UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 8, 2018
SEARS HOLDINGS CORPORATION
(Exact name of registrant as specified in charter)
Delaware | 000-51217, 001-36693 | 20-1920798 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
3333 Beverly Road Hoffman Estates, Illinois |
60179 | |
(Address of principal executive offices) | (Zip code) |
Registrants telephone number, including area code: (847) 286-2500
Not Applicable
(Former name or former address, if changed since last report):
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01. Entry into a Material Definitive Agreement.
The information required by Item 1.01 is included in Item 2.03 below and is incorporated by reference herein.
Item 2.02. Results of Operations and Financial Condition.
On March 14, 2018, Sears Holdings Corporation (the Company) issued a press release regarding, among other things, its fourth quarter and full year 2017 results. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Entry into Second Amendment to Second Amended and Restated Loan Agreement
On March 8, 2018, the Company, through Sears, Roebuck and Co., Kmart Stores of Illinois LLC, Kmart of Washington LLC, Kmart Corporation, SHC Desert Springs, LLC, Innovel Solutions, Inc., Sears Holdings Management Corporation, Maxserv, Inc. and Troy Coolidge No. 13, LLC (collectively, Borrowers), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a Second Amendment (the Second Amendment) to the Second Amended and Restated Loan Agreement, dated as of October 18, 2017 (as amended, including pursuant to the Second Amendment, the Loan Agreement), with JPP, LLC and JPP II, LLC (collectively, the Lenders). Pursuant to the Second Amendment, the Borrowers borrowed an additional $100 million (the Incremental Loan) from the Lenders. After giving effect to the Incremental Loan, the aggregate principal amount outstanding under the Loan Agreement was $621.9 million. Mr. Edward S. Lampert, the Companys Chief Executive Officer and Chairman, is the sole stockholder, chief executive officer and director of ESL Investments, Inc., which controls JPP, LLC and JPP II, LLC. The Incremental Loan matures on July 20, 2020. The Company expects to use the proceeds of the Incremental Loan for general corporate purposes.
The Incremental Loan will have an annual interest rate of LIBOR plus 9.00%, with accrued interest payable monthly. In addition to the Incremental Loan, as of March 5, 2018, under the Loan Agreement there were $379.2 million aggregate principal amount of outstanding loans maturing July 20, 2020, for which the interest rate was increased to LIBOR plus 9.00% in connection with the Second Amendment, as well as $142.7 million aggregate principal amount of outstanding loans maturing April 23, 2018 (subject to extension to July 6, 2018), for which the interest rate remains 11.0%. As with the existing loans under the Loan Agreement, the Incremental Loan is guaranteed by the Company and is currently secured by a first priority lien on certain real properties owned by the Borrowers. No upfront or funding fees will be paid in connection with the Incremental Loan.
The Loan Agreement includes certain representations and warranties, indemnities and covenants, including with respect to the condition and maintenance of the real property collateral. The Loan Agreement has certain events of default, including (subject to certain materiality thresholds and grace periods) payment default, failure to comply with covenants, material inaccuracy of representation or warranty, and bankruptcy or insolvency proceedings. If there is an event of default, the Lenders may declare all or any portion of the outstanding indebtedness to be immediately due and payable, exercise any rights they might have under the Loan Agreement and related documents (including against the collateral), and require the Borrowers to pay a default interest rate equal to the greater of (i) 2.5% in excess of the base interest rate and (ii) the prime rate plus 1%.
The foregoing description of the Second Amendment, the Incremental Loan and the Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the Second Amendment, a copy of which is filed herewith as Exhibit 10.1 and is incorporated by reference herein.
Entry into Credit Agreement
On March 14, 2018, the Company, through SRC O.P. LLC, SRC Facilities LLC and SRC Real Estate (TX), LLC (collectively, the Secured Loan Borrowers), entities wholly-owned and controlled indirectly by the Company, entered into a Credit Agreement (the Credit Agreement) with the lenders party thereto (collectively, the Secured Lenders), UBS AG, Stamford Branch, LLC, as administrative agent, and UBS Securities LLC, as lead arranger and bookrunner. The Credit Agreement provides for a $200 million term loan (the Secured Loan) that is secured by the Secured Loan Borrowers interests in 138 real properties that were released from a ring-fence arrangement with the Pension Benefit Guaranty Corporation.
The Secured Loan is guaranteed by the Company and certain of its subsidiaries. The Secured Loan bears interest at an annual interest rate of LIBOR plus 6.5% for the first three months the Secured Loan is outstanding, LIBOR plus 7.5% for the fourth through the sixth month the Secured Loan is outstanding and LIBOR plus 8.5% for the seventh through the ninth month the Secured Loan is outstanding. Accrued interest is payable monthly during the term of the Secured Loan. The Secured Loan matures on December 14, 2018. The Company will use the proceeds of the Secured Loan to make a contribution to the Companys pension plans.
The Company paid an upfront commitment fee of 1.5% of the principal amount of the Secured Loan, and paid an arrangement fee to UBS Securities LLC. To the extent permitted under other debt of the Company or its affiliates, the Secured Loan may be prepaid at any time in whole or in part, without penalty or premium. The Secured Loan Borrowers are required to apply the net proceeds of the sale of any real property collateral for the Secured Loan to repay the Secured Loan.
The Credit Agreement includes certain representations and warranties, indemnities and covenants, including with respect to the condition and maintenance of the real property collateral. The Credit Agreement has certain events of default, including (subject to certain materiality thresholds and grace periods) payment default, failure to comply with covenants, material inaccuracy of representation or warranty, and bankruptcy or insolvency proceedings. If there is an event of default, the Secured Loan Lenders may declare all or any portion of the outstanding indebtedness to be immediately due and payable, exercise any rights they might have (including against the collateral), and require the Secured Loan Borrowers to pay a default interest rate of 2.0% in excess of the base interest rate.
