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United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
ÈAnnual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended January 29, 2011
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission file number 000-51217
SEARS HOLDINGS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 20-1920798
(State of Incorporation) (I.R.S. Employer Identification No.)
3333 Beverly Road, Hoffman Estates, Illinois 60179
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (847) 286-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of Each Exchange on Which Registered
Common Shares, par value $0.01 per share The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ÈNo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No È
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past
90 days. Yes ÈNo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files). Yes ÈNo
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. È
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer ÈAccelerated filer Non-accelerated filer Smaller reporting company
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No È
On February 26, 2011, the Registrant had 108,742,366 common shares outstanding. The aggregate market value (based on the closing price
of the Registrant’s common shares for stocks quoted on the NASDAQ Global Select Market) of the Registrant’s common shares owned by
non-affiliates (which are assumed, solely for the purpose of this calculation, to be stockholders other than (i) directors and executive
officers of the Registrant and (ii) any person known by the Registrant to beneficially own five percent or more of the Registrant’s common
shares), as of the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $1.9 billion.
Documents Incorporated By Reference
Part III of this Form 10-K incorporates by reference certain information from the Registrant’s definitive proxy statement relating to our
Annual Meeting of Stockholders to be held on May 3, 2011 (the “2011 Proxy Statement”), which will be filed with the Securities and
Exchange Commission within 120 days after the end of the fiscal year to which this Form 10-K relates.

Table of contents

  • Page 1
    ... No.) 3333 Beverly Road, Hoffman Estates, Illinois (Address of principal executive offices) 60179 (Zip Code) Registrant's telephone number, including area code: (847) 286-2500 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of Each Exchange on Which Registered...

  • Page 2
    ...-line stores located across all 50 states and Puerto Rico. These stores are primarily mall-based locations averaging 133,000 square feet. Full-line stores offer a wide array of products and service offerings across many merchandise categories, including home appliances, consumer electronics, tools...

  • Page 3
    ...Sears brand products, such as Kenmore, Craftsman, and DieHard, as well as a wide assortment of national brands. 59 Sears Home Appliance Showrooms-Innovative stores averaging 5,100 square feet that have a simple, appliance only showroom design that are strategically positioned in high-growth suburban...

  • Page 4
    ...Puerto Rico, Guam and the Virgin Islands under the Sears Parts & Repair Services and A&E Factory Service brand names. Commercial and residential customers can obtain parts and repair services for all major brands of products within the home appliances, lawn and garden equipment, consumer electronics...

  • Page 5
    ...and Best Buy are some of the national retailers with which we compete. Home Depot and Lowe's are major competitors in relation to our home appliance business, which accounted for approximately 16% of our 2010 and 15% of our 2009 and 2008 reported revenues. Sears Canada competes in Canada with Hudson...

  • Page 6
    ... affected. The retail industry is highly competitive with few barriers to entry. We compete with a wide variety of retailers, including other department stores, discounters, home improvement stores, home appliances and consumer electronics retailers, auto service providers, specialty retailers...

  • Page 7
    ...assortment of available merchandise and superior customer service. We must also successfully respond to our customers' changing tastes. The performance of our competitors, as well as changes in their pricing policies, marketing activities, new store openings and other business strategies, could have...

  • Page 8
    ... political instability in countries where our suppliers are located, increases in shipping costs, transportation delays and interruptions, adverse fluctuations in currency exchange rates, and changes in U.S. and foreign laws affecting the importation and taxation of goods, including duties, tariffs...

  • Page 9
    ... by changes in laws and government regulations or changes in the enforcement thereof. From time to time, we may be involved in lawsuits and regulatory actions relating to our business, certain of which may be in jurisdictions with reputations for aggressive application of laws and procedures against...

  • Page 10
    ... affect the reported funding status of our pension plans and future contributions, as well as the periodic pension cost in subsequent years. Item 1B. Unresolved Staff Comments None. Item 2. Properties The following table summarizes the locations of our Kmart and Sears Domestic stores at January...

