Foot Locker (FL)

     On May 16, 2008, the Company entered into an amended credit agreement with its banks, providing for a $175 million revolving credit facility and extending the maturity date to May 16, 2011 (the “Credit Agreement”). The Credit Agreement also provides an incremental facility of up to $100 million under certain circumstances. Simultaneously with entering the Credit Agreement, the Company repaid the $88 million that was outstanding on its term loan with the banks, which was scheduled to mature in May 2009. The Credit Agreement provides that the Company comply with certain financial covenants, including (i) a fixed charge coverage ratio of 1.25:1 for the 2008 fiscal year, 1.50:1 for the 2009 fiscal year, and 1.75:1 for each year thereafter and (ii) a minimum liquidity/excess cash flow covenant, which provides that if at the end of any fiscal quarter minimum liquidity is less than $350 million, the excess cash flow for the four consecutive fiscal quarters ended on such date must be at least $25 million. The amount permitted to be paid by the Company as dividends in any fiscal year is $105 million under the terms of the Credit Agreement. With regard to stock purchases, the Credit Agreement provides that not more than $50 million in the aggregate may be expended unless the fixed charge coverage ratio is at least 2.0:1 for the period of four consecutive fiscal quarters most recently ended prior to any stock repurchase. Additionally, the Credit Agreement provides for a security interest in certain of the Company’s intellectual property and certain other non-inventory assets. The Company is in compliance with all of its covenants as of August 2, 2008.

     Any materially adverse change in customer demand, fashion trends, competitive market forces, or customer acceptance of the Company’s merchandise mix and retail locations, uncertainties related to the effect of competitive products and pricing, the Company’s reliance on a few key vendors for a significant portion of its merchandise purchases and risks associated with foreign global sourcing or economic conditions worldwide, as well as other factors listed under the heading “Disclosure Regarding Forward-Looking Statements,” could affect the ability of the Company to continue to fund its needs from business operations.

     Net cash provided by operating activities was $159 million and $53 million for the twenty-six weeks ended August 2, 2008 and August 4, 2007, respectively. During the twenty-six weeks ended August 2, 2008, the Company recorded a non-cash impairment charge of $15 million related to the Northern Group note receivable. The increase in operating cash flows primarily relates to the reduction in inventory purchases, net of accounts payable as well as reduced income tax payments. The reduction in inventory purchases reflects a strategic priority designed to increase inventory turnover. Additionally, during the twenty-six weeks ended August 2, 2008 the Company contributed $6 million to its Canadian qualified pension plan. No contributions to the U.S. or Canadian pension plans were made during the twenty-six weeks ended August 4, 2007. Due to the pension asset performance experienced year-to-date, the Company may make a contribution during 2009 to its U.S. qualified pension plan. The Company is in the process of evaluating the amount and timing of the contribution. The contribution amount will depend on the outcome of the Company’s elections under the Pension Protection Act, as well as the plan asset performance for the balance of the year. The amount expected to be contributed to the Canadian plan during 2009 is approximately $3 million.

     Net cash used in investing activities was $77 million for the twenty-six weeks ended August 2, 2008. Net cash provided by investing activities was $7 million for the twenty-six weeks ended August 4, 2007. During the twenty-six weeks ended August 2, 2008, the Company did not purchase or sell short-term investments. This compares with net sales of $90 million in the corresponding prior-year period. Capital expenditures were $79 million for the twenty-six weeks ended August 2, 2008 as compared with $83 million in the corresponding prior-year period. Capital expenditures forecasted for the full-year of 2008 are approximately $159 million, of which $132 million relates to modernizations of existing stores and new store openings, and $27 million reflects the development of information systems and other support facilities. The Company has the ability to revise and reschedule the anticipated capital expenditure program should the Company’s financial position require it.

     Net cash used in financing activities was $139 million and $82 million for the twenty-six weeks ended August 2, 2008 and August 4, 2007, respectively. During the second quarters of 2008 and 2007, the Company made payments of $88 million and $2 million, respectively, related to its 5-year term loan. During the twenty-six weeks ended August 2, 2008, the Company purchased and retired $6 million of the $200 million 8.50 percent debentures payable in 2022. The Company recorded an excess tax benefit related to stock-based compensation of $1 million for the twenty-six weeks ended August 4, 2007. The Company declared and paid dividends totaling $47 million and $39 million, for the twenty-six weeks ended August 2, 2008 and August 4, 2007, respectively. The Company received proceeds from the issuance of common stock in connection with employee stock programs of $2 million and $8 million for the twenty-six weeks ended August 2, 2008 and August 4, 2007, respectively. The Company purchased 2,283,254 shares of its common stock during the twenty-six weeks ended August 4, 2007 for approximately $50 million.