SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended January 29, 2005
Commission file number 1-10299
New York | 13-3513936 | |||||
(State or other jurisdiction of | (I.R.S. Employer Identification No.) | |||||
incorporation or organization) | ||||||
112 West 34th Street, New York, New York | 10120 | |||||
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(212) 720-3700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |||||
Common Stock, par value $0.01 | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
See pages 59 through 63 for Index of Exhibits.
Number of shares of Common Stock outstanding at March 18, 2005: | 156,355,058 | |||||
The aggregate market value of voting stock held by non-affiliates of the Registrant computed by reference to the closing price as of the last business day of the Registrant’s most recently completed second fiscal quarter, July 31, 2004, was approximately: | $ | 2,600,112,397 | * |
* | For purposes of this calculation only (a) all directors plus one executive officer and owners of five percent or more of the Registrant are deemed to be affiliates of the Registrant and (b) shares deemed to be “held” by such persons at July 31, 2004 include only outstanding shares of the Registrant’s voting stock with respect to which such persons had, on such date, voting or investment power. |
TABLE OF CONTENTS
PART I | ||||||||||
Item 1 | Business | 1 | ||||||||
Item 2 | Properties | 2 | ||||||||
Item 3 | Legal Proceedings | 2 | ||||||||
Item 4 | Submission of Matters to a Vote of Security Holders | 2 | ||||||||
PART II | ||||||||||
Item 5 | Market for the Company’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities | 3 | ||||||||
Item 6 | Selected Financial Data | 3 | ||||||||
Item 7 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 3 | ||||||||
Item 7A | Quantitative and Qualitative Disclosures about Market Risk | 17 | ||||||||
Item 8 | Consolidated Financial Statements and Supplementary Data | 18 | ||||||||
Item 9 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 56 | ||||||||
Item 9A | Controls and Procedures | 56 | ||||||||
PART III | ||||||||||
Item 10 | Directors and Executive Officers of the Company | 56 | ||||||||
Item 11 | Executive Compensation | 57 | ||||||||
Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 57 | ||||||||
Item 13 | Certain Relationships and Related Transactions | 57 | ||||||||
Item 14 | Principal Accountant Fees and Services | 57 | ||||||||
PART IV | ||||||||||
Item 15 | Exhibits and Financial Statement Schedules | 57 |
PART I
Item 1. | Business |
General
Information Regarding Business Segments and Geographic Areas
Employees
Competition
Merchandise Purchases
1
Item 2. | Properties |
Item 3. | Legal Proceedings |
Item 4. | Submission of Matters to a Vote of Security Holders |
Executive Officers of the Company
Chairman of the Board, President and Chief Executive Officer | Matthew D. Serra | |||||
Executive Vice President and Chief Financial Officer | Bruce L. Hartman | |||||
President and Chief Executive Officer, Foot Locker, Inc. — U.S.A. | Richard T. Mina | |||||
Senior Vice President, General Counsel and Secretary | Gary M. Bahler | |||||
Senior Vice President — Real Estate | Jeffrey L. Berk | |||||
Senior Vice President — Chief Information Officer | Marc D. Katz | |||||
Senior Vice President — Strategic Planning | Lauren B. Peters | |||||
Senior Vice President — Human Resources | Laurie J. Petrucci | |||||
Vice President — Investor Relations and Treasurer | Peter D. Brown | |||||
Vice President and Chief Accounting Officer | Robert W. McHugh |
2
PART II
Item 5. | Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Total Number of Shares Purchased(1) | Average Price Paid per Share(1) | Total Number of Shares Purchased as Part of Publicly Announced Program(2) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program(2) | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 31, 2004 through Nov. 27, 2004 | — | $ | — | — | $50,000,000 | |||||||||||||
Nov. 28, 2004 through Jan. 1, 2005 | 6,670 | 26.28 | — | 50,000,000 | ||||||||||||||
Jan. 2, 2005 through Jan. 29, 2005 | — | — | — | 50,000,000 | ||||||||||||||
Total | 6,670 | $ | 26.28 | — |
(1) | These columns reflect shares purchased through option exercises by stock swaps. |
(2) | On November 20, 2002, the Company announced that the Board of Directors authorized the purchase of up to $50 million of the Company’s Common Stock; no purchases have been made under this program. This authorization will terminate on February 3, 2006. |
Item 6. | Selected Financial Data |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Business Overview
3
including television campaigns and sponsorships of various sporting events, Foot Locker, Inc. reinforces its image with a consistent message: namely, that it is the destination store for athletic apparel and footwear with a wide selection of merchandise in a full-service environment.
Athletic Stores
Store Profile
At January 31, 2004 | Acquired | Opened | Closed | At January 29, 2005 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Foot Locker | 2,088 | 11 | 84 | 48 | 2,135 | ||||||||||||||||||
Champs Sports | 581 | — | 5 | 16 | 570 | ||||||||||||||||||
Footaction | — | 349 | 4 | 4 | 349 | ||||||||||||||||||
Lady Foot Locker | 584 | — | 2 | 19 | 567 | ||||||||||||||||||
Kids Foot Locker | �� | 357 | — | 1 | 12 | 346 | |||||||||||||||||
Total Athletic Stores | 3,610 | 360 | 96 | 99 | 3,967 |
Direct-to-Customers
4
the Amazon.com website and the Foot Locker brands are featured in the Amazon.com specialty stores for apparel and accessories and sporting goods. The Company also has an arrangement with the NBA and Amazon.com whereby Footlocker.com provides the fulfillment services for NBA licensed products sold over the Internet at NBAstore.com and the NBA store on Amazon.com. In addition, the Company has a marketing agreement with the U.S. Olympic Committee (USOC) providing the Company with the exclusive rights to sell USOC licensed products through catalogs and via a new e-commerce site. During the fourth quarter of 2004, the Company entered into an agreement with ESPN for ESPN Shop — an ESPN-branded direct mail catalog and e-commerce site linked towww.ESPNshop.com, where fans can purchase athletic footwear, apparel and equipment which will be managed by Footlocker.com. Both the catalog and the e-commerce site feature a variety of ESPN-branded and non-ESPN-branded athletically inspired merchandise.
Executive Summary
Sales
2004 | 2003 | 2002 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | ||||||||||||||||||
Athletic Stores | $ | 4,989 | $ | 4,413 | $ | 4,160 | ||||||||||||
Direct-to-Customers | 366 | 366 | 349 | |||||||||||||||
$ | 5,355 | $ | 4,779 | $ | 4,509 |
Gross Margin
5
Division Profit
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
Athletic Stores | $ | 420 | $ | 363 | $279 | ||||||||||
Direct-to-Customers | 45 | 53 | 40 | ||||||||||||
Division profit | 465 | 416 | 319 | ||||||||||||
Restructuring (charges) income(1) | (2 | ) | (1 | ) | 2 | ||||||||||
Total division profit | 463 | 415 | 321 | ||||||||||||
Corporate expense | (74 | ) | (73 | ) | (52 | ) | |||||||||
Total operating profit | 389 | 342 | 269 | ||||||||||||
Non-operating income(2) | — | — | 3 | ||||||||||||
Interest expense, net | (15 | ) | (18 | ) | (26) | ||||||||||
Income from continuing operations before income taxes | $ | 374 | $ | 324 | $ 246 |
(1) | As more fully described in the notes to the consolidated financial statements, restructuring charges of $2 million and $1 million in 2004 and 2003, respectively, were recorded related to the dispositions of non-core businesses. Restructuring income of $2 million in 2002 reflects revisions to estimates used in the disposition of non-core businesses and the accelerated store-closing program. |
(2) | 2002 includes $2 million gain related to the condemnation of a part-owned and part-leased property for which the Company received proceeds of $6 million and real estate gains from the sale of corporate properties of $1 million during 2002. |
Segment Information
Athletic Stores
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
Sales | $ | 4,989 | $ | 4,413 | $4,160 | ||||||||||
Division profit | |||||||||||||||
Stores | $ | 420 | $ | 363 | $279 | ||||||||||
Restructuring income | — | — | 1 | ||||||||||||
Total division profit | $ | 420 | $ | 363 | $ 280 | ||||||||||
Sales as a percentage of consolidated total | 93 | % | 92 | % | 92% | ||||||||||
Number of stores at year end | 3,967 | 3,610 | 3,625 | ||||||||||||
Selling square footage (in millions) | 8.89 | 7.92 | 8.04 | ||||||||||||
Gross square footage (in millions) | 14.78 | 13.14 | 13.22 |
6
2004 compared with 2003
2003 compared with 2002
7
Direct-to-Customers
2004 | 2003 | 2002 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | ||||||||||||||||||
Sales | $ | 366 | $ | 366 | $ | 349 | ||||||||||||
Division profit | $ | 45 | $ | 53 | $ | 40 | ||||||||||||
Sales as a percentage of consolidated total | 7 | % | 8 | % | 8 | % |
2004 compared with 2003
2003 compared with 2002
Corporate Expense
8
Costs and Expenses
Selling, General and Administrative Expenses
Depreciation and Amortization
Interest Expense, Net
2004 | 2003 | 2002 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | ||||||||||||||||||
Interest expense | $ | 22 | $ | 26 | $ | 33 | ||||||||||||
Interest income | (7 | ) | (8 | ) | (7 | ) | ||||||||||||
Interest expense, net | $ | 15 | $ | 18 | $ | 26 | ||||||||||||
Weighted-average interest rate (excluding facility fees): | ||||||||||||||||||
Short-term debt | — | % | — | % | — | % | ||||||||||||
Long-term debt | 5.2 | % | 6.1 | % | 7.2 | % | ||||||||||||
Total debt | 5.2 | % | 6.1 | % | 7.2 | % | ||||||||||||
Short-term debt outstanding during the year: | ||||||||||||||||||
High | $ | — | $ | — | $ | — | ||||||||||||
Weighted-average | $ | — | $ | — | $ | — |
9
Income Taxes
10
Liquidity and Capital Resources
Liquidity
Cash Flow
11
Capital Structure
Credit Rating
12
Debt Capitalization and Equity
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
Cash, cash equivalents and short-term investments, net of debt | |||||||||||
and capital lease obligations | $ | 131 | $ | 112 | |||||||
Present value of operating leases | 1,989 | 1,683 | |||||||||
Total net debt | 1,858 | 1,571 | |||||||||
Shareholders’ equity | 1,830 | 1,375 | |||||||||
Total capitalization | $ | 3,688 | $ | 2,946 | |||||||
Net debt capitalization percent | 50.4 | % | 53.3 | % | |||||||
Net debt capitalization percent without operating leases | — | % | — | % |
13
Contractual Obligations and Commitments
Payments Due by Period | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Contractual Cash Obligations | Total | Less than 1 Year | 2 – 3 Years | 4 – 5 Years | After 5 Years | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Long-term debt | $ | 351 | $ | 18 | $ | 44 | $ | 113 | $ | 176 | |||||||||||||
Operating leases | 2,723 | 449 | 806 | 578 | 890 | ||||||||||||||||||
Capital lease obligations | 14 | — | 14 | — | — | ||||||||||||||||||
Other long-term liabilities(1) | — | — | — | — | — | ||||||||||||||||||
Total contractual cash obligations | $ | 3,088 | $ | 467 | $ | 864 | $ | 691 | $ | 1,066 |
(1) | The Company’s other liabilities in the Consolidated Balance Sheet as of January 29, 2005 primarily comprise pension and postretirement benefits, deferred rent liability, income taxes, workers’ compensation and general liability reserves and various other accruals. These liabilities have been excluded from the above table as the timing and/or amount of any cash payment is uncertain. The timing of the remaining amounts that are known have not been included as they are minimal and not useful to the presentation. Additional information on the balance sheet caption is included in the “Other Liabilities” footnote under “Item 8. Consolidated Financial Statements and Supplementary Data.” |
Amount of Commitment Expiration by Period | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Other Commercial Commitments | Total Amounts Committed | Less than 1 Year | 2 – 3 Years | 4 – 5 Years | After 5 Years | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Line of credit | $ | 175 | $ | — | $ | — | $ | 175 | $ | — | |||||||||||||
Stand-by letters of credit | 25 | — | — | 25 | — | ||||||||||||||||||
Purchase commitments(2) | 1,696 | 1,686 | 6 | 4 | — | ||||||||||||||||||
Other(3) | 131 | 41 | 58 | 28 | 4 | ||||||||||||||||||
Total commercial commitments | $ | 2,027 | $ | 1,727 | $ | 64 | $ | 232 | $ | 4 |
(2) | Represents open purchase orders, as well as minimum required purchases under merchandise contractual agreements at January 29, 2005. The Company is obligated under the terms of purchase orders; however, the Company is generally able to renegotiate the timing and quantity of these orders with certain vendors in response to shifts in consumer preferences. |
(3) | Represents payments required by non-merchandise purchase agreements and minimum royalty requirements. |
Critical Accounting Policies
14
Business Combinations
Merchandise Inventories
Vendor Reimbursements
Impairment of Long-Lived Assets
15
fair value of a reporting unit. The latter requires judgment and uses one or more methods to compare the reporting unit with similar businesses, business ownership interests or securities that have been sold.