  • Page 11
    ... Discount Stores Super Centers State/Territory Sears Domestic Sears Full-line Essentials/ Mall Stores Grand Stores Specialty Stores Louisiana ...Maine ...Maryland ...Massachusetts ...Michigan ...Minnesota ...Mississippi ...Missouri ...Montana ...Nebraska ...Nevada ...New Hampshire ...New Jersey...

  • Page 12
    ... corporate headquarters, distribution center and customer sales/service operations for Land's End. We also own an 86,000 square foot office building in Troy, Michigan. We operate numerous buying offices throughout the world that procure product internationally, as well as an information technology...

  • Page 13
    ... Home Executive Vice President - Off-Mall Businesses and Supply Chain Senior Vice President and Chief Financial Officer Senior Vice President, General Counsel and Corporate Secretary Senior Vice President Senior Vice President, Controller and Chief Accounting Officer 2011 2009 2009 2005* 2008 2010...

  • Page 14
    ...served as the Company's Executive Vice President, Supply Chain and Operations since the Merger. He joined Kmart in October 2003 as Senior Vice President, Supply Chain and Operations. Mr. Collins joined the Company in October 2008 as Senior Vice President, Financial Planning and Analysis. In December...

  • Page 15
    ...Holdings has not paid and does not expect to pay dividends in the foreseeable future. Equity Compensation Plan Information The following table reflects information about securities authorized for issuance under our equity compensation plans at January 29, 2011. (a) Number of securities to be issued...

  • Page 16
    ... Department Stores Index. The S&P 500 Retailing Index consists of companies included in the S&P 500 Stock Index in the broadly defined retail sector, which includes competing retailers of softlines (apparel and domestics) and hardlines (appliances, electronics and home improvement products), as well...

  • Page 17
    ...of Shares Purchased as Part of Publicly Announced Program(2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program Total Number of Shares Purchased(1) Average Price Paid per Share Average Price Paid per Share for Publicly Announced Program October 31, 2010 to November 27...

  • Page 18
    ... "Management's Discussion and Analysis of Financial Condition and Results of Operations." 2007 results include the impact of a $14 million loss derived from our investments in total return swaps, a $27 million curtailment gain recorded in connection with changes made to Sears Canada's benefit plans...

  • Page 19
    ...some of our most important markets and have identified several initiatives to be rolled out based on test results and customer feedback. Third, our efforts to improve basic store execution produced nearly double-digit increases in our customer service scores year-overyear at both Sears and Kmart. 19

  • Page 20
    ... real-time feedback and recommendations from personal, extended and local networks, thus allowing them to make more informed, smarter shopping decisions. A variety of different experiences are currently available on the web and on mobile phones that allow customers to take advantage of social tools...

  • Page 21
    ... results of operations for 2010, 2009, and 2008 are summarized as follows: millions, except per share data 2010 2009 2008 REVENUES Merchandise sales and services ...COSTS AND EXPENSES Cost of sales, buying and occupancy ...Gross margin dollars ...Margin rate ...Selling and administrative ...Selling...

  • Page 22
    ... years 2010, 2009 and 2008. Fiscal 2010 (Year ended January 29, 2011) Domestic Mark-to- Closed Store Gain on Sale Canadian Pension Market Reserve and of Real Dividend Tax Tax As Expense Losses Severance Estate Impact Matters Adjusted millions, except per share data GAAP Cost of sales, buying and...

  • Page 23
    ... pension plans was relatively minimal in years prior to 2009. However, due to the severe decline in the capital markets that occurred in the latter part of 2008, our domestic pension expense was $120 million in 2010 and $170 million in 2009. During 2010, Sears Canada paid $754 million in dividends...

  • Page 24
    ... sales and services revenue ("margin rate") decreased 100 basis points mainly due to reduced margin rates in home services and appliances. Sears Canada's margin rate declined 180 basis points due to price compression in the appliance and electronics categories, as well as an increase in promotional...

