Financial Review

                                      Management's Discussion and             18
                                      Analysis of Financial Condition       
                                      and Results of Operations             
                                                                            
                                      Independent Auditors' Report            22
                                                                            
                                      Consolidated Statements                 23
                                      of Operations                         
                                                                            
                                      Consolidated Balance Sheets             24
                                                                            
                                      Consolidated Statements                 25
                                      of Shareholders' Equity               
                                                                            
                                      Consolidated Statements                 26
                                      of Cash Flows                         
                                                                            
                                      Notes to Consolidated                   27
                                      Financial Statements                  
                                                                            
                                      Summary of Quarterly Results            36
                                                                            
                                      Five-Year Financial                     37
                                      Summary                               
                                                                            
                                      Directors and Officers                  38



                                                                              17
<PAGE>

Footstar, Inc. and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition
and Results of Operations

The  following  discussion  should  be read in  conjunction  with the  Company's
historical   Consolidated   Financial  Statements  and  Notes  thereto  included
elsewhere  in this Annual  Report.  Except as  otherwise  indicated,  all dollar
amounts herein are stated in millions.

The "Spin-Off"

Footstar,  Inc. (the "Company") became an independent company after the Board of
Directors  of Melville  Corporation  ("Melville")  approved  the spin-off of its
footwear  operations.  These  businesses  were comprised of Meldisco,  a leading
operator of leased footwear  departments  nationwide and abroad;  Footaction,  a
mall-based  branded athletic footwear and apparel chain; and Thom McAn which has
been reported as  discontinued  operations.  The spin-off was completed with the
distribution (the "Distribution") on October 12, 1996, to Melville  shareholders
of record on October 2, 1996, of all the shares of the Company. The Distribution
was made on the basis of .2879  shares of the  Company's  common stock for every
one share of Melville  Corporation common stock. A total of 30,533,883 shares of
the Company's  common stock was issued and began trading on  the  New York Stock
Exchange on a when-issued basis on September 25, 1996.

General

Prior to the Distribution date, Meldisco, Footaction and Thom McAn each operated
as a separate  division of Melville.  On June 3, 1996,  Melville  announced  the
discontinuance of the Thom McAn segment.  Accordingly, the results of operations
for the Thom McAn segment have been  classified as  discontinued  operations for
all periods presented.  In connection with the discontinuation of Thom McAn, the
Company  recorded a pre-tax  charge of approximately  $85.0 million in the first
quarter of 1996. The charge primarily  relates to future operating losses during
the wind-down  period,  lease  buyouts,  asset  write-offs  and  severance.  The
historical financial  information presented herein reflects periods during which
the Company did not operate as an independent company.  Certain assumptions were
made in preparing this financial  information which may not necessarily  reflect
the results of operations or the financial  condition of the Company had it been
an  independent,  public  company  during  the  reporting  periods,  and are not
necessarily  indicative of the Company's future  operating  results or financial
condition.

     Furthermore,  the Company's operating profit from continuing operations for
1995 was  negatively  impacted by the  recording of special  pre-tax  charges of
$35.0 million in the fourth quarter of 1995. These pre-tax charges resulted from
a  comprehensive  restructuring  plan announced by Melville in October 1995 that
included  the  spin-off of the  Company.  The  restructuring  component  of this
charge,  amounting to $16.2  million,  was for  estimated  tenancy and severance
costs associated with the closing of 18 stores,  as well as asset write-offs and
other  costs to be  incurred  from  the  strategic  decision  to  outsource  the
Company's data processing function.  In addition,  the Company recorded an asset
impairment  charge of $7.5  million due to the early  adoption of  Statement  of
Financial  Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for Long-Lived  Assets to Be Disposed Of." Other one-time
charges in connection with the Company's repositioning,  including the recording
of markdowns related to the  discontinuation  of certain product lines and other
miscellaneous  charges,  were directly  charged to operations  and totaled $11.3
million.

     In the absence of these nonrecurring special charges, operating profit from
continuing  operations  would have been  $139.3  million in 1995  compared  with
$104.0 million as reflected in the Consolidated Statement of Operations.

     In  1995,  the  Company  also  changed  its  policy  to expense  internally
developed  software costs that were previously  capitalized.  The impact on 1995
was to reduce net income by $1.0 million. In addition,  a $3.9 million reduction
to net income was reported as the  cumulative  effect of a change in  accounting
principle.


18
<PAGE>

Results of Operations
Net Sales
--------------------------------------------------------------------------------
($ in millions)               1996                1995                1994
--------------------------------------------------------------------------------

Company:

Net sales                 $1,672.3            $1,615.2            $1,612.8

Net sales % change
    from prior year            3.5%                0.1%                9.4%

Same store sales
    % change                   2.8%               (2.1%)               2.4%

Meldisco:

Net sales                 $1,156.6            $1,191.5            $1,280.5

Net sales % change
    from prior year           (2.9%)              (7.0%)               5.6%

Same store sales
    % change                  (2.0%)              (5.8%)               2.4%

% of consolidated
    net sales                 69.2%               73.8%               79.4%

Footaction:

Net sales                 $  515.7            $  423.7            $  332.3

Net sales % change
    from prior year           21.7%               27.5%               26.7%

Same store sales
    % change                  16.8%               13.1%                2.4%

% of consolidated
    net sales                 30.8%               26.2%               20.6%

Fiscal Years 1996, 1995 and 1994

Consolidated net sales for 1996 increased 3.5% over 1995. Footaction's continued
success of its highly focused  marketing and  merchandising  strategies,  better
in-stock  position,  and the increased consumer demand for athletic footwear and
branded apparel enabled Footaction to have a record-setting year. 1996 net sales
increased 21.7%, partially due to a 16.8% same store sales gain in addition to a
13.1% increase in 1995.  During 1996,  Footaction opened 51 new stores and added
almost  300,000  square  feet  from new  stores,  expansions   and  relocations.
Footaction's  sales  increase  was  offset by  decreased  sales at the  Meldisco
division.  Meldisco's  net sales for the year were  $1,157  million  compared to
$1,192 million in 1995.  Comparable  store sales declined 2.0%. This decrease is
attributable to store closings and a difficult first half of 1996 reflecting the
sluggish  discount  footwear  industry   environment.   Meldisco's  second  half
performance improved  resulting  in  positive  same store sales for the last six
months  of  1996.  Contributing  factors  to  Meldisco's  improvement  were  the
introduction  of the  Cobbie  Cuddlers  line in August,  Kmart's  high-frequency
remodeling   program   and   better   in-stock   positions.   Approximately  186
high-frequency  conversions occurred during the year. In 1996,  Meldisco's Kmart
operations  accounted  for 66.6% and 96.3% of the net sales of the  Company  and
Meldisco, respectively.

     Consolidated  net sales in 1995 increased  marginally above the 1994 level.
Footaction's  net sales grew by 27.5%,  fueled by a 13.1% increase in same store
sales and the opening or acquisition of 21 new stores, as well as the conversion
of 11  additional  stores  to  its  new  4,000-6,500  square  foot  large  store
prototype.  Footaction's  same store sales increase was driven by the successful
implementation  of a new merchandise  strategy more focused on "narrow and deep"
assortments  and  by  the  strength  of  branded  apparel.   Footaction's  sales
performance  was  offset by a decline in  Meldisco's  net sales  resulting  from
decreased same store sales due to a difficult retail  environment from increased
competition  among  department and discount  stores and store  closings.  During
1995,  Kmart  closed 218  stores in which  Meldisco  operated a leased  footwear
department.  For fiscal year 1995,  Meldisco's  Kmart  operations  accounted for
70.6% and 95.7% of the net sales of the Company and Meldisco, respectively.

Costs and Expenses
--------------------------------------------------------------------------------
(% of net sales)                        1996           1995           1994
--------------------------------------------------------------------------------
Cost of sales                           68.5%          69.6%          69.3%

Store operating, selling,
     general and administrative
     expenses*                          21.3%          21.2%          19.8%

Depreciation and
         amortization                    1.5%           1.2%           1.2%

*Includes allocations from Melville

Cost of Sales

Positive sales results at Footaction  enabled this segment to leverage its fixed
operating costs while  reductions  were noted in markdowns,  store shrinkage and
merchandise  costs.  As a result of  Footaction's  favorable cost  improvements,
consolidated cost of sales for 1996 decreased 110 basis points.  Meldisco's cost
of sales,  as a percentage of sales,  was  relatively  flat, as  improvement  in
initial  markons were offset by higher  delivery and  distribution  center costs
related to the start-up of new distribution facilities.

     Cost of sales increased as a percentage of  consolidated  net sales in 1995
as compared to 1994 due to the recording of additional  markdowns at Meldisco as
a result of declining  sales in a generally  weak retail  environment as well as
218 Kmart store closings.


                                                                              19
<PAGE>

Footstar, Inc. and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition 
and Results of Operations

Store Operating, Selling, General and Administrative Expenses

Store operating,  selling,  general and administrative expenses, as a percent of
net sales for 1996,  increased  marginally  over 1995.  Costs  incurred  for the
addition of functional  areas  required to support a stand-alone  public company
were partially offset by the improved operating leverage at Footaction.

