THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS
NOT COMPLETE AND MAY BE CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
Filed Pursuant to Rule 424(b)5
Registration Statement No. 333-92082
SUBJECT TO COMPLETION, DATED FEBRUARY 7, 2003
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 6, 2002)
$
SEARS ROEBUCK ACCEPTANCE CORP.
% NOTES DUE FEBRUARY 1, 2043
------------------------------
Sears Roebuck Acceptance Corp. or "SRAC" will pay interest on the Notes at
the rate of % per year on February 1, May 1, August 1 and November 1 of each
year. The first such payment will be made on May 1, 2003. The Notes will mature
at par on February 1, 2043. The Notes will be issued only in denominations of
$25 and integral multiples of $25.
SRAC may redeem all or any portion of the Notes on any scheduled interest
payment date beginning on May 1, 2008, at 100% of the principal amount of the
portion of the Notes that SRAC redeems, plus accrued interest. SRAC must give
the registered holder at least 30 but not more than 60 days notice that it will
redeem any portion of your Notes.
SRAC may also redeem the Notes at any time in the event of certain changes
in U.S. tax law. If SRAC redeems the Notes for this reason, SRAC will pay the
registered holder 100% of the principal amount of the Notes plus accrued
interest. If SRAC redeems any of the Notes for tax purposes, it must redeem all
the Notes.
SRAC will apply to list the Notes on the New York Stock Exchange and
expects trading in the Notes to begin within 30 days of February , 2003, the
original issue date.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS, INCLUDING THOSE DESCRIBED IN
THE "RISK FACTORS" SECTION BEGINNING ON PAGE S-4.
------------------------------
PER NOTE TOTAL
-------- -----
Public offering price(1).................................... % $
Underwriting discount....................................... % $
Proceeds, before expenses, to SRAC.......................... % $
(1) Plus accrued interest from February , 2003, if settlement occurs
after that date.
SRAC has granted the Underwriters an option to purchase up to an additional
$ aggregate principal amount of Notes, solely to cover overallotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement or the accompanying
prospectus. Any representation to the contrary is a criminal offense.
The Underwriters expect to deliver the Notes in book-entry form only
through the facilities of The Depository Trust Company against payment on
February , 2003.
------------------------------
Joint Book-Running Managers
MERRILL LYNCH & CO. SALOMON SMITH BARNEY
MORGAN STANLEY UBS WARBURG
BANC OF AMERICA SECURITIES LLC
DEUTSCHE BANK SECURITIES
RBC DAIN RAUSCHER
LEHMAN BROTHERS
MCDONALD INVESTMENTS INC.
U.S. BANCORP PIPER JAFFRAY
WACHOVIA SECURITIES
WELLS FARGO SECURITIES, LLC
------------------------------
The date of this prospectus supplement is February , 2003.
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus supplement
or the prospectus. You must not rely on any unauthorized information or
representations. This prospectus supplement and prospectus is an offer to sell
only the Notes offered hereby, but only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this prospectus
supplement and the prospectus is current only as of its date.
---------------------
TABLE OF CONTENTS
Prospectus Supplement
Page
----
Cautionary Statement Concerning Forward-Looking
Statements................................................ S-3
Incorporation of Certain Documents by Reference............. S-3
Recent Developments......................................... S-4
Risk Factors................................................ S-4
Capitalization of Sears Roebuck Acceptance Corp............. S-4
The Notes................................................... S-5
Book-Entry Registration..................................... S-7
United States Tax Considerations............................ S-8
Underwriting................................................ S-14
Use of Proceeds............................................. S-15
Legal Matters............................................... S-15
General Information......................................... S-15
Prospectus
Available Information....................................... 3
Reports to Holders of Debt Securities....................... 3
Incorporation of Certain Documents by Reference............. 3
Sears Roebuck Acceptance Corp............................... 4
Use of Proceeds............................................. 4
Ratio of Earnings to Fixed Charges.......................... 5
Description of Debt Securities.............................. 5
Plan of Distribution........................................ 10
Legal Matters............................................... 11
Experts..................................................... 11
SRAC has warranted to the Underwriters that this prospectus supplement and
the prospectus do not contain any untrue statement of a material fact or omit
any material fact necessary to make the statements in this prospectus supplement
and the prospectus not misleading in light of the circumstances under which
these statements were made. SRAC has taken all reasonable care to ascertain the
facts and to verify the accuracy of these statements. SRAC accepts
responsibility accordingly.
Unless otherwise indicated, the information contained in this prospectus
supplement assumes that the Underwriters' overallotment option is not exercised.
S-2
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements in or incorporated by reference in this prospectus
supplement and the accompanying prospectus are "forward-looking statements,"
including forecasts on comparable store sales and comparable earnings per share
for 2003. Statements preceded by, followed by or that otherwise include the
words "believes," "expects," "anticipates," "intends," "project," "estimates,"
"plans," and similar expressions or future or conditional verbs such as "will,"
"should," "would," "may" and "could" are generally forward-looking in nature and
not historical facts. These statements are based on assumptions about the future
that are subject to risks and uncertainties, such as competitive conditions in
retail; changes in consumer confidence and spending; changes in interest rates;
delinquency and charge-off trends in the credit card receivables portfolio;
continued consumer acceptance of the Sears Gold MasterCard Program; the
successful execution of and customer reactions to Sears' Full-line store
strategy and other performance improvements initiatives; Sears' ability to
integrate and operate Lands' End successfully; anticipated cash flow; the
possibility of increased hostilities in the Middle East; general economic
conditions and normal business uncertainty. In addition, Sears typically earns a
disproportionate share of its operating income in the fourth quarter due to
seasonal buying patterns, which are difficult to forecast with certainty.
While SRAC and Sears believe that these forecasts and assumptions are
reasonable, they caution that actual results could differ materially. They
intend these statements to speak as of the date of this prospectus supplement
and by making such statements do not undertake to update such statements as more
information becomes available. You are advised, however, to consult any
additional disclosures SRAC and Sears make in their respective Quarterly Reports
on Form 10-Q, Annual Report on Form 10-K and Current Reports on Form 8-K. See
"Available Information" in the accompanying prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
SRAC and Sears incorporate and make part of this prospectus supplement and
the accompanying prospectus by reference the following documents filed by SRAC
and Sears with the Securities and Exchange Commission pursuant to Section 13 of
the Securities Exchange Act of 1934, as amended:
- the Annual Reports on Form 10-K for the fiscal year ended December 29,
2001, filed by SRAC and Sears;
- the Quarterly Reports on Form 10-Q for the quarters ended March 30, June
29 and September 28, 2002, filed by SRAC and Sears;
- the Quarterly Report on Form 10-Q/A (Amendment Nos. 1 and 2) for the
quarter ended March 30, 2002, filed by Sears;
- the Quarterly Report on Form 10-Q/A for the quarter ended June 29, 2002,
filed by Sears;
- the Current Reports on Form 8-K filed on January 10, January 17, April
10, April 19, May 17, July 18, September 9, October 4, October 7 and
October 18, 2002 and January 16 and February 6, 2003 by Sears;
- the Current Reports on Form 8-K filed on March 29, May 31, July 2,
November 26 and December 11, 2002 by SRAC; and
- all documents filed by SRAC or Sears with the Securities and Exchange
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, on or after the date of this
prospectus supplement and prior to the termination of this offering.
To receive a free copy of any of the documents incorporated by reference in
this prospectus supplement and the accompanying prospectus (other than exhibits,
unless they are specifically incorporated by reference in the documents), call
or write Sears Roebuck Acceptance Corp., 3711 Kennett Pike, Greenville, Delaware
19807, Attention: Vice President, Finance (302/434-3100).
S-3
RECENT DEVELOPMENTS
On February 6, 2003, Sears reported that its total domestic store revenues
for the four weeks ended February 1, 2003 were $1.6 billion, a 6.3% decrease
compared with the four weeks ended February 2, 2002. Comparable domestic store
revenues decreased 8.0%. Sears stated that these results were within its first
quarter plan of a mid-single digit percentage decline. Sears also reaffirmed its
forecast of a low- to mid-single digit percentage increase for 2003 comparable
earnings per share over 2002 comparable earnings per share of $4.92. Consistent
with this guidance, Sears stated that it expects first quarter comparable
earnings per share to be in the range of $0.50 to $0.65. This forecast
incorporates Sears' expected decrease in credit income and the effect of a later
Easter holiday.
