BENEFIT PLANS
We sponsor a number of pension and postretirement benefit plans. Expenses for retirement and savings-related benefit plans were as follows:
|
| | | | | | | | | | | |
millions | 2013 | | 2012 | | 2011 |
Retirement/401(k) Savings Plans | $ | 8 |
| | $ | 10 |
| | $ | 11 |
|
Pension plans | 176 |
| | 630 |
| | 78 |
|
Postretirement benefits | 18 |
| | 24 |
| | 24 |
|
Total | $ | 202 |
| | $ | 664 |
| | $ | 113 |
|
Retirement Savings Plans
Sears Holdings sponsors retirement savings plans for employees meeting service eligibility requirements. The Company does not match employee contributions.
Other Benefit Plans
Certain domestic full-time and part-time employees of Sears are eligible to participate in noncontributory defined benefit plans after meeting age and service requirements. Effective January 1, 2006, the Sears domestic pension plan was frozen and domestic associates no longer earn additional benefits under the plan.
Substantially all full-time Canadian employees, as well as some part-time employees, are eligible to participate in contributory defined benefit plans. Effective July 1, 2008, the Sears Canada defined pension plan was amended and a defined contribution component was added. The defined benefit service accrual ceased and all plan members earn pensionable service under the defined contribution component of the Sears Canada Inc. Registered Retirement Plan.
Pension benefits are based on length of service, compensation and, in certain plans, social security or other benefits. Funding for the various plans is determined using various actuarial cost methods.
In addition to providing pension benefits, Sears provides domestic and Canadian employees and retirees certain medical benefits. These benefits provide access to medical plans, with Company subsidies for certain eligible retirees. Certain domestic Sears retirees are also provided life insurance benefits. To the extent we share the cost of the retiree medical benefits with retirees, such cost sharing is based on years of service and year of retirement. Sears' postretirement benefit plans are not funded. We have the right to modify or terminate these plans.
Pension Plans
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2012 |
millions | | SHC Domestic | | Sears Canada | | Total | | SHC Domestic | | Sears Canada | | Total |
Change in projected benefit obligation: | | | | | | | | | | | | |
Beginning balance | | $ | 5,311 |
| | $ | 1,438 |
| | $ | 6,749 |
| | $ | 6,109 |
| | $ | 1,426 |
| | $ | 7,535 |
|
Interest cost | | 219 |
| | 56 |
| | 275 |
| | 291 |
| | 65 |
| | 356 |
|
Actuarial (gain) loss | | (124 | ) | | 43 |
| | (81 | ) | | 639 |
| | 64 |
| | 703 |
|
Benefits paid | | (424 | ) | | (112 | ) | | (536 | ) | | (323 | ) | | (122 | ) | | (445 | ) |
Settlements | | (1 | ) | | — |
| | (1 | ) | | (1,405 | ) | | — |
| | (1,405 | ) |
Foreign currency exchange impact and other | | — |
| | (141 | ) | | (141 | ) | | — |
| | 5 |
| | 5 |
|
Balance at the measurement date | | $ | 4,981 |
| | $ | 1,284 |
| | $ | 6,265 |
| | $ | 5,311 |
| | $ | 1,438 |
| | $ | 6,749 |
|
| | |
| | |
| | |
| | |
| | |
| | |
|
Change in assets at fair value: | | |
| | |
| | |
| | |
| | |
| | |
|
Beginning balance | | $ | 3,221 |
| | $ | 1,272 |
| | $ | 4,493 |
| | $ | 4,051 |
| | $ | 1,227 |
| | $ | 5,278 |
|
Actual return on plan assets | | 333 |
| | 161 |
| | 494 |
| | 382 |
| | 130 |
| | 512 |
|
Company contributions | | 361 |
| | 39 |
| | 400 |
| | 516 |
| | 33 |
| | 549 |
|
Benefits paid | | (424 | ) | | (112 | ) | | (536 | ) | | (323 | ) | | (122 | ) | | (445 | ) |
Settlements | | (1 | ) | | — |
| | (1 | ) | | (1,405 | ) | | — |
| | (1,405 | ) |
Foreign currency exchange impact | | — |
| | (136 | ) | | (136 | ) | | — |
| | 4 |
| | 4 |
|
Balance at the measurement date | | $ | 3,490 |
| | $ | 1,224 |
| | $ | 4,714 |
| | $ | 3,221 |
| | $ | 1,272 |
| | $ | 4,493 |
|
Net amount recognized | | $ | (1,491 | ) | | $ | (60 | ) | | $ | (1,551 | ) | | $ | (2,090 | ) | | $ | (166 | ) | | $ | (2,256 | ) |
The accumulated benefit obligation for the SHC Domestic pension plan was $5.0 billion at February 1, 2014 and $5.3 billion at February 2, 2013. The accumulated benefit obligation for the Sears Canada pension plan was $1.3 billion at February 1, 2014 and $1.4 billion at February 2, 2013.