     Store operating,  selling, general and administrative expenses increased as
a percentage of net sales in 1995 over 1994 primarily due to negative same store
sales at  Meldisco  which  hindered  its ability to  leverage  its fixed  costs.
Another factor was $6.9 million of special  charges  recorded in connection with
the Company's restructuring and other contingencies.  These special charges were
principally  for  the  settlement  of  certain  claims,  as  well  as for  asset
write-offs  related to the  repositioning  of the Company.  See "General".  This
increase was partially offset by improved operating leverage at Footaction.

Operating Profit
--------------------------------------------------------------------------------
($ in millions)                      1996           1995           1994
--------------------------------------------------------------------------------
Operating profit before
     restructuring and asset
     impairment charges 1

Meldisco                           $102.7         $109.4         $147.1

Footaction                           49.6           18.3            9.6

Corporate 2                          (5.0)            --             --
                                   ------         ------         ------
                                    147.3          127.7          156.7

Restructuring and asset
     impairment charges                --           23.7             --
                                   ------         ------         ------
Operating profit                   $147.3         $104.0         $156.7
                                   ======         ======         ======

Operating profit as a
     % of net sales                   8.8%           6.4%           9.7%

1    Includes   special  charges  recorded  in  connection  with  the  Company's
     restructuring.  Excluding  these charges,  operating  profit for the fiscal
     year ended 1995 would have been $116.1 million for Meldisco,  $23.2 million
     for Footaction, and $139.3 million for Footstar (or 8.6% of net sales).

2    Overhead costs incurred to support new stand-alone public company.

Operating  profit for 1996  increased  41.6% over 1995.  Footaction's  growth in
operating  profit of 171% over 1995 was the  result of sales  growth  from 16.8%
same store  sales and  increased  square  footage  that  allowed  Footaction  to
leverage fixed operating and overhead costs. As a result,  operating profit as a
percent of sales improved to 9.6% from 4.3% in 1995. Additionally,  gross margin
in 1995 included $4.9 million of special  charges  recorded in conjunction  with
Melville's  restructuring  announced in the fourth  quarter of 1995.  Meldisco's
operating  profit  declined  because of negative  same store sales and increased
costs due to start-up  distribution  issues  associated  with two new  warehouse
facilities and the impact of Kmart closing 218 stores in 1995.

     Operating profit in 1995 was adversely  affected by the  restructuring  and
asset impairment  charges,  asset write-offs related to the repositioning of the
Company in anticipation of the Distribution and certain one-time charges.  For a
discussion of these charges see "General". Adjusting operating profit to exclude
the effect of these  charges,  operating  profit in 1995 would have been  $139.3
million as compared to $156.7 million in 1994. This decline resulted principally
from the decrease in operating performance of Meldisco due to a difficult retail
environment  and, to a lesser extent,  Kmart store  closings.  An improvement in
Footaction's  operating performance driven primarily by a 13.1% same store sales
increase partially offset these results.

Liquidity and Capital Resources
--------------------------------------------------------------------------------
($ in millions)                      1996           1995           1994
--------------------------------------------------------------------------------
Cash flows provided by
     operating activities 1        $212.1         $165.3         $136.2

Working capital 2                   259.4          200.0          294.7

Current ratio 2                       1.80x          1.91x          2.75x

Capital expenditures                 68.3           92.9           59.3

1    Cash flows from  operating  activities  are stated  before cash  outlays in
     respect of minority  interest  of $63.8  million,  $53.3  million and $38.1
     million for the fiscal years ended 1996, 1995 and 1994,  respectively.  The
     cash  flow  amounts   include   after-tax   interest   income   amounts  of
     approximately $17.7 million, $27.0 million and $19.2 million for the fiscal
     years  ended 1996,  1995 and 1994,  respectively,  related to  intercompany
     accounts which were eliminated as of the Distribution.

2    1995 and 1994 working  capital and current  ratio  excludes  the  Company's
     intercompany balance with Melville Corporation.



Net cash provided by operating activities totaled $212.1 million, $165.3 million
and $136.2 million for 1996, 1995 and 1994, respectively, and continues to serve
as the  Company's  primary  source of  liquidity.  During the three  years ended
December 28, 1996, cash generated from operations exceeded cash requirements for
capital additions and dividends to Melville Corporation and Kmart. Additionally,
the Company has a credit  agreement  that provides for a $425 million  unsecured
revolving credit facility (the "Credit Facility") in place to meet its operating
and discretionary spending requirements. As of December 28, 1996, there had been
no direct  borrowings under the Credit Facility and $171.4 million in letters of
credit were outstanding under the Credit Facility.

     The  Company's  businesses  are seasonal in nature.  Peak  selling  periods
coincide  with  Christmas,  the Easter  holiday and the  back-to-school  selling

20
<PAGE>

seasons.  Working capital  requirements  vary with seasonal  business volume and
inventory buildups occurring prior to the peak periods. The Company expects that
its current cash,  together with cash generated  from  operations and the Credit
Facility,  will be  adequate to fund its  operating  expenses,  working  capital
needs, capital  expenditures,  projected growth and expansion plans and the cash
needs  associated with the  discontinuance  of Thom McAn. The Company  currently
maintains  significant  borrowing  capacity  to take  advantage  of  growth  and
investment opportunities.

     Current assets, excluding the Melville intercompany receivable, were higher
at December  28, 1996 as compared to the end of 1995 due to the  increased  cash
and  accounts  receivable  balances,  of which $12.4  million  represents  funds
collected  within the first two months of 1997 from the sale of two  warehouses.
Inventories  declined  as the result of the  discontinuance  and closing of Thom
McAn stores in 1996.

     The increase in current liabilities during 1996 compared to the end of 1995
was due to the  recording  of the  discontinued  operation  reserves in 1996 and
improved working capital management.

     The Company  spent $68.3 million on capital  expenditures  in 1996 relating
primarily  to the opening,  remodeling,  relocation  or expansion of  Footaction
stores,   with  the   balance   relating  to  the   completion   of  the  second
state-of-the-art   distribution   facility  for  Meldisco  and  the   continuing
investment in strategic management information systems.

     Capital  expenditures  in 1995 were $92.9 million and related  primarily to
the construction of two state-of-the-art  distribution  facilities to be used by
Meldisco.  The balance of the 1995  capital  expenditures  related to  strategic
management  information  systems at Meldisco and  Footaction and to the opening,
remodeling, relocation or expansion of Footaction stores.

     The  majority of the 1997  capital  will be utilized  for the  expansion of
Footaction,  including a net of 74 new stores and 57 relocations and expansions.
The  remainder  of the  capital is  committed  to the  investment  in  strategic
management information systems.

     The Company  expects that it will retain all available  funds for operation
and expansion of its business, and does not anticipate paying any cash dividends
to  shareholders  in the  foreseeable  future.  Prior  to the  Distribution  and
pursuant  to  the  March  1996  amendment  to  the  Master  Agreement,  Meldisco
distributed  to Kmart in  April  1996  approximately  $64  million  representing
Kmart's normal dividends and their minority interest in all of the undistributed
retained earnings of the Meldisco Subsidiaries with respect to pre-1995 periods.
This  distribution  was  funded  by a  capital  contribution  from  Melville  in
connection  with  the  transfer  of  retained   earnings  to  Melville  and  the
elimination of the resulting  intercompany  indebtedness.  Under its arrangement
with Kmart,  Meldisco will distribute to Kmart, in future periods,  a portion of
Meldisco  Subsidiary  profits  representing  Kmart's  minority  interest  in the
Meldisco Subsidiaries.

     The Company's Credit Facility contains various  operating  covenants which,
among other things, impose certain limitations on the Company's ability to incur
liens,  incur  indebtedness,  merge,  consolidate  or declare and make  dividend
payments.  Under the Credit  Facility,  the  Company is  required to comply with
financial  covenants  relating to ratios of cash flow, fixed charge coverage and
leverage.  The Credit  Facility may be prepaid or retired by the Company without
penalty prior to the maturity date of October 15, 1999. The Credit  Facility has
a direct  borrowing  sublimit of $200 million,  a $400 million  letter of credit
sublimit,  and at no time can the total  indebtedness  under the Credit Facility
exceed $425 million.

     Effective March 1, 1997, the Company established the Funds Transfer Program
whereby  payment for  merchandise  will be  effected  by wire  transfer of funds
rather than through  letters of credit.  Participation  in the program  provides
vendors with the  opportunity to reduce bank fees in connection  with letters of
credit,  streamline  the  documentation  process for payment and enables them to
determine  the date on which  they will be paid.  This  will also  significantly
reduce the size of the Company's letter of credit  commitments within the Credit
Facility, thereby reducing the letter of credit fees payable by the Company.


                                                                              21
<PAGE>

Independent Auditors' Report



To the Board of Directors and Shareholders of Footstar, Inc.:

We have audited the accompanying  consolidated balance sheets of Footstar,  Inc.
and Subsidiary  Companies as of December 28, 1996 and December 31, 1995, and the
related  consolidated  statements of operations,  shareholders'  equity and cash
flows for each of the years in the  three-year  period ended  December 28, 1996.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all material  respects the financial  position of Footstar,
Inc. and Subsidiary Companies as of December 28, 1996 and December 31, 1995, and
the  results of its  operations  and its cash flows for each of the years in the
three-year period ended December 28, 1996 in conformity with generally  accepted
accounting principles.

