Sears 2010 Annual Report Download - page 37

During 2009, we received $166 million in cash from changes in investments and restricted cash. This
reflects cash received from The Reserve Primary Fund of $38 million, as well as changes in restricted cash
requirements at Sears Canada.
During 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. This transaction is further
described in Note 2 to the Consolidated Financial Statements.
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 2008.
Financing Activities and Cash Flows
Net cash used in financing activities was $95 million in 2010, $951 million in 2009 and $643 million in
2008. The financing activities in 2010 reflect purchases of Sears Canada shares, debt repayments and common
share repurchase activity, which were funded in part from $1.25 billion of proceeds from our senior secured notes
offering in October 2010. Financing activities in 2009 and 2008 primarily reflect common share repurchase
activity and debt repayments.
During 2010, we acquired approximately 19 million additional Sears Canada common shares. We paid a
total of $560 million for the additional shares. In addition, Sears Canada purchased and cancelled approximately
2.2 million common shares during 2010 under their Normal Course Issuer Bid, at a cost of $43 million. Sears
Canada declared and paid cash dividends of $7.00 Canadian per common share, or approximately $754 million
Canadian ($708 million U.S.). Accordingly, Sears Canada paid $69 million to minority shareholders in
connection with these dividends. For further information, see Note 2 of Notes to Consolidated Financial
Statements.
Repayments of debt during 2010 were $486 million. Total short-term borrowings at January 29, 2011 of
$360 million were $35 million higher than our level of borrowings at January 30, 2010. The increase in
outstanding long-term debt includes an increase in domestic long-term debt and capital lease obligations of $1.2
billion. Of this amount, $425 million is due in 2011, of which $295 million was paid in February 2011.
Repayments of debt during 2009 were $335 million and $262 million in 2008. In 2010, we took the following
steps to enhance our liquidity position and reduce reliance on our domestic revolving credit facility during the
peak holiday borrowing period:
• On September 10, 2010, our Sears Canada subsidiary entered into a five-year $800 million Canadian
credit facility. The facility is secured by a first lien on Sears Canada’s inventory and receivable
balances. At January 29, 2011, Sears Canada had drawn approximately $107 million ($108 million
Canadian) on the facility and including letters of credit, had a remaining capacity of approximately
$510 million ($511 million Canadian).
• On September 15, 2010, Sears Holdings and Sears Canada executed an inter-company loan whereby
Sears Holdings borrowed $389 million from Sears Canada. Sears Holdings used the loan proceeds to
fund its seasonal working capital build for the holiday selling season, thereby reducing borrowings on
its credit facility. The inter-company loan was repaid in full to Sears Canada on November 12, 2010.
• On October 12, 2010, Sears Holdings issued $1.25 billion of 6
5
⁄ 8 % senior secured notes due 2018.
These notes are secured by domestic inventory and credit card accounts receivable.
All of these steps taken during 2010 extend the duration of our capital structure, while at the same time
allowing us to fund operations, continue to invest in our businesses, repurchase our stock, make payments on our
term debt and complete our acquisition of additional noncontrolling interest in Sears Canada.
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