Foot Locker (FL)

Pension and Postretirement Liabilities

     The Company determines its obligations for pension and postretirement liabilities based upon assumptions related to discount rates, expected long-term rates of return on invested plan assets, salary increases, age, and mortality among others. Management reviews all assumptions annually with its independent actuaries, taking into consideration existing and future economic conditions and the Company’s intentions with regard to the plans. Management believes that its estimates for 2008, as disclosed in the “Retirement Plans and Other Benefits” note in “Item 8. Consolidated Financial Statements and Supplementary Data,” to be reasonable.

     Long-Term Rate of Return Assumption - The expected long-term rate of return on invested pension plan assets is a component of pension expense. The rate is based on the plans’ weighted-average target asset allocation, as well as historical and future expected performance of those assets. The target asset allocation is selected to obtain an investment return that is sufficient to cover the expected benefit payments and to reduce future contributions by the Company. The Company’s common stock represented approximately one percent of the total pension plans’ assets at January 31, 2009.

     The weighted-average long-term rate of return used to determine 2008 pension expense was 8.17 percent. A decrease of 50 basis points in the weighted-average expected long-term rate of return would have increased 2008 pension expense by approximately $3 million. The actual return on plan assets in a given year typically differs from the expected long-term rate of return, and the resulting gain or loss is deferred and amortized into the plans’ expense over time.

     Discount Rate - An assumed discount rate is used to measure the present value of future cash flow obligations of the plans and the interest cost component of pension expense and postretirement income. The discount rate selected to measure the present value of the Company’s U.S. benefit obligations as of January 31, 2009 was derived using a cash flow matching method whereby the Company compares the plans’ projected payment obligations by year with the corresponding yield on the Citibank Pension Discount Curve. The cash flows are then discounted to their present value and an overall discount rate is determined. The discount rate selected to measure the present value of the Company’s Canadian benefit obligations as of January 31, 2009 was developed by using the plan’s bond portfolio indices, which match the benefit obligations.

     The weighted-average discount rates used to determine the 2008 benefit obligations related to the Company’s pension and postretirement plans were 6.22 percent and 6.20 percent, respectively. A decrease of 50 basis points in the weighted-average discount rate would have increased the accumulated benefit obligation as of January 31, 2009 of the pension plans by approximately $24 million and the effect on the postretirement plan would not be significant. Such a decrease would not have significantly changed 2008 pension expense or postretirement income.

     There is limited risk to the Company for increases in health care costs related to the postretirement plan as, beginning in 2001, new retirees have assumed the full expected costs and then-existing retirees have assumed all increases in such costs.

     The Company expects to record postretirement income of approximately $6 million and pension expense of approximately $18 million in 2009.

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Pension and Postretirement
Liabilities

     The
Company determines its obligations for pension and postretirement liabilities
based upon assumptions related to discount rates, expected long-term rates of
return on invested plan assets, salary increases, age, and mortality among
others. Management reviews all assumptions annually with its independent
actuaries, taking into consideration existing and future economic conditions and
the Company’s intentions with regard to the plans. Management believes that its
estimates for 2008, as disclosed in the “Retirement Plans and Other Benefits”
note in “Item 8. Consolidated Financial Statements and Supplementary Data,” to
be reasonable.

     Long-Term Rate of Return Assumption - The expected long-term rate of
return on invested pension plan assets is a component of pension expense. The
rate is based on the plans’ weighted-average target asset allocation, as well as
historical and future expected performance of those assets. The target asset
allocation is selected to obtain an investment return that is sufficient to
cover the expected benefit payments and to reduce future contributions by the
Company. The Company’s common stock represented approximately one percent
of the total pension plans’ assets at January 31, 2009.

     The
weighted-average long-term rate of return used to determine 2008 pension expense
was 8.17 percent. A decrease of 50 basis points in the weighted-average expected
long-term rate of return would have increased 2008 pension expense by
approximately $3 million. The actual return on plan assets in a given year
typically differs from the expected long-term rate of return, and the resulting
gain or loss is deferred and amortized into the plans’ expense over
time.

     Discount Rate - An assumed discount rate is used to measure the present
value of future cash flow obligations of the plans and the interest cost
component of pension expense and postretirement income. The discount rate
selected to measure the present value of the Company’s U.S. benefit obligations
as of January 31, 2009 was derived using a cash flow matching method whereby the
Company compares the plans’ projected payment obligations by year with the
corresponding yield on the Citibank Pension Discount Curve. The cash flows are
then discounted to their present value and an overall discount rate is
determined. The discount rate selected to measure the present value of the
Company’s Canadian benefit obligations as of January 31, 2009 was developed by
using the plan’s bond portfolio indices, which match the benefit
obligations.

     The
weighted-average discount rates used to determine the 2008 benefit obligations
related to the Company’s pension and postretirement plans were 6.22 percent and
6.20 percent, respectively. A decrease of 50 basis points in the
weighted-average discount rate would have increased the accumulated benefit
obligation as of January 31, 2009 of the pension plans by approximately $24
million and the effect on the postretirement plan would not be significant. Such
a decrease would not have significantly changed 2008 pension expense or
postretirement income.

     There is limited risk to the Company for increases in health care costs
related to the postretirement plan as, beginning in 2001, new retirees have
assumed the full expected costs and then-existing retirees have assumed all
increases in such costs.

     The
Company expects to record postretirement income of approximately $6 million and
pension expense of approximately $18 million in 2009.

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