Pension and Postretirement Liabilities
Income Taxes
16
Discontinued, Repositioning and Restructuring Reserves
Disclosure Regarding Forward-Looking Statements
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
17
Item 8. | Consolidated Financial Statements and Supplementary Data |
MANAGEMENT’S REPORT
MATTHEW D. SERRA, Chairman of the Board, President and Chief Executive Officer | BRUCE L. HARTMAN, Executive Vice President and Chief Financial Officer |
March 28, 2005
18
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
MATTHEW D. SERRA, Chairman of the Board, President and Chief Executive Officer | BRUCE L. HARTMAN, Executive Vice President and Chief Financial Officer |
March 28, 2005
19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Foot Locker, Inc.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Foot Locker, Inc. and subsidiaries as of January 29, 2005 and January 31, 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended January 29, 2005, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Foot Locker, Inc.’s internal control over financial reporting as of January 29, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 28, 2005 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.
March 28, 2005
20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
Foot Locker, Inc.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that Foot Locker, Inc. maintained effective internal control over financial reporting as of January 29, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Foot Locker, Inc. maintained, in all material respects, effective internal control over financial reporting as of January 29, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Foot Locker, Inc. and subsidiaries as of January 29, 2005 and January 31, 2004, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended January 29, 2005, and our report dated March 28, 2005 expressed an unqualified opinion on those consolidated financial statements.
March 28, 2005
21
CONSOLIDATED STATEMENTS OF OPERATIONS
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions, except per share amounts) | |||||||||||||||
Sales | $ | 5,355 | $ | 4,779 | $ | 4,509 | |||||||||
Costs and expenses | |||||||||||||||
Cost of sales | 3,722 | 3,297 | 3,161 | ||||||||||||
Selling, general and administrative expenses | 1,088 | 987 | 928 | ||||||||||||
Depreciation and amortization | 154 | 152 | 153 | ||||||||||||
Restructuring charges (income) | 2 | 1 | (2 | ) | |||||||||||
Interest expense, net | 15 | 18 | 26 | ||||||||||||
4,981 | 4,455 | 4,266 | |||||||||||||
Other income (expense) | — | — | (3 | ) | |||||||||||
4,981 | 4,455 | 4,263 | |||||||||||||
Income from continuing operations before income taxes | 374 | 324 | 246 | ||||||||||||
Income tax expense | 119 | 115 | 84 | ||||||||||||
Income from continuing operations | 255 | 209 | 162 | ||||||||||||
Income (loss) on disposal of discontinued operations, net of income tax benefit of $37, $4, and $2, respectively | 38 | (1 | ) | (9 | ) | ||||||||||
Cumulative effect of accounting change, net of income tax benefit of $ — | — | (1 | ) | — | |||||||||||
Net income | $ | 293 | $ | 207 | $ | 153 | |||||||||
Basic earnings per share: | |||||||||||||||
Income from continuing operations | $ | 1.69 | $ | 1.47 | $ | 1.15 | |||||||||
Income (loss) from discontinued operations | 0.25 | (0.01 | ) | (0.06 | ) | ||||||||||
Cumulative effect of accounting change | — | — | — | ||||||||||||
Net income | $ | 1.94 | $ | 1.46 | $ | 1.09 | |||||||||
Diluted earnings per share: | |||||||||||||||
Income from continuing operations | $ | 1.64 | $ | 1.40 | $ | 1.10 | |||||||||
Income (loss) from discontinued operations | 0.24 | (0.01 | ) | (0.05 | ) | ||||||||||
Cumulative effect of accounting change | — | — | — | ||||||||||||
Net income | $ | 1.88 | $ | 1.39 | $ | 1.05 |
See Accompanying Notes to Consolidated Financial Statements.
22
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
Net income | $ | 293 | $ | 207 | $ | 153 | |||||||||
Other comprehensive income, net of tax | |||||||||||||||
Foreign currency translation adjustment: | |||||||||||||||
Translation adjustment arising during the period | 19 | 31 | 38 | ||||||||||||
Cash flow hedges: | |||||||||||||||
Change in fair value of derivatives, net of income tax | (1 | ) | — | — | |||||||||||
Reclassification adjustments, net of income tax expense (benefit) of $1, ($1), and $—, respectively | 1 | (1 | ) | — | |||||||||||
Net change in cash flow hedges | — | (1 | ) | — | |||||||||||
Minimum pension liability adjustment: | |||||||||||||||
Minimum pension liability adjustment, net of deferred tax expense (benefit) of $(9), $10 and $(56), respectively | (14 | ) | 16 | (83 | ) | ||||||||||
Comprehensive income | $ | 298 | $ | 253 | $ | 108 |
See Accompanying Notes to Consolidated Financial Statements.
23
CONSOLIDATED BALANCE SHEETS
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
ASSETS | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 225 | $ | 190 | |||||||
Short-term investments | 267 | 258 | |||||||||
Total cash, cash equivalents and short-term investments | 492 | 448 | |||||||||
Merchandise inventories | 1,151 | 920 | |||||||||
Assets of discontinued operations | 1 | 2 | |||||||||
Other current assets | 188 | 149 | |||||||||
1,832 | 1,519 | ||||||||||
Property and equipment, net | 715 | 668 | |||||||||
Deferred taxes | 180 | 194 | |||||||||
Goodwill | 271 | 136 | |||||||||
Intangible assets, net | 135 | 96 | |||||||||
Other assets | 104 | 100 | |||||||||
$ | 3,237 | $ | 2,713 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | 381 | $ | 234 | |||||||
Accrued liabilities | 275 | 300 | |||||||||
Liabilities of discontinued operations | 2 | 2 | |||||||||
Current portion of repositioning and restructuring reserves | 1 | 1 | |||||||||
Current portion of reserve for discontinued operations | 7 | 8 | |||||||||
Current portion of long-term debt and obligations under capital leases | 18 | — | |||||||||
684 | 545 | ||||||||||
Long-term debt and obligations under capital leases | 347 | 335 | |||||||||
Other liabilities | 376 | 458 | |||||||||
Total liabilities | 1,407 | 1,338 | |||||||||
Shareholders’ equity | 1,830 | 1,375 | |||||||||
$ | 3,237 | $ | 2,713 |
See Accompanying Notes to Consolidated Financial Statements.
24
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
2004 | 2003 | 2002 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
(shares in thousands, amounts in millions) | |||||||||||||||||||||||||||
Common Stock and Paid-In Capital | |||||||||||||||||||||||||||
Par value $0.01 per share, 500 million shares authorized | |||||||||||||||||||||||||||
Issued at beginning of year | 144,009 | $ | 411 | 141,180 | $ | 378 | 139,981 | $ | 363 | ||||||||||||||||||
Restricted stock issued under stock option and award plans | 400 | — | 845 | — | 60 | — | |||||||||||||||||||||
Forfeitures of restricted stock | — | 2 | — | 1 | — | 1 | |||||||||||||||||||||
Amortization of stock issued under restricted stock option plans | — | 8 | — | 4 | — | 2 | |||||||||||||||||||||
Conversion of convertible debt | 9,490 | 150 | — | — | — | — | |||||||||||||||||||||
Reclassification of convertible debt issuance costs | — | (3 | ) | — | — | — | — | ||||||||||||||||||||
Issued under director and employee stock plans, net of tax | 2,256 | 40 | 1,984 | 28 | 1,139 | 12 | |||||||||||||||||||||
Issued at end of year | 156,155 | 608 | 144,009 | 411 | 141,180 | 378 | |||||||||||||||||||||
Common stock in treasury at beginning of year | (57 | ) | (1 | ) | (105 | ) | (1 | ) | (70 | ) | — | ||||||||||||||||
Reissued under employee stock plans | 260 | 5 | 152 | 1 | — | — | |||||||||||||||||||||
Restricted stock issued under stock option and award plans | — | — | — | — | 30 | — | |||||||||||||||||||||
Forfeitures/cancellations of restricted stock | (100 | ) | (2 | ) | (80 | ) | (1 | ) | (60 | ) | (1 | ) | |||||||||||||||
Shares of common stock used to satisfy tax withholding obligations | (137 | ) | (3 | ) | — | — | — | — | |||||||||||||||||||
Exchange of options | (30 | ) | (1 | ) | (24 | ) | — | (5 | ) | — | |||||||||||||||||
Common stock in treasury at end of year | (64 | ) | (2 | ) | (57 | ) | (1 | ) | (105 | ) | (1 | ) | |||||||||||||||
156,091 | 606 | 143,952 | 410 | 141,075 | 377 | ||||||||||||||||||||||
Retained Earnings | |||||||||||||||||||||||||||
Balance at beginning of year | 1,132 | 946 | 797 | ||||||||||||||||||||||||
Net income | 293 | 207 | 153 | ||||||||||||||||||||||||
Cash dividends declared on common stock $0.26, $0.15 and $0.03 per share, respectively | (39 | ) | (21 | ) | (4 | ) | |||||||||||||||||||||
Balance at end of year | 1,386 | 1,132 | 946 | ||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||
Foreign Currency Translation Adjustment | |||||||||||||||||||||||||||
Balance at beginning of year | 16 | (15 | ) | (53 | ) | ||||||||||||||||||||||
Translation adjustment arising during the period | 19 | 31 | 38 | ||||||||||||||||||||||||
Balance at end of year | 35 | 16 | (15 | ) | |||||||||||||||||||||||
Cash Flow Hedges | |||||||||||||||||||||||||||
Balance at beginning of year | (1 | ) | — | — | |||||||||||||||||||||||
Change during year, net of tax | — | (1 | ) | — | |||||||||||||||||||||||
Balance at end of year | (1 | ) | (1 | ) | — | ||||||||||||||||||||||
Minimum Pension Liability Adjustment | |||||||||||||||||||||||||||
Balance at beginning of year | (182 | ) | (198 | ) | (115 | ) | |||||||||||||||||||||
Change during year, net of tax | (14 | ) | 16 | (83 | ) | ||||||||||||||||||||||
Balance at end of year | (196 | ) | (182 | ) | (198 | ) | |||||||||||||||||||||
Total Accumulated Other Comprehensive Loss | (162 | ) | (167 | ) | (213 | ) | |||||||||||||||||||||
Total Shareholders’ Equity | $ | 1,830 | $ | 1,375 | $ | 1,110 |
See Accompanying Notes to Consolidated Financial Statements.
