Foot Locker 2013 Annual Report Download - page 63

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Foot Locker, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies − (continued)
Advertising costs, which are included as a component of selling, general and administrative expenses, were as follows:
2013 2012 2011
(in millions)
Advertising expenses $124 $132 $121
Cooperative advertising reimbursements (22) (25) (22)
Net advertising expense $102 $107 $ 99
Catalog Costs
Catalog costs, which primarily comprise paper, printing, and postage, are capitalized and amortized over the
expected customer response period related to each catalog, which is generally 90 days. Cooperative reim-
bursements earned for the promotion of certain products are agreed upon with vendors and are recorded in
the same period as the associated catalog expenses are amortized. Prepaid catalog costs totaled $3 million
and $4 million at February 1, 2014 and February 2, 2013, respectively.
Catalog costs, which are included as a component of selling, general and administrative expenses, were as
follows:
2013 2012 2011
(in millions)
Catalog costs $36 $45 $44
Cooperative reimbursements (5) (6) (5)
Net catalog expense $31 $39 $39
Earnings Per Share
The Company accounts for and discloses earnings per share using the treasury stock method. Basic earnings
per share is computed by dividing reported net income for the period by the weighted-average number of
common shares outstanding at the end of the period. Restricted stock awards, which contain non-forfeitable
rights to dividends, are considered participating securities and are included in the calculation of basic earnings
per share. Diluted earnings per share reflects the weighted-average number of common shares outstanding
during the period used in the basic earnings per share computation plus dilutive common stock equivalents.
The computation of basic and diluted earnings per share is as follows:
2013 2012 2011
(in millions, except per share data)
Net income $ 429 $ 397 $ 278
Weighted-average common shares outstanding 148.4 151.2 153.0
Basic earnings per share $ 2.89 $ 2.62 $ 1.81
Weighted-average common shares outstanding 148.4 151.2 153.0
Dilutive effect of potential common shares 2.1 2.8 1.4
Weighted-average common shares outstanding assuming dilution 150.5 154.0 154.4
Diluted earnings per share $ 2.85 $ 2.58 $ 1.80
Potential common shares include the dilutive effect of stock options and restricted stock units. Options to
purchase 1.0 million, 0.8 million, and 3.8 million shares of common stock at February 1, 2014, February 2, 2013,
and January 28, 2012, respectively, were not included in the computations primarily 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.
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