SHLD » Topics » NOTE 5 - RESTRUCTURING ACTIVITIES

This excerpt taken from the SHLD 10-K filed Mar 26, 2008.

NOTE 6—RESTRUCTURING ACTIVITIES

In fiscal 2005, we initiated a number of restructuring activities including actions to integrate the home office functions of Kmart and Sears Domestic and align our workforce accordingly. Approximately 1,435 Kmart associates were notified that their positions had been relocated, were under review, or had been eliminated, and approximately 780 former Sears employees were notified of the decision to eliminate their positions in connection with the home office integration efforts. Also during fiscal 2005, Sears Canada implemented a series of productivity improvement initiatives, which included a workforce reduction of approximately 1,200 associates. These initiatives resulted in the recognition of $28 million and $111 million of restructuring costs for fiscal years 2006 and 2005, respectively.

 

71


SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

 

As of February 2, 2008, all actions related to these activities have been substantially completed. The remaining reserve balance of $2 million at February 2, 2008 represents payments to be made in fiscal 2008 in accordance with our severance and relocation plans.

Following is a summary of the fiscal 2007 activity in the reserves established for these integration and productivity initiatives:

 

millions    Estimated Total
Cumulative
Costs to be
Incurred
   Cumulative Costs
recognized
through
February 2, 2008
   Ending Reserve
Balance
February 3, 2007
   Fiscal 2007
Additions
   Fiscal 2007
Cash
Payments
   Ending Reserve
Balance

February 2, 2008

Kmart

   $ 63    $ 63    $ 4    $ —      $ 4    $ —  

Sears Domestic

     59      59      —        —        —        —  

Sears Canada

     76      76      4      —        2      2
                                         

Total

   $ 198    $ 198    $ 8    $ —      $ 6    $ 2
                                         
This excerpt taken from the SHLD 10-K filed Mar 28, 2007.

NOTE 6—RESTRUCTURING ACTIVITIES

In fiscal 2005, the Company initiated a number of restructuring activities including actions to integrate the home office functions of Kmart and Sears Domestic and align its workforce accordingly. Approximately 1,435 Kmart associates were notified that their positions had been relocated, were under review, or had been eliminated, and approximately 780 former Sears employees were notified of the decision to eliminate their positions in connection with the home office integration efforts. Also during fiscal 2005, Sears Canada implemented a series of productivity improvement initiatives, which included a workforce reduction of approximately 1,200 associates. These initiatives resulted in the recognition of $28 million and $111 million of restructuring costs for fiscal 2006 and fiscal 2005, respectively.

As of February 3, 2007, all actions related to these activities have been substantially completed. The remaining reserve balance of $8 million at February 3, 2007 represents payments to be made in fiscal 2007 in accordance with the Company’s severance and relocation plans.

Following is a summary of the fiscal 2006 activity in the reserves established for these integration and productivity initiatives:

 

millions    Estimated
Total
Cumulative
Costs to be
Incurred
  

Cumulative
Costs
recognized
through

February 3,
2007

  

Ending
Reserve
Balance

January 28,
2006

   Fiscal
2006
Additions
   Fiscal
2006
Cash
Payments
  

Ending
Reserve
Balance

February 3,
2007

Kmart

   $ 63    $ 63    $ 21    $ 9    $ 26    $ 4

Sears Domestic

     59      59      2      —        2      —  

Sears Canada

     76      76      13      19      28      4
                                         

Total

   $ 198    $ 198    $ 36    $ 28    $ 56    $ 8
                                         
This excerpt taken from the SHLD 10-Q filed Dec 5, 2006.

NOTE 5 – RESTRUCTURING ACTIVITIES

During fiscal 2005, the Company initiated a number of restructuring activities including actions to integrate the home office functions of Kmart and Sears Domestic and align its workforce accordingly. Approximately 1,435 Kmart associates were notified that their positions had been relocated, were under review, or had been eliminated, and approximately 780 former Sears employees were notified of the decision to eliminate their positions in connection with the home office integration efforts. Also during the third quarter of fiscal 2005, Sears Canada implemented a series of productivity improvement initiatives, which included a workforce reduction of approximately 1,200 associates. These initiatives resulted in the recognition of $4 million and $27 million of restructuring costs for the 13- and 39-week periods ended October 28, 2006, respectively.

