HOFFMAN ESTATES, Ill.,
Aug. 3, 2015 /PRNewswire/
-- Sears Holdings Corporation ("Holdings," "we," "us," "our,"
or the "Company") (Nasdaq: SHLD) today is providing an update on
our second quarter performance, improved financial position and
actions that enhance our liquidity and business operations.
In summary, Holdings:
- Continued to enhance the performance of our business and expect
a fourth consecutive quarter of improved Adjusted EBITDA;
- Completed 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. This represents a significant milestone and provides the
Company with a credit facility consistent with our needs, given our
reduced reliance on inventory as a source of financing;
- Substantially completed the capital structure adjustments we
laid out in August 2014, including
the domestic credit facility extension and the formation of
Seritage Growth Properties ("Seritage"), a recently formed
independent publicly traded real estate investment trust ("REIT"),
and realized $3.0 billion of proceeds
from these REIT-related transactions, including the previously
announced joint ventures with three leading mall owners and
operators; and
- At the end of the quarter, we expect approximately $1.2 billion in availability under our domestic
credit facility and $1.8 billion in
cash compared to $0.2 billion and
$0.6 billion, respectively, in the
prior year.
Estimated Second Quarter Performance
We currently expect to experience a fourth consecutive quarter
of improved Adjusted EBITDA compared to the prior year period. We
expect that, based on our current forecast, which excludes certain
significant items as set forth below, our second quarter Adjusted
EBITDA will range between $(189) million and
$(249) million, before an additional $26 million in rent expense resulting from (i)
the recent transaction with Seritage and (ii) joint ventures
entered into with General Growth Properties, Inc., Simon Property
Group and The Macerich Company, as compared to domestic Adjusted
EBITDA of $(298) million in the
second quarter of the prior year. We have provided a domestic
Adjusted EBITDA reconciliation below.
In addition, we expect to report a significant gain in the
second quarter due to the sale of assets to Seritage, which will
also trigger a significant tax benefit that would be realized on
the deferred taxes related to indefinite-life assets related to the
property sold to the REIT. We currently expect the gain to be
approximately $1.4 billion, of which
approximately $510 million will be
reported in the second quarter of 2015 and the balance of
approximately $900 million will be
deferred and recognized over the term of the leases, and a tax
benefit of approximately $240
million. We expect our reported net income attributable to
Holdings' shareholders for the quarter ending August 1, 2015 will range between approximately
$155 million and $205 million, or
between $1.46 and $1.92 income per
diluted share, including the aforementioned gain and tax benefit,
but excluding any final accounting adjustments for the quarter.
Comparable store sales for the quarter-to-date ("QTD") and
year-to-date ("YTD") periods ended July 25,
2015 for its Sears Domestic and Kmart stores are as
follows:
|
|
QTD
|
|
YTD
|
Kmart
|
|
-6.9%
|
|
-7.0%
|
Sears
Domestic
|
|
-13.9%
|
|
-14.2%
|
Total
|
|
-10.6%
|
|
-10.7%
|
Total comparable store sales for the QTD declined 10.6%,
comprised of decreases of 6.9% at Kmart and 13.9% at Sears
Domestic. Excluding the impact of the consumer electronics
business, a business we are altering to meet the changing needs of
our members, total comparable store sales would have declined 9.1%,
comprised of decreases of 5.4% and 12.5% at Kmart and Sears
Domestic, respectively.
Financial Position and Actions To Improve Liquidity
On July 7, 2015, the Company
completed its rights offering and sale-leaseback transaction with
Seritage. As part of the transaction, Holdings sold 235 real
properties to Seritage along with Holdings' 50% interest in joint
ventures with each of General Growth Properties, Inc., Simon
Property Group and The Macerich Company, which together hold an
additional 31 properties. Holdings received aggregate gross
proceeds from the transaction of $2.7
billion. The properties currently operated as Sears- and
Kmart-branded stores were then leased back to Holdings.
At the end of the quarter, we expect total cash and revolver
availability of approximately $3.0
billion composed of approximately $1.8 billion in cash plus availability under our
domestic credit facility of $1.2
billion. Usage at the end of our second quarter under our
$3.275 billion domestic credit
facility is expected to be approximately $657 million, consisting entirely of letters of
credit outstanding, versus last year's total usage of $2.0 billion, consisting of $1.4 billion of borrowings and letters of credit
outstanding of $646 million.
With the completion of the amendment and extension of the
domestic credit facility and the REIT transaction, we have
substantially enhanced our financial flexibility and achieved our
objective of reducing our reliance on inventory as a source of
financing. We intend to continue taking significant actions to
alter our capital structure, as circumstances allow, to position
Holdings for success and profitability, which could include further
reductions in debt or changes in the composition of our debt.
If the tender offer referred to below is not fully subscribed,
unused amounts will be available to purchase additional debt
securities at the Company's discretion. We would recognize a
$66 million reduction in our annual
cash interest expense if the maximum amount of notes is tendered in
the offer referred to below.
Consistent with our objective to enhance the financial
flexibility of our capital structure, we intend to continue our
focus on executing our transformation from a traditional store
network-based retail business model to an asset-light,
member-centric retailer.
Tender Offer for Outstanding 6 5/8% Senior Secured Notes due
2018
The Company also announced today that it has commenced a tender
offer (the "Offer") to purchase for cash up to $1,000,000,000 principal amount of its
outstanding 6 5/8% Senior Secured Notes Due 2018 (the "Notes"). The
aggregate principal amount of Notes currently outstanding is
$1,238,000,000. The terms and
conditions of the Offer are set forth in an Offer to Purchase (the
"Offer to Purchase") and related Letter of Transmittal (the "Letter
of Transmittal"), each dated August 3,
2015. Holders of Notes are urged to read the Offer to
Purchase and Letter of Transmittal carefully before making any
decision with respect to the Offer.