Entry into Mezzanine Loan Agreement
On March 14, 2018, the Company, through SRC Sparrow 2 LLC (the Mezzanine Loan Borrower), an entity wholly-owned and controlled indirectly by the Company, entered into a Mezzanine Loan Agreement (the Mezzanine Loan Agreement) with JPP, LLC and JPP II, LLC, as lenders (collectively, the Mezzanine Loan Lenders), and JPP, LLC, as administrative agent. Mr. Edward S. Lampert, the Companys Chief Executive Officer and Chairman, is the sole stockholder, chief executive officer and director of ESL Investments, Inc., which controls JPP, LLC and JPP II, LLC. The Mezzanine Loan Agreement provides for a $240 million term loan (the Mezzanine Loan) that is secured by a pledge of the equity interests in SRC O.P. LLC, the direct parent company of the entities that own the 138 real properties that secure the obligations of the Secured Loan Borrowers under the Credit Agreement.
The Mezzanine Loan Agreement contains an uncommitted accordion feature pursuant to which the Mezzanine Loan Borrower may incur additional loans (Additional Mezzanine Loans) of not more than $200 million in aggregate, subject to certain conditions set forth in the Mezzanine Loan Agreement and the Credit Agreement, including that the Additional Mezzanine Loans shall not exceed an amount equal to the principal amount of the Secured Loan repaid by the Secured Loan Borrowers.
The Mezzanine Loan bears interest at an annual interest rate of LIBOR plus 11.0%, with accrued interest payable monthly during the term of the Mezzanine Loan. The Mezzanine Borrowers paid an upfront commitment fee equal to 1.8% of the principal amount of the Mezzanine Loan. The Mezzanine Loan matures on July 20, 2020. The Company will use the proceeds of the Mezzanine Loan to make a contribution to the Companys pension plans.
The Mezzanine Loan is guaranteed by the Company and the same subsidiaries that guarantee the Secured Loan. To the extent permitted under other debt of the Company or its affiliates, the Mezzanine Loan may be prepaid at any time in whole or in part, without penalty or premium. Following repayment in full of the Secured Loan, the Mezzanine Loan Borrower is required to apply the net proceeds of the sale of any real property that served as collateral for the Secured Loan to repay the Mezzanine Loan.
The Mezzanine Loan Agreement includes certain representations and warranties, indemnities and covenants, including with respect to the condition and maintenance of the related real property. The Mezzanine Loan Agreement has certain events of default, including (subject to certain materiality thresholds and grace periods) payment default, failure to comply with covenants, material inaccuracy of representation or warranty, and bankruptcy or insolvency proceedings. If there is an event of default, the Mezzanine Lenders may declare all or any portion of the outstanding Mezzanine Loan to be immediately due and payable, exercise any rights they might have (including against the equity interests pledged as collateral), and require the Mezzanine Loan Borrowers to pay a default interest rate of 2.0% in excess of the base interest rate.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
Exhibit 99.1 | Press release, dated March 14, 2018 |
The information in Item 2.02 of this Current Report on Form 8-K, including the press release incorporated in such Item 2.02, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
Private Securities Litigation Reform Act of 1995
Cautionary Statement Concerning Forward-Looking Statements
This Form 8-K contains forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause the Companys actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Such statements are based upon the
current beliefs and expectations of the Companys management and are subject to significant risks and uncertainties. Factors that could cause actual results to differ from those set forth in the forward-looking statements include, but are not limited to, those discussed in this Form 8-K and those discussed in the Companys most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. The Company intends the forward-looking statements to speak only as of the time made and does not undertake to update or revise them as more information becomes available, except as required by law.
SIGNATURES
Pursuant to the requirements 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 HOLDINGS CORPORATION | ||
By: | /s/ Robert A. Riecker | |
Robert A. Riecker | ||
Chief Financial Officer |
Date: March 14, 2018
Exhibit 10.1
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
This Second Amendment (this Amendment ), dated as of March 8, 2018 by and between JPP, LLC and JPP II, LLC, each a Delaware limited liability company (together JPP or, the Lender ), SEARS, ROEBUCK AND CO. ( Sears ), KMART STORES OF ILLINOIS LLC, KMART OF WASHINGTON LLC, KMART CORPORATION ( KMART ), SHC DESERT SPRINGS, LLC, INNOVEL SOLUTIONS, INC., SEARS HOLDINGS MANAGEMENT CORPORATION, MAXSERV, INC., TROY COOLIDGE NO. 13, LLC, SEARS DEVELOPMENT CO. and BIG BEAVER OF FLORIDA DEVELOPMENT, LLC, collectively as borrower (individually or collectively, as the context may require, jointly and severally, together with their respective permitted successors and assigns, Borrower ), amends that certain Second Amended Restated Loan Agreement, dated as of October 18, 2017 (as amended by that certain Amendment to Second Amended and Restated Loan Agreement, dated as of October 25, 2017, as it may be further amended and restated, the Loan Agreement ; all capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Loan Agreement).
WHEREAS, on October 18, 2017, Lender and Borrower entered into the Loan Agreement;
WHEREAS, on October 25, 2017, Lender and Borrower amended the Loan Agreement pursuant to that certain Amendment to Loan Agreement;
WHEREAS, Lender and Borrower desire to further amend the Loan Agreement;
NOW THEREFORE, in consideration of the mutual premises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby represent, warrant, covenant and agree as follows:
Section 1. Amendment of Loan Documents . Lender and Borrower hereby agree to amend the terms of the Loan Agreement as follows:
(a) The following definitions are hereby added to the list of definitions:
Interest Determination Date means, in connection with the calculation of interest accrued for any Interest Accrual Period, the second Business Day preceding the first day of such Interest Accrual Period.
LIBOR means the rate per annum calculated as set forth below:
On each Interest Determination Date, LIBOR for the applicable period will be the rate for deposits in United States dollars for a one-month period which appears as the London interbank offered rate on the display designated as LIBOR01 on the Reuters Screen (or such other page as may replace that page on that service, or such page or replacement therefor on any successor service) as the London interbank offered rate as of 11:00 a.m., London time, on such date.
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All percentages resulting from any calculations or determinations referred to in this definition will be rounded upwards to the nearest multiple of 1/100 of 1% and all U.S. dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one-half cent or more being rounded upwards).
Prime Rate means the prime rate published in the Money Rates section of The Wall Street Journal. If The Wall Street Journal ceases to publish the prime rate, then Lender shall select an equivalent publication that publishes such prime rate, and if such prime rate is no longer generally published or is limited, regulated or administered by a governmental or quasi-governmental body, then Lender shall reasonably select a comparable interest rate index.
Prime Rate Loan means the Loan at such time as interest thereon accrues at a rate of interest equal to the Prime Rate plus the Prime Rate Spread.
