Foot Locker 2009 Annual Report Download - page 59

Store Closing Program
As part of the Company’s store closing program announced in 2007, the Company recognized exit costs of
$5 million for the year ended January 31, 2009, comprising primarily lease termination costs for 21 stores. In
2007, the Company recognized $4 million of exit costs related to 33 stores, which closed during 2007, comprising
primarily lease termination costs. Store closings may constitute discontinued operations if migration of
customers and cash flows are not expected. The Company has concluded that no store closings have met the
criteria for discontinued operations treatment.
Impairment of Goodwill and Other Intangible Assets
The Company performs its annual goodwill impairment test as of the beginning of each year. However,
during the fourth quarter of 2008, as a result of the significant decline in the Company’s common stock and
market capitalization in relation to the book value, the Company determined that a triggering event had occurred
and performed an interim goodwill impairment test. Based on this testing, the Company determined that the fair
values were less than the carrying values of the Foot Locker, Kids Foot Locker and Footaction reporting unit and
the Champs Sports reporting unit. Accordingly, the Company performed further analysis to determine the extent
of the goodwill impairment and concluded that the carrying value of these two reporting units was fully impaired,
resulting in a non-cash impairment charge of $167 million. There were no goodwill impairment charges in 2009
or 2007.
Intangible assets that are determined to have finite lives are amortized over their useful lives and are
measured for impairment only when events or circumstances indicate that the carrying value may be impaired.
Intangible assets with indefinite lives are tested for impairment if impairment indicators arise and, at a minimum,
annually. As a result of the impairment review related to long-lived assets and goodwill, the Company performed a
review of its other intangible assets and recorded impairment charges in 2008 totaling $2 million related to
trademarks of Footaction in the U.S. and Foot Locker in the Republic of Ireland, reflecting decreases in projected
revenues. There were no other intangible asset impairment charges in 2009 or 2007.
Money Market Impairment
On September 16, 2008, the Company requested redemption of its shares in the Reserve International
Liquidity Fund, Ltd., a money market fund (the ‘‘Fund’’), totaling $75 million. At the time the redemption request
was made, the Company was informed by the Reserve Management Company, the Fund’s investment advisor, that
the Company’s redemption trades would be honored at a $1.00 per share net asset value. Litigation, to which the
Company is not a party, exists that involves how the remaining assets of the Fund should be distributed;
therefore, there is a risk that the Company could receive less than the $1.00 per share net asset value. As a result,
during the third quarter of 2008, the Company recognized an impairment loss of $3 million to reflect a decline in
fair value that is other-than-temporary. This charge was recorded with no tax benefit. The impairment was
related to the underlying securities of Lehman Brothers Holdings Inc. held in the Fund. The Company has
received $65 million of its original investment in the Fund as of January 30, 2010; however, the Company has not
received information as to when the remaining amount of its redemption request will be paid.
Northern Group Note Impairment
On January 23, 2001, the Company announced that it was exiting its Northern Group segment. During the
second quarter of 2001, the Company completed the liquidation of the 324 stores in the United States. On
September 28, 2001, the Company completed the stock transfer of the 370 Northern Group stores in Canada
through one of its wholly owned subsidiaries for approximately CAD$59 million, which was paid in the form of a
note. Over the last several years, the note has been amended and payments have been received; however, the
interest and payment terms remained unchanged. The CAD$15.5 million note was required to be repaid upon the
occurrence of ‘‘payment events,’’ as defined in the purchase agreement, but no later than September 28, 2008.
During the first quarter of 2008, the principal owners of the Northern Group requested an extension on the
repayment of the note. The Company determined, based on the Northern Group’s current financial condition and
projected performance, that repayment of the note pursuant to the original terms of the purchase agreement was
not likely. Accordingly, a non-cash impairment charge of $15 million was recorded during the first quarter of
2008. This charge was recorded with no tax benefit. The tax benefit is a capital loss that can only be used to
offset capital gains. The Company does not anticipate recognizing sufficient capital gains to utilize these losses.
Therefore, the Company determined that a full valuation allowance was required.
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