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): February 25, 2015
_________________________  
SEARS HOLDINGS CORPORATION
(Exact name of registrant as specified in its 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)
 
Registrant’s telephone number, including area code: (847) 286-2500
(Former name or former address, if changed since last report): Not Applicable
 
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))

 










1

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 February 26, 2015, Sears Holdings Corporation (the “Company”) issued a press release regarding its fourth quarter 2014 and full year 2014 results. The press release is attached hereto as Exhibit 99.1.
Item 2.03.
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
As previously reported on a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on September 15, 2014, the Company, through Sears, Roebuck and Co., Sears Development Co., and Kmart Corporation (collectively, “Borrowers”), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a $400 million secured short-term loan (the “Loan”) with JPP II, LLC and JPP, LLC (together, the “Lender”), entities affiliated with ESL Investments, Inc. (“Investments”). Mr. Edward S. Lampert, the Company’s Chief Executive Officer and Chairman, is the sole stockholder, chief executive officer and director of Investments. As of January 31, 2015, Investments, Mr. Lampert and affiliated entities collectively owned approximately 49% of the Company’s outstanding common stock.
On February 25, 2015, Borrowers and the Lender entered into an amendment to the Loan (the “Amendment”), effective February 28, 2015, pursuant to which Borrowers agreed to repay $200 million of the outstanding principal amount of the Loan, together with all interest accrued thereon, on the original maturity date of the Loan. Subject to receipt of such payment, the Lender agreed to release, at Borrowers’ option, its first priority lien on 13 properties owned by Borrowers (the “Released Properties”), which represented approximately half of the value of the collateral under the Loan. The Amendment extends the maturity date of the Loan to the earlier of June 1, 2015 and the date of receipt by the Company of sale proceeds pursuant to a sale/leaseback or similar transaction involving the sale or other transfer by the Company of at least 200 Company properties to a newly formed real estate investment trust capitalized in part through a rights offering to the Company’s stockholders, which, as first disclosed in a Current Report on Form 8-K filed with the SEC on November 7, 2014, is under consideration by the Company. The Loan will continue to have an annual base interest rate of 5% on the principal amount outstanding. Except as described below, Borrowers are not required to pay any fee to the Lender in connection with the Amendment.
At any time prior to maturity of the Loan, Borrowers may make a one-time election to re-borrow up to $200 million from the Lender (the “Delayed Advance”), subject to certain conditions, including payment to the Lender of a fee equal to 0.25% of the principal amount of the Delayed Advance. In the event the Company elects to re-borrow the Delayed Advance, Borrowers would again grant a lien on the Released Properties to secure the Loan.
Except as expressly set forth in the Amendment, the original terms and obligations of the Loan remain in full force and effect. The above description of the Amendment is qualified in its entirety by reference to the complete text of the Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference herein.
Private Securities Litigation Reform Act of 1995 -
A Caution Concerning Forward-Looking Statements
This Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Loan. The Company cautions that these forward-looking statements are subject to risks, uncertainties and assumptions, many of which are beyond the Company’s control, which may cause actual results to differ materially from those indicated in the forward-looking statements for a number of reasons, including without limitation, unanticipated events associated with the funding or pay back of the Loan. Additional information concerning other factors is contained in the Annual Report on Form 10-K of Sears Holdings Corporation for the fiscal year ended February 1, 2014, and subsequent Quarterly Reports on Form 10-Q. The Company undertakes no obligation to release publicly any revisions to forward-looking statements as the result of subsequent events or developments.
Item 9.01.
Financial Statements and Exhibits.
(d) Exhibits





2

Exhibit 10.1
Amendment to Loan Agreement, dated as of February 25, 2015, between Sears, Roebuck and Co., Sears Development Co., Kmart Corporation, JPP II, LLC and JPP, LLC.
Exhibit 99.1
Press release dated February 26, 2015, furnished pursuant to Item 2.02.
























































3

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 hereunto duly authorized.
SEARS HOLDINGS CORPORATION
 
 
By:
/s/ ROBERT A. RIECKER
 
Robert A. Riecker
 
Vice President, Controller and Chief Accounting Officer

Date: February 26, 2015

4

Exhibit Index
 
Exhibit 10.1
Amendment to Loan Agreement, dated as of February 25, 2015, between Sears, Roebuck and Co., Sears Development Co., Kmart Corporation, JPP II, LLC and JPP, LLC.
Exhibit 99.1
Press release dated February 26, 2015, furnished pursuant to Item 2.02.

5

Exhibit 10.1

AMENDMENT TO LOAN AGREEMENT

This Amendment to Loan Agreement (this “ Amendment ”), entered into on February 25, 2015 and effective as of February 28, 2015 (the “ Effective Date ”), by and between JPP II, LLC and JPP, LLC, each a Delaware limited liability company, as lender (collectively, together with their respective successors and assigns, including any lawful holder of any portion of the Indebtedness, “ Lender ”), and SEARS, ROEBUCK AND CO., SEARS DEVELOPMENT CO. and KMART CORPORATION, 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 Loan Agreement, dated as of September 15, 2014 (the “ Loan Agreement ”; all capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Loan Agreement (as amended hereby)).
WHEREAS, on the Business Day immediately succeeding the Effective Date, Borrower shall repay to Lender $200,000,000 of Principal Indebtedness, together with all interest accrued thereon (the “ Repayment ”);
WHEREAS , in connection with the Repayment, Lender shall deliver to Borrower releases of the Mortgages encumbering the Released Properties;
WHEREAS, Lender has agreed to extend the Maturity Date and give Borrower the right obtain an additional advance under the Loan Agreement of up to $200,000,000, subject to the conditions set forth herein; and
WHEREAS, Lender and Borrower desire to amend the Loan Agreement as of the Effective Date to effectuate the foregoing and as otherwise set forth herein.
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.     Repayment . Borrower shall repay to Lender $200,000,000 of Principal Indebtedness, together with all interest accrued thereon, on the Business Day immediately succeeding the Effective Date.
Section 2.     Amendments of Loan Agreement . Lender and Borrower hereby agree that, as of the Effective Date, the terms of the Loan Agreement shall be amended as hereinafter set forth:
(a) The defined term “Maturity Date” is hereby deleted in its entirety and replaced with the following:

