UNITED STATES
SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549

 

Form 10-Q

 

[X]Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended OctoberJuly 29, 20162017
 or
[   ]Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from ____________________  to  ____________________

 

Commission File Number:0-21360
  

Shoe Carnival, Inc.

(Exact name of registrant as specified in its charter)

 

Indiana 35-1736614
(State or other jurisdiction of
incorporation or organization)
 (IRS Employer Identification Number)
   
7500 East Columbia Street
Evansville, IN
 47715
(Address of principal executive offices) (Zip code)

 

(812) 867-6471
(Registrant’s telephone number, including area code)
 
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

[X]Yes[  ]No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

[X]Yes[  ]No

 

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

 

[   ] Large accelerated filer[X] Accelerated filer[   ] Non-accelerated filer[   ] Smaller reporting company

[ ] Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ] Emerging growth company

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

[ ]Yes[X]No

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Number of Shares of Common Stock, $.01 par value, outstanding at November 22, 2016August 25, 2017 was 18,422,425.

17,019,769.

 

 

SHOE CARNIVAL, INC.
INDEX TO FORM 10-Q

 

   Page
Part IFinancial Information 
 Item 1.Financial Statements (Unaudited) 
 Condensed Consolidated Balance Sheets3
 Condensed Consolidated Statements of Income4
 Condensed Consolidated Statement of Shareholders’ Equity5
 Condensed Consolidated Statements of Cash Flows6
 Notes to Condensed Consolidated Financial Statements7
    
 Item 2.

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

1213
    
 Item 3.Quantitative and Qualitative Disclosures About Market Risk20
    
 Item 4.Controls and Procedures20
   
Part IIOther Information 
 Item 1A.Risk Factors21
    
 Item 2.Unregistered Sales of Equity Securities and Use of Proceeds21
    
 Item 6.Exhibits2122
   
 Signature23

2


SHOE CARNIVAL, INC.


PART I - FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

 

SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

 

(In thousands, except share data) 
October 29,
2016
 January 30,
2016
 October 31,
2015
  July 29,
2017
 January 28,
2017
 July 30,
2016
                  
Assets                        
Current Assets:                        
Cash and cash equivalents $33,509  $68,814  $49,035  $18,531  $62,944  $41,549 
Accounts receivable  3,540   2,131   2,665   2,798   4,424   3,185 
Merchandise inventories  314,925   292,878   318,878   357,467   279,646   351,220 
Deferred income taxes  0   1,061   1,236   0   0   2,680 
Other  5,630   5,193   5,611   7,029   4,737   7,991 
Total Current Assets  357,604   370,077   377,425   385,825   351,751   406,625 
Property and equipment – net  102,932   103,386   106,374 
Property and equipment - net  96,046   96,216   103,363 
Deferred income taxes  8,163   7,158   5,655   10,072   9,600   7,045 
Other noncurrent assets  970   472   348   869   911   1,053 
Total Assets $469,669  $481,093  $489,802  $492,812  $458,478  $518,086 
                        
Liabilities and Shareholders’ Equity                        
Current Liabilities:                        
Accounts payable $69,986  $72,086  $75,006  $93,829  $67,808  $116,989 
Accrued and other liabilities  18,936   15,848   18,129   20,367   18,488   19,759 
Total Current Liabilities  88,922   87,934   93,135   114,196   86,296   136,748 
Long-term debt  26,700   0   0 
Deferred lease incentives  30,320   31,971   30,595   28,909   30,751   30,634 
Accrued rent  11,465   11,224   11,221   10,977   11,255   11,407 
Deferred compensation  10,171   9,612   9,892   11,141   10,465   10,022 
Other  767   550   424   686   829   811 
Total Liabilities  141,645   141,291   145,267   192,609   139,596   189,622 
                        
Shareholders’ Equity:                        
Common stock, $.01 par value, 50,000,000 shares authorized, 20,569,198 shares, 20,604,178 shares and 20,604,178 shares issued, respectively  206   206   206 
Common stock, $.01 par value, 50,000,000 shares authorized, 20,552,245 shares, 20,569,198 shares and 20,599,601 shares issued, respectively  206   206   206 
Additional paid-in capital  64,957   66,805   65,807   61,638   65,272   63,753 
Retained earnings  314,851   294,308   291,419   322,473   312,641   306,458 
Treasury stock, at cost, 2,146,622 shares, 955,612 shares and 576,724 shares, respectively  (51,990)  (21,517)  (12,897)
Treasury stock, at cost, 3,533,262 shares, 2,433,925 shares and 1,777,305 shares, respectively  (84,114)  (59,237)  (41,953)
Total Shareholders’ Equity  328,024   339,802   344,535   300,203   318,882   328,464 
Total Liabilities and Shareholders’ Equity $469,669  $481,093  $489,802  $492,812  $458,478  $518,086 

 

See notes to Condensed Consolidated Financial Statements.

3


SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited

 

(In thousands, except per share data) Thirteen
Weeks Ended
October 29,
2016
  Thirteen
Weeks Ended
October 31,
2015
  Thirty-Nine
Weeks Ended
October 29,
2016
  Thirty-Nine
Weeks Ended
October 31,
2015
  Thirteen
Weeks Ended
July 29,
2017
 Thirteen
Weeks Ended
July 30,
2016
 Twenty-six
Weeks Ended
July 29,
2017
 Twenty-six
Weeks Ended
July 30,
2016
                
Net sales $274,524  $269,713  $766,901  $750,302  $235,064  $231,907  $488,453  $492,377 
Cost of sales (including buying, distribution and occupancy costs)  192,514   188,396   542,105   528,022   166,837   164,677   348,070   349,591 
Gross profit  68,227   67,230   140,383   142,786 
                                
Gross profit  82,010   81,317   224,796   222,280 
Selling, general and administrative expenses  66,558   66,144   185,399   182,200   61,803   60,570   120,732   118,841 
                                
Operating income  15,452   15,173   39,397   40,080   6,424   6,660   19,651   23,945 
Interest income  (1)  (2)  (6)  (36)  (1)  (2)  (2)  (5)
Interest expense  43   42   127   126   149   41   191   84 
                                
Income before income taxes  15,410   15,133   39,276   39,990   6,276   6,621   19,462   23,866 
Income tax expense  5,738   5,747   14,839   15,391   2,380   2,517   7,335   9,101 
                                
Net income $9,672  $9,386  $24,437  $24,599  $3,896  $4,104  $12,127  $14,765 
                                
Net income per share:                                
Basic $0.54  $0.47  $1.31  $1.23  $0.24  $0.22  $0.73  $0.78 
Diluted $0.54  $0.47  $1.31  $1.23  $0.24  $0.22  $0.73  $0.78 
                                
Weighted average shares:                                
Basic  17,609   19,444   18,220   19,542   16,091   18,277   16,453   18,526 
Diluted  17,614   19,452   18,225   19,553   16,094   18,282   16,457   18,531 
                                
Cash dividends declared per share $0.07  $0.065  $0.205  $0.19  $0.075  $0.070  $0.145  $0.135 

 

See notes to condensed consolidated financial statements.

Condensed Consolidated Financial Statements.

4


SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
Unaudited

 

  Common Stock  Additional
Paid-In
  Retained  Treasury    
(In thousands) Issued  Treasury  Amount  Capital  Earnings  Stock  Total 
Balance at January 30, 2016  20,604   (956) $206  $66,805  $294,308  $(21,517) $339,802 
Dividends declared ($0.205 per share)                  (3,894)      (3,894)
Stock-based compensation income tax benefit              2           2 
Employee stock purchase plan purchases      8       (8)      194   186 
Restricted stock awards  (35)  225       (5,072)      5,072   0 
Shares surrendered by employees to pay taxes on restricted stock      (11)              (311)  (311)
Purchase of common stock for treasury      (1,413)              (35,428)  (35,428)
Stock-based compensation expense              3,230           3,230 
Net income                  24,437       24,437 
Balance at October 29, 2016  20,569   (2,147) $206  $64,957  $314,851  $(51,990) $328,024 

  Common Stock Additional
Paid-In
 Retained Treasury  
(In thousands) Issued Treasury Amount Capital Earnings Stock Total
Balance at January 28, 2017  20,569   (2,434) $206  $65,272  $312,641  $(59,237) $318,882 
Adoption of Accounting Standards Update No. 2016-09              (188)  188       0 
Dividends declared ($0.145 per share)                  (2,483)      (2,483)
Stock option exercises      4       (58)      84   26 
Employee stock purchase plan purchases      6       (28)      144   116 
Restricted stock awards  (17)  138       (4,524)      4,524   0 
Shares surrendered by employees to pay taxes on restricted stock      (12)              (286)  (286)
Purchase of common stock for treasury      (1,235)              (29,343)  (29,343)
Stock-based compensation expense              1,164           1,164 
Net income                  12,127       12,127 
Balance at July 29, 2017  20,552   (3,533) $206  $61,638  $322,473  $(84,114) $300,203 

 

See notes to Condensed Consolidated Financial Statements.

