Foot Locker 2012 Annual Report Download - page 26

Our financial results may be adversely affected by tax rates or exposure to additional tax liabilities.
We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Our
provision for income taxes is based on a jurisdictional mix of earnings, statutory rates, and enacted tax
rules, including transfer pricing. Significant judgment is required in determining our provision for income
taxes and in evaluating our tax positions on a worldwide basis. Our effective tax rate could be adversely
affected by a number of factors, including shifts in the mix of pretax results by tax jurisdiction, changes in
tax laws or related interpretations in the jurisdictions in which we operate, and tax assessments and
related interest and penalties resulting from income tax audits.
A substantial portion of our cash and investments is invested outside of the U.S. As we plan to permanently
reinvest our foreign earnings outside the U.S., in accordance with U.S. GAAP, we have not provided for U.S.
federal and state income taxes or foreign withholding taxes that may result from future remittances of
undistributed earnings of foreign subsidiaries. Recent proposals to reform U.S. tax rules may result in a
reduction or elimination of the deferral of U.S. income tax on our foreign earnings, which could adversely
affect our effective tax rate. Any of these changes could have an adverse effect on our results of operations
and financial condition.
The effects of natural disasters, terrorism, acts of war, and public health issues may adversely
affect our business.
Natural disasters, including earthquakes, hurricanes, floods, and tornados may affect store and distribution
center operations. In addition, acts of terrorism, acts of war, and military action both in the United States
and abroad can have a significant effect on economic conditions and may negatively affect our ability to
purchase merchandise from vendors for sale to our customers. Public health issues, such as flu or other
pandemics, whether occurring in the United States or abroad, could disrupt our operations and result in a
significant part of our workforce being unable to operate or maintain our infrastructure or perform other
tasks necessary to conduct our business. Additionally, public health issues may disrupt the operations of
our suppliers, our operations, our customers, or have an adverse effect on customer demand. We may be
required to suspend operations in some or all of our locations, which could have a material adverse effect
on our business, financial condition, and results of operations. Any significant declines in public safety or
uncertainties regarding future economic prospects that affect customer spending habits could have a
material adverse effect on customer purchases of our products.
Manufacturer compliance with our social compliance program requirements.
We require our independent manufacturers to comply with our policies and procedures, which cover
many areas including labor, health and safety and environmental standards. We monitor compliance with
our policies and procedures using internal resources, as well as third-party monitoring firms. Although we
monitor their compliance with these policies and procedures, we do not control the manufacturers or their
practices. Any failure of our independent manufacturers to comply with our policies and procedures or
local laws in the country of manufacture could disrupt the shipment of merchandise to us, force us to
locate alternate manufacturing sources, reduce demand for our merchandise, or damage our reputation.
Complications in our distribution centers and other factors affecting the distribution of
merchandise may affect our business.
We operate four distribution centers worldwide to support our businesses. In addition to the distribution
centers that we operate, we have third-party arrangements to support our operations in the U.S., Canada,
Australia, and New Zealand. If complications arise with any facility or any facility is severely damaged or
destroyed, our other distribution centers may not be able to support the resulting additional distribution
demands. This may adversely affect our ability to deliver inventory on a timely basis. We depend upon
third-party carriers for shipment of a significant amount of merchandise. An interruption in service by
these carriers for any reason could cause temporary disruptions in our business, a loss of sales and profits,
and other material adverse effects.
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