Foot Locker 2007 Annual Report Download - page 69

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53
Fair Value
The following represents the fair value of the Company’s derivative holdings:
2007 2006
(in millions)
Current assets ...................................................... $ 3 $ 1
Non-current assets .................................................. 4 —
Current liabilities ................................................... — 2
Non-current liabilities ............................................... 32 12
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 February 2, 2008, of the Company’s long-
term debt obligations.
2008 2009 2010 2011 2012 Thereafter
Feb. 2,
2008
Total
Feb. 3
2007
Total
($ in millions)
Long-term debt ............................. $ — 88 — — — 128 $216 $222
Weighted-average interest rate ................. 6.8% 6.8% 7.0%7.0%7.0%7.0%
Fair Value of Financial Instruments
The carrying value and estimated fair value of long-term debt was $221 million and $216 million, respectively, at
February 2, 2008 and $220 million and $222 million, respectively, at February 3, 2007. The carrying value and estimated
fair value of long-term investments and notes receivable was $14 million, respectively, at February 2, 2008 and
$18 million and $19 million, respectively, at February 3, 2007. The carrying value and estimated fair value of the short-
term investment was $14 million and $15 million, respectively, at February 3, 2007. The carrying values of cash and cash
equivalents, other short-term investments and other current receivables and payables approximate their fair value.
Business Risk
The retailing business is highly competitive. Price, quality, selection of merchandise, reputation, store location,
advertising and customer service are important competitive factors in the Company’s business. The Company operates
in 21 countries and purchased approximately 77 percent of its merchandise in 2007 from its top 5 vendors. In 2007, the
Company purchased approximately 56 percent of its athletic merchandise from one major vendor and approximately
12 percent from another major vendor. Each of our operating divisions is highly dependent on Nike; they individually
purchase 43 to 74 percent of their merchandise from Nike. The Company generally considers all vendor relations to be
satisfactory.
Included in the Company’s Consolidated Balance Sheet as of February 2, 2008, are the net assets of the Company’s
European operations totaling $573 million, which are located in 17 countries, 11 of which have adopted the euro as
their functional currency.
22. 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 the fiscal year.