<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended Commission File Number 1-4009
July 30, 1994
THE UNITED STATES SHOE CORPORATION
Ohio 31-0474200
(State or other jurisdiction (I.R.S. Employer
of Identification Number)
incorporation or organization)
One Eastwood Drive 45227
Cincinnati, Ohio (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (513) 527-7000
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
----- -----
Number of shares outstanding of the registrant's common stock as of July 30,
1994: 46,171,545.
1
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
<TABLE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Thousands except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
July 30, July 31, July 30, July 31,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $ 633,172 $ 639,727 $1,258,491 $ 1,280,067
COST OF SALES 333,841 349,624 641,504 678,315
--------- --------- --------- ---------
Gross profit 299,331 290,103 616,987 601,752
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 284,122 318,139 575,464 641,305
--------- --------- --------- ---------
Earnings (loss) from operations 15,209 (28,036) 41,523 (39,553)
INTEREST EXPENSE, net 3,044 4,851 6,961 9,168
--------- --------- --------- ---------
Earnings (loss) before provision for
income taxes 12,165 (32,887) 34,562 (48,721)
PROVISION (CREDIT) FOR INCOME TAXES 5,231 (10,195) 14,862 (16,370)
--------- --------- --------- ---------
Net earnings (loss) $ 6,934 $ (22,692) $ 19,700 $ (32,351)
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE $.15 $(.50) $.43 $(.71)
========= ========= ========= =========
AVERAGE NUMBER OF SHARES OUTSTANDING 46,591 45,698 46,352 45,663
========= ========= ========= =========
DIVIDENDS PER SHARE $ .08 $ .08 $ .16 $ .21
========= ========= ========= =========
The accompanying notes are an integral part of these condensed statements.
</TABLE>
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------
<TABLE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Thousands)
(Unaudited)
<CAPTION>
July 30, 1994 January 29, 1994
------------- ----------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 138,049 $ 183,203
Receivables, net of allowance for doubtful
accounts of $6,728 at July 30, 1994
and $ 7,620 at January 29, 1994 101,248 85,600
Inventories 355,941 324,096
Future income tax benefits 60,473 60,473
Prepaid expenses 17,788 15,861
--------- ---------
673,499 669,233
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost 838,545 825,936
Less: Accumulated depreciation and amortization 497,327 465,379
--------- ---------
341,218 360,557
--------- ---------
OTHER ASSETS:
Excess of cost over fair value of net assets
acquired, net 27,789 22,247
Other assets and deferred charges 27,192 27,015
--------- ---------
54,981 49,262
--------- ---------
$ 1,069,698 $ 1,079,052
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt and
capital lease obligations $ 50,996 $ 865
Accounts payable 179,644 175,709
Accrued expenses 189,211 170,065
--------- ---------
419,851 346,639
--------- ---------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 89,237 189,761
--------- ---------
DEFERRED CREDITS AND OTHER LIABILITIES 83,548 80,956
--------- ---------
SHAREHOLDERS' INVESTMENT:
Cumulative preferred shares, without par
value, none issued or outstanding - -
Common shares, without par value 80,185 75,629
Foreign currency translation adjustments (4,455) (2,931)
Retained earnings 401,332 388,998
--------- ---------
477,062 461,696
--------- ---------
$ 1,069,698 $ 1,079,052
========== ==========
The accompanying notes are an integral part of these condensed statements.
</TABLE>
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------
<TABLE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
----------------
July 30, 1994 July 31, 1993
------------- -------------
<S> <C> <C>
CASH PROVIDED BY OPERATIONS:
Net earnings (loss) $ 19,700 $ (32,351)
Adjustments to reconcile net earnings (loss)
to cash provided by operations--
Provision for depreciation and amortization 42,706 42,740
Net loss from disposal of property, plant
and equipment 1,373 2,748
Deferred compensation provision 2,456 4,592
Other, net 296 (834)
Changes in components of working capital--
Receivables (15,648) (10,241)
Inventories (31,845) 9,578
Income taxes payable (1,529) (23,774)
Prepaid expenses (1,927) (13,541)
Accounts payable 3,935 9,418
Accrued expenses 20,674 17,732
--------- ---------
Cash provided by operations 40,191 6,067
--------- ---------
INVESTING ACTIVITIES:
Additions to property, plant and equipment (24,343) (26,497)
Excess of cost over fair value of net assets acquired (6,877) (886)
Other, net 601 (146)
--------- ---------
Cash used for investing activities (30,619) (27,529)
--------- ---------
FINANCING ACTIVITIES:
Payments of long-term debt and capital lease obligations (50,529) (28,919)
Dividend payments (7,365) (9,581)
Sale of common shares under stock option plans 2,762 -
Other, net 406 1,973
--------- ---------
Cash used for financing activities (54,726) (36,527)
--------- ---------
Decrease in cash and cash equivalents (45,154) (57,989)
Cash and cash equivalents, beginning of period 183,203 159,225
--------- ---------
Cash and cash equivalents, end of period $ 138,049 $ 101,236
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest $ 10,439 $ 10,902
Income taxes 17,456 7,078
The accompanying notes are an integral part of these condensed statements.
