC disbursements have been reimbursed on a same-day basis. SRAC issues standby letters of credit on behalf of its affiliate, Western Auto Supply Company ("Western Auto"), which are used by Western Auto to secure its obligation to repurchase any defaulted account receivables sold to a financial institution. At December 30, 1995, a $73.0 million standby letter of credit was outstanding. Under the terms of a 1986 agreement, Sears agreed to make all payments required to be made by SRAC to Sears Overseas Finance N.V. ("SOFNV") in accordance with certain loan agreements between SRAC and SOFNV. SRAC remains liable to SOFNV for such loan agreements, which total $342.8 million as of December 30, 1995. The terms of the loan agreements with SOFNV were negotiated between related parties; accordingly, the fair value of these instruments are not provided. 10. FINANCIAL INSTRUMENTS In the normal course of business, SRAC invests in the Notes of Sears and purchases customer receivable balances from Sears. These transactions are negotiated between related parties; accordingly, the fair value of these instruments are not provided. SRAC's other 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 the Company on similar borrowings. The fair value of these financial instruments are as follows: - --------------------------------------------------------------------------- December 31 - --------------------------------------------------------------------------- 1995 1994 - --------------------------------------------------------------------------- Carrying Fair Carrying Fair (millions) Value Value Value Value - --------------------------------------------------------------------------- Medium-term notes 1,383.5 1,413.6 - - Discrete underwritten debt 498.9 516.7 - - 11. QUARTERLY FINANCIAL DATA (UNAUDITED) First Second Third Fourth Quarter Quarter Quarter Quarter 1995 1994 1995 1994 1995 1994 1995 1994 (millions) ------------- ------------- ------------ ------------- Operating Results Combined earnings from Sears notes and CRB $100.7 $47.6 $122.6 $53.9 $128.6 $72.3 $145.9 $90.3 Total Revenues 105.8 51.1 124.7 57.1 131.5 76.3 148.3 98.2 Interest & related expenses 84.2 40.3 99.3 45.2 103.6 55.0 117.5 78.0 Total expenses 84.8 41.1 99.9 45.7 104.2 55.8 118.1 77.8 Income before income taxes 21.0 10.0 24.8 11.4 27.3 20.5 30.2 20.4 Net income 13.7 6.4 16.1 7.3 17.7 13.1 19.6 13.4 Ratio of earnings to fixed charges 1.25 1.25 1.25 1.25 1.26 1.37 1.26 1.26 (billions) Averages Earning assets* $6.6 $ 4.5 $7.5 $4.8 $7.9 $5.4 $9.0 $6.7 Short-term debt 4.6 3.0 5.3 3.2 5.2 4.0 5.4 4.7 Cost of short-term debt 6.14% 3.45% 6.25% 4.11% 6.00% 4.68% 5.93% 5.45% *Notes and receivable balances of Sears and invested cash. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. Not applicable. Item 11. Executive Compensation. Not applicable. Item 12. Security Ownership of Certain Beneficial Owners and Management. Not applicable. Item 13. Certain Relationships and Related Transactions. Not applicable. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) The following documents are filed as a part of this report: 1. An "Index to Financial Statements" has been filed as a part of this report on page S-1 hereof. 2. No financial statement schedules are included herein because they are not required or because the information is contained in the financial statements and notes thereto, as noted in the "Index to Financial Statements" filed as part of this report. 3. An "Exhibit Index" has been filed as part of this report beginning on page E-1 hereof. (b) Reports on Form 8-K: A current report on Form 8-K for November 4, 1995 was filed with the Securities and Exchange Commission on November 29, 1995 to report under item 7, the establishment of the Form of Fixed Rate-Put Option Note Series I as provided in the indenture dated as of May 15, 1995. A current report on Form 8-K for June 8, 1995 was filed with the Securities and Exchange Commission on October 27, 1995 to report under item 5 regarding underwriting agreements executed in June and September 1995 for the issuance of two discrete debt offerings for $250 million with a coupon of 6 1/2% and 6 3/4% maturing on June 15, 2000 and September 15, 2005, and a distribution agreement for Medium-Term Notes Series I dated June 15, 1995. Item 7 of this filing also reported the underwriting, pricing, and distribution agreements and related note forms for these offerings. 