Postretirement Obligations |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2012 |
millions | | SHC Domestic | | Sears Canada | | Total | | SHC Domestic | | Sears Canada | | Total |
Change in accumulated postretirement benefit obligation: | | | | | | | | | | | | |
Beginning balance | | $ | 247 |
| | $ | 295 |
| | $ | 542 |
| | $ | 253 |
| | $ | 321 |
| | $ | 574 |
|
Interest cost | | 8 |
| | 12 |
| | 20 |
| | 10 |
| | 14 |
| | 24 |
|
Plan participants' contributions | | 31 |
| | — |
| | 31 |
| | 42 |
| | — |
| | 42 |
|
Actuarial (gain) loss | | (15 | ) | | (2 | ) | | (17 | ) | | 9 |
| | 16 |
| | 25 |
|
Settlement gain | | — |
| | — |
| | — |
| | — |
| | (22 | ) | | (22 | ) |
Benefits paid | | (56 | ) | | (15 | ) | | (71 | ) | | (67 | ) | | (17 | ) | | (84 | ) |
Benefits paid - settlements | | — |
| | — |
| | — |
| | — |
| | (18 | ) | | (18 | ) |
Plan amendment | | — |
| | (46 | ) | | (46 | ) | | — |
| | — |
| | — |
|
Foreign currency exchange rate impact and other | | — |
| | (28 | ) | | (28 | ) | | — |
| | 1 |
| | 1 |
|
Balance at the measurement date | | $ | 215 |
| | $ | 216 |
| | $ | 431 |
| | $ | 247 |
| | $ | 295 |
| | $ | 542 |
|
| | | | | | | | | | | | |
Change in plan assets at fair value: | | | | | | | | | | | | |
Beginning of year balance | | $ | — |
| | $ | 45 |
| | $ | 45 |
| | $ | — |
| | $ | 69 |
| | $ | 69 |
|
Actual return on plan assets | | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
|
Company contributions | | 25 |
| | 1 |
| | 26 |
| | 25 |
| | 19 |
| | 44 |
|
Plan participants' contributions | | 31 |
| | — |
| | 31 |
| | 42 |
| | — |
| | 42 |
|
Benefits paid | | (56 | ) | | (15 | ) | | (71 | ) | | (67 | ) | | (17 | ) | | (84 | ) |
Benefits paid - settlements | | — |
| | — |
| | — |
| | — |
| | (18 | ) | | (18 | ) |
Foreign currency exchange rate impact and other | | — |
| | (12 | ) | | (12 | ) | | — |
| | (8 | ) | | (8 | ) |
Balance at the measurement date | | $ | — |
| | $ | 20 |
| | $ | 20 |
| | $ | — |
| | $ | 45 |
| | $ | 45 |
|
Funded status | | $ | (215 | ) | | $ | (196 | ) | | $ | (411 | ) | | $ | (247 | ) | | $ | (250 | ) | | $ | (497 | ) |
The current portion of our liability for postretirement obligations is $25 million, which we expect to pay during fiscal 2014.