  • Page 25
    ... offset by lower selling and administrative expenses. Operating income for 2010 includes expenses of $156 million related to domestic pension plans, store closings and severance and a $35 million gain recognized on the sale of a Sears Auto Center. Operating income for 2009 includes expenses of $301...

  • Page 26
    ..., a $53 million reduction in insurance expense, and a decrease of $27 million related to the impact of foreign currency exchange rates. Selling and administrative expenses for 2009 were impacted by domestic pension plan expense of $170 million and store closing costs and severance of $82 million...

  • Page 27
    ... lower gross margin dollars given lower overall sales. Operating income for 2009 includes expenses of $301 million related to domestic pension plans, store closings and severance, a $44 million gain recognized by Sears Canada on the sale of its former headquarters, and a $32 million gain recorded in...

  • Page 28
    ... Results Kmart Kmart results and key statistics were as follows: millions, except for number of stores 2010 2009 2008 Merchandise sales and services ...Cost of sales, buying and occupancy ...Gross margin dollars ...Margin rate ...Selling and administrative ...Selling and administrative expense...

  • Page 29
    ...million in 2010 and $190 million in 2009. Operating income increased due to the improved margin rate and decreased selling and administrative expenses noted above. Kmart's operating income for 2010 includes expenses of $13 million related to store closings and severance. Kmart's operating income for...

  • Page 30
    ...and store closings and severance. Sears Domestic Sears Domestic results and key statistics were as follows: millions, except for number of stores 2010 2009 2008 Merchandise sales and services ...Cost of sales, buying and occupancy ...Gross margin dollars ...Margin rate ...Selling and administrative...

  • Page 31
    ... in insurance expense, as well as reductions in various other expense categories. Selling and administrative expenses for 2010 were impacted by domestic pension plan expense of $120 million and store closing costs and severance of $7 million. Selling and administrative expenses for 2009 were...

  • Page 32
    ...connection with store closings. Sears Domestic's margin rate was 29.7% in 2009 and 28.6% in 2008, an increase of 110 basis points. The increase in margin rate was mainly the result of improvements in merchandise cost and reduced clearance markdowns as a result of better inventory management. Selling...

  • Page 33
    ... retail operations as Sears Domestic. Sears Canada results and key statistics were as follows: millions, except for number of stores 2010 2009 2008 Merchandise sales and services ...Cost of sales, buying and occupancy ...Gross margin dollars ...Margin rate ...Selling and administrative ...Selling...

  • Page 34
    ..., as well as a decline of $27 million due to the impact of exchange rates. Sears Canada's selling and administrative expense rate was 22.6% in 2009 and 22.7% in 2008, and decreased primarily as a result of the noted decline in selling and administrative expenses. Gain on Sales of Assets Sears Canada...

  • Page 35
    ..., from time to time, investments in, but not limited to, commercial paper, U.S. federal, state and municipal government securities, floating-rate notes, repurchase agreements and money market funds. Cash amounts held in these short-term investments are readily available to us. Credit card deposits...

  • Page 36
    ... primarily in the Kmart apparel, electronics, toys, footwear and sporting goods categories. Inventory levels at Sears Canada increased approximately $150 million primarily due to the change in exchange rates, lower sales and the timing of merchandise receipts. Merchandise payables were $3.1 billion...

  • Page 37
    ...in full to Sears Canada on November 12, 2010. On October 12, 2010, Sears Holdings issued $1.25 billion of 6 5⁄ 8% senior secured notes due 2018. These notes are secured by domestic inventory and credit card accounts receivable. • • All of these steps taken during 2010 extend the duration of...

  • Page 38
    ... million of our outstanding indebtedness in open market or privately negotiated transactions. The source of funds for the purchases is our cash from operations or borrowings under the Credit Agreement. Our wholly owned finance subsidiary, Sears Roebuck Acceptance Corp. ("SRAC"), has repurchased $215...

