|
ý
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
FOR THE 52 WEEKS ENDED JANUARY 30, 2016
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
D
ELAWARE
|
|
80-0808358
|
(State or Other Jurisdiction of Incorporation or Organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
5500 TRILLIUM BOULEVARD, SUITE 501 HOFFMAN ESTATES, ILLINOIS
|
|
60192
|
(Address of Principal Executive Offices)
|
|
(Zip Code)
|
Title of Each Class
|
|
Name of Exchange on Which Registered
|
Common Stock, par value $0.01 per share
|
|
The NASDAQ Stock Market
|
Large accelerated filer
|
|
¨
|
|
Accelerated filer
|
|
ý
|
|
|
|
|
|||
Non-accelerated filer
(Do not check if a smaller reporting company)
|
|
¨
|
|
Smaller reporting company
|
|
¨
|
|
|
|
|
|
|
Page
|
|
|
|
PART I
|
|
|
|
|
|
Item 1.
|
Busines
s
|
|
|
|
|
Item 1A.
|
||
|
|
|
Item 1B.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
|
||
|
|
|
PART II
|
|
|
|
|
|
Item 5.
|
||
|
|
|
Item 6.
|
||
|
|
|
Item 7.
|
||
|
|
|
Item 7A.
|
||
|
|
|
Item 8.
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
Item 9.
|
||
|
|
|
Item 9A.
|
||
|
|
|
|
|
|
PART III
|
|
|
|
|
Item 10.
|
||
|
|
|
Item 11.
|
||
|
|
|
Item 12.
|
||
|
|
|
Item 13.
|
||
|
|
|
Item 14.
|
||
|
|
|
PART IV
|
|
|
|
|
|
Item 15.
|
•
|
Hometown Stores
. Our Hometown Stores offer products and services across a wide selection of merchandise categories, including home appliances, lawn and garden equipment, tools, sporting goods, and household goods, with the majority of business driven by big-ticket home appliance and lawn and garden sales. Most of our Hometown Stores carry Sears-branded products, including products branded with the KENMORE
®
, CRAFTSMAN
®
, and DIEHARD
®
marks (which marks are owned by subsidiaries of Sears Holdings and are collectively referred to as the "KCD Marks"), and an assortment of other national brands. Primarily independently operated, predominantly located in smaller communities and averaging approximately 8,500 square feet, Hometown Stores are designed to serve trade areas that may not support a full-service big-box retailer. As of January 30, 2016, there were 855 Hometown Stores in all 50 states, Puerto Rico and Bermuda. Independent dealers operated 848 of these stores and we operated seven stores.
|
•
|
Hardware Stores
. Our Hardware Stores offer products and services across a wide selection of merchandise categories with sales primarily driven by home appliances, lawn and garden equipment, tools, and other home improvement products. In addition, these stores offer certain proprietary in-store services, such as blade sharpening, key cutting, and screen repair, as well as products typically found in local hardware stores, such as fasteners, electrical supplies, and plumbing supplies. Our Hardware Stores have operated as two formats: "traditional" and "neighborhood", with size being the differentiating factor between the two formats. Our "traditional" Hardware Stores average nearly 28,000 square feet in size. Our "neighborhood" Hardware Stores are much smaller in size, averaging 16,000 to 18,000 square feet, and yet, through our multichannel capability, continue to offer the same breadth and depth of inventory as our "traditional" Hardware Stores. Our Hardware Stores, regardless of size, are primarily located in suburban trade areas and are positioned as local stores designed to appeal to convenience-oriented customers. These stores carry Craftsman brand tools and lawn and garden equipment, DieHard brand batteries, and a wide assortment of other national brands and other home improvement products. As of January 30, 2016, there were 57 Hardware Stores in 14 states, 56 of which also carry a selection of Kenmore and other national brands of home appliances. Franchisees operated 30 of these stores and we operated the remaining 27 stores.
|
•
|
Home Appliance Showrooms
. Our Home Appliance Showrooms offer home appliances and related services in stores primarily located in strip malls and lifestyle centers of metropolitan areas. Averaging 5,000 square feet with a simple, primarily appliance-showroom design, our Home Appliance Showrooms offer quality-focused customers a unique store shopping experience. Home Appliance Showroom sales are primarily driven by big-ticket cooking, laundry, and refrigeration home appliances as well as, in certain stores, mattresses. These stores carry Kenmore and other national brands of home appliances. As of January 30, 2016, there were 89 Home Appliance Showrooms in 26 states. Franchisees operated 46 of these stores, we operated 43 stores.
|
•
|
Inventory procurement from third-party vendors, including KCD Products and other products which collectively account for a majority of our revenue;
|
•
|
Logistical, supply chain and inventory support services;
|
•
|
Accounting and financial reporting services;
|
•
|
Risk management, tax, and insurance services;
|
•
|
Online, computer and information technology infrastructure (including the point-of-sale system used by the Company and our dealers and franchisees) and support;
|
•
|
Payroll and certain employee-related services;
|
•
|
Our websites are hosted and maintained by a subsidiary of Sears Holdings and purchases made on our websites are processed by a subsidiary of Sears Holdings;
|
•
|
Certain of our store leases and the leases for stores that we have subleased, or in the future may sublease, to franchisees or others are leased or subleased to us by subsidiaries of Sears Holdings until their expiration at which time we will be required to renegotiate with the landlords directly;
|
•
|
Our stores continue to use the Sears brand name, and other intellectual property owned by Sears Holdings through our license agreements with Sears Holdings;
|
•
|
Our stores continue to participate in the SYW program and rely on the customer data and other information provided by the SYW program; and
|
•
|
Our stores continue to accept Sears-branded credit cards.
|
•
|
our ability in accordance with the Merchandising Agreement to buy KCD Products from Sears Holdings at rates for Sears Holdings-supplied consumer warranties that result from negotiations required by the terms of the Merchandising Agreement;
|
•
|
the extent to which we and Sears Holdings are sharing with each other vendor subsidies in accordance with the Merchandising Agreement;
|
•
|
whether Sears Holdings owes SHO reimbursement for repair over-billings and mis-billings at our ORDCs;
|
•
|
Sears Holdings' refusal to process some "SHO-unique" vendors and products;
|
•
|
Sears Holdings' refusal to promptly perform IT development and enhancement projects requested by SHO in accordance with the Services Agreement;
|
•
|
Sears Holdings' refusal to permit searsoutlet.com to sell new in-box products sourced from SHO's Hometown Stores in accordance with the Merchandising Agreement;
|
•
|
Sears Holdings' unwillingness to enable us to pay directly Sears Holdings' vendors for merchandise that Sears Holdings purchases for us;
|
•
|
Our ability, and the ability of our dealers and franchisees, to make bulk sales of our merchandise;
|
•
|
Sears Holdings' refusal to sell to us all of Sears Holdings' distressed, refurbished, and marked-out-of-stock merchandise in accordance with the Merchandising Agreement;
|
•
|
Sears Holdings' refusal to enable web-to-store and store-to-home transaction capability at all of our locations in accordance with the Services Agreement;
|
•
|
our ability to use our employees to perform all repairs at our ORDCs; and
|
•
|
availability and allocation of merchandise and subsidies from Sears Holdings and from third-party suppliers;
|
•
|
business opportunities that may be attractive to both Sears Holdings and us;
|
•
|
the nature, quality and pricing of services Sears Holdings has agreed to provide to us;
|
•
|
labor, tax, employee benefit, real estate (including sublease obligations) and other matters arising from the Separation;
|
•
|
defense and indemnification arising from losses caused by Sears Holdings;
|
•
|
major business combinations involving us;
|
•
|
employee retention and recruiting;
|
•
|
SHO's intellectual property rights;
|
•
|
the extent of SHO's rights to conduct multi-channel retailing;
|
•
|
competition between our stores and websites and Sears Holdings’ stores and websites; and
|
•
|
the general willingness of SHC to negotiate with us as required by the Merchandising Agreement and the Services Agreement, including with respect to fees payable in accordance with the Services Agreement that must be negotiated for the term of the Services Agreement.
|
•
|
Expansion into the suburban and rural trade areas in which many of our stores operate;
|
•
|
Lower pricing;
|
•
|
Expanding the offering of free delivery and installation of merchandise and other consumer benefits;
|
•
|
Expanding online sales;
|
•
|
Extension of credit to customers on terms more favorable than we offer; and
|
•
|
Larger store size, which may result in greater operational efficiencies, or innovative store formats, and use of disruptive technology.
|
•
|
Actions by our competitors, including opening of new stores in our existing trade areas or changes to the way these competitors conduct business online;
|
•
|
The availability on commercially reasonable terms of the various types of inventory that we need to sell for the profitable operation of our stores;
|
•
|
Changes in our merchandise strategy and mix;
|
•
|
Real estate and maintenance costs for our existing stores (including disagreements between SHO and Sears Holdings regarding their respective responsibilities for these costs);
|
•
|
Changes in population and other demographics;
|
•
|
Timing and effectiveness of our promotional events;
|
•
|
Weather conditions, including level of rainfall, particularly drought, level of snowfall, average temperature, major storms, and delays in, or advances to, the start of seasonal changes; and
|
•
|
The availability of locations for new stores that can be operated profitability by the Company and by our dealers and franchisees.
|
•
|
The growth of online shopping in which we may not be able to fully participate (see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Online" in this Annual Report on Form 10-K
|
•
|
our ability to satisfy obligations to lenders may be impaired, resulting in possible defaults on and acceleration of our indebtedness;
|
•
|
our ability to obtain additional financing for refinancing of existing indebtedness, working capital, capital expenditures, product and service development, acquisitions, general corporate purposes and other purposes may be impaired;
|
•
|
a substantial portion of our cash flow from operations could be dedicated to the payment of the principal and interest on our debt;
|
•
|
we may be increasingly vulnerable to economic downturns and increases in interest rates;
|
•
|
our flexibility in planning for and reacting to changes in our business and the retail industry may be limited; and
|
•
|
we may be placed at a competitive disadvantage relative to other companies in our industry.
|
•
|
Our business profile and market capitalization may not continue to fit the investment objectives of some stockholders and, as a result, these stockholders may sell our shares;
|
•
|
Actual or anticipated fluctuations in our operating results due to factors related to our business;
|
•
|
Our ability to decrease our reliance on products and services provided by Sears Holdings and ability to diversify our supply chain;
|
•
|
Success or failure of our business strategy;
|
•
|
Sears Holdings' financial performance, condition, and prospects;
|
•
|
Our relationship with Sears Holdings;
|
•
|
Actual or anticipated changes in the U.S. economy or the retailing environment;
|
•
|
Our quarterly or annual earnings, or those of other companies in our industry;
|
•
|
Our ability to obtain third-party financing as needed;
|
•
|
Announcements by us or our competitors of significant acquisitions or dispositions;
|
•
|
The failure of securities analysts to cover our common stock;
|
•
|
Changes in earnings estimates by securities analysts or our ability to meet those estimates;
|
•
|
The operating and stock price performance of other comparable companies;
|
•
|
Overall market fluctuations;
|
•
|
Changes in laws and regulations affecting our business;
|
•
|
Actual or anticipated sales or distributions of our capital stock by our officers, directors or significant stockholders;
|
•
|
Terrorist acts or wars; and
|
•
|
General economic conditions and other external factors.
