Sears 2008 Annual Report Download - page 40

implemented using a variety of methods, which may include open market purchases, privately negotiated
transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put
options or otherwise, or by any combination of such methods.
Payments on our debt, when netted with new borrowings during 2008, were nominal. Fiscal 2007 financing
cash flows include debt payments of $601 million, net of new borrowings, as compared to $434 million of net
payments in fiscal 2006. The difference in cash used to repay debt between 2006 and 2007 primarily reflects the
generation of $198 million of debt proceeds, net of approximately $2 million in issuance costs, in connection
with our entering into a five year, $200 million Senior Secured Term Loan at our OSH subsidiary in December
2006. The proceeds of this borrowing were used by OSH to pay Holdings the remaining loan payable issued in
connection with OSH’s recapitalization in November 2005. The Senior Secured Term Loan is non-recourse to
Holdings. Debt payments made during 2008 were completely offset by increases in short-term borrowings, which
were made primarily through our revolving credit facility.
In August 2007, Sears Canada sold its headquarters office building and adjacent land in Toronto, Ontario for
proceeds of $81 million Canadian, net of closing costs. Sears Canada is currently leasing back the property under
a leaseback agreement for a period up to 36 months, and incurring its current level of occupancy costs, until it
relocates all head office operations to currently underutilized space in the Toronto Eaton Centre, Ontario. The
carrying value of the property was approximately $35 million as of February 2, 2008. Given the terms of the
leaseback, for accounting purposes, the excess of proceeds received over the carrying value of the associated
property has been deferred, and the resulting gain will be recognized at the end of the leaseback period when
Sears Canada is no longer utilizing the associated property. We expect to recognize this gain during the first half
of fiscal 2009.
Uses and Sources of Liquidity
Our primary need for liquidity is to fund working capital requirements of our retail businesses, capital
expenditures and for general corporate purposes, including common share repurchases, debt repayment and
pension plan contributions. We believe that these needs will be adequately funded by our operating cash flows,
credit terms received from vendors and borrowings under our $4.0 billion, five-year credit agreement (the
“Credit Agreement”) (described below). At January 31, 2009, $2.6 billion was available under this facility. While
we expect to use the Credit Agreement as our primary funding source, we may also access the public debt
markets on an opportunistic basis. Additionally, we may from time to time consider selective strategic
transactions to create value and improve performance, which may include acquisitions, dispositions,
restructurings, joint ventures and partnerships. Transactions of these types may result in material proceeds or
cash outlays.
Our year end fiscal 2008 and 2007 outstanding borrowings were as follows:
millions
January 31,
2009
February 2,
2008
Short-term borrowings:
Unsecured commercial paper ........................................... $ 7 $ 145
Secured borrowings .................................................. 435 17
Long-term debt, including current portion:
Notes and debentures outstanding ....................................... 1,813 2,099
Capitalized lease obligations ........................................... 664 749
Total borrowings ......................................................... $2,919 $3,010
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