SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 16, 2000
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FOOTSTAR, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-11681 22-3439443
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
933 MacArthur Boulevard, Mahwah, New Jersey 07430
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 934-2000
------------------
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
- ------------------------
1999 FOURTH QUARTER AND FULL YEAR RESULTS AND FIFTH SHARE REPURCHASE PROGRAM
ANNOUNCEMENT.
On February 16, 2000, Footstar, Inc. ("Footstar" or the "Company")
announced its financial results for the fourth quarter and full year ended
January 1, 2000, and the authorization of a fifth share repurchase program.
Fourth Quarter Results. For the fourth quarter, net income from
continuing operations before restructuring and other one-time charges increased
13.9% to $17.2 million, from net income from continuing operations of $15.1
million in the fourth quarter of 1998. On a diluted per share basis, net income
from continuing operations before charges rose 32.3% to $0.82 from $0.62 in the
same quarter a year ago, partially reflecting the benefits of the Company's
share repurchase program.
Operating profit for the fourth quarter of 1999 before restructuring
and other one-time charges amounted to $50.9 million, a 12.6% increase from
operating profit of $45.2 million for the fourth quarter of 1998.
Net sales for the fourth quarter declined 0.3% to $491.7 million from
$493.0 million for the comparable quarter last year. The Company's same store
sales for the quarter decreased 0.2%. Meldisco's same store sales increased
1.8%, while Footaction's same store sales decreased 4.4% during the quarter.
The Company recorded a net reversal of restructuring and asset
impairment charges of $1.8 million in the fourth quarter. This includes total
reversals of $9.9 million related to previously recorded non-recurring charges,
net of an $8.1 million asset impairment charge related to 44 unprofitable
Footaction stores, whose fixed assets were assessed as unrecoverable. Including
restructuring and other one-time charges, income from continuing operations for
the 1999 fourth quarter amounted to $18.4 million, or diluted earnings per share
of $0.88, compared to a loss from continuing operations of $7.6 million, or a
diluted loss of $0.31 per share, in the same 1998 period. Finally, in the fourth
quarter of 1999, the Company reversed an additional $3.8 million of the
discontinued operations reserve balance recorded in 1996. After the effect of
this reversal, net income for the fourth quarter of 1999 reached $20.8 million,
or diluted earnings of $0.99 per share.
The operating profit of Meldisco, before restructuring and other
one-time charges, rose 29.7% for the quarter and 22.9% for the year.
Year-End 1999 Results. For the full fiscal year 1999, net income from
continuing operations before restructuring and other one-time charges increased
7.7% to $60.5 million from net income of $56.2 million. On a per share basis,
diluted earnings from continuing operations rose 24.9% to $2.76 from $2.21 in
1998.
Operating profit for 1999 before restructuring and other one-time
charges amounted to $153.9 million, a 10.7% increase from operating profit of
$139.0 million for 1998.
Including the impact of net reversals of restructuring and other
one-time charges, net income from continuing operations for 1999 was $63.4
million, or diluted earnings of $2.89 per share, compared to net income from
continuing operations of $33.5 million, or $1.32 per share in 1998. Including
the reversal of the discontinued operations reserve in the fourth quarter, net
income for 1999 was $65.8 million, or diluted earnings of $3.00 per share.
Net sales for the fiscal year increased 2.8% to $1,880.0 million from
$1,829.1 million in 1998. The Company's same store sales for the fiscal year
rose 1.4%. Meldisco's same store sales increased 4.0%, while Footaction's
decreased 3.4%.
Share Repurchase Programs. On February 16, 2000 the Company also
announced that its Board of Directors had authorized a stock repurchase program
of up to 10% of the shares of common stock outstanding, or approximately
2,010,000 shares, to be purchased from time to time in the open market.
