Foot Locker 2005 Annual Report Download - page 64

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Business Risk
The retailing business is highly competitive. Price, quality and selection of merchandise, reputation, store location,
advertising and customer service are important competitive factors in the Company’s business. The Company operates in
20 countries and purchased approximately 75 percent of its merchandise in 2005 from its top 5 vendors. In 2005, the
Company purchased approximately 49 percent of its athletic merchandise from one major vendor and approximately
8 percent from another major vendor. The Company generally considers all vendor relations to be satisfactory.
Included in the Company’s Consolidated Balance Sheet as of January 28, 2006, are the net assets of the Company’s
European operations totaling $422 million, which are located in 16 countries, 11 of which have adopted the euro as their
functional currency.
20 Retirement Plans and Other Benefits
Pension and Other Postretirement Plans
The Company has defined benefit pension plans covering most of its North American employees, which are funded
in accordance with the provisions of the laws where the plans are in effect. In addition to providing pension benefits,
the Company sponsors postretirement medical and life insurance plans, which are available to most of its retired U.S.
employees. These plans are contributory and are not funded. The measurement date of the assets and liabilities is the
last day of January each year.
The following tables set forth the plans’ changes in benefit obligations and plan assets, funded status and amounts
recognized in the Consolidated Balance Sheets, measured at January 28, 2006 and January 29, 2005:
Pension Benefits
Postretirement
Benefits
2005 2004 2005 2004
(in millions)
Change in benefit obligation
Benefit obligation at beginning of year .................. $ 703 $ 697 $ 24 $ 27
Service cost ............................................. 9 9 — —
Interest cost ............................................. 36 39 1 1
Plan participants’ contributions .......................... — — 5 5
Actuarial loss (gain) ..................................... — 16 (5) —
Foreign currency translation adjustments ................ 7 5 — —
Benefits paid ............................................ (66) (63) (8) (9)
Benefit obligation at end of year ........................ $ 689 $ 703 $ 17 $ 24
Change in plan assets
Fair value of plan assets at beginning of year ............ $ 551 $ 474
Actual return on plan assets ............................. 60 28
Employer contribution ................................... 29 108
Foreign currency translation adjustments ................ 5 4
Benefits paid ............................................ (66) (63)
Fair value of plan assets at end of year .................. $ 579 $ 551
Funded status
Funded status ........................................... $(110) $(152) $(17) $ (24)
Unrecognized prior service cost (benefit) ................ 3 4 (9) (10)
Unrecognized net (gain) loss ............................ 303 324 (60) (67)
Prepaid asset (accrued liability) ......................... $ 196 $ 176 $(86) $(101)
Balance Sheet caption reported in:
Intangible assets ........................................ $ 1 $ 1 $ — $ —
Accrued liabilities ....................................... (70) (24) (2) (6)
Other liabilities .......................................... (42) (130) (84) (95)
Accumulated other comprehensive loss, pre-tax ......... 307 329 — —
$ 196 $ 176 $(86) $(101)
48