Prime Rate Spread means, in connection with any conversion of the Note A-1 to a Prime Rate Loan, the amount obtained by subtracting (x) the Prime Rate, determined as of the Interest Determination Date for which LIBOR was last available, from (y) the per annum interest rate payable hereunder in respect of such Note Component A-1 while the Loan was accruing interest at LIBOR, determined as of the Interest Determination Date for which LIBOR was last available; provided , however, that if the amount so obtained is a negative number, then the Prime Rate Spread shall be zero.
Second Amendment Date means March 8, 2018.
(b) The definition of Initial Second Lien Advance Amount is hereby amended and restated in its entirety:
Initial Second Lien Advance Amount means has the meaning set forth in Section 1.1(a) .
(c) The definition of Interest Rate is hereby deleted in its entirety and replaced with the following:
Interest Rate means (i) with respect to Note Component A-1, the sum of (A) 9%, plus (B) the greater of (x) the LIBOR Floor or (y) LIBOR, determined as of the Interest Determination Date immediately preceding such Interest Accrual Period (except that at any time that the Loan is a Prime Rate Loan, such rate per annum shall be the sum of the applicable Prime Rate Spread plus the Prime Rate, determined as of the Interest Determination Date immediately preceding such Interest Accrual Period); and (ii) with respect to Note Component A-2 and Note B, 11% per annum.
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(c) The definition of Allocated Loan Amount is hereby deleted in its entirety and replaced with the following:
Allocated Loan Amount means, with respect to each Property, the portion of the Principal Indebtedness allocated thereto as set forth next to such Property on the Property List.
(d) The definition of Property List is hereby deleted in its entirety and replaced with the following:
Property List means the list of real properties certified to Lender in the officers certificate of Borrower, dated as of Second Amendment Date, and delivered to Lender.
(d) The following is added at the end of Section 1.1(a) :
On the Second Amendment Date, Lender made an additional advance to Borrower in the amount of $100,000,000 (the Second Amendment Date Advance Amount ) evidenced by Note Component A-1 . As of the Second Amendment Date and as adjusted to reflect repayments of the Principal Indebtedness in accordance with the terms hereof and the Second Amendment Date Advance Amount: (i) the portion of the Principal Indebtedness evidenced by Note A is $521,877,509.22, (ii) the portion of the Principal Indebtedness evidenced by Note Component A-1 is $479,180,837.99, (iii) the portion of the Principal Indebtedness evidenced by Note Component A-2 is $42,696,671.23, (iv) the portion of the Principal Indebtedness evidenced by Note B is $100,000,000 and (v) the aggregate Principal Indebtedness is $621,877,509.22. In connection with the advance of the Second Amendment Date Advance Amount, Borrower agrees to use its reasonable best efforts to cooperate with Lender to consolidate the Loan (and the Collateral secured hereunder) with one or more loans secured by real property (and the collateral secured thereunder) in which the Lender holds an interest, provided that the consolidated loans have a maturity date of not earlier than July 20, 2020 and on such other terms as acceptable to the Lender and Borrower.
(e) Section 1.1(c) is hereby deleted in its entirety and replaced with the following:
As of the date hereof, the Loan is secured by each of the Initial Properties and the outstanding Indebtedness of Borrower under Note Component A-2 and Note B is further secured by each of the Secondary Properties. For the avoidance of doubt, any Lien on the Secondary Properties securing repayment of Note Component A-2 and Note B shall be subject and subordinate to the Liens securing the Cascade Loan.
(f) A new Section 1.1(e) is hereby added immediately following Section 1.1(d) :
Section 1.1(e) : In the event that Lender determines in good faith as of any Interest Determination Date that adequate and reasonable means do not exist for ascertaining LIBOR, then the Loan shall be converted to a Prime Rate Loan effective as of the first day of the Interest Accrual Period corresponding to such Interest Determination Date and Lender shall give notice thereof to Borrower (which may be by telephone or e-mail, followed promptly by written notice) prior to the next succeeding Payment Date. Except as provided in this Section, the Loan shall at all times be a LIBOR Loan. In no event shall Borrower have the right to convert a LIBOR Loan to a Prime Rate Loan.
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Section 2. Waiver . Pursuant to Sections 1.5 and 1.6 of the Loan Agreement, Borrower has the right to obtain the release of one of more of the Properties from the Liens of the Loan Documents in connection with an arms length Transfer of such Property, subject to the satisfaction of certain conditions, including that Borrower make a payment to Lender, as repayment of the Indebtedness, in an amount equal to the applicable Release Price. Borrower intends to sell the Property located in Warren, OH (the Warrant Property ), for a price less than the Release Price but in any case not less than $19,950,000 (the Minimum Warren Release Price ) and the Property located in Melrose, IL (the Melrose Property ) for a price less than the Release Price, but in any case not less than $15,200,000 (the Minimum Melrose Release Price ). Borrower shall apply the entire net cash proceeds of the sales as a payment to Lender as repayment of the Indebtedness. Lender hereby consent to release its Liens on the Warren Property and the Melrose Property as of the time of sale, notwithstanding that the payment to Lender will be less than the Release Price; provided , that the sale proceeds paid to Lender as repayment of the Indebtedness are no less than the Minimum Warren Release Price and the Minimum Melrose Release Price, as applicable.
Section 2. Miscellaneous .
(a) All of the terms and conditions of the Loan Agreement are incorporated herein by reference with the same force and effect as if fully set forth herein. Except as expressly amended hereby, the Loan Agreement and each of the other Loan Documents remains in full force and effect in accordance with its terms.
(b) Borrower hereby represents and warrants that (i) Borrower has the power and authority to enter into this Amendment, to perform its obligations under the Loan Agreement as amended hereby, (ii) Borrower has by proper action duly authorized the execution and delivery of this Amendment by Borrower and (iii) this Amendment has been duly executed and delivered by Borrower and constitutes Borrowers legal, valid and binding obligations, enforceable in accordance with its terms, subject to bankruptcy, insolvency and similar laws of general applicability relating to or affecting creditors rights and to general equity principles.
(c) This Amendment shall be governed by and construed and interpreted in accordance with the laws of the State of New York without regard to principles of conflicts of law.