</TABLE>
4
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Consolidated Financial Statements --
The consolidated financial statements for the interim periods included
herein have been prepared by the company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Although certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations, management believes that the disclosures are
adequate to make the information presented not misleading. Operating
results for interim periods are not necessarily indicative of results for
the full fiscal year. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the company's latest annual
report on Form 10-K.
Certain reclassifications have been made to the 1993 financial statements
to conform with the 1994 presentation.
2. Accounting Policies --
The consolidated financial statements presented in this report have been
prepared in accordance with the accounting policies described in Note 1
to the consolidated financial statements included in the company s latest
annual report on Form 10-K. While management believes that the
procedures followed in the preparation of the consolidated financial
statements for the interim periods are reasonable, the accuracy of some
estimated amounts is dependent upon facts that will exist later in the
fiscal year. Examples of such estimates include the annual effective tax
rate used for calculating the interim provision for income taxes, annual
inflationary cost increases and year-end inventory levels used in
determining interim LIFO provisions, and accruals for profit sharing,
executive bonuses and unpaid expenses not invoiced.
3. Lines of Credit and Long-Term Debt --
The company maintains a revolving credit facility with a group of banks
that provides for borrowings of up to $125 million. At July 30, 1994,
there were no borrowings outstanding under this facility. The revolving
credit agreement and the company's other agreements with respect to long-
term debt include, among other things, provisions which limit total
consolidated indebtedness, require the maintenance of minimum amounts of
working capital and of certain financial ratios, limit the amount of
capital expenditures and limit capital stock repurchases, asset sales and
the payment of cash dividends by the company.
On June 30, 1994, the company prepaid $50 million of 8% notes, at par,
which were due to mature in 1996.
4. Per Share Data --
Earnings (loss) per share for the three- and six-month periods ended July
30, 1994 and July 31, 1993 are based on the weighted average number of
shares of common stock outstanding during the periods. The effect of the
common stock equivalents for these periods was not significant. Fully
diluted earnings (loss) per share for these periods is not significantly
different from earnings (loss) per share set forth in the Consolidated
Condensed Statements of Operations.
5. Contingencies --
In conjunction with the sale of certain of the company's operations,
certain store leases were assigned to the buyers; however, the company
remains contingently liable as guarantor of the lease obligations.
Aggregate minimum rentals for these and all other lease guarantees
totaled approximately $72 million as of July 30, 1994. Approximately 57%
of this total relates to two primary obligors.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
--------------------------------------------------------------------------
The United States Shoe Corporation (the company) is a specialty retailer
of women's apparel, optical products and services, and footwear. As of
July 30, 1994 the company operated 2,332 retail stores and leased
departments in the United States and Canada. The company also
manufactures, imports and wholesales prominent footwear brands, primarily
for women.
<TABLE>
FINANCIAL INFORMATION BY INDUSTRY SEGMENT
-----------------------------------------
(Thousands)
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
<CAPTION>
July 30, July 31, July 30, July 31,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales:
Women's Apparel Retailing $ 252,040 $ 271,337 $ 502,772 $ 547,076
Optical Retailing 184,576 179,371 384,015 361,025
Footwear 196,556 189,019 371,704 371,966
--------- --------- --------- ---------
Net Sales $ 633,172 $ 639,727 $1,258,491 $1,280,067
========= ========= =========== ===========
Earnings (Loss) from Operations:
Women's Apparel Retailing $ (10,974) $ (34,583) $ (13,596) $ (54,914)
Optical Retailing 16,808 12,719 41,315 25,818
Footwear 13,258 (1,534) 21,146 (216)
General Corporate Expense (3,883) (4,638) (7,342) (10,241)
--------- --------- --------- ---------
Earnings (Loss) from Operations $ 15,209 $ (28,036) $ 41,523 $ (39,553)
========= ========== ========= =========
</TABLE>
RESULTS OF OPERATIONS
---------------------
OVERVIEW -
The company's net sales for the three months ended July 30, 1994
decreased 1.0% to $633.2 million from $639.7 million for the three-month
period ended July 31, 1993. Earnings from operations for the 1994 second
quarter were $15.2 million compared with an operating loss of $28.0
million in 1993. Net earnings for the 1994 second quarter were $6.9
million, or $.15 per share, compared with a net loss of $22.7 million, or
$.50 per share, in the second quarter of 1993.