     As discussed in the notes to consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of,"
effective October 1, 1995 and changed its policy for accounting for the costs of
internally developed software effective January 1, 1995.

/s/KPMG Peat Marwick LLP
------------------------

New York, New York
February 12, 1997


22
<PAGE>

Footstar, Inc. and Subsidiary Companies
Consolidated Statements of Operations


--------------------------------------------------------------------------------
                                                  For the Years Ended
                                        December 28, December 31,  December 31,
($ in millions)                                 1996         1995         1994
--------------------------------------------------------------------------------
Net sales ..............................    $1,672.3     $1,615.2      $1,612.8

Cost of sales ..........................     1,144.7      1,124.5       1,117.8
                                            --------     --------      --------
Gross profit ...........................       527.6        490.7         495.0

Store operating, selling, general                                     
    and administrative expenses ........       355.5        343.0         319.6

Depreciation and amortization ..........        24.8         20.0          18.7

Restructuring and asset impairment                                    
    charges ............................          --         23.7            --
                                            --------     --------      --------
Operating profit .......................       147.3        104.0         156.7

Interest income, net ...................        14.4         21.1          15.4
                                            --------     --------      --------
Income from continuing operations                                     
    before income taxes, minority                            
    interests and cumulative effect                                 
    of change in accounting principle ..       161.7        125.1         172.1
                                                                      
Provision for income taxes .............        54.6         37.3          49.5
                                            --------     --------      --------
Income from continuing operations                                     
    before minority interests and                                     
    cumulative effect of change in                                    
    accounting principle ...............       107.1         87.8         122.6
                                                                      
Minority interests in net income .......        36.0         38.4          51.9
                                            --------     --------      --------
Income from continuing operations                                     
    before cumulative effect of change                                
    in accounting principle ............        71.1         49.4          70.7
                                                                      
Earnings (loss) from discontinued                                     
    operations, net of income taxes                                   
    (benefits) of $1.1, ($14.1) 
    and $3.6 ...........................         0.8        (26.8)          6.0
                                                                      
Loss on disposal of discontinued                                      
    operations, net of tax benefit                                    
    of $31.4 ...........................       (53.6)          --            --
                                            --------     --------      --------
Income before cumulative effect                                       
    of change in accounting principle ..        18.3         22.6          76.7
                                                                      
Cumulative effect of change in                                        
    accounting principle, net ..........          --         (3.9)           --
                                            --------     --------      --------
Net income .............................    $   18.3     $   18.7     $    76.7
                                            ========     ========     =========
                                                                   
See accompanying notes to consolidated financial statements.


                                                                              23
<PAGE>

Footstar, Inc. and Subsidiary Companies
Consolidated Balance Sheets


--------------------------------------------------------------------------------
                                                   December 28,  December 31,
($ in millions, except for share amounts)                 1996           1995
--------------------------------------------------------------------------------
Assets
--------------------------------------------------------------------------------
Current assets:

Cash and cash equivalents .........................     $164.6       $   26.3
                                                                  
Accounts receivable, net ..........................       77.7           56.1
                                                                  
Due from parent and other divisions ...............         --          710.8
                                                                  
Inventories .......................................      281.9          298.1
                                                                  
Prepaid expenses and other current assets .........       59.9           38.5
                                                        ------       --------
Total current assets ..............................      584.1        1,129.8
                                                                  
Property and equipment, net .......................      197.0          195.1
                                                                  
Goodwill, net of accumulated amortization                         
    of $4.2 at December 28, 1996 and $3.4                         
    at December 31, 1995 ..........................       28.8           29.6
                                                                  
Deferred charges and other noncurrent assets ......       22.2           33.7
                                                        ------       --------
Total assets ......................................     $832.1       $1,388.2
                                                        ======       ========
                                                                  
--------------------------------------------------------------------------------
Liabilities and Shareholders' Equity                              
--------------------------------------------------------------------------------
Current liabilities:                                              
                                                                  
Accounts payable ..................................     $ 79.8       $   75.1
                                                                  
Accrued expenses ..................................      215.6          143.9
                                                                  
Income taxes payable ..............................       29.3             --
                                                        ------       --------
Total current liabilities .........................      324.7          219.0
                                                                  
Long-term debt ....................................        0.2            0.2
                                                                  
Other long-term liabilities .......................       58.3           61.4
                                                                  
Minority interests in subsidiaries ................       65.0           93.8
                                                        ------       --------
Total liabilities .................................     $448.2       $  374.4
                                                        ------       --------
Shareholders' equity:                                             
                                                                  
Common stock $.01 par value: 100,000,000                          
    shares authorized, 30,533,883 shares                          
    issued and outstanding ........................        0.3             --
                                                                  
Additional paid-in capital ........................      323.6             --
                                                                  
Equity adjustment from foreign                                    
    currency translation ..........................       (0.4)            --
                                                                  
Retained earnings .................................       60.4             --
                                                        ------       --------
Total shareholders' equity ........................      383.9             --
                                                        ------       --------
Divisional equity .................................         --        1,013.8
                                                        ------       --------
Total liabilities and shareholders' equity ........   $  832.1       $1,388.2
                                                      ========       ========
                                                               
See accompanying notes to consolidated financial statements.


24
<PAGE>

Footstar, Inc. and Subsidiary Companies
Consolidated Statements of Shareholders' Equity

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Equity
                                                                                          Adjustment
                                                                            Additional  From Foreign
                                                              Common Stock     Paid-in      Currency       Retained       Divisional
($ in millions, except for share amounts)                   Shares   Amount    Capital   Translation       Earnings           Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                                            <C> 
Balance as of December 31, 1993 ......................                                                                      $  978.1
                                                                                                                         
Net income ...........................................          --       --         --            --             --            76.7
                                                                                                                         
Dividends paid to parent .............................          --       --         --            --             --           (31.3)
                                                                                                                         
Translation adjustment ...............................          --       --         --            --             --            (1.3)
                                                                                                                         
Melville capital infusion ............................          --       --         --            --             --            10.9
                                                          ----------   ----     ------         -----          -----        -------- 
Balance as of December 31, 1994 ......................          --       --         --            --             --        $1,033.1
                                                          ----------   ----     ------         -----          -----        -------- 
Net income ...........................................          --       --         --            --             --            18.7
                                                                                                                         
Dividends paid to parent .............................          --       --         --            --             --           (38.2)
                                                                                                                         
Translation adjustment ...............................          --       --         --            --             --             1.6
                                                                                                                         
Melville capital withdrawal ..........................          --       --         --            --             --            (1.4)
                                                          ----------   ----     ------         -----          -----        -------- 
Balance as of December 31, 1995 ......................          --       --         --            --             --        $1,013.8
                                                          ----------   ----     ------         -----          -----        -------- 
Changes in shareholders' equity for the period ended October 12, 1996:                                                   
                                                                                                                         
Net loss .............................................          --       --         --            --             --            (4.2)
                                                                                                                         
Translation adjustment ...............................          --       --         --            --             --            (2.0)
                                                                                                                         
Melville capital withdrawal ..........................          --       --         --            --             --          (646.2)
                                                                                                                         
Distribution of Footstar, Inc.                                                                    
         common stock by Melville ....................    30,533,883   $0.3     $323.6         $(0.4)         $37.9        $ (361.4)
                                                          ----------   ----     ------         -----          -----        -------- 
Balance as of October 12, 1996 .......................    30,533,883    0.3      323.6         $(0.4)          37.9              --
                                                          ----------   ----     ------         -----          -----        -------- 
Net income ...........................................          --       --         --            --           22.5              --
                                                          ----------   ----     ------         -----          -----        -------- 
                                                                                                                           
Balance as of December 28, 1996 ......................    30,533,883   $0.3     $323.6         $(0.4)         $60.4              --
                                                          ----------   ----     ------         -----          -----        -------- 
</TABLE>
See accompanying notes to consolidated financial statements.                   


                                                                              25
<PAGE>

Footstar, Inc. and Subsidiary Companies
Consolidated Statements of Cash Flows


--------------------------------------------------------------------------------
                                                    For the Years Ended
                                          December 28, December 31, December 31,
($ in millions)                                   1996         1995         1994
--------------------------------------------------------------------------------
Cash flows from operating activities:

Net income ...............................     $ 18.3        $ 18.7      $ 76.7 
                                                                      
Adjustments to reconcile net                                          
    income to net cash provided                                       
    by (used in) operating activities:                                
                                                                      
Loss on disposal of                                                   
    discontinued operations ..............       85.0            --          --
                                                                      
Restructuring and asset                                               
    impairment charges ...................         --          51.8          --
                                                                      
Cumulative effect of change in                                        
    accounting principle .................         --           9.5          --
                                                                      
Minority interests in net income .........       36.0          38.4        51.9
                                                                      
Depreciation and amortization ............       29.8          26.7        25.9
                                                                      
Loss on disposal of fixed assets .........        2.3           7.6         7.9
                                                                      
Deferred income taxes ....................      (12.2)        (17.5)       12.2
                                                                      
Changes in operating assets and liabilities:                          
                                                                      
(Increase) in accounts                                                
    receivable, net ......................       (9.2)         (3.5)       (9.5)
                                                                      
Decrease (increase) in inventories .......       16.2          64.7       (40.2)
                                                                      
