SHLDQ - Sears Holdings Corp

[muscleman]

re Baker Street -- I think it's interesting to note the attached screen shot... the 60s and 70s see to be the only ones with enough open interest to accommodate 70,000 contracts...

 

Perhaps they bought the 60s and sold the 70s so that they could reduce their actual outlay?

 

A while ago I read some posters in this thread saying Baker street bought a lot of $60 calls expiring within 60 days. This means they are close to expiration now.

[BTShine]

re Baker Street -- I think it's interesting to note the attached screen shot... the 60s and 70s see to be the only ones with enough open interest to accommodate 70,000 contracts...

 

Perhaps they bought the 60s and sold the 70s so that they could reduce their actual outlay?

 

A while ago I read some posters in this thread saying Baker street bought a lot of $60 calls expiring within 60 days. This means they are close to expiration now.

 

 

I believe the wording is something like "the options are exercisable within the next 60 days."  I'm not a specialist in these filings, but I've took this to mean that Baker Street has the ability to exercise (aka exercisable) these options in the next 60 days.  But, they are not obligated to exercise them, nor do the options necessarily expire, within the next 60 days.  That is a big difference to me.  January 2015 LEAPS are exercisable within the next 60 days, but we all know they're still good until January 2015. 

 

[muscleman]

re Baker Street -- I think it's interesting to note the attached screen shot... the 60s and 70s see to be the only ones with enough open interest to accommodate 70,000 contracts...

 

Perhaps they bought the 60s and sold the 70s so that they could reduce their actual outlay?

 

A while ago I read some posters in this thread saying Baker street bought a lot of $60 calls expiring within 60 days. This means they are close to expiration now.

 

 

I believe the wording is something like "the options are exercisable within the next 60 days."  I'm not a specialist in these filings, but I've took this to mean that Baker Street has the ability to exercise (aka exercisable) these options in the next 60 days.  But, they are not obligated to exercise them, nor do the options necessarily expire, within the next 60 days.  That is a big difference to me.  January 2015 LEAPS are exercisable within the next 60 days, but we all know they're still good until January 2015.

 

Oh, ok. Then this is not a big problem for them. Why would they said exercisable within 60 days? That seems to imply it is no longer exercisable after 60 days. That is very weird.

[muscleman]

http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9173227-924-570201&type=sect&TabIndex=2&companyid=656789&ppu=%252fdefault.aspx%253fsym%253dSHLD

 

Can anyone please help me understand Note 20 in this 10k? (In case you can't find it, open the page, CTRL+F, type in note 20, press ENTER :))

Bruce said recently that he wanted to give us a hint and we should check the assets and liabilities of Guarantor Subsidiaries and Non-Guarantor Subsidiaries. I found it here, but can't understand what it means.

 

This is also what Old West talked about:

Eddie Lampert has structured the company advantageously. Many of the company’s best assets are unencumbered by the bulk of the company’s liabilities. We think the subsidiaries all have positive equity, but it’s a useful exercise to consider worst case runoff values if the stakes in Sears Canada, Kenmore, Craftsman, DieHard, and some of the real estate are directly distributed to shareholders through spinoffs or creative re-financings.

 

Could anyone please help me understand this? Thanks a lot in advance! :)

[merkhet]

I've created a screenshot of the assets & liabilities broken out by parent, guarantor & non-guarantor subsidiaries. 

 

(1) Take a look at the receivables & the payables. 

(2) Take a look at the equity value of the non-guarantor subsidiaries.

(3) Figure out the "real" equity value of the non-guarantor subsidiaries -- do they really need such high receivables?

 

Next, take a look at the statement of cash flows

 

(4) Figure out how much the non-guarantor subsidiary is earning

(5) Figure out (3) / (4) for an ROE number

 

The biggest issue with Sears has always been the "when" and not the "what."

 

(Edited to put the screenshots in as attachments.)

