Foot Locker 2006 Annual Report Download - page 60

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During 2006, the Company purchased and retired $38 million of the $200 million 8.50 percent debentures payable
in 2022 at a $2 million discount from face value bringing the outstanding amount to $134 million as of February 3, 2007.
The Company has various interest rate swap agreements, which convert $100 million of the 8.50 percent debentures
from a fixed interest rate to a variable interest rate, which are collectively classified as a fair value hedge. The net fair
value of the interest rate swaps at February 3, 2007 was a liability of $4 million, which was included in other liabilities,
the carrying value of the 8.50 percent debentures was decreased by the corresponding amount. The net fair value of the
interest rate swaps at January 28, 2006 was a liability $1 million, of which $1 million was included in other assets and
$2 million was included in other liabilities. Accordingly, the fair value of the interest rate swaps decreased the carrying
value of the 8.50 percent debentures at January 28, 2006 by $1 million.
Following is a summary of long-term debt and obligations under capital leases:
2006 2005
(in millions)
8.50% debentures payable 2022 ...................................... $130 $171
$175 million term loan ............................................. 90 140
Total long-term debt ............................................ 220 311
Obligations under capital leases ...................................... 14 15
234 326
Less: Current portion ............................................ 14 51
$220 $275
Maturities of long-term debt and minimum rent payments under capital leases in future periods are:
Long-Term
Debt
Capital
Leases Total
(in millions)
2007 .............................................. $ — $14 $ 14
2008 .............................................. 2 — 2
2009 .............................................. 88 — 88
2010 .............................................. — — —
2011 .............................................. — — —
Thereafter ......................................... 130 — 130
220 14 234
Less: Current portion ................................. — 14 14
$220 $— $220
Interest expense related to long-term debt and capital lease obligations, including the effect of the interest
rate swaps and the amortization of the associated debt issuance costs was $20 million in both 2006 and 2005, and $19
million in 2004. The effect of the interest rate swaps was not significant for the year ended February 3, 2007. The effect
of the interest rate swaps resulted in a combined reduction in interest expense of $1 million in 2005, and $3 million in
2004.
15 Leases
The Company is obligated under operating leases for almost all of its store properties. Some of the store leases
contain renewal options with varying terms and conditions. Management expects that in the normal course of business,
expiring leases will generally be renewed or, upon making a decision to relocate, replaced by leases on other premises.
Operating lease periods generally range from 5 to 10 years. Certain leases provide for additional rent payments based
on a percentage of store sales. Rent expense includes real estate taxes, insurance, maintenance, and other costs as
required by some of the Company’s leases. The present value of operating leases is discounted using various interest
rates ranging from 4 percent to 13 percent.