RISK FACTORS
Your investment in the Notes will involve certain risks. This prospectus
supplement and the accompanying prospectus do not describe all of those risks.
You should, in consultation with your own financial and legal advisors,
carefully consider the following discussion of risks before deciding whether an
investment in the Notes is suitable for you. The Notes may not be an appropriate
investment for you if you are not knowledgeable about significant features of
the Notes or financial matters in general.
DEBT RATINGS
Standard & Poor's Ratings Services (S&P) placed its A- rating on SRAC's
senior unsecured debt on CreditWatch with negative implications on October 18,
2002. CreditWatch is an indication that the agency could take an action in the
near future that will result in a confirmation or change of the S&P rating. SRAC
cannot assure you that any of its current ratings will remain in effect for any
given period of time or that a rating will not be lowered.
SRAC MAY CHOOSE TO REDEEM NOTES PRIOR TO MATURITY
SRAC may redeem all or any portion of the Notes on any scheduled interest
payment date beginning on May 1, 2008, at 100% of the principal amount of the
portion of the Notes that SRAC redeems, plus accrued interest. SRAC may also
redeem the Notes in whole (but not in part) at any time after February , 2003
in the event of certain changes in U.S. tax law, as described under "The
Notes -- Redemption for Tax Reasons." If prevailing rates are lower at the time
of redemption, you may not be able to reinvest the redemption proceeds in a
comparable security at an effective interest rate as high as the interest rate
on the Notes being redeemed. SRAC's redemption right also may adversely impact
your ability to sell your Notes as May 1, 2008 approaches.
CAPITALIZATION OF SEARS ROEBUCK ACCEPTANCE CORP.
The following table sets forth SRAC's capitalization as of September 28,
2002, and as adjusted to reflect the issuance of the Notes, assuming that SRAC
uses the net proceeds (before expenses) of $ that SRAC will receive
from issuing the Notes to retire short-term debt.
SEPTEMBER 28, 2002
(UNAUDITED)
----------------------
AS
OUTSTANDING ADJUSTED
----------- --------
(U.S. DOLLARS IN
MILLIONS)
Debt payable within one year(1)............................. $ 4,008 $
Term debt................................................... 10,877
Shareholder's equity(2)..................................... 3,333
------- -------
Total capitalization(3)..................................... $18,218 $
======= =======
---------------
(1) "Debt payable within one year" excludes the current portion of term debt,
which the table includes under "Term debt."
S-4
(2) SRAC has 500,000 authorized shares of common stock at a par value of $100.
SRAC had 350,000 shares of common stock outstanding as of September 28,
2002.
(3) SRAC's capitalization has not otherwise changed materially since September
28, 2002.
THE NOTES
The following description supplements the "Description of Debt Securities"
in the accompanying prospectus. Unless otherwise indicated, the general terms
and provisions of SRAC's unsecured debt securities described in the accompanying
prospectus apply to the Notes.
SRAC will issue the Notes under the indenture dated as of October 1, 2002,
between SRAC and BNY Midwest Trust Company, as trustee. SRAC has filed a copy of
the indenture with the Securities and Exchange Commission. The indenture is
incorporated into this prospectus supplement and the prospectus by reference.
The Notes will be direct, unsecured and unsubordinated obligations of SRAC, and
will rank equally with all of SRAC's other unsecured and unsubordinated debt.
The Notes will mature at par on February 1, 2043 and will constitute a
single series of debt securities under the indenture. SRAC will issue the Notes
in fully registered book-entry form only, without coupons, in denominations of
$25 and integral multiples of $25. Each Note will bear interest at the rate of
% per year. SRAC will pay interest quarterly on February 1, May 1, August 1
and November 1 of each year (each an "interest payment date"), commencing May 1,
2003, to the registered holder of the Notes as of the close of business on the
date fifteen days before the interest payment date. As long as the Notes are
held through the facilities of The Depository Trust Company ("DTC") solely in
book-entry form, the only registered holder of the Notes will be DTC's nominee,
Cede & Co.
If an interest payment date or the maturity date of the Notes is not a
business day, SRAC will pay interest or principal on the next business day.
However, interest will not accrue on the amount to be paid for the period from
the original interest payment date (or maturity date) to the date SRAC makes the
payment. SRAC will calculate the interest based on a 360-day year of twelve
30-day months. (A "business day" is a Monday, Tuesday, Wednesday, Thursday or
Friday that is not a legal holiday for banking institutions in the City of
Wilmington, Delaware, the City of Chicago, the City of New York, or the city in
which the trustee's principal corporate trust office is located.)
SRAC will pay interest on the Notes to DTC by wire transfer on the interest
payment dates. On the redemption or maturity date of the Notes, SRAC will pay
the principal of the Notes to DTC by wire transfer if DTC presents and
surrenders the Notes on or before the redemption or maturity date of the Notes.
If you hold Notes in certificated form, SRAC will pay the interest and principal
on your Notes to you by check unless you have given proper wire transfer
instructions to the trustee. See "Book-Entry Registration -- Certificated Notes"
for further information on holding Notes in certificated form.
SRAC has initially appointed the trustee at its corporate trust office in
New York City as paying agent. SRAC may terminate the appointment of a paying
agent at any time. SRAC may also appoint additional or other paying agents at
any time. SRAC will give notice of any termination or appointment of a paying
agent or any change in a paying agent's office as described below under the
heading "The Notes -- Notices."
SRAC will apply to list the Notes on the New York Stock Exchange.
OPTIONAL REDEMPTION
SRAC may not redeem the Notes before May 1, 2008, except in the event of
certain changes in U.S. tax law as described below under "The
Notes -- Redemption for Tax Reasons." On and after May 1, 2008, SRAC may redeem
the Notes, in whole or in part, on any scheduled interest payment date by paying
you 100% of the principal amount of the portion of your Notes that SRAC is
redeeming, plus any interest that has accrued, but that SRAC has not previously
paid you, up to but not including the date that SRAC redeems your Notes. SRAC
must give you at least 30 but not more than 60 days notice that it
S-5
will redeem your Notes, as described below under the heading "The
Notes -- Notices." If SRAC redeems less than all the Notes at any time, the
trustee will select the Notes to be redeemed by such method as it shall deem to
be fair and appropriate.
REDEMPTION FOR TAX REASONS
SRAC may elect to redeem your Notes if, on or after February , 2003, a
change in the U.S. tax laws results in a substantial probability that SRAC will
not be able to deduct the full amount of interest accrued on the Notes for
United States federal income tax purposes. A redemption for tax reasons need not
occur on an interest payment date.
A change in the U.S. tax laws includes:
- any change in or amendment to the laws of the United States, any
political subdivision of the United States or any taxing authority within
the United States, or regulations or rulings promulgated under those
laws;
- any change in the way those laws, rulings or regulations are interpreted,
applied or enforced;
- any action taken by a taxing authority that applies to SRAC;
- any court decision, even if the court decision does not directly involve
SRAC; or
- any technical advice memorandum, letter ruling or administrative
pronouncement issued by the United States Internal Revenue Service, based
on a fact pattern substantially similar to SRAC's.
SRAC may only redeem your Notes for tax reasons if it:
- redeems all of the Notes;
- delivers to the trustee a legal opinion stating that SRAC may exercise
its right to redeem the Notes and a certificate giving the factual basis
for the legal opinion;
- gives notice, as described below under the heading "The
Notes -- Notices," not less than 30 nor more than 60 days before the date
SRAC will redeem the Notes; and
- pays you 100% of the principal amount of your Notes plus any accrued but
unpaid interest up to but not including the date of redemption.
TRADING CHARACTERISTICS
SRAC expects the Notes to trade at a price that takes into account the
value, if any, of accrued but unpaid interest. This means that purchasers will
not pay, and sellers will not receive, accrued and unpaid interest on the Notes
that is not included in their trading price. Any portion of the trading price of
a Note that is attributable to accrued interest will be treated as ordinary
interest income for federal income tax purposes and will not be treated as part
of the amount realized for purposes of determining gain or loss on the
disposition of the Notes. See "United States Tax Considerations" below.
NOTICES
The trustee will mail notices by first class mail, postage prepaid, to each
registered holder's last known address as it appears in the security register
that the trustee maintains. The trustee will only mail these notices to Cede &
Co., as the registered holder of the Notes, unless SRAC reissues the Notes to
you or your nominees in fully certificated form, as explained below under the
heading "Book-Entry Registration -- Certificated Notes."
