Foot Locker 2011 Annual Report Download - page 46

Net cash used in financing activities of continuing operations was $127 million in 2010 as compared with
$94 million in 2009. During 2010, the Company repurchased 3,215,000 shares of its common stock for
$50 million. Additionally, the Company declared and paid dividends totaling $93 million and $94 million in
2010 and 2009, respectively, representing a quarterly rate of $0.15 per share in both 2010 and 2009.
During 2010 and 2009, the Company received proceeds from the issuance of common stock and treasury
stock in connection with the employee stock programs of $13 million and $3 million, respectively. During
2010, in connection with stock option exercises, the Company recorded excess tax benefits related to
share-based compensation of $3 million as a financing activity.
Capital Structure
On January 27, 2012, the Company entered into an amended and restated credit agreement (the ‘‘2011
Restated Credit Agreement) with its banks, replacing the 2009 Credit Agreement. The 2011 Restated
Credit Agreement provides for a $200 million asset based revolving credit facility maturing on
January 27, 2017. In addition, during the term of the 2011 Restated Credit Agreement, the Company may
make up to four requests for additional credit commitments in an aggregate amount not to exceed $200
million. Interest is based on the LIBOR rate in effect at the time of the borrowing plus a 1.25 to 1.50
percent margin depending on certain provisions as defined in the 2011 Restated Credit Agreement.
The 2011 Restated Credit Agreement provides for a security interest in certain of the Company’s domestic
assets, including certain inventory assets, but excluding intellectual property. The Company is not required
to comply with any financial covenants as long as there are no outstanding borrowings. With regard to the
payment of dividends and share repurchases, there are no restrictions if the Company is not borrowing
and the payments are funded through cash on hand. If the Company is borrowing, Availability as of the end
of each fiscal month during the subsequent projected six fiscal months following the payment must be at
least 20 percent of the lesser of the Aggregate Commitments and the Borrowing Base (as defined in the
2011 Restated Credit Agreement). The Company’s management does not currently expect to borrow under
the facility in 2012, other than amounts used to support standby letters of credit.
Credit Rating
As of March 26, 2012, the Company’s corporate credit ratings from Standard & Poor’s and Moody’s
Investors Service are BB and Ba3, respectively. In addition, Moody’s Investors Service has rated the
Company’s senior unsecured notes B1.
Debt Capitalization and Equity (non-GAAP Measure)
For purposes of calculating debt to total capitalization, the Company includes the present value of
operating lease commitments in total net debt. Total net debt including the present value of operating
leases is considered a non-GAAP financial measure. The present value of operating leases is discounted
using various interest rates ranging from 4.25 percent to 14.5 percent, which represent the Company’s
incremental borrowing rate at inception of the lease. Operating leases are the primary financing vehicle
used to fund store expansion and, therefore, we believe that the inclusion of the present value of operating
leases in total debt is useful to our investors, credit constituencies, and rating agencies.
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