|
Store Openings & Closures
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||
|
|
Fiscal Year
|
|
|||||||
|
|
2013
|
|
2014
|
|
2015
|
|
|||
Beginning Store Count
|
|
1,245
|
|
|
1,260
|
|
|
1,260
|
|
|
Store Openings
|
|
68
|
|
|
45
|
|
|
37
|
|
|
Store Closures
|
|
(53
|
)
|
|
(45
|
)
|
|
(137
|
)
|
|
Ending Store Count
|
|
1,260
|
|
|
1,260
|
|
|
1,160
|
|
|
|
|
Hometown
|
|
Outlet
|
||||||
|
|
Company Operated
|
Dealer/Franchise
|
|
Company Operated
|
Franchise
|
||||
BM
|
Bermuda
|
—
|
|
1
|
|
|
—
|
|
—
|
|
AK
|
Alaska
|
—
|
|
1
|
|
|
—
|
|
—
|
|
AL
|
Alabama
|
—
|
|
31
|
|
|
1
|
|
—
|
|
AR
|
Arkansas
|
—
|
|
33
|
|
|
—
|
|
—
|
|
AZ
|
Arizona
|
—
|
|
16
|
|
|
—
|
|
5
|
|
CA
|
California
|
1
|
|
41
|
|
|
13
|
|
7
|
|
CO
|
Colorado
|
3
|
|
18
|
|
|
5
|
|
—
|
|
CT
|
Connecticut
|
—
|
|
4
|
|
|
2
|
|
—
|
|
DE
|
Delaware
|
1
|
|
4
|
|
|
1
|
|
—
|
|
FL
|
Florida
|
6
|
|
21
|
|
|
14
|
|
—
|
|
GA
|
Georgia
|
1
|
|
32
|
|
|
4
|
|
—
|
|
HI
|
Hawaii
|
—
|
|
1
|
|
|
1
|
|
—
|
|
IA
|
Iowa
|
—
|
|
18
|
|
|
—
|
|
—
|
|
ID
|
Idaho
|
—
|
|
7
|
|
|
—
|
|
1
|
|
IL
|
Illinois
|
11
|
|
27
|
|
|
10
|
|
1
|
|
IN
|
Indiana
|
4
|
|
32
|
|
|
2
|
|
—
|
|
KS
|
Kansas
|
—
|
|
25
|
|
|
1
|
|
1
|
|
KY
|
Kentucky
|
1
|
|
22
|
|
|
1
|
|
—
|
|
LA
|
Louisiana
|
—
|
|
21
|
|
|
2
|
|
—
|
|
MA
|
Massachusetts
|
2
|
|
6
|
|
|
3
|
|
—
|
|
MD
|
Maryland
|
2
|
|
5
|
|
|
3
|
|
—
|
|
ME
|
Maine
|
—
|
|
10
|
|
|
—
|
|
—
|
|
MI
|
Michigan
|
—
|
|
37
|
|
|
4
|
|
1
|
|
MN
|
Minnesota
|
—
|
|
25
|
|
|
2
|
|
—
|
|
MO
|
Missouri
|
1
|
|
36
|
|
|
—
|
|
3
|
|
MS
|
Mississippi
|
—
|
|
24
|
|
|
—
|
|
—
|
|
MT
|
Montana
|
—
|
|
11
|
|
|
—
|
|
—
|
|
NC
|
North Carolina
|
1
|
|
31
|
|
|
2
|
|
3
|
|
ND
|
North Dakota
|
—
|
|
5
|
|
|
—
|
|
—
|
|
NE
|
Nebraska
|
—
|
|
10
|
|
|
—
|
|
—
|
|
NH
|
New Hampshire
|
1
|
|
8
|
|
|
—
|
|
—
|
|
NJ
|
New Jersey
|
11
|
|
3
|
|
|
6
|
|
—
|
|
NM
|
New Mexico
|
—
|
|
8
|
|
|
1
|
|
—
|
|
NV
|
Nevada
|
—
|
|
6
|
|
|
3
|
|
—
|
|
NY
|
New York
|
3
|
|
20
|
|
|
5
|
|
—
|
|
OH
|
Ohio
|
6
|
|
27
|
|
|
8
|
|
—
|
|
OK
|
Oklahoma
|
1
|
|
25
|
|
|
—
|
|
—
|
|
OR
|
Oregon
|
1
|
|
24
|
|
|
—
|
|
2
|
|
PA
|
Pennsylvania
|
10
|
|
14
|
|
|
7
|
|
—
|
|
PR
|
Puerto Rico
|
—
|
|
9
|
|
|
1
|
|
—
|
|
RI
|
Rhode Island
|
—
|
|
3
|
|
|
—
|
|
—
|
|
SC
|
South Carolina
|
—
|
|
15
|
|
|
1
|
|
1
|
|
SD
|
South Dakota
|
—
|
|
5
|
|
|
—
|
|
—
|
|
TN
|
Tennessee
|
—
|
|
17
|
|
|
4
|
|
—
|
|
TX
|
Texas
|
4
|
|
91
|
|
|
4
|
|
12
|
|
UT
|
Utah
|
2
|
|
7
|
|
|
—
|
|
—
|
|
VA
|
Virginia
|
—
|
|
14
|
|
|
5
|
|
—
|
|
VT
|
Vermont
|
—
|
|
8
|
|
|
—
|
|
—
|
|
WA
|
Washington
|
1
|
|
21
|
|
|
1
|
|
2
|
|
WI
|
West Virginia
|
3
|
|
28
|
|
|
3
|
|
—
|
|
WV
|
Wisconsin
|
—
|
|
9
|
|
|
—
|
|
—
|
|
WY
|
Wyoming
|
—
|
|
7
|
|
|
—
|
|
—
|
|
Total
|
77
|
|
924
|
|
|
120
|
|
39
|
|
|
Hometown
|
|
Outlet
|
Company operated stores owned
|
—
|
|
3
|
Leased
|
77
|
|
117
|
Total company operated
|
77
|
|
120
|
|
|
|
|
Independently owned and operated
|
924
|
|
39
|
|
|
|
|
Total store count as of January 31, 2015
|
1,001
|
|
159
|
Name
|
|
Age
|
|
|
Position
|
||
William A. Powell
|
|
|
45
|
|
|
|
Chief Executive Officer, President and Director
|
Michael A. Gray
|
|
|
44
|
|
|
|
Senior Vice President, Store Operations
|
Ryan D. Robinson
|
|
|
50
|
|
|
|
Senior Vice President and Chief Financial Officer
|
David J. Buckley
|
|
|
48
|
|
|
|
Chief Marketing Officer and Vice President, eCommerce
|
Philip M. Etter
|
|
|
51
|
|
|
|
Vice President, Human Resources
|
Charles J. Hansen
|
|
|
68
|
|
|
|
Vice President, General Counsel, and Secretary
|
Michael P. McCarthy
|
|
|
54
|
|
|
|
Vice President, Merchandising and Inventory
|
2015
|
|
High
|
|
Low
|
||||
First Quarter
|
|
$
|
13.93
|
|
|
$
|
6.80
|
|
Second Quarter
|
|
9.92
|
|
|
6.65
|
|
||
Third Quarter
|
|
8.95
|
|
|
6.50
|
|
||
Fourth Quarter
|
|
9.60
|
|
|
6.78
|
|
||
|
|
|
|
|
||||
2014
|
|
High
|
|
Low
|
||||
First Quarter
|
|
$
|
26.31
|
|
|
$
|
19.75
|
|
Second Quarter
|
|
23.97
|
|
|
18.75
|
|
||
Third Quarter
|
|
19.80
|
|
|
14.03
|
|
||
Fourth Quarter
|
|
15.50
|
|
|
10.02
|
|
|
|
2/1/13
|
|
1/31/14
|
|
1/30/15
|
|
1/29/16
|
||||||||
SHOS
|
|
$
|
131.65
|
|
|
$
|
68.42
|
|
|
$
|
36.99
|
|
|
$
|
22.69
|
|
S&P 500 INDEX
|
|
$
|
105.92
|
|
|
$
|
124.78
|
|
|
$
|
139.65
|
|
|
$
|
135.82
|
|
S&P 500 RETAILING INDEX
|
|
$
|
108.67
|
|
|
$
|
134.64
|
|
|
$
|
159.88
|
|
|
$
|
184.76
|
|
•
|
The Pre-Separation Financial Information reflects the results of operations, financial positions, and cash flows of Sears Hometown and Hardware and Sears Outlet prior to their consolidation into SHO, which may not reflect the results of operations, financial positions, and cash flows of SHO had it been a single combined business entity pre-Separation;
|
•
|
The Pre-Separation Financial Information does not reflect changes resulting from the Separation and the integration of the Sears Hometown and Hardware and the Sears Outlet businesses into a single combined business entity, including changes in the cost structure, personnel needs, financing, and operation of the businesses; and
|
•
|
The Pre-Separation Financial Information reflects assumptions made, and allocations for services and expenses historically provided to the Sears Hometown and Hardware and the Sears Outlet businesses, by Sears Holdings. Those assumptions and allocations may not reflect the costs and expenses we would have incurred as a single combined business entity.
|
(1)
|
Our fiscal year end is the Saturday closest to January 31 each year. Fiscal year 2012 was a 53-week year and fiscal years 2015, 2014, 2013, and 2011 were 52-week years.
|
(2)
|
23,100,000 shares outstanding effective upon completion of the Separation are used for all periods prior to the Separation.
|
(3)
|
Adjusted EBITDA
—In addition to our net income (loss) determined in accordance with GAAP, for purposes of evaluating operating performance, we use Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization, or "Adjusted EBITDA," which is adjusted to exclude certain significant items as set forth below. Our management uses Adjusted EBITDA, among other metrics, to evaluate the operating performance of our business for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items, and may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA should not be considered as a substitute for GAAP measurements.
|
•
|
EBITDA excludes the effects of financing and investing activities by eliminating the effects of interest and depreciation costs; and
|
•
|
Other significant items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, which affects comparability of results. These items may also include cash charges such as Severance and executive transition costs and IT transformation investments that make it difficult for investors to assess the Company's core operating performance.
|
|
|
Fiscal
|
||||||||||
thousands
|
|
2015
|
|
2014
|
|
2013
|
||||||
Net income (loss)
|
|
$
|
(27,261
|
)
|
|
$
|
(168,805
|
)
|
|
$
|
35,550
|
|
Income tax (benefit) expense
|
|
(15,152
|
)
|
|
(3,066
|
)
|
|
24,333
|
|
|||
Other income
|
|
(2,585
|
)
|
|
(3,149
|
)
|
|
(1,854
|
)
|
|||
Interest expense
|
|
2,826
|
|
|
3,861
|
|
|
3,046
|
|
|||
Operating income (loss)
|
|
(42,172
|
)
|
|
(171,159
|
)
|
|
61,075
|
|
|||
Depreciation
|
|
14,546
|
|
|
10,172
|
|
|
12,006
|
|
|||
(Gain) loss on the sale of assets
|
|
—
|
|
|
(113
|
)
|
|
(1,567
|
)
|
|||
Impairment of goodwill
|
|
—
|
|
|
167,000
|
|
|
—
|
|
|||
Severance and executive transition costs
|
|
1,066
|
|
|
—
|
|
|
—
|
|
|||
Initial franchise revenues net of provision for losses
|
|
25,086
|
|
|
(3,853
|
)
|
|
(25,607
|
)
|
|||
IT transformation investments
|
|
10,860
|
|
|
—
|
|
|
—
|
|
|||
Adjusted EBITDA
|
|
$
|
9,386
|
|
|
$
|
2,047
|
|
|
$
|
45,907
|
|
•
|
855 Hometown Stores—Primarily independently operated stores, predominantly located in smaller communities, and offering home appliances, lawn and garden equipment, tools, sporting goods, and household goods. Most of our Hometown
|
•
|
57 Hardware Stores—Hardware stores that offer primarily home appliances, lawn and garden equipment, tools, and other home improvement products, and featuring Kenmore, Craftsman, and DieHard, as well as a wide assortment of other national brands. 56 of these locations offer a selection of Kenmore and other national brands of home appliances.
|
•
|
89 Home Appliance Showrooms—Stores that have a simple, primarily appliance showroom design that are located in metropolitan areas.
