New
York
|
13-3513936
|
|||||
(State or other
jurisdiction of
|
(I.R.S. Employer Identification No.)
|
|||||
incorporation
or organization)
|
||||||
112 West
34
th
Street, New York, New York
|
10120
|
|||||
(Address of
principal executive offices)
|
(Zip Code)
|
Title of
each class
|
Name of each exchange on which registered
|
|||||
Common Stock,
par value $0.01
|
New
York Stock Exchange
|
Number of shares
of Common Stock outstanding at March 17, 2006:
|
155,487,431 | |||||
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
Registrants most recently completed second fiscal quarter, July 29, 2005, was approximately:
|
$ | 2,851,036,844 | * |
*
|
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 29, 2005 include only outstanding shares of the Registrants voting stock with respect to which such persons had, on such date, voting or investment power. |
PART I
|
|
|||||||||
Item
1
|
Business
|
1 | ||||||||
Item
1A
|
Risk
Factors
|
2 | ||||||||
Item
1B
|
Unresolved Staff Comments
|
4 | ||||||||
Item
2
|
Properties
|
4 | ||||||||
Item
3
|
Legal Proceedings
|
4 | ||||||||
Item
4
|
Submission of Matters to a Vote of Security Holders
|
4 | ||||||||
PART II
|
|
|||||||||
Item
5
|
Market for the Companys Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
|
6 | ||||||||
Item
6
|
Selected Financial Data
|
6 | ||||||||
Item
7
|
Managements Discussion and Analysis of Financial Condition and Results of Operations
|
6 | ||||||||
Item
7A
|
Quantitative and Qualitative Disclosures about Market Risk
|
19 | ||||||||
Item
8
|
Consolidated Financial Statements and Supplementary Data
|
20 | ||||||||
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 |
Chairman of
the Board, President and Chief Executive Officer
|
Matthew D. Serra
|
|||||
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 and Chief Information Officer
|
Marc D. Katz
|
|||||
Senior Vice
President and Chief Financial Officer
|
Robert W. McHugh
|
|||||
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
|
Giovanna Cipriano
|
Item 5.
|
Market for the Companys Common Equity, Related
Stockholder Matters and Issuer Purchases of
Equity Securities |
|
Total Number
of Shares Purchased |
Average
Price Paid per Share |
Total Number of
Shares Purchased as Part of Publicly Announced Program (1) |
Approximate Dollar Value
of Shares that May Yet be Purchased Under the Program (1) |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
October 30,
2005 to November 26, 2005
|
50,000 | $ | 21.975 | 50,000 | $ | 28,967,188 | ||||||||||||
November 27,
2005 to December 31, 2005
|
629,600 | 22.183 | 629,600 | 15,000,972 | ||||||||||||||
January 1,
2006 to January 28, 2006
|
| | | 15,000,972 | ||||||||||||||
Total
|
679,600 | $ | 22.167 | 679,600 |
(1)
|
On November 20, 2002, the Company announced that the Board of Directors authorized the purchase of up to $50 million of the Companys Common Stock; of which 1,589,800 shares have been purchased for approximately $35 million. This authorization terminated on February 3, 2006. On February 15, 2006, the Company announced that its Board of Directors authorized a new $150 million, 3-year repurchase program. |
|
At
January 29, 2005 |
Opened
|
Closed
|
At
January 28, 2006 |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Foot
Locker
|
2,135 | 75 | 89 | 2,121 | ||||||||||||||
Champs
Sports
|
570 | 11 | 25 | 556 | ||||||||||||||
Footaction
|
349 | 24 | 10 | 363 | ||||||||||||||
Lady Foot
Locker
|
567 | 8 | 21 | 554 | ||||||||||||||
Kids Foot
Locker
|
346 | 1 | 20 | 327 | ||||||||||||||
Total
Athletic Stores
|
3,967 | 119 | 165 | 3,921 |
|
2005
|
2004
|
2003
|
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
|||||||||||||||||
Athletic
Stores
|
$ | 419 | $ | 420 | $ | 363 | ||||||||||||
Direct-to-Customers
|
48 | 45 | 53 | |||||||||||||||
Division
profit
|
467 | 465 | 416 | |||||||||||||||
Restructuring
charges
(1)
|
| (2 | ) | (1 | ) | |||||||||||||
Total
division profit
|
467 | 463 | 415 | |||||||||||||||
Corporate
expense
|
(58 | ) | (74 | ) | (73 | ) | ||||||||||||
Total
operating profit
|
409 | 389 | 342 | |||||||||||||||
Other
income
|
6 | | | |||||||||||||||
Interest
expense, net
|
(10 | ) | (15 | ) | (18 | ) | ||||||||||||
Income from
continuing operations before income taxes
|
$ | 405 | $ | 374 | $ | 324 |
(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. |
|
2005
|
2004
|
2003
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in
millions)
|
|||||||||||||
Interest
expense
|
$ | 23 | $ | 22 | $ | 26 | ||||||||
Interest
income
|
(13 | ) | (7 | ) | (8 | ) | ||||||||
Interest
expense, net
|
$ | 10 | $ | 15 | $ | 18 | ||||||||
Weighted-average interest rate (excluding facility fees):
|
||||||||||||||
Short-term
debt
|
| % | | % | | % | ||||||||
Long-term
debt
|
6.2 | % | 5.2 | % | 6.1 | % | ||||||||
Total
debt
|
6.2 | % | 5.2 | % | 6.1 | % | ||||||||
Short-term
debt outstanding during the year:
|
||||||||||||||
High
|
$ | | $ | | $ | | ||||||||
Weighted-average
|
$ | | $ | | $ | |
|
2005
|
2004
|
2003
|
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in
millions)
|
|||||||||||||||
Sales
|
$ | 5,272 | $ | 4,989 | $ |
4,413
|
||||||||||
Division
profit
|
$ | 419 | $ | 420 | $ |
363
|
||||||||||
Sales
as a percentage of consolidated total
|
93 | % | 93 | % |
92
|
% | ||||||||||
Number
of stores at year end
|
3,921 | 3,967 |
3,610
|
|||||||||||||
Selling
square footage (in millions)
|
8.71 | 8.89 |
7.92
|
|||||||||||||
Gross
square footage (in millions)
|
14.48 | 14.78 |
13.14
|
|
2005
|
2004
|
2003
|
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
|||||||||||||||||
Sales
|
$ | 381 | $ | 366 | $ | 366 | ||||||||||||
Division
profit
|
$ | 48 | $ | 45 | $ | 53 | ||||||||||||
Sales as a
percentage of consolidated total
|
7 | % | 7 | % | 8 | % |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
Cash, cash
equivalents and short-term investments, net of debt and
capital lease obligations |
$ | 261 | $ | 127 | |||||||
Present value of
operating leases
|
1,934 | 1,989 | |||||||||
Total net
debt
|
1,673 | 1,862 | |||||||||
Shareholders equity
|
2,027 | 1,830 | |||||||||
Total
capitalization
|
$ | 3,700 | $ | 3,692 | |||||||
Net debt
capitalization percent
|
45.2 | % | 50.4 | % | |||||||
Net debt
capitalization percent without operating leases
|
% | % |
|
|
Payments Due by Period
|
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Contractual Cash Obligations
|
Total
|
Less than
1 Year |
2 3
Years |
3 5
Years |
After 5
Years |
||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Long-term
debt
(1)
|
$ | 311 | $ | | $ | 52 | $ | 88 | $ | 171 | |||||||||||||
Operating
leases
|
2,600 | 454 | 782 | 561 | 803 | ||||||||||||||||||
Capital lease
obligations
|
15 | 1 | 14 | | | ||||||||||||||||||
Other
long-term liabilities
(2)
|
| | | | | ||||||||||||||||||
Total
contractual cash obligations
|
$ | 2,926 | $ | 455 | $ | 848 | $ | 649 | $ | 974 |
(1)
|
The amounts presented above represent the contractual maturities of the Companys long-term debt, excluding interest. Additional information is included in the Long-Term Debt and Obligations under Capital Leases footnote under Item 8. Consolidated Financial Statements and Supplementary Data. |
(2)
|
The Companys other liabilities in the Consolidated Balance Sheet as of January 28, 2006 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 |
1 3
Years |
3 5
Years |
After 5
Years |
||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Line of
credit
|
$ | 186 | $ | | $ | | $ | 186 | $ | | |||||||||||||
Stand-by
letters of credit
|
14 | | | 14 | | ||||||||||||||||||
Purchase
commitments
(3)
|
1,733 | 1,726 | 6 | 1 | | ||||||||||||||||||
Other
(4)
|
60 | 28 | 23 | 9 | | ||||||||||||||||||
Total
commercial commitments
|
$ | 1,993 | $ | 1,754 | $ | 29 | $ | 210 | $ | |
(3)
|
Represents open purchase orders, as well as minimum required purchases under merchandise contractual agreements, at January 28, 2006. 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. |
(4)
|
Represents payments required by non-merchandise purchase agreements and minimum royalty requirements. Effective March 31, 2006, the Company terminated its agreement with the NFL. |
|
|
|||
MATTHEW D.
SERRA,
Chairman of the Board, President and Chief Executive Officer |
ROBERT W. MCHUGH
Senior Vice President and Chief Financial Officer |
|
|
||
MATTHEW D.
