Sears 2008 Annual Report Download - page 89

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
2006
millions Kmart Sears
Sears
Holdings
Domestic Canada
Merchandise sales and services ................................. $18,647 $29,179 $5,190 $53,016
Costs and expenses
Cost of sales, buying and occupancy ........................ 14,061 20,120 3,643 37,824
Selling and administrative ................................. 3,623 6,820 1,131 11,574
Depreciation and amortization ............................. 77 927 139 1,143
Gain on sales of assets .................................... (71) (11) — (82)
Restructuring charges .................................... 9 — 19 28
Total costs and expenses .............................. 17,699 27,856 4,932 50,487
Operating income ........................................... $ 948 $ 1,323 $ 258 $ 2,529
Total assets ................................................ $ 7,750 $19,209 $2,947 $29,906
NOTE 19—LEGAL PROCEEDINGS
Maurice Levie, individually and on behalf of all others similarly situated v. Sears, Roebuck & Co., et al.—
Following the announcement of the Merger on November 17, 2004, a lawsuit was filed in the United States
District Court for the Northern District of Illinois relating to the transaction. This suit asserts claims under the
federal securities laws on behalf of a class of former Sears’ stockholders against Sears, Alan J. Lacy, Edward S.
Lampert and ESL Partners, L.P. for allegedly failing to make timely disclosure of merger discussions during the
period September 9 through November 16, 2004, and seeks damages. On July 17, 2007, the Court granted in part
and denied in part plaintiffs’ motion for class certification, certifying a class of Sears’ stockholders who sold
shares of Sears’ stock between September 9, 2004 and November 16, 2004, excluding short sellers who covered
their positions during the class period. On September 24, 2007, the Seventh Circuit Court of Appeals denied
defendants’ petition for leave to appeal the class certification order. Merits and expert discovery are concluded.
The Court has set the matter for a status hearing on May 1, 2009.
In re: Sears Holdings Corporation Securities Litigation—In May and July 2006, two class action lawsuits,
which each name as defendants Sears Holdings Corporation and Edward S. Lampert, were filed in United States
District Court for the Southern District of New York, purportedly on behalf of a class of persons that sold shares
of Kmart Holding Corporation stock on or after May 6, 2003 through June 4, 2004. The plaintiffs in each case
allege that Kmart’s Plan of Reorganization and Disclosure Statement filed on January 24, 2003 and amended on
February 25, 2003 misrepresented Kmart’s assets, particularly its real estate holdings, as evidenced by the prices
at which Kmart subsequently sold certain of its stores in June 2004 to Home Depot and Sears. The plaintiffs seek
damages for alleged misrepresentations. On December 19, 2006, the Court consolidated the actions and plaintiffs
filed their consolidated complaint. On April 15, 2008, the Court denied without prejudice defendants’ motion to
dismiss. After taking some additional discovery, defendants filed another motion to dismiss which remains
pending before the Court. The Court has set the pending motion for a hearing on March 17, 2009.
AIG Annuity Insurance Company, et al. v. Sears, Roebuck and Co. —On October 12, 2004, an action was
filed against Sears in the District Court, 192nd Judicial District, Dallas County, Texas by several holders of
certain bonds issued by Sears from 1991 through 1993. Plaintiffs purport to allege under theories of breach of
contract and misrepresentation, that Sears prematurely redeemed the bonds in 2004 following Sears’ sale of the
credit business in 2003. On February 2, 2007, a jury in the case reached a verdict against Sears and the Court
subsequently awarded plaintiffs $61 million plus post-judgment interest. Sears then filed a notice of appeal. On
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