  • Page 39
    ... Rate" as defined in the indenture, plus 50 basis points. We have agreed to offer to exchange the Notes held by nonaffiliates for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended. Sears Canada Credit Agreement In September 2010, Sears Canada...

  • Page 40
    ...of our cash on an annual basis. While Sears Holdings' 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, Roebuck and Co. associates. During 2010, we contributed $277 million to...

  • Page 41
    ... risks are managed through our wholly owned insurance subsidiary. In accordance with applicable insurance regulations, the insurance subsidiary holds investment grade securities to support the insurance coverage it provides. We have transferred certain domestic real estate and intellectual property...

  • Page 42
    ... significant accounting policies. Valuation of Inventory Our inventory is valued at the lower of cost or market determined primarily using the retail inventory method ("RIM"). RIM is an averaging method that is commonly used in the retail industry. To determine inventory cost under RIM, inventory at...

  • Page 43
    ... and/or self-insurance for a number of risks including workers' compensation, asbestos and environmental, automobile, warranty, product and general liability claims. General liability costs relate primarily to litigation that arises from store operations. Self-insurance reserves include actuarial...

  • Page 44
    ... to Kmart's acquisition of Sears, Roebuck and Co. in March 2005. We allocated goodwill, which is defined as the total purchase price less the fair value of all assets and liabilities acquired, to reporting units at the acquisition date. As required by accounting standards, we perform annual goodwill...

  • Page 45
    ... discounted using a weighted-average cost of capital that reflects current market conditions. The projection uses management's best estimates of economic and market conditions over the projected period, including growth rates in sales, costs, estimates of future expected changes in operating margins...

  • Page 46
    ... to offer merchandise and services that our customers want, including our proprietary brand products; our ability to successfully implement initiatives to improve inventory management and other capabilities; competitive conditions in the retail and related services industries; worldwide economic...

  • Page 47
    ... contracts outstanding, totaling $629 million Canadian notional value and with a weighted average remaining life of 0.5 years, designed to hedge our net investment in Sears Canada against adverse changes in exchange rates. The aggregate fair value of the forward contracts at January 29, 2011 was...

  • Page 48
    ... 29, 2011, January 30, 2010 and January 31, 2009 ...Notes to Consolidated Financial Statements ...Schedule II-Valuation and Qualifying Accounts ...Management's Annual Report on Internal Control over Financial Reporting ...Report of Independent Registered Public Accounting Firm ... 49 50 51 52 53...

  • Page 49
    SEARS HOLDINGS CORPORATION Consolidated Statements of Income millions, except per share data 2010 2009 2008 REVENUES Merchandise sales and services ...COSTS AND EXPENSES Cost of sales, buying and occupancy ...Selling and administrative ...Depreciation and amortization ...Impairment charges ...Gain ...

  • Page 50
    ... payables ...Other current liabilities ...Unearned revenues ...Other taxes ...Total current liabilities ...Long-term debt and capitalized lease obligations ...Pension and postretirement benefits ...Other long-term liabilities ...Total Liabilities ...EQUITY Sears Holdings Corporation equity...

  • Page 51
    ..., primarily 90 days or less ...Debt issuance costs ...Purchase of Sears Canada shares ...Sears Canada dividends paid to minority shareholders ...Purchase of treasury stock ...Net cash used in financing activities ...Effect of exchange rate changes on cash and cash equivalents ...NET INCREASE...

  • Page 52
    ..., net of tax ...Total Comprehensive Income ...Proceeds from exercise of stock options ...Stock awards ...Purchase of Sears Canada shares . . Sears Canada dividend paid to minority shareholders ...Shares repurchased ...Associate stock purchase ...Other ...Balance at January 29, 2011 ... 132 10...

  • Page 53
    ...SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations, Consolidation and Basis of Presentation Sears Holdings Corporation ("Holdings," "we," "us," "our" or the "Company") is the parent company of Kmart Holding Corporation ("Kmart") and Sears, Roebuck and Co. ("Sears"). Holdings was formed...