SERRA,
Chairman of the Board, President and Chief Executive Officer |
ROBERT W. MCHUGH,
Senior Vice President and Chief Financial Officer |
INTERNAL CONTROL OVER FINANCIAL REPORTING
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions, except per
share amounts) |
||||||||||||||
Sales
|
$ | 5,653 | $ | 5,355 | $ | 4,779 | |||||||||
Costs and
expenses
|
|||||||||||||||
Cost of
sales
|
3,944 | 3,722 | 3,297 | ||||||||||||
Selling,
general and administrative expenses
|
1,129 | 1,088 | 987 | ||||||||||||
Depreciation
and amortization
|
171 | 154 | 152 | ||||||||||||
Restructuring
charges
|
| 2 | 1 | ||||||||||||
Interest
expense, net
|
10 | 15 | 18 | ||||||||||||
|
5,254 | 4,981 | 4,455 | ||||||||||||
Other
income
|
(6 | ) | | | |||||||||||
|
5,248 | 4,981 | 4,455 | ||||||||||||
Income from
continuing operations before income taxes
|
405 | 374 | 324 | ||||||||||||
Income tax
expense
|
142 | 119 | 115 | ||||||||||||
Income
from continuing operations
|
263 | 255 | 209 | ||||||||||||
Income (loss)
on disposal of discontinued operations,
net of income tax benefit of $3, $37, and $4, respectively |
1 | 38 | (1 | ) | |||||||||||
Cumulative
effect of accounting change,
net of income tax benefit of $ |
| | (1 | ) | |||||||||||
Net income
|
$ | 264 | $ | 293 | $ | 207 | |||||||||
Basic
earnings per share:
|
|||||||||||||||
Income from
continuing operations
|
$ | 1.70 | $ | 1.69 | $ | 1.47 | |||||||||
Income (loss)
from discontinued operations
|
0.01 | 0.25 | (0.01 | ) | |||||||||||
Cumulative
effect of accounting change
|
| | | ||||||||||||
Net
income
|
$ | 1.71 | $ | 1.94 | $ | 1.46 | |||||||||
Diluted
earnings per share:
|
|||||||||||||||
Income from
continuing operations
|
$ | 1.67 | $ | 1.64 | $ | 1.40 | |||||||||
Income (loss)
from discontinued operations
|
0.01 | 0.24 | (0.01 | ) | |||||||||||
Cumulative
effect of accounting change
|
| | | ||||||||||||
Net
income
|
$ | 1.68 | $ | 1.88 | $ | 1.39 |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
Net
income
|
$ | 264 | $ | 293 | $ | 207 | |||||||||
Other
comprehensive income, net of tax
|
|||||||||||||||
Foreign
currency translation adjustment:
|
|||||||||||||||
Translation
adjustment arising during the period
|
(25 | ) | 19 | 31 | |||||||||||
Cash flow
hedges:
|
|||||||||||||||
Change in
fair value of derivatives, net of income tax
|
2 | (1 | ) | | |||||||||||
Reclassification adjustments, net of income tax
|
(1 | ) | 1 | (1 | ) | ||||||||||
Net change
in cash flow hedges
|
1 | | (1 | ) | |||||||||||
Minimum
pension liability adjustment:
|
|||||||||||||||
Minimum
pension liability adjustment, net of deferred tax expense (benefit) of $10, $(9) and $10 million, respectively
|
15 | (14 | ) | 16 | |||||||||||
Comprehensive income
|
$ | 255 | $ | 298 | $ | 253 |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
ASSETS
|
|||||||||||
Current
assets
|
|||||||||||
Cash and cash
equivalents
|
$ | 289 | $ | 225 | |||||||
Short-term
investments
|
298 | 267 | |||||||||
Total cash,
cash equivalents and short-term investments
|
587 | 492 | |||||||||
Merchandise
inventories
|
1,254 | 1,151 | |||||||||
Other current
assets
|
173 | 189 | |||||||||
|
2,014 | 1,832 | |||||||||
Property
and equipment, net
|
675 | 715 | |||||||||
Deferred
taxes
|
147 | 180 | |||||||||
Goodwill
|
263 | 271 | |||||||||
Intangible
assets, net
|
117 | 135 | |||||||||
Other
assets
|
96 | 104 | |||||||||
|
$ | 3,312 | $ | 3,237 | |||||||
LIABILITIES AND SHAREHOLDERS EQUITY
|
|||||||||||
Current
liabilities
|
|||||||||||
Accounts
payable
|
$ | 361 | $ | 381 | |||||||
Accrued and
other liabilities
|
305 | 285 | |||||||||
Current
portion of long-term debt and obligations under capital leases
|
51 | 18 | |||||||||
|
717 | 684 | |||||||||
Long-term
debt and obligations under capital leases
|
275 | 347 | |||||||||
Other
liabilities
|
293 | 376 | |||||||||
Total
liabilities
|
1,285 | 1,407 | |||||||||
Shareholders equity
|
2,027 | 1,830 | |||||||||
|
$ | 3,312 | $ | 3,237 |
|
2005
|
2004
|
2003
|
||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
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
|
156,155 | $ | 608 | 144,009 | $ | 411 | 141,180 | $ | 378 | ||||||||||||||||||
Restricted
stock issued under stock option
and award plans |
225 | | 400 | | 845 | | |||||||||||||||||||||
Forfeitures of
restricted stock
|
| 2 | | 2 | | 1 | |||||||||||||||||||||
Amortization of
stock issued under
restricted stock option plans |
| 6 | | 8 | | 4 | |||||||||||||||||||||
Conversion of
convertible debt
|
| | 9,490 | 150 | | | |||||||||||||||||||||
Reclassification of convertible debt issuance costs
|
| | | (3 | ) | | | ||||||||||||||||||||
Issued under
director and employee stock plans,
net of tax |
900 | 19 | 2,256 | 40 | 1,984 | 28 | |||||||||||||||||||||
Issued at end
of year
|
157,280 | 635 | 156,155 | 608 | 144,009 | 411 | |||||||||||||||||||||
Common stock in
treasury at beginning of year
|
(64 | ) | (2 | ) | (57 | ) | (1 | ) | (105 | ) | (1 | ) | |||||||||||||||
Reissued under
employee stock plans
|
90 | 2 | 260 | 5 | 152 | 1 | |||||||||||||||||||||
Restricted
stock issued under stock option
and award plans |
| | | | | | |||||||||||||||||||||
Forfeitures/cancellations of restricted stock
|
(135 | ) | (2 | ) | (100 | ) | (2 | ) | (80 | ) | (1 | ) | |||||||||||||||
Shares of
common stock used to satisfy tax withholding obligations
|
(49 | ) | (1 | ) | (137 | ) | (3 | ) | | | |||||||||||||||||
Stock
repurchases
|
(1,590 | ) | (35 | ) | | | | | |||||||||||||||||||
Exchange of
options
|
(28 | ) | | (30 | ) | (1 | ) | (24 | ) | | |||||||||||||||||
Common stock in
treasury at end of year
|
(1,776 | ) | (38 | ) | (64 | ) | (2 | ) | (57 | ) | (1 | ) | |||||||||||||||
|
155,504 | 597 | 156,091 | 606 | 143,952 | 410 | |||||||||||||||||||||
Retained
Earnings
|
|||||||||||||||||||||||||||
Balance at
beginning of year
|
1,386 | 1,132 | 946 | ||||||||||||||||||||||||
Net
income
|
264 | 293 | 207 | ||||||||||||||||||||||||
Cash dividends
declared on common stock
$0.32, $0.26 and $0.15 per share, respectively |
(49 | ) | (39 | ) | (21 | ) | |||||||||||||||||||||
Balance at end
of year
|
1,601 | 1,386 | 1,132 | ||||||||||||||||||||||||
Accumulated
Other Comprehensive Loss
|
|||||||||||||||||||||||||||
Foreign
Currency Translation Adjustment
|
|||||||||||||||||||||||||||
Balance at
beginning of year
|
35 | 16 | (15 | ) | |||||||||||||||||||||||
Translation
adjustment arising during the period
|
(25 | ) | 19 | 31 | |||||||||||||||||||||||
Balance at end
of year
|
10 | 35 | 16 | ||||||||||||||||||||||||
Cash Flow
Hedges
|
|||||||||||||||||||||||||||
Balance at
beginning of year
|
(1 | ) | (1 | ) | | ||||||||||||||||||||||
Change during
year, net of tax
|
1 | | (1 | ) | |||||||||||||||||||||||
Balance at end
of year
|
| (1 | ) | (1 | ) | ||||||||||||||||||||||
Minimum
Pension Liability Adjustment
|
|||||||||||||||||||||||||||
Balance at
beginning of year
|
(196 | ) | (182 | ) | (198 | ) | |||||||||||||||||||||
Change during
year, net of tax
|
15 | (14 | ) | 16 | |||||||||||||||||||||||
Balance at end
of year
|
(181 | ) | (196 | ) | (182 | ) | |||||||||||||||||||||
Total
Accumulated Other Comprehensive Loss
|
(171 | ) | (162 | ) | (167 | ) | |||||||||||||||||||||
Total
Shareholders Equity
|
$ | 2,027 | $ | 1,830 | $ | 1,375 |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
From
Operating Activities
|
|||||||||||||||
Net
income
|
$ | 264 | $ | 293 | $ | 207 | |||||||||
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
|
(1 | ) | (38 | ) | 1 | ||||||||||
Restructuring
charges
|
| 2 | 1 | ||||||||||||
Cumulative
effect of accounting change, net of tax
|
| | 1 | ||||||||||||
Depreciation
and amortization
|
171 | 154 | 152 | ||||||||||||
Restricted
stock compensation expense
|
6 | 8 | 4 | ||||||||||||
Tax benefit
on stock compensation
|
3 | 10 | 2 | ||||||||||||
Deferred
income taxes
|
24 | 50 | (5 | ) | |||||||||||
Change in
assets and liabilities:
|
|||||||||||||||
Merchandise
inventories
|
(111 | ) | (183 | ) | (63 | ) | |||||||||
Accounts
payable and other accruals
|
14 | 157 | (17 | ) | |||||||||||
Repositioning
and restructuring reserves
|
| (1 | ) | (1 | ) | ||||||||||
Pension
contributions
|
(26 | ) | (106 | ) | (50 | ) | |||||||||
Income
taxes
|
(8 | ) | | 9 | |||||||||||
Other,
net
|
18 | (57 | ) | 23 | |||||||||||
Net cash
provided by operating activities of continuing operations
|
354 | 289 | 264 | ||||||||||||
From
Investing Activities
|
|||||||||||||||
Acquisitions
|
1 | (242 | ) | | |||||||||||
Gain from
insurance recoveries
|
3 | | | ||||||||||||
Purchases of
short-term investments
|
(2,798 | ) | (2,884 | ) | (1,546 | ) | |||||||||
Sales of
short-term investments
|
2,767 | 2,875 | 1,440 | ||||||||||||
Lease
acquisition costs
|
(8 | ) | (17 | ) | (15 | ) | |||||||||
Capital
expenditures
|
(155 | ) | (156 | ) | (144 | ) | |||||||||
Premiums paid
on foreign currency option contracts
|
(3 | ) | | | |||||||||||
Proceeds from
foreign currency option contracts
|
6 | | | ||||||||||||
Net cash used
in investing activities of continuing operations
|
(187 | ) | (424 | ) | (265 | ) | |||||||||
From
Financing Activities
|
|||||||||||||||
Debt issuance
costs
|
| (2 | ) | | |||||||||||
(Reduction)
increase in long-term debt
|
(35 | ) | 175 | (19 | ) | ||||||||||
Dividends
paid on common stock
|
(49 | ) | (39 | ) | (21 | ) | |||||||||
Issuance of
common stock
|
12 | 28 | 26 | ||||||||||||
Treasury
stock reissued under employee stock plans
|
2 | 5 | 1 | ||||||||||||
Purchase of
treasury shares
|
(35 | ) | | | |||||||||||
Net cash
(used in) provided by financing activities of
continuing operations |
(105 | ) | 167 | (13 | ) | ||||||||||
Net Cash
Provided by operating activities of Discontinued Operations (revised note 1)
|
| 1 | 7 | ||||||||||||
Effect of
Exchange Rate Fluctuations on Cash and Cash Equivalents
|
2 | 2 | (8 | ) | |||||||||||
Net Change
in Cash and Cash Equivalents
|
64 | 35 | (15 | ) | |||||||||||
Cash and
Cash Equivalents at Beginning of Year
|
225 | 190 | 205 | ||||||||||||
Cash and
Cash Equivalents at End of Year
|
$ | 289 | $ | 225 | $ | 190 | |||||||||
Cash Paid
During the Year:
|
|||||||||||||||
Interest
|
$ | 20 | $ | 23 | $ | 25 | |||||||||
Income
taxes
|
$ | 93 | $ | 121 | $ | 77 | |||||||||
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 | $ | |
1
|
Summary of Significant Accounting Policies |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
Advertising
expenses
|
$ | 99.0 | $ | 102.5 | $ | 97.5 | |||||||||
Cooperative
advertising reimbursements
|
(21.2 | ) | (24.8 | ) | (23.4 | ) | |||||||||
Net
advertising expense
|
$ | 77.8 | $ | 77.7 | $ | 74.1 |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
Catalog
costs
|
$ | 48.2 | $ | 50.3 | $ | 42.4 | |||||||||
Cooperative
reimbursements
|
(3.0 | ) | (2.9 | ) | (3.5 | ) | |||||||||
Net catalog
expense
|
$ | 45.2 | $ | 47.4 | $ | 38.9 |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
Income from
continuing operations
|
$ | 263 | $ | 255 | $ | 209 | |||||||||
Effect of
Dilution:
|
|||||||||||||||
Convertible
debt
|
| 2 | 5 | ||||||||||||
Income from
continuing operations assuming dilution
|
$ | 263 | $ | 257 | $ | 214 | |||||||||
Weighted-average common shares outstanding
|
155.1 | 150.9 | 141.6 | ||||||||||||
Effect of
Dilution:
|
|||||||||||||||
Stock options
and awards
|
2.5 | 3.0 | 1.8 | ||||||||||||
Convertible
debt
|
| 3.2 | 9.5 | ||||||||||||
Weighted-average common shares outstanding
assuming dilution |
157.6 | 157.1 | 152.9 |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions, except
per share amounts) |
||||||||||||||
Net
income:
|
|||||||||||||||
As
reported
|
$ | 264 | $ | 293 | $ | 207 | |||||||||
Compensation
expense included in reported net income, net of income tax benefit
|
4 | 5 | 2 | ||||||||||||
Total
compensation expense under fair value method for all awards, net of income tax benefit
|
(9 | ) | (13 | ) | (7 | ) | |||||||||
Pro
forma
|
$ | 259 | $ | 285 | $ | 202 | |||||||||
Basic
earnings per share:
|
|||||||||||||||
As
reported
|
$ | 1.71 | $ | 1.94 | $ | 1.46 | |||||||||
Pro
forma
|
$ | 1.67 | $ | 1.89 | $ | 1.43 | |||||||||
Diluted
earnings per share:
|
|||||||||||||||
As
reported
|
$ | 1.68 | $ | 1.88 | $ | 1.39 | |||||||||
Pro
forma
|
$ | 1.64 | $ | 1.83 | $ | 1.36 |
2
|
Goodwill |
3
|
Intangible Assets, net |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
Intangible
assets not subject to amortization
|
$ | 4 | $ | 4 | |||||||
Intangible
assets subject to amortization (net of accumulated amortization of $84 and $70, respectively)
|
113 | 131 | |||||||||
|
$ | 117 | $ | 135 |
|
2004
|
Additions
|
Amortization
/ Other (1) |
2005
|
Wtd.
