Company Quick10K Filing
Quick10K
Foot Locker
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$56.87 112 $6,390
10-Q 2019-05-04 Quarter: 2019-05-04
10-K 2019-02-02 Annual: 2019-02-02
10-Q 2018-11-03 Quarter: 2018-11-03
10-Q 2018-08-04 Quarter: 2018-08-04
10-Q 2018-05-05 Quarter: 2018-05-05
10-K 2018-02-03 Annual: 2018-02-03
10-Q 2017-10-28 Quarter: 2017-10-28
10-Q 2017-07-29 Quarter: 2017-07-29
10-Q 2017-04-29 Quarter: 2017-04-29
10-K 2017-01-28 Annual: 2017-01-28
10-Q 2016-10-29 Quarter: 2016-10-29
10-Q 2016-07-30 Quarter: 2016-07-30
10-Q 2016-04-30 Quarter: 2016-04-30
10-K 2016-01-30 Annual: 2016-01-30
10-Q 2015-10-31 Quarter: 2015-10-31
10-Q 2015-08-01 Quarter: 2015-08-01
10-Q 2015-05-02 Quarter: 2015-05-02
10-K 2015-01-31 Annual: 2015-01-31
10-Q 2014-11-01 Quarter: 2014-11-01
10-Q 2014-08-02 Quarter: 2014-08-02
10-Q 2014-05-03 Quarter: 2014-05-03
10-K 2014-02-01 Annual: 2014-02-01
8-K 2019-05-24 Earnings, Exhibits
8-K 2019-05-22 Officers, Shareholder Vote, Exhibits
8-K 2019-03-27 Officers
8-K 2019-02-07 Other Events, Exhibits
8-K 2019-02-05 Officers, Exhibits
8-K 2018-11-20 Earnings, Exhibits
8-K 2018-08-24 Earnings, Exhibits
8-K 2018-05-25 Earnings, Exhibits
8-K 2018-05-23 Shareholder Vote
8-K 2018-04-12 Officers, Exhibits
8-K 2018-03-28 Officers, Exhibits
8-K 2018-03-02 Earnings, Exhibits
8-K 2018-02-20 Amend Bylaw, Exhibits
NUE Nucor 17,240
UBNT Ubiquiti Networks 11,030
WBC Wabco Holdings 6,780
BBU Brookfield Business Partners 2,520
PSDO Presidio 1,180
DMAC DiaMedica Therapeutics 39
IBIO Ibio 16
MADL Man AHL Diversified I 0
HCMC Healthier Choices Management 0
PTCO Petrogas 0
FL 2019-05-04
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-15 fl-20190504xex15.htm
EX-31.1 fl-20190504ex311b408cf.htm
EX-31.2 fl-20190504ex31256921e.htm
EX-32 fl-20190504xex32.htm
EX-99 fl-20190504xex99.htm

Foot Locker Earnings 2019-05-04

FL 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 fl-20190504x10q.htm FORM 10-Q fl_Current_Folio_10Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)

 

 

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

 

For the quarterly period ended:  May 4, 2019

OR

 

 

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

 

For the transition period from __________ to __________

Commission File Number: 1‑10299


Picture 1

(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.)

 

330 West 34th Street, New York, New York 10001

(Address of principal executive offices, Zip Code)

(212‑720‑3700)

(Registrant’s telephone number, including area code)

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

FL

New York Stock Exchange

 

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 ☑ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

 

 

 

Large accelerated filer ☑

Accelerated filer ☐

Non-accelerated filer  ☐

Smaller reporting company ☐

Emerging growth company ☐

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☑

Number of shares of Common Stock outstanding as of June 11, 2019: 109,701,174

 

 

FOOT LOCKER, INC.

TABLE OF CONTENTS

 

 

 

Page

PART I 

FINANCIAL INFORMATION

1

 

Item 1.

Financial Statements

1

 

 

Condensed Consolidated Balance Sheets

1

 

 

Condensed Consolidated Statements of Operations

2

 

 

Condensed Consolidated Statements of Comprehensive Income

3

 

 

Condensed Consolidated Statements of Shareholders’ Equity

4

 

 

Condensed Consolidated Statements of Cash Flows

5

 

 

Notes to Condensed Consolidated Financial Statements

6

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

 

Item 4.

Controls and Procedures

28

 

 

 

 

PART II 

OTHER INFORMATION

29

 

Item 1.

Legal Proceedings

29

 

Item 1A.

Risk Factors

29

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

 

Item 6.

