Foot Locker 2005 Annual Report Download - page 30

Company announced that its Board of Directors authorized a new $150 million, 3-year share repurchase program. Under the
share repurchase program, subject to legal and contractual restrictions, the Company may make purchases of its common
stock, from time to time, depending on market conditions, availability of other investment opportunities and other factors.
Net cash provided by financing activities of continuing operations was $167 million in 2004 as compared with net cash
used of $13 million in 2003. The Company elected to finance a portion of the purchase price of the Footaction stores, and on
May 19, 2004 obtained a 5-year, $175 million term loan from the bank group participating in its existing revolving credit facility.
Concurrent with obtaining the term loan, the Company amended and extended the revolving credit facility to expire in 2009.
Financing fees paid for both the term loan and the revolving credit facility amounted to $2 million. During 2003, the Company
repurchased $19 million of its 8.50 percent debentures that are due in 2022. The Company declared and paid dividends totaling
$39 million in 2004 and $21 million in 2003. During 2004 and 2003, the Company received proceeds from the issuance of
common and treasury stock in connection with employee stock programs of $33 million and $27 million, respectively.
Capital Structure
During 2004, the Company obtained a 5-year, $175 million term loan to finance a portion of the purchase price of
the Footaction stores. Concurrent with the financing of a portion of the Footaction acquisition, the Company amended
its revolving credit agreement, thereby, extending the maturity date to May 2009 from July 2006. The agreement includes
various restrictive financial covenants with which the Company was in compliance on January 28, 2006. During 2005, the
Company prepaid the first and second principal payments totaling $35 million, which would have been due in May 2005
and May 2006. In February 2006, the Company repaid an additional $50 million of the term loan, thereby reducing the
loan to $90 million.
In 2004, the Company redeemed its entire $150 million outstanding 5.50 percent convertible subordinated notes.
All of the convertible subordinated notes were cancelled and approximately 9.5 million new shares of the Company’s
common stock were issued. The Company reclassified the remaining $3 million of unamortized deferred costs related to
the original issuance of the convertible debt to equity as a result of the conversion.
Credit Rating
The Company’s corporate credit rating from Standard & Poor’s is BB+ and Ba1 from Moody’s Investors Service.
Debt Capitalization and Equity
For purposes of calculating debt to total capitalization, the Company includes the present value of operating lease
commitments. These commitments are the primary financing vehicle used to fund store expansion. The following table
sets forth the components of the Company’s capitalization, both with and without the present value of operating leases;
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 .................. —% —%
Excluding the present value of operating leases, the Company’s cash, cash equivalents and short-term investments,
net of debt and capital lease obligations, increased to $261 million at January 28, 2006 from $127 million at January 29,
2005. The Company reduced debt and capital lease obligations by $39 million, while increasing cash, cash equivalents
and short-term investments by $95 million. Additionally, the present value of the operating leases decreased by
$55 million representing the net change of lease renewals, the effect of foreign currency fluctuations primarily related
to the euro and the result of the closure of 25 stores due to the hurricanes. Including the present value of operating leases,
the Company’s net debt capitalization percent improved 520 basis points in 2005. The increase in shareholders’ equity
relates to net income of $264 million in 2005, $27 million related to employee stock plans, and a decrease of $25 million
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