(d) Borrower hereby (1) unconditionally ratifies and confirms, renews and reaffirms all of its obligations under the Loan Agreement and each of the other Loan Documents, (2) acknowledges and agrees that such obligations remain in full force and effect, binding on and enforceable against it in accordance with the terms, covenants and conditions of the Loan Agreement as amended hereby and the other Loan Documents, in each case, without impairment, and (3) represents, warrants and covenants that it is not in default under the Loan Agreement or any of the other Loan Documents beyond any applicable notice and cure periods, and there are no defenses, offsets or counterclaims against the Indebtedness.
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(e) Sears Holdings Corporation hereby (1) unconditionally approves and consents to the execution by Borrower of this Amendment and the modifications to the Loan Documents effected thereby, (2) unconditionally ratifies, confirms, renews and reaffirms all of its obligations under the Guaranty and the Environmental Indemnity (collectively, the Guarantor Documents ), (3) acknowledges and agrees that its obligations under the Guarantor Documents remain in full force and effect, and shall continue to remain in full force during each Extension Term, binding on and enforceable against it in accordance with the terms, covenants and conditions of such documents without impairment and reaffirms such obligations under the Guarantor Documents to guaranty the obligations of Borrower under the Loan Agreement and other Loan Documents, and (4) represents, warrants and covenants that (i) it is not in default under the Guaranty beyond any applicable notice and cure periods, (ii) there are no defenses, offsets or counterclaims against its obligations under the Guaranty and (iii) it has the power and authority to enter into this Amendment and has by proper action duly authorized its execution and delivery of this Amendment.
(f) Borrower shall reimburse Lender for all reasonable out-of-pocket fees and expenses of legal counsel incurred by Lender in connection with this Amendment.
(g) This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Copies of originals, including copies delivered by facsimile, pdf or other electronic means, shall have the same import and effect as original counterparts and shall be valid, enforceable and binding for the purposes of this Amendment.
[Signatures appear on following page]
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IN WITNESS WHEREOF, for good and valuable consideration, the sufficiency of which is hereby acknowledged and agreed, the parties hereto have executed and delivered this Amendment as of the date first hereinabove set forth.
LENDER: |
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JPP, LLC,
a Delaware limited liability company |
||
By: | /s/ Edward S. Lampert | |
Name: Edward S. Lampert | ||
Title: Authorized Signatory | ||
JPP II, LLC,
a Delaware limited liability company |
||
By: | /s/ Edward S. Lampert | |
Name: Edward S. Lampert | ||
Title: Authorized Signatory |
SEARS, ROEBUCK AND CO., a New York corporation |
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By: | /s/ Robert A. Riecker | |
Name: Robert A. Riecker | ||
Title: Chief Financial Officer | ||
KMART CORPORATION, a Michigan corporation |
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By: | /s/ Robert A. Riecker | |
Name: Robert A. Riecker | ||
Title: Chief Financial Officer | ||
KMART STORES OF ILLINOIS LLC, an Illinois limited liability company |
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By: Kmart Corporation, a Michigan corporation, as Sole Member | ||
By: | /s/ Robert A. Riecker | |
Name: Robert A. Riecker | ||
Title: Chief Financial Officer | ||
KMART OF WASHINGTON LLC, a Washington limited liability company |
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By: Kmart Corporation, a Michigan corporation, as Sole Member | ||
By: | /s/ Robert A. Riecker | |
Name: Robert A. Riecker | ||
Title: Chief Financial Officer |
SHC Desert Springs, LLC, a Delaware limited liability company |
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By: Kmart Corporation, a Michigan corporation, as Sole Member | ||
By: | /s/ Robert A. Riecker | |
Name: Robert A. Riecker | ||
Title: Chief Financial Officer |
INNOVEL SOLUTIONS, INC., a Delaware corporation |
||
By: | /s/ Robert A. Riecker | |
Name: Robert A. Riecker | ||
Title: Vice President |
Solely with respect to Section 3(e) hereof: | ||
GUARANTOR : | ||
SEARS HOLDINGS CORPORATION, a Delaware corporation | ||
By: | /s/ Robert A. Riecker | |
Name: Robert A. Riecker | ||
Title: Chief Financial Officer |
Exhibit 99.1
NEWS MEDIA CONTACT:
Sears Holdings Public Relations
(847) 286-8371
FOR IMMEDIATE RELEASE:
March 14, 2018
SEARS HOLDINGS REPORTS FOURTH QUARTER AND FULL YEAR 2017 RESULTS
Completes Secured Loan in Connection with Previously Announced PBGC Transaction
HOFFMAN ESTATES, Ill. - Sears Holdings Corporation (Holdings, we, us, our, or the Company) (NASDAQ: SHLD) today announced financial results for its fourth quarter and full year ended February 3, 2018. As a supplement to this announcement, a presentation, pre-recorded conference call and audio webcast are available at our website http://searsholdings.com/invest.
In summary, today we reported the following:
| Generated positive Adjusted EBITDA during the fourth quarter of 2017 with year-over-year improvement of $63 million; |
| Completed secured loan in connection with the previously announced PBGC transaction which unlocks nearly $980 million of appraised asset value; and |
| Expect to report year-over-year Adjusted EBITDA improvement in the first quarter of 2018 as we continue to focus on liquidity required to effectuate our transformation. |
Net income attributable to Holdings shareholders was $182 million ($1.69 earnings per diluted share) for the fourth quarter of 2017, which included a non-cash tax benefit of approximately $470 million related to tax reform, as well as a non-cash accounting charge of $72 million related to the impairment of the Sears trade name. This compares to a net loss attributable to Holdings shareholders of $607 million ($5.67 loss per diluted share) for the prior year fourth quarter, which also included a non-cash accounting charge of $381 million related to the impairment of the Sears trade name. Adjusted EBITDA was $2 million in the fourth quarter of 2017 compared to $(61) million in the prior year fourth quarter.
Edward S. Lampert, Chairman and Chief Executive Officer of Holdings, said, We made progress in 2017, with a return to positive Adjusted EBITDA and another quarter of year-over-year improvement in our financial results. We also took the actions necessary to increase our liquidity and fund our ongoing transformation of the Company. In addition, we entered important partnerships, such as our agreement to sell Kenmore appliances and related services through Amazon, that broaden the reach of our brands. Finally, we continued to enhance our Shop Your Way ecosystem to offer our members more compelling and uniquely tailored value and shopping experiences.