|
thousands
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
Fiscal Year Total
|
||||||||||
|
2015
|
||||||||||||||||||
Hometown
|
$
|
(6
|
)
|
|
$
|
(102
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(108
|
)
|
Outlet
|
496
|
|
|
(60
|
)
|
|
13
|
|
|
—
|
|
|
449
|
|
|||||
Total
|
$
|
490
|
|
|
$
|
(162
|
)
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
341
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
2014
|
||||||||||||||||||
Hometown
|
$
|
(194
|
)
|
|
$
|
172
|
|
|
$
|
336
|
|
|
$
|
—
|
|
|
$
|
314
|
|
Outlet
|
3,482
|
|
|
5,236
|
|
|
6,159
|
|
|
1,717
|
|
|
16,594
|
|
|||||
Total
|
$
|
3,288
|
|
|
$
|
5,408
|
|
|
$
|
6,495
|
|
|
$
|
1,717
|
|
|
$
|
16,908
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
2013
|
||||||||||||||||||
Hometown
|
$
|
2,247
|
|
|
$
|
774
|
|
|
$
|
1,607
|
|
|
$
|
908
|
|
|
$
|
5,536
|
|
Outlet
|
2,965
|
|
|
989
|
|
|
6,175
|
|
|
9,942
|
|
|
20,071
|
|
|||||
Total
|
$
|
5,212
|
|
|
$
|
1,763
|
|
|
$
|
7,782
|
|
|
$
|
10,850
|
|
|
$
|
25,607
|
|
Fiscal year
|
|
Ended
|
|
Weeks
|
2015
|
|
January 30, 2016
|
|
52
|
2014
|
|
January 31, 2015
|
|
52
|
2013
|
|
February 1, 2014
|
|
52
|
|
|
Fiscal
|
||||||||||
thousands
|
|
2015
|
|
2014
|
|
2013
|
||||||
NET SALES
|
|
$
|
2,287,788
|
|
|
$
|
2,356,033
|
|
|
$
|
2,421,562
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
1,769,286
|
|
|
1,803,497
|
|
|
1,843,418
|
|
|||
Gross margin
|
|
518,502
|
|
|
552,536
|
|
|
578,144
|
|
|||
Margin rate
|
|
22.7
|
%
|
|
23.5
|
%
|
|
23.9
|
%
|
|||
Selling and administrative
|
|
546,128
|
|
|
546,636
|
|
|
506,630
|
|
|||
Selling and administrative expense as a percentage of net sales
|
|
23.9
|
%
|
|
23.2
|
%
|
|
20.9
|
%
|
|||
Impairment of goodwill
|
|
—
|
|
|
167,000
|
|
|
—
|
|
|||
Depreciation
|
|
14,546
|
|
|
10,172
|
|
|
12,006
|
|
|||
Gain on the sale of assets
|
|
—
|
|
|
(113
|
)
|
|
(1,567
|
)
|
|||
Total costs and expenses
|
|
2,329,960
|
|
|
2,527,192
|
|
|
2,360,487
|
|
|||
Operating income (loss)
|
|
(42,172
|
)
|
|
(171,159
|
)
|
|
61,075
|
|
|||
Interest expense
|
|
(2,826
|
)
|
|
(3,861
|
)
|
|
(3,046
|
)
|
|||
Other income
|
|
2,585
|
|
|
3,149
|
|
|
1,854
|
|
|||
Income (loss) before income taxes
|
|
(42,413
|
)
|
|
(171,871
|
)
|
|
59,883
|
|
|||
Income tax benefit (expense)
|
|
15,152
|
|
|
3,066
|
|
|
(24,333
|
)
|
|||
NET INCOME (LOSS)
|
|
$
|
(27,261
|
)
|
|
$
|
(168,805
|
)
|
|
$
|
35,550
|
|
•
|
SHO receives commissions on all Commission Sales.
|
•
|
Store sales recorded and fulfilled by SHO and Commission Sales involve essentially the same in-store selling activity. As a consequence, unadjusted comparable store sales, which do not include Commission Sales, overstate what SHO believes to be its effective comparable store sales performance.
|
|
52 Weeks Ended January 30, 2016
|
|
52 Weeks Ended January 31, 2015
|
||||||||||||||||||||
Thousands
|
Hometown
|
|
Outlet
|
|
Total
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||||||||
Net sales
|
$
|
1,630,276
|
|
|
$
|
657,512
|
|
|
$
|
2,287,788
|
|
|
$
|
1,692,377
|
|
|
$
|
663,656
|
|
|
$
|
2,356,033
|
|
Less: Non-comparable store sales
|
(155,999
|
)
|
|
(98,305
|
)
|
|
(254,304
|
)
|
|
(175,711
|
)
|
|
(141,996
|
)
|
|
(317,707
|
)
|
||||||
Comparable store sales recorded by SHO
|
1,474,277
|
|
|
559,207
|
|
|
2,033,484
|
|
|
1,516,666
|
|
|
521,660
|
|
|
2,038,326
|
|
||||||
Commission Sales (1)
|
34,789
|
|
|
7,369
|
|
|
42,158
|
|
|
62,312
|
|
|
9,295
|
|
|
71,607
|
|
||||||
Adjusted comparable store sales
|
$
|
1,509,066
|
|
|
$
|
566,576
|
|
|
$
|
2,075,642
|
|
|
$
|
1,578,978
|
|
|
$
|
530,955
|
|
|
$
|
2,109,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
52 Weeks Ended January 31, 2015
|
|
52 Weeks Ended February 1, 2014
|
||||||||||||||||||||
Thousands
|
Hometown
|
|
Outlet
|
|
Total
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||||||||
Net sales
|
$
|
1,692,377
|
|
|
$
|
663,656
|
|
|
$
|
2,356,033
|
|
|
$
|
1,811,519
|
|
|
$
|
610,043
|
|
|
$
|
2,421,562
|
|
Less: Non-comparable store sales
|
(216,420
|
)
|
|
(80,502
|
)
|
|
(296,922
|
)
|
|
(178,904
|
)
|
|
(82,028
|
)
|
|
(260,932
|
)
|
||||||
Comparable store sales recorded by SHO
|
1,475,957
|
|
|
583,154
|
|
|
2,059,111
|
|
|
1,632,615
|
|
|
528,015
|
|
|
2,160,630
|
|
||||||
Commission Sales (1)
|
61,435
|
|
|
10,086
|
|
|
71,521
|
|
|
24,902
|
|
|
3,322
|
|
|
28,224
|
|
||||||
Adjusted comparable store sales
|
$
|
1,537,392
|
|
|
$
|
593,240
|
|
|
$
|
2,130,632
|
|
|
$
|
1,657,517
|
|
|
$
|
531,337
|
|
|
$
|
2,188,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
52 Weeks Ended January 30, 2016 vs. 52 Weeks Ended January 31, 2015
|
|
52 Weeks Ended January 31, 2015 vs. 52 Weeks Ended February 1, 2014
|
||||||||||||||||||||
|
Hometown
|
|
Outlet
|
|
Total
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||||||||
Comparable store sales recorded by SHO
|
(0.1
|
)%
|
|
(4.1
|
)%
|
|
(1.2
|
)%
|
|
(7.1
|
)%
|
|
(1.2
|
)%
|
|
(5.7
|
)%
|
||||||
Adjusted comparable store sales
|
(1.8
|
)%
|
|
(4.5
|
)%
|
|
(2.6
|
)%
|
|
(4.7
|
)%
|
|
(0.1
|
)%
|
|
(3.6
|
)%
|
•
|
EBITDA excludes the effects of financing and investing activities by eliminating the effects of interest and depreciation costs; and
|
•
|
Other significant items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, which affects comparability of results. These items may also include
|
|
|
Fiscal
|
||||||||||
thousands
|
|
2015
|
|
2014
|
|
2013
|
||||||
Net income (loss)
|
|
$
|
(27,261
|
)
|
|
$
|
(168,805
|
)
|
|
$
|
35,550
|
|
Income tax (benefit) expense
|
|
(15,152
|
)
|
|
(3,066
|
)
|
|
24,333
|
|
|||
Other income
|
|
(2,585
|
)
|
|
(3,149
|
)
|
|
(1,854
|
)
|
|||
Interest expense
|
|
2,826
|
|
|
3,861
|
|
|
3,046
|
|
|||
Operating income (loss)
|
|
(42,172
|
)
|
|
(171,159
|
)
|
|
61,075
|
|
|||
Depreciation
|
|
14,546
|
|
|
10,172
|
|
|
12,006
|
|
|||
(Gain) loss on the sale of assets
|
|
—
|
|
|
(113
|
)
|
|
(1,567
|
)
|
|||
Impairment of goodwill
|
|
—
|
|
|
167,000
|
|
|
—
|
|
|||
Severance and executive transition costs
|
|
1,066
|
|
|
—
|
|
|
—
|
|
|||
Initial franchise revenues net of provision for losses
|
|
25,086
|
|
|
(3,853
|
)
|
|
(25,607
|
)
|
|||
IT transformation investments
|
|
10,860
|
|
|
—
|
|
|
—
|
|
|||
Adjusted EBITDA
|
|
$
|
9,386
|
|
|
$
|
2,047
|
|
|
$
|
45,907
|
|
|
|
Fiscal Year
|
||||||||||
thousands, except for number of stores
|
|
2015
|
|
2014
|
|
2013
|
||||||
Net sales
|
|
$
|
1,630,276
|
|
|
$
|
1,692,377
|
|
|
$
|
1,811,519
|
|
Comparable store sales %
|
|
(0.1
|
)%
|
|
(7.1
|
)%
|
|
(3.2
|
)%
|
|||
Cost of sales and occupancy
|
|
1,262,215
|
|
|
1,297,212
|
|
|
1,389,627
|
|
|||
Gross margin
|
|
368,061
|
|
|
395,165
|
|
|
421,892
|
|
|||
Margin rate
|
|
22.6
|
%
|
|
23.3
|
%
|
|
23.3
|
%
|
|||
Selling and administrative
|
|
378,141
|
|
|
403,367
|
|
|
396,073
|
|
|||
Selling and administrative expense as a percentage of net sales
|
|
23.2
|
%
|
|
23.8
|
%
|
|
21.9
|
%
|
|||
Impairment of goodwill
|
|
—
|
|
|
167,000
|
|
|
—
|
|
|||
Depreciation
|
|
5,568
|
|
|
3,817
|
|
|
6,321
|
|
|||
Gain on the sale of assets
|
|
—
|
|
|
(113
|
)
|
|
—
|
|
|||
Total costs and expenses
|
|
1,645,924
|
|
|
1,871,283
|
|
|
1,792,021
|
|
|||
Operating income (loss)
|
|
$
|
(15,648
|
)
|
|
$
|
(178,906
|
)
|
|
$
|
19,498
|
|
Total Sears Hometown and Hardware stores
|
|
1,001
|
|
|
1,109
|
|
|
1,117
|
|
|
|
Fiscal
|
||||||||||
thousands, except for number of stores
|
|
2015
|
|
2014
|
|
2013
|
||||||
Net sales
|
|
$
|
657,512
|
|
|
$
|
663,656
|
|
|
$
|
610,043
|
|
Comparable store sales %
|
|
(4.1
|
)%
|
|
(1.2
|
)%
|
|
1.2
|
%
|
|||
Cost of sales and occupancy
|
|
507,071
|
|
|
506,285
|
|
|
453,791
|
|
|||
Gross margin
|
|
150,441
|
|
|
157,371
|
|
|
156,252
|
|
|||
Margin rate
|
|
22.9
|
%
|
|
23.7
|
%
|
|
25.6
|
%
|
|||
Selling and administrative
|
|
167,987
|
|
|
143,269
|
|
|
110,557
|
|
|||
Selling and administrative expense as a percentage of net sales
|
|
25.5
|
%
|
|
21.6
|
%
|
|
18.1
|
%
|
|||
Depreciation
|
|
8,978
|
|
|
6,355
|
|
|
5,685
|
|
|||
Gain on the sale of assets
|
|
—
|
|
|
—
|
|
|
(1,567
|
)
|
|||
Total costs and expenses
|
|
684,036
|
|
|
655,909
|
|
|
568,466
|
|
|||
Operating income (loss)
|
|
$
|
(26,524
|
)
|
|
$
|
7,747
|
|
|
$
|
41,577
|
|
Total Sears Outlet stores
|
|
159
|
|
|
151
|
|
|
143
|
|
thousands
|
|
Total
|
|
Within
1 Year |
|
1-3
Years |
|
4-5
Years |
|
After 5
Years |
||||||||||
Short-term borrowings
|
|
$
|
68,300
|
|
|
$
|
68,300
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Capital leases
|
|
506
|
|
|
124
|
|
|
290
|
|
|
92
|
|
|
—
|
|
|||||
Operating leases
|
|
173,383
|
|
|
55,656
|
|
|
73,928
|
|
|
29,112
|
|
|
14,687
|
|
|||||
Total Contractual Obligations
|
|
$
|
242,189
|
|
|
$
|
124,080
|
|
|
$
|
74,218
|
|
|
$
|
29,204
|
|
|
$
|
14,687
|
|
•
|
it requires assumptions to be made about matters that were highly uncertain at the time the estimate was made, and
|
•
|
changes in the estimate that are reasonably likely to occur from period to period or different estimates that could have been selected would have a material effect on our financial condition, cash flows or results of operations.