Exhibits

30

 

 

 

 

SIGNATURE 

31

 

 

 

 

 

 

 

 

 

 

 

 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FOOT LOCKER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions, except shares)

 

 

 

 

 

 

 

 

 

 

 

 

May 4,

 

May 5,

 

February 2,

 

    

2019

    

2018

    

2019

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

*

 

 

 

 ($ in millions)

ASSETS

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

  

 

 

  

 

 

  

Cash and cash equivalents

 

$

1,126

 

$

1,029

 

$

891

Merchandise inventories

 

 

1,211

 

 

1,210

 

 

1,269

Other current assets

 

 

255

 

 

301

 

 

358

 

 

 

2,592

 

 

2,540

 

 

2,518

Property and equipment, net

 

 

810

 

 

843

 

 

836

Operating lease right-of-use assets

 

 

3,025

 

 

 —

 

 

 —

Deferred taxes

 

 

89

 

 

104

 

 

87

Goodwill

 

 

156

 

 

158

 

 

157

Other intangible assets, net

 

 

22

 

 

43

 

 

24

Other assets

 

 

234

 

 

275

 

 

198

 

 

$

6,928

 

$

3,963

 

$

3,820

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

  

 

 

  

 

 

  

Accounts payable

 

$

451

 

$

344

 

$

387

Accrued and other liabilities

 

 

340

 

 

309

 

 

377

Current portion of lease obligations

 

 

499

 

 

 —

 

 

 —

 

 

 

1,290

 

 

653

 

 

764

Long-term debt

 

 

123

 

 

125

 

 

124

Long-term lease obligations

 

 

2,804

 

 

 —

 

 

 —

Other liabilities

 

 

109

 

 

642

 

 

426

Total liabilities

 

 

4,326

 

 

1,420

 

 

1,314

Shareholders’ equity:

 

 

 

 

 

 

 

 

 

Common stock and paid-in capital: 113,161,373; 

 

 

 

 

 

 

 

 

 

121,341,925; and 112,932,605 shares outstanding, respectively

 

 

820

 

 

848

 

 

809

Retained earnings

 

 

2,207

 

 

2,184

 

 

2,104

Accumulated other comprehensive loss

 

 

(384)

 

 

(313)

 

 

(370)

Less: Treasury stock at cost: 774,355; 4,080,653;

 

 

 

 

 

 

 

 

 

and 711,024 shares, respectively

 

 

(41)

 

 

(176)

 

 

(37)

Total shareholders' equity

 

 

2,602

 

 

2,543

 

 

2,506

 

 

$

6,928

 

$

3,963

 

$

3,820

 

*The balance sheet at February 2, 2019 has been derived from the previously reported audited financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in Foot Locker, Inc.’s Annual Report on Form 10‑K for the year ended February 2, 2019.

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

1

 

FOOT LOCKER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

Thirteen weeks ended

 

 

May 4,

 

May 5,

 

    

2019

    

2018

 

 

 

 

 

 

 

Sales

 

$

2,078

 

$

2,025

 

 

 

 

 

 

 

Cost of sales

 

 

1,389

 

 

1,359

Selling, general and administrative expenses

 

 

416

 

 

385

Depreciation and amortization

 

 

44

 

 

45

Litigation and other charges

 

 

 1

 

 

12

Income from operations

 

 

228

 

 

224

 

 

 

 

 

 

 

Interest income, net

 

 

 4

 

 

 2

Other income

 

 

 2

 

 

 3

Income before income taxes

 

 

234

 

 

229

Income tax expense

 

 

62

 

 

64

Net income

 

$

172

 

$

165

 

 

 

 

 

 

 

Basic earnings per share

 

$

1.53

 

$

1.39

Weighted-average shares outstanding

 

 

112.4

 

 

118.7

 

 

 

 

 

 

 

Diluted earnings per share

 

$

1.52

 

$

1.38

Weighted-average shares outstanding, assuming dilution

 

 

113.1

 

 

119.1

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

2

FOOT LOCKER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

($ in millions)

 

 

 

 

 

 

 

 

 

 

Thirteen weeks ended

 

 

May 4,

 

May 5,

 

    

2019

    

2018

 

 

 

 

 

 

 

Net income

 

$

172

 

$

165

Other comprehensive income, net of income tax

 

 

  

 

 

  

 

 

 

 

 

 

 

Foreign currency translation adjustment:

 

 

  

 

 

  

Translation adjustment arising during the period, net of income tax (benefit) of $- and $(5) million, respectively

