Foot Locker 2010 Annual Report Download - page 63

During 2008, the Company determined that the fair values of goodwill were less than the carrying values of
the Foot Locker, Kids Foot Locker, and Footaction reporting unit and the Champs Sports reporting unit, resulting
in a non-cash impairment charge of $167 million. 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 an impairment
charge of $2 million related to trademarks of Footaction and Foot Locker in the Republic of Ireland, which are
part of the Athletic Stores segment.
Impairment of Assets
No impairment charges related to long-lived assets were recorded during 2010. In 2009, the Company
recorded non-cash impairment charges totaling $36 million; $32 million was recorded to write-down long-lived
assets at its Lady Foot Locker, Kids Foot Locker, Footaction, and Champs Sports divisions and a $4 million charge
was recorded to write off certain software development costs for the Direct-to-Customers segment as a result of
management’s decision to terminate this project. During 2008, the Company recorded non-cash impairment
charges of $67 million related to Foot Locker U.S., Kids Foot Locker, Footaction, and Champs Sports.
Reorganization Costs
On January 8, 2010, the Company announced that it would change its organizational structure by
consolidating the management team that oversees its Lady Foot Locker business with the team that manages the
Foot Locker U.S., Kids Foot Locker, and Footaction businesses. As a result of this divisional reorganization, as well
as certain corporate staff reductions taken to improve corporate efficiency, the Company recorded a charge of
$5 million. This charge was comprised primarily of severance costs to eliminate approximately 120 positions.
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. The
Company has concluded that no store closings have met the criteria for discontinued operations treatment.
Money Market Impairment
In 2008, the Company recognized an impairment loss of $3 million to reflect an other-than-temporary
decline in fair value, which was related to the value of the underlying securities of Lehman Brothers held in the
Reserve International Liquidity Fund, Ltd., a money market fund (the ‘‘Fund’’). During 2010, a settlement
agreement was reached between investors and the Fund. The Company received $0.98 per share net asset value
through this agreement. Pursuant to the settlement, the Company received a payment of $9 million during 2010
for the remaining portion of its investment in the Fund, which had a carrying amount of $7 million. The total
amount received was $74 million of its original $75 million investment in the Fund. As the Company had
recognized an impairment loss of $3 million during 2008, a $2 million gain was recorded in 2010 to reflect the
Company’s realized loss of $1 million in the Fund. These amounts were recorded with no tax expense or benefit.
The $2 million gain is recorded within other income.
Northern Group Note Impairment
In 2008, a non-cash impairment charge of $15 million was recorded to fully write off the Northern Group
note, which represented a note received in connection with the disposition of the Company’s former Northern
Group operations.
4. Other Income
Other income reflects non-operating income and includes items such as royalty income from the Company’s
franchising agreements, lease termination gains, realized gains/losses and premiums associated with foreign
currency option contracts, gains on the purchase and retirement of bonds, and other non-operating items.
For 2010, other income includes a $2 million gain on its money-market investment, as well as royalty income,
and gains on lease terminations related to certain lease interests in Europe. For 2009, other income includes
$4 million related to gains from insurance recoveries, gains on the purchase and retirement of bonds, and royalty
income partially offset by foreign currency option contract premiums of $1 million. Other income in 2008
primarily reflects a $4 million net gain related to the Company’s foreign currency options contracts and a
$3 million gain on lease terminations related to two lease interests in Europe.
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