25
CONSOLIDATED STATEMENTS OF CASH FLOWS
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
From Operating Activities | |||||||||||||||
Net income | $ | 293 | $ | 207 | $ | 153 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: | |||||||||||||||
(Income) loss on disposal of discontinued operations, net of tax | (38 | ) | 1 | 9 | |||||||||||
Restructuring charges (income) | 2 | 1 | (2 | ) | |||||||||||
Cumulative effect of accounting change, net of tax | — | 1 | — | ||||||||||||
Depreciation and amortization | 154 | 152 | 153 | ||||||||||||
Impairment of long-lived assets | — | — | 7 | ||||||||||||
Restricted stock compensation expense | 8 | 4 | 2 | ||||||||||||
Tax benefit on stock compensation | 10 | 2 | 2 | ||||||||||||
Gains on sales of real estate and assets | — | — | (3 | ) | |||||||||||
Deferred income taxes | 50 | (5 | ) | 38 | |||||||||||
Change in assets and liabilities, net of dispositions: | |||||||||||||||
Merchandise inventories | (183 | ) | (63 | ) | (22 | ) | |||||||||
Accounts payable and other accruals | 157 | (17 | ) | (22 | ) | ||||||||||
Repositioning and restructuring reserves | (1 | ) | (1 | ) | (3 | ) | |||||||||
Pension contribution | (106 | ) | (50 | ) | — | ||||||||||
Income taxes | — | 9 | 42 | ||||||||||||
Other, net | (57 | ) | 23 | (7 | ) | ||||||||||
Net cash provided by operating activities of continuing operations | 289 | 264 | 347 | ||||||||||||
From Investing Activities | |||||||||||||||
Acquisitions | (242 | ) | — | — | |||||||||||
Purchases of short-term investments | (2,884 | ) | (1,546 | ) | (536 | ) | |||||||||
Sales of short-term investments | 2,875 | 1,440 | 384 | ||||||||||||
Lease acquisition costs | (17 | ) | (15 | ) | (18 | ) | |||||||||
Capital expenditures | (156 | ) | (144 | ) | (150 | ) | |||||||||
Proceeds from sales of real estate and assets | — | — | 6 | ||||||||||||
Net cash used in investing activities of continuing operations | (424 | ) | (265 | ) | (314 | ) | |||||||||
From Financing Activities | |||||||||||||||
Debt issuance costs | (2 | ) | — | — | |||||||||||
Increase (reduction) in long-term debt | 175 | (19 | ) | (41 | ) | ||||||||||
Reduction in capital lease obligations | — | — | (1 | ) | |||||||||||
Dividends paid on common stock | (39 | ) | (21 | ) | (4 | ) | |||||||||
Issuance of common stock | 33 | 27 | 10 | ||||||||||||
Net cash provided by (used in) financing activities of continuing operations | 167 | (13 | ) | (36 | ) | ||||||||||
Net Cash Provided by (Used in) Discontinued Operations | 1 | 7 | (10 | ) | |||||||||||
Effect of Exchange Rate Fluctuations on Cash and Cash Equivalents | 2 | (8 | ) | 3 | |||||||||||
Net Change in Cash and Cash Equivalents | 35 | (15 | ) | (10 | ) | ||||||||||
Cash and Cash Equivalents at Beginning of Year | 190 | 205 | 215 | ||||||||||||
Cash and Cash Equivalents at End of Year | $ | 225 | $ | 190 | $ | 205 | |||||||||
Cash Paid During the Year: | |||||||||||||||
Interest | $ | 23 | $ | 25 | $ | 27 | |||||||||
Income taxes | $ | 121 | $ | 77 | $ | 39 | |||||||||
Non-cash Financing Activities: | |||||||||||||||
Common stock issued upon conversion of convertible debt | $ | 150 | $ | — | $ | — | |||||||||
Debt issuance costs reclassified to equity upon conversion of convertible debt | $ | 3 | $ | — | $ | — |
See Accompanying Notes to Consolidated Financial Statements.
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 | Summary of Significant Accounting Policies |
Basis of Presentation
Reporting Year
Revenue Recognition
Store Pre-Opening and Closing Costs
Advertising Costs
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
Advertising expenses | $ | 102.5 | $ | 97.5 | $ | 89.2 | |||||||||
Cooperative advertising reimbursements | (24.8 | ) | (23.4 | ) | (15.4 | ) | |||||||||
Net advertising expense | $ | 77.7 | $ | 74.1 | $ | 73.8 |
27
Catalog Costs
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
Catalog costs | $ | 50.3 | $ | 42.4 | $ | 41.9 | |||||||||
Cooperative reimbursements | (2.9 | ) | (3.5 | ) | (2.9 | ) | |||||||||
Net catalog expense | $ | 47.4 | $ | 38.9 | $ | 39.0 |
Earnings Per Share
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
Income from continuing operations | $ | 255 | $ | 209 | $ | 162 | |||||||||
Effect of Dilution: | |||||||||||||||
Convertible debt | 2 | 5 | 5 | ||||||||||||
Income from continuing operations assuming dilution | $ | 257 | $ | 214 | $ | 167 | |||||||||
Weighted-average common shares outstanding | 150.9 | 141.6 | 140.7 | ||||||||||||
Effect of Dilution: | |||||||||||||||
Stock options and awards | 3.0 | 1.8 | 0.6 | ||||||||||||
Convertible debt | 3.2 | 9.5 | 9.5 | ||||||||||||
Weighted-average common shares outstanding assuming dilution | 157.1 | 152.9 | 150.8 |
Stock-Based Compensation
28
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions, except per share amounts) | |||||||||||||||
Net income: | |||||||||||||||
As reported | $ | 293 | $ | 207 | $ | 153 | |||||||||
Compensation expense included in reported net income, net of income tax benefit | 5 | 2 | 1 | ||||||||||||
Total compensation expense under fair value method for all awards, net of income tax benefit | (13 | ) | (7 | ) | (6 | ) | |||||||||
Pro forma | $ | 285 | $ | 202 | $ | 148 | |||||||||
Basic earnings per share: | |||||||||||||||
As reported | $ | 1.94 | $ | 1.46 | $ | 1.09 | |||||||||
Pro forma | $ | 1.89 | $ | 1.43 | $ | 1.05 | |||||||||
Diluted earnings per share: | |||||||||||||||
As reported | $ | 1.88 | $ | 1.39 | $ | 1.05 | |||||||||
Pro forma | $ | 1.83 | $ | 1.36 | $ | 1.02 |
Cash and Cash Equivalents
Short-Term Investments
Merchandise Inventories and Cost of Sales
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Significant additions and improvements to property and equipment are capitalized. Maintenance and repairs are charged to current operations as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated. Owned property and equipment is depreciated on a straight-line basis over the estimated useful lives of the assets: maximum of 50 years for buildings and 3 to 10 years for furniture, fixtures and equipment. Property and equipment
29
under capital leases and improvements to leased premises are generally amortized on a straight-line basis over the shorter of the estimated useful life of the asset or the remaining lease term. Capitalized software reflects certain costs related to software developed for internal use that are capitalized and amortized. After substantial completion of the project, the costs are amortized on a straight-line basis over a 2 to 11 year period. Capitalized software, net of accumulated amortization, is included in property and equipment and was $50 million at January 29, 2005 and $55 million at January 31, 2004.
Recoverability of Long-Lived Assets
Goodwill and Intangible Assets
Derivative Financial Instruments
Fair Value of Financial Instruments
30
contracts. Discounted cash flows are used to determine the fair value of long-term investments and notes receivable if quoted market prices on these instruments are unavailable.
Income Taxes
Insurance Liabilities
Accounting for Leases
Foreign Currency Translation
Reclassifications
31
and $4 million in 2002. There was no change to net income for the years presented. The effect on the Consolidated Statements of Cash Flows was not significant for the years ended January 31, 2004 and February 1, 2003 and therefore have not been reclassified.
