Foot Locker 2009 Annual Report Download - page 53

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The computation of basic and diluted earnings per share is as follows:
2009 2008 2007
(in millions)
Net income (loss) from continuing operations ............. $ 47 $ (79) $ 43
Weighted-average common shares outstanding ........... 156.0 154.0 154.0
Basic Earnings per share from continuing operations ......... $ 0.30 $ (0.52) $ 0.29
Weighted-average common shares outstanding ........... 156.0 154.0 154.0
Dilutive effect of potential common shares .............. 0.3 — 1.6
Weighted-average common shares outstanding
assuming dilution ............................. 156.3 154.0 155.6
Diluted earnings per share from continuing operations ........ $ 0.30 $(0.52) $ 0.28
Potential common shares include the dilutive effect of stock options and restricted stock units. Options to
purchase 6.3 million, 4.8 million, and 3.4 million shares of common stock at January 30, 2010, January 31, 2009,
and February 2, 2008, 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. Additionally, due to a loss reported for the year ended January 31, 2009, options
and awards of 1.2 million shares of common stock were excluded from the calculation of diluted earnings per
share as the effect would be antidilutive.
Share-Based Compensation
The Company recognizes compensation expense in the financial statements for share-based awards based on
the grant date fair value of those awards. Additionally, stock-based compensation expense includes an estimate
for pre-vesting forfeitures and is recognized over the requisite service periods of the awards. See Note 21,
‘‘Share-Based Compensation,’’ for information on the assumptions the Company used to calculate the fair value of
share-based compensation.
Upon exercise of stock options, issuance of restricted stock or issuance of shares under the employee stock
purchase plan, the Company will issue authorized but unissued common stock or use common stock held in
treasury. The Company may make repurchases of its common stock from time to time, subject to legal and
contractual restrictions, market conditions and other factors.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less,
including money market funds, to be cash equivalents. Amounts due from third party credit card processors for
the settlement of debit and credit card transactions are included as cash equivalents as they are generally
collected within three business days. Cash equivalents at January 30, 2010 and January 31, 2009 were
$501 million and $331 million, respectively.
Investments
The Company’s short-term investment and auction rate security are classified as available-for-sale. Changes
in the fair value of available-for-sale securities are reported as a component of accumulated other comprehensive
loss in the Consolidated Statements of Shareholders’ Equity and are not reflected in the Consolidated Statements
of Operations until a sale transaction occurs or when declines in fair value are deemed to be
other-than-temporary. The Company routinely reviews available-for-sale securities for other-than-temporary
declines in fair value below the cost basis, and when events or changes in circumstances indicate the carrying
value of a security may not be recoverable, the security is written down to fair value. The Company’s short-term
investment was $7 million and $23 million at January 30, 2010 and January 31, 2009, respectively. The Company’s
auction rate security was $5 million and $2 million at January 30, 2010 and January 31, 2009, respectively.
See Note 19, ‘‘Fair Value Measurements,’’ for further discussion of these investments.
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