During the fourth quarter of 1999, the Company repurchased 719,500
shares of its stock at an average price of $31.95 per share, for an aggregate
purchase amount of $23.0 million. Total stock repurchased in the 1999 fiscal
year amounted to 3,441,475 shares at an average price per share of $30.38, for
an aggregate purchase amount of $104.6 million. In January 2000, the Company
repurchased the 199,700 shares remaining under the fourth repurchase program.
Since becoming a public company in October 1996, through the end of January
2000, Footstar had repurchased a total of 10.7 million shares, representing
approximately 35% of the total shares outstanding at the time of its spin-off
from Melville Corporation, now known as CVS Corporation. The average price paid
per share under the Company's four buyback programs was $29.00, for an aggregate
purchase amount of $310.6 million.
A copy of the press release dated February 16, 2000 is attached hereto
as Exhibit 99.1.
Acquisition of Assets of Just For Feet, Inc.
- --------------------------------------------
On February 16, 2000 the Company also announced that it had entered
into an agreement to acquire certain assets of Just For Feet, Inc., the athletic
footwear and apparel retailer, including the Just For Feet name, 79 Just For
Feet superstores, 23 specialty retail stores, the Internet business and the
corporate headquarters building located in Birmingham, Alabama, for a total
purchase price of $69.7 million in cash and the assumption of certain
merchandise letters of credit for $2.9 million.
Footstar plans to operate the Just For Feet superstores as a third
division of the Company and to maintain the Just For Feet brand name.
The agreement with Just For Feet, which filed for Chapter 11 protection
on November 4, 1999, is expected to be completed by the end of the first
quarter subject to, among other things, Bankruptcy Court and regulatory
approvals.
The transaction is expected to be financed through bank borrowings. A
new three-year $400 million credit facility that Footstar has negotiated with
FleetBoston Financial through its subsidiary Fleet National Bank, will replace
Footstar's existing $300 million facility that expires in September 2000.
A copy of the press release dated February 16, 2000 is attached hereto
as Exhibit 99.2.
Except for the historical information contained herein, the matters
discussed in this Current Report are forward looking statements, including
without limitation the Company's expectations arising from the acquisition of
certain assets from Just For Feet. These and other forward looking statements
involve a number of risks and uncertainties that may cause actual results to
differ from those expressed in any of the forward looking statements. The
Company undertakes no obligation to update forward looking statements to reflect
events and circumstances after the date made.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits.
Exhibit 99.1 Press Release of Footstar, Inc. dated February 16, 2000.
Exhibit 99.2 Press Release of Footstar, Inc. dated February 16, 2000.
<PAGE>
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 hereunto duly authorized.
FOOTSTAR, INC.
CARLOS E. ALBERINI
Dated: February 18, 2000 By: _______________________________
Name: Carlos E. Alberini
Title: Senior Vice President and Chief
Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit 99.1 Press Release of Footstar, Inc. dated February 16, 2000.
Exhibit 99.2 Press Release of Footstar, Inc. dated February 16, 2000.
[Footstar Logo]
Investor Contact: Carlos Alberini Media Contact: Wendi Kopsick
Sr. Vice President & CFO Jim Fingeroth
Kathy Guinnessey Kekst and Company
Vice President, Finance (212) 521-4800
Footstar, Inc.
(201) 760-4008
FOR IMMEDIATE RELEASE
FOOTSTAR REPORTS STRONG 1999 FOURTH QUARTER AND FULL YEAR RESULTS
AND ANNOUNCES FIFTH SHARE REPURCHASE PROGRAM
-- Fourth Quarter Diluted EPS, before
restructuring and other one-time charges,
Increased 32.3% to $0.82 from $0.62 --
- Company Completes Fourth Share Repurchase Program
and Announces Fifth Program for up to 10% of Shares
Outstanding -
MAHWAH, NEW JERSEY, February 16, 2000--Footstar, Inc. (NYSE:FTS) today announced
its financial results for the fourth quarter and full year ended January 1,
2000, as well as the authorization of a fifth share repurchase program.
