1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 4, 2001
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Commission file no. 1-10299
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VENATOR GROUP, INC.
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(Exact name of registrant as specified in its charter)
New York 13-3513936
--------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
112 W. 34th Street, New York, New York 10120
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (212) 720-3700
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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 [ ]
Number of shares of Common Stock outstanding at August 31, 2001: 139,802,772
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2
VENATOR GROUP, 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 (Loss)............................. 3
Condensed Consolidated Statements
of Cash Flows.............................................. 4
Notes to Condensed Consolidated
Financial Statements....................................... 5-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 11-15
Part II. Other Information
Item 1. Legal Proceedings............................................... 16
Item 4. Submission of Matters to a Vote of Security Holders............. 16
Item 6. Exhibits and Reports on Form 8-K................................ 17
Signature....................................................... 18
Index to Exhibits............................................... 19-21
3
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
VENATOR GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except shares)
August 4, July 29, February 3,
2001 2000 2001
----------- ----------- -----------
(Unaudited) (Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents ......................................... $ 189 $ 25 $ 109
Merchandise inventories ........................................... 835 799 730
Assets held for disposal .......................................... 27 45 31
Net assets of discontinued operations ............................. 18 63 37
Other current assets .............................................. 99 111 93
------- ------- -------
1,168 1,043 1,000
Property and equipment, net .......................................... 643 714 684
Deferred taxes ....................................................... 237 317 234
Goodwill, net ........................................................ 139 147 143
Other assets ......................................................... 184 156 171
------- ------- -------
$ 2,371 $ 2,377 $ 2,232
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt ................................................... $ -- $ 95 $ --
Accounts payable .................................................. 329 305 264
Accrued liabilities ............................................... 196 198 222
Current portion of repositioning and restructuring reserves ....... 26 24 13
Current portion of reserve for discontinued operations ............ 44 18 76
Current portion of long-term debt and obligations
under capital leases ............................................ 54 5 54
------- ------- -------
649 645 629
Long-term debt and obligations
under capital leases .............................................. 405 310 259
Other liabilities .................................................... 280 267 331
Shareholders' equity
Common stock and paid-in capital: 139,730,062;
138,018,853 and 138,690,560 shares, respectively ................ 358 343 351
Retained earnings ................................................. 728 968 705
Accumulated other comprehensive loss .............................. (49) (155) (41)
Less: Treasury stock at cost: 22,455; 189,625 and
199,625 shares, respectively .................................... -- (1) (2)
------- ------- -------
Total shareholders' equity ........................................... 1,037 1,155 1,013
------- ------- -------
$ 2,371 $ 2,377 $ 2,232
======= ======= =======
See Accompanying Notes to Condensed Consolidated Financial Statements.
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VENATOR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)
Thirteen weeks ended Twenty-six weeks ended
-------------------------- -------------------------
Aug. 4, July 29, Aug. 4, July 29,
2001 2000 2001 2000
------- -------- ------- --------
Sales ..................................................... $ 1,048 $ 971 $ 2,120 $ 2,015
Costs and Expenses
Cost of sales ........................................... 742 692 1,488 1,425
Selling, general and administrative expenses ............ 227 223 458 461
Depreciation and amortization ........................... 38 39 76 76
Restructuring charge .................................... 32 (1) 32 (1)
Interest expense, net ................................... 6 3 10 11
Other income ............................................ (1) (6) (1) (16)
------- ------- ------- -------
1,044 950 2,063 1,956
------- ------- ------- -------
Income from continuing operations before
income taxes ......................................... 4 21 57 59
Income tax expense......................................... -- 8 21 23
------- ------- ------- -------
Income from continuing operations ......................... 4 13 36 36
Loss from discontinued operations, net of income tax
benefit of $2 and $8, respectively ................... -- (3) -- (12)
Loss on disposal of discontinued operations, net of income
tax expense of $6 and $1, respectively ............... (18) -- (13) --
Cumulative effect of accounting change, net of income tax
benefit of $- ........................................ -- -- -- (1)
------- ------- ------- -------
Net income (loss) ......................................... $ (14) $ 10 $ 23 $ 23
======= ======= ======= =======
Basic earnings per share:
Income from continuing operations .................... $ 0.03 $ 0.09 $ 0.26 $ 0.26
Loss from discontinued operations .................... (0.13) (0.02) (0.09) (0.08)
Cumulative effect of accounting change ............... -- -- -- (0.01)
------- ------- ------- -------
Net income (loss) .................................... $ (0.10) $ 0.07 $ 0.17 $ 0.17
======= ======= ======= =======
Weighted-average common shares outstanding ................ 139.5 137.7 139.0 137.6
Diluted earnings per share:
Income from continuing operations .................... $ 0.03 $ 0.09 $ 0.26 $ 0.26
Loss from discontinued operations .................... (0.13) (0.02) (0.09) (0.08)
Cumulative effect of accounting change ............... -- -- -- (0.01)
------- ------- ------- -------
Net income (loss) .................................... $ (0.10) $ 0.07 $ 0.17 $ 0.17
======= ======= ======= =======
Weighted-average common shares assuming dilution .......... 140.8 139.0 143.2 138.8
See Accompanying Notes to Condensed Consolidated Financial Statements.
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VENATOR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in millions)
Thirteen weeks ended Twenty-six weeks ended
-------------------------- -------------------------
Aug. 4, July 29, Aug. 4, July 29,
2001 2000 2001 2000
------- -------- ------- --------
Net income (loss) ......................................... $ (14) $ 10 $ 23 $ 23
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments arising during
the period .............................................. (1) 2 (8) (13)
Change in fair value of derivatives accounted for as
hedges, net of deferred tax expense of $- ............... (1) -- -- --
------- ------- ------- -------
Comprehensive income (loss) ............................... $ (16) $ 12 $ 15 $ 10
======= ======= ======= =======
See Accompanying Notes to Condensed Consolidated Financial Statements.
