Sears 2007 Annual Report Download - page 87

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
Claims Resolution
We have made significant progress in the reconciliation and settlement of various classes of claims
associated with the discharge of the Predecessor Company’s liabilities subject to compromise pursuant to the
Plan of Reorganization. Differences between claim amounts filed and our estimates are being investigated and
resolved through the claims resolution process. Since June 30, 2003, the first distribution date established in the
Plan of Reorganization, approximately 29.7 million shares of the 31.9 million shares set aside for distribution
have been distributed to holders of Class 5 claims, and approximately $9 million and $4 million in cash has been
distributed to the holders of Class 6 and to the holders of Class 7 claims, respectively. Further, we pro-rated
approximately $5 million from the settlement that the Creditor Trust received to holders of class 4, 5, 6, 8, 10 and
11 claims. Based on the Class 5 claims resolved and distributed to date, we believe that the ultimate amount of
allowed Class 5 claims will be less than the $4.3 billion provided for in the Plan of Reorganization. The
remaining shares left over after all Class 5 claims are ultimately settled will be distributed to the Class 5 creditors
in proportion to their allowed claims.
Bankruptcy-Related Settlements
In fiscal 2007, fiscal 2006, and fiscal 2005, we recognized recoveries of $18 million, $14 million, and
$40 million, respectively, from vendors who had received cash payments for pre-petition obligations (“critical
vendor claims”) or preference payments. In conjunction with these recoveries, we were assigned 205,317 shares
of common stock (weighted average price of $143.09 per share) with an approximate value of $29 million for
fiscal 2007.
NOTE 14—INCOME TAXES
millions 2007 2006 2005
Income before income taxes
U.S. ...................................................... $ 953 $2,125 $1,467
Foreign ................................................... 499 346 495
Total ................................................. $1,452 $2,471 $1,962
Income tax expense
Current:
Federal ............................................... $ 76 $ 426 $ 251
State and local ......................................... 43 75 81
Foreign ............................................... 98 80 213
Total ..................................................... 217 581 545
Deferred:
Federal ............................................... 253 258 227
State and local ......................................... 2 44 19
Foreign ............................................... 78 50 (76)
333 352 170
Total ..................................................... $ 550 $ 933 $ 715
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