We also recognize that we need to do more if we are to deliver on our commitment to return to profitability in 2018. We will work to build on the progress we made in 2017, including ongoing actions to improve or close unprofitable stores and to unlock the value in our assets. Importantly, to ensure our long-term viability, we must substantially improve our sales and gross margin performance, including adjustments to our business model, Lampert concluded.
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Rob Riecker, Chief Financial Officer of Holdings, said, As we continue with our transformation efforts, Sears Holdings has taken a number of actions to improve financial flexibility and support our operations. In addition to pursuing several transactions to adjust our capital structure in order to enhance our liquidity and financial position, we are taking incremental actions to further streamline our operations to drive profitability, including cost reductions of $200 million on an annualized basis in 2018 unrelated to store closures.
Actions undertaken during the fourth quarter of 2017 and into the first quarter of 2018 to provide the Company with additional financial flexibility included:
| Extended the maturity of an existing term loan, which originally was to mature in June 2018 (the Term Loan), to January 2019, with the option to further extend the maturity to July 2019. During the fourth quarter, the Company paid down the Term Loan reducing the outstanding balance to approximately $398 million; |
| Raised $210 million in new financing in the fourth quarter of 2017, and an additional $40 million subsequent to quarter-end, through a series of financial transactions, supported by ground leases and certain intellectual property, with the ability to raise an additional $50 million against the same collateral; |
| Amended the borrowing base definition in the indenture relating to the Companys second lien notes, maturing October 15, 2018, to change the advance rate for inventory to 75%, increased from 65%. The amendment also defers the collateral coverage test for purposes of the repurchase offer covenant in such indenture and restarts it with the second quarter of 2018 (such that no collateral coverage event can occur until the end of the third quarter of 2018). The Company has also made corresponding amendments to its second lien credit agreement; |
| Amended its Domestic Credit Agreement, dated as of July 21, 2015, increasing the size of the general debt basket to $1.25 billion; |
| Completed a third amendment to the Second Lien Credit Agreement, dated as of September 1, 2016, which increased the maximum aggregate principal of the uncommitted line of credit facility established under the Second Lien Credit Agreement to $600 million and extended the maximum duration of line of credit loans to 270 days; |
| Secured an additional $100 million incremental real estate loan (the Incremental Loan) on March 8, 2018, pursuant to an amendment to the Second Amended and Restated Loan Agreement, dated as of October 18, 2017, with JPP, LLC and JPP II, LLC, entities affiliated with ESL Investments, Inc. The Incremental Loan is secured by the same real estate properties as the 2017 Secured Loan Facility, and certain properties under the previous Incremental Loans outstanding, and matures in July 2020. The Company expects to use the proceeds of the Incremental Loan for general corporate purposes; |
| Closed on a new secured loan (the Secured Loan) and mezzanine loan (the Mezzanine Loan), pursuant to which the Company received aggregate gross proceeds of $440 million. The Secured Loan is secured by properties that were previously subject to a ring-fence arrangement with the Pension Benefit Guaranty Corporation (the PBGC), and the Mezzanine Loan is secured by a pledge of the equity interests in SRC O.P. LLC, the direct parent company of the entities that own such properties. Pursuant to the Companys November 2017 agreement with the PBGC, the Company will contribute $407 million of the proceeds into the Sears pension plans, which contribution relieves the Company of contributions to its pension plans for approximately two years (other than a $20 million supplemental payment due in the second quarter of 2018). The Company expects to pay down a substantial portion of the Secured Loan over the next three to six months using proceeds generated from the sale of the underlying properties; and |
| Commenced private exchange offers for its outstanding 8% Senior Unsecured Notes Due 2019 and 6 5/8% Senior Secured Notes Due 2018 to improve the terms on non-first lien debt. |
2
Revenues and Comparable Store Sales
We follow a retail-based financial reporting calendar. Accordingly, our fourth quarter and fiscal year 2017 results reflect the 14- and 53- week periods ended February 3, 2018, respectively, whereas 2016 contained 13- and 52- weeks for the fourth quarter and year, respectively.
We generated total revenues of $4.4 billion for the fourth quarter of 2017, compared with total revenues of $6.1 billion for the prior year fourth quarter, with store closures contributing to over half of the decline, partially offset by the inclusion of an additional week of revenues in the fourth quarter of 2017. Total comparable store sales declined 15.6% for the fourth quarter. Kmart comparable store sales declined 12.2%, while Sears comparable store sales declined 18.1%.
For the full year, revenues were $16.7 billion in 2017 as compared to revenues of $22.1 billion in the prior year. The decline in revenues included a decrease of approximately $3.2 billion as a result of having fewer Kmart and Sears Full-line stores in operation. For the full year, comparable store sales declined 13.5%, with Kmart comparable store sales declining 11.4% and Sears comparable store sales declining 15.2%.
Financial Position
At February 3, 2018, we had utilized approximately $648 million of our $1.5 billion revolving credit facility due in 2020, consisting of $271 million of borrowings and $377 million of letters of credit outstanding. The amount available to borrow under our credit facility was approximately $69 million, which reflects the effect of our springing fixed charge coverage ratio covenant and the borrowing base limitation in our revolving credit facility, which varies based on our overall inventory and receivables balances. Availability under our general debt basket was approximately $102 million at February 3, 2018.
The Companys total cash balances were $336 million at February 3, 2018, including restricted cash of $154 million, compared to $286 million at January 28, 2017. Short-term borrowings totaled $915 million at February 3, 2018, consisting of $271 million of revolver borrowings, $500 million of line of credit loans, and $144 million of borrowings under the incremental real estate loan.
Merchandise inventories at February 3, 2018 were $2.8 billion, compared to $4.0 billion at January 28, 2017, while merchandise payables were $0.6 billion and $1.0 billion at February 3, 2018 and January 28, 2017, respectively.
Total long-term debt (long-term debt and capital lease obligations) was $3.2 billion and $4.2 billion at February 3, 2018 and January 28, 2017, respectively.