The gross profit percentage in the second quarter of 1994 increased to
47.3% from 45.3% in the second quarter of 1993. Increases were recorded
in the women's apparel segment, resulting primarily from the divestiture
in 1993 of the poorly performing Ups 'N Downs and Caren Charles
divisions, and in the footwear segment, resulting primarily from stronger
performance of the company's Easy Spirit and Marx & Newman divisions.
Overall, gross profit comparisons were also affected positively by the
higher margin sales in the optical retailing group representing a larger
percentage of consolidated net sales in 1994.
Selling, general and administrative (SG&A) expenses decreased by 10.7%
in the second quarter of 1994, as the effects of lower operating expenses
in the women's apparel and footwear groups that resulted from cost
control measures, a net reduction of 147 women's apparel stores and a
reduction in general corporate expense were partially offset by operating
expenses associated with 87 additional optical stores and leased
departments. SG&A comparisons were also affected by the inclusion in
1993 of a $10.6 million charge
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
-------------------------------------------------------------------------
relating to the divestiture of the Caren Charles and Ups 'N Downs
divisions and $3.8 million of costs associated with executive management
changes, and by a change in 1994 in the classification of optical coupon
discounts from operating expenses to sales deductions.
Net interest expense was $3.0 million for the 1994 second quarter
compared to $4.9 million in 1993 reflecting a decrease in average debt
outstanding of 21.2% to $152.5 million as $50 million of 8% notes that
were due to mature in 1996 were prepaid, at par, in June 1994, and an
increase in interest income as average short-term investments increased
45.3% to $178.1 million. These factors were partially offset by the
effects of a higher effective interest rate of 9.9% compared with 8.1%
in 1993.
The effective tax rate was 43% in the second quarter of 1994 compared to
a 31% effective tax benefit rate in the same period a year ago. The
increase in 1994 was due primarily to a higher effective state tax rate
compared to a low effective state benefit rate in the prior year.
For the six months ended July 30, 1994, the company reported net sales of
$1,258.5 million compared with $1,280.1 million in the first six months
of 1993. Earnings from operations were $41.5 million for the first half
of 1994 compared with an operating loss of $39.6 million in 1993. Net
earnings were $19.7 million, or $.43 per share, compared with a net loss
of $32.4 million, or $.71 per share, in 1993.
The gross profit percentage in the first six months of 1994 increased to
49.0% from 47.0% in 1993, principally due to higher margins in the
footwear and women's apparel groups. Overall, gross profit comparisons
were also affected positively by the higher margin sales in the optical
retailing group representing a larger percentage of consolidated net
sales in 1994.
SG&A expenses for the first six months of 1994 decreased by 10.3%. This
reduction reflects lower operating expenses in the company's women's
apparel and footwear groups as a result of cost control measures, a net
reduction of 147 women's apparel stores and reduced general corporate
expenses, partially offset by the operating expenses associated with 87
new optical stores and leased departments. SG&A comparisons were also
affected by the inclusion in 1993 of a $10.6 million charge relating to
the Caren Charles and Ups 'N Downs divisions, $5.4 million of costs
associated with executive management changes and $2.6 million of costs
associated with business process redesign initiatives, and by the change
in 1994 in the classification of optical coupon discounts.
Net interest expense was $7.0 million for the first six months of 1994
compared to $9.2 million in 1993. The decrease was due primarily to a
decrease in average outstanding debt, resulting from the prepayment in
June 1994 of $50 million of 8% notes, at par, that were due to mature in
1996, and an increase in interest income as average short-term
investments increased 46.7% to $176.9 million, partially offset by the
effects of a higher effective interest rate.
The effective tax rate was 43% in the first half of 1994 compared to a
34% effective tax benefit rate in the same period a year ago. The
increase in 1994 was due primarily to a higher effective state tax rate
compared to a low effective state benefit rate in the prior year.