5


SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited

 

(In thousands) Thirty-nine
Weeks Ended
October 29,
2016
 Thirty-nine
Weeks Ended
October 31,
2015
  Twenty-six
Weeks Ended
July 29,
2017
 Twenty-six
Weeks Ended
July 30,
2016
            
Cash Flows From Operating Activities                
Net income $24,437  $24,599  $12,127  $14,765 
Adjustments to reconcile net income to net        
cash provided by operating activities:        
Adjustments to reconcile net income to net cash (used in) provided by operating activities:        
Depreciation and amortization  17,698   17,132   11,961   11,773 
Stock-based compensation  3,438   2,595   927   2,123 
Loss on retirement and impairment of assets  500   958   1,705   59 
Deferred income taxes  56   (1,707)  (472)  (1,506)
Lease incentives  1,838   4,116   1,560   898 
Other  (3,064)  (3,597)  (3,140)  (1,973)
Changes in operating assets and liabilities:                
Accounts receivable  (1,409)  55   1,626   (1,054)
Merchandise inventories  (22,047)  (31,001)  (77,821)  (58,341)
Accounts payable and accrued liabilities  (1,298)  9,699   27,356   49,229 
Other  1,303   456   (2,329)  (3,381)
Net cash provided by operating activities  21,452   23,305 
Net cash (used in) provided by operating activities  (26,500)  12,592 
                
Cash Flows From Investing Activities                
Purchases of property and equipment  (17,426)  (22,313)  (12,737)  (11,910)
Proceeds from notes receivable  0   250 
Net cash used in investing activities  (17,426)  (22,063)  (12,737)  (11,910)
                
Cash Flows From Financing Activities                
Borrowings under line of credit  79,200   0 
Payments on line of credit  (52,500)  0 
Proceeds from issuance of stock  186   335   142   133 
Dividends paid  (3,780)  (3,782)  (2,389)  (2,533)
Excess tax benefits from stock-based compensation  2   91   0   2 
Purchase of common stock for treasury  (35,428)  (10,181)  (29,343)  (25,238)
Shares surrendered by employees to pay taxes on restricted stock  (311)  (46)  (286)  (311)
Net cash used in financing activities  (39,331)  (13,583)  (5,176)  (27,947)
Net decrease in cash and cash equivalents  (35,305)  (12,341)  (44,413)  (27,265)
Cash and cash equivalents at beginning of period  68,814   61,376   62,944   68,814 
Cash and Cash Equivalents at end of period $33,509  $49,035 
Cash and Cash Equivalents at End of Period $18,531  $41,549 
                
Supplemental disclosures of cash flow information:                
Cash paid during period for interest $127  $125  $112  $84 
Cash paid during period for income taxes $11,786  $15,561  $7,883  $11,482 
Capital expenditures incurred but not yet paid $994  $2,494  $925  $576 

 

See notes to condensed consolidated financial statements.

Condensed Consolidated Financial Statements.

6


SHOE CARNIVAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

 

Note 1 - Basis of Presentation

 

In our opinion, the accompanying Unaudited Condensed Consolidated Financial Statements and notes have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC"“SEC”) for interim financial information and contain all normal recurring adjustments necessary to present fairly our financial position and the results of our operations and our cash flows for the periods presented. Certain information and disclosures normally included in the notes to Condensed Consolidated Financial Statements have been condensed or omitted according to the rules and regulations of the SEC, although we believe that the disclosures are adequate to make the information presented not misleading. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Condensed Consolidated Financial Statements and the notes thereto contained in our AnnualourAnnual Report on Form 10-K for the fiscal year ended January 30, 2016.28, 2017.

 

Note 2 - Net Income Per Share

 

The following tables set forth the computation of basic and diluted earnings per share as shown on the face of the accompanying Condensed Consolidated Statements of Income:

 

  Thirteen Weeks Ended 
  October 29, 2016  October 31, 2015 
  (In thousands, except per share data) 
                         
Basic Earnings per Share: Net
Income
  Shares  Per
Share
Amount
  Net
Income
  Shares  Per
Share
Amount
 
Net income $9,672          $9,386         
Amount allocated to participating securities  (214)          (187)        
Net income available for basic common shares and basic earnings per share $9,458   17,609  $0.54  $9,199   19,444  $0.47 
                         
Diluted Earnings per Share:                        
Net income $9,672          $9,386         
Amount allocated to participating securities  (214)          (187)        
Adjustment for dilutive potential common shares  0   5       0   8     
Net income available for diluted common shares and diluted earnings per share $9,458   17,614  $0.54  $9,199   19,452  $0.47 

  Thirteen Weeks Ended
  July 29, 2017 July 30, 2016
  (In thousands, except per share data)
   
Basic Earnings per Share: Net
Income
  Shares  Per
Share
Amount
  Net
Income
  Shares  Per
Share
Amount
 
Net income $3,896          $4,104         
Amount allocated to participating securities  (60)          (87)        
Net income available for basic common shares and basic earnings per share $3,836   16,091  $0.24  $4,017   18,277  $0.22 
                         
Diluted Earnings per Share:                        
Net income $3,896          $4,104         
Amount allocated to participating securities  (60)          (87)        
Adjustment for dilutive potential common shares  0   3       0   5     
Net income available for diluted common shares and diluted earnings per share $3,836   16,094  $0.24  $4,017   18,282  $0.22 

7


 Thirty-Nine Weeks Ended  Twenty-six Weeks Ended
 October 29, 2016  October 31, 2015  July 29, 2017 July 30, 2016
 (In thousands, except per share data) (In thousands, except per share data)
                          
Basic Earnings per Share: Net
Income
 Shares Per
Share
Amount
 Net
Income
 Shares Per
Share
Amount
  Net
Income
  Shares  Per
Share
Amount
  Net
Income
  Shares  Per
Share
Amount
 
Net income $24,437          $24,599          $12,127          $14,765         
Amount allocated to participating securities  (515)          (479)          (171)          (303)        
Net income available for basic common shares and basic earnings per share $23,922   18,220  $1.31  $24,120   19,542  $1.23  $11,956   16,453  $0.73  $14,462   18,526  $0.78 
                                                
Diluted Earnings per Share:                                                
Net income $24,437          $24,599          $12,127          $14,765         
Amount allocated to participating securities  (515)          (479)          (171)          (303)        
Adjustment for dilutive potential common shares  0   5       0   11       0   4       0   5     
Net income available for diluted common shares and diluted earnings per share $23,922   18,225  $1.31  $24,120   19,553  $1.23  $11,956   16,457  $0.73  $14,462   18,531  $0.78 

 

Our basic and diluted earnings per share are computed using the two-class method. The two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses. Non-vested restricted stock awards that include non-forfeitable rights to dividends are considered participating securities. During periods of undistributed losses, however, no effect is given to our participating securities since they do not share in the losses. Per share amounts are computed by dividing net income available to common shareholders by the weighted average shares outstanding during each period. No options to purchase shares of common stock were excluded in the computation of diluted shares for the periods presented.

 

Note 3 - Recently Issued Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance on the recognition of revenue for all contracts with customers designed to improve comparability and enhance financial statement disclosures. Subsequently, the FASB has also issued accounting standards updates which clarify the guidance. The underlying principle of this comprehensive model is that revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the payment to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB subsequently issued guidance which approved a one year deferral of the guidance until annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is permitted as2017, which makes the guidance effective for us at the beginning of the original effective date for annual reporting periods (includingfiscal 2018, including interim reporting periods within those periods) beginning after December 15, 2016. Wethat fiscal year. While we have made progress on our scoping review and assessment phase, we are still evaluating the impact of this guidance will have on our condensed consolidated financial position, resultsstatements and related disclosures, and we are continuing to evaluate the method of operationsadoption we will use when we transition to this guidance. At this time the key areas of focus include timing of recognizing revenue for our multi-channel business, recognition of breakage revenue for unredeemed gift cards, our customer loyalty program, and cash flows.presentation of customer related return reserves on the balance sheet.

 

In July 2015, the FASB issued guidance on simplifying the measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. The new guidance does not apply to inventory currently measured using the last-in-first-out or the retail inventory valuation methods. This guidance is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. Early adoption is permitted. We do not believeadopted the guidance will have a material impact on our condensed consolidated financial position, resultsprovisions of operations and cash flows.

8

In November 2015, the FASB issued guidance which simplifies the classification of deferred taxes by requiring an entity to classify deferred tax liabilities and assets as noncurrent within a classified statement of financial position. We early adopted this guidance in the third quarter of fiscal 2016 and are applying this change prospectively. Prior condensed consolidated balance sheets have not been retrospectively adjusted.on January 29, 2017. The adoption resulted in a $2.7 million reclassification of net deferred tax assets from current to noncurrent on our consolidated balance sheet as of October 29, 2016. The adoptionthis guidance did not have a material impact on our consolidated financial position, results of condensed consolidated operations andor cash flows.


In February 2016, the FASB issued guidance which will replace most existing lease accounting guidance. This update requires an entity to recognize leased assets and the rights and obligations created by those leased assets on the balance sheet and to disclose key information about the entity'sentity’s leasing arrangements. ThisThe guidance iswill be effective for annual reporting periods (includingat the beginning of fiscal 2019, including interim reporting periods within those periods) beginning after December 15, 2018. Early adoption is permitted.that fiscal year, and will be applied on a modified retrospective basis. We are evaluating the impact of this guidance on our condensed consolidated financial position, results of operations and cash flows. The adoption of the guidance will require us to recognize right-of-use assets and lease liabilities that will be material to our consolidated balance sheet.