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VENATOR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
Twenty-six weeks ended
--------------------------
Aug. 4, July 29,
2001 2000
------- --------
From Operating Activities:
Net income ............................................................................ $ 23 $ 23
Adjustments to reconcile net income to net cash provided by
(used in) operating activities of continuing operations:
Restructuring charge ................................................................ 32 --
Loss on disposal of discontinued operations, net of tax ............................. 13 --
Loss from discontinued operations, net of tax ....................................... -- 12
Cumulative effect of accounting change, net of tax .................................. -- 1
Depreciation and amortization ....................................................... 76 76
Gains on sales of investments ....................................................... -- (6)
Gains on sales of real estate ....................................................... (1) (10)
Deferred taxes ...................................................................... (30) (12)
Change in assets and liabilities:
Merchandise inventories ........................................................... (108) (106)
Accounts payable and other accruals ............................................... 34 41
Repositioning and restructuring reserves .......................................... (20) (26)
Other, net ........................................................................ (5) 5
------ ------
Net cash provided by (used in) operating activities of continuing operations .......... 14 (2)
------ ------
From Investing Activities:
Proceeds from sales of investments .................................................... -- 7
Proceeds from sales of real estate .................................................... 1 7
Capital expenditures .................................................................. (39) (43)
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Net cash used in investing activities of continuing operations ........................ (38) (29)
------ ------
From Financing Activities:
Increase in short-term debt ........................................................... -- 24
Issuance of convertible long-term debt ................................................ 150 --
Debt issuance costs ................................................................... (8) --
Reduction in long-term debt and capital lease obligations ............................. (4) (103)
Issuance of common stock .............................................................. 8 4
------ ------
Net cash provided by (used in) financing activities of continuing operations .......... 146 (75)
------ ------
Net Cash used in Discontinued Operations ................................................. (45) (31)
Effect of exchange rate fluctuations on Cash and Cash Equivalents ........................ 3 --
------ ------
Net change in Cash and Cash Equivalents .................................................. 80 (137)
Cash and Cash Equivalents at beginning of year ........................................... 109 162
------ ------
Cash and Cash Equivalents at end of interim period ....................................... $ 189 $ 25
====== ======
Cash paid during the period:
Interest .............................................................................. $ 17 $ 19
Income taxes .......................................................................... $ 21 $ 25
See Accompanying Notes to Condensed Consolidated Financial Statements.
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VENATOR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Notes to Consolidated Financial
Statements contained in the Registrant's Form 10-K for the year ended February
3, 2001, as filed with the Securities and Exchange Commission (the "SEC") on
April 23, 2001. Certain items included in these statements are based on
management's estimates. In the opinion of management, all material adjustments,
which are of a normal recurring nature, necessary for a fair presentation of the
results for the interim periods have been included. The results for the
twenty-six weeks ended August 4, 2001 are not necessarily indicative of the
results expected for the year. As discussed below, prior year financial
statements have been restated to reflect the discontinuance of the Northern
Group, the change in method of accounting for layaway sales and the
reclassification of shipping and handling fees to revenue and the related costs
to cost of sales.
Derivative Financial Instruments
Effective February 4, 2001, the Registrant adopted Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," and its related amendment, Statement of Financial
Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities" ("SFAS No. 133"). SFAS No. 133 requires that all
derivative financial instruments be recorded in the Consolidated Balance Sheets
at their fair values. Changes in fair values of derivatives will be recorded
each period in earnings or other comprehensive income (loss), depending on
whether a derivative is designated and effective as part of a hedge transaction
and, if it is, the type of hedge transaction. The effective portion of the gain
or loss on the hedging derivative instrument will be reported as a component of
other comprehensive income (loss) and will be reclassified to earnings in the
period in which the hedged item affects earnings. To the extent derivatives do
not qualify as hedges, or are ineffective, their changes in fair value will be
recorded in earnings immediately, which may subject the Registrant to increased
volatility. The adoption of SFAS No. 133 in 2001 did not have a material impact
on the Registrant's consolidated earnings and reduced accumulated other
comprehensive loss by approximately $1 million after-tax.
The Registrant operates internationally and utilizes certain derivative
financial instruments to mitigate its foreign currency exposures, primarily
related to third-party and intercompany forecasted transactions. For a
derivative to qualify as a hedge at inception and throughout the hedged period,
the Registrant formally documents the nature and relationships between the
hedging instruments and hedged items, as well as its risk-management objectives,
strategies for undertaking the various hedge transactions and method of
assessing hedge effectiveness. Additionally, for hedges of forecasted
transactions, the significant characteristics and expected terms of a forecasted
transaction must be specifically identified, and it must be probable that each
forecasted transaction will occur. If it were deemed probable that the
forecasted transaction would not occur, the gain or loss would be recognized in
earnings immediately. No such gains or losses were recognized in earnings during
the quarter ended August 4, 2001. Derivative financial instruments qualifying
for hedge accounting must maintain a specified level of effectiveness between
the hedging instrument and the item being hedged, both at inception and
throughout the hedged period. The Registrant does not hold derivative financial
instruments for trading or speculative purposes.
The primary currencies to which the Registrant is exposed are the Euro
and the British Pound. When using a forward contract as a hedging instrument,
the Registrant excludes the time value from the assessment of effectiveness. The
change in a forward contract's time value is reported in earnings. For forward
foreign exchange contracts designated as cash flow hedges of inventory, the
effective portion of gains and losses is deferred as a component of accumulated
other comprehensive loss and is recognized as a component of cost of sales when
the related inventory is sold. The effective portion of gains and losses
associated with other forward contracts is deferred as a component of
accumulated other comprehensive loss until the underlying hedged transaction is
reported in earnings. The changes in fair value of forward contracts and option
contracts that do not qualify as hedges are recorded in earnings.
During the quarter ended August 4, 2001, ineffectiveness related to
cash flow hedges was not material. The Registrant is hedging forecasted
transactions for no more than the next twelve months and expects all
derivative-related amounts reported in accumulated other comprehensive loss to
be reclassified to earnings within twelve months.
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During the quarter ended August 4, 2001, accumulated comprehensive loss
was increased by approximately $1 million after-tax due to both the changes in
fair value of derivative financial instruments designated as hedges and the
reclassification to earnings.
During the quarter ended August 4, 2001, the Registrant recorded a gain
of approximately $1 million for the changes in fair value of derivative
instruments not designated as hedges, which was offset by a foreign exchange
loss related to the underlying transactions.
Revenue Recognition
In the fourth quarter of 2000, the Registrant changed its method of
accounting for sales under its layaway program, in accordance with Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements,"
effective as of the beginning of the year. Under the new method, revenue from
layaway sales is recognized when the customer receives the product, rather than
when the initial deposit is paid. The cumulative effect of the change was a $1
million after-tax charge, or $0.01 per diluted share. The impact on each of the
quarters in 2000 was not material.
Revenue was restated in the fourth quarter of 2000, in accordance with
Emerging Issues Task Force Issue No. 00-10, "Accounting for Shipping and
Handling Fees and Costs," to include shipping and handling fees for all periods
presented. Shipping and handling fees of $5 million and $12 million,
respectively, were reclassified to sales from selling, general and
administrative expenses for the thirteen and twenty-six weeks ended August 4,
2001 and the associated costs of $4 million and $9 million, respectively, were
reclassified from selling, general and administrative expenses to cost of sales.
