Sears Canada Reports First Quarter Results

 TORONTO, May 21, 2014 /CNW/ - Sears Canada Inc. (TSX: SCC) today announced its  unaudited first quarter results.  Total revenues for the 13-week period ended  May 3, 2014 was $771.7 million compared to $867.1 million for the 13-week  period ended May 4, 2013, a decrease of 11.0%.  Same store sales decreased  7.6%.  The balance of the change in revenues is primarily attributable to  revenues from stores closed as a result of early termination and amendment of  certain full-line store leases and the sale of joint arrangement interests in  Fiscal 2013.  The net loss for the quarter this year was $75.2 million or 74 cents per share  compared to a net loss of $31.2 million or 31 cents per share for the same  period last year.  Included in the net loss for the first quarter this year  were pre-tax transformation expenses of $7.6 million related primarily to  severance costs incurred during the quarter.  Also included in net loss for  the quarter were pre-tax lease exit costs, warranty and other costs related to  SHS and costs for the future settlement of retirement benefits, totaling $11.2  million.  Included in the net loss for the first quarter last year were  pre-tax transformation expenses of $1.5 million, related primarily to  severance costs incurred during the quarter. Adjusted EBITDA (Earnings Before  Interest, Taxes, Depreciation and Amortization) for the 13-week period ended  May 3, 2014 was a loss of $58.1 million compared to a loss of $9.8 million for  the 13-week period ended May 4, 2013.  "The unseasonable weather had an adverse effect on our revenues," said Douglas  C. Campbell, President and Chief Executive Officer, Sears Canada Inc.  "Sales  of Spring merchandise were below last year, as winter-like weather was  prevalent in most parts of the country well into the new season with cooler  temperatures and significantly more snow in many areas.  However, we took  advantage of the extended winter and cleared a significant quantity of fall  and winter carryover, virtually emptying our stockrooms and getting it in  front of the customer.  As a result, although our same store sales in Apparel  & Accessories (A&A) were comparable to last year in dollars, same store sales  in A&A increased 4.0% from a units standpoint.  We strategically reduced  ending inventory by $99.0 million compared to the end of the same quarter last  year.  "We are pleased with the progress we are making in re-establishing retail  fundamentals in the business so that we can have a solid foundation on which  to implement new initiatives and build sustainable growth," continued Mr.  Campbell.  "Our procurement of a new retail merchandising system and order  management platform, which we announced in April, is designed to take us into  the future with tools that we believe will greatly enhance the customer  experience across all channels over the next several years.  We are making  investments with long-term benefits like this with confidence as we are  committed to providing customers with an unparalleled multi-channel experience  now and in the decades to come."  Adjusted EBITDA is a non-IFRS measure; please refer to the table attached for  a reconciliation of net loss to Adjusted EBITDA.  This release contains information which is forward-looking and is subject to  important risks and uncertainties. Forward-looking information concerns, among  other things, the Company's future financial performance, business strategy,  plans, expectations, goals and objectives.  Often, but not always,  forward-looking information can be identified by the use of words such as  "plans", "expects" or "does not expect", "is expected",  "scheduled",  "estimates", "intends", "anticipates" or "does not anticipate" or "believes",  or variations of such words and phrases, or statements that certain actions,  events or results "may", "could", "would", "might" or "will" be taken, occur  or be achieved.  Although the Company believes that the forward-looking  information presented with respect to the quarter's earnings is reasonable,  such forward-looking information involves known and unknown risks,  uncertainties and other factors which may cause actual results, performance or  achievements to be materially different from any future results, performance  or achievements expressed or implied by the forward-looking information and  undue reliance should not be placed on such information.  Factors which could  cause actual results to differ materially from current expectations include,  but are not limited to: the ability of the Company to successfully implement  its strategic initiatives; productivity improvement and cost reduction  initiatives and whether such initiatives will yield the expected benefits;   the results achieved pursuant to the Company's long-term credit card marketing  and servicing alliance with JPMorgan Chase Bank, N.A. (Toronto Branch);   general economic conditions; competitive conditions in the businesses in which  the Company participates; changes in consumer spending; seasonal weather  patterns; weaker business performance in the subsequent quarter; customer  preference toward product offerings; ability to retain senior management and  key personnel; ability of the Company to successfully manage its inventory  levels; disruptions to the Company's computer systems; economic, social, and  political instability in jurisdictions where suppliers are located; the  Company's reliance on third parties in outsourcing arrangements; structural  integrity and fire safety of foreign factories; increased shipping costs,  potential transportation delays and interruptions; damage to the reputations  of the brands the Company sells; changes in the Company's relationship with  its suppliers; the outcome of product liability claims; any significant  security compromise or breach of the Company's customer, associate or Company  information; the credit worthiness and financial stability of tenants,  partners and co-arrangers, with respect to the Company's real estate joint  arrangement interests; the credit worthiness and financial stability of the  Company's licensees and business partners; possible changes in the Company's  ownership by Sears Holdings Corporation ("Sears Holdings") and other  significant shareholders; interest rate fluctuations and other changes in  funding costs and investment income; fluctuations in foreign currency exchange  rates; the possibility of negative investment returns in the Company's pension  plan or an unexpected increase to the defined benefit obligation; the  impairment of goodwill and other assets; new accounting pronouncements, or  changes to existing pronouncements, that impact the methods the Company uses  to report our financial condition and results from operations; uncertainties  associated with critical accounting assumptions and estimates; the outcome of  pending legal proceedings; compliance costs associated with environmental laws  and regulations; maintaining adequate insurance coverage; the possible future  termination of certain intellectual property rights associated with the  "Sears" name and brand names if Sears Holdings reduces its interest in the  Company to less than 25%; and changes in laws, rules and regulations  applicable to the Company.  Information about these factors, other material  factors that could cause actual results to differ materially from expectations  and about material factors or assumptions applied in preparing forward-looking  information, may be found in this release and in the Company's 2013 Annual  Report under Section 11 "Risks and Uncertainties" and elsewhere in the  Company's filings with securities regulators. The forward-looking information  in this release is, unless otherwise indicated, stated as of the date hereof  and is presented for the purpose of assisting investors and others in  understanding our financial position and results of operations as well as our  objectives and strategic priorities, and may not be appropriate for other  purposes.  The Company does not undertake any obligation to update publicly or  to revise any forward-looking information, whether as a result of new  information, future events or otherwise, except as required by law.  About Sears Canada  Sears Canada is a multi-channel retailer with a network that includes 176  corporate stores, 229 Hometown stores, over 1,400 catalogue and online  merchandise pick-up locations, 96 Sears Travel offices and a nationwide repair  and service network. The Company also publishes Canada's most extensive  general merchandise catalogue and offers shopping online at www.sears.ca.  SEARS CANADA INC. RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA For the 13-week periods ended May 3, 2014 and May 4, 2013  Unaudited                                                             First Quarter     (in CAD millions, except per share amounts)      2014         2013        Net loss                                      $ (75.2)     $ (31.2)         Transformation expense1                          7.6          1.5         Lease exit costs2                                3.8      —         SHS warranty and other costs3                    6.6      —         Costs for future settlement of retirement        0.8      —         benefits4       Depreciation and amortization expense           23.6         30.2         Finance costs                                    2.5          2.3         Interest income                                (0.7)        (0.4)         Income tax expense                            (27.1)       (12.2)       Adjusted EBITDA5                                (58.1)        (9.8)       Basic net loss per share                      $ (0.74)     $ (0.31)     1 Transformation expense during 2014 and 2013 relates primarily to       severance costs incurred during the quarter.     2 Lease exit costs relate primarily to costs incurred to exit certain       properties during Q1 2014.     3 SHS warranty and other costs represent the estimated costs to the       Company related to potential claims for work       that had been performed, prior to SHS announcing it was in       receivership.     4 Costs for future settlement of retirement benefits represent the       expenses incurred during the quarter, related       to the Company's voluntary offer to settle non-pension retirement       benefits.     