 

 

(15)

 

 

(38)

 

 

 

 

 

 

 

Cash flow hedges:

 

 

  

 

 

  

Change in fair value of derivatives, net of income tax

 

 

(2)

 

 

 1

 

 

 

 

 

 

 

Pension and postretirement adjustments:

 

 

  

 

 

  

Amortization of net actuarial gain/loss and prior service cost included in net periodic benefit costs, net of income tax expense of $1 and $1 million, respectively

 

 

 3

 

 

 3

Comprehensive income

 

$

158

 

$

131

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

3

 

FOOT LOCKER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

($ in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Additional Paid-In

    

 

    

 

 

    

 

 

    

Accumulated

    

 

 

 

 

Capital &

 

 

 

 

 

 

 

 

 

Other

 

Total

 

 

Common Stock

 

Treasury Stock

 

Retained

 

Comprehensive

 

Shareholders'

(shares in thousands, amounts in millions)

 

Shares

 

Amount

 

Shares

 

Amount

 

Earnings

 

Loss

 

Equity

Balance at February 2, 2019

 

112,933

 

$

809

 

(711)

 

$

(37)

 

$

2,104

 

$

(370)

 

$

2,506

Restricted stock issued

 

72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

Issued under director and stock plans

 

156

 

 

 4

 

 

 

 

 

 

 

 

 

 

 

 

 

 4

Share-based compensation expense

 

 

 

 

 7

 

 

 

 

 

 

 

 

 

 

 

 

 

 7

Shares of common stock used to satisfy tax withholding obligations

 

 

 

 

 

 

(31)

 

 

(2)

 

 

 

 

 

 

 

 

(2)

Share repurchases

 

 

 

 

 

 

(32)

 

 

(2)

 

 

 

 

 

 

 

 

(2)

Reissued ­- ESPP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

Retirement of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

Net income

 

 

 

 

 

 

 

 

 

 

 

 

172

 

 

 

 

 

172

Cash dividends declared on common stock ($0.38 per share)

 

 

 

 

 

 

 

 

 

 

 

 

(43)

 

 

 

 

 

(43)

Translation adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15)

 

 

(15)

Change in cash flow hedges, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

 

 

(2)

Pension and postretirement adjustments, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 3

 

 

 3

Cumulative effect of the adoption of Topic 842

 

 

 

 

 

 

 

 

 

 

 

 

(26)

 

 

 

 

 

(26)

Balance at May 4, 2019

 

113,161

 

$

820

 

(774)

 

$

(41)

 

$

2,207

 

$

(384)

 

$

2,602

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Additional Paid-In

    

 

    

 

 

    

 

 

    

Accumulated

    

 

 

 

 

Capital &

 

 

 

 

 

 

 

 

 

Other

 

Total

 

 

Common Stock

 

Treasury Stock

 

Retained

 

Comprehensive

 

Shareholders'

(shares in thousands, amounts in millions)

 

Shares

 

Amount

 

Shares

 

Amount

 

Earnings

 

Loss

 

Equity

Balance at February 3, 2018

 

121,262

 

$

842

 

(1,433)

 

$

(63)

 

$

2,019

 

$

(279)

 

$

2,519

Restricted stock issued

 

76

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

Issued under director and stock plans

 

 4

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

Share-based compensation expense

 

 

 

 

 6

 

 

 

 

 

 

 

 

 

 

 

 

 

 6

Shares of common stock used to satisfy tax withholding obligations

 

 

 

 

 

 

(31)

 

 

(1)

 

 

 

 

 

 

 

 

(1)

Share repurchases

 

 

 

 

 

 

(2,617)

 

 

(112)

 

 

 

 

 

 

 

 

(112)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

165

 

 

 

 

 

165

Cash dividends declared on common stock ($0.345 per share)

 

 

 

 

 

 

 

 

 

 

 

 

(41)

 

 

 

 

 

(41)

Translation adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38)

 

 

(38)

Change in cash flow hedges, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1

 

 

 1

Pension and postretirement adjustments, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 3

 

 

 3

Cumulative effect of the adoption of ASU 2014-09

 

 

 

 

 

 

 

 

 

 

 

 

 4

 

 

 

 

 

 4

Cumulative effect of the adoption of ASU 2016-16

 

 

 

 

 

 

 

 

 

 

 

 

37

 

 

 

 

 

37

Balance at May 5, 2018

 

121,342

 

$

848

 

(4,081)

 

$

(176)

 

