UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 5, 2001
[ ] 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.
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(Exact name of registrant as specified in its charter)
Indiana
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(State or other jurisdiction of incorporation or organization)
35-1736614
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(IRS Employer Identification Number)
8233 Baumgart Road, Evansville, Indiana 47725
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(Address of principal executive offices) (Zip Code)
(812) 867-6471
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(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.
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.
Common Stock, $.01 par value, 12,031,518 shares outstanding as of June 11, 2001.
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1
SHOE CARNIVAL, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Part I Financial Information
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets ......................... 3
Condensed Consolidated Statements of Income.................... 4
Condensed Consolidated Statement of Shareholders' Equity....... 5
Condensed Consolidated Statements of Cash Flows................ 6
Notes to Condensed Consolidated Financial Statements........... 7
Item 2 - Management's Discussion and Analysis.................... 8-10
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K........................ 11
Signature........................................................ 12
2
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
May 5, February 3, April 29,
2001 2001 2000
---------- ---------- ----------
(In thousands)
ASSETS
--------
Current Assets:
Cash and cash equivalents............. $ 3,677 $ 3,227 $ 2,767
Accounts receivable................... 706 1,067 624
Merchandise inventories............... 128,158 123,035 111,980
Deferred income tax benefit........... 755 728 795
Other................................. 3,495 1,434 1,476
---------- ---------- ----------
Total Current Assets..................... 136,791 129,491 117,642
Property and equipment-net............... 57,636 57,860 55,503
---------- ---------- ----------
Total Assets............................. $ 194,427 $ 187,351 $ 173,145
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable...................... $ 31,843 $ 33,030 $ 28,781
Accrued and other liabilities......... 11,665 7,896 9,255
Current portion of long-term debt..... 913 874 776
---------- ---------- ----------
Total Current Liabilities................ 44,421 41,800 38,812
Long-term debt........................... 40,976 41,137 31,331
Deferred lease incentives................ 4,035 3,651 3,187
Deferred income taxes.................... 4,090 4,386 3,487
Other.................................... 130 64
---------- ---------- ----------
Total Liabilities........................ 93,652 91,038 76,817
---------- ---------- ----------
Shareholders' Equity:
Common stock, $.01 par value,
50,000 shares authorized,
13,363 shares issued at
May 5, 2001, February 3,
2001 and April 29, 2000........... 134 134 133
Additional paid-in capital............ 64,289 64,288 64,279
Retained earnings..................... 45,966 41,676 35,384
Treasury stock, at cost, 1,379, 1,406 and 410 shares at May 5, 2001, February
3,
2001 and April 29, 2000........... (9,614) (9,785) (3,468)
---------- ---------- ----------
Total Shareholders' Equity............... 100,775 96,313 96,328
---------- ---------- ----------
Total Liabilities and Shareholders'
Equity................................. $ 194,427 $ 187,351 $ 173,145
========== ========== ==========
See Notes to Condensed Consolidated Financial Statements
3
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
Thirteen Thirteen
Weeks Ended Weeks Ended
May 5, 2001 April 29, 2000
------------- --------------
(In thousands, except per share data)
Net sales................................. $ 117,186 $ 95,405
Cost of sales (including
buying, distribution and
occupancy costs)...................... 82,230 67,212
----------- -----------
Gross profit.............................. 34,956 28,193
Selling, general and
administrative expenses............... 27,287 21,943
----------- -----------
Operating income.......................... 7,669 6,250
Interest expense, net..................... 805 579
----------- -----------
Income before income taxes................ 6,864 5,671
Income taxes.............................. 2,574 2,240
----------- -----------
Net income................................ $ 4,290 $ 3,431
=========== ===========
Net income per share:
Basic.................................. $ .36 $ .26
=========== ===========
Diluted................................ $ .35 $ .26
=========== ===========
Average shares outstanding:
Basic.................................. 11,971 12,974
=========== ===========
Diluted................................ 12,303 13,149
=========== ===========
See Notes to Condensed Consolidated Financial Statements
4
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Unaudited
Common Stock Additional
----------------------- Paid-In Retained Treasury
Issued Treasury Amount Capital Earnings Stock Total
------ -------- ------ ------- -------- -------- -----
(In thousands)
Balance at
February 3, 2001. 13,363 (1,406) $ 134 $64,288 $ 41,676 $(9,785) $ 96,313
Exercise of
stock options... 23 1 140 141
Employee stock
purchase
plan purchases... 4 31 31
Net income ........ 4,290 4,290
------ ------ ------ ------- -------- ------- --------
Balance at
