Sears 2012 Annual Report Download - page 25

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25
2012 Compared to 2011
Net Loss from Continuing Operations Attributable to Holdings' Shareholders
We recorded a net loss from continuing operations attributable to Holdings' shareholders of $930 million
($8.78 loss per diluted share from continuing operations) and $3.1 billion ($29.15 loss per diluted share from
continuing operations) for 2012 and 2011, respectively. Our results for 2012 and 2011 were affected by a number of
significant items, including non-cash charges related to pension settlements and the impairment of goodwill balances
and a $1.8 billion non-cash charge to establish a valuation allowance against our domestic deferred tax assets in
2011. Our net loss from continuing operations as adjusted for these significant items was $215 million ($2.03 loss
per diluted share from continuing operations) for 2012 and $482 million ($4.52 loss per diluted share from
continuing operations) for 2011. The improvement in net loss for the year reflected an improvement in gross margin
rate of 90 basis points and a decrease in selling and administrative expenses, which were partially offset by a decline
in gross margin dollars, given lower sales.
In addition to our net income (loss) from continuing operations determined in accordance with GAAP, for
purposes of evaluating operating performance, we use an Adjusted Earnings Before Interest, Taxes, Depreciation
and Amortization ("Adjusted EBITDA") measurement as well as Adjusted Earnings per Share (“Adjusted EPS”).
Adjusted EBITDA is computed as net income (loss) attributable to Sears Holdings Corporation appearing on
the Statements of Operations excluding income (loss) attributable to noncontrolling interest, income tax expense,
interest expense, interest and investment income, other income (loss), depreciation and amortization and gain on
sales of assets. In addition, it is adjusted to exclude certain significant items as set forth below. Our management
uses Adjusted EBITDA to evaluate the operating performance of our businesses, as well as executive compensation
metrics, for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole
basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.
While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator
of operating performance because:
• EBITDA excludes the effects of financings and investing activities by eliminating the effects of interest and
depreciation costs;
• Management considers gains/(losses) on the sale of assets to result from investing decisions rather than
ongoing operations; and
• Other significant items, while periodically affecting our results, may vary significantly from period to
period and have a disproportionate effect in a given period, which affects comparability of results.