 
1
 


““ Maturity Date ” means the earlier of (i) June 1, 2015, (ii) the REIT Completion Date and (iii) such date as may result from acceleration of the Loan in accordance with this Agreement.”
(b) The defined term “Properties” is hereby deleted in its entirety and replaced with the following:
““ Properties ” means the real property on the list of properties set forth on the Retained Property List (other than any such property that is replaced pursuant to Section 2.1(b)) , together with any Substitution Property encumbered by a Mortgage and any Released Properties with respect to which either a new Mortgage has been recorded with respect thereto or the original unrecorded Release Documents have been returned to Lender pursuant to Section 1.1(b) , in each case, as described in greater detail under the applicable Mortgage, together with all buildings and other improvements thereon (other than leasehold improvements that are the property of a Tenant under a Lease at a Property) and all personal property owned by Borrower and encumbered by the Mortgages, together with all rights pertaining to such property; and “ Property ” means an individual property included in the Properties or all Properties collectively, as the context may require.
(c) The defined term “REIT Completion Date” is hereby added to the Definitions and defined as follows:
““ REIT Completion Date ” means the date of receipt by the Guarantor or any of its subsidiaries of sale proceeds pursuant to a sale/leaseback or similar transaction involving the sale or other transfer by the Guarantor or any of its subsidiaries of at least 200 properties to a newly formed real estate investment trust capitalized in part through a rights offering to the stockholders of the Guarantor.”
(d) The defined term “Release Documents” is hereby added to the Definitions and defined as follows:
““ Release Documents ” means, with respect to each Released Property, instruments prepared by Borrower and reasonably satisfactory to Lender, executed and delivered by Lender, releasing and discharging all Liens on such Released Property, including the Lien of the applicable Mortgage and any fixture filings.”
(e) The defined term “Released Properties” is hereby added to the Definitions and defined as follows:
““ Released Properties ” means those Properties set forth on the Released Properties List.”
(f) The defined term “Released Properties List” is hereby added to the Definitions and defined as follows:

 
2
 


““ Released Properties List ” means that certain list of “released properties” certified to Lender in the officer’s certificate of Borrower, dated as of February 25, 2015, and delivered to Lender.”
(g) The defined term “Retained Properties List” is hereby added to the Definitions and defined as follows:
““ Retained Properties List ” means that certain list of “retained properties” certified to Lender in the officer’s certificate of Borrower, dated as of February 25, 2015, and delivered to Lender.”
(h) The defined term “Mortgage” is hereby amended by deleting the words “as of the Closing Date” and replacing such words with “and delivered to Lender from time to time”.
(i) Section 1.1(b) is hereby deleted in its entirety and replaced with the following:
“At Borrower’s request, on no less than four Business Days’ notice to Lender, Lender shall make a single advance to Borrower (the “ Delayed Advance ”) in an amount specified by Borrower up to the Delayed Advance Amount on any Business Day prior to the Maturity Date, subject to the following conditions precedent: (i) no Event of Default is continuing as of such date; (ii) (x) with respect to any Released Property for which the applicable Release Documents have not been recorded as of such date in the applicable recording offices, Borrower shall deliver such Release Documents to Lender and an officer’s certificate of Borrower certifying that none of such Release Documents have been recorded ( provided , that if the Release Documents in respect of any Released Property identified in such officer’s certificate has not yet been delivered to Borrower pursuant to Section 1.6 hereof, such Release Documents shall be deemed to have been delivered by Lender pursuant to Section 1.6 and returned by Borrower in satisfaction of the requirements of this Section 1.1(b)(ii)(x)) and (y) with respect to any Property for which Borrower has recorded one or more Release Documents, Borrower shall comply with Section 2.1(b)(w) and Section 2.1(b)(x) with respect to the Released Properties for which the Release Documents have been recorded prior to the funding of the Delayed Advance (and, references to “Substitution Property” in such Sections shall be deemed to mean “Released Property” for the purposes of this Section 1.1(b) ); provided , that if Borrower has encumbered or otherwise sold, transferred or disposed of any such Released Property, then Borrower shall provide Lender with such additional collateral satisfactory to Lender in its sole discretion (each, an “ Additional Property ”) and shall comply with Section 2.1(b)(w) , Section 2.1(b)(x) and Section 2.2 with respect to such Additional Property (and, reference to “Substitution Property” or “Property” in such Section shall be deemed to mean “Additional Property” for the purposes of this Section 1.1(b) ); and (iii) Borrower shall pay (x) a fee in respect of such Delayed Advance in an amount equal to 0.25% of the amount of such Delayed Advance and (y) all reasonable out-of-pocket expenses incurred by Lender in connection with such Delayed Advance and the satisfaction of the conditions in this Section 1.1(b) . Interest on the Delayed Advance shall begin to accrue on the date that the Delayed Advance is made to Borrower.

 
3
 


The Delayed Advance is not in the nature of a revolving credit facility, and amounts borrowed and repaid hereunder may not be re-borrowed. Within 30 days following the funding of the Delayed Advance, Borrower shall comply with Section 2.2(a) , Section 2.2(b) and Section 2.2(c) with respect to the Released Properties for which the Release Documents have been recorded. To the extent that the Delayed Advance is less than the Delayed Advance Amount, Lender shall agree to either reduce the number of Release Documents required to be delivered to Lender pursuant to this Section 1.1(b)(x) or the number of Released Properties for which Borrower must comply with Section 1.1(b)(y) , in each case in Lender’s reasonable discretion.”
(j) Section 1.1(d) is hereby deleted in its entirety.
(k) The following Section 1.6 is hereby added to the Loan Agreement.
“Section 1.6.     Lender’s Obligation to Deliver Release Documents .
Borrower shall prepare and deliver to Lender the Release Documents as promptly as practicable after February 25, 2015, which Release Documents shall be reasonably acceptable to Lender, and Lender shall promptly execute and deliver the same following receipt from Borrower. Lender shall otherwise reasonably cooperate with Borrower at Borrower’s request in effectuating the releases of the Released Properties contemplated hereby.”
Section 3.          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, and 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 Borrower’s legal, valid and binding obligations, enforceable against Borrower 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) ratifies and confirms all of its obligations under the Loan Agreement and each of the other Loan Documents and (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.