[nsa122]

Forgive my ignorance, but wouldn't the real estate value be listed under "Total property and equipment, net" which is listed as $4.8B for the Guarantor and $1.7B for the Non-Guarantor subsidiaries, suggesting that most of the real estate is held in the former?  Or am I making incorrect assumptions?

Also, is there any way to get a handle on what the Non-Guarantor subsidiaries actually are? Stupid question, but can you just put all your crappy stores in the guarantor subsidiary? Thanks in advance.

[muscleman]

I've created a screenshot of the assets & liabilities broken out by parent, guarantor & non-guarantor subsidiaries. 

 

(1) Take a look at the receivables & the payables. 

(2) Take a look at the equity value of the non-guarantor subsidiaries.

(3) Figure out the "real" equity value of the non-guarantor subsidiaries -- do they really need such high receivables?

 

Next, take a look at the statement of cash flows

 

(4) Figure out how much the non-guarantor subsidiary is earning

(5) Figure out (3) / (4) for an ROE number

 

The biggest issue with Sears has always been the "when" and not the "what."

 

(Edited to put the screenshots in as attachments.)

 

This is confusing to me.

So the non-guarantor has 25 bn receivables and the guarantor has 25 bn payables. I guess this is somewhat like an intercompany loan?

If we reduce that receivable from the book value of the non-guarantor, then it has 3 bn book value and it is earning 900 m per year? That seems very high ROE.

 

But I guess the profitability of the non-guarantor depends on the guarantor. Maybe the guarantor is the biggest customer of the non-guarantor, so if the guarantor dies in the worst case scenario, then probably the non-guarantor will lose significant business too?

 

On the asset side, I still don't understand why the non-guarantor has the best assets. It is not disclosed here.

[merkhet]

The brands (KCD) & real estate reside in the non-guarantor subsidiaries.  Also, the "net" at the end means net of depreciation, which grossly underestimates the value of the real estate.

 

You have to figure out what business the non-guarantor is in -- before you ask whether the value of the non-guarantor subsidiaries depends on the guarantor subsidiaries.  Does it currently?  Probably.  Must it always?  Not necessarily.

[muscleman]

The brands (KCD) & real estate reside in the non-guarantor subsidiaries.  Also, the "net" at the end means net of depreciation, which grossly underestimates the value of the real estate.

 

You have to figure out what business the non-guarantor is in -- before you ask whether the value of the non-guarantor subsidiaries depends on the guarantor subsidiaries.  Does it currently?  Probably.  Must it always?  Not necessarily.

 

Sure. Could you please tell me where to find more info about this, such as what assets are in the non-guarantor and what are in the guarantor?

[merkhet]

The brands (KCD) & real estate reside in the non-guarantor subsidiaries.  Also, the "net" at the end means net of depreciation, which grossly underestimates the value of the real estate.

 

You have to figure out what business the non-guarantor is in -- before you ask whether the value of the non-guarantor subsidiaries depends on the guarantor subsidiaries.  Does it currently?  Probably.  Must it always?  Not necessarily.

 

Sure. Could you please tell me where to find more info about this, such as what assets are in the non-guarantor and what are in the guarantor?

 

I don't know if this is the easiest way, but it's the way that I have done it. I know there are other Sears followers on this board, so they should feel free to chime in at any time.

 

(1) List of subsidiaries -- http://www.sec.gov/Archives/edgar/data/1310067/000131006713000013/shldex21201210k.htm

(2) The $1.25 billion note for Sears -- http://www.sec.gov/Archives/edgar/data/1310067/000119312510230322/0001193125-10-230322-index.htm -- look under Schedule A and cross-reference

(3) Take the list of non-guarantor subsidiaries and do some Google searching (http://en.wikipedia.org/wiki/Sears_Holdings is also helpful)

 

As an example, take a look at the following:

 

(1) A Google search of "sears KCP IP" -- http://bit.ly/12Q4RUl

(2) Then you start to search for the May 2006 transaction, but that'll come up empty so you go to the 10-K

(3) And you'll find some language on page 46 of the 2006 10-K -- http://www.sec.gov/Archives/edgar/data/1310067/000119312507066067/d10k.htm

 

And then you keep following the rabbit down the hole... :)

[Guest wellmont]

lampert is going to be on the CC Thursday after the close.

