Sears 2012 Annual Report Download - page 104

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
104
2010
millions Kmart Sears Domestic Sears Canada Sears Holdings
Merchandise sales and services:
Hardlines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,879 $ 13,692 $ 2,440 $ 21,011
Apparel and Soft Home. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,809 5,454 2,088 12,351
Food and Drug. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,810 38 — 5,848
Service and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 3,091 268 3,454
Total merchandise sales and services. . . . . . . . . . . . . . 15,593 22,275 4,796 42,664
Costs and expenses:
Cost of sales, buying and occupancy. . . . . . . . . . . . . . . . . . 11,757 15,910 3,333 31,000
Selling and administrative. . . . . . . . . . . . . . . . . . . . . . . . . . 3,341 5,940 1,144 10,425
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 149 620 100 869
Gain on sales of assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)(46)(14)(67)
Total costs and expenses. . . . . . . . . . . . . . . . . . . . . . . . 15,240 22,424 4,563 42,227
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 353 $ (149) $ 233 $ 437
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,085 $ 15,299 $ 2,976 $ 24,360
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 153 $ 216 $ 57 $ 426
NOTE 18—LEGAL PROCEEDINGS
We are a defendant in several lawsuits containing class or collective action allegations in which the plaintiffs
are current and former hourly and salaried associates who allege violations of various wage and hour laws, rules and
regulations pertaining to alleged misclassification of certain of our employees and the failure to pay overtime and/or
the failure to pay for missed meal and rest periods. The complaints generally seek unspecified monetary damages,
injunctive relief, or both. Further, certain of these proceedings are in jurisdictions with reputations for aggressive
application of laws and procedures against corporate defendants. We also are a defendant in several putative or
certified class action lawsuits in California relating to alleged failure to comply with California laws pertaining to
certain operational, marketing and payroll practices. The California laws alleged to have been violated in each of
these lawsuits provide the potential for significant statutory penalties. At this time, the Company is not able to either
predict the outcome of these lawsuits or reasonably estimate a potential range of loss with respect to the lawsuits.
We are subject to various other legal and governmental proceedings and investigations, including some
involving the practices and procedures in our more highly regulated businesses and many involving litigation
incidental to those and other businesses. Some matters contain class action allegations, environmental and asbestos
exposure allegations and other consumer-based, regulatory or qui tam claims, each of which may seek
compensatory, punitive or treble damage claims (potentially in large amounts), as well as other types of relief.
In accordance with accounting standards regarding loss contingencies, we accrue an undiscounted liability for
those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and we
disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such
disclosure is necessary for our financial statements to not be misleading. We do not record liabilities when the
likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when
the liability is believed to be only reasonably possible or remote.
Because litigation outcomes are inherently unpredictable, our evaluation of legal proceedings often involves a
series of complex assessments by management about future events and can rely heavily on estimates and
assumptions. If the assessments indicate that loss contingencies that could be material to any one of our financial
statements are not probable, but are reasonably possible, or are probable, but cannot be estimated, then we disclose
the nature of the loss contingencies, together with an estimate of the range of possible loss or a statement that such
loss is not reasonably estimable. While the consequences of certain unresolved proceedings are not presently