Recent Accounting Pronouncements Not Previously Discussed Herein
2 | Acquisitions |
Footaction
(in millions) | ||||||
---|---|---|---|---|---|---|
Inventory | $ | 39 | ||||
Property and equipment | 45 | |||||
Intangible assets — amortizing | 29 | |||||
Goodwill | 122 | |||||
Total assets | 235 | |||||
Accounts payable and accrued liabilities(1) | 5 | |||||
Other liabilities(2) | 4 | |||||
Total liabilities | 9 | |||||
Total purchase price | $ | 226 |
(1) | “Accounts payable and accrued liabilities” include approximately $3 million for anticipated payments to landlords to cancel two of the acquired leases. Also included is approximately $1 million of liabilities related to gift cards assumed. The remaining $1 million relates to transfer taxes and real estate charges assumed from Footstar, Inc. as part of the acquisition. |
(2) | “Other liabilities” includes $4 million of liabilities assumed for leased locations with rents above their fair value. |
32
The Republic of Ireland
(in millions) | ||||||
---|---|---|---|---|---|---|
Intangible assets — amortizing | $ | 2 | ||||
Intangible assets — non-amortizing | 3 | |||||
Goodwill | 12 | |||||
Total assets | 17 | |||||
Other amounts due and payable(1) | (1 | ) | ||||
Cash paid as of January 29, 2005 | $ | 16 |
(1) | “Other amounts due and payable” includes professional fees related to the transaction. |
3 | Goodwill |
Jan. 31, 2004 | Acquisitions(1) | Additions | Other(2) | Jan. 29, 2005 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||||||||||
Goodwill | $ | 136 | 134 | — | 1 | $ | 271 |
(1) | Attributable to the acquisition of 349 Footaction stores and 11 stores in the Republic of Ireland. |
(2) | Includes effect of foreign currency translation. |
4 Intangible Assets, net
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
Intangible assets not subject to amortization | $ | 4 | $ | 2 | |||||||
Intangible assets subject to amortization (net of accumulated amortization of $70 and $51, respectively) | 131 | 94 | |||||||||
$ | 135 | $ | 96 |
33
2003 | Acquisitions(1) | Additions | Amortization / Other(2) | 2004 | Wtd. Avg. Useful Life in Years | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||||||||||||||
Finite life intangible assets | |||||||||||||||||||||||||||
Lease acquisition costs | $ | 94 | $ | — | $ | 17 | $ | (9 | ) | $ | 102 | 12.2 | |||||||||||||||
Trademark | — | 21 | — | (1 | ) | 20 | 20.0 | ||||||||||||||||||||
Loyalty program | — | �� | 1 | — | — | 1 | 2.0 | ||||||||||||||||||||
Favorable leases | — | 9 | — | (1 | ) | 8 | 4.1 | ||||||||||||||||||||
Total | $ | 94 | $ | 31 | $ | 17 | $ | (11 | ) | $ | 131 | 12.6 |
(1) | Attributable to the acquisition of 349 Footaction stores and 11 stores in the Republic of Ireland. |
(2) | Includes effect of foreign currency translation. |
5 | Segment Information |
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
Athletic Stores | $ | 4,989 | $ | 4,413 | $ | 4,160 | |||||||||
Direct-to-Customers | 366 | 366 | 349 | ||||||||||||
Total sales | $ | 5,355 | $ | 4,779 | $ | 4,509 |
34
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
Athletic Stores(1) | $ | 420 | $ | 363 | $ | 280 | |||||||||
Direct-to-Customers | 45 | 53 | 40 | ||||||||||||
465 | 416 | 320 | |||||||||||||
All Other(2) | (2 | ) | (1 | ) | 1 | ||||||||||
Division profit | 463 | 415 | 321 | ||||||||||||
Corporate expense(3) | (74 | ) | (73 | ) | (52 | ) | |||||||||
Operating profit | 389 | 342 | 269 | ||||||||||||
Non-operating income(4) | — | — | 3 | ||||||||||||
Interest expense, net | (15 | ) | (18 | ) | (26 | ) | |||||||||
Income from continuing operations before income taxes | $ | 374 | $ | 324 | $ | 246 |
(1) | 2002 includes reductions in restructuring charges of $1 million. Additionally, the Company recorded non-cash pre-tax charges in selling, general and administrative expenses of approximately $7 million in 2002, which represented impairment of long-lived assets such as store fixtures and leasehold improvements related to Athletic Stores. |
(2) | 2004 includes restructuring charges of $2 million. 2003 includes restructuring charges of $1 million. 2002 includes a $1 million reduction in restructuring charges. |
(3) | 2004 includes integration costs of $5 million related to the acquisitions of Footaction and the 11 stores in the Republic of Ireland. |
(4) | 2002 includes $2 million gain related to the condemnation of a part-owned and part-leased property for which the Company received proceeds of $6 million and real estate gains from the sale of corporate properties of $1 million during 2002. |
Depreciation and Amortization | Capital Expenditures | Total Assets | |||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||
Athletic Stores | $ | 126 | $ | 123 | $ | 123 | $ | 139 | $ | 126 | $ | 124 | $ | 2,335 | $ | 1,739 | $ | 1,591 | |||||||||||||||||||||
Direct-to-Customers | 5 | 4 | 4 | 8 | 6 | 8 | 190 | 183 | 177 | ||||||||||||||||||||||||||||||
131 | 127 | 127 | 147 | 132 | 132 | 2,525 | 1,922 | 1,768 | |||||||||||||||||||||||||||||||
Corporate | 23 | 25 | 26 | 9 | 12 | 18 | 711 | 789 | 744 | ||||||||||||||||||||||||||||||
Discontinued operations | 1 | 2 | 2 | ||||||||||||||||||||||||||||||||||||
Total Company | $ | 154 | $ | 152 | $ | 153 | $ | 156 | $ | 144 | $ | 150 | $ | 3,237 | $ | 2,713 | $ | 2,514 |
Sales
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
United States | $ | 3,982 | $ | 3,597 | $ | 3,639 | |||||||||
International | 1,373 | 1,182 | 870 | ||||||||||||
Total sales | $ | 5,355 | $ | 4,779 | $ | 4,509 |
Long-Lived Assets
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
United States | $ | 547 | $ | 525 | $ | 544 | |||||||||
International | 168 | 143 | 120 | ||||||||||||
Total long-lived assets | $ | 715 | $ | 668 | $ | 664 |
35
6 | Short-Term Investments |
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
Tax exempt municipal bonds | $ | 50 | $ | 44 | |||||||
Taxable bonds | 40 | — | |||||||||
Equity securities | 177 | 214 | |||||||||
$ | 267 | $ | 258 |
7 | Merchandise Inventories |
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
LIFO inventories | $ | 856 | $ | 651 | |||||||
FIFO inventories | 295 | 269 | |||||||||
Total merchandise inventories | $ | 1,151 | $ | 920 |
The value of the Company’s LIFO inventories, as calculated on a LIFO basis, approximates their value as calculated on a FIFO basis. |
8 | Other Current Assets |
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
Net receivables | $ | 47 | $ | 41 | |||||||
Prepaid expenses and other current assets | 47 | 45 | |||||||||
Prepaid income taxes | 40 | — | |||||||||
Deferred taxes | 53 | 60 | |||||||||
Current portion of Northern Group note receivable | 1 | 2 | |||||||||
Fair value of derivative contracts | — | 1 | |||||||||
$ | 188 | $ | 149 |
9 | Property and Equipment, net |
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
Land | $ | 3 | $ | 3 | |||||||
Buildings: | |||||||||||
Owned | 31 | 32 | |||||||||
Furniture, fixtures and equipment: | |||||||||||
Owned | 1,072 | 1,015 | |||||||||
Leased | 14 | 14 | |||||||||
1,120 | 1,064 | ||||||||||
Less: accumulated depreciation | (755 | ) | (706 | ) | |||||||
365 | 358 | ||||||||||
Alterations to leased and owned buildings, net of accumulated amortization | 350 | 310 | |||||||||
$ | 715 | $ | 668 |
36
10 | Other Assets |
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
Deferred tax costs | $ | 25 | $ | 35 | |||||||
Investments and notes receivable | 22 | 23 | |||||||||
Northern Group note receivable, net of current portion | 8 | 6 | |||||||||
Income taxes receivable | — | 1 | |||||||||
Fair value of derivative contracts | 2 | — | |||||||||
Other | 47 | 35 | |||||||||
$ | 104 | $ | 100 |
11 | Accrued Liabilities |
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
Pension and postretirement benefits | $ | 30 | $ | 57 | |||||||
Incentive bonuses | 34 | 38 | |||||||||
Other payroll and payroll related costs, excluding taxes | 51 | 44 | |||||||||
Taxes other than income taxes | 45 | 44 | |||||||||
Property and equipment | 22 | 32 | |||||||||
Gift cards and certificates | 22 | 16 | |||||||||
Income taxes payable | 9 | 9 | |||||||||
Fair value of derivative contracts | 3 | 3 | |||||||||
Current deferred tax liabilities | 1 | — | |||||||||
Other operating costs | 58 | 57 | |||||||||
$ | 275 | $ | 300 |
12 | Revolving Credit Facility |
37
13 | Long-Term Debt and Obligations under Capital Leases |
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
8.50% debentures payable 2022 | $ | 176 | $ | 171 | |||||||
$175 million term loan | 175 | — | |||||||||
5.50% convertible notes | — | 150 | |||||||||
Total long-term debt | 351 | 321 | |||||||||
Obligations under capital leases | 14 | 14 | |||||||||
365 | 335 | ||||||||||
Less: Current portion | 18 | — | |||||||||
$ | 347 | $ | 335 |
38
Long-Term Debt | Capital Leases | Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
2005 | $ | 18 | $ | — | $ | 18 | |||||||||
2006 | 18 | — | 18 | ||||||||||||
2007 | 26 | 14 | 40 | ||||||||||||
2008 | 26 | — | 26 | ||||||||||||
2009 | 87 | — | 87 | ||||||||||||
Thereafter | 176 | — | 176 | ||||||||||||
351 | 14 | 365 | |||||||||||||
Less: Current portion | 18 | — | 18 | ||||||||||||
$ | 333 | $ | 14 | $ | 347 |
14 Leases
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
Rent | $ | 605 | $ | 532 | $ | 491 | |||||||||
Contingent rent based on sales | 11 | 11 | 11 | ||||||||||||