5 Adjusted EBITDA is a measure used by management, the retail industry       and investors as an indicator of the       Company's performance, ability to incur and service debt, and as a       valuation metric. Adjusted EBITDA is a non-IFRS measure.                                                             First Quarter     (in CAD millions)                                   2014        2013        Total merchandising revenue                       $ 770.0     $ 856.4         Non-comparable store sales                        203.6       217.0         Same store sales                                  566.4       639.4       Percentage change in same store sales               (7.6) %     (2.6) %     Percentage change in same store sales by category                             Apparel & Accessories                           — %       4.7 %       Home & Hardlines                                 (12.3) %     (6.9) %  TABLE OF CONTENTS     Unaudited Condensed Consolidated Financial     Statements                                                                                                                             Condensed Consolidated Statements of Financial Position        Condensed Consolidated Statements of Net Loss and Comprehensive Loss        Condensed Consolidated Statements of Changes in Shareholders' Equity        Condensed Consolidated Statements of Cash Flows           Notes to the Unaudited Condensed Consolidated Financial Statements                        Note 1:    General information       Note 2:    Significant accounting policies       Note 3:    Issued standards not yet adopted       Note 4:    Critical accounting judgments and key sources of                estimation uncertainty       Note 5:    Cash and cash equivalents and interest income       Note 6:    Inventories       Note 7:    Long-term obligations and finance costs       Note 8:    Capital stock       Note 9:    Revenue       Note 10:   Retirement benefit plans       Note 11:   Depreciation and amortization expense       Note 12:   Assets classified as held for sale       Note 13:   Financial instruments       Note 14:   Contingent liabilities       Note 15:   Net loss per share       Note 16:   Income taxes       Note 17:   Segmented information       Note 18:   Changes in non-cash working capital balances       Note 19:   Changes in long-term assets and liabilities       Note 20:   Burnaby arrangement       Note 21:   Event after the reporting period  SEARS CANADA INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION Unaudited     (in CAD                        As at              As at         As at     millions)       Notes     May 3,2014   February 1, 2014   May 4, 2013     ASSETS                                                                    Current                                                                   assets     Cash and cash      5     $   270.2     $   513.8          $   109.7       equivalents     Accounts           13         71.0          83.3               79.2       receivable,     net     Income taxes                  21.4           0.8               10.1       recoverable     Inventories        6         792.1         774.6              891.1       Prepaid                       29.2          23.8               28.6       expenses     Derivative         13          2.0           7.2            —       financial     assets     Assets             12         26.8          13.3            —       classified as     held for sale     Total current              1,212.7       1,416.8            1,118.7       assets                                                                               Non-current                                                               assets     Property,                    762.7         785.5            1,098.4       plant and     equipment     Investment                    19.3          19.3               21.7       property     Intangible                    26.2          28.2               26.0       assets     Goodwill                       2.6           2.6                8.7       Deferred tax                 119.1          88.7               98.2       assets     Other           7, 13,        49.3          51.2               45.8       long-term         16     assets     Total assets             $ 2,191.9     $ 2,392.3          $ 2,417.5                                                                                 LIABILITIES                                                               Current                                                                   liabilities     Accounts           13    $   421.5     $   438.7          $   463.3       payable and     accrued     liabilities     Deferred                     181.6         187.7              200.1       revenue     Provisions                   100.5         109.4               53.2       Income taxes                   0.3          52.2            —       payable     Other taxes                   22.5          53.9               19.2       payable     Current         7, 13          4.7           7.9                9.2       portion of     long-term     obligations     Total current                731.1         849.8              745.0       liabilities                                                                               Non-current                                                               liabilities     Long-term       7, 13         26.9          28.0               47.8       obligations     Deferred                      81.0          87.3               86.8       revenue     Retirement         10        291.9         286.0              415.5       benefit     liability     Deferred tax                   4.0           4.2                5.0       liabilities     Other                         62.0          63.2               72.2       long-term     liabilities     Total                      1,196.9       1,318.5            1,372.3       liabilities                                                                               SHAREHOLDERS'                                                             EQUITY     Capital stock      8          14.9          14.9               14.9       Retained           8       1,070.1       1,145.3            1,177.0       earnings     Accumulated                 (90.0)        (86.4)            (146.7)       other     comprehensive     loss     Total                        995.0       1,073.8            1,045.2       shareholders'     equity     Total                    $ 2,191.9     $ 2,392.3          $ 2,417.5       liabilities     and     shareholders'     equity  The accompanying notes are an integral part of these unaudited condensed  consolidated financial statements.  SEARS CANADA INC. CONDENSED CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS For the 13-week periods ended May 3, 2014 and May 4, 2013 Unaudited     (in CAD millions, except per share     Notes        2014         2013       amounts)                                                                                 Revenue                                   9     $  771.7     $  867.1       Cost of goods and services sold        6, 13       518.5        537.7       Selling, administrative and other    10,11,13      353.7        370.9       expenses     Operating loss                                   (100.5)       (41.5)                                                                                   Finance costs                           7,16         2.5          2.3       Interest income                           5          0.7          0.4       Loss before income taxes                         (102.3)       (43.4)                                                                                   Income tax (expense) recovery                                                 Current                                          (2.2)        (2.9)         Deferred                                          29.3         15.1                                                           27.1         12.2       Net loss                                        $ (75.2)     $ (31.2)                                                                                   Basic net loss per share                 15     $ (0.74)     $ (0.31)       Diluted net loss per share               15     $ (0.74)     $ (0.31)                                                                                   Net loss                                        $ (75.2)     $ (31.2)                                                                                   Other comprehensive loss, net of                                            taxes:                                                                                 Items that may subsequently be                                              reclassified to net income:       Loss on foreign exchange               13        (0.4)      —         derivatives       Reclassification to net loss of                  (3.2)      —         gain on foreign exchange       derivatives                                                                                 Total other comprehensive loss                     (3.6)      —       Comprehensive loss                              $ (78.8)     $ (31.2)    The accompanying notes are an integral part of these unaudited condensed  consolidated financial statements.  