|
|
Page
|
|
|
Consolidated Statements of
Operations
|
|
|
|
|
|
|
|
|
|
|
|
Report of Independent
Registered Public Accounting Firm
|
|
|
|
thousands
|
|
January 30,
2016 |
|
January 31,
2015 |
||||
ASSETS
|
|
|
|
|
||||
CURRENT ASSETS
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
18,244
|
|
|
$
|
19,746
|
|
Accounts and franchisee receivables, net
|
|
11,753
|
|
|
15,456
|
|
||
Merchandise inventories
|
|
434,846
|
|
|
442,743
|
|
||
Prepaid expenses and other current assets
|
|
22,176
|
|
|
19,350
|
|
||
Total current assets
|
|
487,019
|
|
|
497,295
|
|
||
PROPERTY AND EQUIPMENT, net
|
|
49,315
|
|
|
50,708
|
|
||
INTANGIBLE ASSETS, net
|
|
4,377
|
|
|
—
|
|
||
LONG-TERM DEFERRED TAXES
|
|
79,141
|
|
|
54,273
|
|
||
OTHER ASSETS, net
|
|
13,981
|
|
|
43,446
|
|
||
TOTAL ASSETS
|
|
$
|
633,833
|
|
|
$
|
645,722
|
|
LIABILITIES
|
|
|
|
|
||||
CURRENT LIABILITIES
|
|
|
|
|
||||
Short-term borrowings
|
|
$
|
68,300
|
|
|
$
|
84,100
|
|
Payable to Sears Holdings Corporation
|
|
54,126
|
|
|
61,089
|
|
||
Accounts payable
|
|
39,762
|
|
|
14,888
|
|
||
Other current liabilities
|
|
66,466
|
|
|
61,085
|
|
||
Total current liabilities
|
|
228,654
|
|
|
221,162
|
|
||
OTHER LONG-TERM LIABILITIES
|
|
2,670
|
|
|
2,274
|
|
||
TOTAL LIABILITIES
|
|
231,324
|
|
|
223,436
|
|
||
COMMITMENTS AND CONTINGENCIES (Note 11)
|
|
|
|
|
|
|
||
STOCKHOLDERS' EQUITY
|
|
|
|
|
||||
Common stock: $.01 par value;
|
|
227
|
|
|
227
|
|
||
Authorized shares: 400,000
|
|
|
|
|
||||
Issued and outstanding shares: 22,722 and 22,736, respectively
|
|
|
|
|
||||
Capital in excess of par value
|
|
555,372
|
|
|
547,888
|
|
||
Retained earnings (deficit)
|
|
(153,090
|
)
|
|
(125,829
|
)
|
||
TOTAL STOCKHOLDERS' EQUITY
|
|
402,509
|
|
|
422,286
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
633,833
|
|
|
$
|
645,722
|
|
|
|
Fiscal Year Ended
|
||||||||||
thousands
|
|
January 30, 2016
|
|
January 31, 2015
|
|
February 1, 2014
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
||||||
Net income (loss)
|
|
$
|
(27,261
|
)
|
|
$
|
(168,805
|
)
|
|
$
|
35,550
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
14,546
|
|
|
10,172
|
|
|
12,006
|
|
|||
Share based compensation
|
|
(70
|
)
|
|
866
|
|
|
911
|
|
|||
Gain on the sale of assets
|
|
—
|
|
|
(113
|
)
|
|
(1,567
|
)
|
|||
Impairment of goodwill
|
|
—
|
|
|
167,000
|
|
|
—
|
|
|||
Provision for losses on franchisee receivables
|
|
25,426
|
|
|
13,055
|
|
|
—
|
|
|||
Change in operating assets and liabilities:
|
|
|
|
|
|
|
||||||
Accounts and franchisee receivables
|
|
1,056
|
|
|
(12,988
|
)
|
|
(26,823
|
)
|
|||
Merchandise inventories
|
|
7,897
|
|
|
39,364
|
|
|
(53,670
|
)
|
|||
Payable to Sears Holdings Corporation
|
|
(6,963
|
)
|
|
(7,307
|
)
|
|
(11,095
|
)
|
|||
Accounts payable
|
|
24,874
|
|
|
(9,241
|
)
|
|
(7,701
|
)
|
|||
Customer deposits
|
|
(5,982
|
)
|
|
(5,306
|
)
|
|
633
|
|
|||
Deferred income taxes
|
|
(6,431
|
)
|
|
(7,129
|
)
|
|
18,614
|
|
|||
Other operating assets
|
|
(13,123
|
)
|
|
1,069
|
|
|
1,525
|
|
|||
Other operating liabilities
|
|
11,576
|
|
|
3,763
|
|
|
(22,751
|
)
|
|||
Net cash provided by (used in) operating activities
|
|
25,545
|
|
|
24,400
|
|
|
(54,368
|
)
|
|||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
||||||
Proceeds from sales of property and investments
|
|
—
|
|
|
154
|
|
|
2,641
|
|
|||
Purchases of property and equipment
|
|
(11,430
|
)
|
|
(12,849
|
)
|
|
(10,704
|
)
|
|||
Net cash used in investing activities
|
|
(11,430
|
)
|
|
(12,695
|
)
|
|
(8,063
|
)
|
|||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
||||||
Common stock repurchased and retired
|
|
—
|
|
|
—
|
|
|
(12,523
|
)
|
|||
Net borrowings (payments) of capital lease obligations
|
|
183
|
|
|
(434
|
)
|
|
(739
|
)
|
|||
Net short-term borrowings (payments)
|
|
(15,800
|
)
|
|
(15,000
|
)
|
|
79,100
|
|
|||
Net cash provided by (used in) financing activities
|
|
(15,617
|
)
|
|
(15,434
|
)
|
|
65,838
|
|
|||
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
|
(1,502
|
)
|
|
(3,729
|
)
|
|
3,407
|
|
|||
CASH AND CASH EQUIVALENTS—Beginning of period
|
|
19,746
|
|
|
23,475
|
|
|
20,068
|
|
|||
CASH AND CASH EQUIVALENTS—End of period
|
|
$
|
18,244
|
|
|
$
|
19,746
|
|
|
$
|
23,475
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
||||||
Cash paid for interest
|
|
$
|
2,945
|
|
|
$
|
3,622
|
|
|
$
|
3,226
|
|
Cash paid for income taxes
|
|
$
|
(5,764
|
)
|
|
$
|
824
|
|
|
$
|
21,022
|
|
SUPPLEMENTAL NON CASH INFORMATION
|
|
|
|
|
|
|
||||||
Tax adjustment related to separation
|
|
$
|
7,554
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Reacquisition rights in exchange for notes receivable
|
|
$
|
6,100
|
|
|
$
|
—
|
|
|
$
|
—
|
|
thousands
|
Number of Shares of Common Stock
|
Common Stock/Par Value
|
Capital in Excess of Par Value
|
Retained Earnings (Deficit)
|
Total Stockholders' Equity
|
|||||||||
Balance at February 2, 2013
|
23,100
|
|
$
|
231
|
|
$
|
556,575
|
|
$
|
9,481
|
|
$
|
566,287
|
|
|
|
|
|
|
|
|||||||||
Net income (loss)
|
—
|
|
—
|
|
—
|
|
35,550
|
|
35,550
|
|
||||
|
|
|
|
|
|
|||||||||
Share-based compensation
|
87
|
|
1
|
|
910
|
|
|
911
|
|
|||||
|
|
|
|
|
|
|||||||||
Common stock repurchased and retired
|
(434
|
)
|
(4
|
)
|
(10,464
|
)
|
(2,055
|
)
|
(12,523
|
)
|
||||
|
|
|
|
|
|
|||||||||
Balance at February 1, 2014
|
22,753
|
|
228
|
|
547,021
|
|
42,976
|
|
590,225
|
|
||||
|
|
|
|
|
|
|||||||||
Net income (loss)
|
—
|
|
—
|
|
—
|
|
(168,805
|
)
|
(168,805
|
)
|
||||
|
|
|
|
|
|
|||||||||
Share-based compensation
|
(17
|
)
|
(1
|
)
|
867
|
|
—
|
|
866
|
|
||||
|
|
|
|
|
|
|||||||||
Balance at January 31, 2015
|
22,736
|
|
227
|
|
547,888
|
|
(125,829
|
)
|
422,286
|
|
||||
|
|
|
|
|
|
|||||||||
Net income (loss)
|
—
|
|
—
|
|
—
|
|
(27,261
|
)
|
(27,261
|
)
|
||||
|
|
|
|
|
|
|||||||||
Share-based compensation
|
(14
|
)
|
—
|
|
(70
|
)
|
—
|
|
(70
|
)
|
||||
|
|
|
|
|
|
|||||||||
Tax adjustment related to the Separation (Note 6)
|
—
|
|
—
|
|
7,554
|
|
—
|
|
7,554
|
|
||||
|
|
|
|
|
|
|||||||||
Balance at January 30, 2016
|
22,722
|
|
$
|
227
|
|
$
|
555,372
|
|
$
|
(153,090
|
)
|
$
|
402,509
|
|
Fiscal Year
|
Ended
|
Weeks
|
2015
|
January 30, 2016
|
52
|
2014
|
January 31, 2015
|
52
|
2013
|
February 1, 2014
|
52
|
thousands
|
|
January 30, 2016
|
|
January 31, 2015
|
||||
Land
|
|
$
|
2,123
|
|
|
$
|
1,981
|
|
Buildings and improvements
|
|
49,680
|
|
|
54,601
|
|
||
Furniture, fixtures and equipment
|
|
37,681
|
|
|
35,104
|
|
||
Capitalized leases
|
|
1,005
|
|
|
799
|
|
||
Total property and equipment
|
|
90,489
|
|
|
92,485
|
|
||
Less: accumulated depreciation
|
|
(41,174
|
)
|
|
(41,777
|
)
|
||
Total property and equipment, net
|
|
$
|
49,315
|
|
|
$
|
50,708
|
|
|
|
Fiscal Year
|
||||||||||
thousands
|
|
2015
|
|
2014
|
|
2013
|
||||||
Minimum rentals
|
|
$
|
63,336
|
|
|
$
|
63,115
|
|
|
$
|
57,679
|
|
Less-Sublease rentals
|
|
(25,505
|
)
|
|
(28,457
|
)
|
|
(19,678
|
)
|
|||
Total
|
|
$
|
37,831
|
|
|
$
|
34,658
|
|
|
$
|
38,001
|
|
Fiscal Year
|
|
|
Capital Leases
|
|
Operating Leases
|
||||
thousands
|
|
|
|
|
|
||||
2016
|
|
|
$
|
124
|
|
|
$
|
55,656
|
|
2017
|
|
|
145
|
|
|
44,173
|
|
||
2018
|
|
|
145
|
|
|
29,755
|
|
||
2019
|
|
|
92
|
|
|
17,319
|
|
||
2020
|
|
|
—
|
|
|
11,793
|
|
||
Thereafter
|
|
|
—
|
|
|
14,687
|
|
||
Total Minimum Lease Payments
|
|
506
|
|
|
173,383
|
|
|||
Less - Sublease Income on Leased Properties
|
—
|
|
|
(33,963
|
)
|
||||
Net Minimum Lease Payments
|
|
$
|
506
|
|
|
$
|
139,420
|
|
|
|
|
|
|
|
|
||||
Less:
|
|
|
|
|
|
||||
Implicit Interest
|
|
|
—
|
|
|
|
|||
Capital Lease Obligations
|
|
|
506
|
|
|
|
|||
Less Current Portion of Capital Lease Obligations
|
(124
|
)
|
|
|
|||||
Long-term Capital Lease Obligations
|
|
$
|
382
|
|
|
|
thousands
|
|
January 30, 2016
|
|
January 31, 2015
|
||||
Short-term franchisee receivables
|
|
$
|
2,376
|
|
|
$
|
9,821
|
|
Miscellaneous receivables
|
|
10,754
|
|
|
8,856
|
|
||
Long-term franchisee receivables
|
|
23,068
|
|
|
49,330
|
|
||
Other assets
|
|
1,677
|
|
|
2,263
|
|
||
Allowance for losses on short-term franchisee receivables (1)
|
|
(1,377
|
)
|
|
(3,221
|
)
|
||
Allowance for losses on long-term franchisee receivables (1)
|
|
(10,764
|
)
|
|
(8,147
|
)
|
||
Total Accounts and franchisee receivables and other assets
|
|
$
|
25,734
|
|
|
$
|
58,902
|
|
thousands
|
|
January 30, 2016
|
|
January 31, 2015
|
||||
Allowance for losses on franchisee receivables, beginning of period
|
|
$
|
11,368
|
|
|
$
|
—
|
|
Expense during the period
|
|
25,426
|
|
|
13,055
|
|
||
Write off of franchisee receivables
|
|
(24,653
|
)
|
|
(1,687
|
)
|
||
Allowance for losses on franchisee receivables, end of period
|
|
$
|
12,141
|
|
|
$
|
11,368
|
|
thousands
|
|
January 30, 2016
|
|
January 31, 2015
|
||||
Customer deposits
|
|
$
|
24,259
|
|
|
$
|
30,241
|
|
Sales and other taxes
|
|
12,880
|
|
|
12,458
|
|
||
Accrued expenses
|
|
23,865
|
|
|
16,588
|
|
||
Payroll and related items
|
|
6,563
|
|
|
4,072
|
|
||
Store closing, severance and executive transition costs
|
|
1,569
|
|
|
—
|
|
||
Total Other current and long-term liabilities
|
|
$
|
69,136
|
|
|
$
|
63,359
|
|
thousands
|
|
January 30, 2016
|
|
January 31, 2015
|
||||
Reacquisition rights
|
|
$
|
6,100
|
|
|
$
|
—
|
|
Less: accumulated amortization expense
|
|
(1,723
|
)
|
|
—
|
|
||
Total intangible assets, net
|
|
$
|
4,377
|
|
|
$
|
—
|
|
|
|
|
|
Fiscal Year Ended
|
||||||||||
thousands
|
|
|
|
2015
|
|
2014
|
|
2013
|
||||||
Income (loss) before income taxes:
|
|
|
|
|
|
|
||||||||
|
U.S.
