Sears 2008 Annual Report Download - page 48

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements made in this Annual Report on Form 10-K and in other public announcements by us
contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are subject to risks and uncertainties that may cause our actual results, performance
or achievements to be materially different from any future results, performance or achievements expressed or
implied by these forward-looking statements. Forward-looking statements include information concerning our
future financial performance, business strategy, plans, goals and objectives. Statements preceded or followed by,
or that otherwise include, the words “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,”
“forecast,” “is likely to” and similar expressions or future or conditional verbs such as “will,” “may” and “could”
are generally forward-looking in nature and not historical facts. Such statements are based upon the current
beliefs and expectations of Holdings’ management and are subject to significant risks and uncertainties. Actual
results may differ materially from those set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ from those set forth in the forward-
looking statements: our ability to offer merchandise and services that our customers want, including our
proprietary brand products; our ability to successfully implement initiatives to improve inventory management
and other capabilities; competitive conditions in the retail and related services industries; worldwide economic
conditions and business uncertainty, the availability of consumer and commercial credit, changes in consumer
confidence, tastes, preferences and spending, and changes in vendor relationships; the impact of seasonal buying
patterns, including seasonal fluctuations due to weather conditions, which are difficult to forecast with certainty;
our dependence on sources outside the United States for significant amounts of our merchandise; our extensive
reliance on computer systems to process transactions, summarize results and manage our business; our reliance
on third parties to provide us with services in connection with the administration of certain aspects of our
business; impairment charges for goodwill and intangible assets or fixed-asset impairment for long-lived assets;
our ability to properly implement and realize the expected benefits from our organizational structure and
operating model; our ability to attract, motivate and retain key executives and other associates; and the outcome
of pending and/or future legal proceedings, including product liability claims and bankruptcy claims, including
proceedings with respect to which the parties have reached a preliminary settlement.
Certain of these and other factors are discussed in more detail in Item 1A of this Annual Report on Form
10-K. While we believe that our forecasts and assumptions are reasonable, we caution that actual results may
differ materially. We intend the forward-looking statements to speak only as of the time made and do not
undertake to update or revise them as more information becomes available.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We face market risk exposure in the form of interest rate risk, foreign currency risk and equity price risk.
These market risks arise from our derivative financial instruments and debt obligations.
Interest Rate Risk
We manage interest rate risk through the use of fixed and variable-rate funding and interest rate derivatives.
As of January 31, 2009, we had interest rate derivatives with a notional amount of $120 million, nominal fair
value and a weighted average remaining life of 0.9 years. All debt securities and interest-rate derivative
instruments are considered non-trading. As of January 31, 2009, 26% of our debt portfolio was variable rate.
Based on the size of this variable rate debt portfolio at January 31, 2009, which totaled approximately $751
million, an immediate 100 basis point change in interest rates would have affected annual pretax funding costs by
$7.5 million. These estimates do not take into account the effect on income resulting from invested cash or the
returns on assets being funded. These estimates also assume that the variable rate funding portfolio remains
constant for an annual period and that the interest rate change occurs at the beginning of the period.
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