 

In March 2016, the FASB issued guidance intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification in the statement of cash flows and forfeitures. ThisWe adopted the provisions of this guidance ison January 29, 2017. As a result of this adoption, all tax-related cash flows resulting from share-based payments in fiscal 2017 are presented as operating activities on the statements of cash flows, as we elected to adopt this portion of the guidance on a prospective basis. Additionally, we made an accounting policy election to account for forfeitures when they occur rather than estimating the number of awards that are expected to vest. As a result of this election, we recorded a cumulative-effect benefit of $188,000 to retained earnings as of the date of adoption.

In November 2016, the FASB issued guidancefor restricted cash classification and presentation on the statement of cash flows, requiring restricted cash to be included within cash and cash equivalents on the statement of cash flows. The guidance will be effective for annual reporting periods (includingat the beginning of fiscal 2018, including interim reporting periods within those periods)that fiscal year, and will be applied on a retrospective basis. We do not believe the guidance will have a material impact on our condensed consolidated statement of cash flows.

In May 2017, the FASB issued guidance which clarifies what constitutes a modification of a share-based payment award. The guidance will be effective at the beginning after December 15, 2016. Earlyof fiscal 2018, including interim periods within that fiscal year, and early adoption is permitted. The guidance requires adoption on a prospective basis for share-based payment awards modified on or after the adoption date We are evaluatingdo not believe the guidance will have a material impact of this guidance on our condensed consolidated financial position, results of operations andor cash flows.

In August 2016, the FASB issued guidance addressing eight specific cash flow issues in an effort to reduce diversity in practice. The amended guidance is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 31, 2017. Early adoption is permitted. We are evaluating the impact of this guidance on our condensed consolidated financial position, results of operations and cash flows.

 

Note 4 - Fair Value Measurements

 

The accounting standards related to fair value measurements define fair value and provide a consistent framework for measuring fair value under the authoritative literature. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect market assumptions. This guidance only applies when other standards require or permit the fair value measurement of assets and liabilities. The guidance does not expand the use of fair value measurements. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels:

 

·Level 1 – Quoted prices in active markets for identical assets or liabilities;
·Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data; and
·Level 3 – Significant unobservable inputs that are not corroborated by market data. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, and are based on the best information available, including our own data. Fair values of our long-lived assets are estimated using an income-based approach and are classified within Level 3 of the valuation hierarchy.

 

The following table presents assets that are measured at fair value on a recurring basis at OctoberJuly 29, 2016, 2017,
January 28, 2017 and July 30, 2016 and October 31, 2015.2016. We have no material liabilities measured at fair value on a recurring or non-recurring basis.

9


 Fair Value Measurements  Fair Value Measurements
(In thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
As of October 29, 2016:                
As of July 29, 2017:        
Cash equivalents – money market account $114  $0  $0  $114  $0  $0  $0  $0 
                                
As of January 30, 2016:                
As of January 28, 2017:                
Cash equivalents– money market account $5,386  $0  $0  $5,386  $114  $0  $0  $114 
                                
As of October 31, 2015:                
As of July 30, 2016:                
Cash equivalents – money market account $5,384  $0  $0  $5,384  $114  $0  $0  $114 

 

The fair values of cash, receivables, accounts payable, accrued expenses and other current liabilities approximate their carrying values because of their short-term nature. In addition, we believe that our credit facility obligation, which is recorded at historical cost and is classified as long-term debt on our condensed consolidated balance sheet as of July 29, 2017, approximates fair value as the interest rate is adjusted based on current market rates.

From time to time, we measure certain assets at fair value on a non-recurring basis, specifically long-lived assets evaluated for impairment.  These are typically store specific assets, which are reviewed for impairment whenever events or changes in circumstances indicate that recoverability of their carrying value is questionable.  If the expected, undiscounted future cash flows related to a store’s assets are less than their carrying value, an impairment loss would be recognized for the difference between estimated fair value and carrying value and recorded in selling, general and administrative expenses. We estimate the fair value of store assets using an income-based approach considering the cash flows expected over the remaining lease term for each location. These projections are primarily based on management’s estimates of store-level sales, gross margins, direct expenses, exercise of future lease renewal options and resulting cash flows and, by their nature, include judgments about how current initiatives will impact future performance. External factors, such as the local environment in which the store resides, including strip-mall traffic and competition, are evaluated in terms of their effect on sales trends. Changes in sales and operating income assumptions or unfavorable changes in external factors can significantly impact the estimated future cash flows. An increase or decrease in the projected cash flow can significantly decrease or increase the fair value of these assets, which would have an effect on the impairment recorded.

 

During the thirteen and thirty-nine weeks ended OctoberJuly 29, 2016,2017, we recorded an impairment charge of $193,000$916,000 on long-lived assets held and used.assets. Subsequent to this impairment, these long-lived assets had a remaining unamortized basis of $337,000.$286,000. During the thirteentwenty-six weeks ended October 31, 2015,July 29, 2017, we recorded an impairment charge of $161,000$1.6 million on long-lived assets held and used.assets. Subsequent to this impairment, these long-lived assets had a remaining unamortized basis of $69,000. During the thirty-nine weeks ended October 31, 2015, we recorded an impairment charge of $212,000 on long-lived assets held and used. Subsequent to this impairment, these long-lived assets had a remaining unamortized basis of $211,000.

We operate nine stores in Puerto Rico with combined net book value$1.3 million. There were no impairments of long-lived assets of $4.5 million. Puerto Rico is experiencing an economic crisis characterized by a deep recession and defaults on its public sector debt. Our estimate of undiscounted cash flows indicates thatrecorded during the carrying amounts of long-lived assets are expected to be recovered. Our estimate of cash flows might change in future periods pending further developments in the economic environment in Puerto Rico.thirteen or twenty-six weeks ended July 30, 2016.

 

Note 5 - Stock-Based Compensation

 

At our 2017 annual meeting of shareholders held on June 13, 2017, our shareholders approved a new equity incentive plan, the Shoe Carnival, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which replaces our 2000 Stock Option and Incentive Plan, as amended (the “2000 Plan”). According to the terms of the 2017 Plan, upon approval of the 2017 Plan by our shareholders, no further awards may be made under the 2000 Plan. A maximum of 1,000,000 shares of our common stock are available for issuance and sale under the 2017 Plan. In addition, any shares of our common stock subject to an award granted under the 2017 Plan, or to an award granted under the 2000 Plan that was outstanding on the date our shareholders approved the 2017 Plan, that expires, is cancelled or forfeited, or is settled for cash will, to the extent of such cancellation, forfeiture, expiration or cash settlement, automatically become available for future awards under the 2017 Plan.


Stock-based compensation includes stock options, cash-settled stock appreciation rights (SARs) and restricted stock awards. Additionally, we recognize stock-based compensation expense for the discount on shares sold to employees through our employee stock purchase plan. For the thirteen and thirty-ninetwenty-six weeks ended OctoberJuly 29, 2016, stock-based compensation expense for the employee stock purchase plan was $9,000 before the income tax benefit of

10

$3,000 and $33,000 before the income tax benefit of $12,000, respectively. For the thirteen and thirty-nine weeks ended October 31, 2015,2017, stock-based compensation expense for the employee stock purchase plan was $9,000 before the income tax benefit of $3,000 and $32,000$20,000 before the income tax benefit of $12,000,$8,000, respectively. For the thirteen and twenty-six weeks ended July 30, 2016, stock-based compensation expense for the employee stock purchase plan was $11,000 before the income tax benefit of $4,000 and $24,000 before the income tax benefit of $9,000, respectively.

No stock options have been granted since fiscal 2008. All outstanding options had vested as of the end of fiscal 2011; therefore no unrecognized compensation expense remains. In the first six months of fiscal 2017 there were 3,500 options exercised and there were 3,500 options outstanding and exercisable as of July 29, 2017.

 

The following section summarizes the share transactions for our restricted stock awards:

 

  Number of
Shares
  Weighted-
Average Grant
Date Fair
Value
 
Restricted stock at January 30, 2016  829,492  $22.13 
Granted  225,003   24.98 
Vested  (33,297)  25.66 
Forfeited  (34,980)  21.55 
Restricted stock at October 29, 2016  986,218  $22.68 
  Number of
Shares
 Weighted-
Average Grant
Date Fair
Value
Restricted stock at January 28, 2017  964,858  $22.63 
Granted  273,398   24.10 
Vested  (32,274)  24.24 
Forfeited or expired  (151,953)  17.74 
Restricted stock at July 29, 2017  1,054,029  $23.67 

 

The weighted-average grant date fair value of stock awards granted during the thirty-ninetwenty-six week periods ended OctoberJuly 29, 2017 and July 30, 2016 was $24.10 and October 31, 2015 was $24.98 and $24.43,$24.94, respectively. The total fair value at grant date of previously non-vestedrestricted stock awards that vested during the first ninesix months of fiscal 20162017 was $854,000.$782,000. The total fair value at grant date of previously non-vestedrestricted stock awards that vested during the first ninesix months of fiscal 20152016 was $106,000.$854,000. Of the 151,953 shares of restricted stock that were forfeited or that expired in the first six months of fiscal 2017, 135,000 shares were restricted stock awards that expired unvested in the first quarter of fiscal 2017, as the performance measures were not achieved. These awards represented the three tiers of the restricted stock awards granted on March 15, 2011.