|
|
|
$
|
(41,643
|
)
|
|
$
|
(172,829
|
)
|
|
$
|
58,713
|
|
|
Foreign
|
|
(770
|
)
|
|
958
|
|
|
1,170
|
|
||||
|
|
Total
|
|
$
|
(42,413
|
)
|
|
$
|
(171,871
|
)
|
|
$
|
59,883
|
|
Income tax expense (benefit):
|
|
|
|
|
|
|
||||||||
Current:
|
|
|
|
|
|
|
|
|||||||
|
Federal
|
|
$
|
(9,758
|
)
|
|
$
|
2,872
|
|
|
$
|
3,808
|
|
|
|
State
|
|
605
|
|
|
608
|
|
|
1,341
|
|
||||
|
Foreign
|
|
432
|
|
|
584
|
|
|
570
|
|
||||
|
|
Total
|
|
(8,721
|
)
|
|
4,064
|
|
|
5,719
|
|
|||
Deferred:
|
|
|
|
|
|
|
|
|||||||
|
Federal
|
|
(4,666
|
)
|
|
(6,037
|
)
|
|
15,859
|
|
||||
|
State
|
|
(1,765
|
)
|
|
(1,093
|
)
|
|
2,847
|
|
||||
|
Foreign
|
|
—
|
|
|
—
|
|
|
(92
|
)
|
||||
|
|
Total
|
|
$
|
(6,431
|
)
|
|
$
|
(7,130
|
)
|
|
$
|
18,614
|
|
|
|
|
|
|
|
|
|
|
||||||
Income tax expense (benefit)
|
|
$
|
(15,152
|
)
|
|
$
|
(3,066
|
)
|
|
$
|
24,333
|
|
|
|
Fiscal Year Ended
|
|||||||
|
|
2015
|
|
2014
|
|
2013
|
|||
Federal tax rate
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income tax (net of federal benefit)
|
|
1.8
|
%
|
|
0.2
|
%
|
|
4.5
|
%
|
Goodwill
|
|
—
|
%
|
|
(34.0
|
)%
|
|
—
|
%
|
Valuation allowance
|
|
(1.6
|
)%
|
|
0.1
|
%
|
|
0.4
|
%
|
Other
|
|
0.5
|
%
|
|
0.5
|
%
|
|
0.7
|
%
|
Effective tax rate
|
|
35.7
|
%
|
|
1.8
|
%
|
|
40.6
|
%
|
|
|
|
Fiscal Year Ended
|
||||||
thousands
|
|
January 30, 2016
|
|
|
January 31, 2015
|
|
|||
Deferred tax assets
|
|
||||||||
|
Bad Debts
|
$
|
4,735
|
|
|
$
|
4,412
|
|
|
|
Capital Leases
|
—
|
|
|
17
|
|
|||
|
Deferred Compensation
|
1,454
|
|
|
548
|
|
|||
|
Deferred Rent
|
53
|
|
|
2,180
|
|
|||
|
Favorable Leases
|
529
|
|
|
105
|
|
|||
|
Inventory
|
4,100
|
|
|
1,579
|
|
|||
|
Net Operating Loss
|
9,873
|
|
|
—
|
|
|||
|
Property
|
4,986
|
|
|
—
|
|
|||
|
Property Taxes
|
179
|
|
|
1,108
|
|
|||
|
Royalty-free License
|
48,513
|
|
|
53,023
|
|
|||
|
Other
|
6,302
|
|
|
5,008
|
|
|||
|
|
Sub-total deferred tax assets
|
$
|
80,724
|
|
|
$
|
67,980
|
|
|
|
Valuation allowance
|
(830
|
)
|
|
(137
|
)
|
||
|
|
Total deferred tax assets
|
$
|
79,894
|
|
|
$
|
67,843
|
|
Deferred tax liabilities
|
|
|
|
||||||
|
Property
|
—
|
|
|
(1,936
|
)
|
|||
|
Other
|
(753
|
)
|
|
(751
|
)
|
|||
|
|
Total deferred tax liabilities
|
(753
|
)
|
|
(2,687
|
)
|
||
Net deferred tax assets
|
$
|
79,141
|
|
|
$
|
65,156
|
|
•
|
We are party to a Separation Agreement with Sears Holdings pursuant to which Sears Holdings consummated the Separation. The Separation Agreement, among other things, provided for the allocation and transfer, through a series of intercompany transactions, of the assets and the liabilities comprising the Sears Hometown and Hardware and Sears Outlet businesses of Sears Holdings. In the Separation Agreement SHO and Sears Holdings agree to release each other from all pre-separation claims (other than with respect to the agreements executed in connection with the Separation) and each agrees to defend and indemnify the other with respect to its post-separation business.
|
•
|
We obtain a significant amount of our merchandise inventories from Sears Holdings. This enables us to take advantage of the amount and scope of Sears Holdings purchasing activities. We are party to a Merchandising Agreement with Sears Holdings, Kmart and SRC (the "Merchandising Agreement") pursuant to which Kmart and SRC (1) sell to us, with respect to certain specified product categories, Sears-branded products including KCD Products and vendor-branded products obtained from Kmart’s and SRC’s vendors and suppliers and (2) grant us licenses to use the trademarks owned by Kmart, SRC or other subsidiaries of Sears Holdings, or the "Sears marks," including the KCD Marks in connection with the marketing and sale of products sold under the Sears marks. The initial term of the Merchandising Agreement will expire in April 2018, subject to two three-year renewal terms with respect to the KCD Products. We pay, on a weekly basis, a royalty determined by multiplying our net sales of the KCD Products by specified fixed royalties rates for each brand’s licensed products, subject to adjustments based on the extent to which we feature Kenmore brand products in certain of our advertising and the extent to which we pay specified minimum commissions to our franchisees and Hometown Store owners. We are also party to agreements with Sears Holdings for related logistics, handling, warehouse and transportation services, the charges for which are based generally on merchandise inventory units. We also pay fees for participation in Sears Holdings' SYW program.
|
•
|
We obtain our merchandise from Sears Holdings and other vendors. For the year ended January 30, 2016, products which we acquired from Sears Holdings, including KCD Products and other products, accounted for approximately
82%
of our total purchases of inventory from all vendors with a comparable level of purchases from Sears Holdings in 2014 and 2013. The loss of or a reduction in the amount of merchandise made available to us by Sears Holdings could have a material adverse effect on our business and results of operations.
|
•
|
Sears Holdings provides the Company with specified corporate services. These services include tax, accounting, procurement, risk management and insurance, advertising and marketing, human resources, loss prevention, environmental, product and human safety, facilities, logistics and distribution, information technology (including the point-of-sale system used by the Company and our dealers and franchisees), online, payment clearing, and other financial, real estate management, merchandise-related and other support services. Sears Holdings charges the Company for these corporate services generally based on actual usage, a pro rata charge based upon sales, head count, or square footage, or a fixed fee or commission as agreed between the parties.
|
•
|
Sears Holdings has licensed the Company until October 11, 2029, on a royalty-free basis, to use under specified conditions (1) the name "Sears" in our corporate name and to promote our businesses and (2) the www.searsoutlet.com, www.searshomeapplianceshowroom.com, www.searshometownstores.com, and www.searshardwarestores.com domain names to promote our businesses. Also, Sears Holdings has licensed the Company until October 11, 2029, on an exclusive, royalty-free basis, under specified conditions to use for the purpose of operating our stores the names "Sears Appliance
|
•
|
Sears Holdings has assigned to us leases for, or has subleased to us, many of the stores that we operate or that we have, in turn, subleased to franchisees. Generally, the terms of the subleases match the terms, including the payment of rent and expiration date, of the existing leases between Sears Holdings (or one of its subsidiaries) and the landlord. In addition, a small number of our stores are in locations where Sears Holdings currently operates one of its stores or a distribution facility. In such cases we have entered into a lease or sublease with Sears Holdings (or one of its subsidiaries) for the portion of the space in which our store will operate, and we pay rent directly to Sears Holdings on the terms negotiated in connection with the Separation. We also lease from Sears Holdings office space for our corporate headquarters.
|
•
|
SHO receives commissions from Sears Holdings for specified sales of merchandise made through www.sears.com and www.searsoutlet.com, the sale of extended-service plans, delivery and handling services and relating to the use in our stores of credit cards branded with the Sears name. For certain transactions SHO pays a commission to Sears Holdings.