  • Page 54
    ... homogenous classes of merchandise, the development of shrinkage and obsolescence reserves, the accounting for price changes and the computations inherent in the LIFO adjustment (where applicable). Management believes that the RIM provides an inventory valuation that reasonably approximates cost and...

  • Page 55
    ... with standards pertaining to accounting for costs associated with exit or disposal activities. As such, we record a liability for costs associated with location closings, which includes employee severance, inventory markdowns and other liquidation fees when management makes the decision to...

  • Page 56
    ... discounted using a weighted-average cost of capital that reflects current market conditions. The projection uses management's best estimates of economic and market conditions over the projected period, including growth rates in sales, costs, estimates of future expected changes in operating margins...

  • Page 57
    ...ceases to be a highly effective hedge, we discontinue hedge accounting. For derivatives that are designated as hedges of our net investment in Sears Canada, we assess effectiveness based on changes in spot currency exchange rates. Changes in spot rates on the derivatives are recorded in the currency...

  • Page 58
    ... to the consolidated financial statements. Self-insurance Reserves We are self-insured for certain costs related to workers' compensation, asbestos and environmental, automobile, warranty, product and general liability claims. We obtain third-party insurance coverage to limit our exposure to certain...

  • Page 59
    ... that manage and directly extend credit relative to our co-branded credit card programs. The third-party financial institutions pay us for generating new accounts and sales activity on co-branded cards, as well as for selling other financial products to cardholders. We recognize these revenues in...

  • Page 60
    ...) Pre-Opening Costs Pre-opening and start-up activity costs are expensed in the period in which they occur. Advertising Costs Advertising costs are expensed as incurred, generally the first time the advertising occurs, and amounted to $2.0 billion, $1.9 billion, and $2.1 billion for 2010, 2009, and...

  • Page 61
    ... open market transactions. We paid a total of $7 million for the additional shares and accounted for the acquisition of additional interest in Sears Canada as an equity transaction in accordance with accounting standards on noncontrolling interests. Dividends On May 18, 2010, Sears Canada announced...

  • Page 62
    ... $119 million of secured borrowings and $206 million of unsecured commercial paper. The weighted-average annual interest rate paid on short-term debt was 3.7% in 2010 and 3.0% in 2009. Long-term debt is as follows: ISSUE millions January 29, 2011 January 30, 2010 SEARS ROEBUCK ACCEPTANCE CORP. 6.50...

  • Page 63
    ...Finance Committee of the Board of Directors authorized the repurchase, subject to market conditions and other factors, of up to $500 million of our outstanding indebtedness in open market or privately negotiated transactions. Our wholly owned finance subsidiary, Sears Roebuck Acceptance Corp. ("SRAC...

  • Page 64
    ..., is an asset based revolving credit facility under which Sears Roebuck Acceptance Corp. ("SRAC") and Kmart Corporation are the borrowers. The Domestic Credit Agreement is secured by a first lien on most of our domestic inventory and credit card and pharmacy receivables, and determines availability...

  • Page 65
    ... for Sears Canada's general corporate purposes and is secured by a first lien on substantially all of Sears Canada's non-real estate assets. Availability under the Sears Canada Facility is determined pursuant to a borrowing base formula based on inventory and account and credit card receivables...

  • Page 66
    ... 1, we sell extended service contracts to our customers. The associated risks are managed through our wholly owned insurance subsidiary. In accordance with applicable insurance regulations, the insurance subsidiary holds investment grade securities to support the insurance coverage it provides. We...

  • Page 67
    ... of January 30, 2010. We had no such foreign currency forward contracts outstanding as of January 31, 2009. Counterparty Credit Risk We actively manage the risk of nonpayment by our derivative counterparties by limiting our exposure to individual counterparties based on credit ratings, value at risk...

  • Page 68
    ... market, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities, credit...

  • Page 69
    ... inputs including interest rates, prices and indices to generate pricing and volatility factors. The predominance of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. Our derivative instruments...

