Foot Locker 2008 Annual Report Download - page 75

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The Company’s pension plan weighted-average asset allocations at January 31, 2009 and February 2, 2008 by
asset category are as follows:
2008 2007
Asset Category
Equity securities ....................................................... 46% 55%
Foot Locker, Inc. common stock ........................................... 1% 1%
Debt securities ........................................................ 51% 42%
Real estate ........................................................... 2% 1%
Other ............................................................... —% 1%
Total ................................................................ 100% 100%
The expected long-term rate of return on invested plan assets is based on historical long-term performance and
future expected performance of those assets based upon current asset allocations.
The U.S. defined benefit plan held 396,000 shares of Foot Locker, Inc. common stock as of January 31, 2009 and
February 2, 2008. Currently, the target composition of the U.S. plan assets is 65 percent equity and 35 percent fixed
income securities, although the Company may alter the targets from time to time depending on market conditions and
the funding requirements of the pension plan. Due to market conditions and other factors, actual asset allocations
may vary from the target allocation outlined above. The Company believes that plan assets are invested in a prudent
manner with an objective of providing a total return that, over the long term, provides sufficient assets to fund benefit
obligations, taking into account the Company’s expected contributions and the level of risk deemed appropriate. The
Company’s investment strategy is to utilize asset classes with differing rates of return, volatility and correlation
to reduce risk by providing diversification relative to equities. Diversification within asset classes is also utilized
to reduce the effect that the return of any single investment may have on the entire portfolio. The Company has
contributed $8 million to its U.S. plan in February 2009. Due to the pension plan asset performance experienced for
the year ended January 31, 2009, the Company may make additional contributions during 2009 to its U.S. qualified
pension plan. The Company is in the process of evaluating the amount and timing of the contribution. The contribution
amount will depend on the plan asset performance for the balance of the year and any statutory or regulatory changes
that may occur.
In late January 2008, the Company modified the actual asset allocations for its Canadian pension plan. Effective
with the beginning of 2008, the target allocation for the Canadian plan is 95 percent debt securities and 5 percent
equity. The bond portfolio is comprised of government and corporate bonds chosen to match the pension plan’s benefit
payment obligations. This change will reduce future volatility with regard to the funded status of the plan. This change
will, however, result in higher pension expense due to the lower long-term rate of return associated with debt securities.
In 2008, the Company contributed $6 million to its Canadian qualified pension plan. The amount contributed to the
Canadian plan in February 2009 was approximately $3 million.
Estimated future benefit payments for each of the next five years and the five years thereafter are as follows:
Pension
Benefits
Postretirement
Benefits
(in millions)
2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64 $1
2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 2
2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 1
2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 1
2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 1
2014–2018. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 4
In February 2007, the Company and its U.S. pension plan, the Foot Locker Retirement Plan, were named as
defendants in a class action in federal court in New York. The Complaint alleged that the Company’s pension plan
violated the Employee Retirement Income Security Act of 1974, including, without limitation, its age discrimination
and notice provisions, as a result of the Company’s conversion of its defined benefit plan to a defined benefit pension
plan with a cash balance feature in 1996. The Company is defending the action vigorously.