|
|
|
Fiscal Year Ended
|
||||||||||
|
|
January 30,
2016 |
|
January 31,
2015 |
|
February 1,
2014 |
||||||
thousands
|
|
|
|
|||||||||
|
|
|
|
|
|
|
||||||
Net Commissions from Sears Holdings Corporation
|
|
$
|
91,291
|
|
|
$
|
99,054
|
|
|
$
|
90,085
|
|
Purchases related to cost of sales and occupancy
|
|
1,386,414
|
|
|
1,499,231
|
|
|
1,597,716
|
|
|||
Services included in selling and administrative
|
|
88,486
|
|
|
96,027
|
|
|
115,740
|
|
|
|
2015
|
||||||||||
thousands
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
|
|
|
|
|
|
||||||
Appliances
|
|
$
|
1,056,175
|
|
|
$
|
529,083
|
|
|
$
|
1,585,258
|
|
Lawn and garden
|
|
286,222
|
|
|
22,166
|
|
|
308,388
|
|
|||
Tools and paint
|
|
183,591
|
|
|
17,850
|
|
|
201,441
|
|
|||
Other
|
|
104,288
|
|
|
88,413
|
|
|
192,701
|
|
|||
Total
|
|
1,630,276
|
|
|
657,512
|
|
|
2,287,788
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
1,262,215
|
|
|
507,071
|
|
|
1,769,286
|
|
|||
Selling and administrative
|
|
378,141
|
|
|
167,987
|
|
|
546,128
|
|
|||
Depreciation
|
|
5,568
|
|
|
8,978
|
|
|
14,546
|
|
|||
Gain on the sale of assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total
|
|
1,645,924
|
|
|
684,036
|
|
|
2,329,960
|
|
|||
Operating income (loss)
|
|
$
|
(15,648
|
)
|
|
$
|
(26,524
|
)
|
|
$
|
(42,172
|
)
|
Total assets
|
|
$
|
421,615
|
|
|
$
|
212,218
|
|
|
$
|
633,833
|
|
Capital expenditures
|
|
$
|
4,563
|
|
|
$
|
6,867
|
|
|
$
|
11,430
|
|
|
|
|
|
|
|
|
|
|
2014
|
||||||||||
thousands
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
|
|
|
|
|
|
||||||
Appliances
|
|
$
|
1,056,114
|
|
|
$
|
522,247
|
|
|
$
|
1,578,361
|
|
Lawn and garden
|
|
316,725
|
|
|
22,297
|
|
|
339,022
|
|
|||
Tools and paint
|
|
204,117
|
|
|
18,471
|
|
|
222,588
|
|
|||
Other
|
|
115,421
|
|
|
100,641
|
|
|
216,062
|
|
|||
Total
|
|
1,692,377
|
|
|
663,656
|
|
|
2,356,033
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
1,297,212
|
|
|
506,285
|
|
|
1,803,497
|
|
|||
Selling and administrative
|
|
403,367
|
|
|
143,269
|
|
|
546,636
|
|
|||
Impairment of goodwill
|
|
167,000
|
|
|
—
|
|
|
167,000
|
|
|||
Depreciation
|
|
3,817
|
|
|
6,355
|
|
|
10,172
|
|
|||
Gain on the sale of assets
|
|
(113
|
)
|
|
—
|
|
|
(113
|
)
|
|||
Total
|
|
1,871,283
|
|
|
655,909
|
|
|
2,527,192
|
|
|||
Operating income
|
|
$
|
(178,906
|
)
|
|
$
|
7,747
|
|
|
$
|
(171,159
|
)
|
Total assets
|
|
$
|
430,128
|
|
|
$
|
215,594
|
|
|
$
|
645,722
|
|
Capital expenditures
|
|
$
|
3,046
|
|
|
$
|
9,803
|
|
|
$
|
12,849
|
|
|
|
2013
|
||||||||||
thousands
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
|
|
|
|
|
|
||||||
Appliances
|
|
$
|
1,160,894
|
|
|
$
|
478,435
|
|
|
$
|
1,639,329
|
|
Lawn and garden
|
|
319,725
|
|
|
23,743
|
|
|
343,468
|
|
|||
Tools and paint
|
|
213,575
|
|
|
14,674
|
|
|
228,249
|
|
|||
Other
|
|
117,325
|
|
|
93,191
|
|
|
210,516
|
|
|||
Total
|
|
1,811,519
|
|
|
610,043
|
|
|
2,421,562
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
1,389,627
|
|
|
453,791
|
|
|
1,843,418
|
|
|||
Selling and administrative
|
|
396,073
|
|
|
110,557
|
|
|
506,630
|
|
|||
Depreciation
|
|
6,321
|
|
|
5,685
|
|
|
12,006
|
|
|||
Gain on the sale of assets
|
|
—
|
|
|
(1,567
|
)
|
|
(1,567
|
)
|
|||
Total
|
|
1,792,021
|
|
|
568,466
|
|
|
2,360,487
|
|
|||
Operating income
|
|
$
|
19,498
|
|
|
$
|
41,577
|
|
|
$
|
61,075
|
|
Total assets
|
|
$
|
632,437
|
|
|
$
|
214,748
|
|
|
$
|
847,185
|
|
Capital expenditures
|
|
$
|
3,731
|
|
|
$
|
6,973
|
|
|
$
|
10,704
|
|
|
Fiscal Year Ended January 30, 2016
|
||||||||||||||||||||||||||||||||
|
First Quarter
(as of May 2, 2015)
|
|
Second Quarter
(as of August 1, 2015)
|
|
Third Quarter
(as of October 31, 2015)
|
|
Fourth Quarter (as of January 30, 2016)
|
||||||||||||||||||||||||||
thousands, except per share amounts
|
As reported
|
Change
|
Restated
|
|
As reported
|
Change
|
Restated
|
|
As reported
|
Change
|
Restated
|
|
|||||||||||||||||||||
PROPERTY AND EQUIPMENT, net
|
$
|
50,613
|
|
$
|
(1,208
|
)
|
$
|
49,405
|
|
|
$
|
52,841
|
|
$
|
(3,905
|
)
|
$
|
48,936
|
|
|
$
|
59,207
|
|
$
|
(6,334
|
)
|
$
|
52,873
|
|
|
$
|
49,315
|
|
TOTAL ASSETS
|
655,270
|
|
(1,208
|
)
|
654,062
|
|
|
636,039
|
|
(3,905
|
)
|
632,134
|
|
|
660,258
|
|
(6,334
|
)
|
653,924
|
|
|
633,833
|
|
||||||||||
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Other current liabilities
|
73,119
|
|
(350
|
)
|
72,769
|
|
|
76,887
|
|
(1,132
|
)
|
75,755
|
|
|
61,695
|
|
(1,836
|
)
|
59,859
|
|
|
66,466
|
|
||||||||||
Total current liabilities
|
229,100
|
|
(350
|
)
|
228,750
|
|
|
208,228
|
|
(1,132
|
)
|
207,096
|
|
|
236,075
|
|
(1,836
|
)
|
234,239
|
|
|
228,654
|
|
||||||||||
TOTAL LIABILITIES
|
231,241
|
|
(350
|
)
|
230,891
|
|
|
210,492
|
|
(1,132
|
)
|
209,360
|
|
|
238,366
|
|
(1,836
|
)
|
236,530
|
|
|
231,324
|
|
||||||||||
TOTAL STOCKHOLDERS' EQUITY
|
424,029
|
|
(858
|
)
|
423,171
|
|
|
425,547
|
|
(2,773
|
)
|
422,774
|
|
|
421,892
|
|
(4,498
|
)
|
417,394
|
|
|
402,509
|
|
||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
655,270
|
|
(1,208
|
)
|
654,062
|
|
|
636,039
|
|
(3,905
|
)
|
632,134
|
|
|
660,258
|
|
(6,334
|
)
|
653,924
|
|
|
633,833
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
||||||||||
|
January 30, 2016
|
|
January 31, 2015
|
|
February 1, 2014
|
||||||
thousands except income per common share
|
|
|
|
|
|
||||||
Basic weighted average shares
|
22,666
|
|
|
22,666
|
|
|
22,984
|
|
|||
Dilutive effect of restricted stock
|
—
|
|
|
—
|
|
|
5
|
|
|||
Diluted weighted average shares
|
22,666
|
|
|
22,666
|
|
|
22,989
|
|
|||
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
(27,261
|
)
|
|
$
|
(168,805
|
)
|
|
$
|
35,550
|
|
|
|
|
|
|
|
||||||
Income (loss) per common share:
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Basic
|
$
|
(1.20
|
)
|
|
$
|
(7.45
|
)
|
|
$
|
1.55
|
|
Diluted
|
$
|
(1.20
|
)
|
|
$
|
(7.45
|
)
|
|
$
|
1.55
|
|
|
|
52 Weeks Ended January 30, 2016
|
|||||
(Shares in thousands)
|
|
Shares
|
|
Weighted-Average Fair Value on Date of Grant
|
|||
Beginning of year balance
|
|
70
|
|
|
$
|
44.45
|
|
Granted
|
|
14
|
|
|
9.38
|
|
|
Vested
|
|
—
|
|
|
—
|
|
|
Forfeited
|
|
(28
|
)
|
|
44.45
|
|
|
Balance at 1/30/2016
|
|
56
|
|
|
$
|
35.68
|
|
|
|
|
|
|
thousands
|
|
2015
|
|
2014
|
|
2013
|
||||||
401(k) Savings Plan
|
|
$
|
905
|
|
|
$
|
1,137
|
|
|
$
|
289
|
|
|
|
|
|
|
|
|
Item 11.
|
Executive Compensation
|
Plan Category
|
|
(a)
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1)
|
|
(b)
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (1)
|
|
(c)
Number of Securities Remaining Available for Future Issuances Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
|
Equity Compensation Plans Approved by Security Holders
|
|
--
|
|
--
|
|
3,929,753 (2)
|
Equity Compensation Plans Not Approved by Security Holders
|
|
--
|
|
--
|
|
--
|
Total
|
|
--
|
|
--
|
|
3,929,753 (2)
|
(1)
|
Financial Statements
|
|
|
|
Sears Hometown and Outlet Stores, Inc.
|
||
|
|
|
By:
|
|
/
S
/ RYAN D. ROBINSON
|
Name:
|
|
Ryan D. Robinson
|
Title:
|
|
Senior Vice President and Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
|
|
||
Date:
|
|
March 31, 2016
|
Exhibit
Number
|
|
Document Description
|
3.1
|
|
Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2012 (File No. 001-35641)).
|
3.2
|
|
Certificate of Amendment of Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.2 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2012 (File No. 001-35641)).
|
3.3
|
|
Amended and Restated Bylaws of Registrant (incorporated by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K filed December 9, 2013 (File No. 001-35641)).
|
4.1
|
|
Form of common stock certificate (incorporated by reference to Exhibit 4.1 to Registrant's Form S-1/A filed on August 31, 2012 (File No. 333-181051)).
|
10.1
|
|
Separation Agreement between Sears Holdings Corporation and Registrant dated as of August 8, 2012 (incorporated by reference to Exhibit 10.1 to Registrant's Form S-1/A filed on August 31, 2012 (File No. 333-181051)).
|
10.2
|
|
Amendment No. 1 to Separation Agreement between Registrant and Sears Holdings Corporation dated December 9, 2013 (incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended November 2, 2013 (File No. 001-35641)).
|
10.3
|
|
Store License Agreement between Sears, Roebuck and Co. and Sears Authorized Hometown Stores, LLC dated August 8, 2012 (incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2012 (File No. 001-35641)).
|
10.4
|
|
Store License Agreement between Sears, Roebuck and Co. and Sears Home Appliance Showrooms, LLC dated August 8, 2012 (incorporated by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2012 (File No. 001-35641)).
|
10.5
|
|
Store License Agreement between Sears, Roebuck and Co. and Sears Outlet Stores, L.L.C. dated August 8, 2012 (incorporated by reference to Exhibit 10.4 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2012 (File No. 001-35641)).
|
10.6
|
|
Amendment No. 1 to Store License Agreement (Outlet) between Sears, Roebuck and Co. and Sears Outlet Stores, L.L.C. dated December 9, 2013 (incorporated by reference to Exhibit 10.6 to Registrant's Annual Report on Form 10-K for the fiscal year ended February 1, 2014 (File No. 001-35641)).
|
10.7
|
|
Trademark License Agreement between Sears, Roebuck and Co. and Registrant dated August 8, 2012 (incorporated by reference to Exhibit 10.5 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2012 (File No. 001-35641)).
|
10.8(1)
|
|
Merchandising Agreement between Sears, Roebuck and Co., Kmart Corporation and Sears Holdings Corporation and Registrant, Sears Authorized Hometown Stores, LLC and Sears Outlet Stores, L.L.C. dated August 8, 2012 (incorporated by reference to Exhibit 10.6 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2012 (File No. 001-35641)).
|
10.9(1)
|
|
Amendment No. 1 to Merchandising Agreement between (i) Sears, Roebuck and Co. and Kmart Corporation and (ii) Registrant, Sears Authorized Hometown Stores, LLC, and Sears Outlet Stores, L.L.C. dated July 5, 2013 (incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended August 3, 2013 (File No. 001-35641)).
|
10.10(1)
|
|
Amendment No. 2 to Merchandising Agreement between (i) Sears, Roebuck and Co. and Kmart Corporation and (ii) Registrant, Sears Authorized Hometown Stores, LLC, and Sears Outlet Stores, L.L.C. dated December 9, 2013 (incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended November 2, 2013 (File No. 001-35641)).
|
10.11
|
|
Amendment No. 3 to Merchandising Agreement between (i) Sears, Roebuck and Co. and Kmart Corporation and (ii) Registrant, Sears Authorized Hometown Stores, LLC, and Sears Outlet Stores, L.L.C. dated May 11, 2015 (incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended May 2, 2015 (File No. 001-35641)).
|
10.12
|
|
Services Agreement between Sears Holdings Management Corporation and Registrant dated August 8, 2012 (incorporated by reference to Exhibit 10.7 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2012 (File No. 001-35641)).
|
10.13
|
|
Amendment No. 1 to Services Agreement between Registrant and Sears Holdings Management Corporation dated December 9, 2013 (incorporated by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended November 2, 2013 (File No. 001-35641)).
|
10.14
|
|
Amendment No. 2 to Services Agreement between Registrant and Sears Holdings Management Corporation dated April 23, 2014 (incorporated by reference to Exhibit 10 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended May 3, 2014 (File No. 001-35641)).
|
10.15
|
|
Amendment No. 3 to Services Agreement between Registrant and Sears Holdings Management Corporation dated March 11, 2015 (incorporated by reference to Exhibit 10.14 to Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2015 (File No. 001-35641)).