 
4
 


(e) 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]

 
5
 



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 :

JPP, LLC,
a Delaware limited liability company  
   
By: /s/ Edward S. Lampert
       Name: Edward S. Lampert
Title: Sole Member


JPP II, LLC,
a Delaware limited liability company  
   
By: /s/ Edward S. Lampert
       Name: Edward S. Lampert
Title: Manager    


   
 



Amendment to Loan Agreement
 
 



BORROWER :
SEARS DEVELOPMENT CO.,
a Delaware corporation  

By: /s/ Robert A. Riecker  
       Name: Robert A. Riecker
Title: Vice President


SEARS, ROEBUCK & CO.,
a New York corporation  

By: /s/ Robert A. Riecker
       Name: Robert A. Riecker
Title: Vice President, Controller and
      Chief Accounting Officer


KMART CORPORATION,
a Michigan corporation  

By: /s/ Robert A. Riecker
       Name: Robert A. Riecker
Title: Vice President, Controller and
      Chief Accounting Officer

 


Amendment to Loan Agreement
 
 




Exhibit 99.1

NEWS MEDIA CONTACT:
Sears Holdings Public Relations
(847) 286-8371
  
                         FOR IMMEDIATE RELEASE:
February 26, 2015

SEARS HOLDINGS REPORTS FOURTH QUARTER AND FULL YEAR 2014 RESULTS
HOFFMAN ESTATES, Ill. - Sears Holdings Corporation (NASDAQ: SHLD) today announced financial results for its fourth quarter and full year ended January 31, 2015. As a supplement to this announcement, a presentation, pre-recorded conference and audio webcast are available at our website http://searsholdings.com/invest.
In summary, we reported:
•
Domestic Adjusted EBITDA of $125 million in the fourth quarter, which was an increase of $217 million over the prior year fourth quarter;
•
Full year Domestic Adjusted EBITDA of $(647) million compared to $(490) million in the prior year;
•
Net loss attributable to Sears Holdings' shareholders of $159 million ( $1.50 loss per diluted share) for the fourth quarter compared to a loss of $358 million ( $3.37 loss per diluted share) for the prior year fourth quarter;
•
Net loss attributable to Sears Holdings' shareholders of $1.7 billion ( $15.82 loss per diluted share) for the full year of 2014 compared to a loss of $1.4 billion ( $12.87 loss per diluted share) for the prior year;
•
Sales to Shop Your Way ® members in Sears Full-line and Kmart stores were 72% and 74% of eligible sales for the fourth quarter and full year, respectively;
•
In the fourth quarter of 2014, Kmart comparable store sales declined 2.0% and Sears Domestic declined 7.0% ;
•
The Company continues to demonstrate that it has the financial flexibility to fund its transformation and meet its obligations. As of January 31, 2015, we had approximately $800 million in availability under our credit facility and $250 million in cash; and
•
During 2014, we closed approximately 234 underperforming Kmart and Sears Full-line stores, the majority of which were Kmart stores. The Company, which has more than 1,700 Sears and Kmart stores, expects to migrate the shopping activity of highly engaged members who previously shopped closed stores to alternative channels. As a result, we hope to retain a portion of the sales previously associated with these stores by nurturing and maintaining our relationships with the members that shopped these locations.

"We are pleased to report $125 million in Adjusted EBITDA in the fourth quarter, a significant improvement year over year," said Edward S. Lampert, Sears Holdings' Chairman and Chief Executive Officer. "While we clearly believe that we can improve upon these results, we are pleased with the positive trend that started in the third quarter, and we currently expect this level of improvement to carry forward into our full year 2015 results. We believe that the changes we are making to focus on our best stores, reward our best members and pursue our best categories will help us continue to transform Sears Holdings into a leading integrated membership-focused company."


1



Rob Schriesheim, Sears Holdings' Chief Financial Officer, said, "During 2014, we took a number of actions to enhance our financial flexibility, support our operations and meet our obligations. In total, the actions we have taken generated $2.3 billion in liquidity. We continue to take action to evolve and transition our capital structure toward a structure that is more flexible, long-term oriented and less dependent on inventory and receivables. We have proven that Sears Holdings is an asset-rich enterprise with multiple levers to generate continued financial flexibility, while creating shareholder value."
We are continuing our efforts to develop Sears Holdings as a membership company, without the significant asset intensity of its traditional retail business. To this end, we announced in November that we have been exploring the formation of a Real Estate Investment Trust (REIT) to purchase some of our properties and to manage them like a pure real estate company. While we can offer no assurances that such a transaction will be consummated, we have made progress and are proceeding towards its formation and separation, which is projected to occur in May or June of this year. We are currently targeting between 200 and 300 Sears and Kmart stores to be sold to the REIT with expected proceeds to Sears Holdings in excess of $2.0 billion. The REIT itself would be funded by equity and debt with the equity raised through a rights offering. The subscription rights would be distributed pro rata to all stockholders of record of the Company, and every stockholder would have the right to participate, except that holders of the Company's restricted stock that is unvested as of the record date would be expected to receive cash awards in lieu of subscription rights.
Financial Results
Revenues decreased approximately $2.5 billion to $8.1 billion for the quarter ended January 31, 2015, as compared to revenues of $10.6 billion for the quarter ended February 1, 2014. The majority of the decline related to the following significant items: $1.1 billion associated with Sears Canada, which was de-consolidated in October 2014, $530 million from the separation of the Lands’ End business, which was completed in the first quarter of 2014 and $497 million in less revenue from fewer Kmart and Sears Full-line stores. For the quarter, domestic comparable store sales declined 4.4% , comprised of a decrease of 2.0% at Kmart and a decrease of 7.0% at Sears Domestic, which contributed to $313 million of the decline.
At Kmart, apparel, toys, jewelry and seasonal were top performers, but were offset by declines in consumer electronics and grocery & household. Excluding the impact of the consumer electronics and grocery & household goods businesses, comparable store sales would have increased 2.8%. Sears Domestic was also negatively impacted by consumer electronics industry trends. Excluding the impact of consumer electronics, Sears Domestic comparable store sales would have decreased 4.6%, primarily driven by decreases in Sears Auto Centers and apparel.
Revenues decreased approximately $5.0 billion to $31.2 billion for the year ended January 31, 2015, as compared to revenues of $36.2 billion in the prior year. The majority of the decline related to the following significant items: $1.7 billion associated with Sears Canada, which was de-consolidated in October 2014, $1.3 billion from the separation of the Lands’ End business, which was completed in the first quarter of 2014 and $1.3 billion in less revenue from fewer Kmart and Sears Full-line stores. For the year, domestic comparable store sales declined 1.8%, comprised of a decrease of 1.4% at Kmart and a decrease of 2.1% at Sears Domestic, which contributed to $421 million of the decline.
For the year, Kmart had positive performance in several categories, most notably apparel and jewelry, partially offset by declines in the consumer electronics and grocery & household categories. Excluding the impact of the consumer electronics and grocery & household goods businesses, comparable store sales would have increased 0.8% for the year. For the year, excluding the impact of consumer electronics, Sears Domestic comparable store sales would have decreased 0.5%, reflecting improved performance in the home appliance and mattress categories offset by declines in Sears Auto Centers, apparel and lawn & garden.
Gross margin decreased $504 million to $2.0 billion in the fourth quarter of 2014, as compared to the prior year fourth quarter, as the above noted decline in sales was partially offset by an improvement in gross margin rate. Kmart's gross margin rate for the fourth quarter increased 170 basis points primarily driven by an increase in the apparel category due to lower promotional activity, as well as improvements in toys, grocery & household and drugstore. Sears Domestic's gross margin rate increased 120 basis points for the quarter with improvement experienced in a majority of categories, most notably home appliances and apparel.