  • Page 70
    ... dividend received on our cost method investment in Sears Mexico for 2010, 2009 and 2008, respectively. NOTE 7-BENEFIT PLANS We sponsor a number of pension and postretirement benefit plans. Expenses for retirement and savingsrelated benefit plans were as follows: millions 2010 2009 2008 Retirement...

  • Page 71
    ...January 30, 2010. Pension Plans SHC Domestic 2010 Sears Canada SHC Domestic 2009 Sears Canada millions Total Total Change in projected benefit obligation Beginning balance ...Benefits earned during the period ...Interest cost ...Actuarial loss ...Benefits paid ...Foreign currency exchange impact...

  • Page 72
    ...pay during fiscal 2011. Weighted-average assumptions used to determine plan obligations are as follows: 2010 SHC Sears Domestic Canada 2009 SHC Sears Domestic Canada 2008 SHC Sears Domestic Canada Pension benefits: Discount Rate ...Rate of compensation increases ...Postretirement benefits: Discount...

  • Page 73
    ...net cost for years ended are as follows: 2010 SHC Sears Domestic Canada 2009 SHC Sears Domestic Canada 2008 SHC Sears Domestic Canada Pension benefits: Discount Rate ...Return of plan assets ...Rate of compensation increases ...Postretirement benefits: Discount Rate ...Return of plan assets ...Rate...

  • Page 74
    ... plan assets as the market related value. For 2011 and beyond, the domestic weighted-average health care cost trend rates used in measuring the postretirement benefit expense are a 9.5% trend rate in 2011 to an ultimate trend rate of 7.5% in 2015. A one-percentage-point change in the assumed health...

  • Page 75
    ... 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...

  • Page 76
    ... Corporation senior secured notes ...U.S. government and agencies ...Mortgage backed and asset backed ...Municipal and foreign government ...Ventures and partnerships ...Total investment assets at fair value ...Cash ...Accounts receivable ...Accounts payable ...Net assets available for plan benefits...

  • Page 77
    ... ...Accounts receivable ...Accounts payable ...Net assets available for plan benefits ... $ 16 185 305 372 1 69 286 - $ 16 185 192 50 - - 250 - $- - - 320 1 - 36 - $357 $- - 113 2 - 69 - - $184 $1,234 $693 116 25 11 (8) $1,378 Sears Canada Investment Assets at Fair Value at January 30, 2010...

  • Page 78
    ... $(315) $- (68) 68 $- Net Transfers Into/(Out of) Level 3 $113 2 69 $184 January 30, 2010 Balance Sears Canada Sales and Settlements Fixed income securities Pooled equity funds ...Corporate bonds and notes ...Mortgage backed and asset backed ...Total Level 3 investments ... $409 62 4 $475 $ 38...

  • Page 79
    ... in total compensation cost related to nonvested awards, which is expected to be recognized over approximately the next 3 years. We do not currently have an employee stock option plan and at January 29, 2011, there are no outstanding options. Changes in employee stock options for 2009 and 2008...

  • Page 80
    ... remains employed by us at the vesting date. The fair value of these awards is equal to the market price of our common stock on the date of grant. We do not currently have a program that provides for restricted stock awards on an annual basis. Changes in restricted stock awards for 2010, 2009, and...

  • Page 81
    ...January 30, 2010 and January 31, 2009 was $(4) million, $(132) million and $(98) million, respectively. NOTE 10-BANKRUPTCY CLAIMS RESOLUTION AND SETTLEMENTS Background On May 6, 2003, Kmart Corporation (the "Predecessor Company"), a predecessor operating company of Kmart, emerged from reorganization...

  • Page 82
    ...143 $ 123 2009 161 (60) (11) (5) (76) $ 85 $ 36 2010 2008 Effective tax rate reconciliation Federal income tax rate ...State and local taxes net of federal tax benefit ...Tax credits ...Resolution of income tax matters ...Canadian repatriation cost on Sears Canada dividend received ...Canadian...