Weighted-average assumptions used to determine plan obligations were as follows: |
| | | | | | | | | | | | |
| | 2013 | | 2012 | | 2011 |
| | SHC Domestic | | Sears Canada | | SHC Domestic | | Sears Canada | | SHC Domestic | | Sears Canada |
Pension benefits: | | | | | | | | | | | | |
Discount Rate | | 4.60% | | 4.20% | | 4.25% | | 4.20% | | 4.90% | | 4.70% |
Rate of compensation increases | | N/A | | 3.50% | | N/A | | 3.50% | | N/A | | 3.50% |
Postretirement benefits: | | | | | | | | | | | | |
Discount Rate | | 4.00% | | 4.20% | | 3.55% | | 4.20% | | 4.20% | | 4.60% |
Rate of compensation increases | | N/A | | 3.50% | | N/A | | 3.50% | | N/A | | 3.50% |
Net Periodic Benefit Cost
The components of net periodic benefit cost were as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2012 | | 2011 |
millions | | SHC Domestic | | Sears Canada | | Total | | SHC Domestic | | Sears Canada | | Total | | SHC Domestic | | Sears Canada | | Total |
Pension benefits: | | | | | | | | | | | | | | | | | | |
Interest cost | | $ | 219 |
| | $ | 56 |
| | $ | 275 |
| | $ | 291 |
| | $ | 65 |
| | $ | 356 |
| | $ | 314 |
| | $ | 74 |
| | $ | 388 |
|
Expected return on plan assets | | (224 | ) | | (76 | ) | | (300 | ) | | (291 | ) | | (76 | ) | | (367 | ) | | (302 | ) | | (80 | ) | | (382 | ) |
Cost of settlements | | — |
| | — |
| | — |
| | 452 |
| | — |
| | 452 |
| | — |
| | — |
| | — |
|
Recognized net loss and other | | 167 |
| | 34 |
| | 201 |
| | 165 |
| | 24 |
| | 189 |
| | 63 |
| | 9 |
| | 72 |
|
Net periodic benefit cost | | $ | 162 |
| | $ | 14 |
| | $ | 176 |
| | $ | 617 |
| | $ | 13 |
| | $ | 630 |
| | $ | 75 |
| | $ | 3 |
| | $ | 78 |
|
| | | | | | | | | | | | | | | | | | |
Postretirement benefits: | | | | | | | | | | | | | | | | | | |
Interest cost | | $ | 8 |
| | $ | 12 |
| | $ | 20 |
| | $ | 10 |
| | $ | 14 |
| | $ | 24 |
| | $ | 13 |
| | $ | 16 |
| | $ | 29 |
|
Expected return on assets | | — |
| | (2 | ) | | (2 | ) | | — |
| | (3 | ) | | (3 | ) | | — |
| | (5 | ) | | (5 | ) |
Cost of settlements | | — |
| | — |
| | — |
| | — |
| | 3 |
| | 3 |
| | — |
| | — |
| | — |
|
Net periodic benefit cost | | $ | 8 |
| | $ | 10 |
| | $ | 18 |
| | $ | 10 |
| | $ | 14 |
| | $ | 24 |
| | $ | 13 |
| | $ | 11 |
| | $ | 24 |
|
Weighted-average assumptions used to determine net cost were as follows: |
| | | | | | | | | | | | |
| | 2013 | | 2012 | | 2011 |
| | SHC Domestic | | Sears Canada | | SHC Domestic | | Sears Canada | | SHC Domestic | | Sears Canada |
Pension benefits: | | | | | | | | | | | | |
Discount Rate | | 4.25% | | 4.20% | | 4.90% | | 4.70% | | 5.75% | | 5.40% |
Return of plan assets | | 7.00% | | 6.50% | | 7.25% | | 6.50% | | 7.50% | | 6.50% |
Rate of compensation increases | | N/A | | 3.50% | | N/A | | 3.50% | | N/A | | 3.50% |
Postretirement benefits: | | | | | | | | | | | | |
Discount Rate | | 3.55% | | 4.20% | | 4.20% | | 4.60% | | 5.00% | | 5.40% |
Return of plan assets | | N/A | | 3.75% | | N/A | | 3.75% | | N/A | | 6.50% |
Rate of compensation increases | | N/A | | 3.50% | | N/A | | 3.50% | | N/A | | 3.50% |
For purposes of determining the periodic expense of our defined benefit plans, we use the fair value of plan assets as the market related value. A one-percentage-point change in the assumed discount rate would have the following effects on the pension liability:
|
| | | | | | | | |
millions | | 1 percentage-point Increase | | 1 percentage-point Decrease |
Effect on interest cost component | | $ | 28 |
| | $ | (36 | ) |
Effect on pension benefit obligation | | $ | (596 | ) | | $ | 713 |
|
For 2014 and beyond, the domestic weighted-average health care cost trend rates used in measuring the postretirement benefit expense are an 8.0% trend rate in 2014 to an ultimate trend rate of 6.0% in 2018. A one-percentage-point change in the assumed health care cost trend rate would have the following effects on the postretirement liability:
|
| | | | | | | | |
millions | | 1 percentage-point Increase | | 1 percentage-point Decrease |
Effect on total service and interest cost components | | $ | 1 |
| | $ | (1 | ) |
Effect on postretirement benefit obligation | | $ | 17 |
| | $ | (15 | ) |
$123 million of the unrecognized net losses in accumulated other comprehensive income are expected to be amortized as a component of net periodic benefit cost during 2014.