SEARS CANADA INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY For the 13-week periods ended May 3, 2014 and May 4, 2013 Unaudited                                                                   Accumulated other comprehensive (loss) income                                                                                            Foreign                               Total                                                                                          exchange                         accumulated                                                                  derivatives                               other                               Capital      Retained     designated as cash     Remeasurement     comprehensive      Shareholders'        (in CAD millions)   Notes     stock      earnings            flow hedges              loss              loss             equity   Balance as at               $  14.9     $ 1,145.3     $              6.0     $      (92.4)     $      (86.4)     $    1,073.8          February 1, 2014        Net loss                                (75.2)                —           —           —            (75.2)       Other comprehensive                                                                                                                   loss        Loss on foreign    13                                                                                                                 exchange        derivatives,        net of income        tax recovery of      $0.2                                                            (0.4)           —             (0.4)              (0.4)           Reclassification                                                                                                                      of gain on        foreign exchange        derivatives,        net of income        tax expense of      $1.2                                                            (3.2)           —             (3.2)              (3.2)        Total other                 —       —                  (3.6)           —             (3.6)             (3.6)       comprehensive loss   Total comprehensive         —        (75.2)                  (3.6)           —             (3.6)             (78.8)          loss     Balance as at May           $  14.9     $ 1,070.1     $              2.4     $      (92.4)     $      (90.0)     $        995.0       3, 2014                                                                                                                                         Balance as at               $  14.9     $ 1,208.2     $          —     $     (146.7)     $     (146.7)     $      1,076.4          February 2, 2013        Net loss                                (31.2)                —           —           —            (31.2)       Total comprehensive         —        (31.2)                —           —           —            (31.2)       loss   Balance as at May           $  14.9     $ 1,177.0     $          —     $     (146.7)     $     (146.7)     $      1,045.2          4, 2013  The accompanying notes are an integral part of these unaudited condensed  consolidated financial statements.  SEARS CANADA INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the 13-week periods ended May 3, 2014 and May 4, 2013 Unaudited     (in CAD millions)                       Notes       2014         2013       Cash flow used for operating                                                activities        Net loss                                     $ (75.2)     $ (31.2)          Adjustments for:                                                             Depreciation and amortization         11        23.6         30.2           expense         Gain on disposal of property,                  (0.4)        (0.2)           plant and equipment         Finance costs                       7, 16        2.5          2.3           Interest income                        5       (0.7)        (0.4)           Retirement benefit plans expense      10         5.7          6.9           Short-term disability expense         10         2.1          2.5           Income tax recovery                   16      (27.1)       (12.2)          Interest received                       5         0.5          0.5          Interest paid                           7       (1.2)        (1.5)          Retirement benefit plans               10       (2.2)        (9.7)          contributions        Income tax payments, net               16      (64.4)        (8.0)          Other income tax deposits              16      (10.3)      —          Changes in non-cash working            18      (85.5)       (92.5)          capital        Changes in long-term assets and        19         4.2        (6.3)          liabilities                                                      (228.4)      (119.6)       Cash flow used for investing                                                activities        Purchases of property, plant and               (10.5)        (6.7)          equipment and intangible assets        Proceeds from sale of property,                   0.6          0.3          plant and equipment                                                        (9.9)        (6.4)       Cash flow used for financing                                                activities        Interest paid on finance lease          7       (0.6)        (0.6)          obligations        Repayment of long-term obligations              (5.8)        (3.4)          Proceeds from long-term                           1.5          1.1          obligations                                                        (4.9)        (2.9)       Effect of exchange rate on cash and                (0.4)          0.1       cash equivalents at end of period     Decrease in cash and cash equivalents            (243.6)      (128.8)       Cash and cash equivalents at                    $  513.8     $  238.5       beginning of period     Cash and cash equivalents at end of             $  270.2     $  109.7       period  The accompanying notes are an integral part of these unaudited condensed  consolidated financial statements.  NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  1. General information  Sears Canada Inc. is incorporated in Canada. The address of its registered  office and principal place of business is 290 Yonge Street, Suite 700,  Toronto, Ontario, Canada M5B 2C3. The principal activities of Sears Canada  Inc. and its subsidiaries (the "Company") include the sale of goods and  services through the Company's Retail channels, which includes its Full-line,  Sears Home, Hometown Dealer, Outlet, Appliances and Mattresses, Corbeil  Electrique Inc. ("Corbeil") stores, and its Direct (catalogue/internet)  channel. It also includes service revenue related to product repair and  logistics. Commission revenue includes travel, home improvement services,  insurance, and performance payments received from JPMorgan Chase Bank, N.A.  (Toronto Branch) ("JPMorgan Chase") under the Company's long-term credit card  marketing and servicing alliance with JPMorgan Chase. The Company has a  multi-year licensing arrangement with TravelBrands Inc. ("TravelBrands")  (formerly known as Thomas Cook Canada Inc.), under which TravelBrands manages  the day-to-day operations of all Sears Travel offices and provides commissions  to the Company. The Company also entered in a multi-year licensing agreement  with SHS Services Management Inc. ("SHS"), under which SHS oversaw the  day-to-day operations of all Sears Home Installed Products and Services  business ("HIPS"). On December 13, 2013, SHS announced it was in receivership,  and all offers of services provided by SHS ceased (see Note 13). Licensee fee  revenues are comprised of payments received from licensees, including  TravelBrands, that operate within the Company's stores. The Company is a party  to a number of real estate joint arrangements which have been classified as  joint operations and accounted for by recognizing the Company's share of joint  arrangements' assets, liabilities, revenues and expenses for financial  reporting purposes.  The indirect parent of the Company is Sears Holdings Corporation ("Sears  Holdings"), incorporated in the U.S. in the state of Delaware. The ultimate  controlling party of the Company is ESL Investments, Inc. (incorporated in the  U.S. in the state of Florida) through Sears Holdings.  2. Significant accounting policies  2.1 Statement of compliance  The unaudited condensed consolidated financial statements of the Company for  the 13-week period ended May 3, 2014 (the "Financial Statements") have been  prepared in accordance with IAS 34, Interim Financial Reporting ("IAS 34")  issued by the International Accounting Standards Board ("IASB"), and  therefore, do not contain all disclosures required by International Financial  Reporting Standards ("IFRS") for annual financial statements. Accordingly,  these Financial Statements should be read in conjunction with the Company's  most recently prepared annual consolidated financial statements for the  52-week period ended February 1, 2014 (the "2013 Annual Consolidated Financial  Statements"), prepared in accordance with IFRS.  2.2 Basis of preparation and presentation  The principal accounting policies of the Company have been applied  consistently in the preparation of these Financial Statements for all periods  presented. These Financial Statements follow the same accounting policies and  methods of application as those used in the preparation of the 2013 Annual  Consolidated Financial Statements, except as noted below. The Company's  significant accounting policies are described in Note 2 of the 2013 Annual  Consolidated Financial Statements.  The Company adopted the following amendments and interpretations which became  effective "in" or "for" the 13-week period ended May 3, 2014:         --  IAS 32, Financial Instruments: Presentation ("IAS 32")             The IASB has amended IAS 32 to provide clarification on the             requirements for offsetting financial assets and liabilities.             These amendments are effective for annual periods beginning on             or after January 1, 2014. Based on the Company's assessment of             these amendments, there is no impact on its Financial             Statements; and         --  IFRIC 21, Levies ("IFRIC 21")             IFRIC 21 provides guidance on when to recognize a liability for             a levy imposed by a government, both for levies that are             accounted for in accordance with IAS 37, Provisions, Contingent             Liabilities and Contingent Assetsand those where the timing and             amount of the levy is certain. This interpretation is             applicable for annual periods on or after January 1, 2014.             Based on the Company's assessment of this interpretation, there             is no impact on its Financial Statements.  