2



For the year, gross margin decreased $1.6 billion to $7.1 billion in 2014, as compared to the prior year due to the above noted decline in sales, as well as a decline in gross margin rate. Kmart's gross margin rate for the year decreased 50 basis points primarily driven by decreases in home, consumer electronics and seasonal, which were partially offset by an improvement in the apparel category. Sears Domestic's gross margin rate decreased 140 basis points for the year primarily driven by decreases in apparel, tools, home and consumer electronics, partially offset by an improvement in mattresses.
Selling and administrative expenses decreased $611 million in the fourth quarter of 2014 compared to the prior year quarter. Excluding significant items noted in our Adjusted Earnings Per Share tables, domestic selling and administrative expenses declined $239 million primarily due to decreases in payroll, insurance and advertising expenses.
For the year, selling and administrative expenses decreased $1.2 billion in 2014 compared to the prior year and included several significant items. Excluding these items, domestic selling and administrative expenses declined $394 million primarily due to a decline in payroll and advertising expenses.
Our effective tax rate for 2014 was 7.4% , compared to 14.8% in 2013. Our tax rate in 2014 continues to reflect the effect of not recognizing the benefit of current period losses in certain domestic and foreign jurisdictions where it is not more likely than not that such benefits would be realized. The 2014 rate was negatively impacted by a valuation allowance established on Sears’s Canada’s deferred tax assets in the third quarter, prior to de-consolidation, and increased foreign taxes in Puerto Rico resulting from a new tax law change, which became effective during the second quarter of 2014. These items were partially offset by state audit settlements and statute expirations.
The Company reported a net loss of $159 million for the fourth quarter of 2014 compared to $358 million for the prior year period. Net loss for the fourth quarter of 2014 and 2013 included significant items, which aggregated to expense of $123 million and $187 million , respectively. Adjusting for these significant items, we would have reported a net loss of $36 million and $171 million in the fourth quarter of 2014 and 2013, respectively. We reported a net loss of $1.7 billion and $1.4 billion for the full year of 2014 and 2013, respectively. Net loss for 2014 and 2013 included significant items, which aggregated to expense of $852 million and $573 million , respectively. Adjusting for these significant items, we would have reported a net loss of $830 million and $792 million in 2014 and 2013, respectively.
Financial Position
The Company had cash balances of $250 million at January 31, 2015 compared with $577 million (domestic only) at February 1, 2014.
Short-term borrowings totaled $615 million ($213 million domestic credit facility, $400 million secured short-term loan and $2 million commercial paper) at the end of 2014 as compared to $1.3 billion ($1.3 billion domestic credit facility and $9 million commercial paper) at the end of 2013. We have entered into an agreement to amend and extend the $400 million short-term secured loan, effective February 28, 2015. Under the terms of the amendment, we will repay $200 million of the $400 million on March 2, 2015 and, in connection with this repayment, the lenders under the short-term secured loan have agreed to release one half of the value of the pledged collateral. The remaining $200 million secured short-term loan was extended until the earlier of June 1, 2015, or the receipt by the Company of the sale proceeds pursuant to the potential REIT transaction.
At January 31, 2015, the amount available to borrow under our credit facility was approximately $800 million, which reflects the effect of our springing fixed charge coverage ratio covenant and the borrowing base limitation in our revolving credit facility.
Total long-term debt (long-term debt and capital lease obligations) was $3.2 billion at January 31, 2015 and $2.9 billion at February 1, 2014. In 2014, our unfunded pension obligation increased to $2.3 billion from $1.5 billion in the prior year. The increase in the obligation was the result of a lower discount rate and the adoption of updated mortality tables, which resulted in a $500 million and $300 million increase in the obligation, respectively.
Merchandise inventories at January 31, 2015 were $4.9 billion , as compared to $6.4 billion (domestic only) at February 1, 2014. Excluding inventory from the Lands' End business of approximately $370 million, domestic inventory decreased approximately $1.1 billion driven by both improved productivity and store closures.

