Sears 2013 Annual Report Download - page 32

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32
Selling and Administrative Expenses
Selling and administrative expenses decreased $1.3 billion to $9.4 billion in 2013 from $10.7 billion in 2012
and included expenses related to pension plans, store closings and severance of $235 million and $725 million in
2013 and 2012, respectively. The prior year also included selling and administrative expense of $343 million related
to SHO and $12 million of transaction costs associated with strategic initiatives. Excluding these items, selling and
administrative expenses declined $431 million primarily due to a decrease in payroll expense. Selling and
administrative expenses at Sears Canada for 2013 included a decrease of $45 million related to the impact of foreign
currency exchange rates.
Selling and administrative expenses as a percentage of revenues ("selling and administrative expense rate")
were 25.9% and 26.7% for 2013 and 2012, respectively, and decreased primarily as the decrease in overall selling
and administrative expenses were partially offset by lower expense leverage due to the above noted decline in
revenues.
Depreciation and Amortization
Depreciation and amortization expense decreased by $98 million during 2013 to $732 million and included
charges of $11 million and $22 million in 2013 and 2012, respectively, taken in connection with store closings. The
prior year also included depreciation and amortization expense of $6 million related to SHO. The decrease in 2013 is
primarily due to having fewer assets available for depreciation.
Impairment Charges
We recorded impairment charges of $233 million and $35 million in 2013 and 2012, respectively, related to the
impairment of long-lived assets. During 2012, we also recorded impairment charges of $295 million related to the
impairment of goodwill. Impairment charges recorded in both years are described further in Notes 12 and 13 in
Notes to Consolidated Financial Statements.
Gain on Sales of Assets
We recorded total gains on sales of assets of $667 million in 2013 and $468 million in 2012, which were
primarily attributable to several real estate transactions.
The gain on sales of assets in 2013 included a gain of $180 million recognized on the amendment and early
termination of the leases on two properties operated by Sears Canada, for which Sears Canada received $184 million
($191 million Canadian) in cash proceeds. We also recorded a gain on sales of assets of $357 million in 2013
recognized on the surrender and early termination of the leases of five properties operated by Sears Canada, for
which Sears Canada received $381 million ($400 million Canadian) in cash proceeds. Finally, gain on sales of assets
in 2013 also included a gain of $67 million related to the sale of a store previously operated under The Great Indoors
format, two Sears Full-line stores and two Kmart stores for which the Company received $98 million in cash
proceeds.
The gain on sales of assets in 2012 included a gain of $223 million recognized on the sale of eleven (six owned
and five leased) Sears Full-line store locations to General Growth Properties for $270 million in cash proceeds, and
a gain of $163 million recognized on the surrender and early termination of the leases on three properties operated
by Sears Canada, under an agreement with The Cadillac Fairview Corporation Limited for which Sears Canada
received $171 million ($170 million Canadian) in cash proceeds. Gain on sales of assets recorded in 2012 also
included a gain of $33 million related to the sale of a store operated under The Great Indoors format, one Sears Full-
line store and one Kmart store.
Operating Loss
We recorded an operating loss of $927 million and $838 million in 2013 and 2012, respectively. Operating loss
for 2013 included non-cash charges related to domestic pension plans, store closings, store impairments and
severance, as well as the gains on sales of assets which aggregated to operating income of $68 million. Operating
loss for 2012 included non-cash charges related to pension settlements and the impairment of Sears Canada goodwill
balances, expenses related to domestic pension plans, store closings, store impairments, severance and transaction