May 5, 2001...... 13,363 (1,379) $ 134 $64,289 $ 45,966 $(9,614) $100,775
====== ======= ====== ======= ======== ======== ========
See Notes to Condensed Consolidated Financial Statements
5
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
Thirteen Thirteen
Weeks Ended Weeks Ended
May 5, 2001 April 29, 2000
----------- --------------
(In thousands)
Cash flows from operating activities:
Net income.................................... $ 4,290 $ 3,431
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 2,670 2,400
Loss on retirement of assets................ 126
Deferred income taxes....................... (323) 272
Other ..................................... (59) (78)
Changes in operating assets and liabilities:
Merchandise inventories.................. (5,123) (7,251)
Accounts receivable....................... 360 70
Accounts payable and accrued liabilities.. 2,582 (2,027)
Prepaid expenses and other current assets. (2,061) (326)
----------- ----------
Net cash provided by (used in) operating
activities.................................... 2,462 (3,509)
----------- ----------
Cash flows from investing activities:
Purchases of property and equipment........... (2,476) (3,959)
Lease incentives.............................. 507 186
----------- ----------
Net cash used in investing activities............ (1,969) (3,773)
----------- ----------
Cash flows from financing activities:
Borrowings under line of credit............... 131,725 99,925
Payments on line of credit.................... (131,725) (90,925)
Payments on capital lease obligations......... (215) (178)
Proceeds from issuance of stock............... 172 596
Purchase of treasury stock.................... (1,044)
----------- ----------
Net cash (used in) provided by financing
activities.................................... (43) 8,374
----------- ----------
Net increase in cash and cash equivalents........ 450 1,092
Cash and cash equivalents at beginning of period. 3,227 1,675
----------- ----------
Cash and cash equivalents at end of period....... $ 3,677 $ 2,767
=========== ==========
Supplemental disclosures of cash flow information:
Cash paid during period for interest.......... $ 951 $ 576
Cash paid during period for income taxes...... $ 0 $ 59
Capital lease obligations incurred............ $ 93 $ 232
See Notes to Condensed Consolidated Financial Statements
6
SHOE CARNIVAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note 1 - Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company and the results of its operations and its cash
flows for the periods presented. Certain information and disclosures normally
included in notes to consolidated financial statements have been condensed or
omitted according to the rules and regulations of the Securities and Exchange
Commission, although the Company believes 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.
It is suggested that these financial statements be read in conjunction with the
financial statements and financial notes thereto included in the Company's 2000
Annual Report.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Number of Stores Store Square Footage Comparable
------------------------------ -------------------- Store
Beginning End of Net End Sales
Quarter Ended Of Period Opened Closed Period Change of Period Increase
- ------------- --------- ------ ------ ------ ------ --------- -----------
May 5, 2001 165 3 0 168 26,000 1,937,000 2.3%
April 29, 2000 138 6 0 144 78,000 1,668,000 1.4%
The following table sets forth the Company's results of operations expressed as
a percentage of net sales for the periods indicated:
Thirteen Thirteen
Weeks Ended Weeks Ended
May 5, 2001 April 29, 2000
----------- --------------
Net sales....................................... 100.0% 100.0%
Cost of sales (including buying,
distribution and occupancy costs)........... 70.2 70.5
--------- ----------
Gross profit.................................... 29.8 29.5
Selling, general and administrative
expenses.................................... 23.3 23.0
--------- ----------
Operating income................................ 6.5 6.5
Interest expense................................ .6 .6
--------- ----------
Income before income taxes...................... 5.9 5.9
Income taxes.................................... 2.2 2.3
--------- ----------
Net income...................................... 3.7% 3.6%
========= ==========
Net Sales
Net sales increased $21.8 million to $117.2 million in the first quarter of
2001, a 22.8% increase over net sales of $95.4 million in the comparable prior
year period. The increase was attributable to a 2.3% comparable store sales
increase and the sales generated by the 30 new stores opened in 2000 and 2001
(net of five stores closed).
Gross Profit
Gross profit increased $6.8 million to $35.0 million in the first quarter of
2001, a 24.0% increase over gross profit of $28.2 million in the comparable
prior year period. The Company's gross profit margin increased to 29.8% from
29.5% in the prior year. As a percentage of sales, the merchandise gross profit
margin was flat with last year and buying, distribution and occupancy costs
decreased 0.3%.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $5.3 million to $27.3
million in the first quarter of 2001 from $21.9 million in the comparable prior
year period. As a percentage of sales, these expenses increased to 23.3% from
23.0% in the prior year. Excluding a charge for store relocation costs of
$388,000 in the first quarter of 2001, selling, general and administrative
expenses as a percentage of sales remained unchanged from last year at 23.0%.