Decrease (increase) in prepaid                                        
    expenses, deferred charges                                        
    and other assets .....................        0.2         (19.2)        1.1
                                                                      
Increase (decrease) in accounts                                       
    payable and accrued expenses .........       20.3          (2.6)      (12.0)
                                                                      
Increase (decrease) in income                                         
    taxes payable and other                                           
    liabilities ..........................       25.4          (9.3)       22.2
                                               ------        ------      ------
Net cash provided by                                                  
    operating activities .................      212.1         165.3       136.2
                                               ------        ------      ------
Cash flows from (used in)                                             
    investing activities:                                             
                                                                      
Additions to property and equipment ......      (68.3)        (92.9)      (59.3)
                                                                      
Acquisitions, net of cash acquired .......         --          (1.5)       (0.4)
                                                                      
Proceeds from the sale or                                             
    disposal of property                                              
    and equipment ........................        3.4            --          --
                                               ------        ------      ------
Net cash (used in) investing                                          
    activities ...........................      (64.9)        (94.4)      (59.7)
                                               ------        ------      ------
Cash flows from (used in) financing activities:                       
                                                                      
Dividends paid to parent .................         --         (38.2)      (31.3)
                                                                      
Dividends paid to minority                                            
    interests ............................      (63.8)        (53.3)      (38.1)
                                                                      
(Decrease) increase in book                                           
    overdrafts ...........................       (5.5)         16.4         6.4
                                                                      
Decrease (increase) in due                                            
    from parent and other                                             
    divisions ............................      710.8          16.6       (21.7)
                                                                      
Melville capital infusion                                             
    (withdrawal) .........................     (646.2)         (1.4)       10.9
                                                                      
Other ....................................       (4.2)          1.4        (1.5)
                                               ------        ------      ------
Net cash (used in) financing                                          
    activities ...........................       (8.9)        (58.5)      (75.3)
                                               ------        ------      ------
Net increase in cash and                                              
    cash equivalent ......................      138.3          12.4         1.2
                                                                      
Cash and cash equivalents                                             
    beginning of year ....................       26.3          13.9        12.7
                                               ------        ------      ------
Cash and cash equivalents                                             
    end of year ..........................     $164.6        $ 26.3      $ 13.9
                                               ======        ======      ======
                                                                    
See accompanying notes to consolidated financial statements.


26
<PAGE>

Footstar, Inc. and Subsidiary Companies
Notes to Consolidated Financial Statements



The Company

Footstar,  Inc. (the "Company") became an independent company after the Board of
Directors  of Melville  Corporation  ("Melville")  approved  the spin-off of its
footwear  operations.  These  businesses  were comprised of Meldisco,  a leading
operator of leased footwear  departments  nationwide and abroad;  Footaction,  a
mall-based branded athletic footwear and apparel chain; and Thom McAn, which has
been reported as  discontinued  operations.  The spin-off was completed with the
distribution (the "Distribution") on October 12, 1996, to Melville  shareholders
of record on October 2, 1996, of all the shares of the Company. The Distribution
was made on the basis of .2879  shares of the  Company's  common stock for every
one share of Melville  Corporation common stock. A total of 30,533,883 shares of
the  Company's  common stock was issued and began  trading on the New York Stock
Exchange on a when-issued basis on September 25, 1996.

Summary of Significant Accounting Policies

Principles  of  Consolidation:  The  consolidated  financial  statements  of the
Company include the accounts of all subsidiary companies. The minority interests
represent the 49% participation of Kmart Corporation  ("Kmart") in the ownership
of substantially all retail subsidiaries of Meldisco formed or to be formed from
July  1967  until  July 1,  2012  for  the  purpose  of  operating  leased  shoe
departments in Kmart stores.  Interdivisional  balances and transactions between
the entities have been eliminated. The accompanying financial statements include
the  consolidated  results of operations,  assets and liabilities of the Company
for the eleven weeks ended December 28, 1996 and the combined historical results
of  operation,  assets and  liabilities  of the Company while a part of Melville
Corporation  for the 41 weeks ended  October 12,  1996,  and for the years ended
December 31, 1995 and 1994.  For  simplicity of  presentation,  these  financial
statements are referred to as consolidated financial statements herein.

     Accounting  Changes:  The Board of  Directors  of the  Company  approved on
December  5, 1996 a change to a fiscal year  ending on the  Saturday  closest to
December 31 from a calendar  year.  Fiscal  1996 ended on December  28, 1996 and
fiscal 1997 will end January 3, 1998 and will be a 53-week year.

     On October 23, 1995, the Financial  Accounting  Standards Board issued SFAS
No.  123,  "Accounting  for Stock  Based  Compensation"  ("SFAS No.  123").  The
provisions of this  statement are  effective  for fiscal years  beginning  after
December 15, 1995. As permitted  under SFAS No. 123, the Company has elected not
to adopt  the  fair  value-  based  method  of  accounting  for its  stock-based
compensation  plans, but continues to apply the provisions of APB Opinion No. 25
and related interpretations in accounting for its plans. The Company has adopted
the disclosure requirements of SFAS No. 123 in fiscal 1996.

     Effective  October 1, 1995,  the Company  adopted  Statement  of  Financial
Accounting  Standards SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for  Long-Lived  Assets to Be  Disposed  Of" ("SFAS  No.  121").  The
reduction of depreciation and  amortization  expense due to the adoption of SFAS
No. 121 was immaterial for fiscal years 1996 and 1995.

     Effective  January  1,  1995,  the  Company  changed  its policy to expense
internally  developed  software  costs that  previously  were  capitalized.  The
Company  believes that this change results in a better  matching of revenues and
expenses. The impact on 1995, inclusive of discontinued operations,  as a result
of this  change,  exclusive of the  cumulative  effect of $3.9  million,  was to
reduce net income by $1.0 million.

     Basis  of  Presentation:   The  preparation  of  financial   statements  in
conformity with generally accepted accounting  principles requires management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amount  of  expenses  during  the
reporting period. Actual results could differ from those estimates.

     Cash and Cash  Equivalents:  Cash  equivalents  consist  of  highly  liquid
instruments  with maturities of three months or less and are stated at cost that
approximates  their fair market value.  The Company's  cash  management  program
utilizes zero balance accounts.  Accordingly,  all book overdraft  balances have
been reclassified to current liabilities.

     Inventories:   Inventories,   principally   finished   goods,   consist  of
merchandise  purchased  from  domestic  and  foreign  vendors  and  are  carried
predominantly  at the lower of cost or market  value,  determined  by the retail
inventory method on a first-in, first-out (FIFO) basis.

     Property  and  Equipment:  Property  and  equipment  are  stated  at  cost.
Depreciation  and  amortization  of property  and  equipment  are  computed on a
straight-line basis, generally over the estimated useful lives of the assets or,
when  applicable,  the life of the  lease,  whichever  is  shorter.  Capitalized
software  costs are  amortized  on a  straight-line  basis over their  estimated
useful  lives.  Maintenance  and  repairs  are  charged  directly  to expense as
incurred.  Major  renewals or  replacements  are  capitalized  after  making the
necessary adjustment on the asset and accumulated  depreciation  accounts of the
items renewed or replaced.


                                                                              27
<PAGE>

Footstar, Inc. and Subsidiary Companies
Notes to Consolidated Financial Statements



     Impairment  of  Long-Lived  Assets:  When changes in  circumstance  warrant
measurement,  impairment  losses  for  store  fixed  assets  are  calculated  by
comparing projected individual store cash flows over the lease term to the asset
carrying values.

     Deferred Charges: Deferred charges, principally beneficial leasehold costs,
are amortized on a straight-line basis, generally over the remaining life of the
leasehold acquired.

     Goodwill: The excess of acquisition costs over the fair value of net assets
acquired is amortized on a straight  line basis over forty years.  Impairment is
assessed based on the  profitability of the related business relative to planned
levels.

     Store  Opening and Closing  Costs:  New store  opening costs are charged to
expense  as  incurred.  In the  event a store is  closed  before  its  lease has
expired,  the total lease  obligation,  less sublease rental income, is provided
for in the year of closing.

     Advertising  Costs: The Company charges  production costs of advertising to
expense the first time the advertising  takes place.  

     Income Taxes: The Company and Melville  Corporation have entered into a Tax
Disaffiliation  Agreement.   Under  the  Agreement,  the  Company  is  generally
responsible for any of its tax with respect to pre-spin  periods,  determined as
if on a separate company basis. For periods  subsequent to October 12, 1996, the
Company will file its own federal and state tax returns.

     Deferred  tax  assets  and   liabilities  are  recognized  for  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases and operating loss and tax credit  carryforwards.  Deferred tax assets and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered or settled.

     Foreign  Currency  Translation:  The Company  translates  foreign  currency
financial  statements by translating balance sheet accounts at the exchange rate
as of the balance sheet date and income  statement  accounts at the average rate
for the year. Translation gains and losses are recorded in shareholders' equity,
and realized  gains and losses are reflected in  operations.  The balance in the
equity adjustment from foreign currency  translation  relates principally to the
Company's operations in Mexico.  Transaction gains and losses were insignificant
in all periods.

     Postretirement Benefits: The Company provides a defined benefit health care
plan for substantially all retirees who meet certain  eligibility  requirements.
The annual cost of  postretirement  benefits is funded as it arises and the cost
is recognized over an employee's term of service to the Company.

