SHLDQ - Sears Holdings Corp

[krazeenyc]

I'm unclear whether store relocations are the same as store closures.

 

It won't make sense it they include closed stores, right?

 

It won't include stores already closed, but it should include stores that are liquidating and scheduled to close later... for example the following are just a few Sears that have been liquidating since earlier in the year and slated to close in January.

 

Sears Fayetteville Mall

Sears Racine’s Regency Mall

Sears Champaign’s Market Place Mall

Sears Salem Mall

Sears Apache Mall

 

I'm sure the SSS #s for the 4th quarter of these stores are atrocious. Especially near the end when they've got literally nothing to sell. Although I'm sure the rest of the stores are doing quite poorly too. lol.

[krazeenyc]

so did they only burn only 50 millions cash? Wasn't cash on hand 1.05 billion last reported?

 

What's the loss coming from? non-cash? Inventories write down or what?

Could you cite the last filing with the cash figure?  I imagine some of the cash generated from asset sales to account in the difference as well..

 

I got 1.05 billion from the latest presentation, but not clear if that include the Sears Canada dividend.

 

Hey Alert-

 

From the release:

 

As of January 4, 2014, we had total cash of approximately $1.0 billion and availability under our credit facilities of $2.3 billion ($1.8 billion under our domestic facility and $0.5 billion under our Sears Canada facility, prior to taking into consideration possible reserves) and $6 million in commercial paper outstanding, with commercial paper capacity of $500 million. The cash balance does not include $300 million Canadian in proceeds from the Sears Canada real estate transactions announced on November 11, 2013, which are expected to be received January 10, 2014.

 

So tomorrow they announce the 300 million?

 

This is a deal sears canada completed back in november, but they are due the money 1/10.

[alertmeipp]

so did they only burn only 50 millions cash? Wasn't cash on hand 1.05 billion last reported?

 

What's the loss coming from? non-cash? Inventories write down or what?

Could you cite the last filing with the cash figure?  I imagine some of the cash generated from asset sales to account in the difference as well..

 

I got 1.05 billion from the latest presentation, but not clear if that include the Sears Canada dividend.

 

Remember store closing lose a lot of money (GAAP/Inventory/etc). But they are cash flow positive cause everything is basically converted to cash.

 

TOTAL CASH last quarter was $600 million ($220 SCC) and ($380 Domestic).  Now it's $1 billion. ($300 million more coming to Sears Canada on 1/10 - they hedged at 1.05 to USD).

 

Now Sears Canada got 400 CAD for some real estate, then paid a 509 CAD dividend of which 247 USD went to SHLD. So SCC is 104 USD.  (This is assuming 1.05 CAD to USD)

 

so $600+ ($247-$104) = $256 Million.

 

On the Debt side.

Sears had $1 Billion left remaining on their U.S. Revolver and now $1.8 Billion remaining now : +$800 million.

Sears also had $160 million of commercial paper outstanding reduced to $4 million

 

So $956 Million less debt. 

 

So even though it's pretty horrible overall SHLD domestic operations generated $1202 million in cash.

 

You lost me on the below:

 

so $600+ ($247-$104) = $256 Million.??

 

Are you saying they generate 1.2 billion in cash?

[alertmeipp]

As of end of Q3, it is

 

"Combined capacity under SHC revolving credit facilities is $1.7 billion in addition to

$0.6 billion of cash on hand"..

 

so that's an capacity increase of 600 millions

[krazeenyc]

so did they only burn only 50 millions cash? Wasn't cash on hand 1.05 billion last reported?

 

What's the loss coming from? non-cash? Inventories write down or what?

Could you cite the last filing with the cash figure?  I imagine some of the cash generated from asset sales to account in the difference as well..

 

I got 1.05 billion from the latest presentation, but not clear if that include the Sears Canada dividend.

 

Remember store closing lose a lot of money (GAAP/Inventory/etc). But they are cash flow positive cause everything is basically converted to cash.