MEETING OF NOTE HOLDERS
SRAC, the trustee or registered holders of a majority of the aggregate
principal amount of the Notes may call a meeting of the Note holders at any
time. These meetings may be for any purpose stated in the
S-6
indenture or authorized by law. The trustee will give notice of the meetings in
the manner described above under the heading "The Notes -- Notices." You will
not be entitled to call these meetings or to vote at them unless SRAC reissues
the Notes to you or your nominees in fully certificated form, as explained below
under the heading "Book-Entry Registration -- Certificated Notes."
GOVERNING LAW
The laws of the State of Delaware will govern the indenture and the Notes.
BOOK-ENTRY REGISTRATION
SRAC has obtained the information in this section concerning DTC and its
book-entry systems and procedures from sources that SRAC believes to be
reliable, but SRAC takes no responsibility for the accuracy of this information.
SRAC will initially issue the Notes in registered form only, without
coupons, as book-entry Notes represented by one or more global notes registered
in the name Cede & Co., as the nominee for DTC. You may purchase Notes in
book-entry form in minimum denominations of $25 and integral multiples of $25.
Unless and until SRAC issues the Notes in fully certificated form under the
limited circumstances described below under the heading "Book-Entry
Registration -- Certificated Notes":
- you will not be entitled to receive a certificate representing your
interest in the Notes;
- all references in this prospectus supplement or in the prospectus to
actions by holders will refer to actions taken by DTC upon instructions
from its Direct Participants (as defined below); and
- all references in this prospectus supplement or the prospectus to
payments and notices to registered holders will refer to payments and
notices to DTC or Cede & Co., as the registered holder of the Notes, for
distribution to you in accordance with DTC procedures.
THE DEPOSITORY TRUST COMPANY
DTC is:
- a limited-purpose trust company organized under the New York Banking Law;
- a "banking organization" under the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" under the New York Uniform Commercial Code, as
amended; and
- a "clearing agency" registered under the provision of Section 17A of the
Securities Exchange Act of 1934, as amended.
DTC holds securities that its Direct Participants deposit with DTC. DTC
also facilitates the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Direct Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
"Direct Participants" of DTC include securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations.
"Indirect Participants," who include securities brokers and dealers, banks and
trust companies, can also access the DTC system if they maintain a custodial
relationship with a Direct Participant. If you are not a Direct Participant or
an Indirect Participant and you wish to purchase, sell or otherwise transfer
ownership of, or other interests in, Notes, you must do so through a Direct
Participant or an Indirect Participant. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange LLC, and the National Association of Securities
S-7
Dealers, Inc. The Securities and Exchange Commission has on file a set of the
rules applicable to DTC and its Direct Participants.
BOOK-ENTRY FORMAT
Under the book-entry format, the trustee will pay interest or principal to
Cede & Co., as nominee of DTC. DTC will forward the payment to the Direct
Participants, who will then forward the payment to the Indirect Participants or
to you as the beneficial owner. You may experience some delay in receiving your
payments under this system.
DTC is required to make book-entry transfers on behalf of its Direct
Participants and is required to receive and transmit payments of principal,
premium, if any, and interest on the Notes. Any Direct Participant or Indirect
Participant with which you have an account is similarly required to make book-
entry transfers and to receive and transmit payments with respect to the Notes
on your behalf.
The trustee will not recognize you as a registered holder under the
indenture, and you can only exercise the rights of a registered holder
indirectly through DTC and its Direct Participants. DTC has advised SRAC that it
will only take action regarding a Note if one or more of the Direct Participants
to whom the Note is credited direct DTC to take such action. DTC can only act on
behalf of its Direct Participants. Your ability to pledge Notes to non-Direct
Participants, and to take other actions, may be limited because you will not
possess a physical certificate that represents your Notes.
DTC has agreed to the foregoing procedures in order to facilitate transfers
of the Notes among participants of DTC. However, DTC is under no obligation to
perform or continue to perform those procedures, and it may discontinue those
procedures at any time.
SAME-DAY SETTLEMENT AND PAYMENT
Initial settlement of the Notes will be made in immediately available
funds. Secondary market trading between DTC Direct Participants will occur in
accordance with DTC rules and will be settled in immediately available funds
using DTC's Same-Day Funds Settlement System.
CERTIFICATED NOTES
SRAC will re-issue Notes to you or your nominees, in fully certificated
registered form, rather than to DTC or its nominees, only if:
- SRAC advises the trustee in writing that DTC is no longer willing or able
to discharge its responsibilities properly, and the trustee or SRAC is
unable to locate a qualified successor; or
- SRAC, at its option, elects to terminate the book-entry system through
DTC.
If either of the two above events occurs, DTC is required to notify all
Direct Participants that Notes in fully certificated registered form are
available through DTC. DTC will then surrender the global note or notes
representing the Notes along with instructions for re-registration. The trustee
will re-issue the Notes in fully certificated registered form and will recognize
the registered holders of the certificated Notes as registered holders under the
indenture.
UNITED STATES TAX CONSIDERATIONS
The following summary of the principal United States federal income tax
consequences of purchasing, owning and disposing of Notes applies to you only if
you are the initial holder of the Notes and you acquire them for a price equal
to the initial issue price of the Notes.
This summary is based upon the opinion of Mayer, Brown, Rowe & Maw, SRAC's
special United States federal income tax counsel. For purposes of this "United
States Tax Considerations" section of this prospectus supplement, with respect
to book-entry Notes, the term "holder" refers to you if you acquire a beneficial
ownership interest in those Notes through the book-entry system of DTC and with
respect to
S-8
certificated Notes, the term "holder" refers to you if you are the beneficial
owner of those notes, regardless of whether those Notes are registered in your
name or the name of your nominee. This summary deals only with Notes held as
capital assets and does not deal with special tax situations such as:
- dealers in securities or currencies or traders in securities who elect
mark-to-market accounting for United States federal income tax purposes;
- tax-exempt organizations;
- banks;
- regulated investment companies;
- common trust funds;
- United States holders (as defined below) whose functional currency is not
the United States dollar; or
- persons holding Notes as part of a larger integrated financial
transaction.
This summary is based on United States federal income tax law, including
the United States Internal Revenue Code of 1986, as amended (the "Code") as of
the date of this prospectus supplement. Subsequent developments in United States
federal income tax law, which may be applied retroactively, could have a
material effect on the United States federal income tax consequences of
purchasing, owning or disposing of Notes as set forth in this summary. Before
you purchase Notes, you should consult your own tax advisor about how the United
States federal income tax law or any other laws, including the laws of any other
taxing jurisdiction, will apply to your particular situation.
SRAC intends to characterize the Notes as debt. SRAC's characterization of
the Notes will be binding on you, unless you disclose a different
characterization on your federal income tax return. The United States Internal
Revenue Service will not be bound by SRAC's or your characterization of the
Notes.
UNITED STATES HOLDERS
The following summary applies to you only if you are a United States holder
(as defined below).
DEFINITION OF A UNITED STATES HOLDER
A "United States holder" is a holder of Notes who is, or which is, a United
States person. A United States person is:
- a citizen or resident of the United States;
- a corporation or partnership organized under the laws of the United
States or of any State;
- an estate, the income of which is subject to United States federal income
taxation regardless of the source of that income; or
- a trust, if a United States court is able to exercise primary supervision
over the trust's administration and one or more United States persons has
the authority to control all of the trust's substantial decisions.
PAYMENTS OF INTEREST
The interest on your Notes will be taxed to you as ordinary interest
income. In addition:
- if you use the cash method of accounting for tax purposes, you will be
taxed on the interest on your Notes at the time it is paid to you; and
- if you use the accrual method of accounting for tax purposes, you will be
taxed on the interest on your Notes at the time it accrues.
S-9
AMORTIZABLE BOND PREMIUM
Generally, if the price you paid for your Notes exceeds the amount payable
upon the Notes at maturity, the excess may constitute amortizable bond premium.
You may elect to amortize such bond premium under the constant interest rate
method over the period from your acquisition date to the Notes' maturity date as
an offset to interest income on the Notes, rather than as a separate interest
deduction item subject to the investment interest limitations of the Code. If
you elect to amortize bond premium, you must generally reduce your tax basis in
the related Notes by the amount of bond premium used to offset interest income.
