Sears 2008 Annual Report Download - page 10

We could incur charges due to impairment of goodwill, intangible and long-lived assets.
At January 31, 2009 we had goodwill and intangible asset balances of $4.7 billion, which are subject to
periodic testing for impairment. Our long-lived assets, primarily stores, also are subject to periodic testing for
impairment. A significant amount of judgment is involved in the periodic testing. Failure to achieve sufficient
levels of cash flow at reporting units could result in impairment charges for goodwill and intangible assets or
fixed asset impairment for long-lived assets. Impairment charges, if any, resulting from the periodic testing are
non-cash. Our goodwill impairment analysis also includes a comparison of the aggregate estimated fair value of
all reporting units to our total market capitalization. Therefore, a significant and sustained decline in our stock
price could result in goodwill impairment charges. During times of financial market volatility, significant
judgment is used to determine the underlying cause of the decline and whether stock price declines are short-term
in nature or indicative of an event or change in circumstances.
The loss of key personnel may disrupt our business and adversely affect our financial results.
We depend on the contributions of key personnel, including Edward S. Lampert (chairman) and other key
employees, for our future success. Although certain executives have employment agreements with us, changes in
our senior management and any future departures of key employees may disrupt our business and materially
adversely affect our results of operations.
Affiliates of our Chairman, whose interests may be different than your interests, exert substantial
influence over our Company.
Affiliates of Edward S. Lampert, the Chairman of our Board of Directors, beneficially own approximately
54% of the outstanding shares of our common stock. These affiliates are controlled, directly or indirectly, by
Mr. Lampert. Accordingly, these affiliates, and thus Mr. Lampert, have substantial influence over many, if not
all, actions to be taken or approved by our shareholders, including the election of directors and any transactions
involving a change of control.
The interests of these affiliates, which have investments in other companies, may from time to time diverge
from the interests of our other shareholders, particularly with regard to new investment opportunities. This
substantial influence may have the effect of discouraging offers to acquire our Company because the
consummation of any such acquisition would likely require the consent of these affiliates.
We may be subject to product liability claims if people or properties are harmed by the products we sell or
the services we offer.
Some of the products we sell may expose us to product liability claims relating to personal injury, death, or
property damage caused by such products, and may require us to take actions such as product recalls. We also
provide various services, which could also give rise to such claims. Although we maintain liability insurance, we
cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will
continue to be available to us on economically reasonable terms, or at all.
We may be subject to periodic litigation and other regulatory proceedings. These proceedings may be
affected by changes in laws and government regulations or changes in the enforcement thereof.
From time to time, we may be involved in lawsuits and regulatory actions relating to our business, certain of
which may be in jurisdictions with reputations for aggressive application of laws and procedures against
corporate defendants. We are impacted by trends in litigation, including class-action allegations brought under
various consumer protection and employment laws, including wage and hour laws. Due to the inherent
uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any
such proceedings. An unfavorable outcome could have a material adverse impact on our business, financial
condition and results of operations. In addition, regardless of the outcome of any litigation or regulatory
proceedings, these proceedings could result in substantial costs and may require that we devote substantial
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