The Offer is scheduled to expire at 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 (such date and time, as the same may be extended, the
"Expiration Time"). Holders of the Notes must validly tender (and
not withdraw) their Notes at or prior to 5:00 p.m., New York
City time, on August 14, 2015,
unless extended by the Company (such date and time, as the same may
be extended, the "Early Tender Date"), to be eligible to receive
the Total Consideration (as defined below). Tenders of Notes may be
validly withdrawn at any time at or prior to 5:00 p.m., New York
City time, on August 14, 2015,
unless extended by the Company. After such time, Notes may not be
validly withdrawn except as otherwise provided in the Offer to
Purchase or as required by law.
The consideration paid in the Offer to each holder of tendering
Notes will be determined in the manner described in the Offer to
Purchase. Holders who validly tender and do not validly withdraw
Notes at or prior to the Early Tender Date will receive the "Total
Consideration" of $990 per
$1,000 principal amount of Notes that
are validly tendered and accepted for purchase, which includes an
early tender payment of $30 per
$1,000 principal amount of Notes
validly tendered and accepted for purchase (the "Early Tender
Premium"). Holders who validly tender and do not validly withdraw
Notes after the Early Tender Date but at or prior to the Expiration
Date will receive the Total Consideration minus the Early Tender
Premium per $1,000 principal amount
of Notes validly tendered and accepted for purchase. In addition,
in each case holders who tender and do not validly withdraw Notes
will receive accrued and unpaid interest on such Notes accepted for
purchase up to, but excluding, the applicable settlement date.
The amount of Notes purchased in the Offer will be determined in
accordance with the tender cap of $1,000,000,000 principal amount and as described
in the Offer to Purchase and Letter of Transmittal. If holders
validly tender Notes in an aggregate principal amount in excess of
the tender cap, the Company will only accept the tender cap,
subject to proration as described in the Offer to Purchase. The
Company will fund purchases of Notes pursuant to the Offer with
cash on hand.
Notes validly tendered and not validly withdrawn at or prior to
the Early Tender Date are expected to settle on August 17, 2015. Notes validly tendered and not
validly withdrawn after the Early Tender Date, and at or prior to
the Expiration Time, are expected to settle on August 31, 2015. Consummation of the Offer, and
payment for the tendered Notes, is subject to the satisfaction or
waiver of certain conditions described in the Offer to Purchase.
The Company's acceptance of and payment for Notes tendered is not
conditioned upon any minimum level of participation.
Jefferies LLC (the "Dealer Manager") is serving as Dealer
Manager for the Offer. Questions regarding the Offer may be
directed to the Dealer Manager at (877) 877-0696 (toll free) or
(212) 284-2435 (collect). Requests for the Offer to Purchase or the
Letter of Transmittal or the documents incorporated by reference
therein may be directed to D.F. King
& Co., Inc., which is acting as the Tender Agent and
Information Agent ("Tender and Information Agent") for the Offer,
at the following telephone numbers: banks and brokers, (212)
269-5550; all others, toll free at (800) 330-5136. Offer materials
are available at the following Web site address:
www.dfking.com/sears.
This press release is neither an offer to purchase nor a
solicitation of an offer to sell securities. No offer,
solicitation, purchase or sale will be made in any jurisdiction in
which such offer, solicitation, or sale would be unlawful. The
Offer is being made solely pursuant to the terms and conditions set
forth in the Offer to Purchase and the Letter of Transmittal. None
of the Company, the Company's Board of Directors, the Dealer
Manager, the Tender and Information Agent, the trustee under the
indenture governing the Notes or any of their respective affiliates
is making any recommendation as to whether holders should tender
their Notes.
Second Quarter Earnings Release
The Company currently plans to release financial results for its
fiscal 2015 second quarter and YTD on or about August 20, 2015, before the market opens.
Adjusted EBITDA Reconciliation
In addition to our net income 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"). The table set forth below provides a
reconciliation of GAAP numbers to Adjusted EBITDA. We believe that
our use of Adjusted EBITDA provides an appropriate measure for
investors to use in assessing our performance across periods, given
that these measures provide adjustments for certain significant
items, which may vary significantly from period to period,
improving the comparability of year-to-year results and is
therefore representative of our ongoing performance. Therefore, we
have adjusted our results for them to make our statements more
useful and comparable. However, we do not, and do not recommend
that you, solely use Adjusted EBITDA to assess our financial
performance.
millions
|
Range
|
|
|
•
|
expected net income
attributable to Holdings' shareholders
|
$
|
205
|
|
$
|
155
|
|
•
|
plus domestic pension
settlements and expense not included in Adjusted EBITDA
|
77
|
|
77
|
|
•
|
plus income statement
line items not included in EBITDA consisting of income taxes,
interest expense, interest and investment income (loss), other
income, depreciation expense and gain on sales of assets
|
(497)
|
|
(507)
|
|
Adjusted
EBITDA
|
(215)
|
|
(275)
|
|
REIT/JV
Rent
|
26
|
|
26
|
|
Adjusted EBITDA
excluding REIT/JV Rent
|
$
|
(189)
|
|
$
|
(249)
|
|
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, statements
about the Offer, the terms of the Offer, the dates on which actions
relating to the Offer are expected to occur 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 ABL transaction and the
sale-leaseback/REIT transaction, such as the impact of the
evaluation and/or completion of such transactions 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 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
NEWS MEDIA CONTACT:
Sears Holdings Public
Relations
(847) 286-8371
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SOURCE Sears Holdings Corporation