A sale-leaseback involves selling property ownership to a third party and then renting that property back from that third party at a rate that was previously agreed upon. This is also a common way to generate cash to fund other projects. Companies may also wish to do this to reduce their real estate risk, since holding lots of real estate exposes them to the ups and downs of the real estate market, although this is very much a secondary reason compared to receiving cash.
Since they are doing the sale-leaseback in the middle of the year, we must adjust the first half of last year pro forma for the sale-leaseback. In other words, we will adjust the financial statements as if they did the sale-leaseback at the beginning of the year. This is done to make the financials comparable and on the same basis as the future projected years, so that we can calculate things like pro forma revenue growth without skewing the numbers due to the timing of the sale-leaseback.
A sale-leaseback increases rent expense, typically found in SG&A, so we would adjust the first half of the income statement as if they were renting the properties already.