Sears Holdings Reports Second Quarter 2015 Results

HOFFMAN ESTATES, Ill., Aug. 20, 2015 /PRNewswire/ -- Sears Holdings Corporation ("Holdings," "we," "us," "our," or the "Company")(NASDAQ: SHLD) today announced financial results for its second quarter ended August 1, 2015, which are in line with the guidance the Company provided on August 3, 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 $(200) million, excluding Seritage Growth Properties and joint venture rent, in the second quarter of 2015 compared to $(298) million in the prior year second quarter, which is the fourth consecutive quarter of improved EBITDA performance on a year-over-year basis;
  • Net income attributable to Holdings' shareholders of $208 million ($1.84 earnings per diluted share) for the second quarter of 2015 compared to a net loss of $573 million ($5.39 loss per diluted share) for the prior year second quarter. Adjusted for significant items, we would have reported a net loss of $256 million ($2.40 loss per diluted share) for the quarter compared to a net loss of $293 million ($2.76 loss per diluted share) in the prior year quarter;
  • Sales to Shop Your Way® members in Sears Full-line and Kmart stores were 74% of eligible sales for the second quarter;
  • Kmart and Sears Domestic comparable store sales declined 7.3% and 14.0%, respectively, in the second quarter of 2015 driven in part by highly targeted promotional and marketing spend to better align with member needs, and a shift away from low margin categories, such as consumer electronics;
  • Kmart's gross margin rate for the second quarter improved 80 basis points over the prior year second quarter, while Sears Domestic's gross margin rate improved 210 basis points;
  • The completion on July 7, 2015 of the Company's rights offering and sale-leaseback transaction with Seritage Growth Properties, a recently formed, independent publicly traded real estate investment trust ("REIT") and received aggregate gross proceeds from the transaction of $2.7 billion;
  • The completion on July 21, 2015 of an amendment and extension of our $3.275 billion domestic credit facility with approximately $2.0 billion maturing in 2020 and the remaining approximately $1.3 billion of the existing credit facility in place until April of 2016;
  • The Company continues to demonstrate that it has the financial flexibility to fund its transformation and meet its obligations. As of August 1, 2015, the Company had $1.8 billion in cash, no revolver borrowings and $657 million of letters of credit outstanding. Availability under the Credit Agreement was approximately $1.2 billion; and
  • Approximately $936 million principal amount of notes were validly tendered as part of our recent cash tender offer (the "Offer") for our 6 5/8% Senior Secured Notes due 2018 (the "Notes").

Edward S. Lampert, Holdings' Chairman and Chief Executive Officer, said, "The second quarter marked our fourth consecutive quarter of improved results. During the quarter we completed many of the objectives we laid out to transform Holdings from a traditional, store-network based retail business model to a more asset-light, member-centric integrated retailer leveraging our Shop Your Way platform. The successful completion of these actions has positioned Sears Holdings for long-term success and is consistent with our strategy to focus on our best stores, reward our best members and pursue our best categories as part of our transformation. As our results over the last four consecutive quarters demonstrate, we are successfully enhancing our margin rates and improving EBITDA performance as we become more efficient with our promotional programs and the use of Shop Your Way to replace more traditional forms of marketing with more targeted and personalized digital interactions with our members."

Rob Schriesheim, Holdings' Chief Financial Officer, said, "In the second quarter of 2015, the Company completed its rights offering and sale-leaseback transaction with Seritage Growth Properties and received aggregate gross proceeds from the transaction of $2.7 billion. In addition, we completed an amendment and extension of the Company's existing asset-based credit facility. With the successful completion of the amendment and extension of the domestic credit facility and the Seritage transaction, we have substantially enhanced our financial flexibility and achieved our objective of reducing our reliance on inventory as a source of financing. We are pleased with the outcome of the Offer, which was in line with our expectations and helped mitigate our annualized cash interest expense. We intend to continue taking significant actions to alter our capital structure, as circumstances allow, to position Sears Holdings for success and profitability, which could include further reductions in debt or changes in the composition of our debt."