Fourth Quarter Results
- ----------------------
For the fourth quarter, net income from continuing operations before
restructuring and other one-time charges increased 13.9% to $17.2 million, from
net income from continuing operations of $15.1 million in the fourth quarter of
1998. On a diluted per share basis, net income from continuing operations before
charges rose 32.3% to $0.82 from $0.62 in the year ago quarter, partially
reflecting the benefits of the Company's share repurchase program.
Operating profit for the fourth quarter of 1999 before restructuring and other
one-time charges amounted to $50.9 million, a 12.6% increase from operating
profit of $45.2 million for the fourth quarter of 1998.
Net sales for the fourth quarter declined 0.3% to $491.7 million from $493.0
million for the comparable quarter last year. The Company's same store sales for
the quarter decreased 0.2%. Meldisco's same store sales increased 1.8%, while
Footaction's same store sales decreased 4.4% during the quarter.
The Company recorded a net reversal of restructuring and asset impairment
charges of $1.8 million in the fourth quarter. This includes total reversals of
$9.9 million related to previously recorded non-recurring charges, net of an
$8.1 million asset impairment charge related to 44 unprofitable Footaction
stores, whose fixed assets were assessed as unrecoverable. Including
restructuring and other one-time charges, income from continuing operations for
the 1999 fourth quarter amounted to $18.4 million, or diluted earnings per share
of $0.88, compared to a loss from continuing operations of $7.6 million, or a
diluted loss of $0.31 per share, in the same 1998 period. Finally, in the fourth
quarter of 1999, the Company reversed an additional $3.8 million of the
discontinued operations reserve balance recorded in 1996. After the effect of
this reversal, net income for the fourth quarter of 1999 reached $20.8 million,
or diluted earnings of $0.99 per share.
Mickey Robinson, Chairman and Chief Executive Officer, commented, "We are very
pleased with Footstar's performance in the fourth quarter and fiscal year 1999,
which is highlighted by the significant increases we achieved in diluted
earnings per share. The results were driven by the strength of our Meldisco
business, where operating profit, before restructuring and other one-time
charges, rose 29.7% for the quarter and 22.9% for the year, as well as by our
ongoing share repurchase program.
"During the quarter, Meldisco achieved sales gains across all categories,
despite the unseasonably warm weather, which slowed sales of winter-related
product. Our branding strategy continues to differentiate our Shoemart
departments in the discount marketplace, and, in particular, our Thom McAn line
continues to generate stellar results. In addition, a favorable sales mix
consisting of a higher proportion of full-price sales further contributed to the
earnings increase.
"Footaction's performance continued to reflect difficult conditions in the
athletic footwear and apparel sector. While same store footwear sales increased
during the quarter and year, lower sales of apparel, sluggish demand for
Jordan-related product and intense promotional activity led to a decline in
operating profit. Footaction's results did have the benefit of the restructuring
initiatives we implemented this year, including the closure of underperforming
stores and the re-allocation of our merchandise mix to reduce square footage
devoted to apparel, while increasing space dedicated to women's and children's
footwear.
"As we look ahead, we believe Meldisco is positioned for another year of healthy
growth. The Thom McAn brand continues to offer excellent potential, and we
recently acquired the license for a new brand, Everlast, which gives us a
recognizable athletic footwear brand that will be marketed in our footwear
departments. At Footaction, we expect the first half of the year to continue to
be challenging, in large part reflecting reduced demand for Jordan-related
product. However, we are optimistic that back-to-school programs and ongoing
consolidation of square footage in the industry will result in improved
performance beginning in the second half of the year," Mr. Robinson said.
Full Year 1999
- --------------
For the fiscal year 1999, net income from continuing operations before
restructuring and other one-time charges increased 7.7% to $60.5 million from
net income of $56.2 million. On a per share basis, diluted earnings from
continuing operations rose 24.9% to $2.76 from $2.21 in 1998.