  • Page 83
    ... carryforwards ...Postretirement benefit plans ...Pension ...Deferred revenue ...Credit carryforwards ...Other ...Total deferred tax assets ...Valuation allowance ...Net deferred tax assets ...Deferred tax liabilities: Trade names/Intangibles ...Property and equipment ...Inventory ...Other ...Total...

  • Page 84
    ... as appropriate. We are generally not able to reliably estimate the ultimate settlement amounts until the close of the audit. While we do not expect material changes, it is possible that the amount of unrecognized benefit with respect to our uncertain tax positions will significantly increase or...

  • Page 85
    ... full-line store. In August 2007, Sears Canada sold its headquarters office building and adjacent land in Toronto, Ontario for proceeds of $81 million Canadian, net of closing costs. Sears Canada leased back the property under a leaseback agreement through March 2009, at which time it finished...

  • Page 86
    ... million at Kmart, respectively, which included $6 million, $27 million and $15 million recorded in cost of sales for inventory clearance markdowns and $7 million, $35 million and $12 million recorded in selling and administrative expenses for store closing and severance costs. For 2009, we recorded...

  • Page 87
    ...HOLDINGS CORPORATION Notes to Consolidated Financial Statements-(Continued) and $21 million recorded in cost of sales for inventory clearance markdowns, $7 million and $39 million and $29 million recorded in selling and administrative expenses for store closing and severance costs. For 2010 and 2009...

  • Page 88
    ... as a director, officer or employee of the Company, (b) control investments in companies in the mass merchandising, retailing, commercial appliance distribution, product protection agreements, residential and commercial product installation and repair services and automotive repair and maintenance...

  • Page 89
    ... President of the Company, serves as Executive Vice President and General Counsel of ESL and our Senior Vice President of Real Estate is employed by ESL. In addition, Mr. Crowley served as President and Chief Operating Officer of ESL while serving as a director and officer of Sears Holdings. NOTE 17...

  • Page 90
    ...revenues from the sale of merchandise and related services to customers, primarily in the United States and Canada. 2010 Sears Sears Domestic Canada Sears Holdings millions Kmart Merchandise sales and services ...Costs and expenses Cost of sales, buying and occupancy ...Selling and administrative...

  • Page 91
    ... of the Merger on November 17, 2004, a lawsuit was filed in the United States District Court for the Northern District of Illinois relating to the transaction. This suit asserts claims under the federal securities laws on behalf of a class of former Sears' stockholders against Sears, Alan J. Lacy...

  • Page 92
    ...to Holdings' shareholders ...0.14 (0.35) (1.98) 3.43 2009 millions, except per share data First Quarter Second Quarter Third Quarter Fourth Quarter(2) Total revenues ...$10,055 $10,551 $10,190 $13,247 Cost of sales, buying and occupancy ...7,182 7,756 7,419 9,467 Selling and administrative ...2,573...

  • Page 93
    ... and unconditional. Additionally, the notes are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables of the guarantor subsidiaries, and consequently may not be available to satisfy the claims of the Company's general creditors. 93

  • Page 94
    ... ...Merchandise payables ...Intercompany payables ...Other current liabilities ...Total current liabilities ...Long-term debt and capitalized lease obligations ...Pension and postretirement benefits ...Other long-term liabilities ...Total Liabilities ...EQUITY Shareholder's equity ...Noncontrolling...

  • Page 95
    ... ...Merchandise payables ...Intercompany payables ...Other current liabilities ...Total current liabilities ...Long-term debt and capitalized lease obligations ...Pension and postretirement benefits ...Other long-term liabilities ...Total Liabilities ...EQUITY Shareholder's equity ...Noncontrolling...

  • Page 96
    SEARS HOLDINGS CORPORATION Notes to Consolidated Financial Statements-(Continued) Condensed ...Merchandise sales and services ...Cost of sales, buying and occupancy ...Selling and administrative ...Depreciation and amortization ...Gain on sales of assets ...Total costs and expenses ...Operating income ...