     Earnings Per Share:  Earnings per share  information  has been omitted from
the accompanying consolidated statements of operations since the Company was not
a separate entity with its own capital structure until October 12,1996. See note
"Pro Forma Financial  Information"  with respect to pro forma earnings per share
data.

     Reclassifications:   Certain   reclassifications  have  been  made  to  the
consolidated  financial  statements  of  prior  years  to  conform  to the  1996
presentation.

Restructuring and Asset Impairment Charges

On October 24, 1995, Melville announced a comprehensive  restructuring plan that
included the spin-off of the Company and the outsourcing of certain  information
processing and telecommunication functions. In connection with the initiation of
the plan,  18 stores  were  closed  and a pre-tax  charge of $23.7  million  was
recorded.  Asset write-offs included in the charge totaled $19.9 million,  while
the balance  required  cash outlays,  primarily in 1996. In connection  with the
various   components  of  the  plan,   approximately  40  store  employees  were
eliminated.

     The  significant  components  of the  restructuring  and  asset  impairment
charges,  and the  reserves  remaining  as of December 28, 1996 and December 31,
1995, relating to continuing operations, were as follows:

--------------------------------------------------------------------------------
                                             Recorded         Remaining
($ in millions)                                             1996       1995
--------------------------------------------------------------------------------
Lease obligations and
         fixed asset write-offs
         for store closings                     $ 3.8       $0.8       $3.6
                                                                       
Asset write-offs related                                               
         to outsourcing                          12.2         --         --
                                                                       
Severance and other                                                    
         employee benefit vesting                 0.2         --        0.2
                                                -----       ----       ----
                                                 16.2        0.8        3.8
                                                                       
Asset impairment charge                                                
         in connection with the                                        
         adoption of SFAS No. 121                 7.5         --         --
                                                -----       ----       ----
Total                                           $23.7       $0.8       $3.8
                                                =====       ====       ====

     The net  sales  and  operating  losses in 1995 of the  stores  closed  were
approximately $7.0 million and $0.8 million, respectively.


28
<PAGE>

Discontinued Operations

On June 3, 1996,  Melville  announced a plan to convert  approximately  100 Thom
McAn stores to Footaction  stores and to exit the Thom McAn business.  This plan
is expected to be completed  by  mid-1997.  In  connection  with this plan,  the
Company recorded a pre-tax charge of $85.0 million in the first quarter of 1996.
Accordingly,  the  results of  operations  for the Thom McAn  segment  have been
classified  as  discontinued   operations  for  all  periods  presented  in  the
consolidated statements of operations.

     Discontinued  operations accounted for 5.3% and 27.9% of total assets as of
year end 1996 and 1995,  respectively.  The 1996 balance  consists of a deferred
tax asset and the 1995 assets consist of due from parent, inventory and property
and equipment.

     Discontinued  operations accounted for 20.7% and 13.9% of total liabilities
as  of  year  end  1996  and  1995,  respectively.  Liabilities  in  both  years
principally consist of reserves for restructuring and employee benefits.

     The following table  summarizes the operating  results of the  discontinued
operations for the fiscal years presented.

--------------------------------------------------------------------------------
($ in millions)              1996           1995           1994
--------------------------------------------------------------------------------
Net sales                  $187.6         $212.0         $227.1
                                                         
Operating loss              (94.5)         (57.3)          (1.8)


     The loss on disposal of discontinued  operations for 1996 included an $85.0
million pre-tax charge relating to future  operating losses during the wind-down
period, lease settlement costs, asset write-offs and severance.

     The  significant  components of the charge and the reserve  remaining as of
December 28, 1996 follow:

--------------------------------------------------------------------------------
($ in millions)                      Recorded      Remaining
--------------------------------------------------------------------------------
Lease obligations and
    fixed asset write-offs
    for store closings, home
    office and warehouse
    shutdowns                           $61.9          $45.0

Operating loss reserve                   21.1            7.6

Severance and other employee
    benefit vesting                       2.0            1.8
                                        -----          -----
Total                                   $85.0          $54.4
                                        =====          =====

     The loss from discontinued  operations for the year ended December 31, 1995
includes $24.8 million of restructuring  charges related to the consolidation of
operations and closure of stores,  as well as an asset impairment charge of $3.2
million related to the adoption of SFAS No. 121.

     The  significant  components  of the  restructuring  and  asset  impairment
charges,  and the  reserves  remaining  as of December 28, 1996 and December 31,
1995 are as follows:

--------------------------------------------------------------------------------
                                        Recorded           Remaining
($ in millions)                                       1996           1995
--------------------------------------------------------------------------------
Lease obligations and
    fixed asset write-offs
    for store closings, home
    office and warehouse
    shutdowns                            $17.6        $ 7.3         $17.6
                                                     
Asset write-offs related                             
    to outsourcing                         0.3           --            --
                                                     
Severance and other                                  
    employee benefit                            
    vesting                                6.9          3.1           6.9
                                         -----        -----         -----
                                          24.8         10.4          24.5
                                                     
Asset impairment                                     
    charge in connection                        
    with the adoption                                    
    of SFAS No. 121                        3.2           --            --
                                         -----        -----         -----
Total                                    $28.0        $10.4         $24.5
                                         =====        =====         =====

Accounts Receivable
Accounts receivable consisted of the following:

--------------------------------------------------------------------------------
($ in millions)                                 1996            1995
--------------------------------------------------------------------------------
Due from licensors                           $  36.2         $  31.8

Other                                           41.9            25.3
                                             -------         -------
                                                78.1            57.1

Less: Allowance for
    doubtful accounts                            0.4             1.0
                                             -------         -------
Total                                        $  77.7         $  56.1
                                             =======         =======

Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:

--------------------------------------------------------------------------------
($ in millions)                             1996             1995
--------------------------------------------------------------------------------
Deferred income taxes                    $  53.9          $  30.7

Other                                        6.0              7.8
                                         -------          -------
Total                                    $  59.9          $  38.5
                                         =======          =======


                                                                              29
<PAGE>

Footstar, Inc. and Subsidiary Companies
Notes to Consolidated Financial Statements



Property and Equipment
Property and equipment consisted of the following:

--------------------------------------------------------------------------------
                                         Useful
                                          lives
($ in millions)                        (in yrs.)         1996        1995
--------------------------------------------------------------------------------
Land                                                   $  6.7      $  7.7

Buildings and improvements               10-40           32.2        55.6

Equipment and furniture                   5-10          160.5       174.3

Leasehold improvements                      10           56.7        78.3

Leased property under
    capital leases                          10            0.1         4.4
                                                       ------      ------
                                                        256.2       320.3
Less accumulated depreciation
    and amortization                                     59.2       125.2
                                                       ------      ------
Total                                                  $197.0      $195.1
                                                       ======      ======

Accrued Expenses
Accrued expenses consisted of the following:

--------------------------------------------------------------------------------
($ in millions)                                         1996        1995
--------------------------------------------------------------------------------
Taxes other than
    income taxes                                      $ 17.0      $ 11.6

Rent                                                    30.4        29.2

Salaries and compensated
    absences                                            13.2        10.4

Reserve for loss on disposal of
    discontinued operations                             54.4          --

Restructuring reserve                                   17.3        35.1

Professional fees                                        2.6        14.1

Capital expenditures                                     5.9        15.3

Other                                                   74.8        28.2
                                                      ------      ------
Total                                                 $215.6      $143.9
                                                      ======      ======

Other Long-Term Liabilities

Other long-term liabilities consisted of the following:

--------------------------------------------------------------------------------
($ in millions)                                 1996           1995
--------------------------------------------------------------------------------
Employee benefit costs                         $37.2          $46.0

Lease obligations for
    closed stores                                1.5            7.7

Other                                           19.6            7.7
                                               -----          -----
Total                                          $58.3          $61.4
                                               =====          =====

Long-Term Debt

The Company has a Credit  Facility  that  provides for $425 million in unsecured
revolving  credit.  As of December  28, 1996 there has been no direct  borrowing
under the Credit  Facility.  Interest on all borrowing is determined  based upon
several alternative rates as stipulated in the Credit Facility.

     The Company's Credit Facility contains various  operating  covenants which,
among other things, impose certain limitations on the Company's ability to incur
liens,  incur  indebtedness,  merge,  consolidate  or declare and make  dividend
payments.  Under the Credit  Facility,  the  Company is  required to comply with
financial  covenants  relating to ratios of cash flow, fixed charge coverage and
leverage.  The Credit  Facility may be prepaid or retired by the Company without
penalty prior to the maturity date of October 15, 1999. The Credit  Facility has
a direct  borrowing  sublimit of $200 million,  a $400 million  letter of credit
sublimit,  and at no time can the total  indebtedness  under the Credit Facility
exceed $425 million. As of December 28, 1996 there was $171.4 million in letters
of credit outstanding.  In-transit inventory of $52.9 million as of December 28,
1996 is included in accounts  payable  and is still  considered  an  outstanding
letter of credit commitment.

Leases

The Company and its  subsidiaries  lease retail  stores,  warehouses  and office
facilities  over  periods  generally  ranging  from five to  fifteen  years with
options to renew such terms ranging from five to fifteen years.

