Foot Locker 2010 Annual Report Download - page 61

Download and view the complete annual report

Please find page 61 of the 2010 Foot Locker annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 104

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104

Foreign Currency Translation
The functional currency of the Company’s international operations is the applicable local currency. The
translation of the applicable foreign currency into U.S. dollars is performed for balance sheet accounts using
current exchange rates in effect at the balance sheet date and for revenue and expense accounts using the
weighted-average rates of exchange prevailing during the year. The unearned gains and losses resulting from
such translation are included as a separate component of accumulated other comprehensive loss within
shareholders’ equity.
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.
2. Segment Information
The Company has determined that its reportable segments are those that are based on its method of internal
reporting. As of January 29, 2011, the Company has two reportable segments, Athletic Stores and
Direct-to-Customers. The Company acquired CCS during the fourth quarter of 2008, and its operations are
presented within the Direct-to-Customers segment.
The accounting policies of both segments are the same as those described in the Summary of Significant
Accounting Policies note. The Company evaluates performance based on several factors, of which the primary
financial measure is division results. Division profit (loss) reflects income (loss) from continuing operations
before income taxes, corporate expense, non-operating income, and net interest expense.
2010 2009 2008
(in millions)
Sales
Athletic Stores ......................................... $4,617 $4,448 $4,847
Direct-to-Customers...................................... 432 406 390
Total sales .......................................... $5,049 $4,854 $5,237
Operating Results
Athletic Stores
(1)
........................................ $ 329 $ 114 $ (59)
Direct-to-Customers
(2)
.................................... 30 32 43
359 146 (16)
Restructuring income
(3)
................................... — 1 —
Division profit (loss) ..................................... 359 147 (16)
Less: Corporate expense
(4)
................................. 97 67 87
Operating profit (loss) .................................... 262 80 (103)
Other income
(5)
......................................... 4 3 8
Interest expense, net ..................................... 9 10 5
Income (loss) from continuing operations before income taxes ......... $ 257 $ 73 $(100)
(1) The year ended January 30, 2010 includes non-cash impairment charges totaling $32 million, which were recorded to write-down
long-lived assets such as store fixtures and leasehold improvements at the Company’s Lady Foot Locker, Kids Foot Locker, Footaction,
and Champs Sports divisions. The year ended January 31, 2009 includes a $241 million charge representing long-lived store asset
impairment, goodwill and other intangibles impairment, and store closing costs related to the Company’s U.S. operations.
(2) Included in the results for the year ended January 29, 2011 is a non-cash impairment charge of $10 million to write down the CCS
tradename intangible asset. Included in the results for the year ended January 30, 2010 is a non-cash impairment charge of $4 million
to write off software development costs.
(3) During the year ended January 30, 2010, the Company adjusted its 1999 restructuring reserves to reflect a favorable lease termination.
(4) During the fourth quarter of 2009, the Company restructured its organization by consolidating the Lady Foot Locker, Foot Locker U.S.,
Kids Foot Locker, and Footaction businesses in addition to reducing corporate staff, resulting in a $5 million charge. Included in
corporate expense for the year ended January 31, 2009 is a $3 million other-than-temporary impairment charge related to the
investment in the Reserve International Liquidity Fund. Additionally, for the year ended January 31, 2009 the Company recorded a
$15 million impairment charge on the Northern Group note receivable.
(5) Other income includes non-operating items, such as gains from insurance recoveries, gains on the repurchase and retirement of bonds,
royalty income, the changes in fair value, premiums paid and realized gains associated with foreign currency option contracts. Included
in the year ended January 29, 2011 is a $2 million gain to reflect the Company’s settlement of its investment in the Reserve
International Liquidity Fund.
42