WOMEN'S APPAREL RETAILING GROUP -
Net sales in the Women's Apparel Retailing Group for the second quarter
of 1994 were $252.0 million, a decrease of 7.1% compared with the 1993
second quarter. The sales decrease primarily resulted from a net
reduction of 10.0% in the number of stores in operation. Comparable
store sales decreased 0.7%.
The group reported an operating loss of $11.0 million for the period
compared with an operating loss of $34.6 million in the second quarter of
1993. The 1993 operating loss included $5.2 million of losses from
discontinued operations, a $10.6 million charge relating to the
divestiture of the Caren Charles and Ups 'N Downs divisions and $1.9
million of costs associated with executive management changes. With the
exception of Petite Sophisticate, each of the major divisions within the
group experienced improvements in
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
-------------------------------------------------------------------------
results of operations over the second quarter of 1993, reflecting
primarily decreased operating expenses. Petite Sophisticate results
declined during the quarter as a result of a higher level of markdowns
to clear spring merchandise.
For the first six months of 1994 the group reported sales of $502.8
million, a decrease of 8.1% from the same period in 1993. This decline
resulted primarily from the effects of a net reduction of 147 stores.
Comparable store sales declined 1.6% during the period.
Operating losses for the six-month period decreased to $13.6 million in
1994 from $54.9 million in 1993. All major divisions within the group
reported improvements in operating results, primarily as a result of
lower operating expenses. The 1993 operating loss included $10.7 million
of losses from discontinued operations, a $10.6 million charge related to
the divestiture of the Ups 'N Downs and Caren Charles divisions, $3.5
million of costs associated with executive management changes and $1.7
million of costs associated with business process redesign initiatives.
The Women's Apparel Retailing Group operated 1,323 stores at the end of
the second quarter compared with 1,470 stores at the same time last year.
OPTICAL RETAILING GROUP -
In the Optical Retailing Group, net sales were $184.6 million for the
second quarter of 1994, an increase of 2.9% compared with the second
quarter of 1993. The sales increase resulted primarily from a 4.9%
increase in comparable store sales and from volume at 87 new stores and
leased departments, including sales at 31 locations acquired in July
1994. Total sales comparisons for the group were affected by a change in
1994 in the classification of coupon discounts from operating expenses to
sales deductions. The increase in comparable store sales reflected
strengthening market fundamentals and favorable customer response to
promotional campaigns during the quarter. Operating earnings increased
to $16.8 million in the second quarter of 1994 from $12.7 million in the
second quarter of 1993 on the higher sales volume and effective cost
containment. Operating results of the group were negatively impacted by
operating losses in the Sight & Save value optical division.
For the first six months of 1994, the group reported sales of $384.0
million, an increase of 6.4% from the same period a year ago. This
increase resulted from new store volume and a comparable store sales
increase of 9.4%, due primarily to strengthening market fundamentals and
the success of promotional campaigns during the period. Total sales
comparisons for the group were affected by the change in 1994 in the
classification of coupon discounts. Earnings from operations increased
to $41.3 million for the first six months of 1994 compared with $25.8
million in the same period a year ago on the higher sales volume and
effective cost containment.
The Optical Retailing Group operated 609 stores and leased departments at
the end of the second quarter compared with 522 stores and leased
departments at the same time last year.
FOOTWEAR GROUP -
Net sales in the Footwear Group were $196.6 million in the 1994 second
quarter compared with net sales of $189.0 million in the same period of
1993. In the manufacturing/wholesaling divisions, 1994 net sales were
$127.4 million, an increase of 1.1% compared with the 1993 second
quarter. Strong sales increases in the Easy Spirit division were
partially offset by decreases in other divisions, primarily the Marx &
Newman import division and the Texas Boot division. The decrease in Marx
& Newman sales resulted primarily from fewer off-price sales of excess
inventories. Sales decreased in the Texas Boot division as the market
for western boots remains soft. Sales in the company's footwear retail
divisions increased 9.6% primarily as a result of a 3.1% net increase in
the number of stores in operation and a 5.0% increase in comparable store
sales, primarily strong increases in Easy Spirit retail stores.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
-------------------------------------------------------------------------
The group reported operating earnings of $13.3 million in the second
quarter of 1994 compared with an operating loss of $1.5 million in the
prior year. The increase in operating earnings was primarily the result
of stronger performance by the Easy Spirit division and improvement by
the Marx & Newman import division. The Marx & Newman division
experienced a significant improvement in gross profit generation as
cleaner inventories resulted in fewer off-price sales and the division
recorded operating earnings for the quarter compared with an operating
loss in the prior year. The group's earnings improvement also reflected
tighter control of expenses across the divisions.