2.2.1 Basis of consolidation  The Financial Statements incorporate the financial statements of the Company  as well as all of its subsidiaries. Real estate joint arrangements are  accounted for by recognizing the Company's share of the joint arrangements'  assets, liabilities, revenues and expenses. Subsidiaries include all entities  where the Company has the power to govern the financial and operating policies  of the entity so as to obtain benefits from its activities. All intercompany  balances and transactions, and any unrealized income and expenses arising from  intercompany transactions, are eliminated in the preparation of these  Financial Statements.  The fiscal year of the Company consists of a 52 or 53-week period ending on  the Saturday closest to January 31. The 13-week periods presented in these  Financial Statements are for the periods ended May 3, 2014 and May 4, 2013.  These Financial Statements are presented in Canadian dollars, which is the  Company's functional currency. The Company is comprised of two reportable  segments, Merchandising and Real Estate Joint Arrangements (see Note 17).  2.3 Seasonality  The Company's operations are seasonal in nature. Accordingly, merchandise and  service revenues, as well as performance payments received from JPMorgan Chase  under the long-term credit card marketing and servicing alliance, will vary by  quarter based on consumer spending behaviour. Historically, the Company's  revenues and earnings are highest in the fourth quarter due to the holiday  season. The Company is able to adjust certain variable costs in response to  seasonal revenue patterns; however, costs such as occupancy are fixed, causing  the Company to report a disproportionate level of earnings in the fourth  quarter. This business seasonality results in quarterly performance that is  not necessarily indicative of the year's performance.  3. Issued standards not yet adopted  The Company monitors the standard setting process for new standards and  interpretations issued by the IASB that the Company may be required to adopt  in the future. Since the impact of a proposed standard may change during the  review period, the Company does not comment publicly until the standard has  been finalized and the effects have been determined.  On December 16, 2011, the IASB issued amendments to a previously released  standard as follows:               IFRS 9, Financial Instruments ("IFRS 9")               This standard will ultimately replace IAS 39, Financial               Instruments: Recognition and Measurement in phases. The first               phase of IFRS 9 was issued on November 12, 2009 and addresses               the classification and measurement of financial assets. The               second phase of IFRS 9 was issued on October 28, 2010               incorporating new requirements on accounting for financial               liabilities. On December 16, 2011, the IASB amended the               mandatory effective date of IFRS 9 to fiscal years beginning               on or after January 1, 2015. The amendment also provides               relief from the requirement to recast comparative financial               statements for the effect of applying IFRS 9. In subsequent               phases, the IASB will address hedge accounting and impairment               of financial assets. In November 2013, the IASB withdrew the               mandatory effective date of IFRS 9. The Company will evaluate               the overall impact on the Company's consolidated financial               statements when the final standard, including all phases, is               issued.                  4. Critical accounting judgments and key sources of estimation uncertainty  In the application of the Company's accounting policies, management is  required to make judgments, estimates and assumptions with regards to the  carrying amounts of assets and liabilities that are not readily apparent from  other sources. The estimates and underlying assumptions are based on  historical experience and other factors that are considered to be relevant.  Actual results may differ from these estimates. The estimates and underlying  assumptions are reviewed on an ongoing basis. Revisions to accounting  estimates are recognized in the period in which the estimate is revised, if  the revision affects only that period, or in the period of the revision and  future periods, if the revision affects both current and future periods.  Critical judgments that management has made in the process of applying the  Company's accounting policies, key assumptions concerning the future and other  key sources of estimation uncertainty that have the potential to materially  impact the carrying amounts of assets and liabilities within the next  financial year are described in Note 4 of the 2013 Annual Consolidated  Financial Statements and are consistent with those used in the preparation of  these Financial Statements.  5. Cash and cash equivalents and interest income  Cash and cash equivalents  The components of cash and cash equivalents were as follows:     (in CAD millions)         As at                As at           As at                           May 3, 2014     February 1, 2014     May 4, 2013     Cash                $     145.2     $          192.4     $      64.4       Cash equivalents                                                             Government               90.0                299.9         —         treasury bills       Bank term                13.0              —            15.0         deposits       Investment               10.4                 10.4            20.6         accounts     Restricted cash            11.6                 11.1             9.7       and cash     equivalents     Total cash and      $     270.2     $          513.8     $     109.7       cash equivalents  The components of restricted cash and cash equivalents are further discussed  in Note 14.  Interest income  Interest income related primarily to cash and cash equivalents for the 13-week  period ended May 3, 2014 totaled $0.7 million  (2013: $0.4 million). For the  same 13-week period, the Company received $0.5 million (2013: $0.5 million) in  cash related to interest income.  6. Inventories  The amount of inventory recognized as an expense during the 13-week period  ended May 3, 2014 was $468.8 million (2013: $489.0 million), which includes  $28.6 million (2013: $24.4 million) of inventory write-downs. These expenses  are included in "Cost of goods and services sold" in the unaudited Condensed  Consolidated Statements of Net Loss and Comprehensive Loss. There were no  reversals of prior period inventory write-downs for the 13-week period ended  May 3, 2014 (2013: $3.5 million).  Inventory is pledged as collateral under the Company's revolving credit  facility (see Note 7).  7. Long-term obligations and finance costs  Long-term obligations  Total outstanding long-term obligations were as follows:     (in CAD millions)         As at                As at           As at                           May 3, 2014     February 1, 2014     May 4, 2013     Real estate joint   $   —     $            2.9     $       4.1       arrangement     obligations -     Current     Finance lease               4.7                  5.0             5.1       obligations -     Current     Total current       $       4.7     $            7.9     $       9.2       portion of     long-term     obligations     Real estate joint   $   —     $        —     $      18.2       arrangement     obligations -     Non-current     Finance lease              26.9                 28.0            29.6       obligations -     Non-current     Total non-current   $      26.9     $           28.0     $      47.8       long-term     obligations                                        The Company's debt consists of a secured credit facility and finance lease  obligations and the Company's share of its real estate joint arrangement  obligations. In September 2010, the Company entered into an $800.0 million  senior secured revolving credit facility (the "Credit Facility") with a  syndicate of lenders with a maturity date of September 10, 2015. The Credit  Facility is secured with a first lien on inventory and credit card  receivables. Availability under the Credit Facility is determined pursuant to  a borrowing base formula. Availability under the Credit Facility was $475.2  million as at May 3, 2014 (February 1, 2014: $374.0 million, May 4, 2013:  $606.5 million). The current availability may be reduced by reserves currently  estimated by the Company to be approximately $197.0 million, which may be  applied by the lenders at their discretion pursuant to the Credit Facility  agreement. As a result of judicial developments relating to the priorities of  pension liability relative to certain secured obligations, the Company has  executed an amendment to its Credit Facility agreement which would provide  additional security to the lenders by pledging certain real estate assets as  collateral, thereby partially reducing the potential reserve amount the  lenders could apply by up to $150.0 million. As at May 3, 2014, three  properties in Ontario have been registered under the amendment to the Credit  Facility agreement. The additional reserve amount may increase or decrease in  the future based on changes in estimated net pension deficits in the event of  a wind-up, and based on the amount, if any, of real estate assets pledged as  additional collateral.  The Credit Facility contains covenants which are customary for facilities of  this nature and the Company was in compliance with all covenants as at May 3,  2014.  As at May 3, 2014, the Company had no borrowings on the Credit Facility and  had unamortized transaction costs incurred to establish the Credit Facility of  $3.8 million included in "Other long-term assets" in the unaudited Condensed  Consolidated Statements of Financial Position (February 1, 2014: no borrowings  and unamortized transaction costs of $4.4 million included in "Other long-term  assets", May 4, 2013: no borrowings and unamortized transaction costs of $5.7  million included in "Other long-term assets"). In addition, the Company had  $24.0 million (February 1, 2014: $24.0 million, May 4, 2013: $24.2 million) of  standby letters of credit outstanding against the Credit Facility. These  letters of credit cover various payments primarily relating to utility  commitments and defined benefit plan deficit funding (see Note 10 for  additional information on retirement benefit plans). Interest on drawings  under the Credit Facility is determined based on bankers' acceptance rates for  one to three month terms or the prime rate plus a spread. Interest amounts on  the Credit Facility are due monthly and are added to principal amounts  outstanding.  