Sublease income | (1 | ) | (1 | ) | (1 | ) | |||||||||
Total rent expense | $ | 615 | $ | 542 | $ | 501 |
(in millions) | ||||||
---|---|---|---|---|---|---|
2005 | $ | 449 | ||||
2006 | 423 | |||||
2007 | 383 | |||||
2008 | 322 | |||||
2009 | 256 | |||||
Thereafter | 890 | |||||
Total operating lease commitments | $ | 2,723 | ||||
Present value of operating lease commitments | $ | 1,989 |
39
15 | Other Liabilities |
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
Pension benefits | $ | 130 | $ | 175 | |||||||
Postretirement benefits | 95 | 113 | |||||||||
Straight-line rent liability | 77 | 67 | |||||||||
Income taxes | 29 | 62 | |||||||||
Workers’ compensation / general liability reserves | 11 | 12 | |||||||||
Reserve for discontinued operations | 11 | 11 | |||||||||
Repositioning and restructuring reserves | 3 | 2 | |||||||||
Fair value of derivatives | — | 1 | |||||||||
Unfavorable leases | 3 | — | |||||||||
Other | 17 | 15 | |||||||||
$ | 376 | $ | 458 |
16 | Discontinued Operations |
40
41
Northern Group
2001 | 2002 | 2003 | 2004 | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance | Charge/ (Income) | Net Usage* | Balance | Charge/ (Income) | Net Usage* | Balance | Charge/ (Income) | Net Usage* | Balance | ||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||
Asset write-offs & impairments | $ | — | $ | 18 | $ | (18) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||
Recognition of note receivable | — | (10) | 10 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Real estate & lease liabilities | 6 | 1 | (1 | ) | 6 | 1 | (7 | ) | — | — | — | — | |||||||||||||||||||||||||||||||
Severance & personnel | 2 | — | (2 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Operating losses & other costs | 3 | — | (2 | ) | 1 | — | 1 | 2 | — | 1 | 3 | ||||||||||||||||||||||||||||||||
Total | $ | 11 | $ | 9 | $ | (13 | ) | $ | 7 | $ | 1 | $ | (6 | ) | $ | 2 | $ | — | $ | 1 | $ | 3 |
International General Merchandise
2001 | 2002 | 2003 | 2004 | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance | Charge/ (Income) | Net Usage* | Balance | Charge/ (Income) | Net Usage* | Balance | Charge/ (Income) | Net Usage* | Balance | ||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||
Woolco | $ | — | $ | 1 | $ | — | $ | 1 | $ | — | $ | (1 | ) | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
The Bargain! Shop | 6 | — | — | 6 | — | (1 | ) | 5 | — | — | 5 | ||||||||||||||||||||||||||||||||
Total | $ | 6 | $ | 1 | $ | — | $ | 7 | $ | — | $ | (2 | ) | $ | 5 | $ | — | $ | — | $ | 5 |
Specialty Footwear
2001 | 2002 | 2003 | 2004 | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance | Charge/ (Income) | Net Usage | Balance | Charge/ (Income) | Net Usage | Balance | Charge/ (Income) | Net Usage | Balance | ||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||
Lease liabilities | $ | 7 | $ | (4) | $ | (1) | $ | 2 | $ | — | $ | — | $ | 2 | $ | — | $ | — | $ | 2 | |||||||||||||||||||||||
Operating losses & other costs | 2 | — | (1 | ) | 1 | — | (1 | ) | — | (1 | ) | 1 | — | ||||||||||||||||||||||||||||||
Total | $ | 9 | $ | (4 | ) | $ | (2 | ) | $ | 3 | $ | — | $ | (1 | ) | $ | 2 | $ | (1 | ) | $ | 1 | $ | 2 |
Domestic General Merchandise
2001 | 2002 | 2003 | 2004 | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance | Charge/ (Income) | Net Usage | Balance | Charge/ (Income) | Net Usage | Balance | Charge/ (Income) | Net Usage | Balance | ||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||
Lease liabilities | $ | 10 | $ | — | $ | (3 | ) | $ | 7 | $ | — | $ | (1 | ) | $ | 6 | $ | — | $ | — | $ | 6 | |||||||||||||||||||||
Legal and other costs | 2 | 5 | (4 | ) | 3 | 4 | (3 | ) | 4 | — | (2 | ) | 2 | ||||||||||||||||||||||||||||||
Total | $ | 12 | $ | 5 | $ | (7 | ) | $ | 10 | $ | 4 | $ | (4 | ) | $ | 10 | $ | — | $ | (2 | ) | $ | 8 |
* | Net usage includes effect of foreign exchange translation adjustments |
42
17 Repositioning and Restructuring Reserves
1999 Restructuring
1993 Repositioning and 1991 Restructuring
Total Repositioning and Restructuring Reserves
2001 | 2002 | 2003 | 2004 | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance | Charge/ (Income) | Net Usage | Balance | Charge/ (Income) | Net Usage | Balance | Charge/ (Income) | Net Usage | Balance | ||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||
Real estate | $ | 3 | $ | — | $ | (1 | ) | $ | 2 | $ | 1 | $ | (1 | ) | $ | 2 | $ | 2 | $ | (1 | ) | $ | 3 | ||||||||||||||||||||
Other disposition costs | 5 | (2 | ) | (2 | ) | 1 | — | — | 1 | — | — | 1 | |||||||||||||||||||||||||||||||
Total | $ | 8 | $ | (2 | ) | $ | (3 | ) | $ | 3 | $ | 1 | $ | (1 | ) | $ | 3 | $ | 2 | $ | (1 | ) | $ | 4 |
18 | Income Taxes |
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
Domestic | $ | 222 | $ | 186 | $ | 160 | |||||||||
International | 152 | 138 | 86 | ||||||||||||
Total pre-tax income | $ | 374 | $ | 324 | $ | 246 |
43
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||||||
Current: | |||||||||||||||
Federal | $ | 11 | $ | 48 | $ | 16 | |||||||||
State and local | 6 | 14 | 5 | ||||||||||||
International | 52 | 58 | 25 | ||||||||||||
Total current tax provision | 69 | 120 | 46 | ||||||||||||
Deferred: | |||||||||||||||
Federal | 43 | 11 | 31 | ||||||||||||
State and local | 8 | (6 | ) | — | |||||||||||
International | (1 | ) | (10 | ) | 7 | ||||||||||
Total deferred tax provision | 50 | (5 | ) | 38 | |||||||||||
Total income tax provision | $ | 119 | $ | 115 | $ | 84 |
2004 | 2003 | 2002 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Federal statutory income tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||
State and local income taxes, net of federal tax benefit | 2.3 | 2.4 | 2.0 | |||||||||||
International income taxed at varying rates | (0.6 | ) | 0.5 | 1.0 | ||||||||||
Foreign tax credit utilization | (2.5 | ) | (1.0 | ) | (1.2 | ) | ||||||||
Increase (decrease) in valuation allowance | 0.1 | (1.5 | ) | (2.0 | ) | |||||||||
Federal/foreign tax settlements | (3.3 | ) | — | — | ||||||||||
State and local tax settlements | — | (0.2 | ) | (0.3 | ) | |||||||||
Tax exempt obligations | (0.2 | ) | (0.2 | ) | (0.1 | ) | ||||||||
Work opportunity tax credit | (0.2 | ) | (0.1 | ) | (0.3 | ) | ||||||||
Other, net | 1.1 | 0.6 | 0.1 | |||||||||||
Effective income tax rate | 31.7 | % | 35.5 | % | 34.2 | % |
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
Deferred tax assets: | |||||||||||
Tax loss/credit carryforwards | $ | 89 | $ | 99 | |||||||
Employee benefits | 116 | 135 | |||||||||
Reserve for discontinued operations | 5 | 8 | |||||||||
Repositioning and restructuring reserves | 3 | 2 | |||||||||
Property and equipment | 89 | 81 | |||||||||
Allowance for returns and doubtful accounts | 7 | 10 | |||||||||
Straight-line rent | 19 | 17 | |||||||||
Goodwill | — | 1 | |||||||||
Other | 17 | 22 | |||||||||
Total deferred tax assets | 345 | 375 | |||||||||
Valuation allowance | (124 | ) | (122 | ) | |||||||
Total deferred tax assets, net | $ | 221 | $ | 253 |
44
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
Deferred tax liabilities: | |||||||||||
Inventories | $ | 8 | $ | 13 | |||||||
Goodwill | 2 | — | |||||||||
Other | 1 | 1 | |||||||||
Total deferred tax liabilities | 11 | 14 | |||||||||
Net deferred tax asset | $ | 210 | $ | 239 | |||||||
Balance Sheet caption reported in: | |||||||||||
Deferred taxes | $ | 180 | $ | 194 | |||||||
Other current assets | 53 | 60 | |||||||||
Other current liabilities | (1 | ) | — | ||||||||
Other liabilities | (22 | ) | (15 | ) | |||||||
$ | 210 | $ | 239 |
45
19 | Financial Instruments and Risk Management |
Foreign Exchange Risk Management
46
Foreign Currency Exchange Rates
Fair Value (US in millions) | Contract Value (US in millions) | Weighted-Average Exchange Rate | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Inventory | ||||||||||||||
Buy €/Sell British £ | $ | — | $ | 59 | 0.6996 | |||||||||
Intercompany | ||||||||||||||
Buy €/Sell $US | $ | — | $ | 6 | 1.2290 | |||||||||
Buy $US/Sell € | (3 | ) | 69 | 1.2432 | ||||||||||
Buy €/Sell British £ | — | 17 | 0.7187 | |||||||||||
$ | (3 | ) | $ | 151 |
Interest Rate Risk Management
2004 | 2003 | 2002 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
($ in millions) | |||||||||||||||
Interest Rate Swaps: | |||||||||||||||
Fixed to Variable ($US) | $ | 100 | $ | 100 | $ | 50 | |||||||||
Average pay rate | 6.46 | % | 5.07 | % | 4.53 | % | |||||||||
Average receive rate | 8.50 | % | 8.50 | % | 8.50 | % | |||||||||
Variable to variable ($US) | $ | 100 | $ | — | $ | — | |||||||||
Average pay rate | 2.73 | % | — | % | — | % | |||||||||
Average receive rate | 3.25 | % | — | % | — | % |
Interest Rates
2005 | 2006 | 2007 | 2008 | 2009 | Thereafter | Jan. 29, 2005 Total | Jan. 31, 2004 Total | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
($ in millions) | |||||||||||||||||||||||||||||||||||
Long-term debt | $ | 18 | 18 | 26 | 26 | 87 | 193 | $ | 368 | $ | 435 | ||||||||||||||||||||||||
Weighted-average interest rate | 5.2 | % | 5.3 | % | 5.4 | % | 5.6 | % | 6.6 | % | 6.9 | % |
47
Fair Value of Financial Instruments
Business Risk
20 | Retirement Plans and Other Benefits |
Pension and Other Postretirement Plans
Pension Benefits | Postretirement Benefits | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2004 | 2003 | ||||||||||||||||
(in millions) | |||||||||||||||||||
