Sears 2015 Annual Report Download - page 45

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.
Uses and Source of Liquidity
Our primary need for liquidity is to fund working capital requirements of our businesses, capital expenditures
and for general corporate purposes, including debt repayment and pension plan contributions. We have incurred
losses and experienced negative operating cash flows for the past several years, and accordingly, the Company has
taken a number of actions to enhance its financial flexibility and fund its continued transformation, support its
operations and meet its obligations.
During 2014, the Company raised approximately $2.3 billion in cash, which included the $500 million
dividend the Company received in connection with the Lands' End separation, $400 million from the secured short-
term loan, $380 million from the Sears Canada rights offering, $625 million from the rights offering for the senior
unsecured notes with warrants and $358 million in additional proceeds from domestic real estate transactions.
During 2015, we entered into three different real estate joint ventures with General Growth Properties, Inc.,
Simon Property Group, Inc. and The Macerich Company, in which we contributed a total of 31 properties to the joint
ventures in exchange for a 50% interest in the each of the joint ventures and $429 million in cash proceeds ($426
million net of closing costs). During the second quarter of 2015, the Company also completed the rights offering and
sale-leaseback transaction with Seritage and received aggregate gross proceeds from the transaction of $2.7 billion,
of which a portion were used to reduce our debt, fund our pension plan and to absorb operating losses. Holdings'
lease payments to the Seritage and real estate joint ventures, respectively, will be approximately $134 million and
$42 million annually, with increases of 2% per year beginning in the second lease year for the REIT properties and
in the fourth lease year for the joint venture properties.
Also during the second quarter of 2015, the Company completed an amendment and extension of our $3.275
billion Domestic Credit Facility, with approximately€$2.0 billion€maturing in 2020 and the remaining€approximately
$1.3 billion€of the existing credit facility expiring on the original maturity date in April of 2016. Finally, during the
third quarter of 2015, the Company completed a tender offer (the "Offer") to purchase for cash up to $1.0
billion€principal amount of its outstanding 6 5/8% Senior Secured Notes Due 2018 (the "Senior Secured Notes").
Approximately $936 million principal amount of the Senior Secured Notes were validly tendered in the Offer. The
reacquisition cost was $929 million. As a result of the Senior Secured Notes validly tendered in the Offer, we have
mitigated our annualized cash interest expense by approximately $62 million.
As a result of these actions taken in 2015, we have significantly reduced our net debt (including unfunded
pension and postretirement benefit obligations) by approximately $1.0 billion compared to year-end 2014.
Based on our financial performance in 2015, we are taking further actions to accelerate our transformation,
which is focused on our Shop Your Way® membership program and our Integrated Retail offerings. As we
leverage€Shop Your Way® and Integrated Retail, we expect to continue to right-size, redeploy and highlight the value
of our assets, including our substantial real estate portfolio, in our transition from an asset intensive, historically
"store-only" based retailer to a more asset light, integrated membership-focused company. We intend to continue
taking significant actions to alter our capital structure, as circumstances allow, to position Sears Holdings for success
and profitability, which could include changes in the composition or amount of our debt. We will accelerate the
closing of unprofitable stores, including, but not limited to, approximately 50 stores that we recently announced
would be closing in the next few months. We also intend to continue to evaluate and optimize our cost structure,
including optimizing store-level marketing expenditures and overall staffing levels, and we will be taking action to
reduce our fixed costs, and to improve our inventory management and gross margin realization. As previously
announced, looking toward 2016, we plan to take actions that will further reduce our costs by between $550 million
and $650 million, depending on the overall volume of sales. As we progress in our transformation, we are primarily
focusing on profitability instead of revenues, market share and other metrics each of which relate to, but do not
necessarily drive, profit. This approach may negatively impact our sales, however, it is aimed at returning the
Company to profitability. We believe that our focus on profitability will contribute to meaningful performance in
2016 and beyond.
In addition to the expense reductions and store closing actions referred to above, we will be targeting at least
$300 million of other asset sales during the first half of fiscal year 2016. The specific assets involved, the timing and
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