$

2,184

 

$

(313)

 

$

2,543

 

 

 

 

 

4

 

 

FOOT LOCKER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

($ in millions)

 

 

 

 

 

 

 

 

 

May 4,

 

May 5,

 

    

2019

    

2018

 

 

 

($ in millions)

From operating activities:

 

 

  

 

 

  

Net income

 

$

172

 

$

165

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

  

 

 

  

Depreciation and amortization

 

 

44

 

 

45

Share-based compensation expense

 

 

 7

 

 

 5

Qualified pension plan contributions

 

 

(55)

 

 

 —

Change in assets and liabilities:

 

 

  

 

 

 

Merchandise inventories

 

 

50

 

 

53

Accounts payable

 

 

67

 

 

90

Accrued and other liabilities

 

 

(22)

 

 

(6)

Pension litigation accrual

 

 

 —

 

 

12

Other, net

 

 

55

 

 

51

Net cash provided by operating activities

 

 

318

 

 

415

 

 

 

 

 

 

 

From investing activities:

 

 

  

 

 

  

Capital expenditures

 

 

(45)

 

 

(64)

Minority investments

 

 

(45)

 

 

 —

Insurance proceeds related to loss on property and equipment

 

 

 —

 

 

 1

Net cash used in investing activities

 

 

(90)

 

 

(63)

 

 

 

 

 

 

 

From financing activities:

 

 

  

 

 

  

Purchase of treasury shares

 

 

(2)

 

 

(112)

Dividends paid on common stock

 

 

(43)

 

 

(41)

Proceeds from exercise of stock options

 

 

 4

 

 

 —

Shares of common stock repurchased to satisfy tax withholding obligations

 

 

(2)

 

 

(1)

Net cash used in financing activities

 

 

(43)

 

 

(154)

 

 

 

 

 

 

 

Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash

 

 

(5)

 

 

(18)

Net change in cash, cash equivalents, and restricted cash

 

 

180

 

 

180

Cash, cash equivalents, and restricted cash at beginning of year

 

 

981

 

 

1,031

Cash, cash equivalents, and restricted cash at end of period

 

$

1,161

 

$

1,211

 

 

 

 

 

 

 

Cash paid during the year:

 

 

  

 

 

  

Interest

 

$

 —

 

$

 —

Income taxes

 

$

40

 

$

61

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

 

5

Table of Contents

FOOT LOCKER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements contained in this report are unaudited. In the opinion of management, the condensed consolidated financial statements include all normal, recurring adjustments necessary for a fair presentation of the results for the interim periods of the fiscal year ending February 1, 2020 and of the fiscal year ended February 2, 2019. Certain items included in these statements are based on management’s estimates. Actual results may differ from those estimates. The results of operations for any interim period are not necessarily indicative of the results expected for the year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Notes to Consolidated Financial Statements contained in Foot Locker, Inc.’s (the “Company”) Form 10‑K for the year ended February 2, 2019, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 2, 2019.

Other than the changes to the Leases policies as a result of the recently adopted accounting standards discussed below, there were no significant changes to the policies disclosed in Note 1, Summary of Significant Accounting Policies of our Annual Report on Form 10‑K for the year ended February 2, 2019.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability, on a discounted basis, and a right-of-use asset for substantially all leases, as well as additional disclosures regarding leasing arrangements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted improvements, which provides an optional transition method of applying the new lease standard. Topic 842 can be applied using either a modified retrospective approach at the beginning of the earliest period presented, or as permitted by ASU 2018-11, at the beginning of the period in which it is adopted.

The Company adopted Topic 842 on February 3, 2019 (the “effective date”) using the optional transition method, which applies Topic 842 at the beginning of the period in which it is adopted. Prior period amounts have not been adjusted in connection with the adoption of this standard. The Company elected the package of practical expedients under the new standard, which permits companies to not reassess lease classification, lease identification, or initial direct costs for existing or expired leases prior to the effective date. We have lease agreements with non-lease components that relate to the lease components. The Company elected the practical expedient to account for non-lease components and the lease components to which they relate, as a single lease component for all classes of underlying assets. Also, the Company elected to keep short-term leases with an initial term of twelve months or less off the balance sheet.

