Foot Locker 2012 Annual Report Download - page 62

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FOOT LOCKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies − (continued)
Potential common shares include the dilutive effect of stock options and restricted stock units. Options to
purchase 0.8 million, 3.8 million, and 4.5 million shares of common stock at February 2, 2013,
January 28, 2012, and January 29, 2011, respectively, were not included in the computations because the
exercise price of the options was greater than the average market price of the common shares and,
therefore, the effect of their inclusion would be antidilutive. Contingently issuable shares of 0.1 million
have not been included as the vesting conditions have not been satisfied.
Share-Based Compensation
The Company recognizes compensation expense in the financial statements for share-based awards based
on the grant date fair value of those awards. Additionally, stock-based compensation expense includes an
estimate for pre-vesting forfeitures and is recognized over the requisite service periods of the awards. See
Note 21, Share-Based Compensation, for information on the assumptions the Company used to calculate the
fair value of share-based compensation.
Upon exercise of stock options, issuance of restricted stock or units, or issuance of shares under the
employees stock purchase plan, the Company will issue authorized but unissued common stock or use
common stock held in treasury. The Company may make repurchases of its common stock from time to
time, subject to legal and contractual restrictions, market conditions, and other factors.
Cash and Cash Equivalents
Cash equivalents at February 2, 2013 and January 28, 2012 were $841 million and $830 million,
respectively. Included in these amounts are $187 million and $191 million of short-term deposits as of
February 2, 2013 and January 28, 2012, respectively. The Company considers all highly liquid investments
with original maturities of three months or less, including commercial paper and money market funds, to
be cash equivalents. Additionally, amounts due from third-party credit card processors for the settlement
of debit and credit card transactions are included as cash equivalents as they are generally collected within
three business days.
Investments
Changes in the fair value of available-for-sale securities are reported as a component of accumulated other
comprehensive loss in the Consolidated Statements of Shareholders’ Equity and are not reflected in the
Consolidated Statements of Operations until a sale transaction occurs or when declines in fair value are
deemed to be other-than-temporary. The Company routinely reviews available-for-sale securities for
other-than-temporary declines in fair value below the cost basis, and when events or changes in
circumstances indicate the carrying value of a security may not be recoverable, the security is written
down to fair value. As of February 2, 2013, the Company held $54 million of available-for-sale securities,
which was comprised of $48 million in short-term investments and a $6 million auction rate security. See
Note 19, Fair Value Measurements, for further discussion of these investments.
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