Sears 2015 Annual Report Download - page 62

credit facility in which the maturity date for $1.971 billion of the domestic credit facility has been extended to July
2020, while $1.304 billion retains the existing maturity date of April 2016. Finally, as also discussed in Note 3, the
Company completed a tender offer for $936 million principal amount of its outstanding 6 5/8% Senior Secured
Notes Due 2018.
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. In 2016, we intend to further reduce
expenses, as well as target other asset sales in the first half of the year. The specific assets involved, the timing and
the overall amount will depend on a variety of factors, including market conditions, interest in specific assets,
valuations of those assets and our underlying operating performance.
We intend to continue taking significant actions to alter our capital structure, as circumstances allow, to
position Holdings for success and profitability, which could include changes in the composition or amount of our
debt. We will continue to consider our overall capital structure and our liquidity position with a goal of creating
long-term value and funding our transformation. On March 3, 2016, we announced our intention to obtain a new
senior secured term loan facility of up to $750 million under the accordion feature in our credit facility, which is
currently being marketed to potential lenders. Additionally, we expect to pursue other near-term actions to bolster
liquidity. Actions available to us include borrowings under our $750 million short-term basket as permitted under the
credit agreement and may include real estate backed financings to secure either short-term or long-term borrowings.
In addition to our ability to raise up to $1.0 billion under the accordion feature in our credit facility, the credit facility
also provides us flexibility of up to $500 million of FILO capacity and up to $2.0 billion of second lien capacity, all
depending on the applicable and available borrowing base as defined in our credit agreement, as well as our ability
to secure commitments from lenders. We believe that our liquidity needs will be satisfied by these actions through
the foreseeable future.
These actions are currently uncommitted, and we cannot predict the outcome of the actions to generate
liquidity€discussed above, or whether such actions would generate the expected liquidity as currently planned.€If we
continue to experience operating losses, and we are not able to generate enough funds from the above actions (or
some combination of other actions), the availability under our domestic credit facility might be fully utilized and we
would need to secure additional sources of funds.€Moreover, if the borrowing base (as calculated pursuant to the
indenture) falls below the principal amount of the notes plus the principal amount of any other indebtedness for
borrowed money that is secured by liens on the collateral for the notes on the last day of any two consecutive
quarters, it could trigger an obligation to repurchase notes in an amount equal to such deficiency.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions about future events. The
estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during
the reporting period. We evaluate our estimates and assumptions on an ongoing basis using historical experience and
other factors that management believes to be reasonable under the circumstances. Adjustments to estimates and
assumptions are made when facts and circumstances dictate. As future events and their effects cannot be determined
with absolute certainty, actual results may differ from the estimates used in preparing the accompanying
consolidated financial statements. Significant estimates and assumptions are required as part of determining
inventory and accounts receivable valuation, estimating depreciation, amortization and recoverability of long-lived
assets, establishing self-insurance, warranty, legal and other reserves, performing goodwill, intangible and long-lived
asset impairment analyses, and in establishing valuation allowances on deferred income tax assets and reserves for
tax examination exposures, and calculating retirement benefits.
Cash and Cash Equivalents
Cash equivalents include all highly liquid investments with original maturities of three months or less at the
date of purchase. We also include deposits in-transit from banks for payments related to third-party credit card and
SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
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