Financial Results

We had Domestic Adjusted EBITDA of $(200) million, excluding Seritage Growth Properties and joint venture rent, in the second quarter of 2015 compared to $(298) million in the prior year second quarter. The terms of our leases with Seritage and the joint venture partners provide us with the ability to accelerate the transformation of our physical stores. We expect that our cash rent obligations will decrease significantly as space in these stores is recaptured.

Revenues decreased approximately $1.8 billion to $6.2 billion for the quarter ended August 1, 2015, as compared to revenues of $8.0 billion for the quarter ended August 2, 2014, with a significant portion of the decline related to actions taken by the Company in 2014 to streamline our operations and focus on our transformation into a member-centric retailer. The decrease in revenue included a decrease of $780 million associated with Sears Canada, which was de-consolidated in October 2014, and $386 million as a result of fewer Kmart and Sears Full-line stores. In addition, comparable store sales declined 10.8% during the quarter, comprised of decreases of 7.3% and 14.0% at Kmart and Sears Domestic, respectively, which accounted for $584 million of the revenue decline.

At Kmart, comparable store sales increased in the home appliances and toys categories, but were offset by declines in consumer electronics, grocery & household, apparel and drugstore. Excluding the impact of the consumer electronics business, which is a business we continue to alter to meet our members' needs, Kmart comparable store sales would have decreased 5.4%. Sears Domestic was also negatively impacted by the consumer electronics business. Excluding the impact of consumer electronics, Sears Domestic comparable store sales would have decreased 12.5%, primarily driven by decreases in home appliances, apparel, lawn & garden and Sears Auto Centers, which were partially offset by an increase in the mattresses category.

During the quarter, gross margin decreased $307 million, as the above noted decline in sales was partially offset by an improvement in gross margin rate. Gross margin for the second quarter of 2015 included one-time vendor credits of $33 million, as well as a credit of $7 million related to the amortization of the deferred gain on sale of assets associated with the Seritage transaction, while the second quarter of 2014 also included gross margin of $184 million from Sears Canada. Gross margin for the quarter also included charges of $5 million and $10 million in 2015 and 2014, respectively, related to store closures.

Kmart's gross margin rate for the second quarter improved 80 basis points, with increases experienced in several categories, particularly grocery & household and electronics. Sears Domestic's gross margin rate improved 210 basis points for the quarter. Excluding the impact of significant items recorded in gross margin during the quarter, which aggregated to a benefit of $38 million in 2015, Sears Domestic's gross margin rate improved 110 basis points, with the most notable increases experienced in the apparel and tools categories. The improvement in gross margin rate in both formats was primarily driven by less clearance markdowns and promotional activity. In addition, as a result of the Seritage and JV transactions, the second quarter of 2015 includes additional rent expense of approximately $26 million.

Selling and administrative expenses decreased $424 million in the second quarter of 2015 compared to the prior year quarter. Excluding significant items noted in our Adjusted Earnings Per Share tables, domestic selling and administrative expenses declined $240 million primarily due to decreases in payroll and advertising expenses.

During the quarter, the Company realized a significant tax benefit on the deferred taxes related to indefinite-life assets associated with the properties sold in the transaction with Seritage. As such, our effective tax rate for the second quarter of 2015 was a benefit of 1,700.0%, compared to an expense of 5.8% in the prior year quarter. In addition, the application of the requirements for accounting for income taxes in interim periods, after consideration of our valuation allowance, causes a significant variation in the typical relationship between income tax expense and pretax income.

The total gain on the sale-leaseback transaction with Seritage Growth Properties was approximately $1.4 billion, of which approximately $508 million was recognized during the second quarter of 2015 and the balance of approximately $894 million was deferred and will be recognized in proportion to the related rent expense over the lease term.

The Company reported net income of $208 million for the second quarter of 2015 compared to a net loss of $573 million for the prior year period. Net income for the second quarter of 2015 and net loss for the second quarter of 2014 included significant items, which aggregated to income of $464 million and expense of $280 million, respectively. Adjusting for these significant items, we would have reported a net loss of $256 million and $293 million in the second quarter of 2015 and 2014, respectively.