Discontinued Operations
On January 23, 2001, the Registrant announced that it was exiting its
694 store Northern Group segment. During the second quarter of 2001, the
Registrant completed the liquidation of the 324 stores in the United States and
entered into a contract on September 7, 2001, to dispose of the 370 stores in
Canada. The Registrant recorded a charge to earnings of $252 million before-tax,
or $294 million after-tax, in the fourth quarter of 2000 for the loss on
disposal of the segment. Major components of the charge included expected cash
outlays for lease buyouts and real estate disposition costs of $68 million,
severance and personnel related costs of $23 million and operating losses and
other exit costs from the measurement date through the expected date of disposal
of $24 million. Non-cash charges included the realization of a $118 million
currency translation loss, resulting from the movement in the Canadian dollar
during the period the Registrant held its investment in the segment and asset
write-offs of $19 million. The Registrant also recorded a tax benefit for the
liquidation of the Northern U.S. stores of $42 million, which was offset by a
valuation allowance of $84 million to reduce the deferred tax assets related to
the Canadian operations to an amount that is more likely than not to be
realized.
In the first quarter of 2001, the Registrant recorded a tax benefit of
$5 million as a result of the implementation of tax planning strategies related
to the discontinuance of the Northern Group. In the second quarter, the
Registrant recorded a charge to earnings of $12 million before-tax, or $19
million after-tax, comprising the write-down of the net assets of the Canadian
business to their net realizable value pursuant to the pending transaction,
which was partially offset by reduced severance costs as a result of the
transaction and favorable results from the liquidation of the U.S. stores and
real estate disposition activity. Net disposition activity of $82 million in the
first half of 2001 included operating losses of $31 million, a $5 million
interest expense allocation based on intercompany debt balances, real estate
disposition activity of $20 million, severance of $4 million and asset
impairments and other costs of $22 million. Of the remaining reserve balance of
$45 million at August 4, 2001, $32 million is expected to be utilized within
twelve months and the remaining $13 million thereafter. The net loss from
discontinued operations for the thirteen and twenty-six weeks ended July 29,
2000, include sales of $76 million and $146 million, respectively, and interest
expense allocations of $3 million and $4 million, respectively, based on
intercompany debt balances.
In 1998, the Registrant exited both its International General
Merchandise and Specialty Footwear segments. In the second quarter of 2001, the
Registrant recorded a tax benefit of $1 million related to the settlement of tax
liabilities in Germany associated with exiting the International General
Merchandise segment. In 1997, the Registrant announced that it was exiting its
Domestic General Merchandise segment. The remaining reserve balances totaled $29
million as of August 4, 2001, $12 million of which is expected to be utilized
within twelve months.
-6-
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Disposition activity related to the reserves is presented below:
NORTHERN GROUP
--------------
(in millions)
Balance Net Charge/ Balance
2/3/2001 Usage (Income) 8/4/2001
-------- ------- -------- --------
Real estate & lease liabilities $ 68 $ (20) $ (11) $ 37
Severance & personnel 23 (4) (14) 5
Operating losses & other costs 24 (58) 37 3
------- ------- ------- -------
Total $ 115 $ (82) $ 12 $ 45
======= ======= ======= =======
INTERNATIONAL GENERAL MERCHANDISE
---------------------------------
(in millions)
Balance Net Charge/ Balance
2/3/2001 Usage (Income) 8/4/2001
-------- ------- -------- --------
The Bargain! Shop $ 7 $ (1) $ -- $ 6
======= ======= ======= =======
SPECIALTY FOOTWEAR
------------------
(in millions)
Balance Net Charge/ Balance
2/3/2001 Usage (Income) 8/4/2001
-------- ------- -------- --------
Real estate & lease liabilities $ 9 $ (1) $ -- $ 8
Other costs 3 (1) -- 2
------- ------- ------- -------
Total $ 12 $ (2) $ -- $ 10
======= ======= ======= =======
DOMESTIC GENERAL MERCHANDISE
----------------------------
(in millions)
Balance Net Charge/ Balance
2/3/2001 Usage (Income) 8/4/2001
-------- ------- -------- --------
Real estate & lease liabilities $ 16 $ (4) $ -- $ 12
Other costs 2 (1) -- 1
------- ------- ------- -------
Total $ 18 $ (5) $ -- $ 13
======= ======= ======= =======
The following is a summary of the net assets of discontinued operations:
DOMESTIC
NORTHERN SPECIALTY GENERAL
(in millions) GROUP FOOTWEAR MERCHANDISE TOTAL
------------- -------- --------- ----------- -------
8/4/2001
--------
Assets $ 32 $ 2 $ 8 $ 42
Liabilities 21 1 2 24
------- ------- ------- -------
Net assets of discontinued operations $ 11 $ 1 $ 6 $ 18
======= ======= ======= =======
7/29/2000
---------
Assets $ 102 $ 4 $ 11 $ 117
Liabilities 48 2 4 54
------- ------- ------- -------
Net assets of discontinued operations $ 54 $ 2 $ 7 $ 63
======= ======= ======= =======
2/3/2001
--------
Assets $ 64 $ 3 $ 8 $ 75
Liabilities 33 1 4 38
------- ------- ------- -------
Net assets of discontinued operations $ 31 $ 2 $ 4 $ 37
======= ======= ======= =======
The Northern Group's assets comprise inventory, fixed assets and other
current assets. The Northern Group's liabilities comprise accounts payable,
restructuring reserves and other accrued liabilities. The assets of the
Specialty Footwear and Domestic General Merchandise segments consist primarily
of fixed assets and deferred tax assets and liabilities reflect accrued
liabilities.
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10
Restructuring Programs
1999 Restructuring
Total restructuring charges of $96 million before-tax were recorded in
1999 for the Registrant's restructuring program. In the second quarter of 1999,
the Registrant announced its plan to sell or liquidate eight non-core
businesses: The San Francisco Music Box Company, Randy River Canada, Foot Locker
Outlets, Colorado, Team Edition, Going to the Game!, Weekend Edition and Burger
King franchises. In the fourth quarter of 1999, the Company announced a further
restructuring plan, which included an accelerated store closing program in the
United States and Asia, corporate headcount reduction and a distribution center
shutdown.
In the first quarter of 2000, the Registrant recorded an additional
restructuring charge of $5 million related to its non-core businesses.
Throughout 2000, the disposition of Randy River Canada, Foot Locker Outlets,
Colorado, Going to the Game!, and Weekend Edition and the accelerated store
closing programs were essentially completed. In the third quarter of 2000,
management decided to continue to operate Team Edition as a manufacturing
business, primarily as a result of the resurgence of the screen print business.