If your Notes are redeemed in full before their maturity and you have elected to
amortize bond premium, you may be entitled to a deduction for any remaining
unamortized bond premium in the taxable year of the redemption. Any election you
make to amortize bond premium generally will apply to all debt instruments held
by you (other than debt instruments the interest on which is excludable from
gross income) at the beginning of the first taxable year to which your election
applies, and any debt instruments you acquire thereafter, and is irrevocable
without the consent of the United States Internal Revenue Service.
SALE, REDEMPTION OR OTHER DISPOSITION OF NOTES
Your tax basis in your Notes will be the Notes' U.S. dollar cost, reduced
by any bond premium you amortize. You may recognize capital gain or loss when
you sell or otherwise dispose of your Notes, or when SRAC redeems your Notes,
equal to the difference between:
- the amount realized on the sale or redemption or other disposition (less
any amount attributable to accrued interest, which will be taxable as
such); and
- your tax basis in the Notes.
Your gain or loss will be a long-term capital gain or loss if at the time of the
sale, payment or other disposition, you have held the Notes for more than one
year.
FOREIGN HOLDERS
The following summary applies to you if you are not a United States holder
(as defined above) and not a resident of a territory of the United States or
other area subject to its jurisdiction.
U.S. WITHHOLDING TAX
Under current United States federal income tax laws, and subject to the
discussion below, United States federal withholding tax will not apply to
payments by SRAC or any paying agent of SRAC (in its capacity as such) of
principal of and interest on your Notes in accordance with the "portfolio
interest" exception of the Code, provided:
- you, or a partnership you are a member of, do not actually or
constructively own ten percent or more of the total combined voting power
of all classes of the stock of SRAC entitled to vote;
- you are not a controlled foreign corporation for United States tax
purposes with respect to which SRAC is a "related person" as defined
under the Code; and
- you provide a signed written statement, under penalties of perjury, that
can reliably be related to you, certifying that you are not a United
States person and providing your name and address to:
(A) SRAC or its agent;
S-10
(B) a securities clearing organization, bank (including certain regulated
United States branches of a foreign bank or a foreign insurance
company) or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a
"Financial Institution"), if that institution:
- holds the Notes on your behalf;
- provides an intermediary certificate to SRAC or its agent under
penalties of perjury confirming that the institution (or a
Financial Institution between you and the institution) has received
your signed written statement; and
- furnishes a copy of your signed written statement to SRAC or its
agent; or
(C) a specified withholding partnership or qualified intermediary that
provides a duly completed withholding certificate to SRAC or its
agent.
Your signed written statement will be generally effective only with respect
to interest payments made to you after you signed the statement in the
calendar year in which you sign it and the three immediately following
calendar years.
U.S. INCOME TAX
Except for the possible application of United States withholding tax (see
"United States Tax Considerations -- Foreign Holders -- U.S. Withholding Tax"
above) and backup withholding tax (see "United States Tax
Considerations -- Backup Withholding and Information Reporting" below), you will
not have to pay United States federal income tax on payments of principal and
interest on your Notes, or on gains from the sale, redemption or other
disposition of your Notes, provided you (or the fiduciary, settlor, or
beneficiary of, or a person holding a power over you, if you are an estate or
trust; or any of your partners, if you are a partnership):
- are not and have not been engaged in a trade or business in the United
States;
- do not have and have not had a present or former connection with the
United States, including, without limitation, the status as a citizen or
former citizen or resident or former resident of the United States; and
- are not and have not been, for United States federal income tax purposes
(i) a personal holding company, (ii) a corporation that accumulates
earnings to avoid United States federal income tax, or (iii) a person
treated as making an election that subjects your payments of principal
and interest on your Notes to United States federal income tax.
However, if you are an individual and are present in the United States for
183 days or more during the taxable year of the sale or other disposition of
your Notes, any gain you realize on the sale or other disposition may be subject
to a 30% United States federal income tax if your gain is attributable to an
office or fixed place of business in the United States or you have a tax home in
the United States.
If you are engaged in a trade or business in the United States and
interest, gain or any other income in respect of your Notes is effectively
connected with the conduct of your trade or business, you may be subject to
United States income tax on the interest, gain or income even though it is
exempt from the withholding tax discussed in the preceding paragraphs. You will
have to pay this income tax at the statutory rates provided for United States
persons after you deduct any deductible expenses allocable to your effectively
connected interest, gain or income. In addition, if you are a foreign
corporation, you may be subject to a branch profits tax equal to 30% of your
effectively connected earnings and profits for the taxable year, as adjusted for
certain items, unless a lower rate applies to you under a United States income
tax treaty with your country of residence. For this purpose, you must include
interest, gain or income on your Notes in the earnings and profits subject to
the branch tax if these amounts are effectively connected with the conduct of
your United States trade or business.
S-11
U.S. ESTATE TAX
If you are an individual and are not a citizen or resident of the United
States at the time of your death, your Notes will generally not be subject to
the United States federal estate tax, unless:
- you actually or constructively own ten percent or more of the total
combined voting power of all classes of stock of SRAC; or
- your interest on the Notes is effectively connected with your conduct of
a United States trade or business.
BACKUP WITHHOLDING AND INFORMATION REPORTING
GENERAL RULES
If you do not provide a correct taxpayer identification number and other
information, or do not comply with certain other requirements or otherwise
establish an exemption, SRAC, its paying agent or a broker, as the case may be,
will be required to collect backup withholding tax from payments to you. This
backup withholding tax applies to certain payments of principal and interest on
Notes and to proceeds from the sale or disposition of Notes before maturity.
Generally, individuals are not exempt recipients, whereas corporations and
certain other entities generally are exempt recipients.
If you provide the United States Internal Revenue Service with the
information it requires, you will receive a refund or a credit against your
United States federal income tax liability for any amounts withheld from your
payments under the backup withholding rules.
SRAC, its paying agent or a broker, as the case may be, will also be
required to report certain information relating to their payments of principal
and interest on Notes and of proceeds from the sale or disposition of Notes
before maturity.
EXCEPTIONS APPLICABLE TO NON-UNITED STATES PERSONS AND EXEMPT RECIPIENTS
Treasury regulations provide that backup withholding and information
reporting will not apply to payments of principal and interest on Notes by SRAC
or its paying agents to you if you certify under penalties of perjury that you
are not a United States person (as described above under "United States Tax
Considerations -- Foreign Holders -- U.S. Withholding Tax") or otherwise
establish an exemption, provided neither SRAC nor its paying agents has actual
knowledge, or reason to know, that you are a United States person or that the
conditions of any other exemption are not in fact satisfied.
If a foreign office of a custodian, nominee or other agent collects your
payment on your behalf, that custodian, nominee or other agent does not have to
apply backup withholding to its payments to you. However, if that custodian,
nominee or other agent is a United States person, a controlled foreign
corporation for United States federal income tax purposes, a foreign partnership
that is either controlled by United States persons or engaged in a United States
trade or business or a foreign person 50% or more of whose gross income is from
a United States trade or business for a specified three-year period, the
custodian, nominee or other agent will be subject to certain information
reporting requirements with respect to that payment unless:
- the custodian, nominee or other agent has evidence in its records that
you are not a United States person and does not have actual knowledge, or
reason to know, that the evidence is false;
- you are an exempt recipient, such as a bank, corporation or Financial
Institution; or
- you otherwise establish an exemption.
Payments to you on a Note by the United States office of a custodian,
nominee or other agent on your behalf will be subject to information reporting
and backup withholding, unless:
- you certify under penalties of perjury that you are not a United States
person and you provide your name and address; or
S-12
- you otherwise establish an exemption.
Backup withholding will not apply to payments of the proceeds of your sale
of your Notes if:
- you are not a United States person; and
- you sell your Notes to or through a foreign office of a broker.
Information reporting will generally apply to payments to you, even if you
are not a United States person, of the proceeds of the sale of your Notes to or
through a foreign office of a broker that is a "U.S. payor" or a "U.S.
middleman" (including (i) a person who is a United States person, (ii) a
controlled foreign corporation for United States federal income tax purposes,
(iii) a foreign partnership that is either controlled by United States persons
or engaged in a United States trade or business, or (iv) a foreign person 50% or
more of whose gross income is from a United States trade or business for a
specified three-year period), unless:
- you are an exempt recipient;
- the broker has evidence in its records that you are not a United States
person and has no actual knowledge or reason to know that the evidence is
unreliable; or
- you otherwise establish an exemption.
Information reporting and backup withholding requirements will apply to payments
of the proceeds of a sale to or through the United States office of a broker
unless:
- you certify under penalties of perjury that you are not a United States
person and provide your name and address; or
- you otherwise establish an exemption.