Financial Position

The Company's cash balances were $1.8 billion at August 1, 2015 compared with $250 million at January 31, 2015.

Domestic merchandise inventories at August 1, 2015 were $5.0 billion, compared to $5.8 billion at August 2, 2014, with the decline being driven by improved productivity and store closures.

Since the first quarter of 2012, we have reduced our net inventory investment by approximately $2.2 billion. By reducing our inventory investment and our payables, we have decreased the level of vendor support needed to run our business, de-risking our business model in a way that benefits both us and our vendor partners.

Short-term borrowings totaled $6 million at the end of the second quarter of 2015 consisting of commercial paper outstanding, as compared to $615 million at January 31, 2015, consisting of $213 million outstanding on our domestic credit facility, a $400 million secured short-term loan and $2 million of commercial paper outstanding.

At August 1, 2015, the amount available to borrow under our credit facility was approximately $1.2 billion, 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 $3.1 billion and $3.2 billion at August 1, 2015 and January 31, 2015, respectively.

As of the "Early Tender Date" of August 17, 2015, approximately $936 million principal amount of the Notes were validly tendered and not validly withdrawn in the Offer. Pursuant to the terms of the Offer, holders of Notes may tender additional Notes at or prior to 11:59 p.m., New York City time, on August 28, 2015, unless the Offer is earlier terminated or extended by the Company in its sole discretion. As such, the unused balance of our debt repurchase authorization is $74 million at August 20, 2015. As a result of the Notes received as of the Early Tender Date, we have mitigated our annualized cash interest expense by approximately $62 million. The Company may consider repurchasing other outstanding debt securities in order to further mitigate our interest expense.

Adjusted EBITDA

In addition to our net income (loss) from continuing operations attributable to Sears 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"), Domestic Adjusted EBITDA, Domestic Adjusted EBITDA excluding Seritage/JV rent and Adjusted Earnings Per Share. The tables attached to this press release provide a reconciliation of GAAP to as adjusted amounts. We believe that our use of Adjusted EBITDA, Domestic Adjusted EBITDA, Domestic Adjusted EBITDA excluding Seritage/JV rent 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, Domestic Adjusted EBITDA excluding Seritage/JV rent 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 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 transactions and other statements that describe the Company's plans. Whenever used, words such as "will," "expect," and other terms of similar meaning 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 Company's 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. These include, but are not limited to, risks and uncertainties relating to the domestic credit facility transaction and the Seritage transaction, such as the impact of the evaluation and/or completion of any such transaction on our other businesses, and risks and uncertainties relating to the Offer, such as the timing and certainty of the completion of that transaction and the operational and financial profile of the Company or any of its businesses after giving effect to it. There can be no assurance that any of these efforts will be successful. Detailed descriptions of other risks, uncertainties and factors relating to Sears Holdings are 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 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.

Sears Holdings Corporation

Condensed Consolidated Statements of Operations

(Unaudited)









Amounts are Preliminary and Subject to Change









13 Weeks Ended


26 Weeks Ended

millions, except per share data

August 1,
2015


August 2,
2014


August 1,
2015


August 2,
2014

REVENUES








Merchandise sales and services

$

6,211



$

8,013



$

12,093



$

15,892


COSTS AND EXPENSES








Cost of sales, buying and occupancy

4,776



6,271



9,140



12,322


Gross margin dollars

1,435



1,742



2,953



3,570


Gross margin rate

23.1

%


21.7

%


24.4

%


22.5

%

Selling and administrative

1,694



2,118



3,375



4,207


Selling and administrative expense as a
  percentage of total revenues

27.3

%


26.4

%


27.9

%


26.5

%

Depreciation and amortization

114



152



236



307


Impairment charges

54



20



54



25


Gain on sales of assets

(526)



(34)



(633)



(80)


Total costs and expenses

6,112



8,527



12,172



16,781


Operating income (loss)

99



(514)



(79)



(889)


Interest expense

(85)



(72)



(175)



(143)


Interest and investment income (loss)

(26)



32



(44)



36


Other income (loss)

(1)



