SEARS HOLDINGS CORPORATION (NASDAQ:SHLD) Files An 8-K Regulation FD DisclosureItem 7.01 Regulation FD Disclosure
| (1) | The annual pension expense included in our statement of operations related to our legacy domestic pension plans is comprised of interest cost, expected return on plan assets and amortization of experience losses. Gains and losses occur when actual experience differs from the estimates used to allocate the change in value of pension plans to expense throughout the year or when assumptions change, as they may each year. Significant factors that can contribute to the recognition of actuarial gains and losses include changes in discount rates used to remeasure pension obligations on an annual basis or, upon a qualifying remeasurement, differences between actual and expected returns on plan assets and other changes in actuarial assumptions. Management believes these actuarial gains and losses are primarily financing activities that are more reflective of changes in current conditions in global financial markets (and in particular interest rates) that are not directly related to the underlying business and that do not have an immediate, corresponding impact on the benefits provided to eligible retirees. This adjustment eliminates the entire pension expense from the statement of operations to improve comparability. |
| (2) | Significant items not included in Adjusted EBITDA include impairment charges related to fixed assets and intangible assets, closed store and severance charges, transaction costs associated with strategic initiatives, items associated with legal matters and costs associated with natural disasters. |
| • | a letter of credit and reimbursement facility, of which $271million was committed and utilized as of October28, 2017 and as of February14, 2018; |
| • | a $500million real estate loan facility (the “2016 Secured Loan Facility”) originally maturing in July 2017, initially extended to January 2018, subsequently extended to April 2018 and further extended, subject to payment of an extension fee, to July 2018 (with $263million principal amount outstanding as of October28, 2017 and $253million principal amount outstanding as of February14, 2018); |
| • | a $500million real estate loan facility maturing in July 2020 (with $384million principal amount outstanding as of October28, 2017 and as of February14, 2018); |
| • | a $200million real estate loan facility maturing in April 2018 and extendable, subject to extension of the 2016 Secured Loan Facility, to July 2018 (with $185million principal amount outstanding as of October28, 2017 and $145million principal amount outstanding as of February14, 2018); |
| • | a $300million second-lien term loan facility maturing in July 2020 (with $300million principal amount outstanding as of October28, 2017 and as of February14, 2018); |
| • | a $500million, uncommitted second-lien line of credit loan facility and an amendment to that facility to extend the maximum duration of the line of credit loans to 270 days and permit total borrowings of up to $600million (of which $413million principal amount was funded as of October28, 2017 and $545million principal amount is funded as of February14, 2018); |
| • | term loans incurred in January 2018 in an aggregate amount of $210million principal amount (all of which are outstanding as of February14, 2018) secured by certain intellectual property and real property (with a right of the borrowers thereunder to incur up to $90million of additional term loans thereunder, subject to the satisfaction of certain conditions and the agreement of the incremental lenders); |
| • | an amendment to the indenture governing our 6⁄% Senior Secured Notes Due 2018 to increase the maximum permissible borrowings secured by inventory to 75% of book value of such inventory from 65% and defer the collateral coverage test for purposes of the repurchase offer covenant in the indenture to restart it with the second quarter of 2018 (such that no collateral coverage event can occur until the end of the third quarter of 2018); |
| • | an amendment to our five-year pension plan protection and forbearance with the Pension Benefit Guaranty Corporation providing for the release of 138 of our properties from a ring-fence arrangement created under our five-year pension plan protection and forbearance agreement in exchange for the payment of approximately $407million into the Sears pension plans (which Holdings expects to raise through a credit facility secured by such properties); and |
| • | various commercial paper issuances (with $40million principal amount outstanding at October28, 2017 and $0 outstanding as of February14, 2018). |
| • | The sale of the Craftsman brand to Stanley Black& Decker for consideration consisting of cash payments and a royalty with an aggregate estimated net present value of approximately $900million. |
| • | Sales of real estate and other assets for net cash proceeds of $1.5billion through October28, 2017 and $1.7billion through the date hereof. |
Subject to consummation of the Exchange Offers and the effectiveness of the proposed amendments to the indenture governing the 6 5/8% Senior Secured Notes due 2018, Holdings and ESL Investments, Inc. have expressed a mutual intention to amend the credit agreement governing our $300 million second lien term loan to provide that interest on such indebtedness may be paid in kind, and that Holdings’ obligations thereunder may be exchanged for Holdings common stock on the same terms as the notes being privately offered in exchange for 6 5/8% Senior Secured Notes Due 2018.
Also subject to consummation of the Exchange Offers and effectiveness of the proposed amendments to the indenture governing the 6 5/8% Senior Secured Notes due 2018, Holdings and third party holders of approximately $99 million in principal amount of senior unsecured notes of various series issued by Holdings’ wholly owned subsidiary, Sears Roebuck Acceptance Corp., have expressed a mutual intention to exchange such indebtedness for new indebtedness of the same principal amount, maturing March 2028 and bearing interest at a rate of 7% per annum, except that interest on such new indebtedness may be paid in kind (in which event the interest rate in respect of the applicable interest period would be 12% per annum).
Item 7.01 Other Events
The Company will hold its 2018 annual meeting of stockholders on May9, 2018.
Private Securities Litigation Reform Act of 1995 –
A Caution Concerning Forward-Looking Statements
This Form8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company cautions that these forward-looking statements are subject to risks, uncertainties and assumptions, many of which are beyond its control, that may cause actual results to differ materially from those indicated in the forward-looking statements for a number of reasons, including, without limitation, risks and uncertainties relating to the commencement of the private exchange offers and negotiated exchange of, or amendments to, certain other indebtedness, statements about our strategic restructuring program and anticipated results of strategic initiatives, our transformation through our integrated retail strategy, our plans to redeploy and reconfigure our assets, our plans to market and sell a portion of our existing real estate 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,” “expects,” “intends,” 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. Additional information concerning other factors is contained in the Company’s most recent annual report on Form10-K and subsequent filings with the Securities and Exchange Commission. The Company intends these forward-looking statements to speak only as of the time made and, except as required by law, does not undertake to update or revise them as more information becomes available.
About SEARS HOLDINGS CORPORATION (NASDAQ:SHLD)
Sears Holdings Corporation is an integrated retailer. The Company is the parent company of Kmart Holding Corporation (Kmart) and Sears, Roebuck and Co. (Sears). It operates through two segments: Kmart and Sears Domestic. It operates approximately 940 Kmart stores across over 50 states, Guam, Puerto Rico and the United States Virgin Islands. Kmart stores carry an array of products across various merchandise categories, including seasonal merchandise, toys, lawn and garden equipment, food and consumables and apparel, including products sold under labels, such as Jaclyn Smith, Joe Boxer and Alphaline and certain Sears brand products (such as Kenmore, Craftsman and DieHard) and services. Its Sears Domestic segment’s operations consist of full-line stores, specialty stores, commercial sales and home services. Full-line stores offer an array of products and service offerings across various merchandise categories, including appliances, consumer electronics/connected solutions and tools.