Change in benefit obligation | |||||||||||||||||||
Benefit obligation at beginning of year | $ | 697 | $ | 685 | $ | 27 | $ | 30 | |||||||||||
Service cost | 9 | 8 | — | — | |||||||||||||||
Interest cost | 39 | 43 | 1 | 1 | |||||||||||||||
Plan participants’ contributions | — | — | 5 | 5 | |||||||||||||||
Actuarial loss | 16 | 18 | — | 1 | |||||||||||||||
Foreign currency translation adjustments | 5 | 11 | — | — | |||||||||||||||
Benefits paid | (63 | ) | (68 | ) | (9 | ) | (10 | ) | |||||||||||
Benefit obligation at end of year | $ | 703 | $ | 697 | $ | 24 | $ | 27 | |||||||||||
Change in plan assets | |||||||||||||||||||
Fair value of plan assets at beginning of year | $ | 474 | $ | 380 | |||||||||||||||
Actual return on plan assets | 28 | 101 | |||||||||||||||||
Employer contribution | 108 | 54 | |||||||||||||||||
Foreign currency translation adjustments | 4 | 7 | |||||||||||||||||
Benefits paid | (63 | ) | (68 | ) | |||||||||||||||
Fair value of plan assets at end of year | $ | 551 | $ | 474 |
48
Pension Benefits | Postretirement Benefits | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2004 | 2003 | ||||||||||||||||
(in millions) | |||||||||||||||||||
Funded status | |||||||||||||||||||
Funded status | $ | (152 | ) | $ | (223 | ) | $ | (24 | ) | $ | (27 | ) | |||||||
Unrecognized prior service cost (benefit) | 4 | 5 | (10 | ) | (11 | ) | |||||||||||||
Unrecognized net (gain) loss | 324 | 296 | (67 | ) | (80 | ) | |||||||||||||
Prepaid asset (accrued liability) | $ | 176 | $ | 78 | $ | (101 | ) | $ | (118 | ) | |||||||||
Balance Sheet caption reported in: | |||||||||||||||||||
Intangible assets | $ | 1 | $ | 2 | $ | — | $ | — | |||||||||||
Accrued liabilities | (24 | ) | (52 | ) | (6 | ) | (5 | ) | |||||||||||
Other liabilities | (130 | ) | (175 | ) | (95 | ) | (113 | ) | |||||||||||
Accumulated other comprehensive loss, pre-tax | 329 | 303 | — | — | |||||||||||||||
$ | 176 | $ | 78 | $ | (101 | ) | $ | (118 | ) |
Pension Benefits | Postretirement Benefits | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2004 | 2003 | ||||||||||||||||
Discount rate | 5.50 | % | 5.90 | % | 5.50 | % | 5.90 | % | |||||||||||
Rate of compensation increase | 3.79 | % | 3.72 | % |
Pension Benefits | Postretirement Benefits | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||
Service cost | $ | 9 | $ | 8 | $ | 8 | $ | — | $ | — | $ | — | |||||||||||||||
Interest cost | 39 | 43 | 44 | 1 | 2 | 2 | |||||||||||||||||||||
Expected return on plan assets | (48 | ) | (46 | ) | (50 | ) | — | — | — | ||||||||||||||||||
Amortization of prior service cost (benefit) | 1 | — | 1 | (1 | ) | (1 | ) | (1 | ) | ||||||||||||||||||
Amortization of net (gain) loss | 11 | 9 | 3 | (13 | ) | (16 | ) | (12 | ) | ||||||||||||||||||
Net benefit expense (income) | $ | 12 | $ | 14 | $ | 6 | $ | (13 | ) | $ | (15 | ) | $ | (11 | ) |
Pension Benefits | Postretirement Benefits | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Discount rate | 5.90 | % | 6.50 | % | 7.00 | % | 5.90 | % | 6.50 | % | 7.00 | % | |||||||||||||||
Rate of compensation increase | 3.79 | % | 3.72 | % | 3.53 | % | |||||||||||||||||||||
Expected long-term rate of return on assets | 8.89 | % | 8.88 | % | 8.87 | % | �� |
49
2004 | 2003 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Asset Category | ||||||||||
Equity securities | 63 | % | 63 | % | ||||||
Foot Locker, Inc. common stock | 2 | % | 2 | % | ||||||
Debt securities | 33 | % | 33 | % | ||||||
Real estate | 1 | % | 1 | % | ||||||
Other | 1 | % | 1 | % | ||||||
Total | 100 | % | 100 | % |
Pension Benefits | Postretirement Benefits | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | |||||||||||
2005 | $63 | $5 | |||||||||
2006 | 62 | 4 | |||||||||
2007 | 60 | 3 | |||||||||
2008 | 58 | 3 | |||||||||
2009 | 58 | 2 | |||||||||
2010–2014 | 266 | 8 |
Savings Plans
The Company has two qualified savings plans, a 401(k) Plan that is available to employees whose primary place of employment is the U.S., and an 1165 (e) Plan, which began during 2004 that is available to employees whose primary place of employment is in Puerto Rico. Both plans require that the employees have attained at least the age of twenty-one and have completed one year of service consisting of at least 1,000 hours. The savings plans allow eligible employees to contribute up to 25 percent and 10 percent, for the U.S. and Puerto Rico plans, respectively, of their compensation on a pre-tax basis. The Company matches 25 percent of the first 4 percent of the employees’ contributions with Company stock and such matching Company contributions are vested incrementally over 5 years for both plans. The charge to operations for the Company’s matching contribution for the U.S. plan was $1.3 million, $1.6 million and $1.4 million in 2004, 2003 and 2002, respectively.
50
21 Stock Plans
Stock Option Plans | Stock Purchase Plan | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Weighted-average risk free rate of interest | 2.57 | % | 2.26 | % | 4.17 | % | 1.33 | % | 1.11 | % | 2.59 | % | |||||||||||||||
Expected volatility | 33 | % | 37 | % | 42 | % | 32 | % | 31 | % | 35 | % | |||||||||||||||
Weighted-average expected award life | 3.7 | years | 3.4 | years | 3.5 | years | .7 | years | .7 | years | .7 | years | |||||||||||||||
Dividend yield | 1.1 | % | 1.2 | % | 1.2 | % | — | — | — | ||||||||||||||||||
Weighted-average fair value | $ | 6.51 | $ | 2.90 | $ | 5.11 | $ | 11.44 | $ | 14.15 | $ | 4.23 |
51
2004 | 2003 | 2002 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Number of Shares | Weighted- Average Exercise Price | Number of Shares | Weighted- Average Exercise Price | Number of Shares | Weighted- Average Exercise Price | ||||||||||||||||||||||
(in thousands, except prices per share) | |||||||||||||||||||||||||||
Options outstanding at beginning of year | 6,886 | $ | 14.73 | 7,676 | $ | 15.18 | 7,557 | $ | 14.63 | ||||||||||||||||||
Granted | 1,183 | $ | 25.20 | 1,439 | $ | 10.81 | 1,640 | $ | 15.72 | ||||||||||||||||||
Exercised | 1,853 | $ | 14.43 | 1,830 | $ | 12.50 | 783 | $ | 6.67 | ||||||||||||||||||
Expired or canceled | 307 | $ | 19.13 | 399 | $ | 19.55 | 738 | $ | 19.80 | ||||||||||||||||||
Options outstanding at end of year | 5,909 | $ | 16.69 | 6,886 | $ | 14.73 | 7,676 | $ | 15.18 | ||||||||||||||||||
Options exercisable at end of year | 3,441 | $ | 15.34 | 4,075 | $ | 15.99 | 4,481 | $ | 15.94 | ||||||||||||||||||
Options available for future grant at end of year | 7,464 | 8,780 | 6,739 |
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Range of Exercise Prices | Shares | Weighted- Average Remaining Contractual Life | Weighted- Average Exercise Price | Shares | Weighted- Average Exercise Price | ||||||||||||||||||
(in thousands, except prices per share) | |||||||||||||||||||||||
$ 4.53 to $10.75 | 1,230 | 7.7 | $ | 9.85 | 483 | $ | 9.25 | ||||||||||||||||
$10.78 to $15.75 | 1,529 | 5.9 | 12.53 | 1,487 | 12.51 | ||||||||||||||||||
$15.85 to $21.88 | 1,318 | 7.0 | 16.55 | 772 | 16.70 | ||||||||||||||||||
$22.19 to $28.13 | 1,832 | 6.7 | 24.84 | 699 | 24.09 | ||||||||||||||||||
$ 4.53 to $28.13 | 5,909 | 6.8 | $ | 16.69 | 3,441 | $ | 15.34 |
22 | Restricted Stock |
52
23 | Shareholder Rights Plan |
24 | Legal Proceedings |
25 | Commitments |
26 | Shareholder Information and Market Prices (Unaudited) |
2004 | 2003 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
High | Low | High | Low | ||||||||||||||||
Common Stock | |||||||||||||||||||
Quarter | |||||||||||||||||||
1st Q | $ | 27.59 | $ | 21.75 | $ | 11.40 | $ | 9.28 | |||||||||||
2nd Q | 25.03 | 19.97 | 15.20 | 10.10 | |||||||||||||||
3rd Q | 24.80 | �� | 19.98 | 18.20 | 13.85 | ||||||||||||||
4th Q | 27.26 | 22.75 | 25.97 | 18.01 |
53
27 | Quarterly Results (Unaudited) |
1st Q | 2nd Q | 3rd Q | 4th Q | Year | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions, except per share amounts) | |||||||||||||||||||||||
Sales | |||||||||||||||||||||||
2004 | $ | 1,186 | 1,268 | 1,366 | 1,535 | 5,355 | |||||||||||||||||
2003 | 1,128 | 1,123 | 1,194 | 1,334 | 4,779 | ||||||||||||||||||
Gross margin(a) | |||||||||||||||||||||||
2004 | $ | 361 | 369 | 426 | 477 | 1,633 | |||||||||||||||||
2003 | 346 | 332 | 390 | 414 | 1,482 | ||||||||||||||||||
Operating profit(b) | |||||||||||||||||||||||
2004 | $ | 78 | 61 | 117 | 133 | 389 | |||||||||||||||||
2003 | 67 | 59 | 102 | 114 | 342 | ||||||||||||||||||
Income from continuing operations | |||||||||||||||||||||||
2004 | $ | 47 | 45 | 74 | 89 | 255 | |||||||||||||||||
2003 | 39 | 37 | 62 | 71 | 209 | ||||||||||||||||||
Net income | |||||||||||||||||||||||
2004 | $ | 48 | 82 | 74 | 89 | 293 | |||||||||||||||||
2003 | 38 | 36 | 62 | 71 | 207 | ||||||||||||||||||
Basic earnings per share: | |||||||||||||||||||||||
2004 | |||||||||||||||||||||||
Income from continuing operations | $ | 0.33 | 0.30 | 0.47 | 0.58 | 1.69 | |||||||||||||||||
Income from discontinued operations | — | 0.25 | — | — | 0.25 | ||||||||||||||||||
Net income | 0.33 | 0.55 | 0.47 | 0.58 | 1.94 | ||||||||||||||||||
2003 | |||||||||||||||||||||||
Income from continuing operations | $ | 0.28 | 0.26 | 0.43 | 0.50 | 1.47 | |||||||||||||||||
Loss from discontinued operations | — | (0.01 | ) | — | — | (0.01 | ) | ||||||||||||||||
Cumulative effect of accounting change(c) | (0.01 | ) | — | — | — | — | |||||||||||||||||
Net income | 0.27 | 0.25 | 0.43 | 0.50 | 1.46 | ||||||||||||||||||
