Foot Locker 2005 Annual Report Download - page 29

facilities. In addition, planned lease acquisition costs are $10 million and primarily relate to the Company’s operations
in Europe. The Company has the ability to revise and reschedule the anticipated capital expenditure program, should the
Company’s financial position require it.
Maintaining access to merchandise that the Company considers appropriate for its business may be subject to the
policies and practices of its key vendors. Therefore, the Company believes that it is critical to continue to maintain
satisfactory relationships with its key vendors. The Company purchased approximately 75 percent in 2005 and 74 percent
in 2004 of its merchandise from its top five vendors, in each respective year, and expects to continue to obtain a significant
percentage of its athletic product from these vendors in future periods. Of that amount, approximately 49 percent in 2005
and 45 percent in 2004 was purchased from one vendor — Nike, Inc. (“Nike”) — and 8 percent and 13 percent from another
in 2005 and 2004, respectively.
Any materially adverse change in customer demand, fashion trends, competitive market forces or customer
acceptance of the Company’s merchandise mix and retail locations, uncertainties related to the effect of competitive
products and pricing, the Company’s reliance on a few key vendors for a significant portion of its merchandise purchases,
risks associated with foreign global sourcing or economic conditions worldwide could affect the ability of the Company
to continue to fund its needs from business operations.
Cash Flow
Operating activities from continuing operations provided cash of $354 million in 2005 as compared with $289 million
in 2004. These amounts reflect income from continuing operations adjusted for non-cash items and working capital
changes. The net increase in operating cash flows of $65 million is primarily due to improved operating performance and
changes in working capital primarily related to changes in merchandise inventories, offset by the related payables and
lower pension contributions of $26 million in 2005 as compared with $106 million in 2004.
Operating activities from continuing operations provided cash of $289 million in 2004 as compared with $264 million
in 2003. The net increase is primarily related to the increase in net income as compared with the prior year, offset in part
by an additional $56 million in pension contributions and increased working capital usage. Merchandise inventories
increased by $120 million to support the recent acquisitions, offset by an increase in accounts payable. The change in
other primarily reflects a prepaid income tax that represents an overpayment of tax, which the Company applied to its
2005 payments.
Net cash used in investing activities of the Company’s continuing operations was $187 million in 2005 as compared
with $424 million in 2004. During 2004, the Company paid $226 million for the purchase of 349 Footaction stores from
Footstar, Inc. and paid e13 million (approximately $16 million) for the purchase of 11 stores in the Republic of Ireland.
During 2005, the Company resolved the remaining Footaction lease matter and received $1 million from the escrow account.
The Company’s purchase of short-term investments, net of sales, increased by $31 million in 2005 as compared with an
increase of $9 million in 2004. Capital expenditures of $155 million in 2005 and $156 million in 2004 primarily related to
store remodeling and new stores. Lease acquisition costs, primarily to secure and extend leases for prime locations in Europe,
were $8 million and $17 million in 2005 and 2004, respectively. Proceeds from the settlement of foreign currency option
contracts, net of premiums paid, was $3 million in 2005. The Company also received $3 million of insurance proceeds related
to the hurricanes in 2005, representing the portion of insurance recoveries in excess of losses recorded.
Net cash used in investing activities of the Company’s continuing operations was $424 million in 2004 as compared
with $265 million in 2003. During 2004, the Company paid $242 million for acquisitions of the Footaction stores and the
stores in the Republic of Ireland. The Company’s purchase of short-term investments, net of sales, increased by $9 million
in 2004 as compared with an increase of $106 million in 2003. Capital expenditures of $156 million in 2004 and $144
million in 2003 primarily related to store remodeling and new stores. Lease acquisition costs, primarily to secure and
extend leases for prime locations in Europe, were $17 million and $15 million in 2004 and 2003, respectively.
Net cash used in financing activities of continuing operations was $105 million in 2005 as compared with net cash
provided of $167 million in 2004. The Company repaid $35 million of its 5-year, $175 million term loan during 2005 and
declared and paid dividends totaling $49 million in 2005 and $39 million in 2004. During 2005 and 2004, the Company
received proceeds from the issuance of common and treasury stock in connection with employee stock programs of
$14 million and $33 million, respectively. As part of its Board-authorized $50 million stock repurchase program, the Company
purchased 1.6 million shares of its common stock during 2005 for approximately $35 million. On February 15, 2006, the
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