In connection with the disposition of several of its non-core
businesses, the Registrant reduced sales support and corporate staff by over 30
percent, reduced divisional staff and consolidated the management of Kids Foot
Locker and Lady Foot Locker into one organization. As of August 4, 2001, 5 of
the originally planned 400 positions have yet to be eliminated. In addition, the
Registrant closed its Champs Sports distribution center in Maumelle, Arkansas
and consolidated its operations with the Foot Locker facility located in
Junction City, Kansas. In the first quarter of 2000, the Registrant recorded a
reduction to the corporate reserve of $5 million, which related to the agreement
to sublease its Maumelle distribution center and sell the associated fixed
assets, which had been impaired in 1999, for proceeds of approximately $3
million.
In the second quarter of 2001, the Registrant recorded a restructuring
charge of approximately $32 million before-tax, or $22 million after-tax, as a
result of the terms of current negotiations to sell The San Francisco Music Box
Company. The Registrant expects to complete this disposition in addition to the
sale of the Burger King franchises by the end of 2001. The remaining reserve
balance at August 4, 2001 totaled $25 million, $24 million of which is expected
to be utilized within twelve months. Disposition activity related to the
reserves is presented below:
NON-CORE BUSINESSES
-------------------
(in millions)
Balance Net Charge/ Balance
2/3/2001 Usage (Income) 8/4/2001
-------- ------- -------- --------
Real estate $ 4 $ (2) $ -- $ 2
Asset impairment -- (15) 15 --
Severance 2 -- -- 2
Other disposition costs 3 -- 17 20
------- ------- ------- -------
Total $ 9 $ (17) $ 32 $ 24
======= ======= ======= =======
CORPORATE OVERHEAD AND LOGISTICS
--------------------------------
(in millions)
Balance Net Charge/ Balance
2/3/2001 Usage (Income) 8/4/2001
-------- ------- -------- --------
Severance $ 2 $ (1) $ -- $ 1
======= ======= ======= =======
TOTAL RESTRUCTURING RESERVES
----------------------------
(in millions)
Balance Net Charge/ Balance
2/3/2001 Usage (Income) 8/4/2001
-------- ------- -------- --------
Real estate $ 4 $ (2) $ -- $ 2
Asset impairment -- (15) 15 --
Severance 4 (1) -- 3
Other disposition costs 3 -- 17 20
------- ------- ------- -------
Total $ 11 $ (18) $ 32 $ 25
======= ======= ======= =======
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Sales and operating losses, excluding restructuring charges, of the
above non-core businesses and under-performing stores, excluding Team Edition,
included in the consolidated results of operations for the thirteen and
twenty-six weeks ended August 4, 2001 and July 29, 2000, respectively, are
presented below.
Thirteen weeks ended Twenty-six weeks ended
-------------------------- ----------------------------
(in millions) August 4, July 29, August 4, July 29,
2001 2000 2001 2000
--------- -------- --------- --------
Sales ....................................... $ 17 $ 27 $ 34 $ 55
======= ======= ======= =======
Operating loss .............................. $ (4) $ (4) $ (7) $ (11)
======= ======= ======= =======
Inventory, fixed assets and other long-lived assets of all businesses
to be exited have been valued at the lower of cost or net realizable value.
These assets, totaling $27 million, $45 million and $31 million, have been
reclassified as assets held for disposal in the Consolidated Balance Sheets as
of August 4, 2001, July 29, 2000 and February 3, 2001, respectively. The assets
of Team Edition have not been reflected as assets held for disposal as of August
4, 2001 and February 3, 2001 as management has decided to retain its operations.
1993 Repositioning and 1991 Restructuring
In the first half of 2001, disposition activity reduced the reserve
balance by approximately $2 million. The remaining reserve balance of $4 million
comprises future lease obligations of $3 million and other facilities-related
costs of $1 million.
Earnings Per Share
Basic earnings per share is computed as net earnings divided by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur from common
shares issuable through the exercise of stock options and the conversion of
convertible long-term debt. The following table reconciles the numerator and
denominator used to compute basic and diluted earnings per share for continuing
operations.
Thirteen weeks ended Twenty-six weeks ended
-------------------------- ----------------------------
(in millions) Aug. 4, July 29, Aug. 4, July 29,
2001 2000 2001 2000
--------- -------- --------- --------
Numerator:
----------
Income from continuing operations ......................... $ 4 $ 13 $ 36 $ 36
Effect of Dilution:
Convertible debt .......................................... -- -- 1 --
------- ------- ------- -------
Income from continuing operations assuming dilution ....... $ 4 $ 13 $ 37 $ 36
======= ======= ======= =======
Denominator:
------------
Weighted-average common shares outstanding ................ 139.5 137.7 139.0 137.6
Effect of Dilution:
Stock options and awards .................................. 1.3 1.3 1.2 1.2
Convertible debt .......................................... -- -- 3.0 --
------- ------- ------- -------
Weighted-average common shares assuming dilution .......... 140.8 139.0 143.2 138.8
======= ======= ======= =======
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For the thirteen weeks ended August 4, 2001, 5.9 million incremental
common shares issuable upon conversion of the Registrant's 5.50% notes were not
included in the computation of diluted earnings per share because of their
antidilutive effect. Options to purchase 3.1 million and 3.3 million shares of
common stock were not included in the computation for the thirteen and
twenty-six weeks ended August 4, 2001, respectively, because the exercise price
of the options was greater than the average market price of the common shares
and, therefore, the effect would be antidilutive.
Segment Information
Sales and operating results for the Registrant's reportable segments
for the thirteen and twenty-six weeks ended August 4, 2001 and July 29, 2000,
respectively, are presented below. Operating results reflect income from
continuing operations before income taxes, excluding corporate expense,
corporate gains and net interest expense.
Sales:
(in millions)
Thirteen weeks ended Twenty-six weeks ended
-------------------------- ----------------------------
(in millions) August 4, July 29, August 4, July 29,
2001 2000 2001 2000
--------- -------- --------- --------
Global Athletic Group:
Retail Stores $ 964 $ 900 $ 1,941 $ 1,862
Direct to Customers 67 52 145 116
------- ------- ------- -------
1,031 952 2,086 1,978
All Other (1) 17 19 34 37
------- ------- ------- -------
$ 1,048 $ 971 $ 2,120 $ 2,015
======= ======= ======= =======
Operating Results:
(in millions)
Thirteen weeks ended Twenty-six weeks ended
-------------------------- ----------------------------
(in millions) August 4, July 29, August 4, July 29,
2001 2000 2001 2000
--------- -------- --------- --------
Global Athletic Group:
Retail Stores (2) $ 64 $ 48 $ 137 $ 112
Direct to Customers 1 (5) 5 (8)
------- ------- ------- -------
65 43 142 104
All Other (1) (36) (4) (39) (13)
------- ------- ------- -------
Operating profit 29 39 103 91
Corporate expense (3) 19 15 36 21
Interest expense, net 6 3 10 11
------- ------- ------- -------
Income from continuing operations
before income taxes $ 4 $ 21 $ 57 $ 59
======= ======= ======= =======
(1) All formats presented as "All Other" were either disposed or held for
disposal at August 4, 2001. Both periods presented for 2001 include
restructuring charges of $32 million. Twenty-six weeks ended July 29,
2000 includes a restructuring charge of $5 million.