Avg. Useful Life in Years |
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
|||||||||||||||||||||||||
Finite life
intangible assets
|
||||||||||||||||||||||||||
Lease
acquisition costs
|
$ | 102 | $ | 8 | $ | (22 | ) | $ | 88 | 11.9 | ||||||||||||||||
Trademark
|
20 | | (1 | ) | 19 | 20.0 | ||||||||||||||||||||
Loyalty
program
|
1 | | (1 | ) | | 2.0 | ||||||||||||||||||||
Favorable
leases
|
8 | | (2 | ) | 6 | 3.8 | ||||||||||||||||||||
Total
|
$ | 131 | $ | 8 | $ | (26 | ) | $ | 113 | 12.3 |
(1)
|
Includes effect of foreign currency translation of $8 million primarily related to the decline in the value of the euro in relation to the U.S. dollar. |
4
|
Segment Information |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
Athletic
Stores
|
$ | 5,272 | $ | 4,989 | $ | 4,413 | |||||||||
Direct-to-Customers
|
381 | 366 | 366 | ||||||||||||
Total
sales
|
$ | 5,653 | $ | 5,355 | $ | 4,779 |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
Athletic
Stores
|
$ | 419 | $ | 420 | $ | 363 | |||||||||
Direct-to-Customers
|
48 | 45 | 53 | ||||||||||||
|
467 | 465 | 416 | ||||||||||||
All Other
(1)
|
| 2 | 1 | ||||||||||||
Division
profit
|
467 | 463 | 415 | ||||||||||||
Corporate
expense
(2)
|
58 | 74 | 73 | ||||||||||||
Operating
profit
|
409 | 389 | 342 | ||||||||||||
Other income
(3)
|
(6 | ) | | | |||||||||||
Interest
expense, net
|
10 | 15 | 18 | ||||||||||||
Income from
continuing operations before income taxes
|
$ | 405 | $ | 374 | $ | 324 |
(1)
|
2004 and 2003 include restructuring charges of $2 million and $1 million, respectively. |
(2)
|
2004 includes integration costs of $5 million related to the acquisitions of Footaction and the 11 stores in the Republic of Ireland. |
(3)
|
2005 includes a $3 million gain from insurance recoveries associated with Hurricane Katrina. Additionally, $3 million represents a net gain on foreign currency option contracts that were entered into by the Company to mitigate the effect of fluctuating foreign exchange rates on the reporting of euro dominated earnings. |
|
Depreciation and
Amortization |
Capital Expenditures
|
Total Assets
|
||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2005
|
2004
|
2003
|
2005
|
2004
|
2003
|
2005
|
2004
|
2003
|
||||||||||||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||
Athletic
Stores
|
$ | 141 | $ | 126 | $ | 123 | $ | 137 | $ | 139 | $ | 126 | $ | 2,322 | $ | 2,335 | $ | 1,739 | |||||||||||||||||||||
Direct-to-Customers
|
6 | 5 | 4 | 6 | 8 | 6 | 196 | 190 | 183 | ||||||||||||||||||||||||||||||
|
147 | 131 | 127 | 143 | 147 | 132 | 2,518 | 2,525 | 1,922 | ||||||||||||||||||||||||||||||
Corporate
|
24 | 23 | 25 | 12 | 9 | 12 | 794 | 711 | 789 | ||||||||||||||||||||||||||||||
Discontinued
operations
|
1 | 2 | |||||||||||||||||||||||||||||||||||||
Total
Company
|
$ | 171 | $ | 154 | $ | 152 | $ | 155 | $ | 156 | $ | 144 | $ | 3,312 | $ | 3,237 | $ | 2,713 |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
United
States
|
$ | 4,257 | $ | 3,982 | $ | 3,597 | |||||||||
International
|
1,396 | 1,373 | 1,182 | ||||||||||||
Total
sales
|
$ | 5,653 | $ | 5,355 | $ | 4,779 |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
United
States
|
$ | 523 | $ | 547 | $ | 525 | |||||||||
International
|
152 | 168 | 143 | ||||||||||||
Total
long-lived assets
|
$ | 675 | $ | 715 | $ | 668 |
6
|
Short-Term Investments |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
Tax exempt
municipal bonds
|
$ | 41 | $ | 50 | |||||||
Taxable
bonds
|
| 40 | |||||||||
Equity
securities
|
257 | 177 | |||||||||
|
$ | 298 | $ | 267 |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
LIFO
inventories
|
$ | 939 | $ | 856 | |||||||
FIFO
inventories
|
315 | 295 | |||||||||
Total
merchandise inventories
|
$ | 1,254 | $ | 1,151 |
8
|
Other Current Assets |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
Net
receivables
|
$ | 49 | $ | 47 | |||||||
Prepaid expenses
and other current assets
|
46 | 47 | |||||||||
Prepaid income
taxes
|
49 | 40 | |||||||||
Deferred
taxes
|
28 | 53 | |||||||||
Current portion
of Northern Group note receivable
|
1 | 1 | |||||||||
Assets of
discontinued operations
|
| 1 | |||||||||
|
$ | 173 | $ | 189 |
9
|
Property and Equipment, net |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
Land
|
$ | 3 | $ | 3 | |||||||
Buildings:
|
|||||||||||
Owned
|
31 | 31 | |||||||||
Furniture,
fixtures and equipment:
|
|||||||||||
Owned
|
1,087 | 1,072 | |||||||||
Leased
|
15 | 14 | |||||||||
|
1,136 | 1,120 | |||||||||
Less:
accumulated depreciation
|
(800 | ) | (755 | ) | |||||||
|
336 | 365 | |||||||||
Alterations to leased and owned buildings,
net of accumulated amortization |
339 | 350 | |||||||||
|
$ | 675 | $ | 715 |
10
|
Other Assets |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
Deferred tax
costs
|
$ | 24 | $ | 25 | |||||||
Investments and
notes receivable
|
22 | 22 | |||||||||
Northern Group
note receivable, net of current portion
|
9 | 8 | |||||||||
Fair value of
derivative contracts
|
1 | 2 | |||||||||
Other
|
40 | 47 | |||||||||
|
$ | 96 | $ | 104 |
11
|
Accrued Liabilities |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
Pension and
postretirement benefits
|
$ | 72 | $ | 30 | |||||||
Incentive
bonuses
|
20 | 34 | |||||||||
Other payroll
and payroll related costs, excluding taxes
|
52 | 51 | |||||||||
Taxes other than
income taxes
|
43 | 45 | |||||||||
Property and
equipment
|
16 | 22 | |||||||||
Gift cards and
certificates
|
25 | 22 | |||||||||
Income taxes
payable
|
3 | 9 | |||||||||
Fair value of
derivative contracts
|
1 | 3 | |||||||||
Current deferred
tax liabilities
|
3 | 1 | |||||||||
Sales return
reserve
|
4 | 3 | |||||||||
Liabilities of
discontinued operations
|
2 | 2 | |||||||||
Current portion
of repositioning and restructuring reserves
|
1 | 1 | |||||||||
Current portion
of reserve for discontinued operations
|
8 | 7 | |||||||||
Other operating
costs
|
55 | 55 | |||||||||
|
$ | 305 | $ | 285 |
12
|
Revolving Credit Facility |
13
|
Long-Term Debt and Obligations under Capital Leases |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
8.50% debentures
payable 2022
|
$ | 171 | $ | 176 | |||||||
$175 million
term loan
|
140 | 175 | |||||||||
Total
long-term debt
|
311 | 351 | |||||||||
Obligations
under capital leases
|
15 | 14 | |||||||||
|
326 | 365 | |||||||||
Less: Current
portion
|
51 | 18 | |||||||||
|
$ | 275 | $ | 347 |
|
Long-Term
Debt |
Capital
Leases |
Total
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
2006
|
$ | 50 | (1) | $ | 1 | $ | 51 | ||||||||
2007
|
| 14 | 14 | ||||||||||||
2008
|
2 | | 2 | ||||||||||||
2009
|
88 | | 88 | ||||||||||||
2010
|
| | | ||||||||||||
Thereafter
|
171 | | 171 | ||||||||||||
|
311 | 15 | 326 | ||||||||||||
Less: Current
portion
|
50 | 1 | 51 | ||||||||||||
|
$ | 261 | $ | 14 | $ | 275 |
(1)
|
Represents the Companys $50 million principal payment on its 5-year term loan that was made in February 2006 and was in advance of the originally scheduled payment dates of May 19, 2007 and May 19, 2008. |
14
|
Leases |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
Rent
|
$ | 630 | $ | 605 | $ | 532 | |||||||||
Contingent
rent based on sales
|
13 | 11 | 11 | ||||||||||||
Sublease
income
|
(1 | ) | (1 | ) | (1 | ) | |||||||||
Total rent
expense
|
$ | 642 | $ | 615 | $ | 542 |
|
(in millions)
|
|||||
---|---|---|---|---|---|---|
2006
|
$ | 454 | ||||
2007
|
420 | |||||
2008
|
362 | |||||
2009
|
299 | |||||
2010
|
262 | |||||
Thereafter
|
803 | |||||
Total
operating lease commitments
|
$ | 2,600 | ||||
Present value
of operating lease commitments
|
$ | 1,934 |
15
|
Other Liabilities |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
Pension
benefits
|
$ | 42 | $ | 130 | |||||||
Postretirement
benefits
|
84 | 95 | |||||||||
Straight-line
rent liability
|
83 | 77 | |||||||||
Income
taxes
|
35 | 29 | |||||||||
Workers
compensation / general liability reserves
|
12 | 11 | |||||||||
Reserve for
discontinued operations
|
14 | 11 | |||||||||
Repositioning
and restructuring reserves
|
3 | 3 | |||||||||
Fair value of
derivatives
|
2 | | |||||||||
Unfavorable
leases
|
3 | 3 | |||||||||
Other
|
15 | 17 | |||||||||
|
$ | 293 | $ | 376 |
16
|
Discontinued Operations |
|
2002
|
2003
|
2004
|
2005
|
|||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Balance
|
Charge/
(Income) |
Net
Usage* |
Balance
|
Charge/
(Income) |
Net
Usage* |
Balance
|
Charge/
(Income) |
Net
Usage* |
Balance
|
|||||||||||||||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||||||
Northern
Group
|
$ | 7 | $ | 1 | $ | (6 | ) | $ | 2 | $ | | $ | 1 | $ | 3 | $ | | $ | 2 | $ | 5 | ||||||||||||||||||||||
International
General Merchandise
|
7 | | (2 | ) | 5 | | | 5 | 2 | 1 | 8 | ||||||||||||||||||||||||||||||||
Specialty
Footwear
|
3 | | (1 | ) | 2 | (1 | ) | 1 | 2 | | (1 | ) | 1 | ||||||||||||||||||||||||||||||
Domestic
General Merchandise
|
10 | 4 | (4 | ) | 10 | | (2 | ) | 8 | | | 8 | |||||||||||||||||||||||||||||||