As at May 3, 2014, the Company had outstanding merchandise letters of credit  of U.S. $8.5 million (February 1, 2014: U.S. $9.0 million, May 4, 2013: U.S.  $9.5 million) used to support the Company's offshore merchandise purchasing  program with restricted cash and cash equivalents pledged as collateral.  The Company has entered into a mortgage on land that it owns in Burnaby,  British Columbia. In accordance with the Burnaby development project with  Concord, the land has been allocated as security for future borrowings (see  Note 20).  Finance costs  Interest expense on long-term obligations, including the Company's share of  interest on long-term obligations of its real estate joint arrangements,  finance lease obligations, the current portion of long-term obligations,  amortization of transaction costs and commitment fees on the unused portion of  the Credit Facility for the 13-week period ended May 3, 2014 totaled $2.3  million (2013: $2.7 million). Interest expense is included in "Finance costs"  in the unaudited Condensed Consolidated Statements of Net Loss and  Comprehensive Loss. Also included in "Finance costs" for the 13-week period  ended May 3, 2014 was an expense of nil (2013: expense reversal of $0.4  million) for interest on accruals for uncertain tax positions, and an expense  of $0.2 million (2013: nil) for interest on the settlement of a sales tax  assessment.  The Company's cash payments for interest on long-term obligations, including  the Company's share of interest on long-term obligations of its real estate  joint arrangements, finance lease obligations, the current portion of  long-term obligations and commitment fees on the unused portion of the Credit  Facility for the 13-week period ended May 3, 2014 totaled $1.8 million (2013:  $2.1 million).  8. Capital stock  On May 22, 2013, the Toronto Stock Exchange ("TSX") accepted the Company's  Notice of Intention to make a Normal Course Issuer Bid ("2013 NCIB"). The 2013  NCIB permits the Company to purchase for cancellation up to 5% of its issued  and outstanding common shares, representing 5,093,883 of the issued and  outstanding common shares as at May 10, 2013. Under the 2013 NCIB, purchases  were allowed to commence on May 24, 2013 and must terminate by May 23, 2014 or  on such earlier date as the Company may complete its purchases pursuant to the  2013 NCIB. The total purchase of common shares by the Company pursuant to the  2013 NCIB will not exceed, in the aggregate, 5% of all outstanding common  shares, and is subject to the limits under the TSX rules, including a daily  limit of 25% of the average daily trading volume (which, cannot exceed 19,689  common shares a day), and a limit of one block purchase per week.  There were no share purchases during the 13-week period ended May 3, 2014  (2013: no share purchases).  During the 52-week period ended February 1, 2014 ("Fiscal 2013"), the Company  distributed $509.4 million to holders of common shares as an extraordinary  cash dividend. Payment in the amount of $5.00 per common share was made on  December 6, 2013.  ESL Investments, Inc., and investment affiliates including Edward S. Lampert,  collectively "ESL", together form the ultimate controlling party of the  Company. ESL is the beneficial holder of 28,158,368 or 27.6%, of the common  shares of the Company as at May 3, 2014 (February 1, 2014: 28,158,368 or  27.6%, May 4, 2013: 28,158,368 or 27.6%). Sears Holdings, the controlling  shareholder of the Company, is the beneficial holder of 51,962,391 or 51.0%,  of the common shares of the Company as at May 3, 2014 (February 1, 2014:  51,962,391 or 51.0%, May 4, 2013: 51,962,391 or 51.0%). The issued and  outstanding shares are fully paid and have no par value.  The authorized common share capital of the Company consists of an unlimited  number of common shares without nominal or par value and an unlimited number  of class 1 preferred shares, issuable in one or more series (the "Class 1  Preferred Shares"). As at May 3, 2014, the only shares outstanding were common  shares of the Company.  9. Revenue  The components of the Company's revenue were as follows:                                      13-Week                                                         Period Ended May 3,                      13-Week     (in CAD millions)                   2014     Period Ended May 4, 2013     Apparel &            $             264.1     $                  280.3       Accessories1     Home & Hardlines1                  356.0                        413.3       Other merchandise                   46.6                         57.1       revenue     Services and other                  74.3                         83.7       Commission and                      30.7                         32.7       licensee revenue                          $             771.7     $                  867.1       1 Certain product lines have been reclassified from the Apparel &       Accessories category, to the Home and Hardlines category.        Also, the Major Appliances category is now included in the Home and       Hardlines category.        Prior year comparative figures have been restated to reflect these       changes.          10. Retirement benefit plans  In July 2008, the Company amended its defined benefit plan by introducing a  defined contribution component and closing the defined benefit component to  new participants. As such, the defined benefit plan continues to accrue  benefits related to future compensation increases but no further service  credit is earned, and no contributions are made by employees.  The expense for the defined benefit, defined contribution and other benefit  plans for the 13-week period ended May 3, 2014 was $1.4 million (2013: $2.0  million), $1.9 million (2013: $2.2 million) and $2.4 million (2013: $2.7  million), respectively. Not included in total retirement benefit plans expense  for the 13-week period are short-term disability expenses of $2.1 million  (2013: $2.5 million) that were paid from the other benefit plan. These  expenses are included in "Selling, administrative and other expenses" in the  unaudited Condensed Consolidated Statements of Net Loss and Comprehensive Loss.  Total cash contributions by the Company to its defined benefit, defined  contribution and other benefit plans for the 13-week period ended May 3, 2014  were $2.2 million (2013: $9.7 million).  In the fourth quarter of Fiscal 2013, the Company amended the early retirement  provision of its pension plan to eliminate a benefit for associates who  voluntarily resign prior to age of retirement, with effect January 1, 2015. In  addition, the Company amended its pension plan for improvements that increase  portability of associates' benefit, with effect March 1, 2014, and implemented  fixed indexing at 0.5% per annum for eligible retirees, with effect January 1,  2014. The Company also froze the benefits offered under the non-pension  retirement plan to benefit levels as at January 1, 2015. In the fourth quarter  of Fiscal 2013, the Company recorded a pre-tax gain on amendments to  retirement benefits of $42.5 million ($42.8 million net of $0.3 million of  expenses). Refer to the 2013 Annual Consolidated Financial Statements for more  details.  During the 13-week period ended May 3, 2014, the Company offered lump sum  settlements to those terminated associates who previously elected to defer the  payment of the defined benefit pension until retirement. The Company expects  to settle accepted offers by the end of October 2014. In addition, the Company  made a voluntary offer to settle health and dental benefits of eligible  members covered under the non-pension retirement plan. The Company expects to  settle any acceptances from the offer by the end of June 2014, and expects to  pay approximately $13.0 million. The Company has incurred $0.8 million in  expenses during the 13-week period ended May 3, 2014 related to the  settlement. Upon settlement, the Company will remeasure the liability on the  non-pension retirement plan and record a settlement gain.  11. Depreciation and amortization expense  The components of the Company's depreciation and amortization expense,  included in "Selling, administrative and other expenses", were as follows:                                       13-Week                 13-Week                             Period Ended May 3,     Period Ended May 4,     (in CAD millions)                    2014                    2013     Depreciation of       $              20.9     $              27.4       property, plant and     equipment     Amortization of                       2.7                     2.8       intangible assets     Total depreciation    $              23.6     $              30.2       and amortization     expense                                                                          12. Assets classified as held for sale  On October 29, 2013, the Company announced the future closure of one of its  Regina Logistics Centres (''RLC''). The RLC including the adjacent vacant  property, which are owned by the Company, is being marketed for sale and if a  buyer is identified that will purchase the RLC at a price acceptable to the  Company, then the RLC will be sold. This process has been approved by senior  management of the Company, and based on these factors, the Company has  concluded that the sale is highly probable.  On May 16, 2014, the Company announced that it had reached a definitive  agreement with Ivanhoé Cambridge II Inc. ("Ivanhoé") to sell its 15% joint  arrangement interest in the Les Rivières Shopping Centre ("Les Rivières") it  owns with Ivanhoé for cash consideration of approximately $33.5 million. The  joint arrangement interest had a net carrying value of approximately $13.5  million as at May 3, 2014. The agreement is subject to customary closing  conditions including representations and warranties given on signing of the  agreement continuing to be true on closing. The transaction is scheduled to  close on June 2, 2014, and the ultimate amount of gain to be recognized will  be determined during the second quarter of the 52-week period ended January  31, 2015. Following the sale, the Company will continue to operate its store  in the shopping centre.  