(2) Both periods presented for 2000 include a $3 million reduction in the
1999 second quarter restructuring charge, offset by a $2 million
restructuring charge.
(3) Twenty-six weeks ended July 29, 2000 includes a $5 million reduction in
the 1999 fourth quarter restructuring charge.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss comprised foreign currency
translation adjustments of $49 million, $153 million, and $41 million at
August 4, 2001, July 29, 2000 and February 3, 2001, respectively. Accumulated
other comprehensive loss included a minimum pension liability adjustment of $2
million at July 29, 2000.
-10-
13
Long-Term and Short-Term Debt
On June 8, 2001, the Registrant completed its offering of $125 million
of subordinated convertible notes due 2008 and an option to exercise an
additional $25 million was completed by July 9, 2001. The notes bear interest at
5.50% and are convertible into the Registrant's common stock at the option of
the holder, at a conversion price of $15.806 per share. The net proceeds of the
proposed offering are being used for working capital and general corporate
purposes and to reduce reliance on bank financing. The Registrant filed a Form
S-3 on July 11, 2001, and an amendment on July 30, 2001, to register the
convertible notes, which became effective on August 1, 2001. Simultaneous with
this offering, the Registrant amended and restated its $300 million revolving
credit agreement to a reduced $190 million three-year facility.
Business Combinations and Goodwill
In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, "Business Combinations" ("SFAS No. 141") and Statement of
Financial Accounting Standards No. 142, "Goodwill and Intangible Assets" ("SFAS
No. 142"). SFAS No. 141 eliminates the pooling-of-interests method of accounting
for business combinations and requires all business combinations initiated or
completed after June 30, 2001 to be accounted for using the purchase method.
Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no
longer amortized but are reviewed annually (or more frequently if impairment
indicators arise) for impairment. Separable intangible assets that are not
deemed to have indefinite lives will continue to be amortized over their useful
lives (but with no maximum life). The amortization provisions of SFAS No. 142
apply to goodwill and intangible assets acquired after June 30, 2001.
Amortization expense related to goodwill was $8 million and $4 million for the
year ended February 3, 2001 and the six months ended August 4, 2001,
respectively. With respect to goodwill and intangible assets acquired prior to
July 1, 2001, the Registrant is required to adopt SFAS No. 142 effective as of
the beginning of fiscal 2002 and is currently evaluating the impact on its
results of operations and financial position.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
References included herein to businesses disposed and held for disposal
relate to The San Francisco Music Box Company, Foot Locker Outlets, Going To The
Game!, Randy River Canada, Burger King franchises and Foot Locker Asia. As
discussed in the footnotes to the Condensed Consolidated Financial Statements,
the Registrant discontinued its Northern Group segment in the fourth quarter of
2000. Accordingly, prior year financial statements have been restated to present
this business segment as a discontinued operation.
RESULTS OF OPERATIONS
Sales of $1,048 million for the second quarter of 2001 increased 7.9
percent from sales of $971 million for the second quarter of 2000. For the
twenty-six weeks ended August 4, 2001, sales of $2,120 million increased 5.2
percent from sales of $2,015 million for the twenty-six weeks ended July 29,
2000. These increases were primarily attributable to the improved sales
performance of ongoing formats. Excluding the effect of foreign currency
fluctuations and sales from businesses disposed and held for disposal, sales
increased 9.8 percent and 6.8 percent for the second quarter and year-to-date
periods of 2001, respectively, as compared with the corresponding prior-year
periods, reflecting increases of 7.7 percent and 6.2 percent in comparable-store
sales.
Gross margin, as a percentage of sales, of 29.2 percent in the second
quarter of 2001 and 29.8 percent for the twenty-six weeks ended August 4, 2001,
improved slightly as compared with 28.7 percent and 29.3 percent, respectively,
in the corresponding prior-year periods. These improvements reflect management's
continued initiatives with regard to effective merchandising and promotional
activity.
-11-
14
Selling, general and administrative expenses ("SG&A") of $227 million
declined to 21.7 percent of sales in the second quarter of 2001 as compared with
23.0 percent in the corresponding prior-year period. SG&A of $458 million for
the twenty-six weeks ended August 4, 2001, declined approximately 130 basis
points to 21.6 percent of sales. These declines reflect the operating
efficiencies achieved by the ongoing store-base in the first half of 2001 as
compared with a year earlier, as a result of previous cost-cutting initiatives
and restructuring programs. For the thirteen and twenty-six weeks ended July 29,
2000, SG&A also included one-time Internet costs of approximately $2 million and
$4 million, respectively, related to website development.
Interest expense of $10 million was essentially flat for the thirteen
weeks ended August 4, 2001 and declined by 14.3 percent to $18 million for the
twenty-six weeks ended August 4, 2001, as compared with the corresponding
prior-year periods. The decrease is primarily due to reduced short-term interest
expense as there were no outstanding borrowings under the revolving credit
agreement in 2001. Interest income amounted to $4 million and $7 million,
respectively, for the thirteen weeks ended August 4, 2001 and July 29, 2000 and
included intercompany interest income related to the Northern Group segment of
$2 million and $3 million, respectively. For the year-to-date period, interest
income totaled $8 million in 2001 and $10 million in 2000 and included
intercompany interest income related to the Northern Group segment of $5 million
and $4 million, respectively. The offsetting interest expense was included in
the loss from discontinued operations through the measurement date for 2000 and
subsequently, in 2001, was charged to the reserve for discontinued operations.
Interest income related to income tax settlements and refunds of $4 million was
also included in the second quarter of 2000.
During the second quarter of 2001, the Registrant recorded a $6 million
tax credit related to a state income tax settlement, partially offset by a $2
million charge from the impact of Canadian tax rate reductions on existing
deferred tax assets. The combined effect of this credit offset, in part, by the
impact of non-deductible goodwill reduced the effective tax rate for the
twenty-six weeks ended August 4, 2001 to 36.75 percent, as compared with 39.0
percent for both the 2000 second quarter and year-to-date periods. The
Registrant expects the effective tax rate to be 39.0 percent for the second half
of 2001.