|
10.16(1)
|
|
Retail Establishment Agreement between Sears Holdings Management Corporation and Registrant (incorporated by reference to Exhibit 10.8 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2012 (File No. 001-35641)).
|
10.17
|
|
Tax Sharing Agreement between Sears Holdings and Registrant dated as of August 8, 2012 (incorporated by reference to Exhibit 10.9 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2012 (File No. 001-35641)).
|
10.18
|
|
Employee Transition and Administrative Services Agreement between Sears, Roebuck and Co., Registrant, Sears Authorized Hometown Stores, LLC and Sears Outlet Stores, L.L.C. dated as of August 31, 2012 (incorporated by reference to Exhibit 10.10 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2012 (File No. 001-35641)).
|
10.19
|
|
Statement of Work #1 to Employee Transition and Administrative Services Agreement between (i) Registrant, Sears Authorized Hometown Stores, LLC, and Sears Outlet Stores, L.L.C. and (ii) Sears Holdings Management Corporation dated December 9, 2013 (incorporated by reference to Exhibit 10.5 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended November 2, 2013 (File No. 001-35641)).
|
10.20
|
|
Supplemental Agreement between Registrant and Sears Holdings Corporation dated December 9, 2013 (incorporated by reference to Exhibit 10.4 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended November 2, 2013 (File No. 001-35641)).
|
10.21(3)
|
|
Sears Hometown and Outlet Stores, Inc. Umbrella Incentive Program (incorporated by reference to Exhibit 10.11 to the Registrant's Form S-1/A filed on August 31, 2012 (File No. 333-181051)).
|
10.22(3)
|
|
Sears Hometown and Outlet Stores, Inc. Annual Incentive Plan (incorporated by reference to Exhibit 10.12 to Registrant's Form S-1/A filed on August 31, 2012 (File No. 333-181051)).
|
10.23(3)
|
|
Sears Hometown and Outlet Stores, Inc. Long-Term Incentive Program (incorporated by reference to Exhibit 10.13 to Registrant's Form S-1/A filed on August 31, 2012 (File No. 333-181051)).
|
10.24(3)
|
|
Sears Hometown and Outlet Stores, Inc. Amended and Restated 2012 Stock Plan (incorporated by reference to Exhibit 10.14 to Registrant's Annual Report on Form 10-K for the 52 weeks ended January 31, 2015 (File No. 001-35641)).
|
10.25(3)
|
|
Form of Executive Severance Agreement (incorporated by reference to Exhibit 10.26 to Sears Holdings Corporation's Annual Report on Form 10-K for the fiscal year ended January 31, 2015 (File No. 000-51217)).
|
10.26(3)
|
|
Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to Registrant's Form S-8 filed on May 16, 2013 (File No. 333-188645)).
|
10.27(2)(3)
|
|
Form of Amended and Restated Executive Severance Agreement.
|
10.28
|
|
Form of Cash Retention Agreement (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed April 21, 2015 (File No. 001-35641)).
|
10.29
|
|
Form of Stock Unit Agreement (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed April 15, 2015 (File No. 001-35641)).
|
10.30(3)
|
|
Form of Executive Severance/Non-Compete Agreement (incorporated by reference to Exhibit 10.5 to Sears Holdings Corporation's Quarterly Report on Form 10-Q for the quarterly period ended October 29, 2005 (File No. 000-51217)).
|
10.31(3)
|
|
Amended and Restated Executive Severance Agreement dated July 1, 2015 between Registrant and William A. Powell (incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed June 12, 2014 (File No. 001-35641)).
|
10.32(3)
|
|
Executive Severance Agreement dated June 10, 2014 between Registrant and Ryan D. Robinson (incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed June 12, 2014 (File No. 001-35641)).
|
10.33(3)
|
|
Letter agreement between Registrant and W. Bruce Johnson dated August 28, 2012 (incorporated by reference to Exhibit 10.18 to Registrant's Form S-1/A filed on August 31, 2012 (File No. 333-181051)).
|
10.34(3)
|
|
Letter agreement between Registrant and William A. Powell dated July 1, 2015 (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed July 1, 2015 (File No. 001-35641).
|
10.35(3)
|
|
Letter agreement between Registrant and Charles J. Hansen, dated August 28, 2012 (incorporated by reference to Exhibit 10.21 to Registrant's Form S-1/A filed on August 31, 2012 (File No. 333-181051)).
|
10.36(3)
|
|
Letter agreement between Registrant and David Buckley dated July 1, 2015 (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed July 1, 2015 (File No. 001-35641).
|
10.37(2)(3)
|
|
Letter agreement between Registrant and Michael Gray dated October 10, 2012.
|
10.38(3)
|
|
Letter agreement between Registrant and Ryan D. Robinson, dated June 10, 2014 (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed June 12, 2014 (File No. 001-35641)).
|
10.39(3)
|
|
Executive Severance/Non-Compete Agreement dated February 14, 2006 between Sears Holdings Corporation and its affiliates and subsidiaries and W. Bruce Johnson (incorporated by reference to Exhibit 10.25 to Registrant's Annual Report on Form 10-K for the 52 weeks ended January 31, 2015 (File No. 001-35641)).
|
10.40
|
|
Credit Agreement, dated as of October 11, 2012, among Sears Authorized Hometown Stores, LLC and the other borrowers named therein, as borrowers; Registrant, as parent; Bank of America, N.A., as Administrative Agent and Collateral Agent, and other lenders party thereto, as lenders; CIT Finance LLC, as Syndication Agent; and Barclays Bank PLC, as Documentation Agent (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed October 15, 2012 (File No. 001-35641)).
|
10.41
|
|
First Amendment to Credit Agreement, dated August 29, 2013, among Sears Authorized Hometown Stores, LLC and the other borrowers named therein, as borrowers, Registrant, as parent and a guarantor, Troy Coolidge No. 6, LLC, as a guarantor, Bank of America, N.A., as Agent, Swing Line Lender, and L/C Issuer, and other lenders party thereto, as lenders (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed August 30, 2013 (File No. 001-35641)).
|
10.42
|
|
Guaranty and Security Agreement, dated as of October 11, 2012, by Sears Authorized Hometown Stores, LLC, and other borrowers and guarantors party thereto and Bank of America, N.A., as Agent (incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed October 15, 2012 (File No. 001-35641)).
|
21
|
|
Subsidiaries of Registrant (incorporated by reference to Exhibit 21 to Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2015 (File No. 001-35641)).
|
23(2)
|
|
Consent of BDO USA, LLP.
|
24(2)
|
|
Powers of Attorney.
|
31.1(2)
|
|
Certification of Chief Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.
|
31.2(2)
|
|
Certification of Chief Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.
|
32.1(2)
|
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101(4)
|
|
The following financial information from the Annual Report on Form 10-K for the fiscal year ended January 30, 2016, formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Statements of Operations for the fiscal years ended January 30, 2016, January 31, 2015, and February 1, 2014; (ii) the Consolidated Balance Sheets at January 30, 2016 and January 31, 2015; (iii) the Consolidated Statements of Cash Flows for the fiscal years ended January 30, 2016, January 31, 2015, and February 1, 2014; (iv) the Consolidated Statements of Stockholders' Equity for the fiscal years ended January 30, 2016, January 31, 2015, and February 1, 2014; and (v) the Notes to the Consolidated Financial Statements.
|
(1)
|
The Securities and Exchange Commission granted confidential treatment for the omitted portions of this Exhibit. The omitted portions have been separately filed with the Securities and Exchange Commission.
|
(2)
|
Filed herewith.
|
(3)
|
A management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 15(b) of Form 10-K.
|
(4)
|
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
|
1.
|
Benefits Upon Termination of Employment
.
|
ii.
|
Continuation of Benefits.
|
iv.
|
Impact of Termination on Certain Other Plans/Programs
.
|
2.
|
Definitions
. For purposes of this Agreement, each capitalized term herein is either defined in the section, exhibit, or Appendix in which it first appears or in this Section 2. The following capitalized terms will have the definitions as set forth below:
|
3.
|
Intellectual Property Rights
. Executive acknowledges that Executive’s development work or research on any and all inventions or expressions of ideas that may or may not be eligible for patent, copyright, trademark or trade secret protection, hereafter made or conceived solely or jointly within the scope of employment at SHO, provided such invention or expression of an idea relates to the business of SHO, or relates to actual or demonstrably anticipated research or development of SHO, or results from any work performed by Executive for or on behalf of SHO, are hereby assigned to SHO, including Executive’s entire rights, title and interest. Executive will promptly disclose such invention or expression of an idea to Executive’s management and will, upon request, promptly execute a specific written assignment of title to SHO. If Executive currently holds any inventions or expressions of an idea, regardless of whether they were published or filed with the U.S. Patent and Trademark Office or the U.S. Copyright Office, or is under contract to not so assign, Executive will list them on the last page of this Agreement.
|
4.
|
Protective Covenants
. Executive acknowledges that this Agreement provides for additional consideration beyond what SHO is otherwise obligated to pay to Executive. In consideration of the opportunity to receive the Severance Benefits, and other good and valuable consideration, Executive agrees to the following:
|
5.
|
Irreparable Harm
. Executive acknowledges that irreparable harm would result from any breach by Executive of the provisions of this Agreement, including Sections 4(a), 4(b), 4(c) and 4(d), and that monetary damages alone would not provide adequate relief for any such breach. Accordingly, if Executive breaches or threatens to breach this Agreement, Executive consents to injunctive relief in favor of SHO without the necessity of SHO posting a bond. Moreover, any award of injunctive relief will not preclude SHO from seeking or recovering any lawful compensatory damages on account of any harm which result from a breach
of this Agreement, including a forfeiture of any future payments otherwise due hereunder, and a return of any payments and benefits already received by Executive under this Agreement.
|
6.
|
Non-Disparagement
. Subject to Section 11, Executive will not take any actions that would reasonably be expected to be detrimental to the interests of SHO nor make derogatory statements, either written or oral to any third party, or otherwise publicly disparage SHO or its products, services, or present or former employees, officers or directors, and will not authorize others to make such derogatory or disparaging statements on Executive’s behalf. This provision does not, and is not intended to, preclude Executive from entering into any relationship with a SHO Competitor or SHO Vendor if such relationship is permissible under Section 4(c) or 4(d) and does not, and is not intended to, preclude Executive from providing truthful
|
7.
|
Cooperation.
Executive agrees, without receiving additional compensation, to fully and completely cooperate with SHO both during and after the period of employment with SHO (including any Salary Continuation Period), with respect to matters that relate to such period of employment, in all investigations, potential litigation or litigation in which SHO is involved or may become involved other than any such investigations, potential litigation or litigation between SHO and Executive. SHO will reimburse Executive for reasonable travel and out-of-pocket expenses incurred in connection with any such investigations, potential litigation or litigation, except in the case of litigation between SHO and Executive.
|
8.
|
Future Enforcement or Remedy
. Any waiver, or failure to seek enforcement or remedy for any breach or suspected breach of any provision of this Agreement by SHO or Executive in any instance will not be deemed a waiver of such provision in the future.
|
9.
|
Acting as Witness
. Subject to Section 11, Executive agrees that both during and after the period of employment with SHO (including any Salary Continuation Period), Executive will not voluntarily act as a witness, consultant or expert for any person or party in any action against or involving SHO unless subject to judicial enforcement to appear as a fact witness only.
|
10.
|
Breach by
Executive
.