 

TOTAL CASH last quarter was $600 million ($220 SCC) and ($380 Domestic).  Now it's $1 billion. ($300 million more coming to Sears Canada on 1/10 - they hedged at 1.05 to USD).

 

Now Sears Canada got 400 CAD for some real estate, then paid a 509 CAD dividend of which 247 USD went to SHLD. So SCC is 104 USD.  (This is assuming 1.05 CAD to USD)

 

so $600+ ($247-$104) = $256 Million.

 

On the Debt side.

Sears had $1 Billion left remaining on their U.S. Revolver and now $1.8 Billion remaining now : +$800 million.

Sears also had $160 million of commercial paper outstanding reduced to $4 million

 

So $956 Million less debt. 

 

So even though it's pretty horrible overall SHLD domestic operations generated $1202 million in cash.

 

You lost me on the below:

 

so $600+ ($247-$104) = $256 Million.??

 

Are you saying they generate 1.2 billion in cash?

 

TYPO $856.

So they generated $350 million cash and reduced debt by $850 million.

[krazeenyc]

As of end of Q3, it is

 

"Combined capacity under SHC revolving credit facilities is $1.7 billion in addition to

$0.6 billion of cash on hand"..

 

so that's an capacity increase of 600 millions

in Q3

that is $1.7 is $1 billion Domestic credit facility, $700 million Canadian facility = $1.7 billion. $600 million cash total $380 domestic  + $220  Canadian.

 

Now it's $1.8 billion Domestic 500 million Canadian. and $1 billion in total cash.

[muscleman]

Where are the losses coming from??? Has to be cleared out inventory right at cheap prices? or something non-cash.

 

Cash end of Q3 was $600 Mill + $450 anticipated from Canadian sales

Cash 1/4/2014 is $1000 Mill + $300 anticipated from Canadian Sales.

 

Cash Availibity from borrowings:

Revolver in Q3 - $1000 mill availability Domestic  + 725 million + $340 Commercial Paper

Revolver in Q4 - $1.8 mill availability Domestic + 500 milloin + $494 commercial paper

 

so + 980 in cash for the quarter? minus what in net inventory?

 

Revolver is down by $800 m, but don't you remember in Q3, they took a $1 bn term loan to replace the revolver?

I think there are several points that needs to look into from this statement:

"This includes $41 million of pension expense, $29 million for store closures and severance and $12 million from gains on sales of assets."

1. The gain on sale of assets is very low. How many buildings is that?

2. $41 m of pension expense. This is very strange. I remember in Q3, someone studies the pension, and told us that due to interest increase, they should report a pension liability reduction of $700 m, and that should be recorded in Q4. But now we are seeing a $41 m pension expense instead. Why?

[krazeenyc]

Where are the losses coming from??? Has to be cleared out inventory right at cheap prices? or something non-cash.

 

Cash end of Q3 was $600 Mill + $450 anticipated from Canadian sales

Cash 1/4/2014 is $1000 Mill + $300 anticipated from Canadian Sales.

 

Cash Availibity from borrowings:

Revolver in Q3 - $1000 mill availability Domestic  + 725 million + $340 Commercial Paper

Revolver in Q4 - $1.8 mill availability Domestic + 500 milloin + $494 commercial paper

 

so + 980 in cash for the quarter? minus what in net inventory?

 

Revolver is down by $800 m, but don't you remember in Q3, they took a $1 bn term loan to replace the revolver?

I think there are several points that needs to look into from this statement:

"This includes $41 million of pension expense, $29 million for store closures and severance and $12 million from gains on sales of assets."

1. The gain on sale of assets is very low. How many buildings is that?

2. $41 m of pension expense. This is very strange. I remember in Q3, someone studies the pension, and told us that due to interest increase, they should report a pension liability reduction of $700 m, and that should be recorded in Q4. But now we are seeing a $41 m pension expense instead. Why?

 

Term loan was already in place in Q3.

http://searsholdings.com/invest/docs/Q3_2013_Webcast.pdf

Page 24.