5





2


Loss before income taxes

(13)



(549)



(298)



(994)


Income tax (expense) benefit

221



(32)



203



(29)


Net income (loss)

208



(581)



(95)



(1,023)


Loss attributable to noncontrolling interests



8





48


NET INCOME (LOSS) ATTRIBUTABLE
  TO HOLDINGS' SHAREHOLDERS

$

208



$

(573)



$

(95)



$

(975)


NET INCOME (LOSS) PER COMMON
  SHARE ATTRIBUTABLE TO
  HOLDINGS' SHAREHOLDERS








Basic earnings (loss) per share

$

1.95



$

(5.39)



$

(0.89)



$

(9.17)


Diluted earnings (loss) per share

$

1.84



$

(5.39)



$

(0.89)



$

(9.17)


Basic weighted average common shares outstanding

106.5



106.3



106.5



106.3


Diluted weighted average common shares outstanding

113.3



106.3



106.5



106.3






Sears Holdings Corporation

 Condensed Consolidated Balance Sheets

(Unaudited)








Amounts are Preliminary and Subject to Change














millions


August 1,
2015


August 2,
2014


January 31,
2015

ASSETS







Current assets







Cash and cash equivalents


$

1,819



$

829



$

250


Restricted cash




10




Accounts receivable


460



516



429


Merchandise inventories


5,028



6,383



4,943


Prepaid expenses and other current assets


270



419



241


Total current assets


7,577



8,157



5,863


Property and equipment, net


2,732



5,091



4,449


Goodwill


269



269



269


Trade names and other intangible assets


2,091



2,302



2,097


Other assets


517



619



531


TOTAL ASSETS


$

13,186



$

16,438



$

13,209


LIABILITIES







Current liabilities







Short-term borrowings


$

6



$

1,404



$

615


Current portion of long-term debt and capitalized lease obligations


70



85



75


Merchandise payables


1,704



2,506



1,621


Other current liabilities


2,068



2,374



2,087


Unearned revenues


802



889



818


Other taxes


363



436



380


Short-term deferred tax liabilities


472



484



480


Total current liabilities


5,485



8,178



6,076


Long-term debt and capitalized lease obligations


3,068



2,815



3,110


Pension and postretirement benefits


2,258



1,721



2,404


Deferred gain on sale-leaseback


798






Sale-leaseback financing obligation


164






Other long-term liabilities


1,830



2,007



1,849


Long-term deferred tax liabilities


489



798



715


Total Liabilities


14,092



15,519



14,154


EQUITY (DEFICIT)







   Total Equity (Deficit)


(906)



919



(945)


   TOTAL LIABILITIES AND EQUITY (DEFICIT)


$

13,186



$

16,438



$

13,209









Total common shares outstanding


106.6



106.5



106.5






Sears Holdings Corporation

Segment Results

(Unaudited)









Amounts are Preliminary and Subject to Change

















13 Weeks Ended August 1, 2015



millions, except store data

Kmart


Sears
Domestic


Sears
Holdings



Merchandise sales and services

$

2,459



$

3,752



$

6,211












Cost of sales, buying and occupancy

1,950



2,826



4,776




Gross margin dollars

509



926



1,435




Gross margin rate

20.7

%


24.7

%


23.1

%











Selling and administrative

594



1,100



1,694




Selling and administrative expense as a 
  percentage of total revenues

24.2

%


29.3

%


27.3

%



Depreciation and amortization

19



95



114




Impairment charges

2



52



54




Gain on sales of assets

(143)



(383)



(526)




           Total costs and expenses

2,422



3,690



6,112




Operating income

$

37



$

62



$

99












Number of:








  Kmart Stores

963





963




  Full-Line Stores



711



711




  Specialty Stores



28



28




  Total Stores

963



739



1,702





















13 Weeks Ended August 2, 2014

millions, except store data

 Kmart


Sears
Domestic


Sears
Canada


Sears
Holdings

Merchandise sales and services

$

2,923



$

4,310



$

780



$

8,013










Cost of sales, buying and occupancy

2,341



3,334



596



6,271


Gross margin dollars

582



976



184



1,742


Gross margin rate

19.9

%


22.6

%


23.6

%


21.7

%









Selling and administrative

729



1,184



205



2,118


Selling and administrative expense as a
  percentage of total revenues

24.9

%


27.5

%


26.3

%


26.4

%

Depreciation and amortization

24



110



18



152


Impairment charges

2



3



15



20


Gain on sales of assets

(31)



