Sears 2007 Annual Report Download - page 95

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
millions
2005
Kmart Sears
Sears
Holdings
Domestic Canada
Merchandise sales and services ............. $19,094 $25,868 $4,280 $49,242
Credit and financial products revenues ....... — — 213 213
Total revenues ...................... 19,094 25,868 4,493 49,455
Costs and expenses
Cost of sales, buying and occupancy .... 14,462 18,221 3,060 35,743
Selling and administrative ............. 3,804 5,968 1,120 10,892
Depreciation and amortization ......... 47 769 126 942
(Gain) loss on sales of assets ........... (40) 1 — (39)
Gain on sale of business .............. — — (317) (317)
Restructuring charges ................ 54 — 57 111
Total costs and expenses .......... 18,327 24,959 4,046 47,332
Operating income ....................... $ 767 $ 909 $ 447 $ 2,123
Total assets ............................ $ 7,325 $20,262 $2,880 $30,467
NOTE 20—LEGAL PROCEEDINGS
Pending against Sears and certain of its officers and directors are a number of lawsuits, described below,
that relate to Sears’ former credit card business and public statements about it. We believe that all of these claims
lack merit and, except as noted below, are defending against them vigorously.
•Marilyn Clark, derivatively on behalf of Sears, Roebuck and Co. v. Alan J. Lacy, et al.—On
October 23, 2002, a purported derivative suit was filed in the Supreme Court of the State of New York
(the “New York Court”) against Sears (as a nominal defendant) and certain current and former
directors seeking damages on behalf of Sears. The complaint purports to allege a breach of fiduciary
duty by the directors with respect to Sears’ management of its credit business. Two similar suits were
subsequently filed in the Circuit Court of Cook County, Illinois (the “Illinois State Court”), and a third
was filed in the United States District Court for the Northern District of Illinois. The New York Court
derivative suit was dismissed on June 21, 2004. A New York appellate court affirmed the dismissal on
December 6, 2005, and the time for further appeal has expired. The two Illinois State Court derivative
suits were dismissed on September 30, 2004. The order of dismissal became final on December 1,
2004, and the time to appeal has expired. The defendant directors filed a motion to dismiss the Illinois
federal court action on May 22, 2006. In lieu of a response, plaintiffs filed an amended complaint
seeking to correct various procedural deficiencies in their original pleading and adding Sears Holdings
Corporation as a defendant. Prior to the defendants responding to the amended complaint, the parties
had agreed to settle the matter. However, plaintiffs subsequently indicated that they were not
proceeding with the settlement and as a result, the defendants filed a motion to dismiss the amended
complaint. Briefing on the motion is scheduled to be completed by early April 2008. Meanwhile,
plaintiffs have filed a motion seeking a voluntary dismissal without prejudice.
•Thomas G. Ong for Thomas G. Ong IRA, et al. v. Sears, Roebuck & Co., et al.—On June 17, 2003, an
action was filed in the United States District Court for the Northern District of Illinois against Sears
and certain officers, purportedly on behalf of a class of all persons who, between June 21, 2002 and
October 17, 2002, purchased the 7% notes that SRAC issued on June 21, 2002. Pursuant to a
subsequently filed amended complaint, plaintiffs named as additional defendants certain former Sears
officers not originally named, SRAC and several investment banking firms, which had acted as
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