Diluted earnings per share: | |||||||||||||||||||||||
2004 | |||||||||||||||||||||||
Income from continuing operations | $ | 0.31 | 0.29 | 0.47 | 0.57 | 1.64 | |||||||||||||||||
Income from discontinued operations | — | 0.24 | — | — | 0.24 | ||||||||||||||||||
Net income | 0.31 | 0.53 | 0.47 | 0.57 | 1.88 | ||||||||||||||||||
2003 | |||||||||||||||||||||||
Income from continuing operations | $ | 0.27 | 0.25 | 0.41 | 0.47 | 1.40 | |||||||||||||||||
Loss from discontinued operations | — | (0.01 | ) | — | — | (0.01 | ) | ||||||||||||||||
Cumulative effect of accounting change(c) | (0.01 | ) | — | — | — | — | |||||||||||||||||
Net income | 0.26 | 0.24 | 0.41 | 0.47 | 1.39 |
(a) | Gross margin represents sales less cost of sales. Includes the effects of the reclassification of tenant allowances as deferred credits, which are amortized as a reduction of rent expense as a component of costs of sales. Costs of sales was reduced by $1 million in each of the first three quarters of 2004 and 2003 and by $2 million for each of the fourth quarters of 2004 and 2003. |
(b) | Operating profit represents income from continuing operations before income taxes, interest expense, net and non-operating income. |
(c) | Cumulative effect of accounting change became further diluted during the second quarter, and therefore is not shown in the year-to-date amount. |
54
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
($ in millions, except per share amounts) | | | | | | |||||||||||||||||
Summary of Continuing Operations | ||||||||||||||||||||||
Sales | $ | 5,355 | 4,779 | 4,509 | 4,379 | 4,356 | ||||||||||||||||
Gross margin(1) | 1,633 | 1,482 | 1,348 | 1,312 | 1,312 | |||||||||||||||||
Selling, general and administrative expenses | 1,088 | 987 | 928 | 923 | 975 | |||||||||||||||||
Restructuring charges (income) | 2 | 1 | (2 | ) | 34 | 1 | ||||||||||||||||
Depreciation and amortization(1) | 154 | 152 | 153 | 158 | 154 | |||||||||||||||||
Interest expense, net | 15 | 18 | 26 | 24 | 22 | |||||||||||||||||
Other (income) expense | — | — | (3 | ) | (2 | ) | (16 | ) | ||||||||||||||
Income from continuing operations | 255 | 209 | 162 | 111 | (3) | 107 | (3) | |||||||||||||||
Cumulative effect of accounting change(2) | — | (1 | ) | — | — | (1 | ) | |||||||||||||||
Basic earnings per share from continuing operations | 1.69 | 1.47 | 1.15 | 0.79 | (3) | 0.78 | (3) | |||||||||||||||
Basic earnings per share from cumulative effect of accounting change | — | — | — | — | (0.01 | ) | ||||||||||||||||
Diluted earnings per share from continuing operations | 1.64 | 1.40 | 1.10 | 0.77 | (3) | 0.77 | (3) | |||||||||||||||
Diluted earnings per share from cumulative effect of accounting change | — | — | — | — | (0.01 | ) | ||||||||||||||||
Common stock dividends declared | 0.26 | 0.15 | 0.03 | — | — | |||||||||||||||||
Weighted-average common shares outstanding (in millions) | 150.9 | 141.6 | 140.7 | 139.4 | 137.9 | |||||||||||||||||
Weighted-average common shares outstanding assuming dilution (in millions) | 157.1 | 152.9 | 150.8 | 146.9 | 139.1 | |||||||||||||||||
Financial Condition | ||||||||||||||||||||||
Cash, cash equivalents and short-term investments | $ | 492 | 448 | 357 | 215 | 109 | ||||||||||||||||
Merchandise inventories | 1,151 | 920 | 835 | 793 | 730 | |||||||||||||||||
Property and equipment, net(4) | 715 | 668 | 664 | 665 | 712 | |||||||||||||||||
Total assets(4) | 3,237 | 2,713 | 2,514 | 2,328 | 2,306 | |||||||||||||||||
Short-term debt | — | — | — | — | — | |||||||||||||||||
Long-term debt and obligations under capital leases | 365 | 335 | 357 | 399 | 313 | |||||||||||||||||
Total shareholders’ equity | 1,830 | 1,375 | 1,110 | 992 | 1,013 | |||||||||||||||||
Financial Ratios | ||||||||||||||||||||||
Return on equity (ROE) | 15.9 | % | 16.8 | 15.4 | 11.1 | 10.0 | ||||||||||||||||
Operating profit margin | 7.3 | % | 7.2 | 6.0 | 4.5 | 4.2 | ||||||||||||||||
Income from continuing operations as a percentage of sales | 4.8 | % | 4.4 | 3.6 | 2.5 | (3) | 2.5 | (3) | ||||||||||||||
Net debt capitalization percent(5) | 50.4 | % | 53.3 | 58.6 | 61.1 | 60.9 | ||||||||||||||||
Net debt capitalization percent (without present value of operating leases)(5) | — | — | — | 15.6 | 16.8 | |||||||||||||||||
Current ratio | 2.7 | 2.8 | 2.2 | 2.0 | 1.5 | |||||||||||||||||
Other Data | ||||||||||||||||||||||
Capital expenditures | $ | 156 | 144 | 150 | 116 | 94 | ||||||||||||||||
Number of stores at year end | 3,967 | 3,610 | 3,625 | 3,590 | 3,752 | |||||||||||||||||
Total selling square footage at year end (in millions) | 8.89 | 7.92 | 8.04 | 7.94 | 8.09 | |||||||||||||||||
Total gross square footage at year end (in millions) | 14.78 | 13.14 | 13.22 | 13.14 | 13.32 |
(1) | Gross margin and depreciation expense include the effects of the reclassification of tenant allowances as deferred credits, which are amortized as a reduction of rent expense as a component of costs of sales. Gross margin was reduced by $5 million in 2004 and 2003, $4 million in 2002 and 2001 and $3 million in 2000 and accordingly, depreciation expense was increased by the corresponding amount. |
(2) | 2003 relates to adoption of SFAS No. 143 “Accounting for Asset Retirement Obligations” (see note 1). 2000 reflects change in method of accounting for layaway sales. |
(3) | As more fully described in note 16, applying the provisions of EITF 90-16, income from continuing operations for 2001 and 2000 would have been reclassified to include the results of the Northern Group. Accordingly, income from continuing operations would have been $91 million and $57 million, respectively. As such basic earnings per share would have been $0.65 and $0.42 for fiscal 2001 and 2000, respectively. Diluted earnings per share would have been $0.64 and $0.41 for fiscal 2001 and 2000, respectively. However, upon achieving divestiture accounting in the fourth quarter of 2002, the results would have been reclassified to reflect the results as shown above and as originally reported by the Company. |
(4) | Property and equipment, net and total assets include the reclassification of tenant allowances as deferred credits, which were previously recorded as a reduction to the cost of property and equipment, and are now classified as part of the deferred rent liability. Property and equipment, net and total assets were increased by $22 million in 2004, $24 million in 2003 and $28 million in each of 2002, 2001 and 2000. |
(5) | Represents total debt, net of cash, cash equivalents and short-term investments and excludes the effect of interest rate swaps of $4 million that increased long-term debt at January 29, 2005 and $1 million that reduced long-term debt at January 31, 2004. |
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Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
(a) | Evaluation of Disclosure Controls and Procedures. |
(b) | Management’s Annual Report on Internal Control over Financial Reporting. |
(c) | Attestation Report of the Independent Registered Public Accounting Firm. |
(d) | Changes in Internal Control over Financial Reporting. |
PART III
Item 10. | Directors and Executive Officers of the Company |
(a) | Directors of the Company |
(b) | Executive Officers of the Company |
(c) | Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 is set forth under the section captioned “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement and is incorporated herein by reference. |
(d) | Information on our audit committee financial expert is contained in the Proxy Statement under the section captioned “Committees of the Board of Directors” and is incorporated herein by reference. |
(e) | Information about the Code of Business Conduct governing our employees, including our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and the Board of Directors, is set forth under the heading “Code of Business Conduct” under the Corporate Governance section of the Proxy Statement and is incorporated herein by reference. |
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Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions |
Item 14. | Principal Accountant Fees and Services |
PART IV
Item 15. | Exhibits and Financial Statement Schedules |
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SIGNATURES
By:
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 28, 2005, by the following persons on behalf of the Company and in the capacities indicated.
Matthew D. Serra Chairman of the Board, President and Chief Executive Officer | Bruce L. Hartman Executive Vice President and Chief Financial Officer | |||||||||
/s/ ROBERT W. MCHUGH Robert W. McHugh Vice President and Chief Accounting Officer | /s/ J. CARTER BACOT J. Carter Bacot Lead Director | |||||||||
/s/ PURDY CRAWFORD Purdy Crawford Director | /s/ JAMES E. PRESTON James E. Preston Director | |||||||||
/s/ NICHOLAS DIPAOLO Nicholas DiPaolo Director | /s/ DAVID Y. SCHWARTZ David Y. Schwartz Director | |||||||||
/s/ ALAN D. FELDMAN Alan D. Feldman Director | /s/ CHRISTOPHER A. SINCLAIR Christopher A. Sinclair Director | |||||||||
/s/ PHILIP H. GEIER JR. Philip H. Geier Jr. Director | /s/ CHERYL NIDO TURPIN Cheryl Nido Turpin Director | |||||||||
/s/ JAROBIN GILBERT JR. Jarobin Gilbert Jr. Director | /s/ DONA D. YOUNG Dona D. Young Director |
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FOOT LOCKER, INC.