[BTShine]

Yeah, that should be interesting to listen to. 

 

Does anyone else think that their conference call will discuss some of their plans to "generate at least $500 million of additional liquidity through monetization of assets over the next twelve months" as they mentioned in their Q4/Year End press release?  That's my guess, but who knows...

 

 

[muscleman]

The brands (KCD) & real estate reside in the non-guarantor subsidiaries.  Also, the "net" at the end means net of depreciation, which grossly underestimates the value of the real estate.

 

You have to figure out what business the non-guarantor is in -- before you ask whether the value of the non-guarantor subsidiaries depends on the guarantor subsidiaries.  Does it currently?  Probably.  Must it always?  Not necessarily.

 

Sure. Could you please tell me where to find more info about this, such as what assets are in the non-guarantor and what are in the guarantor?

 

I don't know if this is the easiest way, but it's the way that I have done it. I know there are other Sears followers on this board, so they should feel free to chime in at any time.

 

(1) List of subsidiaries -- http://www.sec.gov/Archives/edgar/data/1310067/000131006713000013/shldex21201210k.htm

(2) The $1.25 billion note for Sears -- http://www.sec.gov/Archives/edgar/data/1310067/000119312510230322/0001193125-10-230322-index.htm -- look under Schedule A and cross-reference

(3) Take the list of non-guarantor subsidiaries and do some Google searching (http://en.wikipedia.org/wiki/Sears_Holdings is also helpful)

 

As an example, take a look at the following:

 

(1) A Google search of "sears KCP IP" -- http://bit.ly/12Q4RUl

(2) Then you start to search for the May 2006 transaction, but that'll come up empty so you go to the 10-K

(3) And you'll find some language on page 46 of the 2006 10-K -- http://www.sec.gov/Archives/edgar/data/1310067/000119312507066067/d10k.htm

 

And then you keep following the rabbit down the hole... :)

 

Thank you so much for holding me hand by hand through this exercise! I learned a lot! :)

 

The latest 10k said that "The 6  5/8% Notes are guaranteed by certain of our 100% owned domestic subsidiaries that own the collateral for the notes, as well as by Sears Holdings Management Corporation and SRAC (the “guarantor subsidiaries”)."

 

From the link that you posted, it didn't say who owns the KCD IP sub. I verified that Sears Holdings Management Corporation is owned by SHLD parent, and it didn't seem to own the KCD IP sub, so that probably implies that the parent directly owns KCD IP.

 

My other concern is that in the nightmare scenario, if the guarantor sub files for bankruptcy, and Eddie spins off KCD IP, does that constitute  fraudulent conveyance? I assume it does not, because the assets transferred out is from the parent, not from the guarantor sub, but I just want to make sure.

[dcollon]

I think you all will enjoy this commercial.

 

http://www.youtube.com/watch?v=m1yir-p68xM&feature=youtu.be

 

[Grenville]

I think you all will enjoy this commercial.

 

http://www.youtube.com/watch?v=m1yir-p68xM&feature=youtu.be

 

Hilarious!!! I laughed even more the second time I saw it. Thanks!

[Guest wellmont]

I love the out of the box thinking. trying new things. being creative. being innovative. not being me too.

[CorpRaider]

I'm not claiming to know the answer to your fraudulent conveyance question but I think I recall reading something about the IP and brands being moved into "bankruptcy remote" subsidiaries in connection with the SHOS rights offering when they were outlining all of those steps.  You might review some of those materials maybe pull them up and work search the pdfs.  At least that might give you an indication of what they intended for the structure to accomplish.  Eddie got some questions about the separation of the IP and brands during the last earnings call as well, I think.  But I don't remember his responses being particularly helpful.  He did try to dispell the theory that he wants to ultimately end up with nothing but a brand licensing and IP holding co, if I recall correctly.  The mofo just loves selling appliances and auto parts, I guess.