 

The following sectiontable summarizes information regarding stock-based compensation expense recognized for restricted stock awards:

 

(In thousands) Thirteen
Weeks Ended
October 29,
2016
  Thirteen
Weeks Ended
October 31,
2015
  Thirty-Nine
Weeks Ended
October 29,
2016
  Thirty-Nine
Weeks Ended
October 31,
2015
 
Stock-based compensation expense before the recognized income tax benefit $1,295  $810  $3,197  $2,344 
Income tax benefit $482  $308  $1,208  $902 
(In thousands) Thirteen
Weeks Ended
July 29,
2017
 Thirteen
Weeks Ended
July 30,
2016
 Twenty-six
Weeks Ended
July 29,
2017
 Twenty-six
Weeks Ended
July 30,
2016
 Stock-based compensation before the recognized income tax effect $1,133  $1,414  $1,144  $1,902 
 Income tax effect $430  $538  $431  $725 

The $1.1 million of expense recognized in the first six months of fiscal 2017 was comprised of compensation expense of $2.1 million, partially offset by income of $916,000. The income was attributable to the reversal of the cumulative prior period expense for performance-based awards, which were deemed by management as no longer probable to vest prior to their expiration.

 

As of OctoberJuly 29, 2016,2017, approximately $8.7$6.2 million of unrecognized compensation expense remained related to both our performance-based and service-based restricted stock awards. The cost is expected to be recognized over a weighted average period of approximately 2.01.6 years. This incorporates our current assumptions with respect to the estimated requisite service period required to achieve the designated performance conditions for performance-based stock awards.


The following table summarizes the SARs activity:

 

   Number of
Shares
   Weighted-
Average
Exercise Price
   Weighted-
Average
Remaining
Contractual
Term (Years)
 
Outstanding at January 30, 2016  147,550  $24.26     
Forfeited  (6,500)  24.26     
Exercised  (22,375)  24.26     
Outstanding at October 29, 2016  118,675  $24.26   3.4 
             
Exercisable at October 29, 2016  25,557  $24.26   3.4 
  Number of
Shares
 Weighted-
Average
Exercise Price
 Weighted-
Average
Remaining
Contractual
Term (Years)
Outstanding at January 28, 2017  111,300  $24.26     
Forfeited  0   0.00     
Exercised  0   0.00     
Outstanding at July 29, 2017  111,300  $24.26   2.6 
             
Exercisable at July 29, 2017  64,741  $24.26   2.6 

 

SARs were granted during the first quarter of fiscal 2015 to certain non-executive employees, such that one-third of the shares underlying the SARs will vest and become fully exercisable on each of the first three anniversaries of the date of the grant and were assigned a five-year term from the date of grant, after which any unexercised SARs will

11

expire. Each SAR entitles the holder, upon exercise of their vested shares, to receive cash in an amount equal to the closing price of our common stock on the date of exercise less the exercise price, with a maximum amount of gain defined. The SARs granted during the first quarter of fiscal 2015 were issued with a defined maximum gain of $10.00 over the exercise price of $24.26.

 

The fair value of these liability awards are remeasured,re-measured, using a trinomial lattice model, at each reporting period until the date of settlement. Increases or decreases in stock-based compensation expense are recognized over the vesting period, or immediately for vested awards. The weighted-average fair value of outstanding, non-vested SAR awards as of OctoberJuly 29, 2017 and July 30, 2016 was $1.97 and October 31, 2015 was $4.53 and $3.70,$4.86, respectively.

 

The fair value was estimated using a trinomial lattice model with the following assumptions:

 

 October 29, 2016  October 31, 2015  July 29, 2017 July 30, 2016
Risk free interest rate yield curve  0.18% - 1.33%  0.01% - 1.52%  1.00% - 1.83%  0.19% - 1.03%
Expected dividend yield  1.1%  1.0%  1.6%  1.1%
Expected volatility  35.06%  35.34%  35.68%  36.32%
Maximum life  3.4 Years   4.4 Years        2.6 Years        3.6 Years 
Exercise multiple  1.34   1.34   1.34   1.34 
Maximum payout $10.00  $10.00  $10.00  $10.00 
Employee exit rate  2.2% - 9.0%  2.2% - 9.0%  2.2% - 9.0%  2.2% - 9.0%

 

The risk free interest rate was based on the U.S. Treasury yield curve in effect at the end of the reporting period. The expected dividend yield was based on our historical quarterly cash dividends, with the assumption that quarterly dividends would continue at that rate. Expected volatility was based on the historical volatility of our common stock. The exercise multiple and employee exit rate were based on historical option data.

 

The following table summarizes information regarding stock-based compensation expense recognized for SARs:

 

(In thousands) Thirteen
Weeks Ended
October 29,
2016
  Thirteen
Weeks Ended
October 31,
2015
  Thirty-Nine
Weeks Ended
October 29,
2016
  Thirty-Nine
Weeks Ended
October 31,
2015
 
Stock-based compensation expense before the recognized income tax benefit $12  $24  $208  $219 
Income tax benefit $4  $9  $79  $84 

  Thirteen
Weeks Ended
July 29,
2017
 Thirteen
Weeks Ended
July 30,
2016
 Twenty-six
Weeks Ended
July 29,
2017
 Twenty-six
Weeks Ended
July 30,
2016
Stock-based compensation before the recognized income tax effect $(261) $72  $(237) $212 
Income tax effect $(99) $27  $(89) $81 

As of OctoberJuly 29, 2016,2017, approximately $155,000$23,000 in unrecognized compensation expense remained related to non-vested SARs. This expense is expected to be recognized over a weighted-average period of approximately 0.90.7 years.

 

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

 

Factors That May Affect Future Results

 

This quarterly report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, but are not limited to: general economic conditions in the areas of the continental United States in which our stores are located and the impact of the ongoing economic crisis in Puerto Rico on sales at, and cash flows of, our stores located in Puerto Rico; the effects and duration of economic downturns and unemployment rates; changes in the overall retail environment and more specifically in the apparel and footwear retail sectors; our ability to generate increased sales at our stores; our ability to successfully navigate the increasing use of on-line retailers for fashion purchases and the impact on traffic and transactions in our physical stores; our ability to attract customers to our e-commerce website and to successfully grow our e-commerce sales; the potential impact of national and international security concerns on the retail environment; changes in our relationships with key suppliers; the impact of competition and pricing;

12

our ability to successfully manage and execute our marketing initiatives and maintain positive brand perception and recognition; changes in weather patterns, consumer buying trends and our ability to identify and respond to emerging fashion trends; the impact of disruptions in our distribution or information technology operations; the effectiveness of our inventory management; the impact of hurricanes or other natural disasters on our stores, as well as on consumer confidence and purchasing in general; risks associated with the seasonality of the retail industry; the impact of unauthorized disclosure or misuse of personal and confidential information about our customers, vendors and employees; our ability to manage our third-party vendor relationships; our ability to successfully execute our growthbusiness strategy, including the availability of desirable store locations at acceptable lease terms, our ability to open new stores in a timely and profitable manner, including our entry into major new markets, and the availability of sufficient funds to implement our growthbusiness plans; higher than anticipated costs or impairment charges associated with the closing of underperforming stores; our ability to successfully grow our e-commerce sales; the inability of manufacturers to deliver products in a timely manner; changes in the political and economic environments in, and continued favorable trade relations with China, Brazil, Europe and East Asia, whereother countries which are the primarymajor manufacturers of footwear are located;footwear; the impact of regulatory changes in the United States and the countries where our manufacturers are located; the continued favorable trade relations between the United States and China and the other countries which are the major manufacturers of footwear; the resolution of litigation or regulatory proceedings in which we are or may become involved; our ability to meet our labor needs while controlling costs; and future stock repurchases under our stock repurchase program and future dividend payments. For a more detailed discussion of certain risk factors, see the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended January 30, 2016.28, 2017.

 

General

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information to assist the reader in better understanding and evaluating our financial condition and results of operations. We encourage you to read this in conjunction with our Condensed Consolidated Financial Statements and the notes thereto included in PARTPart I, ITEM 1. FINANCIAL STATEMENTSItem 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended January 30, 201628, 2017, as filed with the SEC.

 

Overview of Our Business

 

Shoe Carnival, Inc. is one of the nation’s largest family footwear retailers, providing the convenience of shopping at any of our over 400 store locations or online at shoecarnival.com. Our stores combine competitive pricing with a fun and promotional, in-store marketing effort that encourages customer participation and injects fun and surprise into every shopping experience. We believe this fun and promotional atmosphere results in various competitive advantages, including increased multiple unit sales; the building of a loyal, repeat customer base; the creation of word-of-mouth advertising; and enhanced sell-through of in-season goods. A similar customer experience is reflected in our e-commerce site through special promotions and limited time sales, along with relevant fashionproduct stories featured on our home page.