In the event of a breach by Executive of any of the provisions of this Agreement, including the non-competition provisions (Section 4) and the non-disparagement provision (Section 6) of this Agreement, the obligation of SHO to pay Salary Continuation Amount or to provide other Severance Benefits under this Agreement will immediately cease and any Salary Continuation Amount payments already received and the value of any other Severance Benefits already received will be returned by
Executive
to SHO. Further, Executive agrees that SHO will be entitled to recovery of its attorneys’ fees and other associated costs incurred as a result of any attempt to redress a breach by Executive or to enforce its rights and protect its interests under this Agreement.
|
11.
|
No Prohibition
. Subject to the next sentence, nothing in this Agreement will be construed to prohibit Executive from filing a charge with, reporting possible violations to, or participating or cooperating with any governmental agency or entity, including the Equal Employment Opportunity Commission, the Department of Justice, the Securities and Exchange Commission, Congress, or any agency Inspector General, or making other disclosures that are protected under the whistleblower, anti-discrimination, or anti-retaliation provisions of federal, state, or local law or regulation. Executive may not disclose SHO Confidential Information that is protected by the attorney-client privilege except as expressly authorized by law. Executive does not need the prior authorization of SHO to make any such reports or disclosures, and Executive is not required to notify SHO that Executive has made such reports or disclosures.
|
12.
|
Severability
. If any provision or provisions of this Agreement is found invalid, illegal, or unenforceable, in whole or in part, then such provision or provisions will be modified or restricted so as to effectuate as nearly as possible in a valid and
enforceable
way the provisions hereof, or will be deemed excised from this Agreement, as the case may require, and this Agreement will be construed and enforced to the maximum extent permitted by law, as if such provision or provisions had
been originally incorporated herein as so modified or restricted or as if such provision or provisions had not been originally incorporated herein, as the case may be.
|
13.
|
Employment-at-Will
. This Agreement does not constitute a contract of employment, and Executive acknowledges that Executive’s employment with SHO is terminable “at-will” by either party at any time with or without cause and with or without notice.
|
14.
|
Other Plans, Programs, Policies and Practices
. If any provision of this Agreement conflicts with any other plan, programs, policy, practice or other SHO document, then the provisions of this Agreement will control, except as otherwise precluded by law. Executive will not be eligible for any benefits under
|
15.
|
Entire Agreement
. This Agreement, including the appendices hereto, contains and comprises the entire understanding and agreement between Executive and SHO and fully supersedes any and all other prior agreements or understandings between Executive and SHO (including Executive’s Executive Severance Agreement dated August 2, 2012 between Executive and Sears Holdings Corporation, which had been assigned to, and assumed by, SHO), in each case with respect to the subject matter contained herein, and may be amended only by a writing signed by (a) one of the
Vice President of Human Resources or the Vice President, General Counsel and Secretary (or equivalent) of SHO and (b) Executive.
|
16.
|
Tax Withholding
. Any compensation paid or provided to
Executive
under this Agreement will be subject to any applicable federal, state or local income and employment tax withholding requirements.
|
17.
|
Notices
. All notices and other communications hereunder will be in writing and will be given by hand delivery to the other parties or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
|
18.
|
Assignment
. SHO may assign its rights under this Agreement to any successor in interest, whether by merger, consolidation, sale of assets, or otherwise. This Agreement will be binding whether it is between SHO and Executive or between any successor or assignee of SHO and Executive.
|
19.
|
Section 409A Compliance
.
To the extent that a payment or benefit under this Agreement is subject to Code Section 409A, it is intended that this Agreement as applied to that payment or benefit comply with the requirements of Code Section 409A, and the Agreement will be administered and interpreted consistent with this intent. If the Sixty (60)-Day Period following a Separation from Service begins in one calendar year and ends in a second calendar year (a “
Crossover 60-Day Period
”) and if there are any payments due Executive under this Agreement that are: (i) conditioned on Executive signing and not revoking a release of claims and (ii) otherwise due to be paid during the portion of the Crossover 60-Day Period that falls within the first year thereof, then such payments will be delayed and paid in a lump sum during the portion of the Crossover 60-Day Period that falls within the second year. Executive’s right to receive installment payments pursuant to this Agreement will be treated as a right to receive a series of separate and distinct payments.
|
20.
|
Construction and Interpretation
. In this Agreement (1) “
includes
” and “
including
” are inclusive and mean, respectively, “includes without limitation” and “including without limitation,” (2) “
or
” is disjunctive but not necessarily exclusive, (3) “
will
” expresses an imperative, an obligation, and a requirement, (4) numbered “
Section
” references refer to sections of this Agreement unless otherwise specified, (5) section headings are for convenience only and will have no interpretive value, and (6) unless otherwise indicated all references to a number of days will mean calendar (and not business) days and all references to months or years will mean calendar months or years.
|
21.
|
Counterparts
. This Agreement may be executed in one or more counterparts, which together will constitute a valid and binding agreement.
|
22.
|
Right to Jury
. Executive agrees to waive any right to a jury trial on any claim contending that this Agreement or the General Release and Waiver is illegal or unenforceable in whole or in part, and Executive agrees to try any claims brought in a court or tribunal without
use of a jury or advisory jury. Further, should any claim arising out of Executive’s employment, termination of employment or Salary Continuation Period (if any) be found by a court or tribunal of competent jurisdiction to not be released by the General Release and Waiver, Executive agrees to try such claim to the court or tribunal without
|
23.
|
Governing Law
. This Agreement will be governed under the internal laws of the state of Illinois without regard to principles of conflicts of laws. Executive agrees that the state and federal courts located in the state of Illinois will have exclusive jurisdiction in any action, lawsuit or proceeding based on or arising out of this Agreement, and Executive hereby (a) submits to the personal jurisdiction of such courts, (b) consents to the service of process in connection with any action, suit, or proceeding against Executive, and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction, venue or service of process.
|
EXECUTIVE
________________
________________
|
SEARS HOMETOWN AND OUTLET STORES, INC.
By:
_______________
Philip Etter
Vice President, Human Resources
|
|
|
•
|
A
nnual Base Salary: $280,000.
|
•
|
Annual Incentive Plans
|
•
|
You will be eligible to participate in the
Sears Hometown and Outlet Stores, Inc. Annual Incentive Plan
("SHO AIP") with an annual incentive opportunity of 50% of your base salary. Any incentive payable with respect to a fiscal year will be paid by April 15th of the following fiscal year, provided that you are actively employed at the payment date. Further details regarding your 2012 SHO AI P target award will be provided to you following
approval
of the program.
|
•
|
With respect to your participation under the
Sears Holdings Corporation Annual Incentive Plan
("SHC AIP") for the 2012 fiscal year, upon the Spin-off, your participation in the 2012 SHC AIP will transition to the SHO A I P as follows:
|
•
|
For the I
st
and 2"d fiscal quarters of 2012, the portion of your target incentive award (equivalent to I 0%) that is based on the quarterly SHC EBITDA measure wi ll be determined based on actual performance during the 1
st
and 2nd quarters. If any payout has been earned, it will be paid to you by SHO under the SHO AIP in April 2013, provided that you are act i vel y employed by SHO as of the payment date. The SHC EBITDA gate will continue to need to be attained before any payout is earned. The quarterly SHC EBITDA measure will not be a component of your 2012 annual incentive for the 3d and 4th fiscal quarters of 2012. Instead, the remaining 15% weighted incentive based on the quarterly SHC EBITDA measure for that ti me wi l l be converted to a new measure of SHO EBITDA under the 2012 SHO A IP.
|
•
|
The 75% of your target incentive that is currently based on the Hometown (including Hardware) BOP Total with respect to the fiscal 201 2 period prior to Spin-off wi l l be
converted
to a new measure of SHO EBITDA under the 2012 SHO A I P.
|
•
|
Long-Term Incentive Plans
|
•
|
Participation in the
Sears Hometown and Outlet Stores, Inc. Long-Term Incentive Program
("SHO LTIP"). You will first become eligible to participate in a SHO LTIP starting with the 2012 SHO LTIP when finalized and approved. Your target award amount will be 50% of your base salary. Further details regarding your 2012 target award under the SHO LTIP will be provided to you following the approval of the program.
|
•
|
With respect to your participation in the outstanding
Sears Holdings Corporation Long-Term Incentive Programs
("SHC LTIPs"), you currently participate in the 2010 and 2011 SHC LTIPs with a target incentive percentage of 50% of base salary (at the time of the LTIP award) under each plan. Upon the Spin-off, your participation in these programs will transition as follows:
|
•
|
Your participation under 2010 and 201 1 SHC LTIPs will be closed out as of the effective date of the Spin-off and any incentive that may become payable (as explained below) will be payable under the SHO LTIP.
|
•
|
2010 SHC LTIP: Performance from fiscal year 2010 through the 2"d fiscal quarter end of 2012 will be determined. If any incentive has been earned, it will be payable to you in April 2013.
|
•
|
2011 SHC LTIP: Performance from fiscal year 201 1 through the 2"d fiscal quarter end of 2012 will be determined. If any i ncentive has been earned, it will be payable to you i n April 2014.
|
•
|
Any payouts under the 20 I O LTIP or 201 1 LTIP will be payable to you under the terms of the SHO LTIP. You must be actively employed by SHO to be eligible to receive a payout. In addition, any payout of these amounts wil l be pro-rated based on the n umber of eligible days worked at SHC and SHO, as applicable, during the performance period for each LTIP.
|
•
|
Unvested Cash Award
|
•
|
Prior to the effective date of the Spin-Off, you received the following Special Retention Award from SHC that is currently unvested.
|
Grant Date
|
Vest Date
|
Cash Retention
|
8/2/12
|
8/2/13
|
$70,000
|
8/2/12
|
8/2/14
|
$70,000
|
•
|
Under the terms of your award agreement, this award would be forfeited upon the Spin-Off. However, SHO will replace this award and will be payable by SHO provided you remain employed by SHO through the vesti ng date of the award.
|
•
|
Executive Severance Agreement
|
•
|
Your current Executive Severance Agreement ("Agreement") with SHC will be assigned to and assumed by SHO effective as of the Spin-off i n accordance with Section 20 of the Agreement. Therefore, if post-Spin-off your employment with SHO is terminated by SHO (other than for Cause, death or Disability) or by you for Good Reason (as such capitalized terms are defined i n the Agreement), you will receive six (6) months of salary continuation, based on to your base salary at the ti me of termination, subject to mitigation. Under the Agreement, you agree, among other things, not to disclose confidential information and for twelve ( 12) months fol lowing term i nation of employment not to solicit employees. You also agree not to aid, assist or render services for any ''Sears Competitor" or "Sears Vendor" (as such terms are defined i n the Agreement) for six (6)
months following termination of employment. The non-disclosure, non-solicitation, non-compete and non-affiliation provisions apply regardless of whether you are eligible for severance benefits under this Agreement. A copy of your fully executed Agreement is enclosed for your information.
|
•
|
Other
|
•
|
On a fiscal year basis, you will continue to be eligible to receive three (3) weeks paid vacation. Added to this, you will qualify for six (6) paid National Holidays each year. You also will be eligible for up to four (4) personal days per year.
|
•
|
Upon the Spin-off
,
you will continue to be eligible to participate in all retirement, health and welfare programs made available or sponsored by SHO on a basis no less favorable than other SHO executives at your level, in accordance with the applicable terms, conditions and availability of those programs. These benefits will be provided under SHC benefit programs during a benefits transition period, and thereafter SHO intends to sponsor or make available substantially similar benefit programs
.
|
Signature:
/s/ WILL POWELL
Will Powell
|
Title: Director and Chief Executive Officer and President
|
Signature:
/s/ E. J. BIRD
E.J. Bird
|
Title: Chairman of the Board
|
Signature:
/s/ JAMES F. GOOCH
James F. Gooch
|
Title: Director
|
|
|
|
|
|
Signature:
/s/ JOSEPHINE LINDEN
Josephine Linden
|
Title: Director
|
Signature:
/s/ WILLIAM K. PHELAN
William K. Phelan
|
Title: Director
|
Signature:
/s/ DAVID ROBBINS
David Robbins
|
Title: Director
|
1.
|
I have reviewed this Annual Report on Form 10-K of Sears Hometown and Outlet Stores, Inc.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
March 31, 2016
|
|
|
|
|
/s/ WILL POWELL
|
|
|
Will Powell
|
|
|
|
|
|
Chief Executive Officer and President
|
|
|
Sears Hometown and Outlet Stores, Inc.
|
|
1.
|
I have reviewed this Annual Report on Form 10-K of Sears Hometown and Outlet Stores, Inc.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
March 31, 2016
|
|
|
|
|
/s/ RYAN D. ROBINSON
|
|
|
Ryan D. Robinson
|
|
|
|
|
|
Senior Vice President, Chief Administrative Officer, and Chief Financial Officer
|
|
|
Sears Hometown and Outlet Stores, Inc.
|
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
March 31, 2016
|
|
|
|
|
|
/s/ WILL POWELL
|
|
|
Will Powell
|
|
|
Chief Executive Officer and President
|
|
/s/ RYAN D. ROBINSON
|
|
|
Ryan D. Robinson
|
|
|
Senior Vice President, Chief Administrative Officer, and Chief Financial Officer
|
|