Sears 2014 Annual Report Download - page 13

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13
investigations or litigation, or other reasons, our brands and reputation could be damaged and we could lose
members and customers.
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.
We may be subject to periodic litigation and other regulatory proceedings. These proceedings may be affected
by changes in laws and government regulations or changes in the enforcement thereof.
From time to time, we may be involved in lawsuits and regulatory actions relating to our business, certain of
which may be in jurisdictions with reputations for aggressive application of laws and procedures against corporate
defendants. Some of these actions have the potential for significant statutory penalties, and compensatory, treble or
punitive damages. Our pharmacy, home services and grocery businesses, in particular, are subject to numerous
federal, state and local regulations, and a significant change in, or noncompliance with, these regulations could have
a material adverse effect on our compliance costs and results of operations. We are impacted by trends in litigation,
including class-action allegations brought under various consumer protection and employment laws, including wage
and hour laws, patent infringement claims and investigations and actions that are based on allegations of untimely
compliance or noncompliance with applicable regulations or statutes. Due to the inherent uncertainties of litigation
and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An
unfavorable outcome could have a material adverse impact on our business, financial condition and results of
operations. In addition, regardless of the outcome of any litigation or regulatory proceedings, these proceedings
could result in substantial costs and may require that we devote substantial resources to defend our Company.
Further, changes in governmental regulations both in the United States and in the other countries where we operate
could have adverse effects on our business and subject us to additional regulatory actions. For a description of
current legal proceedings, see Item 3, "Legal Proceedings," as well as Note 18 of Notes to Consolidated Financial
Statements in this report on Form 10-K.
Our pension and postretirement benefit plan obligations are currently underfunded, and we may have to
make significant cash payments to some or all of these plans, which would reduce the cash available for our
businesses.
We have unfunded obligations under our domestic pension and postretirement benefit plans, and we have been
in discussions with the Pension Benefit Guaranty Corporation concerning our pension obligations and potential
REIT transaction. The funded status of our pension plans is dependent upon many factors, including returns on
invested assets, the level of certain market interest rates and the discount rate used to determine pension obligations.
Unfavorable returns on the plan assets or unfavorable changes in applicable laws or regulations could materially
change the timing and amount of required plan funding, which would reduce the cash available for our businesses.
In addition, a decrease in the discount rate used to determine pension obligations could result in an increase in the
valuation of pension obligations, which could affect the reported funding status of our pension plans and future
contributions, as well as the periodic pension cost in subsequent years. Moreover, unfavorable regulatory action
could materially change the timing and amount of required plan funding and negatively impact our business
operations and impair our business strategy.
Item 1B. Unresolved Staff Comments
Not applicable.