Our objective is to be the destination retailer-of-choice for a wide range of consumers seeking value priced, current season name brand and private label footwear. Our product assortment includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes for the entire family in four general categories - women’s, men’s, children’s and athletics. In addition to footwear, our stores carry selected accessory items such as socks, belts, shoe care items, handbags, jewelry, scarves and wallets. Our e-commerce site offers customers an opportunity to choose from a large selection of products in all of the same categories of footwear with a depth of sizes and colors that may not be available in some of our smaller stores, and introduces our concept to consumers who are new to Shoe Carnival, in both existing and new markets.

In addition to footwear, our stores carry complementary accessories such as socks, belts, shoe care items, handbags, sport bags, backpacks, jewelry, scarves and wallets. Our e-commerce site also carries certain accessories such as handbags, sport bags and backpacks.

 

Critical Accounting Policies

 

It is necessary for us to include certain judgments in our reported financial results.  These judgments involve estimates based in part on our historical experience and incorporate the impact of the current general economic climate and company-specific circumstances.  However, because future events and economic conditions are inherently uncertain, our actual results could differ materially from these estimates.  Our accounting policies that require more significant judgments include those with respect to merchandise inventories, valuation of long-lived

13

assets, insurance reserves and income taxes and are discussed in our Annual Report on Form 10-K for the fiscal year ended January 30, 2016.28, 2017.

 

There have been no material changes to our critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the fiscal year ended January 30, 2016.28, 2017. See Note 3 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on recently issued accounting pronouncements.

 

Results of Operations Summary Information

 

  Number of Stores  Store Square Footage   
  Beginning          End of  Net  End  Comparable 
Quarter Ended Of Period  Opened  Closed  Period  Change  of Period  Store Sales 
April 30, 2016  405   3   4   404   (13,000)  4,452,000   2.7%
July 30, 2016  404   9   0   413   79,000   4,531,000   0.5%
October 29, 2016  413   3   1   415   13,000   4,544,000   (0.4)%
                             
Year-to-date 2016  405   15   5   415   79,000   4,544,000   0.9%
                             
May 2, 2015  400   7   6   401   15,000   4,434,000   3.0%
August 1, 2015  401   5   6   400   (9,000)  4,425,000   0.5%
October 31, 2015  400   6   2   404   40,000   4,465,000   6.0%
                             
Year-to-date 2015  400   18   14   404   46,000   4,465,000   3.3%
  Number of Stores Store Square Footage  
Quarter Ended Beginning
Of Period
 Opened Closed End of
Period
 Net
Change
 End of
Period
 Comparable
Store Sales
April 29, 2017  415   7   5   417   7,000   4,533,000   (3.9)%
July 29, 2017  417   5   4   418   (12,000)  4,521,000   0.4%
                             
Year-to-date 2017  415   12   9   418   (5,000)  4,521,000   (1.9)%
                             
April 30, 2016  405   3   4   404   (13,000)  4,452,000   2.7%
July 30, 2016  404   9   0   413   79,000   4,531,000   0.5%
                             
Year-to-date 2016  405   12   4   413   66,000   4,531,000   1.6%

 

Comparable store sales for the periods indicated include stores that have been open for 13 full months after such store’s grand opening prior to the beginning of the period, including those stores that have been relocated or remodeled. Therefore, stores opened or closed during the periods indicated are not included in comparable store sales. We include e-commerce sales in our comparable store sales. Due to our multi-channel retailer strategy, we view the e-commerce sales as an extension of our physical stores.


The following table sets forth our results of operations expressed as a percentage of net sales for the periods indicated:

 

 Thirteen
Weeks Ended
October 29, 2016
 Thirteen
Weeks Ended
October 31, 2015
 Thirty-Nine
Weeks Ended
October 29, 2016
 Thirty-Nine
Weeks Ended
October 31, 2015
 Thirteen
Weeks Ended
July 29, 2017
 Thirteen
Weeks Ended
July 30, 2016
 Twenty-six
Weeks Ended
July 29, 2017
 Twenty-six
Weeks Ended
July 30, 2016
Net sales  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%
Cost of sales (including buying, distribution and occupancy costs)  70.1   69.9   70.7   70.4   71.0   71.0   71.3   71.0 
Gross profit  29.9   30.1   29.3   29.6   29.0   29.0   28.7   29.0 
Selling, general and administrative expenses  24.3   24.5   24.2   24.3   26.3   26.1   24.7   24.1 
Operating income  5.6   5.6   5.1   5.3   2.7   2.9   4.0   4.9 
Interest (income) expense, net  0.0   0.0   0.0   0.0   0.0   0.0   0.0   0.0 
Income before income taxes  5.6   5.6   5.1   5.3   2.7   2.9   4.0   4.9 
Income tax expense  2.1   2.1   1.9   2.0   1.0   1.1   1.5   1.9 
Net income  3.5%  3.5%  3.2%  3.3%  1.7%  1.8%  2.5%  3.0%

 

Executive Summary for ThirdSecond Quarter Ended OctoberJuly 29, 20162017

 

Our third quarter operating results were below our expectations due to slower salesWe had positive momentum early in the second halfquarter of the quarter. While we recordedfiscal 2017 with comparable store sales increasesup low single-digits in athletic merchandise in each month ofMay. As the third quarter sales of our fallprogressed and winter merchandise were not as strong aswe started to enter the prior year, resulting in a high single-digit decline in

14

important back-to-school selling period, comparable store sales flattened as certain markets experienced later back-to-school dates, which shifted sales from the second quarter to the third quarter. As a result, we ended the quarter with a 0.4% increase in comparable store sales. Faced with an uncertain retail environment, we continue to remain focused on effectively managing inventory and maintaining tight controls over our boot categoriescost structure in fiscal 2017. Highlights for the quarter. Additional highlights for the thirdsecond quarter of fiscal 20162017 are as follows:

 

·Net sales increased $4.8$3.2 million, or 1.8%1.4%, in the thirdsecond quarter of fiscal 20162017 compared to the same period last year primarily as a result of store growth. Despite a 0.4% decrease in comparable store sales and a mid single-digit decline in store traffic during the quarter, weyear. We experienced increases in our conversion rate, average sales per transaction, average units per transaction and conversion during the quarter. Store traffic declined mid-single digits and average unit retail. Although overall salesretail was flat compared to the second quarter of men’s, women’s and children’s non-athletic product were down on a comparable store basis, particularly in our boot categories, we posted a low single-digit increase in adult athletics and we continued to produce positive results with sandals.fiscal 2016.

·Our gross profit margin decreased to 29.9%of 29.0% in the thirdsecond quarter of fiscal 2016 from 30.1% in2017 was flat compared to the prior year.second quarter of fiscal 2016. Our merchandise margin, increased 0.1% primarily due to margin increases on the sales of both our athletic and non-athletic product for the quarter partially offset by an increase in expense related to our multi-channel sales initiatives. Buying,along with buying, distribution and occupancy costs,expenses as a percentage of sales, increased 0.3% dueremained flat compared to the deleveraging effectsecond quarter of lower same store sales and new store growth.fiscal 2016.

·We repurchased 375,631469,000 shares of our common stock during the quarter at a total cost of $10.2 million under our share repurchase program and ended the fiscal quarter with $33.5$18.5 million in cash and cash equivalents. We endedBorrowings under our credit facility totaled $26.7 million at the end of the second quarter withof fiscal 2017. These borrowings were primarily used to fund the purchase of merchandise inventory required to meet peak demand for the back-to-school season. As of the filing date of this Quarterly Report on Form 10-Q, we had no interest bearing debt.outstanding borrowings under our credit facility.

·We opened threefive stores including two small-marketand closed four stores during the thirdsecond quarter of fiscal 2016, bringing our total to five small-market stores opened in fiscal 2016. In aggregate, we expect to open seven small-market stores in fiscal 2016 out of a total of 19 new store openings planned for the year. We continue to expect consistent small market unit growth over the next several years as we expand into new and existing markets. Two stores were relocated and one store was closed during the third quarter of fiscal 2016,2017, ending the quarter with 415418 stores.
·During the third quarter of fiscal 2016, we completed the launch of a new online service which gives our customers the option to buy online, pick up in store and buy online, ship to store. This feature provides the convenience of local pickup for our customers with the added benefit of driving traffic back to our stores. This launch represents our continued effort to evolve our customer experience and focus on multi-channel initiatives that we believe will better position us for long-term growth as consumer shopping habits evolve.
·During the third quarter of fiscal 2016, we increased membership in our Shoe Perks customer loyalty program by an additional 1.1 million members, which bring total membership to 12.1 million customers. For the quarter, member sales accounted for approximately 67% of our total business and members on average spent 18% more per transaction than non-members. We believe our Shoe Perks program affords us tremendous opportunity to communicate, build relationships and engage with our most loyal shoppers, which we believe will result in long-term sales gains.