TEMPORARY TREASURY REGULATIONS ON REPORTABLE TRANSACTIONS
Under recently issued temporary Treasury regulations, each taxpayer that
has participated in a "reportable transaction" is required to disclose its
participation on its tax return for the taxable year in which the Federal income
tax liability of the taxpayer is affected by such participation. Although the
matter remains uncertain, it is possible that the redemption of the Notes under
the circumstances described under the heading "The Notes -- Redemption for Tax
Reasons" could render the regulations applicable to the Notes. In addition, a
list identifying holders who purchase the Notes could be required to be
maintained and, upon request, furnished to the Internal Revenue Service. The
Treasury Department is currently reviewing these temporary regulations for the
purpose of narrowing the scope of the regulations and it is unclear whether the
regulations, as revised, would exclude transactions which provide for
redemptions similar to tax redemptions described above from the list of
"reportable transactions." Holders may consider consulting their tax advisors
concerning any possible disclosure obligations arising from the purchase of the
Notes.
S-13
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
and the Pricing Agreement dated the date of this prospectus supplement, SRAC has
agreed to sell to each of the Underwriters named below, and each of the
Underwriters has severally agreed to purchase from SRAC, the respective
principal amounts of Notes set forth opposite its name in the table below:
PRINCIPAL
AMOUNT OF
NOTES
UNDERWRITER ---------
-----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $
Salomon Smith Barney Inc. ..................................
Morgan Stanley & Co. Incorporated...........................
UBS Warburg LLC.............................................
Banc of America Securities LLC..............................
Deutsche Bank Securities Inc. ..............................
RBC Dain Rauscher Inc. .....................................
Lehman Brothers Inc. .......................................
McDonald Investments Inc. ..................................
U.S. Bancorp Piper Jaffray Inc. ............................
Wachovia Securities, Inc. ..................................
Wells Fargo Securities, LLC.................................
------------
Total.......................................... $
============
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Smith Barney Inc.
are acting as joint book-running managers in connection with the offering of the
Notes.
CONDITIONS. The Underwriting Agreement obligates the Underwriters to pay
for and accept delivery of the Notes if their counsel approves specified legal
matters and specified other conditions are satisfied. The Underwriters are
committed to take and pay for all the Notes if they take any of them.
TERMS. The Underwriters have advised SRAC that they will offer part of the
Notes directly to the public at the public offering price set forth on the cover
page of this prospectus supplement and will offer part of the Notes to certain
dealers at a price that represents a concession not in excess of % of the
principal amount of Notes. The Underwriters may allow, and those dealers may
reallow, a concession not in excess of % of the principal amount of Notes
to other underwriters or to certain other dealers. The Underwriters may vary the
price and other selling terms of the Notes from time to time after the initial
offering of the Notes.
OVERALLOTMENT OPTION. SRAC has granted the Underwriters an option,
exercisable until March , 2003, to purchase up to an additional $
aggregate principal amount of Notes at the public offering price less the
underwriting discount, as set forth on the cover page of this prospectus
supplement. The Underwriters may exercise the option solely for the purpose of
covering overallotments, if any, made in connection with the offering of the
Notes. To the extent the option is exercised, each Underwriter will become
obligated to purchase approximately the same percentage of the additional Notes
as the Underwriter purchased in the original offering.
The following table shows the underwriting discount SRAC will pay to the
underwriters in connection with this offering.
TOTAL
-----------------------------
WITHOUT WITH
OVERALLOTMENT OVERALLOTMENT
------------- -------------
Underwriting discount paid by SRAC.......................... $ $
In connection with the offering, SRAC will pay an underwriting discount of
$ for each $25 principal amount of Notes.
S-14
SETTLEMENT. It is expected that delivery of the Notes will be made against
payment for the Notes on or about the date specified in the last paragraph of
the cover page of this prospectus supplement, which will be the third business
day following the date of pricing of the Notes.
PRICE STABILIZATION AND SHORT POSITIONS. In connection with the sale of the
Notes, certain of the Underwriters may engage in transactions that stabilize,
maintain or otherwise affect the price of the Notes. Specifically, the
Underwriters may overallot the offering, creating a short position. In addition,
the Underwriters may bid for and purchase the Notes in the open market to cover
short positions or to stabilize the price of the Notes. Any of these activities
may stabilize or maintain the market price of the Notes above independent market
levels. The Underwriters will not be required to engage in these activities, and
may end any of these activities at any time.
INDEMNIFICATION. SRAC has agreed to indemnify the Underwriters against
specified liabilities, including liabilities under the Securities Act of 1933,
as amended, or to contribute to payments the Underwriters may be required to
make with respect to these liabilities.
EXPENSES. SRAC estimates that its expenses in connection with the offering
and sale of the Notes will be approximately $ , of which up to $
will be reimbursed by the Underwriters.
LISTING. Prior to the offering, there has been no public market for the
Notes. SRAC intends to list the Notes on the New York Stock Exchange, and SRAC
expects trading in the Notes on the New York Stock Exchange to begin within 30
days after the original issue date. In order to meet one of the requirements for
listing the Notes, the Underwriters will undertake to sell lots of 100 or more
Notes to a minimum of 400 beneficial holders.
NEW ISSUE OF NOTES. The Notes are a new issue of securities with no
established trading market. The Underwriters have advised SRAC that the
Underwriters intend to make a market in the Notes but are not obligated to do so
and may discontinue market making at any time without notice. Neither SRAC nor
the Underwriters can assure you that the trading market for the Notes will be
liquid.
OTHER INFORMATION. In the ordinary course of their respective businesses,
certain of the Underwriters and/or their affiliates provide from time to time
various general financing, financial advisory and banking services to SRAC and
its affiliates.
USE OF PROCEEDS
SRAC expects to add the net proceeds (before expenses) of $ ($ if
the Underwriters' overallotment option is exercised in full) that it receives
from the sale of the Notes to its general funds and will initially use these
proceeds to reduce its short-term debt. See "Use of Proceeds" in the prospectus.
LEGAL MATTERS
Steven M. Cook, Vice President, Deputy General Counsel and Acting General
Counsel of Sears, is passing upon the legality of the Notes for SRAC. As of
February 3, 2003, Mr. Cook owned 91,163 shares of Sears common stock (including
1,899 shares held in Sears 401(k) savings plans) and had been granted stock
options with respect to an additional 25,676 Sears common shares. Mayer, Brown,
Rowe & Maw will pass upon certain legal matters for SRAC as to specified tax
matters. Skadden, Arps, Slate, Meagher & Flom LLP is passing upon certain legal
matters for the Underwriters. Skadden, Arps, Slate, Meagher & Flom LLP performs
legal services for Sears from time to time.
GENERAL INFORMATION
The independent auditors of SRAC are Deloitte & Touche LLP.
S-15
SRAC's Board of Directors adopted the resolutions relating to the execution
of the indenture and the sale and issuance of the Notes on January 17, 2000,
November 29, 2001, September 30, 2002 and December 18, 2002.
Except as this prospectus supplement and the prospectus may explain, in the
judgment of SRAC's management, (a) there has been no material adverse change in
SRAC's condition since September 28, 2002 and (b) any pending litigation against
SRAC that is likely to result in a material adverse effect on SRAC's
consolidated financial position is disclosed in this prospectus supplement and
the prospectus or in the documents incorporated by reference.
S-16
SEARS ROEBUCK ACCEPTANCE CORP.
$9,500,000,000
DEBT SECURITIES
----------------------
Sears Roebuck Acceptance Corp. ("SRAC") may from time to time sell up to
$9,500,000,000 aggregate initial offering price of its debt securities. These
debt securities may consist of debentures, notes or other types of unsecured
debt. This prospectus contains a general description of the debt securities that
SRAC may offer for sale. All remaining material terms of these debt securities
will be described in supplements to this prospectus.
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
----------------------
DECEMBER 6, 2002
SRAC HAS NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO
THIS PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AS IF SRAC HAD AUTHORIZED IT. THIS PROSPECTUS AND THE
ACCOMPANYING SUPPLEMENT TO THIS PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH THEY RELATE, NOR DO THIS PROSPECTUS AND THE ACCOMPANYING
SUPPLEMENT TO THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE
INFORMATION CONTAINED IN THIS PROSPECTUS AND THE SUPPLEMENT TO THIS PROSPECTUS
IS ACCURATE AS OF THE DATES ON THEIR COVERS. WHEN SRAC DELIVERS THIS PROSPECTUS
OR A SUPPLEMENT OR MAKES A SALE PURSUANT TO THIS PROSPECTUS, SRAC IS NOT
IMPLYING THAT THE INFORMATION IS CURRENT AS OF THE DATE OF THE DELIVERY OR SALE.
