Sears 2013 Annual Report Download - page 5

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applicable to noncontrolling interests. Accordingly, we reclassified a portion of our ownership interest in Sears
Canada and accumulated other comprehensive loss to noncontrolling interest in the Consolidated Statement of
Equity at February 2, 2013.
At February 1, 2014, February 2, 2013 and January 28, 2012, Holdings was the beneficial holder of
approximately 52 million, or 51%, 52 million, or 51%, and 97 million, or 95%, respectively, of the common shares
of Sears Canada.
Spin-Off of Orchard Supply Hardware Stores Corporation
On December 30, 2011, we completed the spin-off to our shareholders of all the capital stock of Orchard
Supply Hardware Stores Corporation ("Orchard") that was owned by Holdings immediately prior to the spin-off,
consisting of common stock that represented approximately 80% of the voting power of Orchard's outstanding
capital stock and preferred stock that represented 100% of Orchard's outstanding nonvoting capital stock. In
connection with the spin-off, Holdings and certain of its subsidiaries entered into various agreements with Orchard,
including a distribution agreement, a transition services agreement, an appliance sale and consignment agreement
and brand license agreements. In addition, certain tax matters between Holdings and Orchard are governed by a tax
sharing agreement entered into in 2005.
Real Estate Transactions
In the normal course of business, we consider opportunities to purchase leased operating properties, as well as
offers to sell owned, or assign leased, operating and non-operating properties. These transactions may, individually
or in the aggregate, result in material proceeds or outlays of cash. In addition, we review leases that will expire in
the short term in order to determine the appropriate action to take with respect to them.
Further information concerning our real estate transactions is contained in Note 11 of Notes to Consolidated
Financial Statements.
Trademarks and Trade Names
The KMART® and SEARS® trade names, service marks and trademarks, used by us both in the United States
and internationally, are material to our retail and other related businesses.
We sell proprietary branded merchandise under a number of brand names that are important to our operations.
Our KENMORE®, CRAFTSMAN®, DIEHARD® and LANDS' END® brands are among the most recognized
proprietary brands in retailing. These marks are the subject of numerous United States and foreign trademark
registrations. Other well recognized Company trademarks and service marks include CANYON RIVER BLUES®,
COVINGTON®, SHOP YOUR WAYSM, SMART SENSE®, STRUCTURE®, THOM MCAN® and TOUGHSKINS®,
which also are registered or are the subject of pending registration applications in the United States. Generally, our
rights in our trade names and marks continue so long as we use them.
Seasonality
The retail business is seasonal in nature, and we generate a high proportion of our revenues, operating income
and operating cash flows during the fourth quarter of our year, which includes the holiday season. As a result, our
overall profitability is heavily impacted by our fourth quarter operating results. Additionally, in preparation for the
fourth quarter holiday season, we significantly increase our merchandise inventory levels, which are financed from
operating cash flows, credit terms received from vendors and borrowings under our domestic credit agreement
(described in the “Uses and Sources of Liquidity” section below). Fourth quarter reported revenues accounted for
approximately 30% of total reported revenues in each of the years 2013, 2012 and 2011. See Note 19 of Notes to
Consolidated Financial Statements for further information on revenues earned by quarter in 2013 and 2012.
Competition
Our business is subject to highly competitive conditions. We compete with a wide variety of retailers,
including other department stores, discounters, home improvement stores, consumer electronics dealers, auto service