     Net rental  expense  for all  operating  leases for the three  years  ended
December 28, 1996 was as follows:

--------------------------------------------------------------------------------
($ in millions)                        1996         1995         1994
--------------------------------------------------------------------------------
Minimum rentals                      $ 80.0       $ 80.0       $ 70.6

Contingent rentals                    146.3        149.6        174.7
                                     ------       ------       ------
Total                                $226.3       $229.6       $245.3
                                     ======       ======       ======

     At December 28, 1996, the future minimum  rental  payments under  operating
leases, excluding lease obligations for closed stores, were as follows:

--------------------------------------------------------------------------------
Year                  Operating Leases
--------------------------------------------------------------------------------
1997                            $ 48.9
                              
1998                              42.6
                              
1999                              39.8
                              
2000                              37.3
                              
2001                              33.7
                              
Thereafter                       109.7
                                ------
Total                           $312.0
                                ======


30
<PAGE>

Income Taxes

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's  deferred tax assets and  liabilities for the fiscal years were as
follows:

--------------------------------------------------------------------------------
($ in millions)                                  1996           1995
--------------------------------------------------------------------------------
Deferred tax assets:

Restructuring  reserves                         $36.5          $21.2
                                                           
Inventories                                       6.1            6.8
                                                           
Postretirement benefits                          12.9           17.0
                                                           
Other                                            14.1            9.4
                                                -----          -----
Total deferred tax assets                        69.6           54.4
                                                =====          =====
Deferred tax liabilities:                                  
                                                           
Property and equipment                           13.3           10.1
                                                           
Other                                             2.4            2.1
                                                -----          -----
Total deferred tax  liabilities                  15.7           12.2
                                                =====          =====
Net deferred tax  assets                        $53.9          $42.2
                                                =====          =====
                                                         
     Based on the Company's historical and current pre-tax earnings,  management
believes  it is more  likely  than not that the  Company  will  realize  the net
deferred tax assets.

     The provision for income taxes is comprised of the following:

--------------------------------------------------------------------------------
($ in millions)                1996           1995           1994
--------------------------------------------------------------------------------
Federal                       $44.3          $29.6          $40.0

State                          10.3            7.7            9.5
                              -----          -----          -----
Total                         $54.6          $37.3          $49.5
                              =====          =====          =====

     The  provision  for income  taxes  includes a net  deferred  charge of $7.8
million for December 28,  1996,  and net deferred tax benefits of $15.0  million
and $2.8 million for December 31, 1995 and 1994, respectively.

     Reconciliations of the effective tax rates to the U.S. statutory income tax
rate are as follows:

--------------------------------------------------------------------------------
                                              1996        1995        1994
--------------------------------------------------------------------------------
Effective tax  rate                           33.8%       29.8%       28.8%

State income taxes, net
    of federal tax  benefit                   (4.1)       (4.0)       (3.6)

51% owned subsidiaries
    excluded from the    
    consolidated federal
    income tax return                          6.1        11.4        10.1

Other                                         (0.8)       (2.2)       (0.3)
                                              ----        ----        ---- 
Statutory federal
    income tax  rate                          35.0%       35.0%       35.0%
                                              ====        ====        ==== 

Stock Incentive Awards

Effective  on  the   Distribution,   the  Company  adopted  the  1996  Incentive
Compensation  Plan (the  "Plan").  The Plan is designed  to motivate  and reward
officers and key employees for outstanding service, by providing awards that are
linked to the Company's performance and the creation of shareholder value. Under
the Plan,  a maximum of 3,100,000  shares,  plus 10% of the number of any shares
newly  issued by the Company  (excluding  issuances  under the Plan or any other
compensation  or benefit plan of the Company) may be issued in  connection  with
stock  options,  restricted  stock,  incentive  stock,  deferred  stock or other
stock-based awards.

     Stock  options  under  the Plan may not be  awarded  at less  than the fair
market  value  on the date of  grant.  Generally,  options  are  exercisable  in
installments  of 20%  beginning one year from date of grant and expire ten years
after the grant date,  provided  the  optionee  continues  to be employed by the
Company.  During 1996, the Company granted options to purchase 616,500 shares of
Common Stock under the Plan at a price of $21.12 per share.  In 1996, no options
expired or were exercised and 1,050 were forfeited.  At December 28, 1996, there
were no exercisable options.

     In connection with the spin-off,  171,212 deferred stock units were granted
to certain  officers and key  employees.  The units vest five years from date of
grant,  provided the  executive  continues  to be employed by the  Company.  The
market value of these shares has been recorded as unearned  compensation of $3.6
million and is being  amortized to expense over the  five-year  vesting  period.
Approximately $0.2 million was charged to expense in 1996.

     The Plan also permits the granting of performance share units, representing
rights to receive  cash and/or  common  stock of the Company  based upon certain
performance  criteria  generally  over  a  three-year  performance  period,  and
restricted share units,  representing rights to receive cash and/or common stock
of  the  Company  based  upon  certain  performance  criteria  over  a  one-year
performance  period.   Compensation   expense  related  to  grants  under  these
provisions is based on current market price of the Company's common stock at the
date of grant and the extent to which performance  criteria are being met. It is
recorded as unearned  compensation  and  amortized  to expense  over the vesting
period  which  ranges  from  five  years  to  expected  retirement  date  of the
employees.


                                                                              31
<PAGE>

Footstar, Inc. and Subsidiary Companies
Notes to Consolidated Financial Statements

     Effective on the  Distribution,  the Company adopted the 1996  Non-Employee
Director  Stock Plan (the  "Director  Plan").  The Director  Plan is intended to
assist the Company in attracting and retaining highly qualified persons to serve
as non-employee  directors and to more closely align such directors' current and
ongoing  interests  with those of the  Company's  stockholders  by  providing  a
significant  portion of their total compensation in the form of Company Stock. A
total of 200,000  shares of Company  Common Stock are reserved and available for
issuance under the Director  Plan.  Any person who becomes an eligible  director
receives an initial grant to purchase 2,000 shares of common stock.  All options
are  awarded  at the  fair  market  value  on the  date of  grant.  Options  are
exercisable  in  installments  of 20%  beginning one year from date of grant and
expire 10 years after grant date.  During 1996, the Company  granted  options to
purchase  10,000  shares of common stock under the  Director  Plan at a price of
$21.12.  In 1996, no options were expired,  exercised or forfeited.  At December
28, 1996, there were no exercisable options.

     The 1996 Director  Plan also  provides for automatic  grants of 2,000 stock
units ("Stock  Units") to each  non-employee  director on the  Distribution  and
thereafter  to each  person  who,  at the close of  business on the date of each
annual  meeting  of  the  Company's  shareholders   commencing  in  1997,  is  a
non-employee director. Each Stock Unit represents the right to receive one share
of Company Common Stock at the end of a specified period.  Fifty percent of such
Stock  Units will vest six months and a day after the grant date,  provided  the
non-employee director has not ceased to serve as a director for any reason other
than death, disability, or retirement. The remaining fifty percent of such Stock
Units  vest at date of grant and will be paid upon the later of  ceasing to be a
director or attaining age 65, provided that settlement of such Stock Units shall
be accelerated in the event of death, disability, or a Change in Control. During
1996, 10,000 Stock Units were granted.

     At  December  28, 1996 shares  available  for grant under the Plan  totaled
2,313,338  and  180,000  shares of stock  were  available  for  grant  under the
Director's Plan.

     The Company applies Accounting  Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for its
plans.  Accordingly,  no  compensation  expense  has  been  recognized  for  its
stock-based   compensation   plans   other   than  for   restricted   stock  and
performance-based  awards.  Had compensation  cost for the company's other stock
option  plans  been  determined  based upon the fair value at the grant date for
awards  under these  plans  consistent  with the  methodology  prescribed  under
Statement of Financial  Accounting Standards No. 123, Accounting for Stock-Based
Compensation,  the  Company's  net income and earnings per share would have been
reduced by approximately $0.2 million,  or $.01 per share. The fair value of the
options granted during 1996 is estimated as $9.41 on the date of grant using the
Black-Scholes option-pricing model with the following assumptions: volatility of
30.0%,  risk-free interest rate of 6.2%, assumed forfeiture rate of 0.0%, and an
expected life of six and a half years.

401(k) Profit Sharing Plan

The Company has a qualified  401(k) Profit  Sharing Plan  available to full-time
employees who meet the plan's eligibility requirements. This plan, which is also
a defined  contribution  plan,  contains a profit  sharing  component,  with tax
-deferred  contributions to each employee based on certain performance criteria,
and also  permits  employees  to make  contributions  up to the  maximum  limits
allowed by Internal Revenue Code Section 401(d). Under the 401(k) component, the
Company matches a portion of the employee's  contribution under a pre-determined
formula based on the level of contribution and years of vesting service.

     Contributions  to the plan by the  Company  for  both  profit  sharing  and
matching of employee contributions were approximately $3.3 million, $2.3 million
and $2.0 million for the years ended 1996, 1995, and 1994, respectively.


32
<PAGE>

Postretirement Benefits

Prior  to  the  spin-off,  Melville  provided  postretirement  health  benefits.
Subsequent  to  the  spin-off  on  October  12,  1996,   the  Company   provides
postretirement  health  benefits  for  retirees  who  meet  certain  eligibility
requirements.