----------------------
In connection with the issue of any debt securities, an underwriter, if
any, disclosed as stabilizing manager in the applicable supplement to this
prospectus, or any person acting for it, may over-allot or effect transactions
with a view to supporting the market price of such debt securities or any
associated securities at a level higher than that which might otherwise prevail
for a limited period after the issue date. However, there may be no obligation
on such stabilizing manager or any agent of it to do this. Such stabilizing, if
commenced, may be discontinued at any time, and must be brought to an end after
a limited period.
TABLE OF CONTENTS
PROSPECTUS
Available Information....................................... 3
Reports to Holders of Debt Securities....................... 3
Incorporation of Certain Documents by Reference............. 3
Sears Roebuck Acceptance Corp............................... 4
Use of Proceeds............................................. 4
Ratio of Earnings to Fixed Charges.......................... 5
Description of Debt Securities.............................. 5
Plan of Distribution........................................ 10
Legal Matters............................................... 11
Experts..................................................... 11
2
AVAILABLE INFORMATION
SRAC and Sears, Roebuck and Co. ("Sears"), SRAC's parent, are required to
file reports and other information with the Securities and Exchange Commission.
Sears also files proxy statements with the Commission. You can inspect and copy
these reports, proxy statements and other information at the public reference
facilities of the Commission, in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549. You can also obtain copies of these materials from the public
reference room of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. You may call the Commission at 1-800-SEC-0330 for
information on the operation of the public reference room. The Commission also
maintains a web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission (http://www.sec.gov). You can inspect reports and other information
concerning SRAC and Sears at the office of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005. You can also inspect reports, proxy
statements and other information concerning Sears at the offices of the Chicago
Stock Exchange Incorporated, 440 South LaSalle Street, Chicago, Illinois 60605,
and the Pacific Exchange, Inc., 301 Pine Street, San Francisco, California
94104.
SRAC and Sears have filed a registration statement and related exhibits
with the Commission under the Securities Act of 1933, as amended. The
registration statement contains additional information about SRAC, Sears and the
debt securities. You may inspect the registration statement and exhibits without
charge at the office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and you may obtain copies from the Commission at prescribed rates.
REPORTS TO HOLDERS OF DEBT SECURITIES
SRAC will send its annual reports to the holders of its debt securities.
These annual reports will include financial information that independent public
accountants have audited and reported on, as well as other information about
SRAC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
SRAC and Sears incorporate and make part of this prospectus by reference
the following documents, filed by SRAC and Sears with the Commission pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended:
- the Annual Reports on Form 10-K for the fiscal year ended December 29,
2001, filed by SRAC and Sears;
- the Quarterly Reports on Form 10-Q for the quarters ended March 30, June
29 and September 28, 2002, filed by SRAC and Sears;
- the Quarterly Report on Form 10-Q/A (Amendment Nos. 1 and 2) for the
quarter ended March 30, 2002, filed by Sears;
- the Quarterly Report on Form 10-Q/A for the quarter ended June 29, 2002,
filed by Sears;
- the Current Reports on Form 8-K filed on January 10, January 17, April
10, April 19, May 17, July 18, September 9, October 4, October 7 and
October 18, 2002, by Sears;
- the Current Reports on Form 8-K filed on March 29, May 31, July 2, and
November 26, 2002, by SRAC; and
- all documents filed by SRAC or Sears with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, on or after the date of this prospectus and before SRAC
stops offering the debt securities.
To receive a free copy of any of the documents incorporated by reference in
this prospectus (other than exhibits, unless they are specifically incorporated
by reference in the documents), call or write Sears
3
Roebuck Acceptance Corp., 3711 Kennett Pike, Greenville, Delaware 19807,
Attention: Vice President, Finance (302/434-3100).
SEARS ROEBUCK ACCEPTANCE CORP.
SRAC is a wholly owned subsidiary of Sears that was incorporated under the
laws of Delaware in 1956. Its general offices are located at 3711 Kennett Pike,
Greenville, Delaware 19807 (302/434-3100). It raises funds primarily by issuing
commercial paper, medium-term notes and discrete underwritten debt. It uses the
proceeds from its borrowings to acquire short-term notes of Sears and, on
occasion, to purchase outstanding receivable balances from Sears. Sears, a
multi-line retailer that conducts domestic and international merchandising and
credit operations, uses the funds it obtains from SRAC for general funding
purposes. SRAC, and not Sears, will be solely responsible for repaying the debt
securities.
SRAC generates income primarily from the earnings on its investment in the
notes and receivable balances of Sears. Sears presently calculates the interest
rate on its notes so that SRAC maintains an earnings to fixed charges ratio of
at least 1.25. The yield on SRAC's investment in Sears notes is related to
SRAC's borrowing costs. As a result, movements in interest rates and changes in
Sears borrowing requirements cause SRAC's earnings to fluctuate. The indentures
relating to SRAC's debt securities require SRAC to maintain a ratio of earnings
to fixed charges of not less than 1.10 for any fiscal quarter (determined in
accordance with Item 503(d) of Regulation S-K promulgated by the Commission) and
to cause Sears to maintain ownership of all of SRAC's voting stock as long as
any of SRAC's debt securities are outstanding. Sears has agreed to pay SRAC the
amounts that are necessary for SRAC to maintain an earnings to fixed charges
ratio of at least 1.10 and has agreed to maintain ownership of all of SRAC's
voting stock as long as any of SRAC's debt securities are outstanding. See
"Description of Debt Securities -- Indenture Restrictions."
As of December 6, 2002, SRAC had 10 employees.
USE OF PROCEEDS
SRAC generally will add the net proceeds it receives from the sale of its
debt securities to its general funds and use the proceeds to reduce its
short-term debt. As indicated in this prospectus under the heading "Sears
Roebuck Acceptance Corp.," SRAC's principal business is purchasing short-term
notes of Sears. Additionally, SRAC occasionally purchases receivable balances
from Sears domestic credit operations. SRAC expects to incur additional debt,
but has not yet determined how much or the terms of this debt. SRAC will make
these determinations from time to time based on economic conditions and certain
capital requirements of Sears. SRAC anticipates that Sears and its subsidiaries
will continue their practice of short-term borrowing and will occasionally incur
additional long-term debt and engage in securitization programs in which Sears
and its subsidiaries sell interests in pools of credit card receivables in
public or private transactions. Sears also occasionally may issue equity
securities.
4
RATIO OF EARNINGS TO FIXED CHARGES
Sears presently calculates the interest rate on SRAC's investment in Sears
notes to provide SRAC with earnings sufficient to cover its fixed charges at
least 1.25 times. The ratios of earnings to fixed charges for SRAC and Sears for
the interim period and the years ended on the dates set forth in the following
table were as follows:
39 WEEKS
ENDED
SEPTEMBER 28, DECEMBER 29, DECEMBER 30, JANUARY 1, JANUARY 2, JANUARY 3,
2002 2001 2000 2000 1999 1998
------------- ------------ ------------ ---------- ---------- ----------
SRAC(A).................. 1.26 1.26 1.26 1.25 1.26 1.25
Sears(B)................. 2.09 1.76 2.59 2.72 2.19 2.36
---------------
(A) Calculated as follows:
earnings = net income + fixed charges + income taxes
---------------------------------------------------------------------------
fixed charges = interest expense + amortization of debt discount and expense
(B) Calculated as follows:
earnings = income before income taxes, minority interest and extraordinary
loss -- undistributed net income (loss) of unconsolidated subsidiaries +
fixed charges (excluding interest capitalized)
---------------------------------------------------------------------------
fixed charges = interest expense + amortization of debt discount and expense
+ the portion of operating lease rentals which Sears estimates represents
the interest element in such rentals + interest capitalized
DESCRIPTION OF DEBT SECURITIES
This prospectus describes certain general terms and provisions of SRAC's
unsecured debt securities. When SRAC offers to sell a particular series of debt
securities, it will describe the specific terms of the series in a supplement to
this prospectus. SRAC will also indicate in the supplement whether the general
terms and provisions described in this prospectus apply to a particular series
of debt securities.