Total
|
$ | 27 | $ | 5 | $ | (13 | ) | $ | 19 | $ | (1 | ) | $ | | $ | 18 | $ | 2 | $ | 2 | $ | 22 |
*
|
Net usage includes effect of foreign exchange translation adjustments. |
17
|
Repositioning and Restructuring Reserves |
|
2002
|
2003
|
2004
|
2005
|
|||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Balance
|
Charge/
(Income) |
Net
Usage |
Balance
|
Charge/
(Income) |
Net
Usage |
Balance
|
Charge/
(Income) |
Net
Usage |
Balance
|
|||||||||||||||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||||||
Real
estate
|
$ | 2 | $ | 1 | $ | (1 | ) | $ | 2 | $ | 2 | $ | (1 | ) | $ | 3 | $ | | $ | | $ | 3 | |||||||||||||||||||||
Other
disposition costs
|
1 | | | 1 | | | 1 | | | 1 | |||||||||||||||||||||||||||||||||
Total
|
$ | 3 | $ | 1 | $ | (1 | ) | $ | 3 | $ | 2 | $ | (1 | ) | $ | 4 | $ | | $ | | $ | 4 |
18
|
Income Taxes |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
Domestic
|
$ | 309 | $ | 222 | $ | 186 | |||||||||
International
|
96 | 152 | 138 | ||||||||||||
Total pre-tax
income
|
$ | 405 | $ | 374 | $ | 324 |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
Current:
|
|||||||||||||||
Federal
|
$ | 72 | $ | 11 | $ | 48 | |||||||||
State and
local
|
11 | 6 | 14 | ||||||||||||
International
|
35 | 52 | 58 | ||||||||||||
Total current
tax provision
|
118 | 69 | 120 | ||||||||||||
Deferred:
|
|||||||||||||||
Federal
|
22 | 43 | 11 | ||||||||||||
State and
local
|
7 | 8 | (6 | ) | |||||||||||
International
|
(5 | ) | (1 | ) | (10 | ) | |||||||||
Total
deferred tax provision
|
24 | 50 | (5 | ) | |||||||||||
Total income
tax provision
|
$ | 142 | $ | 119 | $ | 115 |
|
2005
|
2004
|
2003
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
||||||||||||||
Federal
statutory income tax rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||||
State and
local income taxes, net of federal tax benefit
|
2.8 | 2.3 | 2.4 | |||||||||||
International
income taxed at varying rates
|
0.8 | (0.6 | ) | 0.5 | ||||||||||
Foreign tax
credit utilization
|
(3.1 | ) | (2.5 | ) | (1.0 | ) | ||||||||
Increase
(decrease) in valuation allowance
|
(1.5 | ) | 0.1 | (1.5 | ) | |||||||||
Federal/foreign tax settlements
|
0.4 | (3.3 | ) | | ||||||||||
State and
local tax settlements
|
| | (0.2 | ) | ||||||||||
Tax exempt
obligations
|
(0.4 | ) | (0.2 | ) | (0.2 | ) | ||||||||
Work
opportunity tax credit
|
(0.2 | ) | (0.2 | ) | (0.1 | ) | ||||||||
Other,
net
|
1.2 | 1.1 | 0.6 | |||||||||||
Effective
income tax rate
|
35.0 | % | 31.7 | % | 35.5 | % |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
Deferred tax
assets:
|
|||||||||||
Tax
loss/credit carryforwards
|
$ | 71 | $ | 89 | |||||||
Employee
benefits
|
75 | 116 | |||||||||
Reserve for
discontinued operations
|
8 | 5 | |||||||||
Repositioning
and restructuring reserves
|
3 | 3 | |||||||||
Property and
equipment
|
108 | 89 | |||||||||
Allowance for
returns and doubtful accounts
|
4 | 7 | |||||||||
Straight-line
rent
|
22 | 19 | |||||||||
Other
|
19 | 17 | |||||||||
Total deferred
tax assets
|
310 | 345 | |||||||||
Valuation
allowance
|
(123 | ) | (124 | ) | |||||||
Total
deferred tax assets, net
|
$ | 187 | $ | 221 |
|
2005
|
2004
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
Deferred tax
liabilities:
|
|||||||||||
Inventories
|
$ | 18 | $ | 8 | |||||||
Goodwill
|
12 | 2 | |||||||||
Other
|
10 | 1 | |||||||||
Total deferred
tax liabilities
|
40 | 11 | |||||||||
Net deferred tax
asset
|
$ | 147 | $ | 210 | |||||||
Balance Sheet
caption reported in:
|
|||||||||||
Deferred
taxes
|
$ | 147 | $ | 180 | |||||||
Other current
assets
|
28 | 53 | |||||||||
Other current
liabilities
|
(3 | ) | (1 | ) | |||||||
Other
liabilities
|
(25 | ) | (22 | ) | |||||||
|
$ | 147 | $ | 210 |
19
|
Financial Instruments and Risk Management |
|
Fair
Value
(US in millions) |
Contract
Value
(US in millions) |
Weighted-Average
Exchange Rate |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Inventory
|
||||||||||||||
Buy
/Sell British £
|
$ | | $ | 34 | 0.6848 | |||||||||
Buy
British £/Sell
|
| (4 | ) | 0.6860 | ||||||||||
Buy
$US/Sell
|
| (8 | ) | 1.2187 | ||||||||||
|
| 22 | ||||||||||||
Earnings
|
||||||||||||||
Buy
/Sell $US
|
$ | | $ | 18 | 1.1500 | |||||||||
|
| 18 | ||||||||||||
Intercompany
|
||||||||||||||
Buy
/Sell $US
|
$ | (1 | ) | $ | 49 | 1.2173 | ||||||||
Buy
$US/Sell
|
| (18 | ) | 1.2394 | ||||||||||
Buy
/Sell British £
|
| 21 | 0.6948 | |||||||||||
Buy
British £/Sell
|
| (3 | ) | 0.6926 | ||||||||||
|
(1 | ) | 49 |
|
2005
|
2004
|
2003
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||||||
Interest Rate
Swaps:
|
|||||||||||||||
Fixed to
Variable ($US) notional amount
|
$ | 100 | $ | 100 | $ | 100 | |||||||||
Average pay
rate
|
8.00 | % | 6.46 | % | 5.07 | % | |||||||||
Average
receive rate
|
8.50 | % | 8.50 | % | 8.50 | % | |||||||||
Variable to
variable ($US) notional amount
|
$ | 100 | $ | 100 | $ | | |||||||||
Average pay
rate
|
4.82 | % | 2.73 | % | | % | |||||||||
Average
receive rate
|
4.79 | % | 3.25 | % | | % |
|
2006
|
2007
|
2008
|
2009
|
2010
|
Thereafter
|
Jan. 28,
2006 Total |
Jan. 29,
2005 Total |
|||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
($ in millions)
|
||||||||||||||||||||||||||||||||||
Long-term
debt
|
$ | 50 | | 2 | 88 | | 190 | $ | 330 | $ | 368 | ||||||||||||||||||||||||
Weighted-average interest rate
|
7.3 | % | 7.3 | % | 7.3 | % | 7.9 | % | 8.2 | % | 8.2 | % |
20
|
Retirement Plans and Other Benefits |
|
Pension Benefits
|
Postretirement
Benefits |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2005
|
2004
|
2005
|
2004
|
|||||||||||||||
|
(in millions)
|
||||||||||||||||||
Change in
benefit obligation
|
|||||||||||||||||||
Benefit
obligation at beginning of year
|
$ | 703 | $ | 697 | $ | 24 | $ | 27 | |||||||||||
Service
cost
|
9 | 9 | | | |||||||||||||||
Interest
cost
|
36 | 39 | 1 | 1 | |||||||||||||||
Plan
participants contributions
|
| | 5 | 5 | |||||||||||||||
Actuarial
loss (gain)
|
| 16 | (5 | ) | | ||||||||||||||
Foreign
currency translation adjustments
|
7 | 5 | | | |||||||||||||||
Benefits
paid
|
(66 | ) | (63 | ) | (8 | ) | (9 | ) | |||||||||||
Benefit
obligation at end of year
|
$ | 689 | $ | 703 | $ | 17 | $ | 24 | |||||||||||
Change in
plan assets
|
|||||||||||||||||||
Fair value of
plan assets at beginning of year
|
$ | 551 | $ | 474 | |||||||||||||||
Actual return
on plan assets
|
60 | 28 | |||||||||||||||||
Employer
contribution
|
29 | 108 | |||||||||||||||||
Foreign
currency translation adjustments
|
5 | 4 | |||||||||||||||||
Benefits
paid
|
(66 | ) | (63 | ) | |||||||||||||||
Fair value of
plan assets at end of year
|
$ | 579 | $ | 551 | |||||||||||||||
Funded
status
|
|||||||||||||||||||
Funded
status
|
$ | (110 | ) | $ | (152 | ) | $ | (17 | ) | $ | (24 | ) | |||||||
Unrecognized
prior service cost (benefit)
|
3 | 4 | (9 | ) | (10 | ) | |||||||||||||
Unrecognized
net (gain) loss
|
303 | 324 | (60 | ) | (67 | ) | |||||||||||||
Prepaid asset
(accrued liability)
|
$ | 196 | $ | 176 | $ | (86 | ) | $ | (101 | ) | |||||||||
Balance
Sheet caption reported in:
|
|||||||||||||||||||
Intangible
assets
|
$ | 1 | $ | 1 | $ | | $ | | |||||||||||
Accrued
liabilities
|
(70 | ) | (24 | ) | (2 | ) | (6 | ) | |||||||||||
Other
liabilities
|
(42 | ) | (130 | ) | (84 | ) | (95 | ) | |||||||||||
Accumulated
other comprehensive loss, pre-tax
|
307 | 329 | | | |||||||||||||||
|
$ | 196 | $ | 176 | $ | (86 | ) | $ | (101 | ) |
|
Pension Benefits
|
Postretirement Benefits
|
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2005
|
2004
|
2005
|
2004
|
|||||||||||||||
Discount
rate
|
5.43 | % | 5.50 | % | 5.50 | % | 5.50 | % | |||||||||||
Rate of
compensation increase
|
3.77 | % | 3.79 | % |
|
Pension Benefits
|
Postretirement Benefits
|
|||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2005
|
2004
|
2003
|
2005
|
2004
|
2003
|
|||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||
Service
cost
|
$ | 9 | $ | 9 | $ | 8 | $ | | $ | | $ | | |||||||||||||||
Interest
cost
|
36 | 39 | 43 | 1 | 1 | 2 | |||||||||||||||||||||
Expected return
on plan assets
|
(49 | ) | (48 | ) | (46 | ) | | | | ||||||||||||||||||
Amortization of
prior service cost (benefit)
|
1 | 1 | | (1 | ) | (1 | ) | (1 | ) | ||||||||||||||||||
Amortization of
net (gain) loss
|
13 | 11 | 9 | (12 | ) | (13 | ) | (16 | ) | ||||||||||||||||||
Net benefit
expense (income)
|
$ | 10 | $ | 12 | $ | 14 | $ | (12 | ) | $ | (13 | ) | $ | (15 | ) |
|
Pension Benefits
|
Postretirement Benefits
|
|||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2005
|
2004
|
2003
|
2005
|
2004
|
2003
|
|||||||||||||||||||||
Discount
rate
|
5.50 | % | 5.90 | % | 6.50 | % | 5.50 | % | 5.90 | % | 6.50 | % | |||||||||||||||
Rate of
compensation increase
|
3.77 | % | 3.79 | % | 3.72 | % | |||||||||||||||||||||
Expected
long-term rate of return on assets
|
8.88 | % | 8.89 | % | 8.88 | % |
|
2005
|
2004
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Asset
Category
|
||||||||||
Equity
securities
|
