Foot Locker 2003 Annual Report Download - page 46

In 1998, the Company exited both its International General Merchandise and Specialty Footwear segments. In the
second quarter of 2002, the Company recorded a $1 million charge for a lease liability related to a Woolco store in the
former International General Merchandise segment, which was more than offset by a net reduction of $2 million before-tax,
or $1 million after-tax, for each of the second and third quarters of 2002 in the Specialty Footwear reserve primarily
reflecting real estate costs more favorable than original estimates.
In 1997, the Company announced that it was exiting its Domestic General Merchandise segment. In the second
quarter of 2002, the Company recorded a charge of $4 million before-tax, or $2 million after-tax, for legal actions related
to this segment, which have since been settled. In addition, the successor-assignee of the leases of a former business
included in the Domestic General Merchandise segment has filed a petition in bankruptcy, and rejected in the bankruptcy
proceeding 15 leases it originally acquired from a subsidiary of the Company. There are currently several actions pending
against this subsidiary by former landlords for the lease obligations. In the fourth quarter of 2002, the Company recorded
a charge of $1 million after-tax related to certain actions. In each of the second and fourth quarters of 2003, the Company
recorded an additional after-tax charge of $1 million, related to certain actions. The Company estimates the gross
contingent lease liability related to the remaining actions as approximately $6 million. The Company believes that it may
have valid defenses; however, the outcome of these actions cannot be predicted with any degree of certainty.
The remaining reserve balances for these three discontinued segments totaled $17 million as of January 31, 2004,
$6 million of which is expected to be utilized within twelve months and the remaining $11 million thereafter.
The major components of the pre-tax losses (gains) on disposal and disposition activity related to the reserves are
presented below:
Northern Group 2000 2001 2002 2003
Balance
Charge/
(Income)
Net
Usage* Balance
Charge/
(Income)
Net
Usage* Balance
Charge/
(Income)
Net
Usage* Balance
(in millions)
Realized loss — currency movement . . . $ — $ — $ — $— $ — $ — $— $— $— $—
Asset write-offs & impairments ....... — 23 (23) — 18 (18) — — — —
Recognition of note receivable ....... — — — — (10) 10 — — — —
Real estate & lease liabilities ......... 68 (16) (46) 6 1 (1) 6 1 (7) —
Severance & personnel .............. 23 (13) (8) 2 — (2) — — — —
Operating losses & other costs ........ 24 18 (39) 3 — (2) 1 — 1 2
Total ............................ $115 $ 12 $(116) $11 $ 9 $(13) $ 7 $ 1 $ (6) $ 2
International General Merchandise
2000 2001 2002 2003
Balance
Charge/
(Income)
Net
Usage* Balance
Charge/
(Income)
Net
Usage* Balance
Charge/
(Income)
Net
Usage* Balance
(in millions)
Woolco ........................... $— $ 4 $(4) $— $ 1 $— $1 $— $(1) $—
The Bargain! Shop ................. 7 — (1) 6 — — 6 — (1) 5
Total ............................ $ 7 $ 4 $(5) $ 6 $ 1 $— $7 $— $(2) $ 5
Specialty Footwear 2000 2001 2002 2003
Balance
Charge/
(Income)
Net
Usage Balance
Charge/
(Income)
Net
Usage Balance
Charge/
(Income)
Net
Usage Balance
(in millions)
Lease liabilities .................... $ 9 $— $(2) $7 $ (4) $(1) $2 $— $— $ 2
Operating losses & other costs ........ 3 — (1) 2 — (1) 1 — (1) —
Total ............................ $12 $— $(3) $9 $ (4) $(2) $3 $— $ (1) $ 2
Domestic General Merchandise 2000 2001 2002 2003
Balance
Charge/
(Income)
Net
Usage Balance
Charge/
(Income)
Net
Usage Balance
Charge/
(Income)
Net
Usage Balance
(in millions)
Lease liabilities .................... $16 $— $(6) $10 $— $(3) $ 7 $— $(1) $ 6
Legal and other costs ............... 2 3 (3) 2 5 (4) 3 4 (3) 4
Total ............................ $18 $ 3 $(9) $12 $ 5 $(7) $10 $ 4 $(4) $10
* Net usage includes effect of foreign exchange translation adjustments
34