Sears 2007 Annual Report Download - page 86

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
Comprehensive Income and Accumulated Other Comprehensive Loss
The following table shows the computation of comprehensive income:
millions
February 2,
2008
February 3,
2007
January 28,
2006
Net income ................................................... $826 $1,492 $ 857
Other comprehensive income/(loss):
Minimum pension liability adjustment, net of tax ..................... — 174 (110)
Pension and postretirement adjustments, net of tax .................... 53 — —
Deferred gain/(loss) on derivatives ................................. 1 (1) 3
Cumulative translation adjustments ................................ (44) 19 (24)
Other comprehensive income/(loss) ................................ 10 192 (131)
Total comprehensive income ..................................... $836 $1,684 $ 726
The following table displays the components of accumulated other comprehensive income (loss):
millions
February 2,
2008
February 3,
2007
January 28,
2006
Minimum pension liability, net of tax .............................. $— $— $(187)
Pension and postretirement adjustments, net of tax .................... 115 62 —
Cumulative unrealized derivative gain .............................. 3 2 3
Currency translation adjustments .................................. (49) (5) (24)
Accumulated other comprehensive income (loss) ..................... $ 69 $ 59 $(208)
NOTE 13—BANKRUPTCY CLAIMS RESOLUTION AND SETTLEMENTS
Background
On May 6, 2003, Kmart Corporation (the “Predecessor Company”), a predecessor operating company of
Kmart, emerged from reorganization proceedings under Chapter 11 of the federal bankruptcy laws pursuant to
the terms of a plan of reorganization (the “Plan of Reorganization”). The Predecessor Company is a direct,
wholly-owned subsidiary of Kmart and an indirect, wholly-owned subsidiary of Holdings. Upon emergence, all
of the then outstanding equity securities of the Predecessor Company, as well as substantially all of its
pre-petition liabilities were cancelled. On the day of emergence, 89.7 million shares of Kmart common stock and
options to purchase 8.2 million shares of Kmart common stock were issued pursuant to the Plan of
Reorganization, of which 31.9 million shares of the Kmart common stock issued were allocated to satisfy the
pre-petition claims of unsecured Class 5 creditors.
In connection with the emergence from Chapter 11, Kmart reflected the terms of the Plan of Reorganization
in its consolidated financial statements, applying the terms of SOP 90-7 with respect to financial reporting upon
emergence from Chapter 11 (“Fresh-Start Accounting”). Upon applying Fresh-Start Accounting, a new reporting
entity was deemed to have been created and the recorded amounts of assets and liabilities were adjusted to reflect
their estimated fair values.
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