Income from continuing operations of $4 million, or $0.03 per diluted
share, for the thirteen weeks ended August 4, 2001, declined by $0.06 per
diluted share from $13 million for the thirteen weeks ended July 29, 2000, and
remained unchanged at $36 million, or $0.26 per diluted share, for the
twenty-six weeks ended August 4, 2001. Income from continuing operations for the
2001-quarter and year-to-date periods included a restructuring charge of $22
million after-tax, or $0.16 per diluted share. For the quarter ended August 4,
2001, the Registrant reported a net loss of $14 million, or $0.10 per diluted
share, which included a loss on disposal of discontinued operations of $18
million, or $0.13 per diluted share, compared to net income of $10 million, or
$0.07 per diluted share for the corresponding prior-year period, which included
a $3 million loss from discontinued operations, or $0.02 per diluted share. Net
income of $23 million, or $0.17 per diluted share, for the twenty-six weeks
ended August 4, 2001 also remained unchanged from the corresponding prior-year
period.
STORE COUNT
The following table summarizes store count by segment, after
reclassification for businesses disposed and held for disposal. During the
twenty-six weeks ended August 4, 2001, the Registrant remodeled or relocated 83
ongoing stores.
February 3, August 4, July 29,
2001 Opened Closed 2001 2000
----------- ------ ------ --------- --------
Global Athletic Group................................................. 3,582 27 54 3,555 3,636
Disposed and held for disposal........................................ 170 12 4 178 180
----- --- --- ----- -----
Total........................................................... 3,752 39 58 3,733 3,816
===== === === ===== =====
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SALES
The following table summarizes sales by segment, after reclassification
for businesses disposed and held for disposal.
Thirteen weeks ended Twenty-six weeks ended
-------------------------- ----------------------------
(in millions) August 4, July 29, August 4, July 29,
2001 2000 2001 2000
--------- -------- --------- --------
Global Athletic Group:
Retail Stores $ 964 $ 899 $ 1,941 $ 1,861
Direct to Customers 67 52 145 116
------- ------- ------- -------
1,031 951 2,086 1,977
Disposed and held for disposal 17 20 34 38
------- ------- ------- -------
Total sales $ 1,048 $ 971 $ 2,120 $ 2,015
======= ======= ======= =======
Global Athletic Group sales increased by 8.4 percent and by 5.5
percent, respectively, for the 2001 second quarter and year-to-date periods as
compared with the corresponding prior-year periods, reflecting comparable-store
sales increases of 7.7 percent and 6.2 percent, respectively. Sales from ongoing
retail store formats increased by 7.2 percent and by 4.3 percent, respectively,
reflecting stronger sales performance in all formats, particularly in Europe.
Footwear, basketball in particular, continued to drive the sales growth across
all formats, as the number of launches of marquee and exclusive footwear
products was increased significantly in the first half of 2001. In addition, the
second quarter of 2001 was also positively impacted by a one-week calendar
shift, which included an additional week of back-to-school business. Apparel
sales remained strong in 2001 and reflected a balanced mix of branded, licensed
and private label products.
Direct to Customers sales increased by 28.8 percent and by 25.0 percent
for the thirteen and twenty-six weeks ended August 4, 2001 as compared with the
corresponding prior-year periods. Catalog sales increased by 11.6 percent to $48
million in the second quarter of 2001 and by 8.2 percent to $105 million for the
year-to-date period. Internet sales more than doubled for both the thirteen and
twenty-six weeks ended August 4, 2001 to $19 million and $40 million,
respectively, as compared with the corresponding periods in 2000.
OPERATING RESULTS
Operating results reflect income from continuing operations before
income taxes, excluding corporate expense, corporate gains and net interest
expense. The following table summarizes operating profit by segment, after
reclassification for businesses disposed and held for disposal.
Thirteen weeks ended Twenty-six weeks ended
-------------------------- ----------------------------
(in millions) August 4, July 29, August 4, July 29,
2001 2000 2001 2000
--------- -------- --------- --------
Global Athletic Group:
Retail Stores $ 64 $ 47 $ 137 $ 113
Direct to Customers 1 (5) 5 (8)
------- ------- ------- -------
65 42 142 105
Disposed and held for disposal (4) (4) (7) (10)
Restructuring charges (32) 1 (32) (4)
------- ------- ------- -------
Total operating profit $ 29 $ 39 $ 103 $ 91
======= ======= ======= =======
-13-
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The Global Athletic Group reported increases in operating profit of
54.8 percent and 35.2 percent to $65 million and $142 million, respectively, for
the thirteen and twenty-six weeks ended August 4, 2001, as compared with the
corresponding prior-year periods. Operating profit from ongoing retail stores
increased by 36.2 percent and 21.2 percent, respectively, for the 2001 second
quarter and year-to-date periods. These increases reflect strong sales growth,
gross margin rate and operating expense efficiencies, as operating profit, as a
percentage of sales, increased to 6.6 percent in the second quarter of 2001 from
5.2 percent in the corresponding prior-year period and to 7.1 percent from 6.1
percent for the year-to-date period. Direct to Customers operating results
improved by $6 million and $13 million, respectively, for the thirteen and
twenty-six weeks ended August 4, 2001, as compared with the corresponding
periods ended July 29, 2000, which included one-time Internet development costs
of approximately $2 million and $4 million, respectively.
In the second quarter of 2001, the Registrant recorded a restructuring
charge of approximately $32 million before-tax, or $22 million after-tax, as a
result of the terms of current negotiations to sell The San Francisco Music Box
Company. The Registrant expects to complete this disposition in addition to the
sale of the Burger King franchises by the end of 2001. Related to the
disposition of these and other restructured businesses, the Registrant recorded
a $5 million charge in the first quarter of 2000 and a net reduction of $1
million in the second quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Generally, the Registrant's primary sources of cash have been from
operations, borrowings under the revolving credit agreement and proceeds from
the sale of non-strategic assets. As noted below, the Registrant raised $150
million in cash through the issuance of subordinated convertible notes. The
Registrant generally finances real estate with operating leases. The principal
use of cash has been to finance inventory requirements, capital expenditures
related to store openings, store remodelings and management information systems,
and to fund other general working capital.
Operating activities of continuing operations provided cash of $14
million for the twenty-six weeks ended August 4, 2001, as compared with $2
million cash used in the corresponding prior-year period. These amounts reflect
the income from continuing operations reported by the Registrant in those
periods, adjusted for non-cash items and working capital changes.
Net cash used in investing activities of continuing operations of $38
million and $29 million for the first half of 2001 and 2000, respectively,
primarily reflected capital expenditures. Planned capital expenditures of $120
million and lease acquisition costs of $30 million for 2001 comprise $110
million for new store openings and remodeling of existing stores, and $40
million for management information systems, logistics and other support
facilities.