62 | % | 63 | % | ||||||
Foot Locker,
Inc. common stock
|
2 | % | 2 | % | ||||||
Debt
securities
|
34 | % | 33 | % | ||||||
Real
estate
|
1 | % | 1 | % | ||||||
Other
|
1 | % | 1 | % | ||||||
Total
|
100 | % | 100 | % |
|
Pension
Benefits |
Postretirement
Benefits |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
||||||||||
2006
|
$ | 64 | $ | 2 | |||||||
2007
|
62 | 3 | |||||||||
2008
|
60 | 3 | |||||||||
2009
|
60 | 2 | |||||||||
2010
|
58 | 2 | |||||||||
20112015
|
263 | 6 |
21
|
Stock Plans |
|
Stock Option Plans
|
Stock Purchase Plan
|
|||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2005
|
2004
|
2003
|
2005
|
2004
|
2003
|
|||||||||||||||||||||
Weighted-average risk free
rate of interest |
3.99 | % | 2.57 | % | 2.26 | % | 4.19 | % | 1.33 | % | 1.11 | % | |||||||||||||||
Expected
volatility
|
28 | % | 33 | % | 37 | % | 25 | % | 32 | % | 31 | % | |||||||||||||||
Weighted-average expected
award life |
3.8 | years | 3.7 | years | 3.4 | years | .7 | years | .7 | years | .7 | years | |||||||||||||||
Dividend
yield
|
1.1 | % | 1.1 | % | 1.2 | % | | | | ||||||||||||||||||
Weighted-average fair value
|
$ | 6.69 | $ | 6.51 | $ | 2.90 | $ | 5.54 | $ | 11.44 | $ | 14.15 |
|
2005
|
2004
|
2003
|
||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
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
|
5,909 | $ | 16.69 | 6,886 | $ | 14.73 | 7,676 | $ | 15.18 | ||||||||||||||||||
Granted
|
1,014 | $ | 27.42 | 1,183 | $ | 25.20 | 1,439 | $ | 10.81 | ||||||||||||||||||
Exercised
|
682 | $ | 15.03 | 1,853 | $ | 14.43 | 1,830 | $ | 12.50 | ||||||||||||||||||
Expired or
canceled
|
279 | $ | 22.11 | 307 | $ | 19.13 | 399 | $ | 19.55 | ||||||||||||||||||
Options
outstanding at end of year
|
5,962 | $ | 18.45 | 5,909 | $ | 16.69 | 6,886 | $ | 14.73 | ||||||||||||||||||
Options
exercisable at end of year
|
4,042 | $ | 16.00 | 3,441 | $ | 15.34 | 4,075 | $ | 15.99 | ||||||||||||||||||
Options
available for future grant at
end of year |
5,768 | 7,464 | 8,780 |
|
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
$10.89
|
1,012 | 6.6 | $ | 9.79 | 702 | $ | 9.59 | ||||||||||||||||
$11.31 to
$12.99
|
1,158 | 5.0 | 12.24 | 1,154 | 12.24 | ||||||||||||||||||
$13.34 to
$16.02
|
1,047 | 6.0 | 15.83 | 1,043 | 15.84 | ||||||||||||||||||
$16.19 to
$25.37
|
1,016 | 4.1 | 22.93 | 799 | 23.15 | ||||||||||||||||||
$25.39 to
$27.01
|
1,032 | 8.3 | 25.65 | 327 | 25.39 | ||||||||||||||||||
$27.10 to
$28.50
|
697 | 9.1 | 28.04 | 17 | 28.15 | ||||||||||||||||||
$ 4.53 to
$28.50
|
5,962 | 6.4 | $ | 18.45 | 4,042 | $ | 16.00 |
|
2005
|
2004
|
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
High
|
Low
|
High
|
Low
|
|||||||||||||||
Common
Stock
|
|||||||||||||||||||
Quarter
|
|||||||||||||||||||
1
st
Q
|
$ | 29.95 | $ | 25.88 | $ | 27.59 | $ | 21.75 | |||||||||||
2
nd
Q
|
27.65 | 24.31 | 25.03 | 19.97 | |||||||||||||||
3
rd
Q
|
25.37 | 18.75 | 24.80 | 19.98 | |||||||||||||||
4
th
Q
|
24.07 | 18.74 | 27.26 | 22.75 |
26
|
Quarterly Results (Unaudited) |
|
1
st
Q
|
2
nd
Q
|
3
rd
Q
|
4
th
Q
|
Year
|
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions, except per share
amounts)
|
||||||||||||||||||||||
Sales
|
|||||||||||||||||||||||
2005
|
$ | 1,377 | 1,304 | 1,408 | 1,564 | 5,653 | |||||||||||||||||
2004
|
1,186 | 1,268 | 1,366 | 1,535 | 5,355 | ||||||||||||||||||
Gross margin
(a)
|
|||||||||||||||||||||||
2005
|
$ | 418 | 377 | 430 | 484 | (c) | 1,709 | ||||||||||||||||
2004
|
361 | 369 | 426 | 477 | 1,633 | ||||||||||||||||||
Operating
profit
(b)
|
|||||||||||||||||||||||
2005
|
$ | 94 | 71 | 104 | 140 | 409 | |||||||||||||||||
2004
|
78 | 61 | 117 | 133 | 389 | ||||||||||||||||||
Income from
continuing operations
|
|||||||||||||||||||||||
2005
|
$ | 58 | 44 | 65 | 96 | 263 | |||||||||||||||||
2004
|
47 | 45 | 74 | 89 | 255 | ||||||||||||||||||
Net
income
|
|||||||||||||||||||||||
2005
|
$ | 58 | 44 | 66 | 96 | 264 | |||||||||||||||||
2004
|
48 | 82 | 74 | 89 | 293 | ||||||||||||||||||
Basic
earnings per share:
|
|||||||||||||||||||||||
2005
|
|||||||||||||||||||||||
Income from
continuing operations
|
$ | 0.37 | 0.29 | 0.42 | 0.62 | 1.70 | |||||||||||||||||
Income from
discontinued operations
|
| | 0.01 | | 0.01 | ||||||||||||||||||
Net
income
|
0.37 | 0.29 | 0.43 | 0.62 | 1.71 | ||||||||||||||||||
2004
|
|||||||||||||||||||||||
Income from
continuing operations
|
$ | 0.33 | 0.30 | 0.47 | 0.58 | 1.69 | |||||||||||||||||
Loss from
discontinued operations
|
| 0.25 | | | 0.25 | ||||||||||||||||||
Net
income
|
0.33 | 0.55 | 0.47 | 0.58 | 1.94 | ||||||||||||||||||
Diluted
earnings per share:
|
|||||||||||||||||||||||
2005
|
|||||||||||||||||||||||
Income from
continuing operations
|
$ | 0.37 | 0.28 | 0.41 | 0.61 | 1.67 | |||||||||||||||||
Income from
discontinued operations
|
| | 0.01 | | 0.01 | ||||||||||||||||||
Net
income
|
0.37 | 0.28 | 0.42 | 0.61 | 1.68 | ||||||||||||||||||
2004
|
|||||||||||||||||||||||
Income from
continuing operations
|
$ | 0.31 | 0.29 | 0.47 | 0.57 | 1.64 | |||||||||||||||||
Loss from
discontinued operations
|
| 0.24 | | | 0.24 | ||||||||||||||||||
Net
income
|
0.31 | 0.53 | 0.47 | 0.57 | 1.88 |
(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 by $2 million for the fourth quarter of 2004. |
(b)
|
Operating profit represents income from continuing operations before income taxes, interest expense, net and non-operating income. |
(c)
|
The fourth quarter of 2005 includes permanent markdowns of $7 million. |
|
2005
|
2004
|
2003
|
2002
|
2001
|
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
($ in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Summary of
Continuing Operations
|
||||||||||||||||||||||
Sales
|
$ | 5,653 | 5,355 | 4,779 | 4,509 | 4,379 | ||||||||||||||||
Gross margin
(1)
|
1,709 | 1,633 | 1,482 | 1,348 | 1,312 | |||||||||||||||||
Selling,
general and administrative expenses
|
1,129 | 1,088 | 987 | 928 | 923 | |||||||||||||||||
Restructuring
charges (income)
|
| 2 | 1 | (2 | ) | 34 | ||||||||||||||||
Depreciation
and amortization
(1)
|
171 | 154 | 152 | 153 | 158 | |||||||||||||||||
Interest
expense, net
|
10 | 15 | 18 | 26 | 24 | |||||||||||||||||
Other (income)
expense
|
(6 | ) | | | (3 | ) | (2 | ) | ||||||||||||||
Income from
continuing operations
|
263 | 255 | 209 | 162 | 111 | (3) | ||||||||||||||||
Cumulative
effect of accounting change
(2)
|
| | (1 | ) | | | ||||||||||||||||
Basic earnings
per share from continuing operations
|
1.70 | 1.69 | 1.47 | 1.15 | 0.79 | (3) | ||||||||||||||||
Basic earnings
per share from cumulative effect of accounting change
|
| | | | | |||||||||||||||||
Diluted
earnings per share from continuing operations
|
1.67 | 1.64 | 1.40 | 1.10 | 0.77 | (3) | ||||||||||||||||
Diluted
earnings per share from cumulative effect of accounting change
|
| | | | | |||||||||||||||||
Common stock
dividends declared
|
0.32 | 0.26 | 0.15 | 0.03 | | |||||||||||||||||
Weighted-average common shares outstanding (in millions)
|
155.1 | 150.9 | 141.6 | 140.7 | 139.4 | |||||||||||||||||
Weighted-average common shares outstanding assuming dilution (in millions)
|
157.6 | 157.1 | 152.9 | 150.8 | 146.9 | |||||||||||||||||
Financial
Condition
|
||||||||||||||||||||||
Cash, cash
equivalents and short-term investments
|
$ | 587 | 492 | 448 | 357 | 215 | ||||||||||||||||
Merchandise
inventories
|
1,254 | 1,151 | 920 | 835 | 793 | |||||||||||||||||
Property and
equipment, net
(4)
|
675 | 715 | 668 | 664 | 665 | |||||||||||||||||
Total assets
(4)
|
3,312 | 3,237 | 2,713 | 2,514 | 2,328 | |||||||||||||||||
Short-term
debt
|
| | | | | |||||||||||||||||
Long-term debt
and obligations under capital leases
|
326 | 365 | 335 | 357 | 399 | |||||||||||||||||
Total shareholders equity
|
2,027 | 1,830 | 1,375 | 1,110 | 992 | |||||||||||||||||
Financial
Ratios
|
||||||||||||||||||||||
Return on
equity (ROE)
|
13.6 | % | 15.9 | 16.8 | 15.4 | 11.1 | ||||||||||||||||
Operating
profit margin
|
7.2 | % | 7.3 | 7.2 | 6.0 | 4.5 | ||||||||||||||||
Income from
continuing operations as a percentage of sales
|
4.7 | % | 4.8 | 4.4 | 3.6 | 2.5 | (3) | |||||||||||||||
Net debt
capitalization percent
(5)
|
45.2 | % | 50.4 | 53.3 | 58.6 | 61.1 | ||||||||||||||||
Net debt
capitalization percent (without present value of operating leases)
(5)
|
| | | | 15.6 | |||||||||||||||||
Current ratio
|
2.8 | 2.7 | 2.8 | 2.2 | 2.0 | |||||||||||||||||
Other
Data
|
||||||||||||||||||||||
Capital
expenditures
|
$ | 155 | 156 | 144 | 150 | 116 | ||||||||||||||||
Number of
stores at year end
|
3,921 | 3,967 | 3,610 | 3,625 | 3,590 | |||||||||||||||||
Total selling
square footage at year end (in millions)
|
8.71 | 8.89 | 7.92 | 8.04 | 7.94 | |||||||||||||||||
Total gross
square footage at year end (in millions)
|
14.48 | 14.78 | 13.14 | 13.22 | 13.14 |
(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 accordingly, depreciation expense was increased by the corresponding amount. |
(2)
|
2003 relates to adoption of SFAS No. 143 Accounting for Asset Retirement Obligations. |
