Sears 2009 Annual Report Download - page 10

disruption of our business. In addition, to the extent we are unable to maintain our outsourcing arrangements, we
would incur substantial costs, including costs associated with hiring new employees, in order to return these
services in-house.
We could incur charges due to impairment of goodwill, intangible and long-lived assets.
At January 30, 2010, we had goodwill and intangible asset balances of $4.6 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, which could have a material adverse effect on our results of
operations. 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
57% 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.
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