The debt securities are to be issued under either an indenture dated as of
May 15, 1995 between SRAC and JPMorgan Chase Bank, as trustee, or an indenture
dated as of October 1, 2002 between SRAC and BNY Midwest Trust Company, as
trustee, the terms of each of which are identical in all material respects. SRAC
also may enter into an indenture with one or more other eligible trustees. SRAC
will identify the trustee and the particular indenture under which it is issuing
each series of its debt securities in the applicable supplement to this
prospectus.
The following sections summarize certain provisions of SRAC's debt
securities and indentures. This summary is qualified by and subject to the
actual provisions of the indenture under which SRAC is issuing a particular
series of debt securities. SRAC has filed the indentures with the Commission and
is incorporating each of them by reference in this prospectus. References below
to the "indenture" and the "trustee" refer to the applicable indenture and
trustee identified in a prospectus supplement relating to a particular series of
debt securities. Where this summary refers to particular provisions of each
indenture in parentheses, the provisions are incorporated by reference.
GENERAL TERMS
The debt securities will be unsecured obligations of SRAC.
SRAC can issue an unlimited amount of debt securities under the indenture,
and can issue them from time to time in one or more series.
5
If any of the following terms apply to a particular series of debt
securities that SRAC offers to sell, the supplement to this prospectus will
describe the applicable terms:
- the title
- any limit on the aggregate principal amount
- the maturity date or dates
- the issue price
- the interest rate or rates (which may be fixed or variable)
- the date from which interest will accrue
- the interest payment dates (including the first interest payment date)
- the record dates for the interest payment dates
- any optional or mandatory redemption, conversion or exchange provisions
and whether you have or SRAC has the right to use these provisions
- any subordination provisions
- any sinking fund provisions
- the amount payable upon acceleration of the maturity date, if the amount
is not the principal amount of the debt securities
- the terms of any warrants attached to the debt securities
- the currencies that you may use to purchase the debt securities and that
SRAC may use to pay principal, any premium and interest
- any index SRAC will use to determine the amount of principal, premium and
interest payments
- whether SRAC will issue the debt securities as one or more global
securities to be held for investors by a depository and, if so, the name
of the depository
- the places where the principal, any premium and interest will be payable,
if those places are not set forth in the indenture
- any other terms that are consistent with the indenture that may modify or
delete any provision of the indenture to the extent the provision applies
to such series
SRAC will pay principal and any premium and may pay any interest at the
office of the paying agent it maintains for such purposes in the Borough of
Manhattan of The City of New York. You may transfer your beneficial interests in
debt securities (other than debt securities represented by global securities) at
the same office. SRAC may also designate other locations for payments and
transfers in the city in which its principal executive offices are located or
the city in which the principal corporate trust office of the trustee is
located. Unless SRAC specifies otherwise in the supplement to this prospectus,
the locations for payment and transfer initially will include a designated
office of the trustee in the Borough of Manhattan of The City of New York and
SRAC's principal executive offices in Greenville, Delaware.
SRAC will generally pay interest on its debt securities by checks mailed to
you at your registered address, unless you make other arrangements or the debt
securities are represented by a global security. (Sections 2.5, 3.1, 3.2) If the
debt securities are represented by global securities, SRAC will provide
information about payment of principal, any premium and interest and about
transfers of beneficial interests in the global securities in the supplement to
this prospectus.
If SRAC has indicated in the supplement to this prospectus that it will pay
principal, any premium and interest in a currency other than U.S. dollars and
that currency is unavailable for payment due to circumstances beyond SRAC's
control, SRAC will pay the principal, any premium and interest in U.S.
6
dollars. The exchange rate will be the most recent noon buying rate in The City
of New York for cable transfers in the unavailable currency, as certified for
customs purposes by the Federal Reserve Bank of New York. (Section 2.12)
SRAC will issue its debt securities only in fully registered form, without
coupons. The debt securities will be issued in denominations of $1,000 or an
integral multiple of $1,000, unless SRAC indicates otherwise in the supplement
to this prospectus. (Section 2.2)
You will not have to pay a service charge to register a transfer or
exchange of debt securities. However, SRAC may require you to pay an amount
sufficient to cover any tax or other governmental charge in connection with the
transfer or exchange. (Section 2.5)
SRAC may issue debt securities at a discounted price with provisions that
permit it to pay less than the principal amount if the holders of the debt
securities accelerate the maturity date as a result of a continuing default. If
SRAC chooses to issue these discounted debt securities, it will describe the
federal income tax consequences and other special considerations in the
supplement to this prospectus.
If your beneficial interest in these debt securities are held of record in
the name of a depositary or other nominee, you must notify such depositary or
nominee to take action, under the indenture or otherwise, on your behalf as
holder of the debt securities.
INDENTURE RESTRICTIONS
The indenture provides that SRAC will maintain a ratio of earnings to fixed
charges in every fiscal quarter of at least 1.10 and that it will cause Sears to
maintain ownership of all of SRAC's voting stock. SRAC determines its ratio of
earnings to fixed charges in accordance with Item 503(d) of Regulation S-K
promulgated by the Commission, as in effect on the date of the indenture. SRAC
has letter agreements with Sears pursuant to which Sears has agreed, for the
benefit of the holders of SRAC's debt securities, that
- Sears will pay SRAC amounts which, when added to SRAC's other earnings,
will be sufficient for SRAC to maintain the fixed charge coverage ratio
required by the indenture; and
- Sears will maintain ownership of SRAC's voting stock as long as SRAC is
required to cause Sears to do so.
The indenture provides that SRAC will cause Sears to observe and perform in
all material respects all covenants or agreements of Sears contained in the
letter agreements and will not amend, waive, terminate or otherwise modify any
provision of the letter agreements. (Section 3.6)
DEFAULTS
If any of the following occur in connection with any series of SRAC's debt
securities, SRAC will be in default under those debt securities:
- if SRAC fails to pay the principal amount and any premium on the series
when due and payable;
- if SRAC fails for 30 days after any interest payment date to pay any
interest that has become due (unless it deposits the entire amount due
with the trustee or with a paying agent within 30 days after the due
date);
- if SRAC fails to perform any of its other covenants under the indenture
that apply to that series of debt securities and does not cure that
failure for 60 days after it receives written notice that it has failed
to perform from holders of a majority of the principal amount of the
particular series of debt securities or the trustee;
- if any of SRAC's creditors or creditors of Sears, including holders of
SRAC's debt securities from a different series, accelerates the maturity
date of $100,000,000 or more in principal amount of SRAC debt or Sears
debt as a result of an event of default under any relevant mortgage,
indenture
7
or instrument, and that creditor does not rescind or annul the
acceleration within 30 days after SRAC receives written notice from
holders of a majority of the principal amount of the particular series of
debt securities or the trustee; however, if the maturity date was
accelerated as a result of compliance with applicable laws, court orders
or governmental decrees or if the default is remedied or cured by SRAC or
Sears or waived by the holders thereof or the debt is discharged prior to
the time that the holders of the particular series of SRAC debt
securities or the trustee take action to accelerate the maturity of these
SRAC debt securities or before the trustee receives a judgment in its
favor, then SRAC will not be in default under this provision;
- if SRAC takes specified actions in connection with a bankruptcy,
insolvency or reorganization; or
- if SRAC commits an act or omission that the supplement to this prospectus
identifies as an event of default.
Unless the supplement to this prospectus specifies otherwise, if SRAC
defaults on a particular series of debt securities and the default is
continuing, the holders of a majority of the principal amount of the outstanding
debt securities of that series or the trustee may accelerate the maturity date
of those debt securities. To accelerate the maturity date, those holders or the
trustee must declare that the principal amount of the debt securities of that
series is immediately due and payable. In certain circumstances, holders of a
majority of the principal amount of outstanding debt securities of the series
may annul the acceleration of the maturity date. (Section 6.1)
Within 90 days after a default for any series of debt securities occurs,
the trustee must notify the holders of debt securities of that series of the
default if it is known to the trustee and SRAC has not remedied it. A default
means the events specified above without the grace periods or notice. The
trustee may withhold notice to the holders of these debt securities of any
default (except in the payment of principal or interest) if it in good faith
considers this withholding to be in the best interests of the holders. (Section
10.3)
SRAC is required to file an annual certificate with the trustee, signed by
an officer, about any default by SRAC under any provision of the indenture.