(3)
|
In applying the provisions of EITF 90-16, income from continuing operations for 2001 would have been reclassified to include the results of the Northern Group. Accordingly, income from continuing operations would have been $91 million. As such basic earnings per share would have been $0.65 for fiscal 2001. Diluted earnings per share would have been $0.64 for fiscal 2001. 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 and 2001. |
(5)
|
Represents total debt, net of cash, cash equivalents and short-term investments and includes the effect of interest rate swaps of $1 million that decreased long-term debt at January 28, 2006, $4 million that increased long-term debt at January 29, 2005 and $1 million that reduced long-term debt at January 31, 2004. |
Item 9A.
|
Controls and Procedures |
(a)
|
Evaluation of Disclosure Controls and Procedures. |
(b)
|
Managements 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. |
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 Information section of the Proxy Statement and is incorporated herein by reference. |
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 |
Item 15.
|
Exhibits and Financial Statement Schedules |
Chairman
of the Board, President and
Chief Executive Officer
Matthew D. Serra Chairman of the Board, President and Chief Executive Officer |
Robert W. McHugh Senior Vice President and Chief Financial Officer |
|||||||||
/s/
G
IOVANNA
C
IPRIANO
Giovanna Cipriano Vice President and Chief Accounting Officer |
/s/
J
AMES
E
.
P
RESTON
James E. Preston Director |
|||||||||
/s/
P
URDY
C
RAWFORD
Purdy Crawford Director |
/s/
D
AVID
Y
.
S
CHWARTZ
David Y. Schwartz Director |
|||||||||
/s/
N
ICHOLAS
D
IPAOLO
Nicholas DiPaolo Director |
/s/
C
HRISTOPHER
A
.
S
INCLAIR
Christopher A. Sinclair Director |
|||||||||
/s/
A
LAN
D
.
F
ELDMAN
Alan D. Feldman Director |
/s/
C
HERYL
N
IDO
T
URPIN
Cheryl Nido Turpin Director |
|||||||||
/s/
P
HILIP
H
.
G
EIER
J
R.
Philip H. Geier Jr. Director |
/s/
D
ONA
D
.
Y
OUNG
Dona D. Young Director |
|||||||||
/s/
J
AROBIN
G
ILBERT
J
R.
Jarobin Gilbert Jr. Director |
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 Registrants equity securities are defined in the Registrants 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 Registrants Form 8-K dated January 16,
1992).
|
|||||
10.1
|
1986
Foot Locker Stock Option Plan (incorporated herein by reference to Exhibit 10(b) to the Registrants 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 Registrants 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 Registrants Annual Report on Form 10-K for the
year ended January 31, 1998, filed by the Registrant with the SEC on April 21, 1998).
|
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 Registrants
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
|
Amendment to the Supplemental Executive Retirement Plan adopted November 16, 2005.
|
|||||
10.11
|
Long-Term Incentive Compensation Plan, as amended and restated (incorporated herein by reference to Exhibit 10(f) to the 1995 Form
10-K).
|
|||||
10.12
|
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)).
|
|||||
10.13
|
Form
of indemnification agreement, as amended (incorporated herein by reference to Exhibit 10(g) to the 8-B Registration Statement).
|
|||||
10.14
|
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)).
|
|||||
10.15
|
Foot
Locker Voluntary Deferred Compensation Plan (incorporated herein by reference to Exhibit 10(i) to the 1995 Form 10-K).
|
|||||
10.16
|
Foot
Locker Directors Stock Option Plan (incorporated herein by reference to Exhibit 10.1 to the July 29, 2000 Form 10-Q).
|
|||||
10.17
|
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).
|
|||||
10.18
|
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).
|
|||||
10.19
|
Foot
Locker Directors Retirement Plan, as amended (incorporated herein by reference to Exhibit 10(k) to the 8-B Registration
Statement).
|
|||||
10.20
|
Amendments to the Foot Locker Directors Retirement Plan (incorporated herein by reference to Exhibit 10(c) to the Registrants
Quarterly Report on Form 10-Q for the period ended October 28, 1995, filed by the Registrant with the SEC on December 11, 1995).
|
|||||
10.21
|
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)).
|
Exhibit No.
in Item 601 of Regulation S-K |
Description
|
|||||
---|---|---|---|---|---|---|
10.22
|
Restricted Stock Agreement with Matthew D. Serra dated as of February 2, 2003
(incorporated herein by reference to Exhibit 10.22 to the Registrants Annual Report on Form 10-K for the year ended February 1, 2003, filed by the Registrant with the SEC on May 19, 2003). |
|||||
10.23
|
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).
|
|||||
10.24
|
Restricted Stock Agreement with Matthew D. Serra dated as of February 18, 2004 (incorporated herein by reference to Exhibit 10 to the
Registrants Quarterly Report on Form 10-Q for the period ended May 1, 2004, filed by the Registrant with the SEC on June 8,
2004).
|
|||||
10.25
|
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).
|
|||||
10.26
|
Foot
Locker Executive Severance Pay Plan (incorporated herein by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the
period ended October 31, 1998 (the October 31, 1998).
|
|||||
10.27
|
Form
of Senior Executive Employment Agreement (incorporated herein by reference to Exhibit 10.23 to the Registrants 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)).
|
|||||
10.28
|
Form
of Executive Employment Agreement (incorporated herein by reference to Exhibit 10.24 to the 1999 Form 10-K).
|
|||||
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 Registrants Annual Report on Form 10-K for the year ended
January 30, 1999 filed by the Registrant on April 30, 1999 (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 (Credit Agreement)
(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).
|
|||||
10.32
|
Amendment No. 1 to the Credit Agreement (incorporated herein by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on May 18,
2005).
|
|||||
10.33
|
Letter of Credit Agreement dated as of March 19, 1999 (incorporated herein by reference to Exhibit 10.35 to the 1998 Form
10-K).
|
|||||
10.34
|
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 16,
2005, filed by the Registrant with the SEC on February 18, 2005).
|
|||||
10.35
|
Foot
Locker 2003 Stock Option and Award Plan (incorporated herein by reference to Exhibit 10.2 to the August 2, 2003 Form 10-Q).
|
|||||
10.36
|
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).
|
|||||
10.37
|
Automobile Expense Reimbursement Program for Senior Executives (incorporated herein by reference to Exhibit 10.36 to the Annual Report on Form
10-K for the year ended January 29, 2005 filed by the Registrant on March 29, 2005 (the 2004 Form 10-K).
|
Exhibit No.
in Item 601 of Regulation S-K |
Description
|
|||||
---|---|---|---|---|---|---|
10.38
|
Executive Medical Expense Allowance Program for Senior Executives (incorporated herein by reference to Exhibit 10.37 to the 2004 Form
10-K).
|
|||||
10.39
|
Financial Planning Allowance Program for Senior Executives (incorporated herein by reference to Exhibit 10.38 to the 2004 Form
10-K).
|
|||||
10.40
|
Form
of Nonstatutory Stock Option Award Agreement for Executive Officers.
|
|||||
10.41
|
Form
of Incentive Stock Option Award Agreement for Executive Officers.
|
|||||
10.42
|
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).
|
|||||
10.43
|
Long-term Disability Program for Senior Executives (incorporated herein by reference to Exhibit 10.42 to the 2004 Form
10-K).
|
|||||
10.44
|
Letter Agreement with Bruce L. Hartman (incorporated herein by reference to Exhibit 99.1 to the Form 8-K filed by the Registrant on December
28, 2005).
|
|||||
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.
|
Exhibit No.
in Item 601 of Regulation S-K |
Description
|
|||||
---|---|---|---|---|---|---|
10.10
|
Amendment to the Supplemental Executive Retirement Plan adopted November 16, 2005.
|
|||||
10.40
|
Form
of Nonstatutory Stock Option Award Agreement for Executive Officers.
|
|||||
10.41
|
Form
of Incentive Stock Option Award Agreement for Executive Officers.
|
|||||
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.
|
Exhibit 10.10
Foot Locker Supplemental Executive Retirement Plan
Amendment
Section 6 of the Foot Locker Supplemental Executive Retirement Plan is amended to be and reads as follows:
6. |
Payment . |
(a) Payment of an Award under the Plan is based on the Company's unfunded obligation to pay. Subject to the following sentence and Sections 6(c), 7 and 8 hereof, amounts credited to a Participant's Account shall be paid in twelve (12) quarterly installments, commencing as soon as administratively feasible following the Participant's Retirement. If a Participant's employment is terminated for Cause, the Participant shall not receive any payments under this Plan.