Non-GAAP Financial Measures
In addition to our net income (loss) attributable to Holdings shareholders determined in accordance with Generally Accepted Accounting Principles (GAAP), for purposes of evaluating operating performance, we use Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA), which is a non-GAAP measure. The tables attached to this press release provide a reconciliation of GAAP to the as adjusted amounts. We believe that our use of Adjusted EBITDA provides an appropriate measure for investors to use in assessing our performance across periods, given that these measures provide adjustments for certain significant items which may vary significantly from period to period, improving the comparability of year-to-year results and is therefore representative of our ongoing performance. Therefore, we have adjusted our results for them to make our statements more useful and comparable. However, we do not, and do not recommend that you, solely use Adjusted EBITDA to assess our financial and earnings performance.
As a result of the Seritage and JV transactions, Adjusted EBITDA for the fourth quarter of 2017 and 2016 included additional rent expense of approximately $40 million and $47 million, respectively, while the full year of 2017 and
3
2016 included additional rent expense of approximately $169 million and $197 million, respectively. Due to the structure of the leases, we expect that our cash rent obligations to Seritage and the joint venture partners will decline, over time, as space in these stores is recaptured. From the inception of the Seritage transaction to date, we have received recapture notices on 55 properties and also exercised our right to terminate the lease on 56 properties.
Forward-Looking Statements
This press release contains forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements about our transformation through our integrated retail strategy, our plans to redeploy and reconfigure our assets, our liquidity, our ability to exercise financial flexibility as we meet our obligations and pursue possible strategic initiatives and other transactions, the commencement of the private exchange offers and other statements that describe the Companys plans. Whenever used, words such as believe, estimate, intend, will, expect, and other terms of similar meaning or expression are intended to identify such forward-looking statements. Forward-looking statements, including these, are based on the current beliefs and expectations of our management and are subject to significant risks, assumptions and uncertainties, many of which are beyond the Companys control, that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Detailed descriptions of other risks relating to Sears Holdings are discussed in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017, and other filings with the Securities and Exchange Commission. While we believe that our forecasts and assumptions are reasonable, we caution that actual results may differ materially. We intend the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available, except as required by law. Results presented herein are unaudited. The unaudited and estimated financial results for the fourth quarter and full-year 2017 contained in this press release reflect a number of complex and subjective judgments and estimates about the appropriateness of certain reported amounts and disclosures. Our financial statements for the 2017 fiscal year are not finalized. We are required to consider all available information through the finalization of our financial statements and their possible impact on our financial conditions and results of operations for the period, including the impact of such information on the complex judgments and estimates referred to above. As a result, subsequent information or events may lead to material differences between the information about the results of operations described herein and the results of operations described in our subsequent annual report. You should consider this possibility in reviewing the financial information for the period described above.
Pre-Recorded Conference Call and Audio Webcast
Sears Holdings, in conjunction with todays financial results announcement, will post a pre-recorded conference call and audio webcast on its corporate website. It will feature prepared remarks from Mr. Riecker, who will focus his comments to provide additional context around the quarter. The pre-recorded conference call may be accessed by telephone at 844.826.0613 or 973.200.3092 (conference ID: 4997267), and on Sears Holdings website at http://www.searsholdings.com/invest/ under Events & Presentations. The accompanying presentation and transcript will be posted online in conjunction.
About Sears Holdings Corporation
Sears Holdings Corporation (NASDAQ: SHLD) is a leading integrated retailer focused on seamlessly connecting the digital and physical shopping experiences to serve our members - wherever, whenever and however they want to shop. Sears Holdings is home to Shop Your Way ® , a social shopping platform offering members rewards for shopping at Sears and Kmart, as well as with other retail partners across categories important to them. The Company operates through its subsidiaries, including Sears, Roebuck and Co. and Kmart Corporation, with full-line and specialty retail stores across the United States. For more information, visit www.searsholdings.com.
4
Sears Holdings Corporation
Consolidated Statements of Operations
(Unaudited)
Amounts are Preliminary and Subject to Change
5
Sears Holdings Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
Amounts are Preliminary and Subject to Change
millions |
February 3,
2018 |
January 28,
2017 |