(3)





(34)


           Total costs and expenses

3,065



4,628



834



8,527


Operating loss

$

(142)



$

(318)



$

(54)



$

(514)










Number of:








  Kmart Stores

1,077







1,077


  Full-Line Stores



757



113



870


  Specialty Stores



36



319



355


  Total Stores

1,077



793



432



2,302






Sears Holdings Corporation

Segment Results

(Unaudited)









Amounts are Preliminary and Subject to Change

















26 Weeks Ended August 1, 2015



millions, except store data

Kmart


Sears
Domestic


Sears
Holdings



Merchandise sales and services

$

4,815



$

7,278



$

12,093












Cost of sales, buying and occupancy

3,788



5,352



9,140




Gross margin dollars

1,027



1,926



2,953




Gross margin rate

21.3

%


26.5

%


24.4

%











Selling and administrative

1,217



2,158



3,375




Selling and administrative expense as a
  percentage of total revenues

25.3

%


29.7

%


27.9

%



Depreciation and amortization

39



197



236




Impairment charges

2



52



54




Gain on sales of assets

(161)



(472)



(633)




           Total costs and expenses

4,885



7,287



12,172




Operating loss

$

(70)



$

(9)



$

(79)












Number of:








  Kmart Stores

963





963




  Full-Line Stores



711



711




  Specialty Stores



28



28




  Total Stores

963



739



1,702





















26 Weeks Ended August 2, 2014

millions, except store data

Kmart


Sears
Domestic


Sears
Canada


Sears
Holdings

Merchandise sales and services

$

5,820



$

8,595



$

1,477



$

15,892










Cost of sales, buying and occupancy

4,643



6,550



1,129



12,322


Gross margin dollars

1,177



2,045



348



3,570


Gross margin rate

20.2

%


23.8

%


23.6

%


22.5

%









Selling and administrative

1,420



2,356



431



4,207


Selling and administrative expense as a
  percentage of total revenues

24.4

%


27.4

%


29.2

%


26.5

%

Depreciation and amortization

47



224



36



307


Impairment charges

2



8



15



25


(Gain) loss on sales of assets

(52)



(29)



1



(80)


           Total costs and expenses

6,060



9,109



1,612



16,781


Operating loss

$

(240)



$

(514)



$

(135)



$

(889)










Number of:








  Kmart Stores

1,077







1,077


  Full-Line Stores



757



113



870


  Specialty Stores



36



319



355


  Total Stores

1,077



793



432



2,302






Sears Holdings Corporation

Adjusted EBITDA

(Unaudited)







Amounts are Preliminary and Subject to Change







13 Weeks Ended


26 Weeks Ended

millions

August 1,
2015


August 2,
2014


August 1,
2015


August 2,
2014

Net income (loss) attributable to Holdings per statement of operations

$

208



$

(573)



$

(95)



$

(975)


Loss attributable to noncontrolling interests



(8)





(48)


Income tax expense (benefit)

(221)



32



(203)



29


Interest expense

85



72



175



143


Interest and investment (income) loss

26



(32)



44



(36)


Other (income) loss

1



(5)





(2)


Operating income (loss)

99



(514)



(79)



(889)


Depreciation and amortization

114



152



236



307


Gain on sales of assets

(526)



(34)



(633)



(80)


Before excluded items

(313)



(396)



(476)



(662)










Closed store reserve and severance

(2)



40



37



68


Domestic pension expense

57



23



114



45


Other(1)

(15)





(89)




Amortization of deferred Seritage gain

(7)





(7)




Impairment charges

54



20



54



25


Adjusted EBITDA

(226)



(313)



(367)



(524)










Lands' End separation







(10)


Adjusted EBITDA as defined(2)

$

(226)



$

(313)



$

(367)



$

(534)










Sears Canada segment



15





58


Domestic Adjusted EBITDA as defined(2)

$

(226)



$

(298)



$

(367)



$

(476)










Seritage/JV rent

26





26




Domestic Adjusted EBITDA as defined(2) excluding Seritage/JV rent

$

(200)



$

(298)



$

(341)



$

(476)



(1) Consists of one-time credits from vendors, 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 that were included in our results of operations prior to the separation.

 

Sears Holdings Corporation

Adjusted EBITDA

(Unaudited)










Amounts are Preliminary and Subject to Change










13 Weeks Ended


August 1, 2015


August 2, 2014

millions

Kmart

Sears
Domestic

Sears
Holdings


Kmart

Sears
Domestic

Sears
Canada

Sears
Holdings

Operating
  income
  (loss) per
  statement of
  operations

$

37


$

62


$

99



$

(142)


$

(318)


$

(54)


$

(514)


Depreciation and amortization

19


95


114



24


110


18


152


Gain on sales of assets

(143)


(383)


(526)



(31)


(3)



(34)


Before excluded items

(87)


(226)


(313)



(149)


(211)


(36)


(396)











Closed store reserve and severance

5


(7)


(2)



27


7


6


40


Domestic pension expense


57


57




23



23


Other(1)


(15)


(15)







Amortization of deferred Seritage gain

(1)


(6)


(7)







Impairment charges

2


52


54



2


3


15


20


Adjusted EBITDA

(81)


(145)


(226)



(120)


(178)


(15)


(313)


% to  revenues

(3.3)%


(3.9)%


(3.6)%



(4.1)%


(4.1)%


(1.9)%


(3.9)%





26 Weeks Ended


August 1, 2015


August 2, 2014

millions

Kmart

Sears
Domestic

Sears
Holdings


Kmart

Sears
Domestic

Sears
Canada

Sears
Holdings

Operating loss per statement of operations

$

(70)


$

(9)


$

(79)



$

(240)


$

(514)


$

(135)


$

(889)


Depreciation and amortization

39


197


236



47


224


36


307


(Gain) loss on sales of assets

(161)


(472)


(633)



(52)


(29)


1


(80)


Before excluded items

(192)


(284)


(476)



(245)


(319)


(98)


(662)











Closed store reserve and severance

41


(4)


37



36


7


25


68


Domestic pension expense


114


114




45



45


Other(1)

8


(97)


(89)







Amortization of deferred Seritage gain

(1)


(6)


(7)







Impairment charges

2


52


54



2


8


15


25


Adjusted EBITDA

(142)


(225)


(367)



(207)


(259)


(58)


(524)











Lands' End separation






(10)



(10)


Adjusted EBITDA as defined(2)

$

(142)


$

(225)


$

(367)



$

(207)


$

(269)


$

(58)


$

(534)


%to revenues(3)

(2.9)%


(3.1)%


(3.0)%



(3.6)%


(3.2)%


(3.9)%


(3.4)%



(1) Consists of one-time credits from vendors, 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 that were included in our results of operations prior to the separation.

(3) Excludes revenues of the Lands' End business that were included in our results of operations prior to the separation.

 


Sears Holdings Corporation


Adjusted Earnings per Share


(Unaudited)



Amounts are Preliminary and Subject to Change



13 Weeks Ended August 1, 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

Mark-to-Market Adjustments

Amortization of Deferred Seritage Gain

Other(1)

Domestic Tax Matters

As
Adjusted

Gross margin impact

$

1,435


$


$

5


$


$


$

(7)


$

(33)


$


$

1,400


Selling and administrative impact

1,694


(57)


7





(18)



1,626


Depreciation and amortization impact

114



(2)







112


Impairment charges impact

54



(54)








Gain on sales of assets impact

(526)




508






(18)


Operating income impact

99


57


54


(508)



(7)


(15)



(320)


Interest and investment loss impact

(26)





23





(3)


Income tax benefit impact

221


(21)


(20)


190


(9)


