Foot Locker 2005 Annual Report Download - page 63

Download and view the complete annual report

Please find page 63 of the 2005 Foot Locker annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 133

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133

Foreign Currency Exchange Rates
The table below presents the fair value, notional amounts, and weighted-average exchange rates of foreign exchange
forward and option contracts outstanding at January 28, 2006.
Fair Value
(US in millions)
Contract Value
(US in millions)
Weighted-Average
Exchange Rate
Inventory
Buy e/Sell British £ ........................................ $— $ 34 0.6848
Buy British £/Sell e........................................ — (4) 0.6860
Buy $US/Sell e............................................. — (8) 1.2187
—22
Earnings
Buy e/Sell $US ............................................. $— $ 18 1.1500
—18
Intercompany
Buy e/Sell $US ............................................. $(1) $ 49 1.2173
Buy $US/Sell e............................................. — (18) 1.2394
Buy e/Sell British £ ........................................ — 21 0.6948
Buy British £/Sell e........................................ — (3) 0.6926
(1) 49
Interest Rate Risk Management
The Company has employed various interest rate swaps to minimize its exposure to interest rate fluctuations. These
swaps, which mature in 2022, have been designated as a fair value hedge of the changes in fair value of $100 million
of the Company’s 8.50 percent debentures payable in 2022 attributable to changes in interest rates and effectively convert
the interest rate on the debentures from 8.50 percent to a 1-month variable rate of LIBOR plus 3.45 percent.
The fair value of the swaps, included as an addition to other liabilities, was approximately $1 million at January 28, 2006,
and the fair value of the swaps, included as an addition to other assets was approximately $2 million at January 29, 2005.
The following table presents the Company’s outstanding interest rate derivatives:
2005 2004 2003
(in millions)
Interest Rate Swaps:
Fixed to Variable ($US) — notional amount ............. $ 100 $ 100 $ 100
Average pay rate ...................................... 8.00% 6.46% 5.07%
Average receive rate .................................. 8.50% 8.50% 8.50%
Variable to variable ($US) — notional amount ........... $ 100 $ 100 $ —
Average pay rate ...................................... 4.82% 2.73% —%
Average receive rate .................................. 4.79% 3.25% —%
Interest Rates
The Company’s major exposure to market risk is to changes in interest rates, primarily in the United States.
The table below presents the fair value of principal cash flows and related weighted-average interest rates by maturity
dates, including the effect of the interest rate swaps outstanding at January 28, 2006, of the Company’s long-term
debt obligations.
2006 2007 2008 2009 2010 Thereafter
Jan. 28,
2006
Total
Jan. 29,
2005
Total
($ in millions)
Long-term debt ..................... $ 50 — 2 88 — 190 $330 $368
Weighted-average interest rate ....... 7.3% 7.3% 7.3% 7.9% 8.2% 8.2%
Fair Value of Financial Instruments
The carrying value and estimated fair value of long-term debt was $311 million and $330 million, respectively, at
January 28, 2006 and $351 million and $368 million, respectively, at January 29, 2005. The carrying value and estimated
fair value of long-term investments and notes receivable was $33 million and $33 million, respectively, at January 28,
2006, and $32 million and $33 million, respectively, at January 29, 2005. The carrying values of cash and cash equivalents,
short-term investments and other current receivables and payables approximate their fair value.
47