[Vish_ram]

It also reminds me of the LVLT thread of yesteryear.

 

The challenge I see for SHLD is that as Lampert continues to work on SYW, create WOW experiences, and sell stores, will he be able to control SHLD's destiny? At some point, if he fails to monetize fast, the debtors may have an upper hand and force him into bankruptcy.

 

Lampert looks more and more like Sandra Bullock in movie Gravity, trying to find a way to come back to earth. Bullock managed to press the right buttons in Chinese satellite without knowing Chinese. Will Lampert steer a retailer without knowing retail?

 

I guess I don't understand why after 9 years of Lampert repeatedly proving he has absolutely no idea how to run a retailer, people continue to think there might be some kind of turnaround on the way and pile into the stock. I get the real estate value argument, but Lampert has no idea what to do with that either.

 

+1

 

No matter what he does its bullish for the thesis. Very similar to the BBRY thread....

[alertmeipp]

Where is Sanjay?

[heth247]

So they generated $350 million cash and reduced debt by $850 million.

 

How could they possibly generate 1.2b cash in 4Q?

 

Could they have taken some short term debt to pay down the revolver?  I remember that the revolver is backed up by inventory. When they reduce the inventory and close stores, the revolver capacity is also reduced.

[wisdom]

Q3 presentation:

 

"…the annual investment associated with these

activities is measured in hundreds of millions of

dollars…we are carrying 2 business/promotion models

during our transformational investment."

 

Eventually they will pull the plug on traditional promotions.

[alertmeipp]

Few thoughts:

 

The charge, seems like big chunk of it is DTA write off.

 

" fourth quarter restructuring activities including severance, store closings and impairment charges, an estimated non-cash charge of approximately $145 million related to the establishment of an additional valuation allowance against our state separate entity deferred tax assets, as well as other tax related matters and any non-cash impairment charges for fixed assets"

 

Pension adjustment should come after year end.

 

If Land's End and SAC really worth 2.5 billions as some suggested, add SCC, all three alone worth 3 billions?

 

They spent 69m last q on SYW points, and said they are carrying expenses for both traditional and online expenses. You would expect that should help revenue yet it's down big QoQ and YoY. When would happen if they stop the traditional channels.

 

It seems to me most of their money was spent on SYW points, pension adjustment and IT expenses, hopefully, all of these will slow down soon??

[BTShine]

wait a sec. didn't somebody just report they saw lots of people around the registers looking engaged and asking Lots of questions about SYW?  ???

 

I did!  Clearly not representative of the whole company.  I'll take the blame on that one.  Sorry.

 

lesson: less anecdotes. more 10qs.

 

Haha yes, this thread is good in providing anecdotes and extrapolating insignificant data points. How else does a thread reach this length... ;)

 

 

 

Not much to say. Glad I got out at the time I did. I found some good stocks afterwards which made SHLD look like a crapshoot. Pure luck.

We'll see how far this plummets ultimately. Might even be able to pick some up in the $20-25 range. Stranger things have happened.

 

Tombgrt and Wellmont,

 

Congrats on not losing capital with SHLD.  Cheers to you. 

 

I think observing companies in the real world plays an important role with investing.  We can agree to disagree if you'd like, but I won't agree that investing is done best when only looking at 10-K's and Q's. 

 

 

[alertmeipp]

So they generated $350 million cash and reduced debt by $850 million.

 

How could they possibly generate 1.2b cash in 4Q?

 

Could they have taken some short term debt to pay down the revolver?  I remember that the revolver is backed up by inventory. When they reduce the inventory and close stores, the revolver capacity is also reduced.

 

Hard to tell without the numbers, why issue such an update now? The blog post should be in the release. Especially, they are going to get 300 millions tmw.

[heth247]

Few thoughts:

 

They spent 69m last q on SYW points, and said they are carrying expenses for both traditional and online expenses. You would expect that should help revenue yet it's down big QoQ and YoY. When would happen if they stop the traditional channels.

 

It seems to me most of their money was spent on SYW points, pension adjustment and IT expenses, hopefully, all of these will slow down soon??