Financing activities for the Registrant's continuing operations
provided cash of $146 million for the twenty-six weeks ended August 4, 2001
compared to cash used in financing activities of $75 million for the
corresponding prior-year period. On June 8, 2001, the Registrant completed its
offering of $125 million of subordinated convertible notes due 2008 and an
option to exercise an additional $25 million was completed by July 9, 2001. The
notes bear interest at 5.50% and are convertible into the Registrant's common
stock at the option of the holder, at a conversion price of $15.806 per share.
The net proceeds of the proposed offering are being used for working capital and
general corporate purposes and to reduce reliance on bank financing. The
Registrant filed a Form S-3 on July 11, 2001, and an amendment on July 30, 2001,
to register the convertible notes, which became effective on August 1, 2001.
Simultaneous with this offering, the Registrant amended and restated its $300
million revolving credit agreement to a reduced $190 million three-year
facility. During the first half of 2000, the Registrant purchased $13 million of
its $200 million 7.00% debentures and on June 1, 2000, the remaining balance of
$87 million was repaid with restricted cash funds set aside on February 15,
2000, as required by the revolving credit agreement. There were no short-term
borrowings outstanding during substantially all of the entire first half of
2001, whereas outstanding borrowings under the Registrant's revolving credit
agreement amounted to $95 million at July 29, 2000, an increase of $24 million
for the first half of 2000. Management believes current domestic and
international credit facilities and cash provided by operations will be
adequate to finance its working capital requirements and support the
development of its short-term and long-term strategies.
Net cash used in discontinued operations includes the Northern Group
loss from discontinued operations in 2000, the change in assets and liabilities
of the discontinued segments and disposition activity charged to the reserves
for both periods presented.
-14-
17
NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, "Business Combinations" ("SFAS No. 141") and Statement of
Financial Accounting Standards No. 142, "Goodwill and Intangible Assets" ("SFAS
No. 142"). SFAS No. 141 eliminates the pooling-of-interests method of accounting
for business combinations and requires all business combinations initiated or
completed after June 30, 2001 to be accounted for using the purchase method.
Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no
longer amortized but are reviewed annually (or more frequently if impairment
indicators arise) for impairment. Separable intangible assets that are not
deemed to have indefinite lives will continue to be amortized over their useful
lives (but with no maximum life). The amortization provisions of SFAS No. 142
apply to goodwill and intangible assets acquired after June 30, 2001.
Amortization expense related to goodwill was $8 million and $4 million for the
year ended February 3, 2001 and the six months ended August 4, 2001,
respectively. With respect to goodwill and intangible assets acquired prior to
July 1, 2001, the Registrant is required to adopt SFAS No. 142 effective as of
the beginning of fiscal 2002 and is currently evaluating the impact on its
results of operations and financial position.
IMPACT OF EUROPEAN MONETARY UNION
The European Union comprises 15 member states, 12 of which adopted a
common currency, the "euro." From January 1, 1999 until January 1, 2002, the
transition period, the national currencies will remain legal tender in the
participating countries as denominations of the euro. Monetary, capital, foreign
exchange and interbank markets have converted to the euro, and non-cash
transactions are possible in euros. On January 1, 2002, euro bank notes and
coins will be issued and the former national currencies will be withdrawn from
circulation no later than February 28, 2002.
The Registrant has substantially completed the necessary modifications
to its information systems, accounting systems, vendor payments and human
resource systems. Plans to upgrade or modify the point of sale hardware and
software are in progress and are expected to be finalized throughout the
remainder of 2001.
The adoption of a single European currency will lead to greater product
pricing transparency and a more competitive environment. The Registrant
currently displays the euro equivalent price of merchandise, as do many
retailers. The euro conversion is not expected to have a significant effect on
the Registrant's results of operations or financial condition.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis of Financial Condition and Results
of Operations contains forward-looking statements within the meaning of the
federal securities laws. All statements, other than statements of historical
facts, which address activities, events or developments that the Registrant
expects or anticipates will or may occur in the future, including, but not
limited to, such things as future capital expenditures, expansion, strategic
plans, growth of the Registrant's business and operations and euro related
actions and other such matters are forward-looking statements. These
forward-looking statements are based on many assumptions and factors including,
but not limited to, customer demand, fashion trends, competitive market forces,
uncertainties related to the effect of competitive products and pricing,
customer acceptance of the Registrant's merchandise mix and retail locations,
economic conditions worldwide, effects of currency fluctuations, the ability of
the Registrant to execute its business plans effectively with regard to each of
its operating units, consumer preferences and economic conditions worldwide and
the ability of the Registrant to implement, in a timely manner, the programs and
actions related to the euro issue. Any changes in such assumptions or factors
could produce significantly different results. The Registrant undertakes no
obligation to publicly update forward-looking statements, whether as a result of
new information, future events or otherwise.
-15-
18
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The only legal proceedings pending against the Registrant or its
consolidated subsidiaries consist of ordinary, routine litigation,
including administrative proceedings, incident to the businesses of the
Registrant, as well as litigation incident to the sale and disposition
of businesses that have occurred in the past several years. Management
does not believe that the outcome of such proceedings will have a
material effect on the Registrant's consolidated financial position,
liquidity, or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant's annual meeting of shareholders was held on
June 14, 2001, in New York, New York. Proxies were solicited
by management of the Registrant pursuant to Regulation 14A
under the Securities Exchange Act of 1934; there was no
solicitation in opposition to management's nominees as listed
in the Notice of 2001 Annual Meeting and Proxy Statement, both
dated May 1, 2001.
(b) Each of James E. Preston, Matthew D. Serra, Christopher A.
Sinclair and Dona D. Young was elected as a director in Class
I for a three-year term ending at the annual meeting of
shareholders of the Registrant in 2004. Cheryl Turpin was
elected as a director in Class III for a two-year term ending
at the annual meeting in 2003. All of such individuals
previously served as directors of the Registrant. J. Carter
Bacot, Purdy Crawford, Philip H. Geier Jr., Jarobin Gilbert
Jr. and David Y. Schwartz, having previously been elected
directors of the Registrant for terms continuing beyond the
2001 annual meeting of shareholders, continue in office as
directors.