(b) A Participant shall only be entitled to receive the remainder of the installment payments payable on his or her behalf, if the Participant does not engage in Competition during employment or the one (1) year period following his or her Retirement and does not violate his or her obligation with regard to Confidentiality at any time. The remainder of a Participant's installment payments shall be immediately forfeited in the event of the Participant's Competition during employment or during the one (1) year period following his or her Retirement or violation of his or her obligation with regard to Confidentiality at any time.
(c) Solely with respect to 2005, the Committee, in its sole discretion, may select one (or more) Participants who have attained at least age 55 and whose termination of employment occurs during 2005 to be eligible to receive payment. All distributions shall be made solely during 2005 and shall be subject to such terms and conditions as the Committee may specify consistent with the requirements of the Plan, Code Section 409A and Internal Revenue Service Notice 2005-1 (as permitted by proposed Treasury regulations issued under Code Section 409A). The Committee shall be permitted to adopt such rules and regulations as it may, in its discretion, deem necessary or desirable to administer the provisions of this Section 6(c). A Participant who terminates participation in this Plan pursuant to this Section 6(c) shall not be permitted to re-commence participation in this Plan.
November 16, 2005
Exhibit 10.40
Revised Form 3/1/2006
FOOT LOCKER ____________ STOCK OPTION AND AWARD PLAN
NONSTATUTORY STOCK OPTION AWARD AGREEMENT
Stock Option Grant
Effective (the Date of Grant), pursuant to action taken by the Compensation and Management Resources Committee [or the Stock Option Plan Sub-Committee] of the Board of Directors of Foot Locker, Inc. (the Company), a New York corporation, the Company hereby grants to you a Nonstatutory Option (the Option) under the Foot Locker Stock Option and Award Plan (the Plan), to purchase, in accordance with the terms of the Plan, up to, but not more than, that number of full shares of common stoc (Common Stock) set forth below at the purchase price per share of US $ (the Exercise Price), which is 100 percent of the Fair Market Value (as defined in the Plan) of a share of Common Stock on .
The Option has been granted to you for a period expiring on unless, prior to that time, the Option is exercised in full, is cancelled, or expires due to your death, retirement or other termination of employment, as provided in the Plan. Except as otherwise provided in the Plan, the Option will become exercisable in annual installments over a three-year vesting period according to the vesting schedule set forth below.
Name of Participant: | __________________ | ||
Number of Shares of Common | |||
Stock Covered by the Option: | __________________ | ||
Date of Grant: | __________________ | ||
Exercise Price Per Share: | $_________________ | ||
Vesting Schedule: | __________________ | ||
The Option is subject to the terms of the Plan, the Prospectus covering the Plan dated , any subsequently issued Prospectus or Appendix covering the Plan, and the terms and conditions set forth above. All of these documents are incorporated herein by this reference and made a part of the Option.
Non-Competition [Optional provision, as determined by the Compensation and Management
Resources Committee or the Stock Option Plan Sub-Committee]
By accepting this Option you agree that during the Non-Competition Period you will not engage in Competition with the Company or any of its subsidiaries, divisions, or affiliates (the Control Group).
As used herein, Competition means:
(i) participating, directly or indirectly, as an individual proprietor, stockholder, officer, employee, director, joint venturer, investor, lender, or in any capacity whatsoever within the United States of America or in any other country where any of your former employing members of the Control Group does business, in (A) a business in competition with the retail, catalog, or on-line sale of athletic footwear, athletic apparel and sporting goods conducted by the Control Group (the Athletic Business), or (B) a business that in the prior fiscal year supplied product to the Control Group for the Athletic Business having a value of $20 million or more at cost to the Control Group; provided, however, that such participation shall not include (X) the mere ownership of not more than 1 percent of the total outstanding stock of a publicly held company; (Y) the performance of services for any enterprise to the extent such services are not performed, directly or indirectly, for a business in competition with the Athletic Business or for a business which supplies product to the Control Group for the Athletic Business; or (Z) any activity engaged in with the prior written approval of the Chief Executive Officer of the Company; or
(ii) intentionally recruiting, soliciting or inducing, any employee or employees of the Control Group to terminate their employment with, or otherwise cease their relationship with the former employing members of the Control Group where such employee or employees do in fact so terminate their employment.
As used herein, Non-Competition Period means (i) the period commencing and ending on , or any part thereof, during which you are employed by the Control Group and (ii) if your employment with the Control Group terminates for any reason during such period, the one-year period commencing on the date your employment with the Control Group terminates. Notwithstanding the foregoing, the Non-Competition Period shall not extend beyond the date your employment with the Control Group terminates if such termination of employment occurs following a Change in Control as defined in Attachment A hereto.
You agree that the breach by you of the provisions included herein under the heading Non-Competition (the Non-Competition Provision) would result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law. You therefore agree that in the event of a breach or a threatened breach of the Non-Competition Provision, the Company shall be entitled to (i) an immediate injunction and restraining order to prevent such breach, threatened breach, or continued breach, including by any and all persons acting for or with you, without having to prove damages and (ii) any other remedies to which the Company may be entitled at law or in equity. The terms of this paragraph shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach of the Non-Competition Provision, including, but not limited to, recovery of damages. In addition, in the event of your breach of the Non-Competition Provision, any stock options covered by this
Nonstatutory Stock Option Award Agreement (Award Agreement) that are then unexercised (whether or not vested) shall be immediately cancelled. You and the Company further agree that the Non-Competition Provision is reasonable and that the Company would not have granted the stock option provided for in this Award Agreement but for the inclusion of the Non-Competition Provision herein. If any provision of the Non-Competition Provision is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend over the maximum period of time, range of activities, or geographic area as to which it may be enforceable. The validity, construction, and performance of the Non-Competition Provision shall be governed by the laws of the State of New York without regard to its conflicts of laws principles. For purposes of the Non-Competition Provision, you and the Company consent to the jurisdiction of state and federal courts in New York County.
Sign and Return Copy of Agreement
Please sign and return one copy of this Nonstatutory Stock Option Award Agreement (Award Agreement) by to: Secretary, Foot Locker, Inc., 112 West 34th Street, New York, New York 10120, Attention: Sheilagh Clarke. An Award Agreement that is mailed in an envelope that is postmarked on or before will be deemed to have been delivered by this date.
Please note your complete home address on the copy of the Award Agreement that you return.
[Date]
FOOT LOCKER, INC. |
By:__________________________
|
SIGNATURE : |
HOME ADDRESS : |
_____________________________
________________
|
Street/P.O. Box |
_____________________________
________________
|
Town/City |
State/Province |
_____________________________
Zip/Postal Code |
ATTACHMENT A
Change in Control
A Change in Control shall mean any of the following: (i) (A) the making of a tender or exchange offer by any person or entity or group of associated persons or entities (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (a Person) (other than the Company or its Affiliates) for shares of common stock of the Company pursuant to which purchases are made of securities representing at least twenty percent (20%) of the total combined voting power of the Companys then issued and outstanding voting securities; (B) the merger or consolidation of the Company with, or the sale or disposition of all or substantially all of the assets of the Company to, any Person other than (a) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) fifty percent (50%) or more of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation; or (b) a merger or capitalization effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the beneficial owner, directly or indirectly (as determined under Rule 13d-3 promulgated under the Securities Exchange Act of 1934), of securities representing more than the amounts set forth in (C) below; (C) the acquisition of direct or indirect beneficial ownership (as determined under Rule 13d-3 promulgated under the Securities Exchange Act of 1934), in the aggregate, of securities of the Company representing twenty percent (20%) or more of the total combined voting power of the Companys then issued and outstanding voting securities by any Person acting in concert as of the date of this Agreement; provided, however, that the Board may at any time and from time to time and in the sole discretion of the Board, as the case may be, increase the voting security ownership percentage threshold of this item (C) to an amount not exceeding forty percent (40%); or (D) the approval by the shareholders of the Company of any plan or proposal for the complete liquidation or dissolution of the Company or for the sale of all or substantially all of the assets of the Company; or (ii) during any period of not more than two (2) consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into agreement with the Company to effect a transaction described in clause (i)) whose election by the Board or nomination for election by the Companys stockholders was approved by a vote of at least two-thirds (?) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof.
Exhibit 10.41
Revised Form, 3/1/2006 |
FOOT LOCKER ___________ STOCK OPTION AND AWARD PLAN
INCENTIVE STOCK OPTION AWARD AGREEMENT
Stock Option Grant
Effective (the Date of Grant), pursuant to action taken by the Compensation and Management Resources Committee [or the Stock Option Plan Sub-Committee] of the Board of Directors of Foot Locker, Inc. (the Company), a New York corporation, the Company hereby grants to you an incentive stock option (the Option), as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the Code), under the Foot Locker Stock Option and Award Plan (the Plan), to purchase, in accordance with the terms of the Plan, that number of full shares of common stock of the Company (Common Stock) set forth below at the purchase price per share of US $ (the Exercise Price), which is 100 percent of the Fair Market Value (as defined in the Plan) of a share of Common Stock on .
The Option has been granted to you for a period expiring on unless, prior to that time, the Option is exercised in full, is cancelled, or expires due to your death, retirement or other termination of employment, as provided in the Plan. Except as otherwise provided in the Plan, the Option will become exercisable in annual installments over a three-year vesting period according to the vesting schedule set forth below.
Name of Participant: |
Number of Shares of Common |
|
Stock Covered by the Option: |
|
Date of Grant: |
Exercise Price Per Share: |
$ |
Vesting Schedule: |
If the Option, or other incentive stock options granted to you under the Plan or any other stock option plan of the Company or its parent (if any) or subsidiary corporations, first become exercisable during any calendar year and those options represent shares of Common Stock having an aggregate Fair Market Value (determined as of the Date of Grant of each option) in excess of US $100,000, then those options (or portions thereof) representing the amount of the aggregate Fair Market Value exceeding US $100,000 shall automatically be converted (in reverse order of their Date of Grant) into Nonstatutory Options (as defined in the Plan).
The Option is subject to the terms of the Plan, the Prospectus covering the Plan dated , any subsequently issued Prospectus or Appendix covering the Plan, and the terms and conditions set forth above. All of these documents are incorporated herein by this reference and made a part of the Option.
Non-Competition [Optional provision, as determined by the Compensation and Management
Resources Committee or the Stock Option Plan Sub-Committee]
By accepting this Option, you agree that during the Non-Competition Period you will not engage in Competition with the Company or any of its subsidiaries, divisions, or affiliates (the Control Group).