 

They spent 69m MORE, not just 69m.

[Parsad]

Where is Sanjay?

 

Outside of Fairfax and Berkshire, we won't be talking about any of our holdings going forward...you'll have to watch filings or be a partner.  ;D 

 

I will say one thing...one quarter of results does not sway our views either way.  Cheers and please keep your heads on! 

[BTShine]

Few thoughts:

 

They spent 69m last q on SYW points, and said they are carrying expenses for both traditional and online expenses. You would expect that should help revenue yet it's down big QoQ and YoY. When would happen if they stop the traditional channels.

 

It seems to me most of their money was spent on SYW points, pension adjustment and IT expenses, hopefully, all of these will slow down soon??

 

They spent 69m MORE, not just 69m.

 

There's a good chance they're spending $600 million a year, or more, on SYWR points. 

 

Not making any judgements on whether that's a good investment for SHLD, but it's a significant factor to consider when looking at SHLD's financial performance over the last year. 

[ragnarisapirate]

Where is Sanjay?

 

Outside of Fairfax and Berkshire, we won't be talking about any of our holdings going forward...you'll have to watch filings or be a partner.  ;D 

 

 

But where's the fun in that?

 

[heth247]

So they generated $350 million cash and reduced debt by $850 million.

 

How could they possibly generate 1.2b cash in 4Q?

 

Could they have taken some short term debt to pay down the revolver?  I remember that the revolver is backed up by inventory. When they reduce the inventory and close stores, the revolver capacity is also reduced.

 

Hard to tell without the numbers, why issue such an update now? The blog post should be in the release. Especially, they are going to get 300 millions tmw.

 

Their adjusted EBITDA is estimated to be -65m~65m, let's call it break even. Then how could asset sale and inventory liquidation alone generate 1.2b cash?

 

[ZenaidaMacroura]

So they generated $350 million cash and reduced debt by $850 million.

 

How could they possibly generate 1.2b cash in 4Q?

 

Could they have taken some short term debt to pay down the revolver?  I remember that the revolver is backed up by inventory. When they reduce the inventory and close stores, the revolver capacity is also reduced.

 

Hard to tell without the numbers, why issue such an update now? The blog post should be in the release. Especially, they are going to get 300 millions tmw.

 

Their adjusted EBITDA is estimated to be -65m~65m, let's call it break even. Then how could asset sale and inventory liquidation alone generate 1.2b cash?

I think that is in question- without more information it is a stretch to say the 1.2b is the result of asset sales or inventory liquidation.  What's up with the blog providing so much essential information forgone in the voluntary / spontaneous disclosure anyhow?

[krazeenyc]

So they generated $350 million cash and reduced debt by $850 million.

 

How could they possibly generate 1.2b cash in 4Q?

 

Could they have taken some short term debt to pay down the revolver?  I remember that the revolver is backed up by inventory. When they reduce the inventory and close stores, the revolver capacity is also reduced.

 

Hard to tell without the numbers, why issue such an update now? The blog post should be in the release. Especially, they are going to get 300 millions tmw.

 

Their adjusted EBITDA is estimated to be -65m~65m, let's call it break even. Then how could asset sale and inventory liquidation alone generate 1.2b cash?

 

The $1.2 billion does not even take into account the $247 million from the SCC dividend. Basically they are  converting inventory to CASH in a big way (happens every Q4). Remember closing stores loses a ton of money (GAAP) by selling things under cost, but closing stores and converting that inventory to cash generates a lot of cash.  Remember Eddie has told us that closing stores is generally cash flow positive.  Theoretically they could have sold a store for $100 million and only have a $12 million profit to show for it and it would up cash by $100 million -- but i doubt it.

 

As far as the inventory goes, they have MORE than enough net inventory to cover the revolver (assuming that a lot of the net inventory is the "allowed" kind re: the revolver.

 

I would highly doubt that they got another short term debt instrument. I think there is a reason they broke out how much cash/short term debt they have in this pre-announcement.

