Foot Locker, Inc. reported that net income for the fourth quarter increased 7.0% to 61 cents per share, or $96 million, from 57 cents per share, or $89 million last year. Included in this year's results was a credit of 2 cents per share, or $3 million, from insurance proceeds related to Hurricanes Katrina, Rita and Wilma, net of related income tax expense. Also recorded in this year's fourth quarter, was net income of 4 cents per share, or $6 million, resulting from a reduction of the company's income tax valuation allowance primarily due to actions taken to utilize international tax loss carry forwards. As a result, the company's effective income tax rate for this year's fourth quarter was approximately 32 percent, in line with the comparable period of last year.
For the fourth quarter period, sales increased 1.9% to $1.56 billion this year compared with sales of $1.54 billion for the corresponding prior year period. Fourth quarter comparable-store sales increased 3.9%.
Full Year Results
Full year net income was $1.68 per share, or $264 million, compared with $1.88 per share, or $293 million last year. Net income for 2005 includes $1 million, or a penny per share, from discontinued operations, and for 2004 net income includes $38 million, or 24 cents per share, from discontinued operations. Excluding the income from discontinued operations, the company's income from continuing operations in 2005 increased 1.8% to $1.67 per share, or $263 million, versus $1.64 per share, or $255 million last year. The 2 cents per share credit related to insurance recoveries recorded during the fourth quarter, as outlined above, essentially offset charges, net of credits, totaling 2 cents per share recorded during the company's third fiscal quarter related to these hurricanes, potential insolvency of one of the company's insurance administrators and the settlement of litigation proceedings.
Full year sales increased 5.6% to $5,653 million, compared with sales of $5,355 million last year. Comparable-store sales increased 2.7%.
“Our financial results in 2005 reflected solid sales and profit gains posted by our combined North American businesses, which were partially offset by declines in certain international markets,” stated Matthew D. Serra, Foot Locker, Inc.'s chairman and chief executive officer. “In total, we generated an 8.3 percent increase in pre-tax income and effectively continued to implement our strategic priorities. We are also encouraged that we were able to strengthen our financial position further, while also redeploying additional cash to benefit our shareholders.”
Financial Position
At the end of the year, the company's cash position, net of debt, stood at $261 million, a $134 million improvement versus last year. The company utilized its strong cash flow during 2005 to fund the following initiatives:
-
$163 million was reinvested through its capital expenditure program
- $35 million of long-term debt was repaid to its banks
- $26 million contribution was made to its pension plans
-
$49 million was paid in dividends to common shareholders, an
approximate 25 percent increase versus the prior year -
$35 million was utilized to repurchase 1.6 million shares of its common
stock
Store Count Highlights
The company opened 119 new stores during the year, remodeled/relocated 316 stores, and closed 165 stores. The closings include 25 that were impacted by Hurricanes Katrina, Rita or Wilma, most of which the company will strive to reopen in 2006. At January 28, 2006, the company operated 3,921 stores in 20 countries in North America, Europe and Australia.
2006 Outlook
The company plans to focus its efforts on continuing to increase the productivity of its existing business while also pursuing its growth strategies. Capital expenditures are planned at $190 million, an increase of 17 percent versus 2005. The company plans to open approximately 175 new stores, remodel and relocate 350 stores, and close 110 stores.
A low-to-mid single digit comparable-store sales increase is planned for 2006, which the Company currently expects will contribute to an earnings increase to between $1.75 and $1.85 per share. The company currently expects its first quarter earnings to be in the range of 37 cents to 40 cents per share.
FOOT LOCKER, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Periods ended January 28, 2006 and January 29, 2005
(In millions, except per share amounts)
Fourth Quarter Fourth Quarter
2005 2004
Sales $1,564 $1,535
Cost of sales 1,080 1,058
Selling, general and administrative expenses 301 302
Depreciation and amortization 43 42
Interest expense, net 2 3
Other income (3) ---
1,423 1,405
Income from continuing
operations before income taxes 141 130
Income tax expense 45 41
Income from continuing operations $96 $89
Income from disposal of discontinued
operations, net of tax --- ---
Net income $96 $89
Diluted EPS:
Income from continuing operations $0.61 $0.57
Income from disposal of discontinued
operations, net of tax --- ---
Net income
$0.61 $0.57
Weighted-average diluted shares outstanding 156.7 157.8
Year-To-Date Year-To-Date
2005 2004
Sales $5,653 $5,355
Cost of sales 3,944 3,722
Selling, general and
administrative expenses 1,129 1,088
Depreciation and amortization 171 154
Restructuring charge --- 2
Interest expense, net 10 15
Other income (6) ---
5,248 4,981
Income from continuing
operations before income taxes 405 374
Income tax expense 142 119
Income from continuing operations 263 255
Income from disposal of
discontinued operations, net of tax(1) 1 38
Net income $264 $293
Diluted EPS:
Income from continuing operations $1.67 $1.64
Income from disposal of
discontinued operations, net of tax(1) 0.01 0.24
Net income $1.68 $1.88
Weighted-average diluted shares outstanding 157.6 157.1
(1) 2004 Income tax benefit related to discontinued businesses.