Total pre-opening costs in the first quarter of 2001 were $187,000 or 0.2% of
sales, as compared to $451,000 or 0.5%, of sales in the first quarter of 2000.
Interest Expense
The increase in net interest expense to $805,000 in the first quarter of 2001
from $579,000 in the first quarter of 2000 resulted from increased borrowings.
Income Taxes
The effective income tax rate of 37.5% in the first quarter of 2001 and 39.5% in
the first quarter of 2000 differed from the statutory federal rates due
primarily to state and local income taxes, net of the federal tax benefit.
Liquidity and Capital Resources
The Company's primary sources of funds are cash flows from operations and
borrowings under its revolving credit facility. Net cash provided by operating
activities was $2.5 million during the first quarter of 2001. Excluding changes
in operating assets and liabilities, cash provided by operating activities was
$6.7 million in the first quarter of 2001. Merchandise inventories increased
$5.1 million to $128.2 million at May 5, 2001 from $123.0 million at February 3,
2001. The increase in merchandise inventories was primarily due to seasonal
fluctuations and the addition of three stores in the first quarter of 2001.
Working capital increased to $92.4 million at May 5, 2001 from $87.7 million at
February 3, 2001. The current ratio was 3.1 to 1 at May 5, 2001 and February 3,
2001. Long-term debt as a percentage of total capital was 28.9% at May 5, 2001
compared with 29.9% at February 3, 2001. The increase in working capital was
primarily due to seasonal fluctuations.
Capital expenditures, net of lease incentives, were $2.1 million in the first
quarter of 2001. Of these expenditures, $1.2 million was incurred for new stores
and $500,000 was incurred for the relocation of two stores. The remaining
capital expenditures in the first quarter of 2001 were primarily for the
remodeling of certain stores, merchandise display and signage enhancements and
improvements to computer systems.
The Company intends to open 17 or 18 stores in 2001, including the three stores
opened in the first quarter. Six or seven stores are expected to be opened in
the second quarter with the remaining store openings in the third quarter. Six
stores were opened in the first quarter of 2000.
The actual amount of the Company's cash requirements for capital expenditures
depends in part on the number of new stores opened, the amount of lease
incentives, if any, received from landlords and the number of stores remodeled.
The opening of new stores will be dependent upon, among other things, the
availability of desirable locations, the negotiation of acceptable lease terms
and general economic and business conditions affecting consumer spending in
areas the Company targets for expansion.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company's current store prototype utilizes between 8,000 and 15,000 square
feet depending upon, among other factors, the location of the store and the
population base the store is expected to service. Capital expenditures for a new
store are expected to average approximately $330,000, including point-of-sale
equipment which is generally acquired through equipment leasing transactions.
The average inventory investment in a new store is expected to range from
$450,000 to $750,000, depending on the size and sales expectation of the store
and the timing of the new store opening. Pre-opening expenses, such as
advertising, salaries, supplies and utilities, are expected to average
approximately $75,000 per store.
The Company's credit facility provides for a combination of cash advances on a
revolving basis and the issuance of commercial letters of credit. Borrowings
under the revolving credit line are based on eligible inventory. Borrowings and
letters of credit outstanding under this facility at May 5, 2001 were $40.0
million and $2.8 million, respectively.
The Company anticipates that its existing cash and cash flow from operations,
supplemented by borrowings under the credit facility will be sufficient to fund
its planned expansion and other operating cash requirements for at least the
next 12 months.
Seasonality
The Company's 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.
Non-capital expenditures, such as advertising and payroll, incurred prior to
opening of a new store are charged to expense as incurred. Therefore, the
Company's results of operations may be adversely affected in any quarter in
which the Company incurs pre-opening expenses related to the opening of new
stores.
The Company has three distinct selling periods: Easter, back-to-school and
Christmas.
10
SHOE CARNIVAL, INC.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
The annual meeting of the common shareholders of the Company was held
June 14, 2001.
Election of Directors
Mark L. Lemond and James A. Aschleman were each elected at the annual
meeting to serve as a Director of the Company for a three year term.
Messrs. Lemond and Aschleman received 11,325,256 and 11,437,461
votes, respectively, in favor of their election. No votes were cast
against the election of either nominee.
Other Matters Voted Upon at the Meeting
Deloitte & Touche LLP was appointed as auditor for the Company for
2001. 11,481,275 votes were cast in favor, 3,272 votes were cast
against and 18,699 abstentions were recorded with respect to such
appointment.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended May
5, 2001
11
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: June 18, 2001 SHOE CARNIVAL, INC.
(Registrant)
By: /s/ W. Kerry Jackson
------------------------------
W. Kerry Jackson
Senior Vice President and
Chief Financial Officer
12