Upon adoption of this new standard, the Company recorded right-of-use assets and lease obligations on the Condensed Consolidated Balance Sheet for our operating leases of $3,148 million and $3,422 million, respectively, as of February 3, 2019. As part of adopting the standard, previously recognized liabilities for deferred rent and lease incentives were reclassified as a component of the right-of-use assets. Additionally upon adoption, we evaluated right-to-use assets for impairment and determined that approximately $29 million of impairment was required related to newly recognized right-to-use assets that would have been impaired in previous periods. This impairment of the right-to-use asset as of February 3, 2019 was recorded, net of related income tax effects, as a $26 million reduction of beginning retained earnings. The standard did not significantly affect our Condensed Consolidated Statements of Income, Comprehensive Income, or Cash Flows.

Other recently issued accounting pronouncements did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements.

 

6

Table of Contents

FOOT LOCKER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Revenue

Store revenue is recognized at the point of sale and includes merchandise, net of returns, and excludes taxes. Revenue from layaway sales is recognized when the customer receives the product, rather than when the initial deposit is paid. Revenue for merchandise that is shipped to our customers from our distribution centers and stores is recognized upon shipment date.

Total revenue recognized includes shipping and handling fees. We have determined that control of the promised good is passed to the customer upon shipment date since the customer has legal title, the rewards of ownership, and has paid for the merchandise as of the shipment date. Shipping and handling is accounted for as a fulfillment activity. The Company accrues the cost and recognized revenue for these activities upon shipment date.

Sales disaggregated based upon sales channel is presented below.

 

 

 

 

 

 

 

 

 

Thirteen weeks ended

 

 

May 4,

 

May 5,

 

    

2019

    

2018

 

 

($ in millions)

Sales by Channel

 

 

 

 

 

 

Stores

 

$

1,758

 

$

1,743

Direct-to-customers

 

 

320

 

 

282

Total sales

 

$

2,078

 

$

2,025

 

Sales disaggregated based upon geographic area is presented in the below table. Sales are attributable to the geographic area in which the sales transaction is fulfilled.

 

 

 

 

 

 

 

 

 

Thirteen weeks ended

 

 

May 4,

 

May 5,

 

    

2019

    

2018

 

 

($ in millions)

Sales by Geography

 

 

 

 

 

 

United States

 

$

1,552

 

$

1,501

International

 

 

526

 

 

524

Total sales

 

$

2,078

 

$

2,025

Contract Liabilities

The Company sells gift cards which do not have expiration dates. Revenue from gift card sales is recorded when the gift cards are redeemed by customers. Breakage income is reported as part of sales. The table below presents the activity of our gift card liability balance:

 

 

 

 

 

($ in millions) 

Balance at February 3, 2019

 $

35

Redemptions

 

(25)

Breakage recognized in sales

 

(2)

Activations

 

22

Balance at May 4, 2019

 $

30

The Company elected not to disclose the information about remaining performance obligations since the amount of gift cards redeemed after 12 months is not significant.

 

7

Table of Contents

FOOT LOCKER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. Segment Information

The Company has integrated all available shopping channels including stores, websites, apps, social channels, and catalogs. Store sales are primarily fulfilled from the store’s inventory but may also be shipped from any of our distribution centers or from a different store location if an item is not available at the original store. Direct-to-customer orders are primarily shipped to our customers through our distribution centers but may also be shipped from any store or a combination of our distribution centers and stores depending on the availability of particular items.

Our operating segments are identified according to how our business activities are managed and evaluated by our chief operating decision maker, our CEO. During 2018, the Company expanded into Asia and launched our digital channels across Singapore, Hong Kong, and Malaysia. In addition, we entered China through a limited offering in partnership with Tmall (a Chinese-language platform for business-to-consumer online retail). During the first quarter of 2019, the Company changed its organizational and internal reporting structure in order to support an accelerated growth strategy for the region. We opened an Asian headquarters in Singapore and realigned our organization into three distinct geographic regions: Europe, Middle East and Africa (“EMEA”), Asia Pacific, and North America.

In light of these changes, the Company has re-evaluated its operating segments. The Company has determined that it has three operating segments, North America, EMEA, and Asia Pacific. Our North America operating segment includes the results of the following banners operating in the U.S. and Canada: Foot Locker, Kids Foot Locker, Lady Foot Locker, Champs Sports, Footaction, and SIX:02, including each of their related e-commerce businesses, as well as our Eastbay business that includes internet, catalog, and team sales. Our EMEA operating segment includes the results of the following banners operating in Europe: Foot Locker, Runners Point, Sidestep, and Kids Foot Locker, including each of their related e-commerce businesses. Our Asia Pacific operating segment includes the results of Foot Locker and Kids Foot Locker and the related e-commerce businesses operating in Australia, New Zealand, and Asia. We have further aggregated these operating segments into one reportable segment based upon their shared customer base and similar economic characteristics.