Operating profit for 1999 before restructuring and other one-time charges
amounted to $153.9 million, a 10.7% increase from operating profit of $139.0
million for 1998.
Including the impact of net reversals of restructuring and other one-time
charges, net income from continuing operations for 1999 was $63.4 million, or
diluted earnings of $2.89 per share, compared to net income from continuing
operations of $33.5 million, or $1.32 per share in 1998. Including the reversal
of the discontinued operations reserve in the fourth quarter, net income for
1999 was $65.8 million, or diluted earnings of $3.00 per share.
Net sales for the fiscal year increased 2.8% to $1,880.0 million from $1,829.1
million in 1998. The Company's same store sales for the fiscal year rose 1.4%.
Meldisco's same store sales increased 4.0%, while Footaction's decreased 3.4%.
Share Repurchase Programs
- -------------------------
The Company also announced today that its Board of Directors has authorized a
stock repurchase program of up to 10% of the shares of common stock outstanding,
or approximately 2,010,000 shares to be purchased from time to time in the open
market.
During the fourth quarter of 1999, the Company repurchased 719,500 shares of its
stock at an average price of $31.95 per share, for an aggregate purchase amount
of $23.0 million. Total stock repurchased in the 1999 fiscal year amounted to
3,441,475 shares at an average price per share of $30.38, for an aggregate
purchase amount of $104.6 million. In January 2000, the Company repurchased the
199,700 shares remaining under the fourth repurchase program. Since becoming a
public company in October 1996, through the end of January 2000, Footstar had
repurchased a total of 10.7 million shares, representing approximately 35% of
the total shares outstanding at the time of its spin-off from Melville
Corporation, now known as CVS Corporation. The average price paid per share
under the Company's four buyback programs was $29.00, for an aggregate purchase
amount of $310.6 million.
Commenting on the repurchase activity, Mr. Robinson said, "As always, we are
evaluating appropriate opportunities to deliver greater value to our
shareholders. The new repurchase program reflects our commitment to this
objective, and we will continue to pursue additional avenues at the strategic
and operating levels of our business. Our Board is confident in the Company's
long term growth prospects and continues to believe the repurchase of shares
offers a compelling investment opportunity."
As of January 1, 2000, Footstar operated 544 Footaction stores, which sell
branded athletic footwear and apparel, and 2,494 Meldisco leased footwear
departments.
Except for the historical information contained herein, the matters discussed in
this release are forward looking statements that involve risks and uncertainties
that may cause actual results to differ from those expressed in any of the
forward looking statements. Such risks and uncertainties include, but are not
limited to, uncertainties related to the effect of competitive products and
pricing, consumer demand for footwear, unseasonable weather, consumer acceptance
of our merchandise mix and retail locations, the availability of products, and
the other risks detailed in the Company's Securities and Exchange Commission
filings. The Company undertakes no obligation to update forward looking
statements to reflect events or circumstances after the date such statements
were made.
