GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

At July 29, 2017, the principal amount outstanding of the Company's 65/8% Senior Secured Notes due 2018 was $303 million. The Senior Secured Notes were issued in 2010 by Sears Holdings Corporation ("Parent"). The Senior Secured Notes are guaranteed by certain of our 100% owned domestic subsidiaries that own the collateral for the notes, as well as by SRAC (the "guarantor subsidiaries"). The following condensed consolidated financial information presents the Condensed Consolidating Balance Sheets at July 29, 2017, July 30, 2016 and January 28, 2017, the Condensed Consolidating Statements of Operations and the Condensed Consolidating Statements of Comprehensive Income (Loss) for the 13- and 26- week periods ended July 29, 2017 and July 30, 2016, and the Condensed Consolidating Statements of Cash Flows for the 26 week periods ended July 29, 2017 and July 30, 2016 of (i) Parent; (ii) the guarantor subsidiaries; (iii) the non-guarantor subsidiaries; (iv) eliminations and (v) the Company on a consolidated basis.

The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions including transactions with our wholly-owned non-guarantor insurance subsidiary. The Company has accounted for investments in subsidiaries under the equity method. The guarantor subsidiaries are 100% owned directly or indirectly by the Parent and all guarantees are joint, several and unconditional. Additionally, the notes are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables of the guarantor subsidiaries, and consequently may not be available to satisfy the claims of the Company's general creditors. Certain investments primarily held by non-guarantor subsidiaries are recorded by the issuers at historical cost and are recorded at fair value by the holder.

Condensed Consolidating Balance Sheet

July 29, 2017



millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	180	$	32		$	—		$	212
Restricted cash	230			—		—			—			230
Intercompany receivables	—			—		27,871			(27,871		)	—
Accounts receivable	—			350		20			—			370
Merchandise inventories	—			3,433		—			—			3,433
Prepaid expenses and other current assets	31			661		432			(806		)	318
Total current assets	261			4,624		28,355			(28,677		)	4,563
Total property and equipment, net	—			1,262		707			—			1,969
Goodwill and intangible assets	—			355		1,261			(98		)	1,518
Other assets	405			1,304		1,532			(2,940		)	301
Investment in subsidiaries	9,307			27,692		—			(36,999		)	—
TOTAL ASSETS	$	9,973		$	35,237	$	31,855		$	(68,714	)	$	8,351
Current liabilities
Short-term borrowings	$	—		$	689	$	—		$	(143	)	$	546
Current portion of long-term debt and capitalized lease obligations	—			1,052		—			—			1,052
Merchandise payables	—			672		(2		)	—			670
Intercompany payables	11,416			16,455		—			(27,871		)	—
Other current liabilities	37			2,108		1,158			(611		)	2,692
Total current liabilities	11,453			20,976		1,156			(28,625		)	4,960
Long-term debt and capitalized lease obligations	2,130			3,036		—			(2,761		)	2,405
Pension and postretirement benefits	—			1,727		4			—			1,731
Deferred gain on sale-leaseback	—			455		—			—			455
Sale-leaseback financing obligation	—			141		89			—			230
Long-term deferred tax liabilities	48			—		738			(143		)	643
Other long-term liabilities	—			1,211		560			(193		)	1,578
Total Liabilities	13,631			27,546		2,547			(31,722		)	12,002
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(3,658		)	7,691		29,308			(36,992		)	(3,651		)
Total Equity (Deficit)	(3,658		)	7,691		29,308			(36,992		)	(3,651		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	9,973		$	35,237	$	31,855		$	(68,714	)	$	8,351

