Foot Locker, Inc. reported that income from continuing operations for the first quarter ended May 1, 2004 increased 15% to 31 cetns per share, or $47 million, compared with 27 cents, or $39 million last year. For the 13-week first quarter period, sales increased 5.1% to $1.19 billion this year compared with sales of $1.13 billion last year. First quarter comparable-store sales increased 0.3%.
“Our first quarter financial performance was in line with our expectations and the earnings guidance we previously communicated,” stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive Officer. “We are pleased with the financial and strategic progress made during the first quarter. We are also pleased, following the end of the quarter, to have completed our acquisition of the Footaction chain. Given our solid first quarter financial results, we have more confidence in our ability to increase income per share from continuing operations in both our second quarter and full year by 10-to-20 percent.”
The Company's financial position strengthened as its cash position, net of debt, increased by $105 million from the same period last year. Merchandise inventories are well positioned to support the Company's recent acquisition of approximately 350 Footaction stores as well as the Company's existing business and planned new store openings.
Taking advantage of current favorable conditions in the interest rate environment, the Company elected to finance a portion of the purchase price of its recently acquired Footaction stores through a 5-year, $175 million amortizing term loan with its existing bank group. The initial interest rate on the LIBOR-based, floating-rate loan is 2.625 percent. The Company also amended and extended to 2009 its revolving credit agreement to be co-terminus with the final maturity of the term loan.
On April 20, 2004, the Company provided notification to The Bank of New York, as Trustee under the indenture, of its intent to redeem the entire $150 million outstanding 5.5% convertible subordinated notes. As a result of this redemption notification, the Company expects that most holders will convert their notes into shares of Foot Locker, Inc. common stock, on or before June 3, 2004, at a conversion price of $15.806 per share.
Mr. Serra continued, “Maintaining a strong financial position and working towards an investment grade credit rating remains a high priority for our Company, and we believe that the continuing progress we have made in enhancing our financial position and balance sheet is moving us closer towards this goal. Along these lines, we are focused on remaining financially prudent as we pursue new investment opportunities, as evidenced by the completion of the new financing arrangement in connection with our Footaction stores purchase.
During the first quarter of 2004 the Company opened 21 stores, remodeled/relocated 119 stores and closed 44 stores. At May 1, 2004, the Company operated 3,587 stores in 16 countries in North America, Europe and Australia.
FOOT LOCKER, INC.
Consolidated Statements of Operations
(unaudited)
Periods ended May 1, 2004 and May 3, 2003
(In millions, except per share amounts)
First Quarter First Quarter
2004 2003
Sales $1,186 $1,128
Cost of sales 826 783
Selling, general and administrative expenses 248 241
Depreciation and amortization 34 37
Interest expense, net 4 5
1,112 1,066
Income from continuing operations before
income taxes 74 62
Income tax expense 27 23
Income from continuing operations 47 39
Income on disposal of discontinued operations, net 1 --
Cumulative effect of accounting changes, net (1) -- (1)
Net income $48 $38
Diluted EPS:
Income from continuing operations $0.31 $ 0.27
Loss on disposal of discontinued operations -- --
Cumulative effect of accounting changes, net
of income taxes (1) -- (0.01)
Net income $ 0.31 $ 0.26