For the first six months of 1994, the group reported net sales of $371.7
million, a slight decrease from the $372.0 million in the same period a
year ago. In the manufacturing/wholesaling divisions, net sales in 1994
were $241.6 million, a 4.0% decrease. Strong sales increases in the Easy
Spirit division were more than offset by the sales decreases reported by
other manufacturing/wholesaling divisions, primarily Marx & Newman,
Joyce, Cobbie and Texas Boot. The decline in Marx & Newman sales related
primarily to the reduction in off-price sales of excess inventories.
Sales by the Joyce and Cobbie divisions reflected fewer independent store
operators and the conversion of certain company-owned concept stores to
the Easy Spirit format. A soft western boot market adversely affected
Texas Boot sales. Sales in the company's footwear retail divisions
increased 8.2% to $130.1 million, primarily as a result of a 3.1% net
increase in the number of stores in operation and a 6.4% increase in
comparable store sales, primarily strong increases in Easy Spirit retail
stores.
The group reported operating earnings of $21.1 million for the first six
months of 1994 compared with near breakeven results in the prior year.
With the exception of Texas Boot, which continued to experience sluggish
performance, earnings improvements were reported in all of the company's
major manufacturing/wholesaling divisions.
Footwear retailing operated 400 stores and leased departments at the end
of the second quarter of 1994 compared with 388 at the same time last
year.
FINANCIAL CONDITION
-------------------
CASH AND CASH EQUIVALENTS -
Cash and cash equivalents decreased $45.2 million in the first six months
of 1994. Cash provided by operations of $40.2 million was offset by cash
paid for capital additions of $24.3 million, payments of long-term debt
and capital lease obligations of $50.5 million and dividend payments of
$7.4 million.
CASH PROVIDED BY OPERATIONS -
Cash provided by operations in the first six months of 1994 was $40.2
million compared with $6.1 million in 1993. The $34.1 million increase
was primarily the result of a $48.5 million increase in cash generated by
net earnings, adjusted for non-cash items, partially offset by an
increase of $15.5 million in cash used for changes in working capital.
CAPITAL EXPENDITURES -
Capital expenditures for the six months ended July 30, 1994 amounted to
$24.3 million, a decrease of $2.2 million from the same period in 1993.
The company's capital expenditure plan for 1994 of $65 million
emphasizes the upgrading of management information systems at all
divisions and the refurbishment of certain stores, including Casual
Corner and LensCrafters. Capital expenditures in 1994 also reflect an
emphasis on the expansion of Easy Spirit footwear retailing stores and
Casual Corner & Company women's apparel factory outlet stores. The
company's capital expenditure plan is under continuing review and is
subject to additional adjustment based on the availability of suitable
real estate, human resources growth and future profitability. The
capital expenditure program is being funded from existing cash reserves
and cash generated from operations.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
-------------------------------------------------------------------------
WORKING CAPITAL -
At July 30, 1994, the company's working capital was $253.6 million
compared with $322.6 million at January 29, 1994 and $276.9 million at
July 31, 1993. The company ended the second quarter with a 1.6-to-1
current ratio, compared with 1.9-to-1 at the end of fiscal 1993 and 1.6-
to-1 at the end of the second quarter last year.
The company maintains a $125 million revolving credit facility with a
group of banks, which is available to finance working capital needs. At
July 30, 1994, there were no borrowings outstanding under this facility.
LONG-TERM CAPITAL RESOURCES -
Long-term debt (including current maturities) at July 30, 1994 totaled
$127.6 million, a decrease of $50.0 million and $50.7 million from
January 29, 1994 and July 31, 1993, respectively. These decreases
resulted from scheduled repayments and the prepayment on June 30, 1994 of
$50 million of 8% notes, due in 1996.
To balance the company's fixed and variable interest rate risk, as of
July 30, 1994 the company had entered into five $25 million interest rate
swap agreements that mature on various dates through November 1995.
Under the terms of the agreements, the company receives interest at a
fixed rate (4.98% weighted-average rate as of July 30, 1994) and pays
interest at a variable rate tied to the six-month LIBOR (5.16% as of July
30, 1994).