As at May 3, 2014, the assets of RLC and the assets of the property owned with  Ivanhoé were separately classified as held for sale on the Company's  unaudited Condensed Consolidated Statements of Financial Position. The major  classes of assets classified as held for sale were as follows:     (in CAD millions)                         RLC   Les Rivières    Total         Accounts receivable, net          $ —   $        0.1   $  0.1         Prepaid expenses                    —            0.2      0.2       Current assets classified as held     —            0.3      0.3       for sale       Property, plant and equipment          10.9           13.0     23.9         Investment property                     2.4        —      2.4         Other long-term assets              —            0.2      0.2       Non-current assets classified as         13.3           13.2     26.5       held for sale     Assets classified as held for       $    13.3   $       13.5   $ 26.8       sale                                            The major classes of assets classified as held for sale as of February 1, 2014  were as follows:     (in CAD millions)                                 RLC         Property, plant and equipment                $ 10.9         Investment property                             2.4       Assets classified as held for sale             $ 13.3                                                         There were no assets classified as held for sale as at May 4, 2013.  The operations of the RLC and Les Rivières are not presented as discontinued  operations on the unaudited Condensed Consolidated Statements of Net Loss and  Comprehensive Loss as they do not represent a separate geographical area of  operations or a separate major line of business.  13. Financial instruments  In the ordinary course of business, the Company enters into financial  agreements with banks and other financial institutions to reduce underlying  risks associated with interest rates and foreign currency. The Company does  not hold or issue derivative financial instruments for trading or speculative  purposes.  Financial instrument risk management  The Company is exposed to credit, liquidity and market risk as a result of  holding financial instruments. Market risk consists of foreign exchange and  interest rate risk.  13.1 Credit risk  Credit risk refers to the possibility that the Company can suffer financial  losses due to the failure of the Company's counterparties to meet their  payment obligations. Exposure to credit risk exists for derivative  instruments, cash and cash equivalents, accounts receivable and other  long-term assets.  Cash and cash equivalents, accounts receivable, derivative instruments and  investments included in other long-term assets totaling $344.7 million as at  May 3, 2014 (February 1, 2014: $605.8 million, May 4, 2013: $190.4 million)  expose the Company to credit risk should the borrower default on maturity of  the instruments. The Company manages this exposure through policies that  require borrowers to have a minimum credit rating of A, and limiting  investments with individual borrowers at maximum levels based on credit rating.  The Company is exposed to minimal credit risk from customers as a result of  ongoing credit evaluations and review of accounts receivable collectability.  As at May 3, 2014, one party represented 13.0% of the Company's net accounts  receivable (February 1, 2014: one party represented 11.3% of the Company's  accounts receivable, May 4, 2013: two parties represented 38.1% of the  Company's accounts receivable).  13.2 Liquidity risk  Liquidity risk is the risk that the Company may not have cash available to  satisfy financial liabilities as they come due. The Company actively maintains  access to adequate funding sources to ensure it has sufficient available funds  to meet current and foreseeable financial requirements at a reasonable cost.  The following table summarizes the carrying amount and the contractual  maturities of both the interest and principal portion of significant financial  liabilities as at May 3, 2014:                                                        Contractual Cash Flow Maturities     (in CAD        Carrying                  Within     1 year to     3 years to        Beyond       millions)        Amount       Total      1 year       3 years        5 years       5 years     Accounts      $ 421.5     $   421.5     $ 421.5     $ —     $  —     $ —       payable and     accrued     liabilities     Finance          31.6          41.1         6.8          11.1           10.0          13.2       lease     obligations     including     payments     due within     one year 1     Operating           n/a       465.9        99.2         150.7          104.6         111.4       lease     obligations     2     Royalties 2         n/a         3.2         0.5           1.5            1.2       —       Purchase            n/a        15.7         8.2           7.5        —       —       agreements     2,4     Retirement      291.9         101.0        22.8          58.7           19.5       —       benefit     plans     obligations     3                   $ 745.0     $ 1,048.4     $ 559.0     $   229.5     $    135.3     $   124.6       1 Cash flow maturities related to finance lease obligations, including       payments due within one year, include annual interest on       finance lease obligations       at a weighted average rate of 7.6%. The Company had no borrowings on       the Credit Facility at May 3, 2014.     2 Purchase agreements, operating lease obligations, and royalties are       not reported in the unaudited Condensed Consolidated Statements of       Financial Position.     3 Payments beyond 2013 are subject to a funding valuation as at       December 31, 2013 to be completed by September 30, 2014. Until then,       the Company is obligated to fund in accordance with the most recent       valuation completed as at December 31, 2010.     4 Certain vendors require minimum purchase commitment levels over the       term of the contract.          Management believes that cash on hand, future cash flow generated from  operations and availability of current and future funding will be adequate to  support these financial liabilities. As at May 3, 2014, the Company does not  have any significant capital expenditure commitments.  Market risk  Market risk exists as a result of the potential for losses caused by changes  in market factors such as foreign currency exchange rates, interest rates and  commodity prices.  13.3 Foreign exchange risk  The Company enters into foreign exchange contracts to reduce the foreign  exchange risk with respect to U.S. dollar denominated assets and liabilities  and purchases of goods or services. As at May 3, 2014, there were forward  contracts outstanding with a notional value of US $64 million (February 1,  2014: US $90 millions, May 4, 2013: nil) and a fair value of $2.0 million  included in "Derivative financial assets" (February 1, 2014: $7.2 million, May  4, 2013: nil) in the unaudited Condensed Consolidated Statements of Financial  Position. These derivative contracts have settlement dates extending to July  2014. The intrinsic value portion of these derivatives has been designated as  a cash flow hedge for hedge accounting treatment under IAS 39, Financial  Instruments: Recognition and Measurement. These contracts are intended to  reduce the foreign exchange risk with respect to anticipated purchases of U.S.  dollar denominated goods and services, including goods purchased for resale  ("hedged item"). As at May 3, 2014, the designated portion of these hedges was  considered effective.  While the notional principal of these outstanding financial instruments is not  recorded in the unaudited Condensed Consolidated Statements of Financial  Position, the fair value of the contracts is included in "Derivative financial  assets" or "Derivative financial liabilities", depending on the fair value,  and classified as current or long-term, depending on the maturities of the  outstanding contracts. Changes in the fair value of the designated portion of  contracts are included in OCI for cash flow hedges, to the extent the  designated portion of the hedges continues to be effective, with any  ineffective portion included in "Cost of goods and services sold" in the  unaudited Condensed Consolidated Statements of Net Loss and Comprehensive  Loss. Amounts previously included in OCI are reclassified to "Cost of goods  and services sold" in the same period in which the hedged item impacted Net  Loss.  During the 13-week period ended May 3, 2014, the Company recorded a loss of  $0.1 million (2013: loss of $0.8 million) in "Selling, administrative and  other expenses", relating to the translation or settlement of U.S. dollar  denominated monetary items consisting of cash and cash equivalents, accounts  receivable and accounts payable.  The period end exchange rate was 0.9107 U.S. dollar to Canadian dollar. A 10%  appreciation or depreciation of the U.S. and or the Canadian dollar exchange  rate was determined to have an after-tax impact on net loss of $0.6 million  for U.S. dollar denominated balances included in cash and cash equivalents,  accounts receivable and accounts payable.  13.4 Interest rate risk  From time to time, the Company enters into interest rate swap contracts with  approved financial institutions to manage exposure to interest rate risks. As  at May 3, 2014, the Company had no interest rate swap contracts in place  (February 1, 2014: nil, May 4, 2013: nil).  Interest rate risk reflects the sensitivity of the Company's financial  condition to movements in interest rates. Financial assets and liabilities  which do not bear interest or bear interest at fixed rates are classified as  non-interest rate sensitive.  