 

Results of Operations for the ThirdSecond Quarter Ended OctoberJuly 29, 20162017

 

Net Sales

 

Net sales increased $4.8$3.2 million to $274.5$235.1 million during the thirdsecond quarter of fiscal 2016,2017, a 1.8%1.4% increase over the prior year's thirdyear’s second quarter net sales of $269.7$231.9 million. Of this increase in net sales, $7.4$800,000 was attributable to the 0.4% increase in comparable store sales and $5.7 million was attributable to the sales generated by the 2328 new stores we opened since the beginning of the thirdsecond quarter of fiscal 2015. This increase was2016. These increases were partially offset by a 0.4%, or $0.7 million, decrease in comparable store sales and a $1.9 million loss in sales of $3.3 million from the eight14 stores closed since the beginning of the thirdsecond quarter of fiscal 2015. Slower than anticipated sales in non-athletic footwear, particularly boots, and a mid single-digit decline in store traffic were the primary factors in our comparable store sales decrease during the third quarter.2016.

 

Gross Profit

 

Gross profit increased to $82.0$68.2 million during the thirdsecond quarter of fiscal 20162017, compared to gross profit of $81.3$67.2 million for the thirdsecond quarter of fiscal 2015.2016, primarily due to the increase in net sales. Our gross profit margin decreased to 29.9%remained flat at 29.0% compared to 30.1% in the thirdsecond quarter of fiscal 2015.2016. Our merchandise margin, increased 0.1% primarily due to margin increases on the sales of both our athletic and non-athletic product for the quarter partially offset by an increase in expense related to our multi-channel sales initiatives. Buying,along with buying, distribution and occupancy costs however, increased 0.3% as a percentage of sales, duringremained flat compared to the third

15

second quarter of fiscal 2016 compared to the same period last year primarily due to the deleveraging effect of lower same store sales and new store growth.2016.


Selling, General and Administrative Expenses

 

Selling, general and administrative expenses increased $414,000$1.2 million in the thirdsecond quarter of fiscal 20162017 to $66.6$61.8 million compared to $60.6 million in the same prior year period.second quarter of fiscal 2016. As a percentage of sales, these expenses decreasedincreased to 24.3%26.3% in the thirdsecond quarter of fiscal 20162017 from 24.5%26.1% in the thirdsecond quarter of fiscal 2015. Significant changes2016. The overall increase in selling, general and administrative expenses during the second quarter of fiscal 2017 was primarily due to a $1.0 million increase in expenses between the comparative periods included the following:

·On an overall basis, the net change in selling, general and administrative expenses was primarily driven by increases in wages, depreciation and stock-based compensation expense and reductions in incentive compensation, employee health care and advertising expense during the third quarter of fiscal 2016 compared to the third quarter of the prior year.

·We incurred additional selling expense of $897,000 during the third quarter of fiscal 2016 compared to the third quarter of last year related to the operation of 23 new stores opened since the beginning of the third quarter of fiscal 2015, net of expense reductions associated with the closure of eight stores since the beginning of the same period.
·Stock-based compensation expense increased $473,000 in the third quarter of fiscal 2016 compared to the same period last year. This was primarily attributable to performance and service-based stock awards granted in fiscal 2016. 
·Incentive compensation decreased $790,000 in the third quarter of fiscal 2016 compared to the same period last year. This decrease was primarily attributable to lower financial performance against the defined metrics associated with our performance-based compensation in the third quarter of fiscal 2016.

for new stores net of expense reductions for stores that have closed and a $916,000 increase in impairments of long-lived assets. These increases were partially offset by decreases in stock-based compensation and incentive compensation expense totaling $849,000.

 

Pre-opening costs included in selling, general and administrative expenses were $351,000$234,000 in the thirdsecond quarter of fiscal 20162017 compared to $500,000$353,000 in the thirdsecond quarter last year. We opened threefive new stores in the thirdsecond quarter of fiscal 20162017 compared to sixnine new stores in the thirdsecond quarter of fiscal 2015.2016. Pre-opening costs, such as advertising, payroll and supplies, incurred prior to the opening of a new store are charged to expense in the period in which they are incurred. The total amount of pre-opening expense incurred will vary by store depending on the specific market and the promotional activities involved.

 

Store closing costs included in selling, general and administrative expenses were $335,000,$1.6 million, or 0.1%0.7% as a percentage of sales, in the thirdsecond quarter of fiscal 2017. Store closing costs were $74,000 in the second quarter last year. Four stores were closed in the second quarter of fiscal 2017 compared to no store closings in the second quarter of fiscal 2016. StoreIncluded in store closing costs were $611,000, or 0.2% as a percentage of sales, in the third quarter last year. One store was closed in the thirdsecond quarter of fiscal 2016 compared to two stores in2017 were impairments of long-lived assets of $916,000. There were no impairments of long-lived assets recorded during the thirdsecond quarter of fiscal 2015.2016.

 

Income Taxes

 

The effective income tax rate for the thirdsecond quarter of fiscal 20162017 was 37.2%37.9% as compared to 38.0% for the same time period in fiscal 2015.2016. Our provision for income tax expense is based on the current estimate of our annual effective tax rate and is adjusted as necessary for quarterly events.

 

Results of Operations for NineSix Month Period Ended OctoberJuly 29, 20162017

 

Net Sales

 

Net sales increased $16.6decreased $3.9 million to $766.9$488.5 million duringfor the nine-monthsix-month period ended OctoberJuly 29, 2016,2017, a 2.2% increase0.8% decrease compared to net sales of $750.3$492.4 million for the nine-monthsix-month period ended October 31, 2015.July 30, 2016. Of the $16.6 million increasethis decrease in net sales, approximately $18.6$8.9 million was attributable to the 35 new stores we opened since the beginning of fiscal 20151.9% decrease in comparable store sales and $7.2$6.8 million was attributable to our 0.9% increase in comparable store sales for the nine-month period ended October 29, 2016. These increases were partially offset by a loss of $9.2 million in sales from the 2018 stores closed since the beginning of fiscal 2015.2016. These decreases were partially offset by an increase in sales of $11.8 million generated by the 31 new stores opened since the beginning of fiscal 2016.

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Gross Profit

 

Gross profit increaseddecreased $2.4 million to $224.8 million during the first nine months of fiscal 2016 compared to gross profit of $222.3$140.4 million in the first ninesix months of fiscal 2015. Our2017 primarily due to the decrease in net sales. The gross profit margin decreased to 29.3% compared to 29.6% infor the first ninesix months of fiscal 2015. Our2017 decreased to 28.7% from 29.0% as reported in the comparable prior year period. The merchandise margin decreased 0.4% primarily due to expenses related to our multi-channel sales initiatives. Buying,increased 0.2%, but buying, distribution and occupancy costs decreased 0.1%increased 0.5% as a percentage of sales during the first nine months of fiscal 2016 compared to the same period last year primarily due a decrease in outbound freightto the deleveraging effect of lower same store sales on occupancy costs.

 


Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $3.2$1.9 million in the first ninesix months of fiscal 20162017 to $185.4$120.7 million compared to the same prior year period.period last year. As a percentage of sales, these expenses decreasedincreased to 24.2%24.7% in the first ninesix months of fiscal 20162017 from 24.3%24.1% in the third quarterfirst six months of fiscal 2015. Significant changes2016. The overall increase in selling, general and administrative expenses during the first six months of fiscal 2017 was primarily due to a $2.2 million increase in expenses between the comparative periods included the following:for new stores net of expense reductions for stores that have closed, a $1.6 million increase in impairments of long-lived assets and a $1.1 million increase in employee healthcare expense. These increases were partially offset by a $2.2 million decrease in selling expenses associated with our comparable store base and decreases in stock-based compensation and incentive compensation expense totaling $1.4 million.

·On an overall basis, the net change in selling, general and administrative expenses was primarily driven by increases in wages, other employee benefits and stock-based compensation expense and reductions in incentive compensation, employee health care and fixed asset write-offs during the first nine months of fiscal 2016 compared to the first nine months of the prior year.
·We incurred additional selling expense of $1.0 million during the first nine months of fiscal 2016 compared to the first nine months of last year related to the operation of 35 new stores opened since the beginning of fiscal 2015, net of expense reductions associated with the closure of 20 stores since the beginning of the same period.
·Stock-based compensation expense increased $843,000 in the first nine months of fiscal 2016 compared to the same period last year. This was primarily attributable to management assumptions related to the timing and probability of the vesting of performance-based stock awards and the net impact of the related adjustments on stock-based compensation expense and grants of awards in fiscal 2016.
·Incentive compensation decreased $1.4 million in the first nine months of fiscal 2016 compared to the same period last year. This decrease was primarily attributable to lower financial performance against the defined metrics associated with our performance-based compensation in the first nine months of fiscal 2016.

 

In the first ninesix months of fiscal 2016,2017, pre-opening costs included in selling, general and administrative expenses were $815,000,$517,000, or 0.1% as a percentage of sales, compared to $1.1 million,463,000, or 0.2%0.1% as a percentage of sales, in the same period last year. Pre-opening costs, such as advertising, payroll and supplies, incurred prior to the opening of a new store are charged to expense in the period in which they are incurred. The total amount of pre-opening expense incurred will vary by store depending on the specific market and the promotional activities involved.