3




Adjusted EBITDA
The tables attached to this press release provide a reconciliation of GAAP to as adjusted amounts, including Adjusted EBITDA. We believe that our use of Adjusted EBITDA, Domestic Adjusted EBITDA and Adjusted EPS 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, Domestic Adjusted EBITDA or Adjusted EPS to assess our financial and earnings performance. We also use, and recommend that you use, diluted earnings per share in addition to Adjusted EPS in assessing our earnings performance.
Forward-Looking Statements
Results are unaudited. This press release contains forward-looking statements, including about our transformation through our integrated retail strategy, our plans to redeploy and reconfigure our assets, our liquidity and our ability to exercise financial flexibility as we meet our obligations and possible strategic transactions. 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 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. In addition, the statements concerning the sale-leaseback/real estate investment trust transaction regarding certain owned real estate also are subject to risks and uncertainties, including our ability to enter into or complete any such transaction on acceptable terms, on intended timetables or at all, the form or terms and conditions of any such transaction, and the impact of the evaluation and/or completion of any such transaction on our other businesses. There can be no assurance that any of these efforts will be successful. The following additional factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: our ability to offer merchandise and services that our customers want, including our proprietary brand products; our ability to successfully implement our integrated retail strategy to transform our business; our ability to successfully manage our inventory levels; our ability to successfully implement initiatives to improve our liquidity through inventory management and other actions; competitive conditions in the retail and related services industries; worldwide economic conditions and business uncertainty, including the availability of consumer and commercial credit, changes in consumer confidence and spending, the impact of rising fuel prices, and changes in vendor relationships; vendors’ lack of willingness to provide acceptable payment terms or otherwise restricting financing to purchase inventory or services; possible limits on our access to our domestic credit facility, which is subject to a borrowing base limitation and a springing fixed charge coverage ratio covenant, capital markets and other financing sources, including additional second lien financings, with respect to which we do not have commitments from lenders; our ability to successfully achieve our plans to generate liquidity through potential transactions or otherwise; potential liabilities in connection with the separation of Lands’ End, Inc. and disposition of a portion of our ownership interest in Sears Canada, Inc.; our extensive reliance on computer systems, including legacy systems, to implement our integrated retail strategy, process transactions, summarize results, maintain customer, member, associate and Company data, and otherwise manage our business, which may be subject to disruptions or security breaches; the impact of seasonal buying patterns, including seasonal fluctuations due to weather conditions, which are difficult to forecast with certainty; our dependence on sources outside the United States for significant amounts of our merchandise; our reliance on third parties to provide us with services in connection with the administration of certain aspects of our business and the transfer of significant internal historical knowledge to such parties; impairment charges for goodwill and intangible assets or fixed-asset impairment for long-lived assets; our ability to attract, motivate and retain key executives and other associates; our ability to protect or preserve the image of our brands; the outcome of pending and/or future legal proceedings, including product liability and qui tam claims and proceedings with respect to which the parties have reached a preliminary settlement; the timing and amount of required pension plan funding; and other risks, uncertainties and factors discussed in our most recent Annual Report on Form 10-K 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

4



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.
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.

5



Sears Holdings Corporation
Consolidated Statements of Operations
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Amounts are Preliminary and Subject to Change
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
Years Ended
 
millions, except per share data
 
January 31,
2015
 
February 1,
2014
 
January 31,
2015
 
February 1,
2014
REVENUES
 
 
 
 
 
 
 
 
 
Merchandise sales and services
 
$
8,099

 
$
10,593

 
$
31,198

 
$
36,188

 
 
 
 
 
 
 
 
 
 
COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
Cost of sales, buying and occupancy
 
6,121

 
8,111

 
24,049

 
27,433

 
Gross margin dollars
 
1,978

 
2,482

 
7,149

 
8,755

 
Gross margin rate
 
24.4
%
 
23.4
%
 
22.9
%
 
24.2
%
 
 
 
 
 
 
 
 
 
 
 
Selling and administrative
 
2,002

 
2,613

 
8,220

 
9,384

 
Selling and administrative expense as a percentage of total revenues
 
24.7
%
 
24.7
%
 
26.3
%
 
25.9
%
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
126

 
173

 
581

 
732

 
Impairment charges
 
38

 
219

 
63

 
233

 
Gain on sales of assets
 
(59
)
 
(391
)
 
(207
)
 
(667
)
 
    Total costs and expenses
 
8,228

 
10,725

 
32,706

 
37,115

 
 
 
 
 
 
 
 
 
 
Operating loss
 
(129
)
 
(132
)
 
(1,508
)
 
(927
)
Interest expense
 
(92
)
 
(73
)
 
(313
)
 
(254
)
Interest and investment income (loss)
 
(1
)
 
178

 
132

 
207

Other income
 
—

 
2

 
4

 
2

 
 
 
 
 
 
 
 
 
 
Loss before income taxes
 
(222
)
 
(25
)
 
(1,685
)
 
(972
)
Income tax (expense) benefit
 
63

 
(125
)
 
(125
)
 
(144
)
 
 
 
 
 
 
 
 
 
 
Net loss
 
(159
)
 
(150
)
 
(1,810
)
 
(1,116
)
(Income) loss attributable to noncontrolling interests
 
—

 
(208
)
 
128

 
(249
)
 
 
 
 
 
 
 
 
 
 
NET LOSS ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS
 
$
(159
)
 
$
(358
)
 
$
(1,682
)
 
$
(1,365
)
 
 
 
 
 
 
 
 
 
 
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS:
 
 
 
 
 
 
 
 
 
Diluted loss per share
 
$
(1.50
)
 
$
(3.37
)
 
$
(15.82
)
 
$
(12.87
)
 
Diluted weighted average common shares outstanding
 
106.3

 
106.2

 
106.3

 
106.1






6



Sears Holdings Corporation
 Condensed Consolidated Balance Sheets
(Unaudited)
 
 
 
 
 
Amounts are Preliminary and Subject to Change
 
 
 
 
 
 
 
 
 
millions
 
January 31,
2015
 
February 1,
2014
ASSETS
 
 
 
 
Current assets
 
 
 
 
   Cash and cash equivalents
 
$
250

 
$
1,028

   Restricted cash
 
—

 
10

   Accounts receivable
 
429

 
553

   Merchandise inventories
 
4,943

 
7,034

   Prepaid expenses and other current assets
 
241

 
334

   Total current assets
 
5,863

 
8,959

 
 
 
 
 
Property and equipment, net
 
4,449

 
5,394

Goodwill
 
269

 
379

Trade names and other intangible assets
 
2,097

 
2,850

Other assets
 
531

 
679

   TOTAL ASSETS
 
$
13,209

 
$
18,261

 
 
 
 
 
LIABILITIES
 
 
 
 
Current liabilities
 
 
 
 
   Short-term borrowings
 
$
615

 
$
1,332

   Current portion of long-term debt and capitalized lease obligations
 
75

 
83

   Merchandise payables
 
1,621

 
2,496

   Unearned revenues
 
818

 
900

   Other taxes
 
380

 
460

   Short-term deferred tax liabilities
 
480

 
387

   Other current liabilities
 
2,087

 
2,527

   Total current liabilities
 
6,076

 
8,185

 
 
 
 
 
Long-term debt and capitalized lease obligations
 
3,110

 
2,834

Pension and postretirement benefits
 
2,404

 
1,942

Long-term deferred tax liabilities
 
715

 
1,109

Other long-term liabilities
 
1,849

 
2,008

   Total Liabilities
 
14,154

 
16,078

   Total Equity
 
(945
)
 
2,183

   TOTAL LIABILITIES AND EQUITY
 
$
13,209

 
$
18,261

 
 
 
 
 
Total common shares outstanding
 
106.5

 
106.4





7



Sears Holdings Corporation
Segment Results
(Unaudited)
 
 
 
 
 
 
 
 
 
Amounts are Preliminary and Subject to Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended January 31, 2015
 
 
millions, except store data
 
 Kmart
 
Sears Domestic
 
Sears Holdings
 
 
Merchandise sales and services
 
$
3,547

 
$
4,552

 
$
8,099

 
 
 
 
 
 
 
 
 
 
 
Cost of sales, buying and occupancy
 
2,723

 
3,398

 
6,121

 
 
Gross margin dollars
 
824

 
1,154

 
1,978

 
 
Gross margin rate
 
23.2
%
 
25.4
%
 
24.4
%
 
 
 
 
 
 
 
 
 
 
 
Selling and administrative
 
834

 
1,168

 
2,002

 
 
Selling and administrative expense as a percentage of total revenues
 
23.5
%
 
25.7
%
 
24.7
%
 
 
Depreciation and amortization
 
23

 
103

 
126

 
 
Impairment charges
 
27

 
11

 
38

 
 
Gain on sales of assets
 
(27
)
 
(32
)
 
(59
)
 
 
Total costs and expenses
 
3,580

 
4,648

 
8,228

 
 
Operating loss
 
$
(33
)
 
$
(96
)
 
$
(129
)
 
 
 
 
 
 
 
 
 
 
 
Number of:
 
 
 
 
 
 
 
 
  Kmart Stores
 
979

 
—

 
979

 
 
  Full-Line Stores
 
—

 
717

 
717

 
 
  Specialty Stores
 
—

 
29

 
29

 
 
  Total Stores
 
979

 
746

 
1,725

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended February 1, 2014
millions, except store data
 
 Kmart
 
Sears Domestic
 
Sears Canada
 
Sears Holdings
Merchandise sales and services
 
$
4,007

 
$
5,489

 
$
1,097

 
$
10,593

 
 
 
 
 
 
 
 
 
Cost of sales, buying and occupancy
 
3,145

 
4,161

 
805

 
8,111

Gross margin dollars
 
862

 
1,328

 
292

 
2,482

Gross margin rate
 
21.5
%
 
24.2
%
 
26.6
%
 
23.4
%
 
 
 
 
 
 
 
 
 
Selling and administrative
 
878

 
1,416

 
319

 
2,613

Selling and administrative expense as a percentage of total revenues
 
21.9
%
 
25.8
%
 
29.1
%
 
24.7
%
Depreciation and amortization
 
32

 
121

 
20

 
173

Impairment charges
 
67

 
140

 
12

 
219

Gain on sales of assets
 
(19
)
 
(15
)
 
(357
)
 
(391
)
Total costs and expenses
 
4,103

 
5,823

 
799

 
10,725

Operating income (loss)
 
$
(96
)
 
$
(334
)
 
$
298

 
$
(132
)
 
 
 
 
 
 
 
 
 
Number of:
 
 
 
 
 
 
 
 
  Kmart Stores
 
1,152

 
—

 
—

 
1,152

  Full-Line Stores
 
—

 
778

 
118

 
896

  Specialty Stores
 
—

 
50

 
331

 
381

  Total Stores
 
1,152

 
828

 
449

 
2,429

 
 
 
 
 
 
 
 
 

8



Sears Holdings Corporation
Segment Results
(Unaudited)
 
 
 
 
 
 
 
 
 
Amounts are Preliminary and Subject to Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended January 31, 2015
millions, except store data
 
 Kmart
 
Sears Domestic
 
Sears Canada
 
Sears Holdings
Merchandise sales and services
 
$
12,074

 
$
17,036

 
$
2,088

 
$
31,198

 
 
 
 
 
 
 
 
 
Cost of sales, buying and occupancy
 
9,513

 
12,950

 
1,586

 
24,049

Gross margin dollars
 
2,561

 
4,086

 
502

 
7,149

Gross margin rate
 
21.2
%
 
24.0
%
 
24.0
%
 
22.9
%
 
 
 
 
 
 
 
 
 
Selling and administrative
 
2,962

 
4,655

 
603

 
8,220

Selling and administrative expense as a percentage of total revenues
 
24.5
%
 
27.3
%
 
28.9
%
 
26.3
%
Depreciation and amortization
 
95

 
437

 
49

 
581

Impairment charges
 
29

 
19

 
15

 
63

(Gain) loss on sales of assets
 
(103
)
 
(105
)
 
1

 
(207
)
Total costs and expenses
 
12,496

 
17,956

 
2,254

 
32,706

Operating loss
 
$
(422
)
 
$
(920
)
 
$
(166
)
 
$
(1,508
)
 
 
 
 
 
 
 
 
 
Number of:
 
 
 
 
 
 
 
 
  Kmart Stores
 
979

 
—

 
—

 
979

  Full-Line Stores
 
—

 
717

 
—

 
717

  Specialty Stores
 
—

 
29

 
—

 
29

  Total Stores
 
979

 
746

 
—

 
1,725

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended February 1, 2014
millions, except store data
 
 Kmart
 
Sears Domestic
 
Sears Canada
 
Sears Holdings
Merchandise sales and services
 
$
13,194

 
$
19,198

 
$
3,796

 
$
36,188

 
 
 
 
 
 
 
 
 
Cost of sales, buying and occupancy
 
10,329

 
14,324

 
2,780

 
27,433

Gross margin dollars
 
2,865

 
4,874

 
1,016

 
8,755

Gross margin rate
 
21.7
%
 
25.4
%
 
26.8
%
 
24.2
%
 
 
 
 
 
 
 
 
 
Selling and administrative
 
3,083

 
5,216

 
1,085

 
9,384

Selling and administrative expense as a percentage of total revenues
 
23.4
%
 
27.2
%
 
28.6
%
 
25.9
%
Depreciation and amortization
 
129

 
511

 
92

 
732

Impairment charges
 
70

 
150

 
13

 
233

Gain on sales of assets
 
(66
)
 
(63
)
 
(538
)
 
(667
)
Total costs and expenses
 
13,545

 
20,138

 
3,432

 
37,115

Operating income (loss)
 
$
(351
)
 
$
(940
)
 
$
364

 
$
(927
)
 
 
 
 
 
 
 
 
 
Number of:
 
 
 
 
 
 
 
 
  Kmart Stores
 
1,152

 
—

 
—

 
1,152

  Full-Line Stores
 
—

 
778

 
118

 
896

  Specialty Stores
 
—

 
50

 
331

 
381

  Total Stores
 
1,152

 
828

 
449

 
2,429

 
 
 
 
 
 
 
 
 


9



Sears Holdings Corporation
Adjusted EBITDA
(Unaudited)
 
 
 
 
 
 
 
 
Amounts are Preliminary and Subject to Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
Years Ended
millions
January 31,
2015
 
February 1,
2014
 
January 31,
2015
 
February 1,
2014
Net loss attributable to Holdings per statement of operations
$
(159
)
 
$
(358
)
 
$
(1,682
)
 
$
(1,365
)
Income (loss) attributable to noncontrolling interests
—

 
208

 
(128
)
 
249

Income tax expense (benefit)
(63
)
 
125

 
125

 
144

Interest expense
92

 
73

 
313

 
254

Interest and investment (income) loss
1

 
(178
)
 
(132
)
 
(207
)
Other income
—

 
(2
)
 
(4
)
 
(2
)
Operating loss
(129
)
 
(132
)
 
(1,508
)
 
(927
)
Depreciation and amortization
126

 
173

 
581

 
732

Gain on sales of assets
(59
)
 
(391
)
 
(207
)
 
(667
)
Before excluded items
(62
)
 
(350
)
 
(1,134
)
 
(862
)
 
 
 
 
 
 
 
 
Closed store reserve and severance
86

 
103

 
224

 
130

Domestic pension expense
22

 
40

 
89

 
162

Other expenses (1)
41

 
—

 
50

 
—

Impairment charges
38

 
219

 
63

 
233

Adjusted EBITDA
125

 
12

 
(708
)
 
(337
)
 
 
 
 
 
 
 
 
Lands' End separation
—

 
(80
)
 
(10
)
 
(150
)
Adjusted EBITDA as defined (2)
$
125

 
$
(68
)
 
$
(718
)
 
$
(487
)
 
 
 
 
 
 
 
 
Sears Canada segment
—

 
(24
)
 
71

 
(3
)
Domestic Adjusted EBITDA as defined (2)
$
125

 
$
(92
)
 
$
(647
)
 
$
(490
)
(1) Consists of expenses associated with legal matters, transaction costs associated with strategic initiatives and other expenses.
(2) Adjusted to reflect the results of the Lands' End business which were included in our results of operations prior to the separation.

10



Sears Holdings Corporation
Adjusted EBITDA
(Unaudited)
 
 
 
 
 
 
 
 
 
 
Amounts are Preliminary and Subject to Change
 
 
 
 
 
 
 
 
Quarters Ended
millions
January 31, 2015
 
February 1, 2014
 
Kmart
Sears Domestic
Sears Holdings
 
Kmart
Sears Domestic
Sears Canada
Sears Holdings
Operating income (loss) per statement of operations
$
(33
)
$
(96
)
$
(129
)
 
$
(96
)
$
(334
)
$
298

$
(132
)
Depreciation and amortization
23

103

126

 
32

121

20

173

Gain on sales of assets
(27
)
(32
)
(59
)
 
(19
)
(15
)
(357
)
(391
)
Before excluded items
(37
)
(25
)
(62
)
 
(83
)
(228
)
(39
)
(350
)
 
 
 
 
 
 
 
 
 
Closed store reserve and severance
58

28

86

 
56

(4
)
51

103

Domestic pension expense
—

22

22

 
—

40

—

40

Other expenses (1)
40

1

41

 
—

—

—

—

Impairment charges
27

11

38

 
67

140

12

219

Adjusted EBITDA
88

37

125

 
40

(52
)
24

12

 
 
 
 
 
 
 
 
 
Lands' End separation
—

—

—

 
—

(80
)
—

(80
)
Adjusted EBITDA as defined (2)
$
88

$
37

$
125

 
$
40

$
(132
)
$
24

$
(68
)
% to revenues (3)
2.5
%
0.8
%
1.5
%
 
1.0
%
(2.7
)%
2.2
%
(0.7
)%
 
Years Ended
millions
January 31, 2015
 
February 1, 2014
 
Kmart
Sears Domestic
Sears Canada
Sears Holdings
 
Kmart
Sears Domestic
Sears Canada
Sears Holdings
Operating income (loss) per statement of operations
$
(422
)
$
(920
)
$
(166
)
$
(1,508
)
 
$
(351
)
$
(940
)
$
364

$
(927
)
Depreciation and amortization
95

437

49

581

 
129

511

92

732

(Gain) loss on sales of assets
(103
)
(105
)
1

(207
)
 
(66
)
(63
)
(538
)
(667
)
Before excluded items
(430
)
(588
)
(116
)
(1,134
)
 
(288
)
(492
)
(82
)
(862
)
 
 
 
 
 
 
 
 
 
 
Closed store reserve and severance
142

55

27

224

 
89

(31
)
72

130

Domestic pension expense
—

89

—

89

 
—

162

—

162

Other expenses (1)
43

4

3

50

 
—

—

—

—

Impairment charges
29

19

15

63

 
70

150

13

233

Adjusted EBITDA
(216
)
(421
)
(71
)
(708
)
 
(129
)
(211
)
3

(337
)
 
 
 
 
 
 
 
 
 
 
Lands' End separation
—

(10
)
—

(10
)
 
—

(150
)
—

(150
)
Adjusted EBITDA as defined  (2)
$
(216
)
$
(431
)
$
(71
)
$
(718
)
 
$
(129
)
$
(361
)
$
3

$
(487
)
% to revenues  (3)
(1.8
)%
(2.6
)%
(3.4
)%
(2.3
)%
 
(1.0
)%
(2.0
)%
0.1
%
(1.4
)%

(1) Consists of expenses associated with legal matters, transaction costs associated with strategic initiatives and other expenses.
(2) Adjusted for the results of the Lands' End business which were included in our results of operations prior to the separation.
(3) Excludes revenues of the Lands' End business which were included in our results of operations prior to the separation.