As used herein, Competition means:
(i) participating, directly or indirectly, as an individual proprietor, stockholder, officer, employee, director, joint venturer, investor, lender, or in any capacity whatsoever within the United States of America or in any other country where any of your former employing members of the Control Group does business, in (A) a business in competition with the retail, catalog, or on-line sale of athletic footwear, athletic apparel and sporting goods conducted by the Control Group (the Athletic Business), or (B) a business that in the prior fiscal year supplied product to the Control Group for the Athletic Business having a value of $20 million or more at cost to the Control Group; provided, however, that such participation shall not include (X) the mere ownership of not more than 1 percent of the total outstanding stock of a publicly held company; (Y) the performance of services for any enterprise to the extent such services are not performed, directly or indirectly, for a business in competition with the Athletic Business or for a business which supplies product to the Control Group for the Athletic Business; or (Z) any activity engaged in with the prior written approval of the Chief Executive Officer of the Company; or
(ii) intentionally recruiting, soliciting or inducing, any employee or employees of the Control Group to terminate their employment with, or otherwise cease their relationship with the former employing members of the Control Group where such employee or employees do in fact so terminate their employment.
As used herein, Non-Competition Period means (i) the period commencing and ending on , or any part thereof, during which you are employed by the Control Group and (ii) if your employment with the Control Group terminates for any reason during such period, the one-year period commencing on the date your employment with the Control Group terminates. Notwithstanding the foregoing, the Non-Competition Period shall not extend beyond the date your employment with the Control Group terminates if such termination of employment occurs following a Change in Control as defined in Attachment A hereto.
You agree that the breach by you of the provisions included herein under the heading Non-Competition (the Non-Competition Provision) would result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law. You therefore agree that in the event of a breach or a threatened breach of the Non-Competition Provision, the Company shall be entitled to (i) an immediate injunction and restraining order to prevent such breach, threatened breach, or continued breach, including by any and all persons acting for or
with you, without having to prove damages and (ii) any other remedies to which the Company may be entitled at law or in equity. The terms of this paragraph shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach of the Non-Competition Provision, including, but not limited to, recovery of damages. In addition, in the event of your breach of the Non-Competition Provision, any stock options covered by this Nonstatutory Stock Option Award Agreement (Award Agreement) that are then unexercised (whether or not vested) shall be immediately cancelled. You and the Company further agree that the Non-Competition Provision is reasonable and that the Company would not have granted the stock option provided for in this Award Agreement but for the inclusion of the Non-Competition Provision herein. If any provision of the Non-Competition Provision is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend over the maximum period of time, range of activities, or geographic area as to which it may be enforceable. The validity, construction, and performance of the Non-Competition Provision shall be governed by the laws of the State of New York without regard to its conflicts of laws principles. For purposes of the Non-Competition Provision, you and the Company consent to the jurisdiction of state and federal courts in New York County.
Sign and Return Copy of Agreement
Please sign and return one copy of this Nonstatutory Stock Option Award Agreement (Award Agreement) by to: Secretary, Foot Locker, Inc., 112 West 34th Street, New York, New York 10120, Attention: Sheilagh Clarke. An Award Agreement that is mailed in an envelope that is postmarked on or before will be deemed to have been delivered by this date.
Please note your complete home address on the copy of the Award Agreement that you return.
[Date]
FOOT LOCKER, INC. |
By:__________________________
|
SIGNATURE : |
HOME ADDRESS : |
_____________________________
________________
|
Street/P.O. Box |
_____________________________
________________
|
Town/City |
State/Province |
_____________________________
Zip/Postal Code |
ATTACHMENT A
Change in Control
A Change in Control shall mean any of the following: (i) (A) the making of a tender or exchange offer by any person or entity or group of associated persons or entities (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (a Person) (other than the Company or its Affiliates) for shares of common stock of the Company pursuant to which purchases are made of securities representing at least twenty percent (20%) of the total combined voting power of the Companys then issued and outstanding voting securities; (B) the merger or consolidation of the Company with, or the sale or disposition of all or substantially all of the assets of the Company to, any Person other than (a) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) fifty percent (50%) or more of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation; or (b) a merger or capitalization effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the beneficial owner, directly or indirectly (as determined under Rule 13d-3 promulgated under the Securities Exchange Act of 1934), of securities representing more than the amounts set forth in (C) below; (C) the acquisition of direct or indirect beneficial ownership (as determined under Rule 13d-3 promulgated under the Securities Exchange Act of 1934), in the aggregate, of securities of the Company representing twenty percent (20%) or more of the total combined voting power of the Companys then issued and outstanding voting securities by any Person acting in concert as of the date of this Agreement; provided, however, that the Board may at any time and from time to time and in the sole discretion of the Board, as the case may be, increase the voting security ownership percentage threshold of this item (C) to an amount not exceeding forty percent (40%); or (D) the approval by the shareholders of the Company of any plan or proposal for the complete liquidation or dissolution of the Company or for the sale of all or substantially all of the assets of the Company; or (ii) during any period of not more than two (2) consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into agreement with the Company to effect a transaction described in clause (i)) whose election by the Board or nomination for election by the Companys stockholders was approved by a vote of at least two-thirds (?) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof.
|
Fiscal Year Ended
|
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Jan. 28,
2006 |
Jan. 29,
2005 |
Jan. 31,
2004 |
Feb. 1,
2003 |
Feb. 2,
2002 |
||||||||||||||||||
NET
EARNINGS
|
|||||||||||||||||||||||
Income from
continuing operations
|
$ | 263 | $ | 255 | $ | 209 | $ | 162 | $ | 111 | |||||||||||||
Income tax
expense
|
142 | 119 | 115 | 84 | 64 | ||||||||||||||||||
Interest
expense, excluding capitalized interest
|
23 | 22 | 26 | 33 | 35 | ||||||||||||||||||
Portion of
rents deemed representative of the
interest factor (1/3) |
214 | 202 | 177 | 164 | 157 | ||||||||||||||||||
|
$ | 642 | $ | 598 | $ | 527 | $ | 443 | $ | 367 | |||||||||||||
FIXED
CHARGES
|
|||||||||||||||||||||||
Gross
interest expense
|
$ | 23 | $ | 22 | $ | 26 | $ | 33 | $ | 35 | |||||||||||||
Portion of
rents deemed representative of the
interest factor (1/3) |
214 | 202 | 177 | 164 | 157 | ||||||||||||||||||
|
$ | 237 | $ | 224 | $ | 203 | $ | 197 | $ | 192 | |||||||||||||
RATIO OF
EARNINGS TO FIXED CHARGES
|
2.7 | 2.7 | 2.6 | 2.2 | 1.9 |
Name
|
State or Other
Jurisdiction of Incorporation |
|||||
---|---|---|---|---|---|---|
Footlocker.com,
Inc.
|
Delaware
|
|||||
Eastbay,
Inc.
|
Wisconsin
|
|||||
FLE CV
Management, Inc.
|
Delaware
|
|||||
FLE
C.V.
|
Netherlands
|
|||||
FLE Holdings,
BV
|
Netherlands
|
|||||
FL Europe
Holdings, Inc.
|
Delaware
|
|||||
Foot Locker
Austria GmbH
|
Austria
|
|||||
Foot Locker
Belgium B.V.B.A.
|
Belgium
|
|||||
Foot Locker
Denmark ApS
|
Denmark
|
|||||
Foot Locker
Europe B.V.
|
Netherlands
|
|||||
Foot Locker
France S.A.S.
|
France
|
|||||
Foot Locker Italy
S.r.l.
|
Italy
|
|||||
Foot Locker
Netherlands B.V.
|
Netherlands
|
|||||
Foot Locker
Sweden Aktiebolag
|
Sweden
|
|||||
Foot Locker
Germany GmbH & Co. KG
|
Germany
|
|||||
Foot Locker Spain
S.L.
|
Spain
|
|||||
Foot Locker
Australia, Inc.
|
Delaware
|
|||||
Foot Locker New
Zealand, Inc.
|
Delaware
|
|||||
Freedom
Sportsline Limited
|
United Kingdom
|
|||||
Foot Locker
Atlantic City, LLC
|
Delaware
|
|||||
Team Edition
Apparel, Inc.
|
Florida
|
|||||
Foot Locker
Specialty, Inc.
|
New
York
|
|||||
Foot Locker
Retail, Inc.
|
New
York
|
|||||
Foot Locker
Operations LLC
|
Delaware
|
(1)
|
Each subsidiary company is 100% owned, directly or indirectly, by Foot Locker, Inc. All subsidiaries are consolidated with Foot Locker, Inc. for accounting and financial reporting purposes. |
Name
|
State or Other
Jurisdiction of Incorporation |
|||||
---|---|---|---|---|---|---|
Foot Locker
Stores, Inc.
|
Delaware
|
|||||
Foot Locker
Corporate Services, Inc.
|
Delaware
|
|||||
Robbys
Sporting Goods, Inc.
|
Florida
|
|||||
Foot Locker
Holdings, Inc.
|
New
York
|
|||||
Foot Locker
Canada Corporation
|
Canada
|
|||||
FL Canada
Holdings, Inc.
|
Delaware
|
|||||
Foot Locker
Sourcing, Inc.
|
Delaware
|
|||||
Foot Locker
Artigos desportivos e de tempos livres, Lda.
|
Portugal
|
|||||
Foot Locker
Greece Athletic Goods Ltd.
|
Greece
|
|||||
Foot Locker
Suisse S.A.
|
Switzerland
|
|||||
FL Corporate NY,
LLC
|
Delaware
|
|||||
FL Retail NY,
LLC
|
Delaware
|
|||||
FL Specialty NY,
LLC
|
Delaware
|
|||||
Foot Locker
Canada Holdings ULC
|
Canada
|
|||||
Foot Locker
Retail Ireland Limited
|
Ireland
|
|||||
FL Finance
(Europe) Limited
|
Ireland
|
|||||
FL Retail
Operations LLC
|
New
York
|
|||||
FL Specialty
Operations LLC
|
New
York
|
(1)
|
Each subsidiary company is 100% owned, directly or indirectly, by Foot Locker, Inc. All subsidiaries are consolidated with Foot Locker, Inc. for accounting and financial reporting purposes. |
|
Form S-8 No. 33-10783 |
|
Form S-8 No. 33-91888 |
|
Form S-8 No. 33-91886 |
|
Form S-8 No. 33-97832 |
|
Form S-8 No. 333-07215 |
|
Form S-8 No. 333-21131 |
|
Form S-8 No. 333-62425 |
|
Form S-8 No. 333-33120 |
|
Form S-8 No. 333-41056 |
|
Form S-8 No. 333-41058 |
|
Form S-8 No. 333-74688 |
|
Form S-8 No. 333-99829 |
|
Form S-8 No. 333-111222 |
|
Form S-8 No. 333-121515 |
|
Form S-3 No. 33-43334 |
|
Form S-3 No. 33-86300 |
|
Form S-3 No. 333-64930 |
1.
|
I have reviewed this annual report on Form 10-K of Foot Locker, Inc. (the Registrant); |
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report. |
4.
|
The Registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c)
|
Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d)
|
Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and |
5.
|
The Registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the Audit Committee of the Registrants Board of Directors (or persons performing the equivalent functions): |
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and |
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting. |
1.
|
I have reviewed this annual report on Form 10-K of Foot Locker, Inc. (the Registrant); |
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report. |
4.
|
The Registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c)
|
Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d)
|
Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and |
5.
|
The Registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the Audit Committee of the Registrants Board of Directors (or persons performing the equivalent functions): |
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and |
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting. |
Certification Pursuant to
18 U.S.C. Section 1350
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley
Act of 2002
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |