Foot Locker 2002 Annual Report Download - page 26

All Other Businesses
The dispo sitio n of all business fo rmats captured in the “All Other”
catego ry was co mpleted during 2001. They include
Afterthoughts, The San Francisco Music Bo x Co mpany, Burger
King and Po peye’s franchises, Randy River Canada, Weekend
Editio n and Garden Centers.
( in millio ns) 2002 2001 2000
Sales $— $54 $123
Operating profi t ( loss) before
corporate expense, net
Dispo se d $— $( 1 2) $ —
Restructuring inco me ( charges) 1 ( 33) ( 11)
Gain ( lo ss) o n sale o f businesse s — 1 ( 1)
To tal o perating profit ( lo ss) befo re
co rpo rate expense, net $ 1 $( 44) $( 12)
Sales as a pe rcentage o f
co nso lidated to tal — % 1% 3%
Number o f sto res at year end — — 170
Selling square fo o tage ( in millio ns) — — 0. 18
Gross square fo o tage ( in millio ns) — — 0.24
In co nnectio n with the 1999 restructuring pro gram, restruc-
turing inco me of $1 millio n was reco rded in 2002 as a reduc tio n
in the previo us charges related to the dispo sitio n o f the no n-c o re
businesses. Restructuring charges o f $33 millio n and $11 millio n
were recorded in 2001 and 2000, respectively, fo r the dispo sitio n
of The San Francisco Music Box Co mpany and the Burger King and
Po peye’s franchises.
The sale of The San Franc isco Music Box Co mpany was co m-
pleted o n No vember 13, 2001, fo r cash pro ceeds of approximately
$14 millio n. In additio n, o n Octo ber 10, 2001, the Co mpany c o m-
pleted the sale o f assets related to its Burger King and Po peye’s
franc hises fo r cash pro ceeds of approximately $5 millio n.
In 2001, a $1 millio n adjustment was reco rded to the g ain o n
the 1999 sale of Aftertho ug hts. In 2000, the Co mpany recorded
a $1 millio n adjustment to the $19 millio n gain reco gnized o n
the 1998 sale of the Garden Centers nursery business.
Liquidit y and Capit al Resources
Cash Flow and Liquidit y
Generally, the Co mpany’s primary so urce o f c ash has been fro m
o peratio ns. The Co mpany has a $190 millio n revolving c redit facil-
ity available through June 2004. In 2001, the Co mpany raised
$150 millio n in cash thro ugh the issuance o f subo rdinated co n-
vertible no tes. The Co mpany generally finances real estate with
o perating leases. The principal uses of cash have been to finance
invento ry requirements, capital expenditures related to sto re o pen-
ing s, sto re remo delings and management info rmatio n systems, and
to fund o ther general wo rking capital requirements.
Management believes o perating cash flows and c urrent credit
facilities will be adequate to finance its wo rking capital require-
ments, to make scheduled pensio n c o ntributions fo r the Co mpany’s
retirement plans, to fund quarterly dividend payments, which are
part of the approved dividend payment pro gram, and suppo rt the
develo pment of its sho rt-term and lo ng-term o perating strategies.
Planned capital expenditures fo r 2003 are $148 millio n, o f which
$114 millio n relates to new sto re o penings and mo dernizatio ns o f
existing sto res and $34 millio n reflects the develo pment of info r-
matio n systems and o ther suppo rt facilities. In additio n, planned
lease acquisitio n costs are $17 millio n and primarily relate to the
Co mpany’s o peratio ns in Euro pe. The Co mpany has the ability to
revise and reschedule the anticipated capital expenditure program
sho uld the Co mpany’s financ ial po sitio n require it.
Any materially adverse reaction to custo mer demand, fashio n
trends, c o mpetitive market fo rces, uncertainties related to the
effect of competitive pro ducts and pricing, c usto mer acc eptance
of the Co mpany’s merchandise mix and retail lo catio ns, the
Co mpany’s reliance on a few key vendo rs fo r a significant po rtio n
of its merchandise purchases ( and o n o ne key vendo r fo r approx-
imately 44 percent o f its merchandise purchases) , risks asso ci-
ated with fo reign glo bal so urcing o r econo mic co nditio ns
worldwide c o uld affec t the ability of the Co mpany to continue to
fund its needs from business o peratio ns.
Operating activities of continuing o peratio ns pro vided cash o f
$347 millio n in 2002 co mpared with $204 million in 2001. These
amo unts reflec t inco me fro m c o ntinuing o peratio ns, adjusted fo r
non-cash items and wo rking c apital changes. The increase in cash-
flow from o peratio ns of $143 millio n in 2002 is primarily due to
improved o perating perfo rmance and is also related to wo rking
capital changes primarily related to merchandise invento ries, off-
set by the related payables and inco me taxes payable. During the
third quarter of 2002, the Co mpany rec o rded a current receivable
of approximately $45 millio n related to a Federal inco me tax refund
and subsequently received the cash during the fo urth quarter.
Payments c harged to the repo sitioning and restructuring reserves
were $3 million in 2002 c o mpared with $62 millio n in 2001.
Operating activities of continuing o peratio ns pro vided cash of
$204 millio n in 2001 co mpared with $265 million in 2000. The
decline in cash flo w fro m o peratio ns in 2001 reflected increased
cash o utflo ws for merchandise invento ries and inco me taxes
payable and repo sitio ning and restructuring reserves. Payments
charged to repo sitio ning reserves were $62 millio n in 2001 co m-
pared with $38 millio n in 2000.
Net cash used in investing activities o f co ntinuing o peratio ns
was $162 millio n in 2002 co mpared with $116 millio n in 2001.
Capital expenditures o f $150 millio n in 2002 and $116 millio n in
2001 primarily related to sto re remo deling s and new sto res. Lease
acquisitio n co sts, primarily related to the process of securing and
extending prime lease locatio ns fo r real estate in Euro pe, were $18
millio n and $20 millio n in 2002 and 2001, respectively. Pro ceeds
fro m sales o f real estate and o ther assets and investments were
$6 millio n in 2002 co mpared with $20 million in 2001. Pro ceeds
fro m the condemnation of the Co mpany’s part-o wned and part-
leased pro perty c o ntributed $6 millio n of cash received in 2002.
Pro ceeds from the sales of The San Francisco Music Box Co mpany
and the Burger King and Po peye’s franchises co ntributed $14 mil-
lio n and $5 millio n in cash, respectively, in 2001.
Net cash used in investing activities o f co ntinuing o peratio ns
was $116 millio n in 2001 co mpared with $86 millio n in 2000. The
change was due to pro c eeds fro m sales of real estate and other
assets and investments of $20 millio n in 2001 co mpared with $25
millio n in 2000, in additio n to the $22 millio n increase in capi-
tal expenditures in 2001. Capital expenditures o f $116 millio n in
2001 primarily related to sto re remo deling s and new sto res co m-
pared with $94 millio n in 2000.
Cash used in financing ac tivities o f the Co mpany’s co ntinuing
o peratio ns was $36 millio n in 2002 as co mpared with $89 million
of c ash provided by financing ac tivities o f co ntinuing o peratio ns
in 2001. The change in 2002 compared with 2001 was primarily
due to the issuance of $150 millio n of co nvertible no tes o n June
8, 2001, which was partially o ffset by the repayment o f the $50
millio n 6.98 percent medium-term no tes that matured in Octo ber
2001 and the purchase and retirement o f $8 million of the $40
millio n 7.00 percent medium-term no tes payable in Octo ber
2002. During 2002, the repayment o f debt co ntinued as the
Co mpany repaid the balance of the $40 millio n 7.00 percent
medium- term notes that were due in Octo ber 2002 and $9 mil-
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