2


6


(216)


153


After tax and noncontrolling interests impact

208


36


34


(318)


14


(5)


(9)


(216)


(256)


Diluted earnings per share impact

$

1.84


$

0.32


$

0.30


$

(2.81)


$

0.12


$

(0.04)


$

(0.08)


$

(1.91)


$

(2.40)





13 Weeks Ended August 2, 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

As
Adjusted(2)

Gross margin impact

$

1,742


$


$

10


$


$


$

(184)


$

1,568


Selling and administrative impact

2,118


(23)


(24)




(205)


1,866


Depreciation and amortization impact

152



(1)




(18)


133


Impairment charges impact

20



(5)




(15)



Gain on sales of assets impact

(34)




10




(24)


Operating loss impact

(514)


23


40


(10)



54


(407)


Interest expense impact

(72)






2


(70)


Interest and investment income impact

32






(24)


8


Other income impact

5






(5)



Income tax expense impact

(32)


(9)


(15)


4


238


(10)


176


Loss attributable to noncontrolling interests impact

8






(8)



After tax and noncontrolling interests impact

(573)


14


25


(6)


238


9


(293)


Diluted loss per share impact

$

(5.39)


$

0.13


$

0.24


$

(0.06)


$

2.24


$

0.08


$

(2.76)



(1) Consists of one-time credits from vendors and transaction costs associated with strategic initiatives.
(2) Adjusted to reflect the results of the Sears Canada business that were included in our results prior to the disposition.

 

Sears Holdings Corporation

Adjusted Earnings per Share

(Unaudited)


Amounts are Preliminary and Subject to Change



26 Weeks Ended August 1, 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

Mark-to-Market Adjustments

Amortization of Deferred Seritage Gain

Other(1)

Domestic Tax Matters

As
Adjusted

Gross margin impact

$

2,953


$


$

11


$


$


$

(7)


$

(126)


$


$

2,831


Selling and administrative impact

3,375


(114)


(26)





(37)



3,198


Depreciation and amortization impact

236



(2)







234


Impairment charges

54



(54)








Gain on sales of assets impact

(633)




604






(29)


Operating loss impact

(79)


114


93


(604)



(7)


(89)



(572)


Interest and investment loss impact

(44)





42





(2)


Income tax benefit impact

203


(43)


(35)


226


(16)


2


33


(89)


281


After tax and noncontrolling interests impact

(95)


71


58


(378)


26


(5)


(56)


(89)


(468)


Diluted loss per share impact

$

(0.89)


$

0.67


$

0.55


$

(3.55)


$

0.24


$

(0.05)


$

(0.52)


$

(0.84)


$

(4.39)































26 Weeks Ended August 2, 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(2)

Gross margin impact

$

3,570


$


$

17


$


$


$

(348)


$

(87)


$

3,152


Selling and administrative impact

4,207


(45)


(26)




(431)


(77)


3,628


Depreciation and amortization impact

307



(1)




(36)


(3)


267


Impairment charges impact

25



(10)




(15)




Gain on sales of assets impact

(80)




23



(1)



(58)


Operating loss impact

(889)


45


54


(23)



135


(7)


(685)


Interest expense impact

(143)






4



(139)


Interest and investment income impact

36






(26)



10


Other income impact

2






(2)




Income tax expense impact

(29)


(17)


(20)


9


371


(12)


3


305


Loss attributable to noncontrolling interest impact

48






(48)




After tax and noncontrolling interest impact

(975)


28


34


(14)


371


51


(4)


(509)


Diluted loss per share impact

$

(9.17)


$

0.26


$

0.32


$

(0.13)


$

3.49


$

0.48


$

(0.04)


$

(4.79)



(1) Consists of one-time credits from vendors, expenses associated with legal matters, transaction costs associated with strategic initiatives and other expenses.

(2) Adjusted to reflect the results of the Lands' End and Sears Canada businesses that were included in our results prior to the separation/disposition.

NEWS MEDIA CONTACT:
Sears Holdings Public Relations
(847) 286-8371

 

SOURCE Sears Holdings Corporation








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