Cash and cash equivalents and borrowings under the secured revolving credit  facility, when applicable, are subject to interest rate risk. The total  subject to interest rate risk as at May 3, 2014 was a net asset of $271.5  million (February 1, 2014: net asset of $515.1 million, May 4, 2013: net asset  of $111.0 million). An increase or decrease in interest rates of 25 basis  points would cause an immaterial after-tax impact on net loss for net assets  subject to interest rate risk included in cash and cash equivalents and other  long-term assets as at May 3, 2014.  13.5 Classification and fair value of financial instruments  The estimated fair values of financial instruments presented are based on  relevant market prices and information available at those dates. The following  table summarizes the classification and fair value of certain financial  instruments as at the specified dates. The Company determines the  classification of a financial instrument when it is initially recorded, based  on the underlying purpose of the instrument. As a significant number of the  Company's assets and liabilities, including inventories and capital assets, do  not meet the definition of financial instruments, values in the tables below  do not reflect the fair value of the Company as a whole.  The fair value of financial instruments are classified and measured according  to the following three levels, based on the fair value hierarchy.         --  Level 1: Quoted prices in active markets for identical assets             or liabilities         --  Level 2: Inputs other than quoted prices in active markets that             are observable for the asset or liability either directly (i.e.             as prices) or indirectly (i.e. derived from prices)         --  Level 3: Inputs for the asset or liability that are not based             on observable market data     (in CAD                                                                           millions)                                     Fair Value   As at        As at       As at                        Balance        Hierarchy2     May     February      May 4,                      Sheet                          3,      1, 2014        2013     Classification   Category                     2014     Available for                                                                     sale       Cash               Cash and      Level 1   100.4        310.3        20.6         equivalents            cash                      equivalents1     Fair value                                                                        through profit     or loss       Long-term      Other             Level 1     0.2          0.2         0.2         investments    long-term                      assets       U.S. $         Derivative        Level 2     2.0          7.2     —         derivative     financial       contracts      assets       Long-term      Other             Level 3     1.3          1.3         1.3         investments    long-term                      assets     1 Interest income related to cash and cash equivalents is disclosed in                                                                    Note 5.     2 Classification of fair values relates to 2014          All other assets that are financial instruments not listed in the chart above  have been classified as "Loans and receivables". All other financial  instrument liabilities have been classified as "Other liabilities" and are  measured at amortized cost in the unaudited Condensed Consolidated Statements  of Financial Position. The carrying value of these financial instruments  approximate fair value given that they are short-term in nature.  Effective March 3, 2013, the Company finalized an exclusive, multi-year  licensing arrangement with SHS, which resulted in SHS overseeing the  day-to-day operations of HIPS. The Company provided SHS an interest-bearing  loan which allowed SHS to pay the final purchase price of $5.3 million over 6  years. SHS repaid this loan on September 30, 2013, and shortly afterwards,  issued the Company an interest-bearing promissory note for $2.0 million,  secured by certain assets of SHS, repayable by July 16, 2015. The promissory  note asset is included in "Other long-term assets" in the Consolidated  Statements of Financial Position as at May 3, 2014.  On December 13, 2013, SHS announced that it was in receivership. All offers of  services provided by SHS ceased, and the Company is working with the Receiver,  PricewaterhouseCoopers Inc., on options for completing pending orders. As a  result of the announcement, the Company recorded a warranty provision of $2.0  million in the fourth quarter of Fiscal 2013 related to potential future  claims for work that had been performed by SHS, as well as assuming the  warranty obligations with respect to work previously performed by the Company  which had been assumed by SHS.  As a result of an announcement made by the Company on March 21, 2014 regarding  certain obligations of SHS, the Company recorded an additional provision of  $4.4 million for warranty, and a $2.2 million allowance for doubtful accounts  against the net receivable (including outstanding commissions receivable) for  the 13-week period ended May 3, 2014.  14. Contingent liabilities  14.1 Legal proceedings  The Company is involved in various legal proceedings incidental to the normal  course of business. The Company takes into account all available information,  including guidance from experts (such as internal and external legal counsel)  at the time of reporting to determine if it is probable that a present  obligation (legal or constructive) exists, if it is probable that an outflow  of resources embodying economic benefit will be required to settle such  obligation and whether the Company can reliably measure such obligation at the  end of the reporting period. The Company is of the view that, although the  outcome of such legal proceedings cannot be predicted with certainty, the  final disposition is not expected to have a material adverse effect on the  Financial Statements.  14.2 Commitments and guarantees  Commitments  As at May 3, 2014, cash and cash equivalents that are restricted represent  cash and investments pledged as collateral for letter of credit obligations  issued under the Company's offshore merchandise purchasing program of $11.0  million (February 1, 2014: $11.1 million, May 4, 2013: $9.7 million), which is  the Canadian equivalent of U.S. $10.0 million (February 1, 2014: U.S. $10.0  million, May 4, 2013: U.S. $9.6 million).  The Company has certain vendors which require minimum purchase commitment  levels over the term of the contract. Refer to Note 13.2 "Liquidity risk".  Guarantees  The Company has provided the following significant guarantees to third parties:  Royalty License Agreements  The Company pays royalties under various merchandise license agreements, which  are generally based on the sale of products. Certain license agreements  require a minimum guaranteed payment of royalties over the term of the  contract, regardless of sales. Total future minimum royalty payments under  such agreements were $3.2 million as at May 3, 2014 (February 1, 2014: $3.5  million, May 4, 2013: $1.8 million).  Other Indemnification Agreements  In the ordinary course of business, the Company has provided indemnification  commitments to counterparties in transactions such as leasing transactions,  royalty agreements, service arrangements, investment banking agreements and  director and officer indemnification agreements. The Company has also provided  certain indemnification agreements in connection with the sale of the credit  and financial services operations in November 2005. The foregoing  indemnification agreements require the Company to compensate the  counterparties for costs incurred as a result of changes in laws and  regulations, or as a result of litigation or statutory claims, or statutory  sanctions that may be suffered by a counterparty as a consequence of the  transaction. The terms of these indemnification agreements will vary based on  the contract and typically do not provide for any limit on the maximum  potential liability. Historically, the Company has not made any significant  payments under such indemnifications and no amounts have been accrued in the  Financial Statements with respect to these indemnification commitments.  15. Net loss per share  A reconciliation of the number of shares used in the net loss per share  calculation is as follows:     (Number of shares)                    13-Week                 13-Week                                 Period Ended May 3,     Period Ended May 4,                                              2014                    2013     Weighted average number           101,877,662             101,877,662       of shares per basic net     loss per share     calculation     Effect of dilutive                    —                 —       instruments outstanding     Weighted average number           101,877,662             101,877,662       of shares per diluted     net loss per share     calculation                                                                              "Net loss" as disclosed in the unaudited Condensed Consolidated Statements of  Net Loss and Comprehensive Loss was used as the numerator in calculating the  basic and diluted net loss per share. For the 13-week period ended May 3,  2014, there were no outstanding dilutive instruments. For the 13-week period  ended May 4, 2013, the Company incurred a net loss and therefore all potential  common shares were anti-dilutive.  16. Income taxes  The Company's total net cash payments of income taxes for the 13-week period  ended May 3, 2014 were $74.7 million (2013: $8.0 million).  In the ordinary course of business, the Company is subject to ongoing audits  by tax authorities. While the Company believes that its tax filing positions  are appropriate and supportable, periodically, certain matters are challenged  by tax authorities. During the 13-week period ended May 3, 2014, the Company  recorded benefits for interest on prior period tax re-assessments and accruals  for uncertain tax positions as described in the table below, all included in  the unaudited Condensed Consolidated Statements of Net Loss and Comprehensive  Loss as follows:                                           13-Week          13-Week                                        Period Ended     Period Ended     (in CAD millions)                 May 3, 2014      May 4, 2013     Finance costs recovery           $    —     $        0.4       Income tax recovery (expense):                                         Current                                 0.1              0.5         Deferred                              (0.1)            (0.1)       Net benefits on uncertain tax    $    —     $        0.8       positions  The Company routinely evaluates and provides for potentially unfavourable  outcomes with respect to any tax audits, and believes that the final  disposition of tax audits will not have a material adverse effect on its  liquidity.  