SEARS HOLDINGS CORP - FORM 8-K - EX-99.1 - EXHIBIT - April 8, 2014

Attached files

file filename
8-K - 8-K - SEARS HOLDINGS CORPshcform8-kxlandsenddisposi.htm


Exhibit 99.1
 
Sears Holdings Corporation
Unaudited Pro Forma Consolidated Financial Information
 
On April 4, 2014, Sears Holdings Corporation (“Holdings”) completed the previously announced distribution of 100% of the outstanding shares of common stock of Lands' End, Inc. (“Lands' End”) to the Holdings stockholders (the “Distribution”).
 
The following unaudited pro forma consolidated statement of operations of Holdings for the fiscal year ended February 1, 2014 is presented as if the Distribution had occurred as of February 3, 2013.  The following unaudited pro forma consolidated balance sheet as of February 1, 2014 assumes that the Distribution occurred on February 1, 2014.
 
The statements are presented based on information currently available, are intended for informational purposes only, and do not purport to represent what the Holdings financial position and results of operations actually would have been had the Distribution occurred on the dates indicated, or to project the Holdings' financial performance for any future period.
 
The unaudited pro forma consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in the Holdings' Form 10-K for the fiscal year ended February 1, 2014.
 
The Historical column in the Unaudited Pro Forma Consolidated Statement of Operations and in the Unaudited Pro Forma Consolidated Balance Sheet reflect the Holdings' historical financial statements for the periods presented and does not reflect any adjustments related to the Distribution and related events.
 
The information in the Lands' End Separation column in the Unaudited Pro Forma Consolidated Statement of Operations and the Unaudited Pro Forma Consolidated Balance Sheet were derived from the Lands' End Form 10-K for the fiscal year ended January 31, 2014.
 
The Other column in the Unaudited Pro Forma Consolidated Statements reflects pro forma adjustments which are further described in the accompanying notes.
 


E-1


Sears Holdings Corporation
Unaudited Pro Forma Consolidated Statement of Operations
Fiscal Year Ended February 1, 2014
millions, except per share data
 
Historical
 
Lands' End Separation
 
Other
 
Notes
 
Pro Forma Holdings Operations
Merchandise sales and services
 
$
36,188

 
$
(1,563
)
 
$
76

 
(a)
 
$
34,701

 
 
 
 
 
 
 
 
 
 
 
Cost of sales, buying and occupancy
 
27,433

 
(853
)
 
(35
)
 
(a)(c)
 
26,545

Selling and administrative
 
9,384

 
(560
)
 
100

 
(a)(c)
 
8,924

Depreciation and amortization
 
732

 
(22
)
 
—

 
 
 
710

Impairment charges
 
233

 
—

 
—

 
 
 
233

Gain on sale of assets
 
(667
)
 
—

 
—

 
 
 
(667
)
        Total costs and expenses
 
37,115

 
(1,435
)
 
65

 
 
 
35,745

Operating income (loss)
 
(927
)
 
(128
)
 
11

 
 
 
(1,044
)
Interest expense
 
(254
)
 
—

 
—

 
 
 
(254
)
Interest and investment income
 
207

 
—

 
—

 
 
 
207

Other income
 
2

 
—

 
—

 
 
 
2

Income (loss) from operations before income taxes
 
(972
)
 
(128
)
 
11

 
 
 
(1,089
)
Income tax expense
 
(144
)
 
49

 
(47
)
 
(d)
 
(142
)
Net income (loss)
 
(1,116
)
 
(79
)
 
(36
)
 
 
 
(1,231
)
Income attributable to noncontrolling interests
 
(249
)
 
—

 
—

 
 
 
(249
)
Net income (loss) attributable to Holdings’ shareholders
 
$
(1,365
)
 
$
(79
)
 
$
(36
)
 
 
 
$
(1,480
)
 
 
 
 
 
 
 
 
 
 
 
Basic Loss Per Share
 
$
(12.87
)
 
 
 
 
 
 
 
$
(13.95
)
 
 
 
 
 
 
 
 
 
 
 
Diluted Loss Per Share
 
$
(12.87
)
 
 
 
 
 
 
 
$
(13.95
)
 
 
 
 
 
 
 
 
 
 
 
Weighted Shares Outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
 
106.1
 
 
 
 
 
 
 
106.1

Diluted
 
106.1
 
 
 
 
 
 
 
106.1



See accompanying notes.
 