-ATTACHMENTS FOLLOW-
<PAGE>
<TABLE>
<CAPTION>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in millions, except for per share data)
Fourth Quarter Ended Year Ended
January 1, % of January 2, % of January 1, % of January 2, % of
2000 Sales 1999 Sales 2000 Sales 1999 Sales
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 491.7 100.0% $ 493.0 100.0% $ 1,880.0 100.0% $1,829.1 100.0%
Cost of sales 336.0 68.3% 352.2 71.4% 1,294.5 68.9% 1,278.0 69.9%
--------------------------------------- -------------------------------------
Gross profit 155.7 31.7% 140.8 28.6% 585.5 31.1% 551.1 30.1%
Store operating, selling, general and
administrative expenses 97.2 19.8% 95.6 19.4% 396.9 21.1% 386.3 21.1%
Depreciation and amortization 7.6 1.5% 7.7 1.6% 34.7 1.8% 33.5 1.8%
Net restructuring and asset impairment
(reversals) charges (1.8) -0.4% 26.7 5.4% (4.7) -0.3% 26.7 1.5%
--------------------------------------- -------------------------------------
Operating profit 52.7 10.7% 10.8 2.2% 158.6 8.4% 104.6 5.7%
Interest expense, net 0.7 0.1% 0.4 0.1% 2.3 0.1% 0.6 0.0%
--------------------------------------- -------------------------------------
Income before income taxes and minority
interests 52.0 10.6% 10.4 2.1% 156.3 8.3% 104.0 5.7%
Provision for income taxes 15.6 3.2% 2.5 0.5% 48.3 2.6% 32.4 1.8%
--------------------------------------- -------------------------------------
Income before minority interests 36.4 7.4% 7.9 1.6% 108.0 5.7% 71.6 3.9%
Minority interests in net income 18.0 3.7% 15.5 3.1% 44.6 2.4% 38.1 2.1%
--------------------------------------- -------------------------------------
Income from continuing operations 18.4 3.7% (7.6) -1.5% 63.4 3.4% 33.5 1.8%
Income on disposal of discontinued
operations, net of income taxes 2.4 0.5% 0.0 0.0% 2.4 0.1% 0.0 0.0%
--------------------------------------- -------------------------------------
Net income $ 20.8 4.2% $ (7.6) -1.5% $ 65.8 3.5% $ 33.5 1.8%
======================================= =====================================
Weighted average shares outstanding:
Basic 20.6 24.5 21.6 25.2
========== ========== ========== =========
Diluted 20.9 24.5 21.9 25.4
========== ========== ========== =========
Earnings per share:
Basic:
Income from continuing $ 0.89 $ (0.31) $ 2.94 $ 1.33
operations ========== ========== ========== =========
Net income $ 1.01 $ (0.31) $ 3.05 $ 1.33
========== ========== ========== =========
Diluted:
Income from continuing $ 0.88 $ (0.31) $ 2.89 $ 1.32
operations ========== ========== ========== =========
Net income $ 0.99 $ (0.31) $ 3.00 $ 1.32
========== ========== ========== =========
</TABLE>
Note: 1 - Percentages may not foot due to rounding
2 - The Company recorded a net reversal of restructuring and asset
impairment charges of $1.8 million ($1.2 million after taxes) in the
fourth quarter and $4.7 million ($2.9 million after taxes) in the
year. In the fourth quarter, this includes a new charge of $8.1
million which partially offset reversals totaling $9.9 million.
Additional reversals of $2.9 million were recorded prior to the
fourth quarter.
3 - The Company purchased 3,441,475 shares of its stock during 1999 at
an average price of $30.38 per share, for an aggregate purchase
amount of $104.6 million. In 1998 the company purchased 4,382,925
shares of its stock at an average price of $30.69, for an aggregate
purchase amount of $134.5 million. In 1997 the Company purchased
2,685,900 shares of its stock at an average price of $24.68 per
share, for an aggregate purchase amount of $66.3 million.
4 - The Company recorded, in December of 1999, a reversal of $3.8
million or $2.4 million after tax, of a reserve balance recorded as a
result of the discontinuance of the Thom McAn chain in 1996.
