Sears 2008 Annual Report Download - page 39

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Investing Activities and Cash Flows
Net cash flows used in investing activities totaled $637 million in fiscal 2008, as compared to $437 million
used in fiscal 2007 and $660 million used in fiscal 2006. Cash used in investing activities in all three years was
primarily used for purchases of property and equipment.
During fiscal 2008 we spent $497 million on capital expenditures as compared to $570 million during fiscal
2007. Capital expenditures during fiscal 2008 included ongoing investments in the maintenance of the company’s
facilities (including a significant investment in lighting retrofit projects to reduce energy consumption in
Holdings’ facilities) and in information technology. Capital expenditures during fiscal 2007 included multiple
real estate acquisitions of space used for Holdings’ retail locations or distribution centers and for continued
investments in our information technology. We used $508 million for capital expenditures in fiscal 2006, and
significant projects included the opening of 16 Sears Essentials/Grand locations, as well as remodeling
approximately 70 Kmart locations to include Sears brand products, most notably home appliances.
We anticipate fiscal 2009 capital expenditure levels to be approximately flat to 2008 levels; however, it
should be noted that in the normal course of business, we consider opportunities to purchase leased operating
properties, as well as offers to sell owned, or assign leased, operating and non-operating properties. These
transactions may, individually or in the aggregate, result in material proceeds or outlays of cash and cause our
capital expenditure levels to vary from period to period. In addition, we review leases that will expire in the short
term in order to determine the appropriate action to take with respect to them. During fiscal 2008, we purchased
9 previously leased operating properties for $22 million.
During fiscal 2008 we purchased an additional 2.6 million of Sears Canada’s common shares in open market
transactions. We paid a total of $37 million for the additional shares acquired, which brought our total ownership
interest in Sears Canada to 73%. Fiscal 2006 investing activity cash flows also reflect cash paid in connection
with the acquisition of additional interest in Sears Canada. We paid a total of $282 million for additional
common shares of Sears Canada during 2006, raising Holdings’ ownership in Sears Canada to approximately
70% as of February 3, 2007 from approximately 54% as of fiscal year end 2005. These transactions are further
described in Note 3 to the Consolidated Financial Statements.
As discussed in the “Results of Operations” and “Investment of Available Capital” sections above, we
entered into total return swaps during fiscal 2007 and fiscal 2006. In connection with the settlement of our
investments in total return swaps during 2007, collateral posted in the amount of $80 million in 2006 was
returned to us in 2007. There were no total return swaps outstanding as of January 31, 2009 or February 2, 2008.
We purchased 5.3 million shares of common stock of Restoration Hardware, Inc. (“Restoration”), a
specialty retailer of hardware, bathware, furniture, lighting, textiles, accessories and gifts during 2007. Our
investment of $30 million represented an ownership interest of 13.67% of Restoration’s total outstanding shares.
We sold our investment in Restoration during the second quarter of fiscal 2008.
Financing Activities and Cash Flows
Net cash used in financing activities was $643 million in fiscal 2008 as compared to $3.4 billion used in
2007 and $1.3 billion used in 2006. The difference primarily reflects common share repurchase activity during
the three year period. We repurchased $678 million, $2.9 billion and $806 million of our common stock pursuant
to our common share repurchase program in fiscal 2008, 2007 and 2006, respectively. The common share
repurchase program was initially announced in 2005 with a total authorization by our Board of Directors of up to
$1.0 billion. During the three year period from fiscal 2006 through fiscal 2008, the Board of Directors authorized
the repurchase of up to an additional $4.5 of common stock, for a total authorization since inception of the
program of $5.5 billion. At January 31, 2009, we had approximately $505 million of remaining authorization
under the program. The share repurchase program has no stated expiration date and share repurchases may be
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