Foot Locker 2007 Annual Report Download - page 49

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is incurred. In accordance with EITF Issue No. 02-16, “Accounting by a Reseller for Cash Consideration from a Vendor,”
the Company accounts for reimbursements received in excess of expenses incurred related to specific, incremental
advertising, as a reduction to the cost of merchandise and is reflected in cost of sales as the merchandise is sold.
Advertising costs, which are included as a component of selling, general and administrative expenses, net of
reimbursements for cooperative advertising, were as follows:
2007 2006 2005
(in millions)
Advertising expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105.9 $ 92.5 $ 99.0
Cooperative advertising reimbursements . . . . . . . . . . . . . . . . . . (34.8) (23.0) (21.2)
Net advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71.1 $ 69.5 $ 77.8
Catalog Costs
Catalog costs, which primarily comprise paper, printing, and postage, are capitalized and amortized over the
expected customer response period to each catalog, which is generally 90 days. Cooperative reimbursements earned
for the promotion of certain products is agreed upon with vendors and is recorded in the same period as the associated
catalog expenses are amortized. Prepaid catalog costs totaled $4.0 million and $3.9 million at February 2, 2008 and
February 3, 2007, respectively.
Catalog costs, which are included as a component of selling, general and administrative expenses, net of
reimbursements for cooperative reimbursements, were as follows:
2007 2006 2005
(in millions)
Catalog costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45.6 $47.0 $48.2
Cooperative reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.8) (3.5) (3.0)
Net catalog expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41.8 $ 43.5 $45.2
Earnings Per Share
Basic earnings per share is computed using the weighted-average number of common shares outstanding for the
period. Diluted earnings per share uses the weighted-average number of common shares outstanding during the period
plus dilutive common stock equivalents, such as stock options and awards. The computation of earnings per share is
as follows:
2007 2006 2005
(in millions)
Net income from continuing operations . . . . . . . . . . . . . . . . . . . $ 49 $247 $263
Weighted-average common shares outstanding . . . . . . . . . . . . . . 154.0 155.0 155.1
Effect of Dilution:
Stock options and awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6 1.8 2.5
Weighted-average common shares outstanding
assuming dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155.6 156.8 157.6
Options to purchase 3.4 million, 2.8 million, and 2.2 million shares of common stock as of February 2, 2008,
February 3, 2007, and January 28, 2006, respectively, were not included in the computations because the exercise
price of the options was greater than the average market price of the common shares and, therefore, the effect of their
inclusion would be antidilutive.