INDEX OF EXHIBITS REQUIRED
BY ITEM 15 OF FORM 10-K
AND FURNISHED IN ACCORDANCE
WITH ITEM 601 OF REGULATION S-K
Exhibit No. in Item 601 of Regulation S-K | Description | |||||
---|---|---|---|---|---|---|
3(i)(a) | Certificate of Incorporation of the Registrant, as filed by the Department of State of the State of New York on April 7, 1989 (incorporated herein by reference to Exhibit 3(i)(a) to the Quarterly Report on Form 10-Q for the quarterly period ended July 26, 1997, filed by the Registrant with the SEC on September 4, 1997 (the “July 26, 1997 Form 10-Q”)). | |||||
3(i)(b) | Certificates of Amendment of the Certificate of Incorporation of the Registrant, as filed by the Department of State of the State of New York on (a) July 20, 1989, (b) July 24, 1990, (c) July 9, 1997 (incorporated herein by reference to Exhibit 3(i)(b) to the July 26, 1997 Form 10-Q), (d) June 11, 1998 (incorporated herein by reference to Exhibit 4.2(a) of the Registration Statement on Form S-8 (Registration No. 333-62425), and (e) November 1, 2001 (incorporated herein by reference to Exhibit 4.2 to the Registration Statement on Form S-8 (Registration No. 333-74688) previously filed by the Registrant with the SEC). | |||||
3(ii) | By-laws of the Registrant, as amended (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarterly period ended May 5, 2001 (the “May 5, 2001 Form 10-Q”), filed by the Registrant with the SEC on June 13, 2001). | |||||
4.1 | The rights of holders of the Registrant’s equity securities are defined in the Registrant’s Certificate of Incorporation, as amended (incorporated herein by reference to (a) Exhibits 3(i)(a) and 3(i)(b) to the July 26, 1997 Form 10-Q, Exhibit 4.2(a) to the Registration Statement on Form S-8 (Registration No. 333-62425) previously filed by the Registrant with the SEC, and Exhibit 4.2 to the Registration Statement on Form S-8 (Registration No. 333-74688) previously filed by the Registrant with the SEC). | |||||
4.2 | Indenture dated as of October 10, 1991 (incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-3 (Registration No. 33-43334) previously filed by the Registrant with the SEC). | |||||
4.3 | Form of 8 1/2% Debentures due 2022 (incorporated herein by reference to Exhibit 4 to the Registrant’s Form 8-K dated January 16, 1992). | |||||
4.8 | Distribution Agreement dated July 13, 1995 and Forms of Fixed Rate and Floating Rate Notes (incorporated herein by reference to Exhibits 1, 4.1 and 4.2, respectively, to the Registrant’s Form 8-K dated July 13, 1995). | |||||
10.1 | 1986 Foot Locker Stock Option Plan (incorporated herein by reference to Exhibit 10(b) to the Registrant’s Annual Report on Form 10-K for the year ended January 28, 1995, filed by the Registrant with the SEC on April 24, 1995 (the “1994 Form 10-K”)). | |||||
10.2 | Amendment to the 1986 Foot Locker Stock Option Plan (incorporated herein by reference to Exhibit 10(a) to the Registrant’s Annual Report on Form 10-K for the year ended January 27, 1996, filed by the Registrant with the SEC on April 26, 1996 (the “1995 Form 10-K”)). | |||||
10.3 | Foot Locker 1995 Stock Option and Award Plan (incorporated herein by reference to Exhibit 10(p) to the 1994 Form 10-K). | |||||
10.4 | Foot Locker 1998 Stock Option and Award Plan (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the year ended January 31, 1998, filed by the Registrant with the SEC on April 21, 1998 (the “1997 Form 10-K”)). |
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Exhibit No. in Item 601 of Regulation S-K | Description | |||||
---|---|---|---|---|---|---|
10.5 | Amendment to the Foot Locker 1998 Stock Option and Award Plan (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the period ended July 29, 2000, filed by the Registrant with the SEC on September 7, 2000 (the “July 29, 2000 Form 10-Q”)). | |||||
10.6 | Executive Supplemental Retirement Plan (incorporated herein by reference to Exhibit 10(d) to the Registration Statement on Form 8-B filed by the Registrant with the SEC on August 7, 1989 (Registration No. 1-10299) (the “8-B Registration Statement”)). | |||||
10.7 | Amendment to the Executive Supplemental Retirement Plan (incorporated herein by reference to Exhibit 10(c)(i) to the 1994 Form 10-K ). | |||||
10.8 | Amendment to the Executive Supplemental Retirement Plan (incorporated herein by reference to Exhibit 10(d)(ii) to the 1995 Form 10-K). | |||||
10.9 | Supplemental Executive Retirement Plan (incorporated herein by reference to Exhibit 10(e) to the 1995 Form 10-K). | |||||
10.10 | Long-Term Incentive Compensation Plan, as amended and restated (incorporated herein by reference to Exhibit 10(f) to the 1995 Form 10-K). | |||||
10.11 | Annual Incentive Compensation Plan, as amended (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarterly period ended August 2, 2003 filed by the Registrant with the SEC on September 15, 2003 (the “August 2, 2003 Form 10-Q”)). | |||||
10.12 | Form of indemnification agreement, as amended (incorporated herein by reference to Exhibit 10(g) to the 8-B Registration Statement). | |||||
10.13 | Amendment to form of indemnification agreement (incorporated herein by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q for the quarterly period ended May 5, 2001 filed by the Registrant with the SEC on June 13, 2001 (the “May 5, 2001 Form 10-Q”)). | |||||
10.14 | Foot Locker Voluntary Deferred Compensation Plan (incorporated herein by reference to Exhibit 10(i) to the 1995 Form 10-K). | |||||
10.15 | Foot Locker Directors Stock Option Plan (incorporated herein by reference to Exhibit 10.1 to the July 29, 2000 Form 10-Q). | |||||
10.16 | Trust Agreement dated as of November 12, 1987 (“Trust Agreement”), between F.W. Woolworth Co. and The Bank of New York, as amended and assumed by the Registrant (incorporated herein by reference to Exhibit 10(j) to the 8-B Registration Statement). | |||||
10.17 | Amendment to Trust Agreement made as of April 11, 2001 (incorporated herein by reference to Exhibit 10.4 to May 5, 2001 Form 10-Q). | |||||
10.18 | Foot Locker Directors’ Retirement Plan, as amended (incorporated herein by reference to Exhibit 10(k) to the 8-B Registration Statement). | |||||
10.19 | Amendments to the Foot Locker Directors’ Retirement Plan (incorporated herein by reference to Exhibit 10(c) to the Registrant’s Quarterly Report on Form 10-Q for the period ended October 28, 1995, filed by the Registrant with the SEC on December 11, 1995 (the “October 28, 1995 Form 10-Q”)). | |||||
10.20 | Employment Agreement with Matthew D. Serra dated as of February 9, 2005 (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K dated February 9, 2005 filed by the Registrant with the SEC on February 11, 2005 (the “February 9, 2005 Form 8-K”)). |
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Exhibit No. in Item 601 of Regulation S-K | Description | |||||
---|---|---|---|---|---|---|
10.21 | Restricted Stock Agreement with Matthew D. Serra dated as of February 2, 2003 (incorporated herein by reference to Exhibit 10.22 to the 2002 Form 10-K). | |||||
10.22 | Restricted Stock Agreement with Matthew D. Serra dated as of September 11, 2003 (incorporated herein by reference to Exhibit 10 to the Quarterly Report on Form 10-Q for the period ended November 1, 2003 filed by the Registrant with the SEC on December 15, 2003). | |||||
10.23 | Restricted Stock Agreement with Matthew D. Serra dated as of February 18, 2004 (incorporated herein by reference to Exhibit 10 to the Registrant’s Quarterly Report on Form 10-Q for the period ended May 1, 2004, filed by the Registrant with the SEC on June 8, 2004). | |||||
10.24 | Restricted Stock Agreement with Matthew D. Serra dated as of February 9, 2005 (incorporated herein by reference to Exhibit 10.2 to the February 9, 2005 Form 8-K). | |||||
10.25 | Foot Locker Executive Severance Pay Plan (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended October 31, 1998 (the “October 31, 1998 Form 10-Q”)). | |||||
10.26 | Form of Senior Executive Employment Agreement (incorporated herein by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended January 29, 2000 filed by the Registrant with the SEC on April 21, 2000 (the “1999 Form 10-K”)). | |||||
10.27 | Form of Executive Employment Agreement (incorporated herein by reference to Exhibit 10.24 to the 1999 Form 10-K). | |||||
10.28 | Foot Locker, Inc. Directors’ Stock Plan (incorporated herein by reference to Exhibit 10(b) to the Registrant’s October 28, 1995 Form 10-Q). | |||||
10.29 | Foot Locker, Inc. Excess Cash Balance Plan (incorporated herein by reference to Exhibit 10(c) to the 1995 Form 10-K). | |||||
10.30 | Form of Restricted Stock Agreement (incorporated herein by reference to Exhibit 10.30 to the 1998 Form 10-K). | |||||
10.31 | Fifth Amended and Restated Credit Agreement dated as of April 9, 1997, amended and restated as of May 19, 2004 (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended July 31, 2004, filed by the Registrant with the SEC on September 8, 2004 (the “July 31, 2004 Form 10-Q”)). | |||||
10.32 | Letter of Credit Agreement dated as of March 19, 1999 (incorporated herein by reference to Exhibit 10.35 to the 1998 10-K). | |||||
10.33 | Foot Locker 2002 Directors Stock Plan, as amended (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K dated February 18, 2005, filed by the Registrant with the SEC on February 18, 2005). | |||||
10.34 | Foot Locker 2003 Stock Option and Award Plan (incorporated herein by reference to Exhibit 10.2 to the August 2, 2003 Form 10-Q). | |||||
10.35 | Summary of Changes to Non-Employee Directors’ Compensation (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended October 30, 2004, filed by the Registrant with the SEC on December 7, 2004). | |||||
10.36 | Automobile Expense Reimbursement Program for Senior Executives | |||||
10.37 | Executive Medical Expense Allowance Program for Senior Executives | |||||
10.38 | Financial Planning Allowance Program for Senior Executives | |||||
10.39 | Form of Nonstatutory Stock Option Award Agreement for Executive Officers |
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Exhibit No. in Item 601 of Regulation S-K | Description | |||||
---|---|---|---|---|---|---|
10.40 | Form of Incentive Stock Option Award Agreement for Executive Officers | |||||
10.41 | Form of Nonstatutory Stock Option Award Agreement for Non-employee Directors (incorporated herein by reference to Exhibit 10.2 to the July 31, 2004 Form 10-Q). | |||||
10.42 | Long-term Disability Program for Senior Executives | |||||
12 | Computation of Ratio of Earnings to Fixed Charges. | |||||
18 | Letter on Change in Accounting Principle (incorporated herein by reference to Exhibit 18 to the 1999 Form 10-K). | |||||
21 | Subsidiaries of the Registrant. | |||||
23 | Consent of Independent Registered Public Accounting Firm. | |||||
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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Exhibits filed with this Form 10-K:
Exhibit No. in Item 601 of Regulation S-K | Description | |||||
---|---|---|---|---|---|---|
10.1 | Form of Nonstatutory Stock Option Award Agreement for Executive Officers. | |||||
10.2 | Form of Incentive Stock Option Award Agreement for Executive Officers. | |||||
10.3 | Automobile Expense Reimbursement Program for Senior Executives. | |||||
10.4 | Executive Medical Expense Allowance Program for Senior Executives. | |||||
10.5 | Financial Planning Allowance Program for Senior Executives. | |||||
10.6 | Long-term Disability Program for Senior Executives | |||||
12 | Computation of Ratio of Earnings to Fixed Charges. | |||||
21 | Subsidiaries of the Registrant. | |||||
23 | Consent of Independent Registered Public Accounting Firm. | |||||
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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