(Section 3.4)
Before holders of debt securities have a right to institute a proceeding to
enforce the indenture or to obtain a remedy provided for by the indenture:
- holders of debt securities must notify the trustee of a default in
writing;
- holders of a majority of the principal amount of outstanding debt
securities of the particular series must request in writing that the
trustee institute the proceeding;
- holders of a majority of the principal amount of outstanding debt
securities of the particular series must offer reasonable indemnity to
the trustee if the trustee institutes the proceeding; and
- the trustee must neglect or refuse to institute the proceeding within a
reasonable time.
These requirements do not prevent a holder from enforcing the payment of
principal and interest on the debt securities held by such holder on or after
the relevant principal or interest due dates. (Section 6.7)
MODIFICATION OR AMENDMENT OF THE INDENTURE
SRAC may amend the indenture with the consent of the holders of a majority
of the aggregate principal amount of the outstanding debt securities of each
series affected by the amendment. However,
8
SRAC may not make any amendment without the consent of the holders of each
affected debt security then outstanding if that amendment will:
- permit SRAC to change the time of payment of any payment on the debt
securities, reduce any payment on the debt securities, or change the
currency in which SRAC makes any payments on the debt securities; or
- reduce the percentage of holders of any series of debt securities whose
consent is required to amend the indenture. (Article XI)
DEFEASANCE
TERMINATION OF SPECIFIED OBLIGATIONS
Unless SRAC provides otherwise in the supplement to this prospectus, SRAC
may terminate some of its obligations under the indenture with respect to the
debt securities of any series by depositing with the trustee or a paying agent,
in trust, any combination of the following in an amount sufficient to pay the
principal, any premium and each installment of interest on the debt securities
of that series on the dates these payments are due:
- money;
- securities backed by the full faith and credit of the United States of
America that the issuer cannot call or redeem (if the debt securities
with respect to which SRAC is terminating some of its obligations are
denominated in U.S. dollars);
- specified depository receipts for any non-callable and non-redeemable
securities backed by the full faith and credit of the United States of
America, or for a specific payment of interest on or principal of any
such securities, issued by a bank or trust company as custodian (if the
debt securities with respect to which SRAC is terminating some of its
obligations are denominated in U.S. dollars); or
- other securities that, when deposited in trust, alone or in combination
with other items in this list, will result in a nationally recognized
rating agency rating SRAC's debt securities in the highest generic
long-term debt rating category applicable to debt issued by an issuer
that has been released from its obligations to the same extent that SRAC
has been (if the debt securities with respect to which SRAC is
terminating some of its obligations are denominated in a foreign
currency).
As a prerequisite to establishing such a trust, in addition to other
requirements, SRAC must receive a ruling from the Internal Revenue Service or an
opinion of counsel who is not its employee. The ruling or opinion must state
that the holders of the debt securities with respect to which SRAC is
terminating some of its obligations will not recognize income, gain or loss for
federal income tax purposes as a result of the deposit with the trustee and
termination of these obligations. The ruling or opinion must also state that
those holders will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if SRAC had not
deposited money or securities with the trustee and terminated these obligations.
SRAC must also receive an opinion of counsel stating that, after 90 days, either
the trust deposit will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally or that the holders' rights would be adequately protected
despite the application of such laws to the trust funds.
Notwithstanding the deposit with the trustee or paying agent and compliance
with the additional requirements described above or in the indenture, SRAC's
obligations under the indenture to do the following with respect to a series
will remain in full force and effect until SRAC has paid the debt securities of
that series in full:
- pay principal, premium (if any) and interest;
- register the transfer or exchange of the debt securities;
9
- replace mutilated, destroyed, lost and stolen debt securities;
- maintain paying agencies; and
- hold monies for payment in trust. (Section 13.4)
If and when the Internal Revenue Service can provide a ruling, or counsel
can provide an opinion as described above, without reliance upon the
continuation of SRAC's obligations regarding the payment of principal, premium
(if any) and interest, then SRAC may discharge the indenture with respect to the
particular series of debt securities -- including its payment obligations -- by
delivering the ruling or opinion to the trustee and satisfying the other
conditions provided for in the indenture. (Section 13.4) Under present ruling
positions of the Internal Revenue Service, SRAC cannot obtain such a ruling or
opinion.
DISCHARGE OF THE INDENTURE
SRAC may also discharge the indenture, and all of its obligations under the
indenture, with respect to a particular series of debt securities -- including
its payment obligations -- if:
- all securities issued under the indenture have been canceled or delivered
to the trustee to be canceled; or
- all securities issued under the indenture that have not been canceled
- have become due and payable in accordance with their terms; or
- will become due and payable in accordance with their terms within one
year; or
- will be called for redemption within one year under arrangements that
satisfy the trustee.
To discharge the indenture in these circumstances, SRAC must deposit trust funds
with the trustee in an amount sufficient to pay all principal, interest and
premiums on the outstanding securities until they mature or are redeemed. SRAC
must also deliver a certificate of one of its officers and an opinion of
counsel, each stating that SRAC has complied with all conditions precedent to
the satisfaction and discharge of the indenture. (Section 13.1)
REGARDING THE TRUSTEES
JPMorgan Chase Bank, BNY Midwest Trust Company and certain of their
respective affiliates perform other services for SRAC.
PLAN OF DISTRIBUTION
SRAC may sell its debt securities to or through underwriters, directly to
other purchasers or through agents. SRAC anticipates offering its debt
securities directly to brokers or dealers, investment companies, insurance
companies, banks, savings and loan associations and trust companies or similar
institutions, and to trusts for which a bank, savings and loan association,
trust company or investment adviser is the trustee or is authorized to make
investment decisions.
SRAC may distribute its debt securities from time to time in one or more
transactions:
- at a fixed price or prices, which may change;
- at market prices prevailing at the time of sale;
- at prices related to such prevailing market prices; or
- at negotiated prices.
The supplement to this prospectus will describe the method of distribution
of any particular series of debt securities.
10
In connection with the sale of its debt securities, SRAC, or the purchasers
of debt securities for whom the underwriters may act as agents, may compensate
the underwriters in the form of discounts, concessions or commissions.
Underwriters may sell SRAC's debt securities to or through dealers and may
compensate the dealers in the form of discounts, concessions or commissions.
Dealers may also receive commissions from the purchasers of debt securities, for
whom they may act as agents. Under the Securities Act of 1933, as amended, the
Commission may deem underwriters, dealers and agents that participate in the
distribution of debt securities to be underwriters. The Commission also may deem
any discounts, commissions or concessions and any profit on the resale of debt
securities to be underwriting discounts and commissions under the Securities Act
of 1933, as amended. The supplement to this prospectus will identify any such
underwriter or agent and will describe any such compensation.
SRAC may enter into agreements to indemnify underwriters, dealers and
agents that participate in the distribution of its debt securities against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Unless otherwise specified in the supplement to this prospectus, Anastasia
D. Kelly, Senior Vice President and General Counsel of Sears, will pass upon the
legality of the debt securities for SRAC.
EXPERTS
The financial statements of SRAC and the financial statements and the
related financial statement schedule of Sears incorporated in this prospectus by
reference from SRAC's and Sears' Annual Reports on Form 10-K for the year ended
December 29, 2001 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are incorporated herein by
reference, and have been so incorporated in reliance upon the reports of
Deloitte & Touche LLP given upon the authority of Deloitte & Touche LLP as
experts in accounting and auditing.
With respect to the unaudited interim financial information contained in
the Quarterly Reports on Form 10-Q for Sears and SRAC, which are incorporated in
this prospectus by reference, Deloitte & Touche LLP have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in the Quarterly
Reports on Form 10-Q for Sears and SRAC and incorporated by reference in this
prospectus, they did not audit and they do not express an opinion on such
interim financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited nature
of the review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
reports on the unaudited interim financial information because those reports are
not "reports" or a "part" of the registration statement prepared or certified by
an accountant within the meaning of Sections 7 and 11 of the Securities Act of
1933.
11
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$
SEARS ROEBUCK ACCEPTANCE CORP.
% NOTES DUE FEBRUARY 1, 2043
------------
PROSPECTUS SUPPLEMENT
FEBRUARY , 2003
------------
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
MORGAN STANLEY
UBS WARBURG
------------
BANC OF AMERICA SECURITIES LLC
DEUTSCHE BANK SECURITIES
RBC DAIN RAUSCHER
LEHMAN BROTHERS
MCDONALD INVESTMENTS INC.
U.S. BANCORP PIPER JAFFRAY
WACHOVIA SECURITIES
WELLS FARGO SECURITIES, LLC
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------