||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 182 | $ | 286 | ||||
Restricted cash |
154 | | ||||||
Accounts receivable |
343 | 466 | ||||||
Merchandise inventories |
2,798 | 3,959 | ||||||
Prepaid expenses and other current assets |
335 | 285 | ||||||
|
|
|
|
|||||
Total current assets |
3,812 | 4,996 | ||||||
Property and equipment (net of accumulated depreciation and amortization of $2,381 and 2,841) |
1,729 | 2,240 | ||||||
Goodwill |
269 | 269 | ||||||
Trade names and other intangible assets |
1,168 | 1,521 | ||||||
Other assets |
284 | 336 | ||||||
|
|
|
|
|||||
TOTAL ASSETS |
$ | 7,262 | $ | 9,362 | ||||
|
|
|
|
|||||
LIABILITIES |
||||||||
Current liabilities |
||||||||
Short-term borrowings |
$ | 915 | $ | | ||||
Current portion of long-term debt and capitalized lease obligations |
968 | 590 | ||||||
Merchandise payables |
576 | 1,048 | ||||||
Unearned revenues |
641 | 748 | ||||||
Other taxes |
247 | 339 | ||||||
Other current liabilities |
1,568 | 1,956 | ||||||
|
|
|
|
|||||
Total current liabilities |
4,915 | 4,681 | ||||||
Long-term debt and capitalized lease obligations |
2,249 | 3,573 | ||||||
Pension and postretirement benefits |
1,619 | 1,750 | ||||||
Deferred gain on sale-leaseback |
362 | 563 | ||||||
Sale-leaseback financing obligation |
247 | 235 | ||||||
Other long-term liabilities |
1,467 | 1,641 | ||||||
Long-term deferred tax liabilities |
126 | 743 | ||||||
|
|
|
|
|||||
Total Liabilities |
10,985 | 13,186 | ||||||
|
|
|
|
|||||
Total Deficit |
(3,723 | ) | (3,824 | ) | ||||
|
|
|
|
|||||
TOTAL LIABILITIES AND DEFICIT |
$ | 7,262 | $ | 9,362 | ||||
|
|
|
|
|||||
Total common shares outstanding |
107.8 | 107.1 |
6
Sears Holdings Corporation
Segment Results
(Unaudited)
Amounts are Preliminary and Subject to Change
Quarter Ended February 3, 2018 | ||||||||||||
millions, except store data | Kmart |
Sears
Domestic |
Sears
Holdings |
|||||||||
Total revenues |
$ | 1,475 | $ | 2,901 | $ | 4,376 | ||||||
|
|
|
|
|
|
|||||||
Cost of sales, buying and occupancy |
1,190 | 2,262 | 3,452 | |||||||||
Gross margin dollars |
285 | 639 | 924 | |||||||||
Gross margin rate |
19.3 | % | 22.0 | % | 21.1 | % | ||||||
Selling and administrative |
363 | 793 | 1,156 | |||||||||
Selling and administrative expense as a percentage of total revenues |
24.6 | % | 27.3 | % | 26.4 | % | ||||||
Depreciation and amortization |
14 | 59 | 73 | |||||||||
Impairment charges |
5 | 108 | 113 | |||||||||
Gain on sales of assets |
(73 | ) | (138 | ) | (211 | ) | ||||||
|
|
|
|
|
|
|||||||
Total costs and expenses |
1,499 | 3,084 | 4,583 | |||||||||
|
|
|
|
|
|
|||||||
Operating loss |
$ | (24 | ) | $ | (183 | ) | $ | (207 | ) | |||
|
|
|
|
|
|
|||||||
Number of: |
||||||||||||
Kmart Stores |
432 | | 432 | |||||||||
Full-Line Stores |
| 547 | 547 | |||||||||
Specialty Stores |
| 23 | 23 | |||||||||
|
|
|
|
|
|
|||||||
Total Stores |
432 | 570 | 1,002 | |||||||||
|
|
|
|
|
|
Quarter Ended January 28, 2017 | ||||||||||||
millions, except store data | Kmart |
Sears
Domestic |
Sears
Holdings |
|||||||||
Total revenues |
$ | 2,402 | $ | 3,650 | $ | 6,052 | ||||||
|
|
|
|
|
|
|||||||
Cost of sales, buying and occupancy |
1,993 | 2,772 | 4,765 | |||||||||
Gross margin dollars |
409 | 878 | 1,287 | |||||||||
Gross margin rate |
17.0 | % | 24.1 | % | 21.3 | % | ||||||
Selling and administrative |
578 | 1,001 | 1,579 | |||||||||
Selling and administrative expense as a percentage of total revenues |
24.1 | % | 27.4 | % | 26.1 | % | ||||||
Depreciation and amortization |
20 | 77 | 97 | |||||||||
Impairment charges |
15 | 394 | 409 | |||||||||
Gain on sales of assets |
(61 | ) | (20 | ) | (81 | ) | ||||||
|
|
|
|
|
|
|||||||
Total costs and expenses |
2,545 | 4,224 | 6,769 | |||||||||
|
|
|
|
|
|
|||||||
Operating loss |
$ | (143 | ) | $ | (574 | ) | $ | (717 | ) | |||
|
|
|
|
|
|
|||||||
Number of: |
||||||||||||
Kmart Stores |
735 | | 735 | |||||||||
Full-Line Stores |
| 670 | 670 | |||||||||
Specialty Stores |
| 25 | 25 | |||||||||
|
|
|
|
|
|
|||||||
Total Stores |
735 | 695 | 1,430 | |||||||||
|
|
|
|
|
|
7
Sears Holdings Corporation
Segment Results
(Unaudited)
Amounts are Preliminary and Subject to Change
Year Ended February 3, 2018 | ||||||||||||
millions, except store data | Kmart |
Sears
Domestic |
Sears
Holdings |
|||||||||
Total revenues |
$ | 5,618 | $ | 11,084 | $ | 16,702 | ||||||
|
|
|
|
|
|
|||||||
Cost of sales, buying and occupancy |
4,601 | 8,574 | 13,175 | |||||||||
Gross margin dollars |
1,017 | 2,510 | 3,527 | |||||||||
Gross margin rate |
18.1 | % | 22.6 | % | 21.1 | % | ||||||
Selling and administrative |
1,455 | 3,676 | 5,131 | |||||||||
Selling and administrative expense as a percentage of total revenues |
25.9 | % | 33.2 | % | 30.7 | % | ||||||
Depreciation and amortization |
60 | 272 | 332 | |||||||||
Impairment charges |
16 | 126 | 142 | |||||||||
Gain on sales of assets |
(881 | ) | (767 | ) | (1,648 | ) | ||||||
|
|
|
|
|
|
|||||||
Total costs and expenses |
5,251 | 11,881 | 17,132 | |||||||||
|
|
|
|
|
|
|||||||
Operating income (loss) |
$ | 367 | $ | (797 | ) | $ | (430 | ) | ||||
|
|
|
|
|
|
|||||||
Number of: |
||||||||||||
Kmart Stores |
432 | | 432 | |||||||||
Full-Line Stores |
| 547 | 547 | |||||||||
Specialty Stores |
| 23 | 23 | |||||||||
|
|
|
|
|
|
|||||||
Total Stores |
432 | 570 | 1,002 | |||||||||
|
|
|
|
|
|
Year Ended January 28, 2017 | ||||||||||||
millions, except store data | Kmart |
Sears
Domestic |
Sears
Holdings |
|||||||||
Total revenues |
$ | 8,650 | $ | 13,488 | $ | 22,138 | ||||||
|
|
|
|
|
|
|||||||
Cost of sales, buying and occupancy |
7,093 | 10,359 | 17,452 | |||||||||
Gross margin dollars |
1,557 | 3,129 | 4,686 | |||||||||
Gross margin rate |
18.0 | % | 23.2 | % | 21.2 | % | ||||||
Selling and administrative |
2,175 | 3,934 | 6,109 | |||||||||