E-2


Sears Holdings Corporation
Unaudited Pro Forma Consolidated Balance Sheet
As of February 1, 2014
millions
Historical
 
Lands' End Separation
 
Other
 
Notes
 
Pro Forma Holdings
ASSETS
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,028

 
$
(22
)
 
$
—

 

 
$
1,006

Restricted cash
10

 
(3
)
 
—

 
 
 
7

Accounts receivable
553

 
(34
)
 
—

 
 
 
519

Merchandise inventories
7,034

 
(370
)
 
6

 
(c)
 
6,670

Prepaid expenses and other current assets
334

 
(22
)
 
—

 
 
 
312

Total current assets
8,959

 
(451
)
 
6

 
 
 
8,514

Property and equipment
 
 
 
 
 
 
 
 
 
Land
1,850

 
(4
)
 
—

 
 
 
1,846

Buildings and improvements
5,405

 
(114
)
 
—

 
 
 
5,291

Furniture, fixtures and equipment
2,587

 
(141
)
 
—

 
 
 
2,446

Capital leases
267

 
—

 
—

 
 
 
267

Gross property and equipment
10,109

 
(259
)
 
—

 
 
 
9,850

Less accumulated depreciation and amortization
(4,715
)
 
158

 
—

 
 
 
(4,557
)
Total property and equipment, net
5,394

 
(101
)
 
—

 
 
 
5,293

Goodwill
379

 
(110
)
 
—

 
 
 
269

Trade names and other intangible assets
2,850

 
(531
)
 
—

 
 
 
2,319

Other assets
679

 
(1
)
 
—

 
 
 
678

TOTAL ASSETS
$
18,261

 
$
(1,194
)
 
$
6

 
 
 
$
17,073

LIABILITIES
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Short-term borrowings
$
1,332

 
$
—

 
$
(500
)
 
(b)
 
$
832

Current portion of long-term debt and capitalized lease obligations
83

 
—

 
—

 
 
 
83

Merchandise payables
2,496

 
(80
)
 
—

 
 
 
2,416

Other current liabilities
2,527

 
(74
)
 
—

 
 
 
2,453

Unearned revenues
900

 
(45
)
 
—

 
 
 
855

Other taxes
460

 
—

 
—

 
 
 
460

Short-term deferred tax liabilities
387

 
(4
)
 
2

 
(d)
 
385

Total current liabilities
8,185

 
(203
)
 
(498
)
 
 
 
7,484

Long-term debt and capitalized lease obligations
2,834

 
—

 
—

 
 
 
2,834

Pension and postretirement benefits
1,942

 
—

 
—

 
 
 
1,942

Other long-term liabilities
2,008

 
(3
)
 
—

 
 
 
2,005

Long-term deferred tax liabilities
1,109

 
(196
)
 
24

 
(d)
 
937

Total Liabilities
16,078

 
(402
)
 
(474
)
 
 
 
15,202

Commitments and contingencies
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
 
 
 
 
 
Total Equity
2,183

 
(792
)
 
480

 
(b)(c)(d)
 
1,871

TOTAL LIABILITIES AND EQUITY
$
18,261

 
$
(1,194
)
 
$
6

 
 
 
$
17,073



See accompanying notes.

E-3


Sears Holdings Corporation
Notes to Unaudited Pro Forma Consolidated Financial Information
 
Note 1. Other Pro Forma Adjustments
 
(a) Reflects the adjustments of allocated corporate overhead costs and intercompany revenues between Holdings and Lands' End to conform to a stand-alone basis following the Distribution.

(b) Reflects that Holdings received aggregate gross proceeds from the Distribution of $500 million, consisting of a cash dividend paid by Lands' End prior to the Distribution to a subsidiary of Holdings, and that the proceeds of the dividend were used to reduce borrowings under Holdings' domestic revolving credit facility.

(c) The Historical and Lands' End Separation columns currently reflect the accounting policies for Holdings and Lands' End, respectively, which differ on a stand-alone basis. A portion of these pro forma adjustments adjust for Lands' End's classification accounting policy for buying and occupancy costs and for differences in inventory methods.

(d) Reflects the expected impacts following Distribution to conform income taxes to a stand-alone basis.



E-4

SEARS HOLDINGS CORP Reports