As of October 28, 2006, all actions related to these activities have been substantially completed. The remaining costs to be incurred will be recognized over the associates’ remaining service periods in accordance with SFAS No. 146, “Accounting for Costs Associated with Disposal and Exit Activities.” The remaining reserve balance of $17 million at October 28, 2006 represents payments to be made during the remainder of fiscal 2006 in accordance with the Company’s severance and relocation plans.

 

7


Table of Contents

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

 

Following is a summary of the fiscal 2006 activity in the reserves established for these integration and productivity initiatives:

 

millions    Estimated
Total
Cumulative
Costs to be
Incurred
   Cumulative
Costs recognized
through
October 28, 2006
  

Ending Reserve
Balance

January 28, 2006

   Fiscal 2006
Additions
   Fiscal 2006
Cash
Payments
  

Ending Reserve
Balance

October 28, 2006

Kmart

   $ 63    $ 62    $ 21    $ 8    $ 20    $ 9

Sears Domestic

     59      59      2      —        2      —  

Sears Canada

     76      76      13      19      24      8
                                         

Total

   $ 198    $ 197    $ 36    $ 27    $ 46    $ 17
                                         
This excerpt taken from the SHLD 10-Q filed Sep 1, 2006.

NOTE 5 – RESTRUCTURING ACTIVITIES

During fiscal 2005, the Company initiated a number of restructuring activities including actions to integrate the home office functions of Kmart and Sears Domestic and align its workforce accordingly. Approximately 1,435 Kmart associates were notified that their positions had been relocated, were under review, or had been eliminated, and approximately 780 former Sears employees were notified of the decision to eliminate their positions in connection with the home office integration efforts. Also during the third quarter of fiscal 2005, Sears Canada implemented a series of productivity improvement initiatives, which included a workforce reduction of approximately 1,200 associates. These initiatives resulted in the recognition of $14 million and $23 million of restructuring costs for the 13- and 26-week periods ended July 29, 2006, respectively.

As of July 29, 2006, all actions related to these activities have been substantially completed. The remaining costs to be incurred will be recognized over the associates’ remaining service periods in accordance with SFAS No. 146, “Accounting for Costs Associated with Disposal and Exit Activities”. The remaining reserve balance of $22 million at July 29, 2006 represents payments to be made in the remainder of fiscal 2006 in accordance with the Company’s severance and relocation plans.

 

7


Table of Contents

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

 

Following is a summary of the fiscal 2006 activity in the reserves established for these integration and productivity initiatives:

 

millions    Estimated
Total
Cumulative
Costs to be
Incurred
   Cumulative
Costs recognized
through July 29,
2006
   Ending Reserve
Balance
January 28,
2006
   Fiscal 2006
Additions
   Fiscal 2006
Cash
Payments
  

Ending Reserve
Balance

July 29, 2006

Kmart

   $ 61    $ 58    $ 21    $ 4    $ 15    $ 10

Sears Domestic

     59      59      2      —        2      —  

Sears Canada

     76      76      13      19      20      12
                                         

Total

   $ 196    $ 193    $ 36    $ 23    $ 37    $ 22
                                         
This excerpt taken from the SHLD 10-K filed Mar 17, 2006.

NOTE 5—RESTRUCTURING ACTIVITIES

        During fiscal 2005, the Company initiated a number of restructuring activities and, as a result, recorded $111 million in restructuring charges, as follows:

Kmart

        During fiscal 2005, the Company initiated actions to integrate the home office functions of Kmart and Sears and align its workforce accordingly. Approximately 1,435 Kmart associates were notified that their positions had been relocated, were under review, or had been eliminated. In connection therewith, the Company recorded restructuring charges totaling $54 million, comprised of $18 million in severance, benefits and outplacement service costs for approximately 730 impacted Kmart associates and $36 million of relocation expenses for approximately 520 associates who accepted relocation offers. The Company estimates that the total costs related to the relocation, severance and outplacement

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services associated with these actions will be approximately $63 million. The remaining costs to be incurred will be recognized over the associates' remaining service periods in accordance with SFAS No. 146, "Accounting for Costs Associated with Disposal and Exit Activities". As of January 28, 2006, total cash payments of $33 million had been made in connection with these actions, with the remaining reserve balance of $21 million at January 28, 2006 representing payments to be made in fiscal 2006 in accordance with the Company's severance and relocation plans.