     The  weighted  average  discount  rates used to determine  the  accumulated
postretirement  benefit obligation  ("APBO") were 7.5% and 6.89% at December 28,
1996 and December 31,  1995,  respectively.  The  following  table  reflects the
Company's accrued postretirement benefit costs:

--------------------------------------------------------------------------------
($ in millions)                                     1996        1995
--------------------------------------------------------------------------------
Accumulated postretirement
    benefit obligation:

Retirees                                           $17.1       $13.0

Fully eligible active
    plan participants                                0.9         1.3

Other plan participants                              5.2        12.5
                                                   -----       -----
                                                    23.2        26.8

Unrecognized prior
    service cost                                     6.5        11.6

Unrecognized net gain                                4.9         7.5
                                                   -----       -----
Accrued postretirement
    benefit cost included in        
    other long-term liabilities                    $34.6       $45.9
                                                   =====       =====

Effective in December 1992, the Company amended these plans to terminate certain
benefits,  resulting in a prior  service  gain of $14.8  million to be amortized
over 13 years.  The  Company's  net periodic  cost,  inclusive  of  discontinued
operations,  for the years ended  December 28, 1996,  December 31, 1995 and 1994
was as follows:

--------------------------------------------------------------------------------
($ in millions)                                  1996      1995      1994
--------------------------------------------------------------------------------
Interest expense                                $ 1.7     $ 1.8     $ 1.7

Service cost (net of prior
    service gain amortization)                   (0.4)      0.5)     (0.3)

Amortization of gains                            (0.3)     (0.3)       --
                                                -----     -----     -----
                                                $ 1.0     $ 1.0     $ 1.4
                                                =====     =====     =====

For  measurement  purposes,  an 8.6% increase in the cost of covered health care
benefits was assumed for 1996.  The rate was assumed to decline  gradually to 5%
in the year 1999 and  remain at that  level  thereafter.  A 1%  increase  in the
health-care cost trend rate would increase the APBO at December 28, 1996 by $3.4
million and the 1996 annual expense by $0.4 million.

Supplemental Executive Retirement Plan

The Company has an unfunded  Supplemental  Executive  Retirement  Plan ("SERP").
Expense  related to the SERP was $0.6,  $0.4 and $0.2 in fiscal years 1996, 1995
and 1994, respectively.

Loans

The  weighted  average  interest  rate on loans to Melville  for the period from
January 1 to October 12, 1996 and the years ended  December 31,  1995,  and 1994
was 5.2%, 5.7% and 4.2%, respectively. The related interest income earned by the
Company on such loans was $13.7  million,  $20.9  million  and $15.5  million in
1996, 1995 and 1994, respectively.

Commitments and Contingencies

The  Company is  involved  in various  claims and legal  actions  arising in the
ordinary  course  of  business.  In the  opinion  of  management,  the  ultimate
disposition  of these  matters  will not have a material  adverse  effect on the
Company's combined financial position, results of operations or liquidity.

Countervailing Duty

The U.S. Customs Service charged Brazilian companies of unfair trading practices
during 1980 and 1981,  when the Brazilian  government was allegedly  subsidizing
its shoe  manufacturers,  and imposed an  additional  duty (the  "countervailing
duty") on all shoes  imported  from Brazil by U. S.  Companies  during this time
period.  The  Company  accrued  approximately  $7.0  million  for the  estimated
liability related to this matter between 1981 and 1988.

     In  December  1994,  the  GATT  Uruguay  Round   Agreements  Act  contained
provisions that effectively ended the Brazil  countervailing duty.  Accordingly,
the  Company  reversed  the  entire  accrual,  which  is  reflected  in the 1994
consolidated statement of operations.


                                                                              33
<PAGE>

Footstar, Inc. and Subsidiary Companies
Notes to Consolidated Financial Statements



Meldisco's Relationship with Kmart

For the year ended  December  28,  1996 and the fiscal year ended  December  31,
1995, Meldisco's Kmart operations represented 96.3% and 95.7%, respectively,  of
Meldisco's net sales. These operations represented 66.6% and 70.6% respectively,
of the Company's  consolidated  net sales during the same periods.  The business
relationship  between  Meldisco and Kmart is very significant to the Company and
the loss of Meldisco's  Kmart operations would have a material adverse effect on
the Company.

     The  Company's  arrangement  with Kmart is governed  by a Master  Agreement
effective as of July 1, 1995 and amended as of March 1996. The Master  Agreement
provides the Company with the  non-transferable  exclusive  right and license to
operate a footwear  department in each applicable  Kmart store. The initial term
of the Master  Agreement  expires July 1, 2012 and is renewable  thereafter  for
15-year terms, unless terminated earlier as provided in the Master Agreement.

Pro Forma Financial Information

The  following  table  represents  a  comparison  of  the  Company's  pro  forma
consolidated  condensed  statements of operations to the actual  results for the
year ended December 28, 1996. Pro forma results assume that the Distribution and
related  transactions and events occurred as of the beginning of 1996. Pro forma
financial  information is presented for informational  purposes only and may not
reflect the future  results of the  Company or what the results  would have been
had the Company been operated as a separate company.

--------------------------------------------------------------------------------
($ in millions, except per share data)               Historical      Pro Forma
--------------------------------------------------------------------------------
Net sales                                              $1,672.3       $1,672.3

Cost of sales                                           1,144.7        1,144.7
                                                       --------       --------
Gross profit                                              527.6          527.6

Store operating, selling, general
    and administrative expenses                           355.5          363.1

Depreciation and amortization                              24.8           24.8
                                                       --------       --------
Operating profit                                          147.3          139.7

Interest income, net                                       14.4            0.7
                                                       --------       --------
Income from continuing
    operations before income     

taxes and minority interests                              161.7          140.4

Provision for income taxes                                 54.6           46.2
                                                       --------       --------
Income from continuing
    operations before
    minority interests                                    107.1           94.2

Minority interests in
    net income                                             36.0           36.0
                                                       --------       --------
Income from continuing
    operations                                         $   71.1       $   58.2
                                                       ========       ========

Weighted average shares
    outstanding (in millions)                                             30.6
                                                                      ========
Earnings per share                                                    $   1.90
                                                                      ========

     The pro forma  results  have been  derived  from the  historical  financial
results and principally reflect the following:

     a)   The elimination of the Melville expense allocation and the anticipated
          net  increase  in overhead to add  functional  areas  required to be a
          stand-alone public company.

     b)   The  elimination  of net  interest  income  relating  to  intercompany
          balances due to the recapitalization of the Company.

     c)   The  net  change  in  provision  for  income  taxes.   The  pro  forma
          adjustments were tax effected at 39%, which approximates the Company's
          blended statutory rate.

     d)   Pro forma  earnings  per common  share  assumes  that the common stock
          issued on the  Distribution  date had been issued at the  beginning of
          1996,  after giving  effect to common stock  equivalents  arising from
          deferred stock awards.


34
<PAGE>

Segment Information

The  Company is a retailer  conducting  business  through  retail  stores in two
business  segments:  Meldisco in discount  footwear  and  Footaction  in branded
athletic  footwear and apparel.  Information  about operations for each of these
segments is summarized as follows:

--------------------------------------------------------------------------------
                                                   For the Years Ended
                                       December 28,  December 31,   December 31,
($ in millions)                                1996          1995           1994
--------------------------------------------------------------------------------
Meldisco:

Net sales ............................    $1,156.6       $1,191.5       $1,280.5

Operating profit1 ....................       102.7           99.5          147.1

Identifiable assets at year end 2 ....       405.3          885.9          864.4

Depreciation and amortization ........         8.7            4.6            5.9

Additions to property and equipment ..        28.5           75.2           14.1

Footaction:

Net sales ............................       515.7          423.7          332.3

Operating profit1 ....................        49.6            4.5            9.6

Identifiable assets at year end 2 ....       228.7          119.3          107.2

Depreciation and amortization ........        16.1           15.4           12.8

Additions to property and equipment ..        38.9           13.2           32.4

Corporate:

Net sales ............................          --             --             --

Operating profit .....................        (5.0)            --             --

Identifiable assets at year end ......       154.0             --             --

Depreciation and amortization ........          --             --             --

Additions to property and equipment ..          --             --             --

Consolidated:

Net sales ............................     1,672.3        1,615.2        1,612.8
                                          --------       --------       --------
Operating profit1 ....................       147.3          104.0          156.7

Interest income, net .................        14.4           21.1           15.4
                                          --------       --------       --------
Earnings before income taxes
     and minority interests ..........    $  161.7       $  125.1       $  172.1
                                          --------       --------       --------
Identifiable assets at year end 2 ....    $  788.0       $1,005.2       $  971.6
                                          
Assets of discontinued operations ....        44.1          383.0          420.9
                                          --------       --------       --------
Total assets at year end .............    $  832.1       $1,388.2       $1,392.5
                                          --------       --------       --------
Depreciation and amortization ........    $   24.8       $   20.0       $   18.7
                                          --------       --------       --------
Additions to property and equipment ..    $   67.4       $   88.4       $   46.5
                                          
Additions  to property and equipment      
     of discontinued operations ......         0.9            4.5           12.8
                                          --------       --------       --------
Total additions to property               
     and equipment ...................    $   68.3       $   92.9       $   59.3
                                          --------       --------       --------
                                        
Operating  profit  is  defined  as  total  revenues  less  operating   expenses.
Identifiable  assets  include those assets  directly  related to each  segment's
operations.