<PAGE>
<TABLE>
<CAPTION>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
BEFORE NET RESTRUCTURING AND OTHER ONE-TIME CHARGES (REVERSALS) (2),(4)
(in millions, except for per share data)
Fourth Quarter Ended Year Ended
January 1, % of January 2, % of January 1, % of January 2, % of
2000 Sales 1999 Sales 2000 Sales 1999 Sales
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 491.7 100.0% $ 493.0 100.0% $ 1,880.0 100.0% $ 1,829.1 100.0%
Cost of sales 336.0 68.3% 344.5 69.9% 1,294.5 68.9% 1,270.3 69.4%
------------------------------------------- ------------------------------------------
Gross profit 155.7 31.7% 148.5 30.1% 585.5 31.1% 558.8 30.6%
Store operating, selling, general and
administrative expenses 97.2 19.8% 95.6 19.4% 396.9 21.1% 386.3 21.1%
Depreciation and amortization 7.6 1.5% 7.7 1.6% 34.7 1.8% 33.5 1.8%
------------------------------------------- ------------------------------------------
Operating profit 50.9 10.4% 45.2 9.2% 153.9 8.2% 139.0 7.6%
Interest expense, net 0.7 0.1% 0.4 0.1% 2.3 0.1% 0.6 0.0%
------------------------------------------- ------------------------------------------
Income before restructuring reversal,
income taxes and minority interests 50.2 10.2% 44.8 9.1% 151.6 8.1% 138.4 7.6%
Provision for income taxes 15.0 3.1% 14.2 2.9% 46.5 2.5% 44.1 2.4%
------------------------------------------- ------------------------------------------
Income before restructuring reversal
and minority interests 35.2 7.2% 30.6 6.2% 105.1 5.6% 94.3 5.2%
Minority interests in net income 18.0 3.7% 15.5 3.1% 44.6 2.4% 38.1 2.1%
------------------------------------------- ------------------------------------------
Net income before restructuring
reversal $ 17.2 3.5% $ 15.1 3.1% $ 60.5 3.2% $ 56.2 3.1%
=========================================== ==========================================
Weighted average shares outstanding:
Basic 20.6 24.5 21.6 25.2
=========== ============ ========== ===========
Diluted 20.9 24.5 21.9 25.4
=========== ============ ========== ===========
Earnings per share before restructuring
reversal:
Basic:
Net Income $ 0.83 $ 0.62 $ 2.80 $ 2.23
=========== ============ ========== ===========
Diluted:
Net Income $ 0.82 $ 0.62 $ 2.76 $ 2.21
=========== ============ ========== ===========
</TABLE>
<PAGE>
Note: 1-Percentages may not foot due to rounding
2-The Company recorded a net reversal of restructuring and asset
impairment charges of $1.8 million ($1.2 million after taxes) in the
fourth quarter and $4.7 million ($2.9 million after taxes) in the
year. In the fourth quarter, this includes a new charge of $8.1
million which partially offset reversals totaling $9.9 million.
Additional reversals of $2.9 million were recorded prior to the
fourth quarter.
3-The Company purchased 3,441,475 shares of its stock during 1999 at
an average price of $30.38 per share, for an aggregate purchase
amount of $104.6 million. In 1998 the company purchased 4,382,925
shares of its stock at an average price of $30.69, for an aggregate
purchase amount of $134.5 million. In 1997 the Company purchased
2,685,900 shares of its stock at an average price of $24.68 per
share, for an aggregate purchase amount of $66.3 million.
4-The Company recorded, in December of 1999, a reversal of $3.8
million or $2.4 million after tax, of a reserve balance recorded as a
result of the discontinuance of the Thom McAn chain in 1996.
<PAGE>
<TABLE>
<CAPTION>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
January 1, January 2,
2000 1999
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 31.8 $ 49.1
Accounts receivable, net 42.8 52.0
Inventories 271.3 280.2
Prepaid expenses and other current assets 34.9 49.4
------- -------
Total current assets 380.8 430.7
Property and equipment, net 198.7 217.3
Other non-current assets 32.7 37.4
------- -------
Total assets $ 612.2 $ 685.4
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 100.5 $ 112.3
Accrued expenses 117.8 143.8
Income taxes payable 11.2 12.7
------- -------
Total current liabilities 229.5 268.8
Other long-term liabilities 40.5 45.5
Minority interests in subsidiaries 74.3 67.8
Shareholders' equity 267.9 303.3
------- -------
Total liabilities and shareholders' equity $ 612.2 $ 685.4
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FOOTSTAR, INC.