Included in "Other long-term assets" in the unaudited Condensed Consolidated  Statements of Financial Position as at May 3, 2014, were receivables of $32.5  million (February 1, 2014: $32.5 million, May 4, 2013: $14.7 million) related  to payments made by the Company for disputed tax assessments.  17. Segmented information  In order to identify the Company's reportable segments, the Company uses the  process outlined in IFRS 8, Operating Segments which includes the  identification of the Chief Operating Decision Maker, the identification of  operating segments, which has been done based on Company formats, and the  aggregation of operating segments. The Company has aggregated its operating  segments into two reportable segments: Merchandising and Real Estate Joint  Arrangements. The Merchandising segment includes revenues from the sale of  merchandise and related services to customers. The Real Estate Joint  Arrangement segment includes income from the Company's joint arrangement  interests in shopping centres across Canada, all of which contain a Sears  store.  17.1 Segmented statements of (loss) earnings                                       13-Week                 13-Week                             Period Ended May 3,     Period Ended May 4,     (in CAD millions)                    2014                    2013     Total revenue                                                             Merchandising       $             770.0     $             856.4         Real Estate Joint                   1.7                    10.7         Arrangements     Total revenue         $             771.7     $             867.1       Segmented operating                                                     (loss) income       Merchandising       $           (100.7)     $            (44.4)         Real Estate Joint                   0.2                     2.9         Arrangements     Total segmented       $           (100.5)     $            (41.5)       operating loss     Finance Costs                                                             Merchandising       $               2.5     $               1.9         Real Estate Joint               —                     0.4         Arrangements     Total finance costs   $               2.5     $               2.3       Interest Income                                                           Merchandising       $               0.7     $               0.2         Real Estate Joint               —                     0.2         Arrangements     Total interest income $               0.7     $               0.4       Income tax recovery                                                       Merchandising       $              27.1     $              12.2         Real Estate Joint               —                 —         Arrangements     Total income tax      $              27.1     $              12.2       recovery     Net loss              $            (75.2)     $            (31.2)                                                      17.2 Segmented statements of total assets                                   As at           As at           As at       (in CAD                 May 3, 2014     February 1,     May 4, 2013     millions)                                      2014     Merchandising           $   2,154.3     $   2,354.2     $   2,121.7       Real Estate                    37.6            38.1           295.8       Joint     Arrangements     Total assets            $   2,191.9     $   2,392.3     $   2,417.5                                                                              17.3 Segmented statements of total liabilities                             As at                As at           As at       (in CAD millions) May 3, 2014     February 1, 2014     May 4, 2013                                                                Merchandising     $   1,195.2     $        1,314.4     $   1,345.5       Real Estate Joint         1.7                  4.1            26.8       Arrangements     Total liabilities $   1,196.9     $        1,318.5     $   1,372.3                                                                             18. Changes in non-cash working capital balances  Cash used for non-cash working capital balances were comprised of the  following:                                               13-Week          13-Week                                            Period Ended     Period Ended     (in CAD millions)                     May 3, 2014      May 4, 2013     Accounts receivable, net             $       12.2     $      (1.5)       Inventories                                (17.5)           (39.7)       Prepaid expenses                            (5.6)              0.1       Accounts payable and accrued               (18.4)           (25.9)       liabilities     Deferred revenue                            (6.1)              2.3       Provisions                                  (8.9)           (13.5)       Income and other taxes payable and         (41.6)           (14.2)       recoverable     Effect of foreign exchange rates              0.4            (0.1)       Cash used for non-cash working       $     (85.5)     $     (92.5)     capital balances                                                                19. Changes in long-term assets and liabilities  Cash generated from (used for) long-term assets and liabilities were comprised  of the following:                                             13-Week          13-Week                                          Period Ended     Period Ended     (in CAD millions)                   May 3, 2014      May 4, 2013     Other long-term assets             $       11.5     $        0.2       Other long-term liabilities               (7.5)            (5.9)       Other                                       0.2            (0.6)       Cash generated from (used for)     $        4.2     $      (6.3)     long-term assets and liabilities                                                              20. Burnaby arrangement  On October 11, 2013, the Company announced that it entered into a binding  agreement with Concord Pacific Group of Companies ("Concord") to pursue the  development of nine acres of the Company's property on and adjacent to the  Company's store located at the Metropolis at Metrotown in Burnaby, British  Columbia (the "Project"). Closing under the agreement is contingent upon  obtaining the approval from the City of Burnaby for the Project, which is  expected to occur over an extended period of time.  This agreement contemplates the sale of a 50% interest in the site for a value  of approximately $140.0 million subject to adjustments, and the retention of  Concord on customary terms to manage the development. $15.0 million of the  purchase price is to be paid in cash on closing, with the balance represented  by an interest-free long term note secured by Concord's 50% interest in the  property, the principal of which is expected to be repaid out of cash flow  generated from the Project over time. It is contemplated that this note will  be subordinated to other debt financing expected to be raised and used to  develop the Project. The note will be guaranteed by a Concord affiliate.  Following the sale of the 50% interest, it is contemplated that the parties  will enter into a co-ownership arrangement. If third party debt financing  cannot be obtained, Concord will be responsible for providing debt financing  to develop the Project (which would, with certain exceptions, be subordinated  to the long-term note held by the Company). The estimated cost to fully  develop and build out the Project as contemplated is currently in excess of  $1.0 billion. Completion of the Project as contemplated is subject to  strategic considerations, including, but not limited to, potential shifts in  the Canadian economy and the condition of the real estate market now and in  the future.  In January 2014, in conjunction with Concord obtaining financing to develop  the Project, the Company entered into a demand mortgage for $25.0 million,  secured by the Project property. Interest on drawings under the mortgage is  determined based on the prime rate plus a spread, and is due monthly. As at  May 3, 2014, the Company had no borrowings on the mortgage. In January 2014,  Concord entered into a demand loan agreement for $20.0 million. The loan is  guaranteed by Concord's parent company, One West Holdings Ltd., and the  Company's undrawn $25.0 million mortgage has been pledged as collateral. As at  May 3, 2014, Concord has borrowed $13.6 million against the available demand  loan.  21. Event after the reporting period  On May 16, 2014, the Company announced that it had reached a definitive  agreement with Ivanhoé to sell its 15% joint arrangement interest in Les  Rivières that it owns with Ivanhoé, for cash consideration of approximately  $33.5 million. The joint arrangement interest had a net carrying value of  approximately $13.5 million as at May 3, 2014. The agreement is subject to  customary closing conditions including representations and warranties given on  signing of the agreement continuing to be true on closing. The transaction is  scheduled to close on June 2, 2014, and the ultimate amount of gain to be  recognized will be determined during the second quarter of the 52-week period  ended January 31, 2015. Following the sale, the Company will continue to  operate its store in the shopping centre.    SOURCE  Sears Canada Inc.  Contact for Media:Vincent Power Sears Canada, Corporate Communications  416-941-4422 vpower@sears.ca  To view this news release in HTML formatting, please use the following URL:  http://www.newswire.ca/en/releases/archive/May2014/21/c9174.html  CO: Sears Canada Inc. ST: Ontario NI: RET ERN  
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