Investment Strategy
The Investment Committee, made up of select members of senior management, has appointed a non-affiliated third party professional to advise the Committee with respect to the SHC domestic pension plan assets. The plan's overall investment objective is to provide a long-term return that, along with Company contributions, is expected to meet future benefit payment requirements. A long-term horizon has been adopted in establishing investment policy such that the likelihood and duration of investment losses are carefully weighed against the long-term potential for appreciation of assets. The plan's investment policy requires investments to be diversified across individual securities, industries, market capitalization and valuation characteristics. In addition, various techniques are utilized to monitor, measure and manage risk.
Domestic plan assets were invested in the following classes of securities:
|
| | | | | | |
| | Plan Assets at |
| | February 1, 2014 | | February 2, 2013 |
Equity securities | | 36 | % | | 31 | % |
Fixed income and other debt securities | | 59 |
| | 64 |
|
Other | | 5 |
| | 5 |
|
Total | | 100 | % | | 100 | % |
The domestic plan's target allocation is determined by taking into consideration the amounts and timing of projected liabilities, our funding policies and expected returns on various asset classes. At February 1, 2014, the plan's target asset allocation was 35% equity and 65% fixed income. To develop the expected long-term rate of return on assets assumption, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.
Sears Canada plan assets were invested in the following classes of securities (none of which were securities of the Company): |
| | | | | | |
| | Plan Assets at |
| | February 1, 2014 | | February 2, 2013 |
Equity securities | | 26 | % | | 26 | % |
Fixed income and other debt securities | | 74 |
| | 74 |
|
Total | | 100 | % | | 100 | % |
The Sears Canada plans' target allocation is determined by taking into consideration the amounts and timing of projected liabilities, our funding policies and expected returns on various asset classes. At February 1, 2014, the plan's target asset allocation was 55% to 75% fixed income and 25% to 45% equity. To develop the expected long-term rate of return on assets assumption, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.
Future Cash Flows of Benefit Plans
Information regarding expected future cash flows for our benefit plans is as follows: |
| | | | | | | | | | | | |
millions | | SHC Domestic | | Sears Canada | | Total |
Pension benefits: | | | | | | |
Employer contributions: | | | | | | |
2014 (expected) | | $ | 487 |
| | $ | — |
| | $ | 487 |
|
Expected benefit payments: | | |
| | |
| | |
|
2014 | | $ | 339 |
| | $ | 79 |
| | $ | 418 |
|
2015 | | 342 |
| | 80 |
| | 422 |
|
2016 | | 344 |
| | 80 |
| | 424 |
|
2017 | | 344 |
| | 80 |
| | 424 |
|
2018 | | 345 |
| | 80 |
| | 425 |
|
2019-2023 | | 1,709 |
| | 395 |
| | 2,104 |
|
Postretirement benefits: | | |
| | |
| | |
|
Employer contributions: | | |
| | |
| | |
|
2014 (expected) | | $ | 25 |
| | $ | 1 |
| | $ | 26 |
|
Expected employer contribution for benefit payments: | | |
| | |
| | |
|
2014 | | $ | 25 |
| | $ | 16 |
| | $ | 41 |
|
2015 | | 24 |
| | 16 |
| | 40 |
|
2016 | | 23 |
| | 15 |
| | 38 |
|
2017 | | 21 |
| | 15 |
| | 36 |
|
2018 | | 20 |
| | 15 |
| | 35 |
|
2019-2023 | | 80 |
| | 71 |
| | 151 |
|
Domestic Pension Plan Funding
Contributions to our pension plans remain a significant use of our cash on an annual basis. While the Company's pension plan is frozen, and thus associates do not currently earn pension benefits, the Company has a legacy pension obligation for past service performed by Kmart and Sears associates. During 2013, we contributed $361 million to our domestic pension plans. We estimate that the domestic pension contribution will be $487 million in 2014 and approximately $310 million in 2015, though the ultimate amount of pension contributions could be affected by changes in the applicable regulations, as well as financial market and investment performance.