Segment Information
(in millions)
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter YTD
-------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
Meldisco
Sales
1999 $273.6 $329.2 $292.2 $341.7 $1,236.7
1998 $236.3 $316.6 $288.3 $333.6 $1,174.8
Operating profit
1999 $8.6 $44.8 $24.6 $55.4 $133.4
1998 $1.8 $40.7 $23.3 $39.9 $105.7
1998 excluding restructuring and
other one-time charges (reversals) $1.8 $40.7 $23.3 $42.7 $108.5
Footaction
Sales
1999 $165.5 $149.8 $178.0 $150.0 $643.3
1998 $164.6 $146.0 $184.3 $159.4 $654.3
Operating profit (loss)
1999 $10.5 $6.1 $16.0 ($0.3) $32.3
1999 excluding restructuring and
other one-time charges (reversals) $9.0 $6.1 $16.0 ($2.1) $29.0
1998 $8.9 $8.0 $17.5 ($26.6) $7.8
1998 excluding restructuring and
other one-time charges (reversals) $8.9 $8.0 $17.5 $5.0 $39.4
General Corporate Expenses
Operating (loss)
1999 ($1.0) ($1.9) ($1.8) ($2.4) ($7.1)
1999 excluding restructuring and
other one-time charges (reversals) ($2.4) ($1.9) ($1.8) ($2.4) ($8.5)
1998 ($2.5) ($1.9) ($2.0) ($2.5) ($8.9)
Footstar
Sales
1999 $439.1 $479.0 $470.2 $491.7 $1,880.0
1998 $400.9 $462.6 $472.6 $493.0 $1,829.1
Operating profit
1999 $18.1 $49.0 $38.8 $52.7 $158.6
1999 excluding restructuring and
other one-time charges (reversals) $15.2 $49.0 $38.8 $50.9 $153.9
1998 $8.2 $46.8 $38.8 $10.8 $104.6
1998 excluding restructuring and
other one-time charges (reversals) $8.2 $46.8 $38.8 $45.2 $139.0
</TABLE>
[Footstar Logo]
Investor Contact: Carlos Alberini Media Contact: Wendi Kopsick
Sr. Vice President & CFO Jim Fingeroth
Kathy Guinnessey Kekst and Company
Vice President, Finance (212) 521-4800
Footstar, Inc.
(201) 760-4008
FOR IMMEDIATE RELEASE
FOOTSTAR TO ACQUIRE ASSETS OF JUST FOR FEET
--Expands Company's Presence in Athletic Footwear Industry and
Provides Access to New Customer Base and Markets--
MAHWAH, NEW JERSEY, February 16, 2000 - Footstar, Inc. (NYSE: FTS) today
announced that it has entered into an agreement to acquire certain assets of
Just For Feet, Inc. (NASDAQ: FEETQ), the athletic footwear and apparel retailer,
including the Just For Feet name, 79 Just For Feet superstores, 23 specialty
retail stores, the Internet business and the Corporate headquarters building
located in Birmingham, Alabama, for a total purchase price of $69.7 million in
cash and the assumption of certain merchandise letters of credit for $2.9
million. This consideration is exclusive of amounts that Just For Feet, Inc.
will receive for the sale of other assets to successful bidders.
The transaction, which we currently expect will be accretive in 2000, provides
Footstar with new growth opportunities to significantly accelerate the Company's
long-term growth rate. It builds upon the Company's leadership position in the
athletic footwear and apparel marketplace, and enables the Company to enter the
superstore segment of the footwear industry. Footstar's plans are to leverage
its state-of-the-art distribution capabilities and its existing infrastructure
to lower operating expense and improve the profitability of the stores it is
acquiring.
The acquisition will solidify Footstar's position as the nation's third largest
footwear retailer and the second largest retailer of athletic footwear and
apparel. Footstar achieved sales of $1.88 billion in 1999, including sales of
$643 million in 1999 in its Footaction chain of athletic footwear and apparel
stores. The Just For Feet stores to be acquired are expected to generate more
than $400 million in annualized sales.