 

Store closing costs and non-cash impairment charges included in selling, general and administrative expenses were $631,000,$2.7 million, or 0.5% as a percentage of sales, in the first six months of fiscal 2017. Store closing costs were $296,000, or 0.1% as a percentage of sales, in the first nine months of fiscal 2016. Store closing costs and non-cash impairment charges of long-lived assets were $1.8 million, or 0.2% as a percentage of sales, in the first ninesix months of last year. We closed fivenine stores in the first ninesix months of fiscal 20162017 and 14four stores were closed in the first ninesix months of fiscal 2015.2016. Included in the store closing costs in the first six months of fiscal 2017 were impairments of long-lived assets of $1.6 million. There were no impairments of long-lived assets recorded during the first six months of fiscal 2016.

 

Income Taxes

 

The effective income tax rate for the first ninesix months of fiscal 20162017 was 37.8%37.7% compared to 38.5%38.1% for the same period in fiscal 2015.2016. Our provision for income tax expense is based on the current estimate of our annual effective tax rate and is adjusted as necessary for quarterly events. The decrease in the effective income tax rate between periods was primarily due to changes in state tax rates.

 

Liquidity and Capital Resources

 

We anticipate that our existingOur primary sources of liquidity are cash and cash flowsequivalents on hand, cash generated from operations and availability under our credit facility. We believe these resources will be sufficient to fund our planned store expansion along with other capital expenditures,cash needs, as they arise, for at least the next 12 months. Our primary uses of cash are for working capital, needs,which are principally inventory purchases, store initiatives, potential dividend payments, potential share repurchases under our share repurchase program, the financing of capital projects, including investments in new systems, and various other commitments and obligations, as they arise, for at least the next 12 months.obligations.

17

 

Cash Flow - Operating Activities

 

Our net cash used in operating activities was $26.5 million in the first six months of fiscal 2017 compared to cash provided by operating activities was $21.5of $12.6 million in the first ninesix months of fiscal 2016 compared to $23.3 million in the first nine months of fiscal 2015.2016. These amounts reflect our income from operations adjusted for non-cash items and working capital changes. The year-over-year decrease in operating cash flow was primarily driven by a reductionan increase in merchandise inventories required to meet peak demand for the back-to-school season and by the timing of payments for accounts payable and accrued liabilities.

 

Working capital decreasedincreased to $268.7$271.6 million at OctoberJuly 29, 2016,2017 from $284.3$269.9 million at October 31, 2015,July 30, 2016, primarily due to decreasesthe decrease in cashaccounts payable and an increase in merchandise inventory, partially offset by athe decrease in accounts payablecash and cash equivalents compared to the thirdend of the second quarter of the prior year. The current ratio was 4.03.4 as of OctoberJuly 29, 2016,2017, compared to 4.13.0 at October 31, 2015.July 30, 2016.

 

Cash Flow - Investing Activities

 

Our cash outflows for investing activities are primarily for capital expenditures. During the first ninesix months of fiscal 2016,2017, we expended $17.4$12.7 million for the purchase of property and equipment, of which $12.9$8.1 million was for new stores, remodeling and relocations. During the first ninesix months of fiscal 2015,2016, we expended $22.3$11.9 million for the purchase of property and equipment, of which $15.0$11.7 million was for new stores, remodeling and relocations. The remaining capital expenditures in both periods were for continued investments in technology and normal asset replacement activities.


 

Cash Flow - Financing Activities

 

Cash outflows for financing activities are primarily forhave represented cash dividend payments, share repurchases and share repurchases.payments on our credit facility. Shares of our common stock can be either acquired as part of a publicly announced share repurchase program or withheld by us in connection with employee payroll tax withholding upon the vesting of restricted stock awards. Our cash inflows from financing activities have represented proceeds from the issuance of shares as a result of stock option exercises, and purchases under our Employee Stock Purchase Plan.Plan and borrowings under our credit facility.

 

During the first ninesix months of fiscal 2016,2017, net cash used in financing activities was $39.3$5.2 million compared to net cash used in financing activities of $13.6$27.9 million in the first ninesix months of fiscal 2015.2016. The increasedecrease in cash used in financing activities between the two respective periods was primarily attributable to the $35.4net borrowings of $26.7 million, partially offset by an increase of $4.1 million in common stock repurchased under our share repurchase program duringcompared to the first ninesix months of fiscal 2016, compared to the $10.2 million repurchased in the first nine months of fiscal 2015.2016.

 

Capital Expenditures

 

Capital expenditures for fiscal 2016,2017, including actual expenditures during the first ninesix months, are expected to be between $21$22 million and $22$23 million, with approximately $16$14 million to be used for new stores, relocations and remodels. The remaining capital expenditures are expected to be incurred for continued investments in technology and normal asset replacement activities. Lease incentives to be received from landlords during fiscal 2016,2017, including actual amounts received during the first ninesix months, are expected to be approximately $4 to $5 million. The actual amount of cash required for capital expenditures for store operations depends in part on the number of new stores opened and relocated, the amount of lease incentives, if any, received from landlords and the number of stores remodeled.

 

Store Openings and Closings

 

We aim to realize positive long-term financial performance for our store portfolio. We utilize a formalizedformal review process in our evaluation of potential new store sites as well as for decisions surrounding leases on existing store locations. Our approach is both qualitative and quantitative in nature. We look to continually enhance this process and utilizewith tools such as real estate specific software toolsused for portfolio analysis. These enhancementsanalysis that aid us in identifying the best possibleviable locations for future expansion and identifying potential store closings and relocations. We believe this will enable us to realize positive long-term financial performance of our portfolio.

 

In fiscal 2016,2017, we anticipate opening 19 new stores, including seven small-market stores. We opened 1512 stores in the first ninesix months of fiscal 2016, including five small-market stores.2017. Pre-opening expenses, including rent, freight, advertising, salaries and supplies, are presently expected to total approximately $1.7$1.4 million for fiscal 2016,2017, or an average of $87,000$72,000 per store. During fiscal 2015,2016, we opened 2019 new stores and expended $1.9$1.6 million on pre-opening expenses, or an average of $96,000$85,000 per store. The opening of new stores is dependent upon, among other things, the

18

availability of desirable locations, the negotiation of acceptable lease terms and general economic and business conditions affecting consumer spending in areas we target for expansion.

 

We anticipate closing 25 to 27 stores in fiscal 2017. We closed fivenine stores during the first ninesix months of fiscal 2016. Fourteen2017. Four stores were closed during the first ninesix months of fiscal 2015. Currently, we have four additional store closings scheduled for the fourth quarter of fiscal 2016. The timing and actual amount of expense recorded in closing a store can vary significantly depending, in part, on the period in which management commits to a closing plan, the remaining basis in the fixedlong-lived assets to be disposed of at closing and the cost incurred in terminating the lease.

We believe that a continued, disciplined approach to new store openings is very important as we leverage our multi-channel strategy and pursue opportunities for brick-and-mortar stores across large, mid and smaller markets. Over the past several years, we have analyzed our entire portfolio of stores, with a concentration on underperforming stores, to meet our long-term goal of increasing shareholder value through increasing operating income. Our objective is to identify and address underperforming stores that produce low or negative contribution and either renegotiate lease terms, relocate or close the store. Based on this analysis, we have identified 30 to 35 stores that we plan to close in fiscal 2018 if we cannot improve the performance of those stores to meet our minimum contribution level. Even though this would reduce our overall net sales volume, we believe this strategy would realize long-term improvement in operating income and diluted earnings per share. We expect new store openings for fiscal 2018 will continue to review our annual store growth rate based on our view of the internal and external opportunities and challengesbe in the marketplace.low single digit range. We remain committed to long-term strategic store growth; however, with the changing landscape in brick-and-mortar stores, we believe more attractive real estate opportunities will become available in the marketplace if we remain diligent in our approach.

 


Dividends

 

On September 8, 2016,June 13, 2017, our Board of Directors approved the payment of our thirdsecond quarter cash dividend to our shareholders.  The dividend of $0.07$0.075 per share was paid on OctoberJuly 17, 20162017 to shareholders of record as of the close of business on OctoberJuly 3, 2016.2017.

 

The declaration and payment of any future dividends are at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors. Our credit agreement (described below) permits the payment of cash dividends as long as no default or event of default exists under the credit agreement both immediately before and immediately after giving effect to the cash dividends, and the aggregate amount of cash dividends for a fiscal year do not exceed $10.0 million.

