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.
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.
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.
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.