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) By Stephen D. Carp* Vice President, Finance and Assistant Secretary March 28, 1996 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) ) ) ) Stephen D. Carp* Vice President, Finance ) March 28, 1996 and Assistant Secretary ) (Principal Financial and ) Accounting Officer) ) ) ) James A. Blanda* Director ) ) ) James D. Constantine* Director ) ) ) Alan J. Lacy* Director ) ) ) Alice M. Peterson* Director ) ) ) Larry R. Raymond* Director ) ) ) George F. Slook* Director ) *By \s\ Stephen D. Carp Individually and as Attorney-in-Fact SEARS ROEBUCK ACCEPTANCE CORP. INDEX TO FINANCIAL STATEMENTS PAGE STATEMENTS OF INCOME 5 STATEMENTS OF FINANCIAL POSITION 6 STATEMENTS OF STOCKHOLDER'S EQUITY 7 STATEMENTS OF CASH FLOWS 8 NOTES TO FINANCIAL STATEMENTS 9-14 INDEPENDENT AUDITORS' REPORT S-2 S-1 INDEPENDENT AUDITORS' REPORT To the Stockholder and Board of Directors of Sears Roebuck Acceptance Corp. Greenville, Delaware We have audited the accompanying Statements of Financial Position of Sears Roebuck Acceptance Corp. (a wholly-owned subsidiary of Sears, Roebuck and Co.) as of December 30, 1995 and December 31, 1994, and the related Statements of Income, Stockholder's Equity, and Cash Flows for each of the three years in the period ended December 30, 1995. These financial statements are the responsibility of Sears Roebuck Acceptance Corp.'s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Sears Roebuck Acceptance Corp. as of December 30, 1995 and December 31, 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 1995 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP January 19, 1996 Philadelphia, Pennsylvania 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 February 6, 1996.** 4(a) $4,680,000,000 Amended Credit Agreement dated as of June 29, 1995 among the Registrant, the Banks listed on the signature pages thereof, the Managing Agent, Co-Arrangers, Co-Agent and Lead Managers referred to therein and Morgan Guaranty Trust Company of New York, as Agents [Incorporated by reference to exhibit 4(a) to Registrant's Current Report on Form 8-K dated June 29, 1995*]. 4(b) $1,000,000,000 Credit Agreement dated as of June 29, 1995 among the Registrant, the Banks listed on the signature pages thereof, the Managing Agent, Co-Arrangers, Co-Agent and Lead Managers referred to therein and Morgan Guaranty Trust Company of New York, as Agents [Incorporated by reference to exhibit 4(b) to Registrant's Current Report on Form 8-K dated June 29, 1995*]. 4(c) Form of Registrant's Investment Note Agreement. [Incorporated by reference to Exhibit 4(c) to Annual Report on Form 10-K of the Registrant for the year ended December 31, 1992*]. 4(d) 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(e) Form of 6 1/2% Note.*** 4(f) Form of Fixed-Rate Medium-Term Note Series I.*** 4(g) Form of Floating Rate Medium-Term Note Series I.*** 4(h) Form of 6 3/4% Note.*** 4(i) Fixed Charge Coverage and Ownership Agreement dated May 15, 1995 between Sears, Roebuck and Co. and the Registrant.*** - ---------------------------------- * Sec File No. 1-4040 ** Filed herewith. *** [Incorporated by reference to Exhibit 4(a) to Registrant's Current Report on Form 8-K dated June 8, 1995, File No. 1-4040.] E-1 EXHIBIT INDEX (cont'd) 4(j) Indenture dated as of May 15, 1995 between the Registrant and The Chase Manhattan Bank, NA [Incorporated by reference to Exhibit 4(b) to Amendment No. 1 to Registration Statement No. 33-64215]. 4(k) Extension Agreement dated March 1, 1996, between Sears, Roebuck and Co. and the Registrant.** 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) Letter Agreement dated as of September 2, 1986 between Registrant and Sears, Roebuck and Co. [Incorporated by reference to Exhibit 10 to the Registrant's Current Report on Form 8-K dated September 2, 1986*]. 10(c)(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(c)(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(c)(3) Letter Agreement dated November 26, 1986 amending Agreement to Issue Letters of Credit dated December 3, 1985 [Incorporated by reference to Exhibit 10(i)(3) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987*]. 12 Calculation of ratio of earnings to fixed charges.** 23 Consent of Deloitte and Touche LLP.** 24 Power of attorney.** __________________________ * SEC File No. 1-4040. ** Filed herewith. *** [Incorporated by reference to Exhibit 4(a) to Registrant's Current Report on Form 8-K dated June 8, 1995, File No. 1-4040.] E-2 Exhibit 12 SEARS ROEBUCK ACCEPTANCE CORP. CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES 1995 1994 1993 (dollars in millions) INCOME BEFORE INCOME TAXES $103.3 $ 62.3 $ 60.8 PLUS FIXED CHARGES: Interest 398.4 190.5 177.6 Amortization of debt discount and expense 6.2 28.0 58.5 ------- ------- ------- TOTAL FIXED CHARGES 404.6 218.5 236.1 ------- ------- ------- EARNINGS BEFORE INCOME TAXES AND FIXED CHARGES $ 507.9 $ 280.8 $ 296.9 ======= ======= ======= RATIO OF EARNINGS TO FIXED CHARGES 1.26 1.29 1.26