11



Sears Holdings Corporation
Adjusted Earnings per Share
(Unaudited)
 
 
 
 
 
 
 
 
 
Amounts are Preliminary and Subject to Change
 
 
 
 
 
 
 
Quarter Ended January 31, 2015
 
 
Adjustments
 
millions, except per share data
GAAP
Domestic Pension Expense
Domestic Closed Store
Reserve, Store Impairments and
Severance
Domestic Gain on Sales of Assets
Other Expenses
Domestic Tax Matters
As
Adjusted
Gross margin impact
$
1,978

$
—

$
10

$
—

$
—

$
—

$
1,988

Selling and administrative impact
2,002

(22
)
(76
)
—

(41
)
—

1,863

Depreciation and amortization impact
126

—

(1
)
—

—

—

125

Impairment charges impact
38

—

(38
)
—

—

—

—

Gain on sales of assets impact
(59
)
—

—

22

—

—

(37
)
Operating loss impact
(129
)
22

125

(22
)
41

—

37

Income tax benefit impact
63

(8
)
(47
)
8

(15
)
19

20

After tax and noncontrolling interests impact
(159
)
14

78

(14
)
26

19

(36
)
Diluted loss per share impact
$
(1.50
)
$
0.13

$
0.73

$
(0.13
)
$
0.25

$
0.18

$
(0.34
)
 
Quarter Ended February 1, 2014
 
 
Adjustments
 
millions, except per share data
GAAP
Domestic
Pension
Expense
Domestic Closed Store Reserve, Store Impairments and Severance
Domestic Gain on Sales of Assets
Domestic Tax Matters
Sears Canada Segment
Lands' End Separation
As Adjusted (1)
Gross margin impact
$
2,482

$
—

$
28

$
—

$
—

$
(292
)
$
(208
)
$
2,010

Selling and administrative impact
2,613

(40
)
(24
)
—

—

(319
)
(128
)
2,102

Depreciation and amortization impact
173

—

(6
)
—

—

(20
)
(6
)
141

Impairment charges impact
219

—

(207
)
—

—

(12
)
—

—

Gain on sales of assets impact
(391
)
—

—

12

—

357

—

(22
)
Operating loss impact
(132
)
40

265

(12
)
—

(298
)
(74
)
(211
)
Interest expense impact
(73
)
—

—

—

—

3

—

(70
)
Interest and investment income impact
178

—

—

—

—

(170
)
—

8

Other income impact
2

—

—

—

—

(3
)
—

(1
)
Income tax expense impact
(125
)
(15
)
(99
)
5

249

60

28

103

Income attributable to noncontrolling interests impact
(208
)
—

—

—

—

208

—

—

After tax and noncontrolling interests impact
(358
)
25

166

(7
)
249

(200
)
(46
)
(171
)
Diluted loss per share impact
$
(3.37
)
$
0.24

$
1.56

$
(0.07
)
$
2.34

$
(1.88
)
$
(0.43
)
$
(1.61
)

(1) Adjusted for the results of the Lands' End and Sears Canada businesses which were included in our results prior to the separation/disposition.




12



Sears Holdings Corporation
Adjusted Earnings per Share
(Unaudited)
 
 
 
 
 
 
 
 
 
Amounts are Preliminary and Subject to Change
 
 
 
 
 
 
 
Year Ended January 31, 2015
 
 
Adjustments
 
millions, except per share data
GAAP
Domestic
Pension
Expense
Domestic Closed Store Reserve, Store Impairments and Severance
Domestic Gain on Sales of Assets
Other Expenses
Gain on Sears Canada Disposition
Domestic Tax Matters
Sears Canada Segment
Lands' End Separation
As Adjusted (1)
Gross margin impact
$
7,149

$
—

$
68

$
—

$
—

$
—

$
—

$
(502
)
$
(87
)
$
6,628

Selling and administrative impact
8,220

(89
)
(129
)
—

(47
)
—

—

(603
)
(77
)
7,275

Depreciation and amortization impact
581

—

(8
)
—

—

—

—

(49
)
(3
)
521

Impairment charges impact
63

—

(48
)
—

—

—

—

(15
)
—

—

Gain on sales of assets impact
(207
)
—

—

87

—

—

—

(1
)
—

(121
)
Operating loss impact
(1,508
)
89

253

(87
)
47

—

—

166

(7
)
(1,047
)
Interest expense impact
(313
)
—

—

—

—

—

—

5

—

(308
)
Interest and investment income impact
132

—

—

—

—

(70
)
—

(38
)
—

24

Other income impact
4

—

—

—

—

—

—

(4
)
—

—

Income tax expense impact
(125
)
(33
)
(95
)
33

(18
)
26

574

136

3

501

Loss attributable to noncontrolling interests impact
128

—

—

—

—

—

—

(128
)
—

—

After tax and noncontrolling interests impact
(1,682
)
56

158

(54
)
29

(44
)
574

137

(4
)
(830
)
Diluted loss per share impact
$
(15.82
)
$
0.53

$
1.48

$
(0.51
)
$
0.27

$
(0.41
)
$
5.40

$
1.29

$
(0.04
)
$
(7.81
)
 
Year Ended February 1, 2014
 
 
Adjustments
 
millions, except per share data
GAAP
Domestic
Pension
Expense
Domestic Closed Store Reserve, Store Impairments and Severance
Domestic Gain on Sales of Assets
Domestic Tax Matters
Sears Canada Segment
Lands' End Separation
As Adjusted (1)
Gross margin impact
$
8,755

$
—

$
56

$
—

$
—

$
(1,016
)
$
(616
)
$
7,179

Selling and administrative impact
9,384

(162
)
(2
)
—

—

(1,085
)
(466
)
7,669

Depreciation and amortization impact
732

—

(11
)
—

—

(92
)
(22
)
607

Impairment charges impact
233

—

(220
)
—

—

(13
)
—

—

Gain on sales of assets impact
(667
)
—

—

67

—

538

—

(62
)
Operating loss impact
(927
)
162

289

(67
)
—

(364
)
(128
)
(1,035
)
Interest expense impact
(254
)
—

—

—

—

1

—

(253
)
Interest and investment income impact
207

—

—

—

—

(187
)
—

20

Other income impact
2

—

—

—

—

(2
)
—

—

Income tax expense impact
(144
)
(60
)
(109
)
26

655

59

49

476

Income attributable to noncontrolling interests impact
(249
)
—

—

—

—

249

—

—

After tax and noncontrolling interests impact
(1,365
)
102

180

(41
)
655

(244
)
(79
)
(792
)
Diluted loss per share impact
$
(12.87
)
$
0.96

$
1.70

$
(0.39
)
$
6.17

$
(2.30
)
$
(0.73
)
$
(7.46
)
(1) Adjusted for the results of the Lands' End and Sears Canada businesses which were included in our results prior to the separation/disposition.

13