1    Includes   special  charges  recorded  in  connection  with  the  Company's
     restructuring.  Excluding  these charges,  operating  profit for the fiscal
     year ended 1995 would have been $116.1 million for Meldisco,  $23.2 million
     for Footaction, and $139.3 million for the consolidated Company.

2    Both 1995 and 1994 include the intercompany balance with Melville.


                                                                              35
<PAGE>

Footstar, Inc. and Subsidiary Companies
Notes to Consolidated Financial Statements



Summary of Quarterly Results (Unaudited)

Summary  data for the years ended  December 28, 1996 and December 31, 1995 is as
follows:
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------
($ in millions)                  1st Quarter   2nd Quarter   3rd Quarter   4th Quarter         Total
----------------------------------------------------------------------------------------------------
<C>                                   <C>           <C>           <C>           <C>         <C>     
Net sales

1996 ..............................   $336.9        $419.0        $432.7        $483.7      $1,672.3
                                                                                            
1995 ..............................    325.8         421.8         412.4         455.2       1,615.2
                                                                                            
Gross profit                                                                                
                                                                                            
1996 ..............................   $ 93.6        $138.1        $135.1        $160.8      $  527.6
                                                                                            
1995 ..............................     90.2         130.0         125.3         145.2         490.7
                                                                        
Income from continuing
    operations before cumulative
    effect of change in
    accounting principle

1996 ..............................   $  6.1        $ 22.2        $ 19.0        $ 23.8      $   71.1
                                                                                            
1995 ..............................      5.6          20.6          17.9           5.3          49.4
                                                                                       
Income (loss) before
    cumulative effect of change
    in accounting principle

1996 ..............................   $(48.5)       $ 24.0        $ 19.0        $ 23.8      $   18.3
                                                                                            
1995 ..............................      1.6          21.3          18.3         (18.6)         22.6
                                                                                       
Net income (loss)

1996 ..............................   $(48.5)       $ 24.0        $ 19.0        $ 23.8      $   18.3
                                                                                            
1995 ..............................     (2.3)         21.3          18.3         (18.6)         18.7
</TABLE>

Market Information

The Company's common stock began trading on a when-issued basis on September 25,
1996.  During the period September 25, 1996 through December 28, 1996, the stock
traded at a price between $19.50 and $27.00 per share.  As of December 28, 1996,
there were 5,285 shareholders of record.

Supplemental Cash Flow Information

Cash  payments for income taxes and interest for the three years ended  December
28, 1996 were as follows:

--------------------------------------------------------------------------------
($ in millions)                                       1996     1995     1994
--------------------------------------------------------------------------------
Income taxes ...................................      $7.6    $52.8    $40.6

Interest (net of amounts capitalized) ..........      $0.4    $ 0.3    $ 0.6


36
<PAGE>

Footstar, Inc. and Subsidiary Companies
Five-Year Financial Summary



Five-Year Historical Financial Summary
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------
($ in millions)                           1996           1995            1994           1993          1992
-----------------------------------------------------------------------------------------------------------
Statement of Operations Data

<S>                                   <C>            <C>             <C>            <C>           <C>     
Net sales .........................   $1,672.3       $1,615.2        $1,612.8       $1,474.8      $1,413.8
                                                                                                 
Cost of sales .....................    1,144.7        1,124.5         1,117.8        1,011.7         971.5
                                      --------       --------        --------       --------      --------
Gross profit ......................      527.6          490.7           495.0          463.1         442.3
                                                                                                 
Store operating, selling, general                                                                
and administrative expenses .......      355.5          343.0           319.6          287.0         266.7
                                                                                                 
Depreciation and amortization .....       24.8           20.0            18.7           13.7          10.5
                                                                                                 
Restructuring and asset                                                                          
impairment charges ................         --           23.7              --             --            --
                                      --------       --------        --------       --------      --------
Operating profit1 .................      147.3          104.0           156.7          162.4         165.1
                                                                                                 
Interest income, net ..............       14.4           21.1            15.4           11.7          12.5
                                                                                                 
Provision for income taxes ........       54.6           37.3            49.5           53.7          54.8
                                                                                                 
Minority interests in net income ..       36.0           38.4            51.9           47.3          53.8
                                                                                                 
(Loss) earnings from discontinued                                                                
operations, net 2 .................      (52.8)         (26.8)            6.0            5.0         (45.2)
                                                                                                 
Cumulative effect of changes in                                                                  
accounting principle, net 3 .......         --           (3.9)             --             --         (22.1)
                                      --------       --------        --------       --------      --------
Net income ........................   $   18.3       $   18.7        $   76.7       $   78.1      $    1.7
                                      --------       --------        --------       --------      --------
Balance Sheet Data                                                                               
                                                                                                 
Current assets:                                                                                  
                                                                                                 
Cash and cash equivalents .........   $  164.6       $   26.3        $   13.9       $   12.7      $   10.0
Due from parent and                                                                              
other divisions ...................         --          710.8           727.7          706.1         731.8
                                                                                                 
Inventories .......................      281.9          298.1           347.3          307.1         299.4
                                                                                                 
Other .............................      137.6           94.6           101.8          103.8         128.2
                                      --------       --------        --------       --------      --------
Total current assets ..............      584.1        1,129.8         1,190.7        1,129.7       1,169.4
                                                                                                 
Property and equipment, net .......      197.0          195.1           163.9          133.0         110.7
                                                                                                 
Other assets ......................       51.0           63.3            37.9           38.9          40.4
                                      --------       --------        --------       --------      --------
Total assets ......................      832.1        1,388.2         1,392.5        1,301.6       1,320.5
                                      --------       --------        --------       --------      --------
Current liabilities ...............      324.7          219.0           168.3          135.1         159.1
                                                                                                 
Other liabilities .................       58.5           61.6            82.4           94.5         124.4
                                                                                                 
Minority interests in                                                                            
subsidiaries ......................       65.0           93.8           108.7           93.9         100.2
                                                                                                 
Divisional equity .................         --        1,013.8         1,033.1          978.1         936.8
                                                                                                 
Shareholders'  equity .............      383.9             --              --             --            --
</TABLE> 

1    Amounts  in  1995  also  reflect  certain  non-recurring  special  charges.
     Operating  profit in 1995  excluding the effect of these charges would have
     been $139.3 million. See "Management's Discussion and Analysis of Financial
     Condition and Results of Operations."

2    The Company recorded a pre-tax charge of $85.0 million in the first quarter
     of 1996 for the discontinuation of Thom McAn.

3    The charge in 1995 was for the  write-off,  effective  January 1, 1995,  of
     internally developed software costs that were previously  capitalized.  The
     charge in 1992 was for the adoption of  Statement  of Financial  Accounting
     Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
     Than Pensions," effective January 1, 1992.


                                                                              37
<PAGE>

Directors

Dr. George S. Day
Professor of  The Wharton School
of the University of Pennsylvania

Stanley P. Goldstein
Chairman and Chief Executive Officer
of CVS Corporation

Terry R. Lautenbach
Former Senior Vice President
of IBM Corporation

Bettye Martin Musham
President and Chief Executive Officer
of GEAR HOLDINGS, INC.

Kenneth S. Olshan
Former Chairman and
Chief Executive Officer
of Wells Rich Greene BDDP

J.M. Robinson
Chairman of the Board,
Chief Executive Officer and
President of the Company

M. Cabell Woodward, Jr.
Former Vice Chairman,
Chief Financial Officer and a
Director of ITT Corporation


Officers

Footstar, Inc.

J.M. Robinson
Chairman of the Board,
Chief Executive Officer
and President

Carlos E. Alberini
Senior Vice President and
Chief Financial Officer

Vice Presidents
Joseph C. Caracappa,
  Chief Information Officer

Joseph P. Couture, Tax

James T. DeVeau, Logistics

Maureen Richards,
  General Counsel and
  Corporate Secretary

Donald V. Roach,
  Corporate Controller

Marc G. Schuback,
  Assistant General Counsel
  and Assistant Corporate
  Secretary

Brian M. Szames, Treasurer

Meldisco
933 MacArthur Boulevard
Mahwah, NJ 07430

Jeffrey A. Shepard
President and
Chief Executive Officer

Senior Vice Presidents
Glenn D. Mathieu
Randall S. Proffitt

Vice Presidents
Gerald R. Bahlman
Rosemary E. Donahue
Kenneth G. Eckert
Michael E. Hills
Paul J. Holveck
Melville A. Lambert
Robert M. Livorsi
John M. Shaw
Stuart H. Smith
John L. Swem
Gary D. Thomas
Paul J. Trzynka
Leopold J. Van Ree
Henry A. Wansing


Footaction
7880 Bent Branch Drive
Irving, T  75063

Ralph T. Parks
President and
Chief Executive Officer

Senior Vice Presidents
Charles M. Albert
Keith Daly
Homer L. Greer

Vice Presidents
Rick L. Bergien
Steven K. Carnley
Timothy B. Cincotta
Paul L. Dorcas
Nissan Joseph
Eric J. Luthro
Mark W. Mayer
Jose A. Palacios
Timothy S. Renberg
William L. Reynolds, Jr.