  • Page 97
    ... Parent Eliminations Consolidated Merchandise sales and services ...Cost of sales, buying and occupancy ...Selling and administrative ...Depreciation and amortization ...Impairment charges ...Gain on sales of assets ...Total costs and expenses ...Operating income (loss) ...Interest expense...

  • Page 98
    ... 90 days or less ...Debt issuance costs ...Purchase of Sears Canada shares ...Sears Canada dividends paid to minority shareholders ...Purchase of treasury stock ...Net borrowing with Affiliates ...Net cash provided by (used in) financing activities ...Effect of exchange rate changes on cash and cash...

  • Page 99
    ...operating activities ...Proceeds from sales of property and investments ...Net decrease in investments and restricted cash ...Purchases of property and equipment ...Net investing with Affiliates ...Net cash provided by (used in) investing activities ...Stock issued under executive compensation plans...

  • Page 100
    ... provided by (used in) operating activities ...Acquisitions of businesses, net of cash acquired ...Proceeds from sales of property and investments ...Net increase in investments and restricted cash ...Purchases of property and equipment . . Net investing with Affiliates ...Net cash provided by (used...

  • Page 101
    Sears Holdings Corporation Schedule II-Valuation and Qualifying Accounts Years 2010, 2009 and 2008 Balance at beginning of period Additions charged to costs and expenses millions (Deductions) Balance at end of period Allowance for Doubtful Accounts(1): 2010 ...2009 ...2008 ...Allowance for ...

  • Page 102
    ... maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Company's principal executive and principal financial officers and effected by the Company's board of directors, management and other...

  • Page 103
    ... opinions. A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other...

  • Page 104
    ... financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting at January 29, 2011, based on the criteria established in...

  • Page 105
    ... this reference. Item 9B. Other Information On April 6, 2010, W. Bruce Johnson, Executive Vice President - Off-Mall Businesses and Supply Chain of the Company, received an award of 40,000 shares of restricted stock under the Company's 2006 Stock Plan, which award is scheduled to vest on a graduated...

  • Page 106
    ....com. Any amendment to, or waiver from, a provision of the codes of conduct will be posted to the above-referenced website. There were no changes to the process by which stockholders may recommend nominees to the Board of Directors during the last year. Item 11. Executive Compensation Information...

  • Page 107
    ... contained in Regulation S-X because the information called for is contained in the financial statements and notes thereto. 3. Exhibits An "Exhibit Index" has been filed as part of this Report beginning on Page E-1 and is incorporated herein by this reference. Certain of the agreements incorporated...

  • Page 108
    ... duly authorized. SEARS HOLDINGS CORPORATION By: Name: Title: /s/ WILLIAM K. PHELAN William K. Phelan Senior Vice President, Controller and Chief Accounting Officer Date: March 11, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 109
    ... on behalf of the Sears Holdings Pension Plan and Sears Holdings Pension Trust (incorporated by reference to Exhibit 4.5 to Registrant's Current Report on Form 8-K, dated October 12, 2010, filed on October 15, 2010 (File No. 000-51217)). Guarantee executed by Sears, Roebuck and Co. under the...

  • Page 110
    10.4 Amended and Restated Credit Agreement, dated as of May 21, 2009, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp., Kmart Corporation, the lenders party thereto, Bank of America, N.A., as Administrative Agent, Co-Collateral Agent and Swingline Lender, Wells Fargo Retail Finance,...

  • Page 111
    ...Sears Holdings Corporation Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.14 to Registrant's Annual Report on Form 10-K for the fiscal year ended January 30, 2010 (the "2009 10-K"))** Sears Holdings Corporation 2007 Executive Long-Term Incentive Program...to employment dated ...

  • Page 112
    ... to employment dated November 3, 2009.** Computation of ratio of earnings to fixed charges for Registrant and consolidated subsidiaries. Subsidiaries of Registrant. Consent of Deloitte & Touche LLP. Powers of Attorney of certain officers and directors of Registrant. Certification of Chief Executive...