In 2012, federal legislation was signed into law which allowed pension plan sponsors to use higher interest rate assumptions in valuing plan liabilities and determining funding obligations. As a result of this legislation, the Company's domestic pension plan was within $203 million of being 80% funded under applicable law. In order to reduce the risks of gross pension obligations, the Company elected to contribute an additional $203 million to its domestic pension plan on September 14, 2012, after which its domestic pension plan was 80% funded under applicable law.
Effective September 17, 2012, the Company amended its domestic pension plan, primarily related to lump sum benefit eligibility, and began notifying certain former employees of the Company of its offer to pay those employees' pension benefit in a lump sum. These amendments did not have a significant impact on our plan. Former employees eligible for the voluntary lump sum payment option are generally those who are vested traditional formula participants of the Plan who terminated employment prior to January 1, 2012 and who have not yet started receiving monthly payments of their pension benefits.
The Company offered the one-time voluntary lump sum window in an effort to reduce its long-term pension obligations and ongoing annual pension expense. This voluntary offer was made to approximately 86,000 eligible terminated vested participants, representing approximately $2.0 billion of the Company's total qualified pension plan liabilities. Eligible participants had until November 19, 2012 to make their election. The Company made payments of approximately $1.5 billion to employees who made the election in December 2012 and funded the payments from existing pension plan assets. In connection with this transaction, the Company incurred a non-cash charge to operations of approximately $452 million pre-tax in the fourth quarter of 2012 as a result of the requirement to expense the unrealized actuarial losses. The charge had no effect on equity because the unrealized actuarial losses are already recognized in accumulated other comprehensive income/(loss). Accordingly, the effect on retained earnings was offset by a corresponding reduction in accumulated other comprehensive loss.
Fair Value of Pension and Postretirement Benefit Plan Assets
The following table presents our plan assets using the fair value hierarchy at February 1, 2014 and February 2, 2013: |
| | | | | | | | | | | | | | | | |
| | Investment Assets at Fair Value at |
SHC Domestic | | February 1, 2014 |
millions | | Total | | Level 1 | | Level 2 | | Level 3 |
Cash equivalents and short-term investments | | $ | 274 |
| | $ | — |
| | $ | 274 |
| | $ | — |
|
Equity securities: | | |
| | |
| | |
| | |
|
U.S. companies | | 1,026 |
| | 1,026 |
| | — |
| | — |
|
International companies | | 163 |
| | 163 |
| | — |
| | — |
|
Fixed income securities: | | | | | | | | |
Corporate bonds and notes | | 1,888 |
| | — |
| | 1,888 |
| | — |
|
Sears Holdings Corporation senior secured notes | | 99 |
| | — |
| | 99 |
| | — |
|
Mortgage-backed and asset-backed | | 3 |
| | — |
| | 3 |
| | — |
|
Ventures and partnerships | | 6 |
| | — |
| | — |
| | 6 |
|
Total investment assets at fair value | | $ | 3,459 |
| | $ | 1,189 |
| | $ | 2,264 |
| | $ | 6 |
|
Cash | | 3 |
| | | | | | |
Accounts receivable | | 57 |
| | | | |
| | |
Accounts payable | | (29 | ) | | | | |
| | |
Net assets available for plan benefits | | $ | 3,490 |
| | |
| | |
| | |
|
| | | | | | | | | | | | | | | | |
| | Investment Assets at Fair Value at |
SHC Domestic | | February 2, 2013 |
