FOOT LOCKER INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

F O R M 10 - Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2004

Commission file no. 1-10299

FOOT LOCKER, INC.
(Exact name of registrant as specified in its charter)

New York		13-3513936

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

112 W. 34^th Street, New York, New York		10120

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number: (212) 720-3700

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x

No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x

No o

Number of shares of Common Stock outstanding at August 27, 2004: 155,665,049

FOOT LOCKER, INC.

TABLE OF CONTENTS

			Page No.

Part I.	Financial Information

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets	1

		Condensed Consolidated Statements of Operations	2

		Condensed Consolidated Statements of Comprehensive Income	3

		Condensed Consolidated Statements of Cash Flows	4

		Notes to Condensed Consolidated Financial Statements	5-14

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14-19

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19

	Item 4.	Controls and Procedures	20

Part II.	Other Information

	Item 1.	Legal Proceedings	20

	Item 4.	Submission of Matters to a Vote of Security Holders	20

	Item 6.	Exhibits and Reports on Form 8-K	21

		Signature	22

		Index to Exhibits	23

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FOOT LOCKER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except shares)

	July 31, 2004			August 2, 2003			January 31, 2004

	(Unaudited)			(Unaudited)			*
ASSETS
Current assets
Cash and cash equivalents	$	399		$	332		$	448
Merchandise inventories		1,166			948			920
Assets of discontinued operations		2			2			2
Other current assets		156			98			149

		1,723			1,380			1,519
Property and equipment, net		694			621			644
Deferred taxes		208			256			194
Goodwill and intangible assets		392			223			232
Other assets		89			109			100

	$	3,106		$	2,589		$	2,689

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	475		$	339		$	234
Accrued liabilities		293			259			300
Current portion of repositioning and restructuring reserves		1			4			1
Current portion of reserve for discontinued operations		8			17			8
Liabilities of discontinued operations		2			2			2
Current portion of long-term debt and obligations under capital leases		18			—			—

		797			621			545
Long-term debt and obligations under capital leases		339			348			335
Other liabilities		318			428			434

		1,454			1,397			1,314
Shareholders’ equity
Common stock and paid-in capital: 155,704,339, 142,262,025 and 144,008,667 shares, respectively		587			385			411
Retained earnings		1,244			1,012			1,132
Accumulated other comprehensive loss		(178	)		(204	)		(167	)
Less: Treasury stock at cost: 48,922, 66,124 and 56,587 shares, respectively		(1	)		(1	)		(1	)

Total shareholders’ equity		1,652			1,192			1,375

	$	3,106		$	2,589		$	2,689

See Accompanying Notes to Condensed Consolidated Financial Statements.

* The balance sheet at January 31, 2004 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2004.

-1-

FOOT LOCKER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)

	Thirteen weeks ended					Twenty-six weeks ended

	July 31, 2004		Aug. 2, 2003			July 31, 2004		Aug. 2, 2003

Sales	$	1,268	$	1,123		$	2,454	$	2,251
Costs and Expenses
Cost of sales		900		792			1,726		1,575
Selling, general and administrative expenses		268		233			516		474
Depreciation and amortization		37		38			71		75
Restructuring charge		2		1			2		1
Interest expense, net		4		4			8		9
Other income, net		—		—			—		—

		1,211		1,068			2,323		2,134

Income from continuing operations before income taxes		57		55			131		117
Income tax expense		12		18			39		41

Income from continuing operations		45		37			92		76

Income (loss) on disposal of discontinued operations, net of income tax benefit of $37 in 2004 and $1 in 2003, respectively		37		(1	)		38		(1	)
Cumulative effect of accounting change, net of income tax of $-		—		—			—		(1	)

Net income	$	82	$	36		$	130	$	74

Basic earnings per share:
Income from continuing operations	$	0.30	$	0.26		$	0.63	$	0.54
Income (loss) from discontinued operations		0.25		(0.01	)		0.26		(0.01	)
Cumulative effect of accounting change		—		—			—		—

Net income	$	0.55	$	0.25		$	0.89	$	0.53

Weighted-average common shares outstanding		150.8		141.3			147.1		141.2

Diluted earnings per share:
Income from continuing operations	$	0.29	$	0.25		$	0.60	$	0.52
Income (loss) from discontinued operations		0.24		(0.01	)		0.24		(0.01	)
Cumulative effect of accounting change		—		—			—		—