Sears 2010 Annual Report Download - page 82

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
Bankruptcy-Related Settlements
In 2008, we recognized recoveries of $5 million from vendors who had received cash payments for
pre-petition obligations (“critical vendor claims”) or preference payments. During 2008, the Company received
126,385 shares of common stock (weighted average price of $94.61 per share) with an approximate value of
$12 million from the Class 5 distribution referenced above. Of this amount, $5 million was recognized as a
recovery gain in other income, as they relate to recoveries from vendors who had received cash payments for
pre-petition obligations (critical vendor claims) or preference payments. The remaining $7 million was recorded
as capital in excess of par value, as these shares are the result of a 2004 transaction in which the Company
entered into settlement agreements with past providers of surety bonds to resolve all issues in connection with
their pre-petition claims. In accordance with the terms of the settlement agreements, Kmart assumed
responsibility for the future obligations under the bonds issued with respect to the Predecessor Company’s
workers’ compensation insurance program and was assigned the Class 5 claims against the Company.
NOTE 11—INCOME TAXES
millions 2010 2009 2008
Income (loss) before income taxes
U.S. .................................................................. $(137) $ (38) $ (407)
Foreign ............................................................... 323 458 591
Total ............................................................. $ 186 $420 $ 184
Income tax expense (benefit)
Current:
Federal ............................................................ $ 11 $(179) $ (70)
State and local ...................................................... (4) 18 32
Foreign ........................................................... 110 141 199
Total ................................................................. 117 (20) 161
Deferred:
Federal ............................................................ (87) 124 (60)
State and local ...................................................... 6 21 (11)
Foreign ........................................................... — (2) (5)
(81) 143 (76)
Total ................................................................. $ 36 $123 $ 85
2010 2009 2008
Effective tax rate reconciliation
Federal income tax rate ................................................... 35.0% 35.0% 35.0%
State and local taxes net of federal tax benefit ................................. 0.7 6.0 7.2
Tax credits ............................................................. (11.7) (3.0) (6.3)
Resolution of income tax matters ........................................... (8.2) (6.2) (6.8)
Canadian repatriation cost on Sears Canada dividend received .................... 4.7 — —
Canadian rate differential on noncontrolling interest ............................ (0.1) (0.9) (2.3)
Basis difference in domestic subsidiary ...................................... — — (30.2)
Nondeductible goodwill .................................................. — — 50.0
Other ................................................................. (1.0) (1.6) (0.4)
19.4% 29.3% 46.2%
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