Condensed Consolidating Balance Sheet

July 30, 2016



millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	236	$	40	$	—		$	276
Intercompany receivables	—			—		27,413		(27,413		)	—
Accounts receivable	—			357		33		—			390
Merchandise inventories	—			4,684		—		—			4,684
Prepaid expenses and other current assets	114			597		255		(691		)	275
Total current assets	114			5,874		27,741		(28,104		)	5,625
Total property and equipment, net	—			1,698		767		—			2,465
Goodwill and intangible assets	—			364		1,909		(98		)	2,175
Other assets	—			265		1,785		(1,701		)	349
Investment in subsidiaries	10,209			26,879		—		(37,088		)	—
TOTAL ASSETS	$	10,323		$	35,080	$	32,202	$	(66,991	)	$	10,614
Current liabilities
Short-term borrowings	$	—		$	164	$	—	$	—		$	164
Current portion of long-term debt and capitalized lease obligations	—			549		1		—			550
Merchandise payables	—			1,345		—		—			1,345
Intercompany payables	12,236			15,177		—		(27,413		)	—
Other current liabilities	12			2,258		1,315		(691		)	2,894
Total current liabilities	12,248			19,493		1,316		(28,104		)	4,953
Long-term debt and capitalized lease obligations	706			3,631		1		(1,501		)	2,837
Pension and postretirement benefits	—			2,068		4		—			2,072
Deferred gain on sale-leaseback	—			686		—		—			686
Sale-leaseback financing obligation	—			164		—		—			164
Long-term deferred tax liabilities	58			—		901		(67		)	892
Other long-term liabilities	—			804		1,121		(222		)	1,703
Total Liabilities	13,012			26,846		3,343		(29,894		)	13,307
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(2,689		)	8,234		28,859		(37,102		)	(2,698		)
Noncontrolling interest	—			—		—		5			5
Total Equity (Deficit)	(2,689		)	8,234		28,859		(37,097		)	(2,693		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	10,323		$	35,080	$	32,202	$	(66,991	)	$	10,614

Condensed Consolidating Balance Sheet

January 28, 2017



millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	260	$	26	$	—		$	286
Intercompany receivables	—			—		27,415		(27,415		)	—
Accounts receivable	—			441		25		—			466
Merchandise inventories	—			3,959		—		—			3,959
Prepaid expenses and other current assets	23			692		856		(1,286		)	285
Total current assets	23			5,352		28,322		(28,701		)	4,996
Total property and equipment, net	—			1,504		736		—			2,240
Goodwill and intangible assets	—			360		1,528		(98		)	1,790
Other assets	4			285		931		(884		)	336
Investment in subsidiaries	9,110			26,703		—		(35,813		)	—
TOTAL ASSETS	$	9,137		$	34,204	$	31,517	$	(65,496	)	$	9,362
Current liabilities
Short-term borrowings	$	—		$	108	$	—	$	(108	)	$	—
Current portion of long-term debt and capitalized lease obligations	—			1,189		—		(599		)	590
Merchandise payables	—			1,048		—		—			1,048
Intercompany payables	11,830			15,585		—		(27,415		)	—
Other current liabilities	17			2,479		1,219		(672		)	3,043
Total current liabilities	11,847			20,409		1,219		(28,794		)	4,681
Long-term debt and capitalized lease obligations	1,215			3,160		—		(802		)	3,573
Pension and postretirement benefits	—			1,746		4		—			1,750
Deferred gain on sale-leaseback	—			563		—		—			563
Sale-leaseback financing obligation	—			235		—		—			235
Long-term deferred tax liabilities	48			—		724		(29		)	743
Other long-term liabilities	—			808		1,038		(205		)	1,641
Total Liabilities	13,110			26,921		2,985		(29,830		)	13,186
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(3,973		)	7,283		28,532		(35,666		)	(3,824		)
Noncontrolling interest	—			—		—		—			—
Total Equity (Deficit)	(3,973		)	7,283		28,532		(35,666		)	(3,824		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	9,137		$	34,204	$	31,517	$	(65,496	)	$	9,362

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended July 29, 2017



millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	3,490		$	—		$	8		$	3,498
Services and other	—			891			547			(571		)	867
Total revenues	—			4,381			547			(563		)	4,365
Cost of sales, buying and occupancy - merchandise sales	—			2,884			—			18			2,902
Cost of sales and occupancy - services and other	—			586			203			(297		)	492
Total cost of sales, buying and occupancy	—			3,470			203			(279		)	3,394
Selling and administrative	(33		)	1,476			210			(284		)	1,369
Depreciation and amortization	—			67			16			—			83
Impairment charges	—			5			—			—			5
Gain on sales of assets	6			(386		)	—			—			(380		)
Total costs and expenses	(27		)	4,632			429			(563		)	4,471
Operating income (loss)	27			(251		)	118			—			(106		)
Interest expense	(154		)	(237		)	(4		)	272			(123		)
Interest and investment income (loss)	28			64			168			(272		)	(12		)
Income (loss) before income taxes	(99		)	(424		)	282			—			(241		)
Income tax (expense) benefit	—			21			(31		)	—			(10		)
Equity (deficit) in earnings in subsidiaries	(152		)	177			—			(25		)	—
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(251	)	$	(226	)	$	251		$	(25	)	$	(251	)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended July 30, 2016



millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	4,643		$	—		$	5		$	4,648
Services and other	—			1,065			756			(806		)	1,015
Total revenues	—			5,708			756			(801		)	5,663
Cost of sales, buying and occupancy - merchandise sales	—			3,796			—			13			3,809
Cost of sales and occupancy - services and other	—			731			264			(401		)	594
Total cost of sales, buying and occupancy	—			4,527			264			(388		)	4,403
Selling and administrative	1			1,596			300			(413		)	1,484
Depreciation and amortization	—			74			18			—			92
Impairment charges	—			7			—			—			7
Gain on sales of assets	—			(152		)	—			98			(54		)
Total costs and expenses	1			6,052			582			(703		)	5,932
Operating income (loss)	(1		)	(344		)	174			(98		)	(269		)
Interest expense	(115		)	(159		)	14			161			(99		)
Interest and investment income (loss)	11			55			82			(161		)	(13		)
Other loss	—			—			(1		)	—			(1		)
Income (loss) before income taxes	(105		)	(448		)	269			(98		)	(382		)
Income tax (expense) benefit	—			34			(47		)	—			(13		)
Equity (deficit) in earnings in subsidiaries	(192		)	140			—			52			—
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(297	)	$	(274	)	$	222		$	(46	)	$	(395	)

Condensed Consolidating Statement of Operations

For the 26 Weeks Ended July 29, 2017



millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	6,914		$	—		$	13		$	6,927
Services and other	—			1,765			1,157			(1,183		)	1,739
Total revenues	—			8,679			1,157			(1,170		)	8,666
Cost of sales, buying and occupancy - merchandise sales	—			5,740			—			45			5,785
Cost of sales and occupancy - services and other	—			1,188			441			(649		)	980
Total cost of sales, buying and occupancy	—			6,928			441			(604		)	6,765
Selling and administrative	(32		)	2,807			427			(566		)	2,636
Depreciation and amortization	—			138			32			—			170
Impairment charges	—			20			—			—			20
Gain on sales of assets	(486		)	(635		)	—			—			(1,121		)
Total costs and expenses	(518		)	9,258			900			(1,170		)	8,470
Operating income (loss)	518			(579		)	257			—			196
Interest expense	(271		)	(458		)	(8		)	486			(251		)
Interest and investment income (loss)	38			103			331			(486		)	(14		)
Income (loss) before income taxes	285			(934		)	580			—			(69		)
Income tax (expense) benefit	—			150			(88		)	—			62
Equity (deficit) in earnings in subsidiaries	(292		)	347			—			(55		)	—
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(7	)	$	(437	)	$	492		$	(55	)	$	(7	)

Condensed Consolidating Statement of Operations

For the 26 Weeks Ended July 30, 2016



millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	9,042		$	—		$	8		$	9,050
Services and other	—			2,086			1,378			(1,457		)	2,007
Total revenues	—			11,128			1,378			(1,449		)	11,057
Cost of sales, buying and occupancy - merchandise sales	—			7,399			—			32			7,431
Cost of sales and occupancy - services and other	—			1,463			512			(786		)	1,189
Total cost of sales, buying and occupancy	—			8,862			512			(754		)	8,620
Selling and administrative	2			3,195			485			(695		)	2,987
Depreciation and amortization	—			151			36			—			187
Impairment charges	—			15			—			—			15
Gain on sales of assets	—			(211		)	(2		)	98			(115		)
Total costs and expenses	2			12,012			1,031			(1,351		)	11,694
Operating income (loss)	(2		)	(884		)	347			(98		)	(637		)
Interest expense	(189		)	(304		)	(6		)	315			(184		)
Interest and investment income (loss)	11			76			211			(315		)	(17		)
Income (loss) before income taxes	(180		)	(1,112		)	552			(98		)	(838		)
Income tax (expense) benefit	—			70			(98		)	—			(28		)
Equity (deficit) in earnings in subsidiaries	(588		)	286			—			302			—
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(768	)	$	(756	)	$	454		$	204		$	(866	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended July 29, 2017



millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(251	)	$	(226	)	$	251	$	(25	)	$	(251	)
Other comprehensive income
Pension and postretirement adjustments, net of tax	—			127			—		—			127
Total other comprehensive income	—			127			—		—			127
Comprehensive income (loss) attributable to Holdings' shareholders	$	(251	)	$	(99	)	$	251	$	(25	)	$	(124	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended July 30, 2016



millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(297	)	$	(274	)	$	222	$	(46	)	$	(395	)
Other comprehensive income
Pension and postretirement adjustments, net of tax	—			64			—		—			64
Unrealized net gain, net of tax	—			—			22		(22		)	—
Total other comprehensive income	—			64			22		(22		)	64
Comprehensive income (loss) attributable to Holdings' shareholders	$	(297	)	$	(210	)	$	244	$	(68	)	$	(331	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended July 29, 2017



millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(7	)	$	(437	)	$	492	$	(55	)	$	(7	)
Other comprehensive income
Pension and postretirement adjustments, net of tax	—			177			—		—			177
Currency translation adjustments, net of tax	—			—			1		—			1
Unrealized net gain, net of tax	—			—			26		(26		)	—
Total other comprehensive income	—			177			27		(26		)	178
Comprehensive income (loss) attributable to Holdings' shareholders	$	(7	)	$	(260	)	$	519	$	(81	)	$	171

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended July 30, 2016



millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(768	)	$	(756	)	$	454	$	204		$	(866	)
Other comprehensive income
Pension and postretirement adjustments, net of tax	—			128			—		—			128
Unrealized net gain, net of tax	—			—			63		(63		)	—
Total other comprehensive income	—			128			63		(63		)	128
Comprehensive income (loss) attributable to Holdings' shareholders	$	(768	)	$	(628	)	$	517	$	141		$	(738	)

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended July 29, 2017



millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(11	)	$	(1,436	)	$	309		$	—		$	(1,138	)
Proceeds from sales of property and investments	—			569			—			—			569
Proceeds from Craftsman sale	572			—			—			—			572
Proceeds from sales of receivables	293			—			—			—			293
Purchases of property and equipment	—			(36		)	(5		)	—			(41		)
Net investing with Affiliates	(582		)	—			(298		)	880			—
Net cash provided by (used in) investing activities	283			533			(303		)	880			1,393
Proceeds from debt issuances	—			330			—			—			330
Repayments of long-term debt	(39		)	(678		)	—			—			(717		)
Increase in short-term borrowings, primarily 90 days or less	—			216			—			—			216
Proceeds from sale-leaseback financing	—			89			—			—			89
Debt issuance costs	(3		)	(14		)	—			—			(17		)
Net borrowing with Affiliates	—			880			—			(880		)	—
Net cash provided by (used in) financing activities	(42		)	823			—			(880		)	(99		)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	230			(80		)	6			—			156
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR	—			260			26			—			286
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF PERIOD	$	230		$	180		$	32		$	—		$	442

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended July 30, 2016



millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	184		$	(1,066	)	$	433		$	(191	)	$	(640	)
Proceeds from sales of property and investments	—			101			113			—			214
Purchases of property and equipment	—			(70		)	(5		)	—			(75		)
Net investing with Affiliates	(184		)	—			(347		)	531			—
Net cash provided by (used in) investing activities	(184		)	31			(239		)	531			139
Proceeds from debt issuances	—			1,228			—			—			1,228
Repayments of long-term debt	—			(34		)	(1		)	—			(35		)
Decrease in short-term borrowings, primarily 90 days or less	—			(633		)	—			—			(633		)
Debt issuance costs	—			(21		)	—			—			(21		)
Intercompany dividend	—			—			(191		)	191			—
Net borrowing with Affiliates	—			531			—			(531		)	—
Net cash provided by (used in) financing activities	—			1,071			(192		)	(340		)	539
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	—			36			2			—			38
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR	—			200			38			—			238
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF PERIOD	$	—		$	236		$	40		$	—		$	276