Foot Locker 2010 Annual Report Download - page 48

There is limited risk to the Company for increases in health care costs related to the postretirement plan as,
beginning in 2001, new retirees have assumed the full expected costs and then-existing retirees have assumed all
increases in such costs. A one percent change in the assumed health care cost trend rate would change the SERP
Medical Plan’s accumulated benefit obligation by approximately $1 million.
The Company expects to record postretirement income of approximately $5 million and pension expense of
approximately $20 million in 2011.
Income Taxes
In accordance with GAAP, deferred tax assets are recognized for tax credit and net operating loss
carryforwards, reduced by a valuation allowance, which is established when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. Management is required to estimate taxable income
for future years by taxing jurisdiction and to use its judgment to determine whether or not to record a valuation
allowance for part or all of a deferred tax asset. Estimates of taxable income are based upon the Company’s
three-year strategic plans. A one percent change in the Company’s overall statutory tax rate for 2010 would have
resulted in an $8 million change in the carrying value of the net deferred tax asset and a corresponding charge or
credit to income tax expense depending on whether such tax rate change was a decrease or an increase.
The Company has operations in multiple taxing jurisdictions and is subject to audit in these jurisdictions.
Tax audits by their nature are often complex and can require several years to resolve. Accruals of tax
contingencies require management to make estimates and judgments with respect to the ultimate outcome of
tax audits. Actual results could vary from these estimates.
The Company expects its 2011 effective tax rate to approximate 37 percent. The actual rate will primarily
depend upon the percentage of the Company’s income earned in the United States as compared with
international operations.
Recent Accounting Pronouncements
Recently issued accounting pronouncements did not, or are not believed by management to, have a material
effect on the Company’s present or future consolidated financial statements.
Disclosure Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of the federal securities laws. Other
than statements of historical facts, all statements which address activities, events or developments that the
Company expects or anticipates will or may occur in the future, including, but not limited to, such things as
future capital expenditures, expansion, strategic plans, financial objectives, dividend payments, stock
repurchases, growth of the Company’s business and operations, including future cash flows, revenues and
earnings, and other such matters are forward-looking statements. These forward-looking statements are based on
many assumptions and factors detailed in the Company’s filings with the Securities and Exchange Commission,
including the effects of currency fluctuations, customer demand, fashion trends, competitive market forces,
uncertainties related to the effect of competitive products and pricing, customer acceptance of the Company’s
merchandise mix and retail locations, the Company’s reliance on a few key vendors for a majority of its
merchandise purchases (including a significant portion from one key vendor), pandemics and similar major health
concerns, unseasonable weather, further deterioration of global financial markets, economic conditions
worldwide, further deterioration of business and economic conditions, any changes in business, political and
economic conditions due to the threat of future terrorist activities in the United States or in other parts of the
world and related U.S. military action overseas, the ability of the Company to execute effectively its strategic
plan and its business plans with regard to each of its business units, and risks associated with foreign global
sourcing, including political instability, changes in import regulations, and disruptions to transportation services
and distribution.
Any changes in such assumptions or factors could produce significantly different results. The Company
undertakes no obligation to update forward-looking statements, whether as a result of new information, future
events, or otherwise.
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