The company's debt-to-capital ratio (long-term debt, including capital
lease obligations, as a percentage of the sum of long-term debt and
shareholders' investment) was 22.7% at July 30, 1994 compared with 29.1%
at January 29, 1994 and 29.7% at July 31, 1993.
The company's revolving credit agreement and agreements with respect to
long-term debt include, among other things, provisions which limit total
consolidated indebtedness, require the maintenance of minimum amounts of
working capital and of certain financial ratios, and limit capital
expenditures, capital stock repurchases, asset sales and the payment of
cash dividends by the company. Under the most restrictive dividend
provision, approximately $31 million of consolidated retained earnings at
July 30, 1994 is available for payment of cash dividends. The company's
ability to pay future dividends is, among other things, contingent upon
future operating results or changes to existing borrowing agreements.
FOREIGN EXCHANGE RISK -
The company uses foreign exchange forward contracts to hedge the risk of
changes in foreign currency exchange rates associated with transactions
denominated in foreign currencies, primarily shoe purchases from European
countries. At July 30, 1994, the company held contracts aggregating
approximately $34.7 million.
CONTINGENCIES -
In conjunction with the sale of certain of the company's operations,
certain store leases were assigned to the buyers; however, the company
remains contingently liable as guarantor of the lease obligations.
Aggregate minimum rentals for these and all other lease guarantees
totaled approximately $72 million as of July 30, 1994. Approximately 57%
of this total relates to two primary obligors.
10
<PAGE>
PART II. OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-------------------------
In the opinion of management of the company, there are no material
pending legal proceedings, other than ordinary routine litigation
incidental to its business, to which the company or any of its
subsidiaries is a party or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
(a) The Annual Meeting of Shareholders of company was held on May 26,
1994.
(b) Not Applicable
(c) i) Three nominees were elected to the Board of Directors at
the 1994 Annual Meeting.
Albert M. Kronick was elected by a vote of 36,746,498 for and
1,086,999 withheld.
Charles S. Mechem, Jr. was elected by a vote of 36,755,620 for
and 1,077,877 withheld.
John L. Roy was elected by a vote of 36,749,348 for and
1,084,149 withheld.
ii) The shareholders confirmed the selection of Arthur Andersen
& Co. as the company's auditors for 1994. There were
34,962,818 votes cast in favor, 157,914 votes cast in
opposition, 1,353,463 abstentions and 1,359,302 broker
non-votes.
iii) The shareholders ratified a proposal to amend The United
States Shoe Corporation 1988 Employee Incentive Plan to
increase the number of common shares available for issuance
under the plan by 2,000,000. There were 22,274,580 votes cast
in favor, 11,673,255 votes cast in opposition, 446,348
abstentions and 3,439,314 broker non-votes.
iv) The shareholders ratified a proposal to adopt The United
States Shoe Corporation Associates' Discounted Stock Purchase
Plan, under which associates are able to purchase common
shares of the company at 85% of fair market value. There were
31,631,321 votes cast in favor, 2,361,695 votes cast in
opposition, 401,167 abstentions and 3,439,314 broker
non-votes.
v) The shareholders ratified a shareholder proposal to reorganize
the board of directors into a single class of directors.
There were 28,312,348 votes cast in favor, 5,127,101 votes
cast in opposition, 1,151,817 abstentions and 3,242,231 broker
non-votes.
vi) The shareholders defeated a shareholder proposal for the board
of directors to take steps to spin-off the company's apparel
and footwear operations, thereby creating three separate
publicly traded corporations. There were 7,696,810 votes
cast in favor, 25,755,537 votes cast in opposition, 921,640
abstentions and 3,459,510 broker non-votes.
(d) Not Applicable
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(a) Exhibits
4. Instruments defining the rights of security holders, including
indentures. The company hereby agrees to furnish to the
Commission, upon request, copies of instruments defining the
rights of holders of the company's long-term debt.
27. Financial Data Schedule
(b) Reports on Form 8-K
The company did not file a current report on Form 8-K during the
quarter for which this report is filed.
Note: The information furnished in this report reflects all adjustments
which are, in the opinion of management, necessary to a fair presentation
of the results for the interim periods reported.
SIGNATURES
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.
THE UNITED STATES SHOE CORPORATION
(Registrant)
Date: September 9, 1994 By: /s/ Edwin C. Gerth
---------------------
Edwin C. Gerth
Vice President - Corporate Controller
(Chief Accounting Officer)
12
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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