Selling and administrative expense as a percentage of total revenues |
25.1 | % | 29.2 | % | 27.6 | % | ||||||
Depreciation and amortization |
71 | 304 | 375 | |||||||||
Impairment charges |
22 | 405 | 427 | |||||||||
Gain on sales of assets |
(181 | ) | (66 | ) | (247 | ) | ||||||
|
|
|
|
|
|
|||||||
Total costs and expenses |
9,180 | 14,936 | 24,116 | |||||||||
|
|
|
|
|
|
|||||||
Operating loss |
$ | (530 | ) | $ | (1,448 | ) | $ | (1,978 | ) | |||
|
|
|
|
|
|
|||||||
Number of: |
||||||||||||
Kmart Stores |
735 | | 735 | |||||||||
Full-Line Stores |
| 670 | 670 | |||||||||
Specialty Stores |
| 25 | 25 | |||||||||
|
|
|
|
|
|
|||||||
Total Stores |
735 | 695 | 1,430 | |||||||||
|
|
|
|
|
|
8
Sears Holdings Corporation
Adjusted EBITDA Reconciliation
(Unaudited)
Quarters Ended | Years Ended | |||||||||||||||
millions |
February 3,
2018 |
January 28,
2017 |
February 3,
2018 |
January 28,
2017 |
||||||||||||
Net income (loss) attributable to Holdings per statement of operations |
$ | 182 | $ | (607 | ) | $ | (383 | ) | $ | (2,221 | ) | |||||
Income tax benefit |
(539 | ) | (213 | ) | (598 | ) | (174 | ) | ||||||||
Interest expense |
152 | 115 | 539 | 404 | ||||||||||||
Interest and investment (income) loss |
(2 | ) | 1 | 12 | 26 | |||||||||||
Other income |
| (13 | ) | | (13 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating loss |
(207 | ) | (717 | ) | (430 | ) | (1,978 | ) | ||||||||
Depreciation and amortization |
73 | 97 | 332 | 375 | ||||||||||||
Gain on sales of assets |
(211 | ) | (81 | ) | (1,648 | ) | (247 | ) | ||||||||
Impairment charges |
113 | 409 | 142 | 427 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Before excluded items |
(232 | ) | (292 | ) | (1,604 | ) | (1,423 | ) | ||||||||
Closed store reserve and severance |
143 | 202 | 462 | 384 | ||||||||||||
Pension expense |
117 | 72 | 656 | 288 | ||||||||||||
Other (1) |
(7 | ) | (21 | ) | 2 | 31 | ||||||||||
Amortization of deferred Seritage gain |
(19 | ) | (22 | ) | (78 | ) | (88 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
$ | 2 | $ | (61 | ) | $ | (562 | ) | $ | (808 | ) | |||||
|
|
|
|
|
|
|
|
(1) | The 14- and 53- week periods ended February 3, 2018 consisted of items associated with legal matters, expenses associated with natural disasters and transaction costs associated with strategic initiatives. The 13- and 52- week periods ended January 28, 2017 consisted of expenses associated with legal matters, transaction costs associated with strategic initiatives and other expenses. |
9
Sears Holdings Corporation
Adjusted EBITDA Reconciliation
(Unaudited)
Amounts are Preliminary and Subject to Change
Quarters Ended | ||||||||||||||||||||||||
February 3, 2018 | January 28, 2017 | |||||||||||||||||||||||
millions | Kmart |
Sears
Domestic |
Sears
Holdings |
Kmart |
Sears
Domestic |
Sears
Holdings |
||||||||||||||||||
Operating loss per statement of operations |
$ | (24 | ) | $ | (183 | ) | $ | (207 | ) | $ | (143 | ) | $ | (574 | ) | $ | (717 | ) | ||||||
Depreciation and amortization |
14 | 59 | 73 | 20 | 77 | 97 | ||||||||||||||||||
Gain on sales of assets |
(73 | ) | (138 | ) | (211 | ) | (61 | ) | (20 | ) | (81 | ) | ||||||||||||
Impairment charges |
5 | 108 | 113 | 15 | 394 | 409 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Before excluded items |
(78 | ) | (154 | ) | (232 | ) | (169 | ) | (123 | ) | (292 | ) | ||||||||||||
Closed store reserve and severance |
92 | 51 | 143 | 159 | 43 | 202 | ||||||||||||||||||
Pension expense |
| 117 | 117 | | 72 | 72 | ||||||||||||||||||
Other (1) |
(8 | ) | 1 | (7 | ) | 7 | (28 | ) | (21 | ) | ||||||||||||||
Amortization of deferred Seritage gain |
(2 | ) | (17 | ) | (19 | ) | (4 | ) | (18 | ) | (22 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Adjusted EBITDA |
$ | 4 | $ | (2 | ) | $ | 2 | $ | (7 | ) | $ | (54 | ) | $ | (61 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
% to revenues |
0.3 | % | (0.1 | )% | | % | (0.3 | )% | (1.5 | )% | (1.0 | )% |
Years Ended | ||||||||||||||||||||||||
February 3, 2018 | January 28, 2017 | |||||||||||||||||||||||
millions | Kmart |
Sears
Domestic |
Sears
Holdings |
Kmart |
Sears
Domestic |
Sears
Holdings |
||||||||||||||||||
Operating income (loss) per statement of operations |
$ | 367 | $ | (797 | ) | $ | (430 | ) | $ | (530 | ) | $ | (1,448 | ) | $ | (1,978 | ) | |||||||
Depreciation and amortization |
60 | 272 | 332 | 71 | 304 | 375 | ||||||||||||||||||
Gain on sales of assets |
(881 | ) | (767 | ) | (1,648 | ) | (181 | ) | (66 | ) | (247 | ) | ||||||||||||
Impairment charges |
16 | 126 | 142 | 22 | 405 | 427 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Before excluded items |
(438 | ) | (1,166 | ) | (1,604 | ) | (618 | ) | (805 | ) | (1,423 | ) | ||||||||||||
Closed store reserve and severance |
281 | 181 | 462 | 318 | 66 | 384 | ||||||||||||||||||
Pension expense |
| 656 | 656 | | 288 | 288 | ||||||||||||||||||
Other (1) |
(23 | ) | 25 | 2 | 15 | 16 | 31 | |||||||||||||||||
Amortization of deferred Seritage gain |
(11 | ) | (67 | ) | (78 | ) | (17 | ) | (71 | ) | (88 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Adjusted EBITDA |
$ | (191 | ) | $ | (371 | ) | $ | (562 | ) | $ | (302 | ) | $ | (506 | ) | $ | (808 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
% to revenues |
(3.4 | )% | (3.3 | )% | (3.4 | )% | (3.5 | )% | (3.8 | )% | (3.6 | )% |
(1) | The 14- and 53- week periods ended February 3, 2018 consisted of items associated with legal matters, expenses associated with natural disasters and transaction costs associated with strategic initiatives. The 13- and 52- week periods ended January 28, 2017 consisted of expenses associated with legal matters, transaction costs associated with strategic initiatives and other expenses. |
10