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The acquisition of the Just For Feet superstores provides Footstar with access
to a new suburban, value-conscious customer that prefers the off-mall, big-box
superstore format with its dominant assortment. This new customer base
complements Footaction's core 12-24 year-old fashion-oriented customer. Footstar
plans to operate the Just For Feet superstores as a third division of the
Company and to maintain the Just For Feet brand name.
The acquisition also provides Footstar with what the Company believes are
excellent specialty store locations, including a heavy concentration of stores
in the Midwest, a geographic region currently underserved by Footaction. The new
specialty stores include very attractive locations in Chicago and Detroit, two
markets recently identified for expansion as part of Footaction's urban growth
strategy. Plans are to convert the specialty stores, which currently operate
under the Imperial Sports and Athletic Attic brand names, to Footaction stores
immediately after the acquisition.
Mickey Robinson, Footstar Chairman and Chief Executive Officer, commented, "This
acquisition provides us with attractive opportunities to expand our position in
the footwear industry, while building greater value for our shareholders. Just
For Feet has developed a powerful, big-box format that has been successful in
attracting a customer who prefers the broad selection, service, value and
excitement of the 'out-of-the-mall' superstore format, and we are acquiring the
most profitable of those locations. Moreover, we believe this segment offers
excellent growth potential for a dominant national retailer.
"At the same time, the new specialty stores will provide opportunities to
increase Footaction's sales volume while leveraging our existing infrastructure
and economies of scale. Importantly, we see a number of areas where we should be
able to achieve cost savings and synergies, taking advantage of our corporate
support and distribution capabilities and our existing vendor relationships.
"We welcome the Just For Feet associates who will be joining us. They have
developed an outstanding organization, with a unique concept and excellent
sales-generating power. We look forward to their contributions as part of
Footstar," Mr. Robinson said.
The agreement with Just For Feet, which filed for Chapter 11 protection on
November 4, 1999, is expected to be completed by the end of the first quarter
subject to, among other things, Bankruptcy Court and regulatory approvals.
The transaction is expected to be financed through bank borrowings. A new
three-year $400 million credit facility that Footstar has negotiated with
FleetBoston Financial through its subsidiary Fleet National Bank, will replace
Footstar's existing $300 million facility that expires in September of this
year. FleetBoston Robertson Stephens is the lead arranger for the transaction.
Merrill Lynch advised Footstar on the acquisition.
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Just For Feet, Inc. which is based in Birmingham, Alabama, operates large-format
superstores and smaller specialty stores that specialize in brand-name athletic
and outdoor footwear and apparel. At the time of its Chapter 11 filing, Just For
Feet operated 150 Just For Feet superstores in 26 states and Puerto Rico and 173
Company-owned and 39 franchised specialty stores in 23 states and Puerto Rico.
Footstar, Inc., headquartered in Mahwah, New Jersey, is a leading footwear
retailer. As of January 29, 2000, the Company's Footaction division,
headquartered in Irving, Texas, near Dallas, operated 537 mostly mall-based
stores in 45 states, Puerto Rico, and the U.S. Virgin Islands, which sell
branded athletic footwear and apparel. The Company's Meldisco division is a
leader in the discount footwear segment, operating 2,487 leased footwear
departments, primarily in Kmart stores.
Except for the historical information contained herein, the matters discussed in
this release are forward looking statements that involve risks and uncertainties
that may cause actual results to differ from those expressed in any of the
forward looking statements. Such risks and uncertainties include, but are not
limited to, uncertainties related to the effect of competitive products and
pricing, consumer demand for footwear, unseasonable weather, consumer acceptance
of our merchandise mix and retail locations, the availability of products, and
the other risks detailed in the Company's Securities and Exchange Commission
filings. The Company undertakes no obligation to update forward looking
statements to reflect events or circumstances after the date such statements
were made.
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