 

I am not an accountant but..

 

Pension expense is different than pension contributions.  Muscleman.

 

Pension expense is basically made up of the service cost and interest cost. Service cost is the additional liability that's created by another year of service generated by the employees working -- for SHLD this is $0 since the plan is frozen. Interest cost is the additional liability that's created by the (former) employees being another year closer to begin redeeming their benefits.

 

So in 2012 and 2011 the pension contributions made by the company were $516 and $352 million respectively while the pension expenses were $165 and $74 (not sure why this was so low it was 120 in 2010).  The actual CASH contributions to pension AND post retirement benefits (via CASH) were $593 and $390 million.  Since they made a voluntary $200 million + CASH 4th quarter contribution last year to the pension, I know it'll be lower this year. And probably lower than they originally expected. They'll probably have put appx $1.37 billion in cash toward the pension and post retirement benefits over the past 3 years.

[muscleman]

Where is Sanjay?

 

Outside of Fairfax and Berkshire, we won't be talking about any of our holdings going forward...you'll have to watch filings or be a partner.  ;D 

 

I will say one thing...one quarter of results does not sway our views either way.  Cheers and please keep your heads on!

 

 

Could you please tell me how to watch your filings?

[ZenaidaMacroura]

So they generated $350 million cash and reduced debt by $850 million.

 

How could they possibly generate 1.2b cash in 4Q?

 

Could they have taken some short term debt to pay down the revolver?  I remember that the revolver is backed up by inventory. When they reduce the inventory and close stores, the revolver capacity is also reduced.

 

Hard to tell without the numbers, why issue such an update now? The blog post should be in the release. Especially, they are going to get 300 millions tmw.

 

Their adjusted EBITDA is estimated to be -65m~65m, let's call it break even. Then how could asset sale and inventory liquidation alone generate 1.2b cash?

 

The $1.2 billion does not even take into account the $247 million from the SCC dividend. Basically they are  converting inventory to CASH in a big way (happens every Q4). Remember closing stores loses a ton of money (GAAP) by selling things under cost, but closing stores and converting that inventory to cash generates a lot of cash.  Remember Eddie has told us that closing stores is generally cash flow positive.  Theoretically they could have sold a store for $100 million and only have a $12 million profit to show for it and it would up cash by $100 million -- but i doubt it.

 

 

I would highly doubt that they got another short term debt instrument. I think there is a reason they broke out how much cash/short term debt they have in this pre-announcement.

 

But not even a passing remark about the improved cash position, the expected 300m on 1/10, other than a vague reference in a blogpost?

[krazeenyc]

So they generated $350 million cash and reduced debt by $850 million.

 

How could they possibly generate 1.2b cash in 4Q?

 

Could they have taken some short term debt to pay down the revolver?  I remember that the revolver is backed up by inventory. When they reduce the inventory and close stores, the revolver capacity is also reduced.

 

Hard to tell without the numbers, why issue such an update now? The blog post should be in the release. Especially, they are going to get 300 millions tmw.

 

Their adjusted EBITDA is estimated to be -65m~65m, let's call it break even. Then how could asset sale and inventory liquidation alone generate 1.2b cash?

 

The $1.2 billion does not even take into account the $247 million from the SCC dividend. Basically they are  converting inventory to CASH in a big way (happens every Q4). Remember closing stores loses a ton of money (GAAP) by selling things under cost, but closing stores and converting that inventory to cash generates a lot of cash.  Remember Eddie has told us that closing stores is generally cash flow positive.  Theoretically they could have sold a store for $100 million and only have a $12 million profit to show for it and it would up cash by $100 million -- but i doubt it.

 

 

I would highly doubt that they got another short term debt instrument. I think there is a reason they broke out how much cash/short term debt they have in this pre-announcement.

 

But not even a passing remark about the improved cash position, the expected 300m on 1/10, other than a vague reference in a blogpost?

 

It is in the press release. it mentions the new cash position, the new debt positions, and the incoming $300 million to SCC.