Sears

        In addition, in fiscal 2005 the Company notified approximately 780 former Sears employees of the decision to eliminate their positions in connection with the home office integration efforts. In connection therewith, the Company recorded a reserve of $59 million for costs associated with severance, benefits and outplacement services for the impacted individuals. In accordance with Emerging Issues Task Force ("EITF") No. 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination", costs associated with these integration actions are reflected as a component of purchase accounting as an increase to goodwill. As of January 28, 2006, the Company had made payments totaling approximately $57 million in respect of these restructuring actions, with a reserve balance of $2 million at January 28, 2006 representing payments to be made in fiscal 2006 in accordance with the Company's severance plan.

Sears Canada

        During fiscal 2005, Sears Canada implemented a series of productivity improvement initiatives, which included a workforce reduction of approximately 1,200 associates. In connection with Sears Canada's restructuring activities, the Company has recorded a restructuring charge of $57 million for the year ended January 28, 2006 for costs associated with severance, benefits and outplacement services to be provided to the impacted individuals. Sears Canada made payments totaling $44 million in fiscal 2005 relative to this reserve and the reserve balance of $13 million at January 28, 2006 represents payments to be made to the impacted individuals in early fiscal 2006 in accordance with Sears Canada's severance plan.

Predecessor Company—13 Weeks Ended April 30, 2003

        The Predecessor Company recognized $37 million in non-cash restructuring charges during the 13-week period ended April 30, 2003, primarily related to accelerated depreciation of assets at 316 Kmart stores that were closed as part of a Predecessor Company restructuring effort in that year.

This excerpt taken from the SHLD 10-K filed Mar 15, 2006.

NOTE 5—RESTRUCTURING ACTIVITIES

        During fiscal 2005, the Company initiated a number of restructuring activities and, as a result, recorded $111 million in restructuring charges, as follows:

Kmart

        During fiscal 2005, the Company initiated actions to integrate the home office functions of Kmart and Sears and align its workforce accordingly. Approximately 1,435 Kmart associates were notified that their positions had been relocated, were under review, or had been eliminated. In connection therewith, the Company recorded restructuring charges totaling $54 million, comprised of $18 million in severance, benefits and outplacement service costs for approximately 730 impacted Kmart associates and $36 million of relocation expenses for approximately 520 associates who accepted relocation offers. The Company estimates that the total costs related to the relocation, severance and outplacement

68



services associated with these actions will be approximately $63 million. The remaining costs to be incurred will be recognized over the associates' remaining service periods in accordance with SFAS No. 146, "Accounting for Costs Associated with Disposal and Exit Activities". As of January 28, 2006, total cash payments of $33 million had been made in connection with these actions, with the remaining reserve balance of $21 million at January 28, 2006 representing payments to be made in fiscal 2006 in accordance with the Company's severance and relocation plans.

Sears

        In addition, in fiscal 2005 the Company notified approximately 780 former Sears employees of the decision to eliminate their positions in connection with the home office integration efforts. In connection therewith, the Company recorded a reserve of $59 million for costs associated with severance, benefits and outplacement services for the impacted individuals. In accordance with Emerging Issues Task Force ("EITF") No. 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination", costs associated with these integration actions are reflected as a component of purchase accounting as an increase to goodwill. As of January 28, 2006, the Company had made payments totaling approximately $57 million in respect of these restructuring actions, with a reserve balance of $2 million at January 28, 2006 representing payments to be made in fiscal 2006 in accordance with the Company's severance plan.

Sears Canada

        During fiscal 2005, Sears Canada implemented a series of productivity improvement initiatives, which included a workforce reduction of approximately 1,200 associates. In connection with Sears Canada's restructuring activities, the Company has recorded a restructuring charge of $57 million for the year ended January 28, 2006 for costs associated with severance, benefits and outplacement services to be provided to the impacted individuals. Sears Canada made payments totaling $44 million in fiscal 2005 relative to this reserve and the reserve balance of $13 million at January 28, 2006 represents payments to be made to the impacted individuals in early fiscal 2006 in accordance with Sears Canada's severance plan.

Predecessor Company—13 Weeks Ended April 30, 2003

        The Predecessor Company recognized $37 million in non-cash restructuring charges during the 13-week period ended April 30, 2003, primarily related to accelerated depreciation of assets at 316 Kmart stores that were closed as part of a Predecessor Company restructuring effort in that year.

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