millions | | Total | | Level 1 | | Level 2 | | Level 3 |
Cash equivalents and short-term investments | | $ | 187 |
| | $ | — |
| | $ | 187 |
| | $ | — |
|
Equity securities: | | |
| | |
| | |
| | |
|
U.S. companies | | 848 |
| | 848 |
| | — |
| | — |
|
International companies | | 138 |
| | 138 |
| | — |
| | — |
|
Registered investment companies | | 1 |
| | 1 |
| | — |
| | — |
|
Fixed income securities: | | | | | | | | |
Corporate bonds and notes | | 1,840 |
| | — |
| | 1,840 |
| | — |
|
Sears Holdings Corporation senior secured notes | | 176 |
| | — |
| | 176 |
| | — |
|
U.S. government and agencies | | 1 |
| | — |
| | 1 |
| | — |
|
Mortgage-backed and asset-backed | | 6 |
| | — |
| | 6 |
| | — |
|
Ventures and partnerships | | 12 |
| | — |
| | — |
| | 12 |
|
Total investment assets at fair value | | $ | 3,209 |
| | $ | 987 |
| | $ | 2,210 |
| | $ | 12 |
|
Accounts receivable | | 44 |
| | | | |
| | |
Accounts payable | | (32 | ) | | | | |
| | |
Net assets available for plan benefits | | $ | 3,221 |
| | |
| | |
| | |
|
| | | | | | | | | | | | | | | | |
| | Investment Assets at Fair Value at |
Sears Canada | | February 1, 2014 |
millions | | Total | | Level 1 | | Level 2 | | Level 3 |
Cash equivalents and short-term investments | | $ | 107 |
| | $ | — |
| | $ | 107 |
| | $ | — |
|
Equity securities: | | |
| | |
| | |
| | |
|
U.S. companies | | 152 |
| | 152 |
| | — |
| | — |
|
International companies | | 3 |
| | 3 |
| | — |
| | — |
|
Common collective trusts | | 264 |
| | — |
| | 264 |
| | — |
|
Fixed income securities: | | | | | | | | |
Corporate bonds and notes | | 617 |
| | — |
| | 554 |
| | 63 |
|
Mortgage-backed and asset-backed | | 54 |
| | — |
| | 6 |
| | 48 |
|
Municipal and foreign government | | 14 |
| | — |
| | 14 |
| | — |
|
Hedge and pooled equity funds | | 2 |
| | — |
| | — |
| | 2 |
|
Total investment assets at fair value | | $ | 1,213 |
| | $ | 155 |
| | $ | 945 |
| | $ | 113 |
|
Cash | | 31 |
| | | | |
| | |
Refundable deposits | | 22 |
| | | | | | |
Accounts receivable | | 347 |
| | | | |
| | |
Accounts payable | | (369 | ) | | | | |
| | |
Net assets available for plan benefits | | $ | 1,244 |
| | |
| | |
| | |
|
| | | | | | | | | | | | | | | | |
| | Investment Assets at Fair Value at |
Sears Canada | | February 2, 2013 |
millions | | Total | | Level 1 | | Level 2 | | Level 3 |
Cash equivalents and short-term investments | | $ | 67 |
| | $ | — |
| | $ | 67 |
| | $ | — |
|
Equity securities: | | |
| | |
| | |
| | |
|
U.S. companies | | 177 |
| | 177 |
| | — |
| | — |
|
International companies | | 5 |
| | 5 |
| | — |
| | — |
|
Common collective trusts | | 277 |
| | — |
| | 277 |
| | — |
|
Fixed income securities: | | | | | | | | |
Corporate bonds and notes | | 613 |
| | — |
| | 612 |
| | 1 |
|
U.S. government and agencies | | 1 |
| | — |
| | 1 |
| | — |
|
Mortgage-backed and asset-backed | | 66 |
| | — |
| | 7 |
| | 59 |
|
Municipal and foreign government | | 34 |
| | — |
| | 34 |
| | — |
|
Hedge and pooled equity funds | | 3 |
| | — |
| | — |
| | 3 |
|
Total investment assets at fair value | | $ | 1,243 |
| | $ | 182 |
| | $ | 998 |
| | $ | 63 |
|
Cash | | 42 |
| | | | |
| | |
Refundable deposits | | 25 |
| | | | | | |
Accounts receivable | | 567 |
| | | | |
| | |
Accounts payable | | (560 | ) | | | | |
| | |
Net assets available for plan benefits | | $ | 1,317 |
| | |
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Equity securities, which include common and preferred stocks and registered investment companies (mutual funds), are actively traded and valued at the closing price reported in the active market in which the security is traded and are assigned to Level 1.
