Sears 2008 Annual Report Download - page 77

Download and view the complete annual report

Please find page 77 of the 2008 Sears annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 103

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
NOTE 8—EARNINGS PER SHARE
The following tables set forth the components used to calculate basic and diluted earnings per share.
millions except earnings per share 2008 2007 2006
Basic weighted average shares ................................. 127.0 144.7 155.6
Dilutive effect of stock options ................................ — 0.1 0.1
Diluted weighted average shares ............................... 127.0 144.8 155.7
Net income ................................................ $ 53 $ 826 $1,492
Earnings per share
Basic ................................................. $ 0.42 $ 5.71 $ 9.59
Diluted ............................................... $ 0.42 $ 5.70 $ 9.58
The computation of dilutive shares outstanding excludes out-of-the-money stock options because such
outstanding options’ exercise prices are greater than the average market price of our common shares and,
therefore, the effect would be antidilutive.
NOTE 9—SHAREHOLDERS’ EQUITY
Stock-based Compensation
We account for stock-based compensation using the fair value method in accordance with SFAS
No. 123(R). We recorded $1 million, $29 million, and $21 million in total compensation expense relative to
stock-based compensation arrangements during fiscal 2008, fiscal 2007, and fiscal 2006, respectively. As of
January 31, 2009, we had $15 million in total compensation cost related to nonvested awards, which is expected
to be recognized over approximately the next 3 years.
We do not currently have an employee stock option plan. As of January 31, 2009, all outstanding options
relate to grants made either prior to, or in connection with, the Merger. Changes in employee stock options for
fiscal 2008, fiscal 2007, and fiscal 2006 were as follows:
2008 2007 2006
(Shares in thousands) Shares
Weighted-
Average
Exercise
Price Shares
Weighted-
Average
Exercise
Price Shares
Weighted-
Average
Exercise
Price
Beginning of year balance ...................... 350 $112.90 350 $112.90 350 $112.90
Granted ..................................... — — — — — —
Exercised .................................... — — — — — —
Cancelled/Forfeited ............................ — — — — — —
End of year balance ........................ 350 $112.90 350 $112.90 350 $112.90
Exercisable .................................. 350 $112.90 350 $112.90 275 $119.52
Fair value of options granted during the year ........ $ — $ — $ —
77