[JRH]

The mofo just loves selling appliances and auto parts, I guess.

 

I laughed MUCH harder at this than at the commercial.  Just me, I guess.

 

Earnings are out, stock not happy:

http://searsholdings.mediaroom.com/index.php?s=16310&item=137202

[Guest wellmont]

The mofo just loves selling appliances and auto parts, I guess.

 

I laughed MUCH harder at this than at the commercial.  Just me, I guess.

 

Earnings are out, stock not happy:

http://searsholdings.mediaroom.com/index.php?s=16310&item=137202

 

and the stock is getting crushed. which is par for the course after a shld earnings release. :) but really the worse things get the faster he should act in trying to create value with the asset base. one would think. but eddie may want to drain the swamp Again first....

[Guest wellmont]

this company is not even producing adjusted ebitda anymore. eddie is certainly way more patient than the minority shareholders! :)

[JRH]

this company is not even producing adjusted ebitda anymore. eddie is certainly way more patient than the minority shareholders! :)

 

It's remarkable to view this in light of the 80/20 theory (20% of the stores hold 80% of the value).  If you believe the profitable stores are also largely the ones where the real estate is most valuable, then that means something like 80% of the stores are bleeding red ink by Sears' own preferred profitability metric.

 

FYI, Sears employs ~275,000 people.  That's a lot of jobs on life support.

[Guest wellmont]

this company is not even producing adjusted ebitda anymore. eddie is certainly way more patient than the minority shareholders! :)

 

It's remarkable to view this in light of the 80/20 theory (20% of the stores hold 80% of the value).  If you believe the profitable stores are also largely the ones where the real estate is most valuable, then that means something like 80% of the stores are bleeding red ink by Sears' own preferred profitability metric.

 

FYI, Sears employs ~275,000 people.  That's a lot of jobs on life support.

 

I really think he wants to buy more stock under $50. and when he gets the amount of stock he wants then he will start creating value. he is draining the swamp of all shareholders who lack infinite patience. I don't understand why he is not selling more assets. this is a sellers market and he does nothing.

[BargainValueHunter]

this company is not even producing adjusted ebitda anymore. eddie is certainly way more patient than the minority shareholders! :)

 

 

 

It's remarkable to view this in light of the 80/20 theory (20% of the stores hold 80% of the value).  If you believe the profitable stores are also largely the ones where the real estate is most valuable, then that means something like 80% of the stores are bleeding red ink by Sears' own preferred profitability metric.

 

FYI, Sears employs ~275,000 people.  That's a lot of jobs on life support.

 

I really think he wants to buy more stock under $50. and when he gets the amount of stock he wants then he will start creating value. he is draining the swamp of all shareholders who lack infinite patience. I don't understand why he is not selling more assets. this is a sellers market and he does nothing.

 

Reminds me of Loews during 2009. Many golden opportunities flew out of the window for the sake of...I don't know what!

[Guest hellsten]

I really think he wants to buy more stock under $50. and when he gets the amount of stock he wants then he will start creating value. he is draining the swamp of all shareholders who lack infinite patience. I don't understand why he is not selling more assets. this is a sellers market and he does nothing.

 

I hope he mentions the Sith Lord in the next earnings call.

[muscleman]

The mofo just loves selling appliances and auto parts, I guess.

 

I laughed MUCH harder at this than at the commercial.  Just me, I guess.

 

Earnings are out, stock not happy:

http://searsholdings.mediaroom.com/index.php?s=16310&item=137202

 

 

The decline at Sears Domestic of 2.4% predominately was driven by weather related declines in the lawn & garden category. Excluding lawn & garden, comparable store sales would have increased 0.3%.

 

So things are actually stabilizing at least.

I think with their new lease to own program, Q2 results could be better. :)