Common collective trusts are portfolios of underlying investments held by investment managers and are valued at the unit value reported by the investment managers as of the end of each period presented. Collective short-term investment funds are stated at net asset value (NAV) as determined by the investment managers. Investment managers value the underlying investments of the funds at amortized cost, which approximates fair value, and have assigned a Level 2 to the valuation of those investments. Fixed income securities are assigned to Level 2 as they are primarily valued by institutional bid evaluation, which determines the estimated price a dealer would pay for a security and which is developed using proprietary models established by the pricing vendors for this purpose.
Certain corporate and mortgage-backed debt securities are assigned to Level 3 based on the relatively low position in the preferred hierarchy of the pricing source. Valuation of the Plan's non-public limited partnerships requires significant judgment by the general partners due to the absence of quoted market value, inherent lack of liquidity, and the long-term nature of the assets, and may result in fair value measurements that are not indicative of ultimate realizable value. Hedge funds consist of fund-of-funds investments and direct hedge funds and are assigned to Level 3. The fund-of-funds investments are primarily valued using a market approach based on the NAVs calculated by the fund and are not publicly available. Direct hedge funds are primarily valued by each fund's third party administrator based on the valuation of the underlying type of security held and are not publicly available. All hedge fund investments are in the process of being redeemed.
A rollforward of our Level 3 assets each year is as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | |
SHC Domestic | | February 2, 2013 Balance | | Net Realized and Unrealized Losses | | Purchases | | Sales and Settlements | | Net Transfers Into/(Out of) Level 3 | | February 1, 2014 Balance |
millions | | | | | | | | | | | | |
Fixed income securities: | | | | | | | | | | | | |
Venture and partnerships | | $ | 12 |
| | $ | (3 | ) | | $ | — |
| | $ | (3 | ) | | $ | — |
| | $ | 6 |
|
Total Level 3 investments | | $ | 12 |
| | $ | (3 | ) | | $ | — |
| | $ | (3 | ) | | $ | — |
| | $ | 6 |
|
|
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SHC Domestic | | January 28, 2012 Balance | | Net Realized and Unrealized Gains/(Losses) | | Purchases | | Sales and Settlements | | Net Transfers Into/(Out of) Level 3 | | February 2, 2013 Balance |
millions | | | | | | | | | | | | |
Fixed income securities: | | | | | | | | | | | | |
Corporate bonds and notes | | $ | 2 |
| | $ | (2 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Venture and partnerships | | 15 |
| | 1 |
| | — |
| | (4 | ) | | — |
| | 12 |
|
Total Level 3 investments | | $ | 17 |
| | $ | (1 | ) | | $ | — |
| | $ | (4 | ) | | $ | — |
| | $ | 12 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Sears Canada | | February 2, 2013 Balance | | Net Realized and Unrealized Losses | | Purchases | | Sales and Settlements | | Net Transfers Into/(Out of) Level 3 | | February 1, 2014 Balance |
millions | | | | | | | | | | | | |
Fixed income securities: | | | | | | | | | | | | |
Corporate bonds and notes | | $ | 1 |
| | $ | — |
| | $ | 63 |
| | $ | (1 | ) | | $ | — |
| | $ | 63 |
|
Mortgage-backed and asset-backed | | 59 |
| | (2 | ) | | — |
| | (9 | ) | | — |
| | 48 |
|
Hedge and pooled equity funds | | 3 |
| | — |
| | — |
| | (1 | ) | | — |
| | 2 |
|
Total Level 3 investments | | $ | 63 |
| | $ | (2 | ) | | $ | 63 |
| | $ | (11 | ) | | $ | — |
| | $ | 113 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Sears Canada | | January 28, 2012 Balance | | Net Realized and Unrealized Gains | | Purchases | | Sales and Settlements | | Net Transfers Into/(Out of) Level 3 | | February 2, 2013 Balance |
millions | | | | | | | | | | | | |
Fixed income securities: | | | | | | | | | | | | |
Corporate bonds and notes | | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
Mortgage backed-and asset-backed | | 64 |
| | 5 |
| | — |
| | (10 | ) | | — |
| | 59 |
|
Hedge and pooled equity funds | | 16 |
| | — |
| | — |
| | (13 | ) | | — |
| | 3 |
|
Total Level 3 investments | | $ | 80 |
| | $ | 5 |
| | $ | 1 |
| | $ | (23 | ) | | $ | — |
| | $ | 63 |
|