MARCO TEORICO

Other long-term liabilities at January 31, 2015 and February 1, 2014 consisted of the following:

millions January 31,2015 February 1,2014

Unearned revenues. . . $ 739 $ 836 Self-insurance reserves . . . 611 686 Other . . . 499 486 Total . . . $ 1,849 $ 2,008

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued) NOTE 17—SUMMARY OF SEGMENT DATA

These reportable segment classifications are based on our business formats, as described in Note 1. The Kmart and Sears Canada formats each represent both an operating and reportable segment. As a result of the de-

consolidation of Sears Canada as described in Note 2, Sears Canada is no longer an operating or reportable segment, and the segment results presented below reflect the operating results for Sears Canada through October 16, 2014. The Sears Domestic reportable segment consists of the aggregation of several business formats. These formats are evaluated by our Chief Operating Decision Maker ("CODM") to make decisions about resource allocation and to assess performance.

Each of these segments derives its revenues from the sale of merchandise and related services to customers, primarily in the United States and Canada. The merchandise and service categories are as follows:

(i) Hardlines—consists of home appliances, consumer electronics, lawn & garden, tools & hardware, automotive parts, household goods, toys, housewares and sporting goods;

(ii) Apparel and Soft Home—includes women's, men's, kids', footwear, jewelry, accessories and soft home; (iii) Food and Drug—consists of grocery & household, pharmacy and drugstore;

(iv) Service—includes repair, installation and automotive service and extended contract revenue; and

(v) Other—includes revenues earned in connection with our agreements with SHO and Lands' End, as well as credit revenues and licensed business revenues.

2014

millions Kmart DomesticSears CanadaSears HoldingsSears

Merchandise sales and services:

Hardlines. . . $ 3,605 $ 8,903 $ 1,100 $ 13,608 Apparel and Soft Home . . . 4,049 3,673 880 8,602 Food and Drug . . . 4,326 12 — 4,338 Service . . . 17 2,318 77 2,412 Other . . . 77 2,130 31 2,238 Total merchandise sales and services . . . 12,074 17,036 2,088 31,198 Costs and expenses:

Cost of sales, buying and occupancy . . . 9,513 12,950 1,586 24,049 Selling and administrative . . . 2,962 4,655 603 8,220 Depreciation and amortization . . . 95 437 49 581 Impairment charges . . . 29 19 15 63 (Gain) loss on sales of assets . . . (103) (105) 1 (207)

Total costs and expenses . . . 12,496 17,956 2,254 32,706 Operating loss . . . $ (422) $ (920) $ (166) $ (1,508) Total assets. . . $ 3,155 $ 10,054 $ — $ 13,209 Capital expenditures. . . $ 45 $ 193 $ 32 $ 270

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued) 2013

millions Kmart DomesticSears CanadaSears HoldingsSears

Merchandise sales and services:

Hardlines. . . $ 4,037 $ 9,355 $ 1,866 $ 15,258 Apparel and Soft Home . . . 4,298 5,197 1,742 11,237 Food and Drug . . . 4,772 16 — 4,788 Service . . . — 2,502 131 2,633 Other . . . 87 2,128 57 2,272 Total merchandise sales and services . . . 13,194 19,198 3,796 36,188 Costs and expenses:

Cost of sales, buying and occupancy . . . 10,329 14,324 2,780 27,433 Selling and administrative . . . 3,083 5,216 1,085 9,384 Depreciation and amortization . . . 129 511 92 732 Impairment charges . . . 70 150 13 233 Gain on sales of assets . . . (66) (63) (538) (667)

Total costs and expenses . . . 13,545 20,138 3,432 37,115 Operating income (loss). . . $ (351) $ (940) $ 364 $ (927) Total assets. . . $ 3,902 $ 12,206 $ 2,153 $ 18,261 Capital expenditures. . . $ 63 $ 196 $ 70 $ 329

2012

millions Kmart DomesticSears CanadaSears HoldingsSears

Merchandise sales and services:

Hardlines. . . $ 4,486 $ 11,870 $ 2,246 $ 18,602 Apparel and Soft Home . . . 4,588 5,434 1,856 11,878 Food and Drug . . . 5,398 38 — 5,436 Service . . . — 2,604 151 2,755 Other . . . 95 1,031 57 1,183 Total merchandise sales and services . . . 14,567 20,977 4,310 39,854 Costs and expenses:

Cost of sales, buying and occupancy . . . 11,158 15,107 3,075 29,340 Selling and administrative . . . 3,284 6,184 1,192 10,660 Depreciation and amortization . . . 147 578 105 830 Impairment charges . . . 10 25 295 330 Gain on sales of assets . . . (37) (261) (170) (468)

Total costs and expenses . . . 14,562 21,633 4,497 40,692 Operating income (loss). . . $ 5 $ (656) $ (187) $ (838) Total assets. . . $ 4,304 $ 12,648 $ 2,388 $ 19,340 Capital expenditures. . . $ 122 $ 171 $ 85 $ 378

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued) 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. 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. Additionally, some of these claims or actions, such as the qui tam claims, have the potential for significant statutory penalties.

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 determinable, and an estimate of the probable and reasonably possible loss or range of loss in excess of amounts accrued for such proceedings cannot be reasonably made, an adverse outcome from such proceedings could have a material effect on our earnings in any given reporting period. However, in the opinion of our management, after consulting with legal counsel, and taking into account insurance and reserves, the ultimate liability related to current outstanding matters is not expected to have a material effect on our financial position, liquidity or capital resources.