(c) The matters voted upon and the results of the voting were as
follows:
(1) Election of Directors:
Abstentions and
Name Votes For Votes Withheld Broker Non-Votes
---- ----------- -------------- ----------------
James E. Preston 119,424,659 2,235,111 0
Matthew D. Serra 119,418,725 2,241,045 0
Christopher A. Sinclair 119,428,337 2,231,433 0
Cheryl Turpin 119,418,651 2,241,119 0
Dona D. Young 113,716,899 7,942,871 0
(2) Proposal to ratify the appointment of independent
accountants:
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------- ----------- ----------------
120,768,246 761,106 130,418 0
(3) Proposal to reapprove the performance goals of the
Long-Term Incentive Compensation Plan:
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------- ----------- ----------------
111,712,861 9,642,716 304,193 0
At the close of business on the record date of April 27, 2001, there
were outstanding 138,838,548 shares of the Registrant's Common Stock,
par value $0.01 per share ("Common Stock"). There were represented at
the meeting, in person or by proxy, 121,659,770 shares of Common Stock.
Such shares represented 87.63 percent of the total number of shares of
such class of stock outstanding on the record date.
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19
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
An index of the exhibits that are required by this item, and
which are furnished in accordance with Item 601 of Regulation
S-K, appears on pages 18 through 20. The exhibits which are in
this report immediately follow the index.
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K dated May 17, 2001
(date of earliest event reported) reporting sales and earnings
for the first quarter ended May 5, 2001.
The Registrant filed a report on Form 8-K dated May 24, 2001
(date of earliest event reported) reporting condensed
consolidated balance sheets as of May 5, 2001 and April 29,
2000.
The Registrant filed a report on Form 8-K dated May 30, 2001
(date of earliest event reported) reporting its intention to
offer at least $125 million of subordinated convertible notes
due 2008. On Form 8-K dated June 11, 2001 (date of earliest
event reported) the Registrant reported the completion of the
offering, simultaneous with the amendment and restatement of
its revolving credit facility.
-17-
20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VENATOR GROUP, INC.
----------------------------------------
(Registrant)
Date: September 18, 2001
/s/ Bruce Hartman
----------------------------------------
BRUCE HARTMAN
Senior Vice President
and Chief Financial Officer
-18-
21
VENATOR GROUP, INC.
INDEX OF EXHIBITS REQUIRED BY ITEM 6(a) OF FORM 10-Q
AND FURNISHED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K
Exhibit No. in Item 601
of Regulation S-K Description
----------------------- -----------
1 *
2 *
3(i)(a) Certificate of Incorporation of the Registrant, as filed by
the Department of State of the State of New York on April 7,
1989 (incorporated herein by reference to Exhibit 3(i)(a) to
the Quarterly Report on Form 10-Q for the quarterly period
ended July 26, 1997, filed by the Registrant with the SEC on
September 4, 1997 (the "July 26, 1997 Form 10-Q")).
3(i)(b) Certificates of Amendment of the Certificate of Incorporation
of the Registrant, as filed by the Department of State of the
State of New York on (a) July 20, 1989 (b) July 24, 1990 (c)
July 9, 1997 (incorporated herein by reference to Exhibit
3(i)(b) to the July 26, 1997 Form 10-Q) and (d) June 11, 1998
(incorporated herein by reference to Exhibit 4.2(a) of the
Registration Statement on Form S-8 (Registration No.
333-62425) previously filed with the SEC).
3(ii) By-laws of the Registrant, as amended (incorporated herein by
reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q
for the quarterly period ended May 5, 2001, filed by the
Registrant with the SEC on June 13, 2001.
4.1 The rights of holders of the Registrant's equity securities
are defined in the Registrant's Certificate of Incorporation,
as amended (incorporated herein by reference to Exhibits
3(i)(a) and 3(i)(b) to the July 26, 1997 Form 10-Q and Exhibit
4.2(a) to the Registration Statement on Form S-8 (Registration
No. 333-62425) previously filed with the SEC).
4.2 Rights Agreement dated as of March 11, 1998 ("Rights
Agreement"), between Venator Group, Inc. and First Chicago
Trust Company of New York, as Rights Agent (incorporated
herein by reference to Exhibit 4 to the Form 8-K dated
March 11, 1998).
4.2(a) Amendment No. 1 to the Rights Agreement, dated as of May 28,
1999 (incorporated herein by reference to Exhibit 4.2(a) to
the Quarterly Report on Form 10-Q for the quarterly period
ended May 1, 1999, filed by the Registrant with the SEC on
June 4, 1999).
-19-
22
Exhibit No. in Item 601
of Regulation S-K Description
----------------------- -----------
4.3 Indenture dated as of October 10, 1991 (incorporated herein by
reference to Exhibit 4.1 to the Registration Statement on
Form S-3 (Registration No. 33-43334) previously filed with the
SEC).
4.4 Forms of Medium-Term Notes (Fixed Rate and Floating Rate)
(incorporated herein by reference to Exhibits 4.4 and 4.5 to
the Registration Statement on Form S-3 (Registration No.
33-43334) previously filed with the SEC).
4.5 Form of 8 1/2% Debentures due 2022 (incorporated herein by
reference to Exhibit 4 to the Registrant's Form 8-K dated
January 16, 1992).
4.6 Distribution Agreement dated July 13, 1995 and Forms of Fixed
Rate and Floating Rate Notes (incorporated herein by reference
to Exhibits 1, 4.1 and 4.2, respectively, to the Registrant's
Form 8-K dated July 13, 1995).
4.7 Indenture dated as of June 8, 2001 (incorporated herein by
reference to Exhibit 4.1 to the Registration Statement on
Form S-3 (Registration No. 333-64930) previously filed with
the SEC).
4.8 Form of 5.50% Convertible Subordinated Note (incorporated
herein by reference to Exhibit 4.2 to the Registration
Statement on Form S-3 (Registration No. 333-64930) previously
filed with the SEC).
4.9 Registration Rights Agreement dated as of June 8, 2001
(incorporated herein by reference to Exhibit 4.3 to the
Registration Statement on Form S-3 (Registration No.
333-64930) previously filed with the SEC).
5 *
8 *
9 *
-20-
23
Exhibit No. in Item 601
of Regulation S-K Description
----------------------- -----------
10.1 Amendment No. 5 dated as of June 8, 2001 to the Credit
Agreement dated as of April 9, 1997.
11 *
12 Computation of Ratio of Earnings to Fixed Charges.
13 *
15 Letter re: Unaudited Interim Financial Statements.
16 *
17 *
18 *
19 *
20 *
21 *
22 *
23 *
24 *
25 *
26 *
99 Independent Accountants' Review Report.
* Not applicable
-21-
24
Exhibits filed with this Form 10-Q:
Exhibit No. Description
----------- -----------
10.1 Amendment No. 5 dated as of June 8, 2001 to the Credit
Agreement dated as of April 9, 1997.
12 Computation of Ratio of Earnings to Fixed Charges.
15 Letter re: Unaudited Interim Financial Statements.
99 Independent Accountants' Review Report.