The Company evaluates performance based on several factors, of which the primary financial measure is the banner’s financial results referred to as division profit. Division profit reflects income before income taxes, pension litigation charges, corporate expense, non-operating income, and net interest income.

 

The following table summarizes our results:

 

 

 

 

 

 

 

 

 

 

Thirteen weeks ended

 

 

May 4,

 

May 5,

 

    

2019

    

2018

 

 

($ in millions)

Sales

 

$

2,078

 

$

2,025

 

 

 

 

 

 

 

Operating Results

 

 

  

 

 

  

Division profit

 

 

250

 

 

247

Less: Pension litigation charges  (1)

 

 

 1

 

 

12

Less: Corporate expense (2)

 

 

21

 

 

11

Income from operations

 

 

228

 

 

224

Interest income, net

 

 

 4

 

 

 2

Other income

 

 

 2

 

 

 3

Income before income taxes

 

$

234

 

$

229

 

8

Table of Contents

FOOT LOCKER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

3. Segment Information – (continued)

(1)

The Company recorded pre-tax charges of $1 million and $12 million for the quarters ended May 4, 2019 and May 5, 2018, respectively, related to a pension litigation matter and the related plan reformation. The charge in the current period reflects professional fees in connection with the plan reformation.  The prior year charge reflected adjustments to the value of the judgment and interest that continued to accrue, as required by the provisions of the required plan reformation.

(2)

Corporate expense consists of unallocated selling, general and administrative expenses as well as depreciation and amortization related to the Company’s corporate headquarters, centrally managed departments, unallocated insurance and benefit programs, certain foreign exchange transaction gains and losses, and other items. 

 

 

4. Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents, as reported on our condensed consolidated balance sheets, to cash, cash equivalents, and restricted cash, as reported on our condensed consolidated statements of cash flows.

 

 

 

 

 

 

 

 

 

May 4,

 

May 5,

 

    

2019

    

2018

 

 

($ in millions)

Cash and cash equivalents

 

$

1,126

 

$

1,029

Restricted cash included in other current assets

 

 

 5

 

 

 1

Restricted cash included in other non-current assets

 

 

30

 

 

181

Cash, cash equivalents, and restricted cash

 

$

1,161

 

$

1,211

 

During 2017 in connection with the pension litigation matter, the Company deposited $150 million in a qualified settlement fund.  At May 5, 2018, this amount was classified as part of non-current assets.  During 2018 and in March 2019, the Company used substantially all of the qualified settlement fund to pay class counsel fees and to make a contribution to the pension plan.

Other amounts included in restricted cash primarily relate to amounts held in escrow in connection with various leasing arrangements in Europe and deposits held in insurance trusts in order to satisfy the requirement to collateralize part of the self-insured workers’ compensation and liability claims.

The Company has elected to present book overdrafts, representing checks issued but still outstanding in excess of bank balances, as part of accounts payable.

5. Goodwill

Annually during the first quarter, or more frequently if impairment indicators arise, the Company reviews goodwill and intangible assets with indefinite lives for impairment.

In light of the change in our organizational and internal reporting structure in the first quarter of 2019, we have reassessed our reporting units and have determined that the collective omni-channel banners in North America, EMEA, and Asia Pacific are the three reporting units at which goodwill is tested.

Accordingly, goodwill was re-allocated between the affected reporting units based on their relative fair values. As required, we conducted the annual impairment review both before and after this change. Neither review resulted in the recognition of impairment, as the fair value of each reporting unit exceeded its carrying value.

9

Table of Contents

FOOT LOCKER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. Other Intangible Assets, net

The components of finite-lived intangible assets and intangible assets not subject to amortization are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 4, 2019

 

 

May 5, 2018

 

 

Gross

 

Accum.

 

Net

 

Gross

 

Accum.

 

Net

($ in millions)

 

value

 

amort.

 

value

 

value

 

amort.

 

value

Amortized intangible assets: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease acquisition costs

 

$

116

 

$

(108)

 

$

 8

 

$

128

 

$

(117)

 

$

11

Trademarks / trade names

 

 

20

 

 

(15)

 

 

 5

 

 

20

 

 

(14)

 

 

 6

Favorable leases

 

 

 -

 

 

 -

 

 

 -

 

 

 7

 

 

(6)

 

 

 1

 

 

$

136

 

$

(123)

 

$

13