Foot Locker (FL)

Northern Group Note Impairment

     On January 23, 2001, the Company announced that it was exiting its Northern Group segment. During the second quarter of 2001, the Company completed the liquidation of the 324 stores in the United States. On September 28, 2001, the Company completed the stock transfer of the 370 Northern Group stores in Canada through one of its wholly owned subsidiaries for approximately CAD$59 million, which was paid in the form of a note. Over the last several years, the note has been amended and payments have been received; however, the interest and payment terms remained unchanged. The CAD$15.5 million note was required to be repaid upon the occurrence of “payment events,” as defined in the purchase agreement, but no later than September 28, 2008. During the first quarter of 2008, the principal owners of the Northern Group requested an extension on the repayment of the note. The Company determined, based on the Northern Group’s current financial condition and projected performance, that repayment of the note pursuant to the original terms of the purchase agreement was not likely. Accordingly, a non-cash impairment charge of $15 million was recorded during the first quarter of 2008 in accordance with SFAS No. 114, “Accounting by Creditors for Impairment of a Loan.” This charge has been recorded with no tax benefit. The tax benefit is a capital loss that can only be used to offset capital gains. The Company does not anticipate recognizing sufficient capital gains to utilize these losses. Therefore, the Company determined that a full valuation allowance was required.

     Another wholly owned subsidiary of the Company was the assignor of the store leases involved in the Northern Group transaction and, therefore, retains potential liability for such leases. As the assignor of the Northern Canada leases, the Company remained secondarily liable under these leases. As of January 31, 2009, the Company estimates that its gross contingent lease liability is CAD$2 million. The Company currently estimates the expected value of the lease liability to be insignificant. The Company believes that, because it is secondarily liable on the leases, it is unlikely that it would be required to make such contingent payments.

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Northern Group Note
Impairment

     On
January 23, 2001, the Company announced that it was exiting its Northern Group
segment. During the second quarter of 2001, the Company completed the
liquidation of the 324 stores in the United States. On September 28, 2001, the
Company completed the stock transfer of the 370 Northern Group stores in Canada
through one of its wholly owned subsidiaries for approximately CAD$59 million,
which was paid in the form of a note. Over the last several years, the note has
been amended and payments have been received; however, the interest and payment
terms remained unchanged. The CAD$15.5 million note was required to be repaid
upon the occurrence of “payment events,” as defined in the purchase agreement,
but no later than September 28, 2008. During the first quarter of 2008, the
principal owners of the Northern Group requested an extension on the repayment
of the note. The Company determined, based on the Northern Group’s current
financial condition and projected performance, that repayment of the note
pursuant to the original terms of the purchase agreement was not likely.
Accordingly, a non-cash impairment charge of $15 million was recorded during the
first quarter of 2008 in accordance with SFAS No. 114, “Accounting by Creditors
for Impairment of a Loan.” This charge has been recorded with no tax benefit.
The tax benefit is a capital loss that can only be used to offset capital gains.
The Company does not anticipate recognizing sufficient capital gains to utilize
these losses. Therefore, the Company determined that a full valuation allowance
was required.

     Another wholly owned subsidiary of the Company was the assignor of the
store leases involved in the Northern Group transaction and, therefore, retains
potential liability for such leases. As the assignor of the Northern Canada
leases, the Company remained secondarily liable under these leases. As of
January 31, 2009, the Company estimates that its gross contingent lease
liability is CAD$2 million. The Company currently estimates the expected value
of the lease liability to be insignificant. The Company believes that, because
it is secondarily liable on the leases, it is unlikely that it would be required
to make such contingent payments.

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