 

Credit Facility

 

OurOn March 27, 2017, we entered into a second amendment of our current unsecured credit agreement provides(as amended, the “Credit Agreement”) to extend the expiration date by five years to March 27, 2022, and to renegotiate certain terms and conditions. The Credit Agreement, as amended, continues to provide for up to $50.0 million in cash advances and commercial and standby letters of credit with borrowing limits based on eligible inventory. Itinventory, which amount may be increased from time to time by up to an additional $50.0 million, without the consent of any lender, if certain conditions are met. The Credit Agreement contains covenants which stipulate: (1) Total Shareholders’ Equity adjusted for(as defined in the effect of any share repurchases,Credit Agreement) will not fall below that$250.0 million at the end of the prioreach fiscal year-end;quarter; (2) the ratio of funded debt plus three times rent to EBITDA (as defined in the Credit Agreement) plus rent will not exceed 2.5 to 1.0; and (3) the aggregate amount of cash dividends for a fiscal year will not exceed 30% of condensed consolidated net income for the immediately preceding fiscal year,$10.0 million; and in no event may the total(4) distributions in any fiscal year exceed 25%the form of redemptions of our common stock may be made solely with cash on hand so long as before and immediately after such distributions there are no revolving loans outstanding under the prior year’s ending net worth.Credit Agreement. We were in compliance with these covenants as of OctoberJuly 29, 2016.2017. Should a default condition be reported, the lenders may preclude additional borrowings and call all loans and accrued interest at their discretion. There were noThe credit facility bears interest, at our option, at (1) the agent bank’s prime rate (as defined in the Credit Agreement) plus 1%, with the prime rate defined as the greater of (a) the Federal Funds rate plus 0.50% or (b) the interest rate announced from time to time by the agent bank as its “prime rate” or (2) LIBOR plus 1.25% to 2.50%, depending on our achievement of certain performance criteria. A commitment fee is charged at 0.20% to 0.35% per annum, depending on our achievement of certain performance criteria, on the unused portion of the bank group’s commitment. As of July 29, 2017, there was $26.7 million of borrowings outstanding under the credit facility and letters of credit outstanding were $1.0 million at October 29, 2016.$1.4 million. As of OctoberJuly 29, 2016, $49.02017, $21.9 million was available to us for additional borrowings under the credit facility. As of the filing date of this Quarterly Report on Form 10-Q, we had no outstanding borrowings under our credit facility.

 

Share Repurchase Program

 

On December 9, 2015,6, 2016, our Board of Directors authorized a new share repurchase program for up to $50 million of outstanding common stock, effective January 1, 2016.2017. The purchases may be made in the open market or through privately negotiated transactions, from time-to-time through December 31, 2016,2017, and in accordance with applicable laws, rules and regulations. On January 21, 2016,27, 2017, we entered into a stock repurchase plan for the purpose of repurchasing shares of our common stock in accordance with guidelines specified under Rule 10b5-1 of the Securities Exchange Act. After its expiration, we entered into another such plan on June 28, 2016 (collectively, theAct of 1934 (the “Rule 10b5-1 Plans”Plan”). The Rule 10b5-1 Plans werePlan was established pursuant to, and as part of, our share repurchase program and permitpermitted shares to be repurchased in accordance with pre-determined criteria when repurchases would otherwise be prohibited, such as during self-imposed blackout periods, or under insider trading laws. The Rule 10b5-1 Plan was to expire on May 26, 2017, but we terminated the plan on May 17, 2017 to ensure we remained in compliance with the covenant in our Credit Agreement regarding redemptions of our common stock described above. Under the terms of our Credit Agreement, we are not permitted to repurchase any shares of our common stock while there are outstanding borrowings under the Credit Agreement. Our share repurchase program may be amended, suspended or discontinued at any time and does not commit us to repurchase shares of our common stock. We have funded, and intend to continue to fund, the share repurchase program from cash on hand, and any shares acquired will be available for stock-based compensation awards and other corporate purposes. The actual number and value of the shares to be purchased will depend on the performance of our stock price and other market conditions.

 


During the thirdsecond quarter of fiscal 2016,2017, we repurchased 375,631469,000 shares of common stock at a total cost of $10.2 million under the new share repurchase program. As of OctoberJuly 29, 2016,2017, approximately 1.61.5 million shares at an aggregate cost of $39.7$36.5 million had been repurchased under the new share repurchase program. The amount that remained available under the share repurchase program at OctoberJuly 29, 20162017 was $10.3$13.5 million.

19

 

Seasonality and Quarterly Results

 

Our quarterly results of operations have fluctuated, and are expected to continue to fluctuate in the future, primarily as a result of seasonal variances and the timing of sales and costs associated with opening new stores and closing underperforming stores. Non-capital expenditures, such as advertising and payroll, incurred prior to the opening of a new store are charged to expense as incurred. The timing and actual amount of expense recorded in closing an individual store can vary significantly depending, in part, on the period in which management commits to a closing plan, the remaining basis in the fixed assets to be disposed of at closing and the cost incurred in terminating the lease. Therefore, our results of operations may be adversely affected in any quarter in which we incur pre-opening expenses related to the opening of new stores or incur store closing costs related to the closure of underperforming stores.

 

We have three distinct peak selling periods: Easter, back-to-school and Christmas. To prepare for our peak shopping seasons, we must order and keep in stock significantly more merchandise than we would carry during other parts of the year. Any unanticipated decrease in demand for our products during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could reduce our net sales and gross margins and negatively affect our profitability. Our operating results depend significantly upon the sales generated during these periods.

 

ITEM  3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are exposed to market risk in that the interest payable under our credit facility is based on variable interest rates and therefore is affected by changes in market rates. We do not use interest rate derivative instruments to manage exposure to changes in market interest rates. We had no borrowingsA 1% change in the weighted average interest rate charged under ourthe credit facility duringwould have resulted in interest expense fluctuating by approximately $21,000 for the first nine monthssecond quarter of fiscal 2016 or fiscal 2015.2017.

 

ITEM 4.  CONTROLS AND PROCEDURES

 

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of OctoberJuly 29, 2016,2017, that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

There has been no significant change in our internal control over financial reporting that occurred during the quarter ended OctoberJuly 29, 2016,2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

20


SHOE CARNIVAL, INC.
PART II - OTHER INFORMATION

 

ITEM 1A.   RISK FACTORS

 

You should carefully consider the risks and uncertainties we describe both in this Quarterly Report on Form 10-Q and in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended January 30, 201628, 2017 before deciding to invest in, or retain, shares of our common stock. If any of these risks or uncertainties actually occur, we may not be able to conduct our business as currently planned and our financial condition, results of operations or cash flows could be materially and adversely affected. There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended January 30, 2016.28, 2017.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Issuer Purchases of Equity Securities

Issuer Purchases of Equity Securities
             
Period  Total Number
of Shares
Purchased(1)
   Average
Price Paid
per Share
   Total Number
Of Shares
Purchased
as Part
of Publicly
Announced
Programs(2)
  Approximate
Dollar Value
of Shares
that May Yet
Be Purchased
Under  
Programs(2)
               
April 30, 2017 to May 27, 2017  219,052  $22.90   218,100  $18,688,000
May 28, 2017 to July 1, 2017  250,882  $20.73   250,700  $13,491,000
July 2, 2017 to July 29, 2017  0  $0.00   0  $13,491,000
   469,934       468,800   

          Total Number  Approximate 
          Of Shares  Dollar Value 
          Purchased  of Shares 
          as Part  that May Yet 
  Total Number  Average  of Publicly  Be Purchased 
  of Shares  Price Paid  Announced  Under 
Period Purchased(1)  per Share  Programs(2)  Programs(2) 
                 
July 31, 2016 to August 27, 2016  0  $0.00   0  $20,474,000 
August 28, 2016 to October 1, 2016  375,631  $27.13   375,631  $10,285,000 
October 2, 2016 to October 29, 2016  0  $0.00   0  $10,285,000 
   375,631       375,631     

 

(1)NoTotal number of shares werepurchased includes 1,134 shares withheld by us in the third quarter in connection with employee payroll tax withholding upon the vesting of restricted stock awards.

 

(2)On December 9, 2015,6, 2016, our Board of Directors authorized a new share repurchase program for up to $50$50.0 million of our outstanding common stock, effective January 1, 20162017 and expiring on December 31, 2016.2017.

ITEM 6.   EXHIBITS

 

   Incorporated by Reference To 
Exhibit
No.
 DescriptionFormExhibitFiling
Date
Filed
Herewith
3-A Amended and Restated Articles of Incorporation of Registrant8-K3-A06/14/2013 
3-B By-laws of Registrant, as amended to date8-K3-B06/14/2013 
10-A

 21Shoe Carnival, Inc. 2017 Equity Incentive Plan8-K10.106/15/2017 

EXHIBITS - Continued10-B
Exhibit
No.
Form of Restricted Stock Award Agreement under the 2017 Equity Incentive Plan (Non-employee Director)  Incorporated by Reference ToX
10-C 
Form of Service-Based Restricted Stock Unit Award Agreement under the 2017 Equity Incentive Plan (Executive Officers) DescriptionFormExhibitFiling
Date
Filed
HerewithX
31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   X
31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   X
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   X
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   X
101 The following materials from Shoe Carnival, Inc.’s Quarterly Report on Form 10-Q for the quarter ended OctoberJuly 29, 2016,2017, formatted in XBRL (Extensible Business Reporting Language): (1) Condensed Consolidated Balance Sheets, (2) Condensed Consolidated Statements of Income, (3) Condensed Consolidated Statement of Shareholders’ Equity, (4) Condensed Consolidated Statements of Cash Flows, and (5) Notes to Condensed Consolidated Financial Statements.   X

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SHOE CARNIVAL, INC.


SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed, on its behalf by the undersigned thereunto duly authorized.

 

Date:  November 30, 2016August 31, 2017SHOE CARNIVAL, INC.
(Registrant)           

 

 

By:   /s/ W. Kerry Jackson
W. Kerry Jackson
Senior Executive Vice President,
Chief Operating and Financial Officer and Treasurer

(Duly Authorized Officer and Principal Financial Officer)

 

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