Foot Locker 2004 Annual Report Download - page 33

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Discontinued, Repositioning and Restructuring Reserves
The Company exited four business segments as part of its discontinuation and restructuring programs. The final
discontinued segment and disposition of the restructured businesses were completed in 2001. In order to identify and
calculate the associated costs to exit these businesses, management made assumptions regarding estimates of future
liabilities for operating leases and other contractual agreements, the net realizable value of assets held for sale or disposal
and the fair value of non-cash consideration received. The Company has settled the majority of these liabilities and the
remaining activity relates to the disposition of the residual lease liabilities.
As a result of achieving divestiture accounting in the fourth quarter of 2002, the Northern Group note was recorded
at its fair value. The Company is required to review the collectibility of the note based upon various criteria such as the
credit-worthiness of the issuer or a delay in payment of the principal or interest. Future adjustments, if any, to the carrying
value of the note will be recorded pursuant to SEC Staff Accounting Bulletin Topic 5:Z:5, “Accounting and Disclosure
Regarding Discontinued Operations,” which requires changes in the carrying value of assets received as consideration from
the disposal of a discontinued operation to be classified within continuing operations. The purchaser has made all
payments required under the terms of the Note, however the business sustained unexpected operating losses during the
past fiscal year. The Company has evaluated the projected performance of the business and will continue to monitor its
results during the coming year. At January 29, 2005, $9 million remains outstanding on the Note.
The remaining discontinued reserve balances at January 29, 2005 totaled $18 million of which $7 million is expected
to be utilized within the next twelve months. The remaining repositioning and restructuring reserves totaled $4 million
at January 29, 2005, whereby $1 million is expected to be utilized within the next twelve months.
Disclosure Regarding Forward-Looking Statements
This report, including the Shareholders’ Letter, contains forward-looking statements within the meaning of the
federal securities laws. All statements, other than statements of historical facts, which address activities, events or
developments that the Company expects or anticipates will or may occur in the future, including, but not limited to, such
things as future capital expenditures, expansion, strategic plans, dividend payments, stock repurchases, growth of the
Company’s business and operations, including future cash flows, revenues and earnings, and other such matters are
forward-looking statements. These forward-looking statements are based on many assumptions and factors detailed in
the Company’s filings with the Securities and Exchange Commission, including the effects of currency fluctuations,
customer demand, fashion trends, competitive market forces, uncertainties related to the effect of competitive products
and pricing, customer acceptance of the Company’s merchandise mix and retail locations, the Company’s reliance on a
few key vendors for a majority of its merchandise purchases (including a significant portion from one key vendor),
unseasonable weather, risks associated with foreign global sourcing, including political instability, changes in import
regulations, disruptions to transportation services and distribution, economic conditions worldwide, any changes in
business, political and economic conditions due to the threat of future terrorist activities in the United States or in other
parts of the world and related U.S. military action overseas and the ability of the Company to execute its business plans
effectively with regard to each of its business units. Any changes in such assumptions or factors could produce significantly
different results. The Company undertakes no obligation to update forward-looking statements, whether as a result of new
information, future events, or otherwise.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information regarding interest rate risk management and foreign exchange risk management is included in the
“Financial Instruments and Risk Management” footnote under “Item 8. Consolidated Financial Statements and
Supplementary Data.”
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