<PAGE>
- - - - - - --------------------------------------------------------------------------------
- - - - - - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 29, 1994 Commission File Number 1-4009
THE UNITED STATES SHOE CORPORATION
Ohio 31-0474200
(State or other jurisdiction of (I.R.S. Employer Identification No.)
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
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of Each Exchange on Which Registered
-------------- -----------------------------------------
Common Shares without Par Value New York Stock Exchange
/Pacific Stock Exchange
Preference Share Purchase Rights New York Stock Exchange
/Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. __
Aggregate market value of the registrant's common stock held by nonaffiliates of
the registrant as of April 4, 1994: $782,346,874
Number of shares outstanding of the registrant's common stock as of April 4,
1994: 45,927,585
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Annual Report to
Shareholders for the fiscal year ended January 29, 1994 - Part I and Part II.
Portions of the Definitive Proxy Statement dated April 22, 1994 - Part III.
<PAGE>
PART I
ITEM 1. BUSINESS.
THE COMPANY
The United States Shoe Corporation (the "company") is a specialty retailing
company operating 2,237 retail outlets and leased departments in the United
States, Puerto Rico and Canada. The company's specialty retailing businesses
focus on three major product segments: women's apparel, optical and footwear.
The company also manufactures, imports and wholesales prominent footwear brands,
primarily for women, that accounted for about 18% of the company's net sales for
the fiscal year ended January 29, 1994 ("fiscal 1993"). Information concerning
the number of stores operated by the company's retailing businesses at the close
of each of its last three fiscal years is set forth on page 20 of the company's
Annual Report to Shareholders for fiscal 1993, (the "Annual Report to
Shareholders"), and that information is incorporated herein by reference.
Information concerning business developments occurring during fiscal 1993
are described on pages 24 through 29, under the caption "MANAGEMENT'S
DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS", of the Annual
Report to Shareholders, and that information is incorporated herein by
reference.
Information concerning net sales and earnings from operations for each of
the company's business segments and the identifiable assets of each business
segment are set forth under the caption "FIVE-YEAR FINANCIAL SUMMARY" on page 23
of the Annual Report to Shareholders, and that information is incorporated
herein by reference.
<PAGE>
ITEM 1. BUSINESS (CONTINUED).
WOMEN'S APPAREL RETAILING GROUP
The operating divisions constituting the Women's Apparel Retailing Group,
whose stores are located primarily in enclosed malls, are as follows:
CASUAL CORNER offers wear-to-work fashion apparel for the misses customer
for her ready-to-wear, sportswear, and accessory needs at moderate and
upper-moderate price ranges targeted to women age 25 to 50.
PETITE SOPHISTICATE focuses on wear-to-work and casual fashion apparel for
women 5'4" and under at moderate and upper-moderate prices.
CAPEZIO focuses on moderately priced casual and active apparel in updated
feminine styles that emphasize color.
PAPPAGALLO offers upper-moderate to better priced apparel, shoes and
accessories for professional women age 30 to 50.
AUGUST MAX WOMAN offers wear-to-work and casual fashion apparel for women
who wear sizes 14-26 at moderate prices.
CAREER IMAGE COMPANY STORE offers misses brand-name fashions at value
prices, with stores located in factory outlet centers.
OPTICAL RETAILING GROUP
The company's Optical Retailing Group, the largest in the world based on
revenues, includes LENSCRAFTERS, an optical superstore chain, and SIGHT & SAVE,
a value optical retailing chain.
LENSCRAFTERS operates the largest group of optical superstores in both the
United States and Canada. Customers can choose from a large selection of frames
and lenses offering superior comfort and fit and can obtain a completed pair of
glasses made in about one hour because of the on-site lens grinding
laboratories. These stores are located primarily in enclosed malls and strip
centers.
<PAGE>
ITEM 1. BUSINESS (CONTINUED).
LensCrafters also operates EYEXAM2000, a service of independent or
company optometrists who provide eye examinations either in, or in locations
convenient to, the stores. LensCrafters also provides services under managed
care programs, in which third-party benefit plans cover eyewear purchases from
approved outlets.
SIGHT & SAVE, the company's value optical retailing business, offers
everyday low prices and service in one to four days. As a brand, it is sharply
different from LensCrafters, appealing to a different, but complementary,
customer as a way to broaden the group's reach. The company operates the Sight
& Save business primarily through leased optical departments in selected Kmart
stores.
FOOTWEAR GROUP
FOOTWEAR RETAILING
The company's footwear retailing operations include three separate
businesses: the BANISTER division, which operates factory outlet stores; the
CONCEPT division, which operates corporately-owned concept shoe stores under
the names EASY SPIRIT, THE COBBIE SHOP and JOYCE-SELBY SHOES; and the
CINCINNATI SHOE division, which primarily manages leased footwear departments in
Burlington Coat Factory and Steinmart strong-value stores. In the fourth
quarter of fiscal 1993 the company announced its plan to consolidate Banister
and Cincinnati Shoe operations. In fiscal 1993 about 9% of the company's
wholesale footwear volume was sold through its footwear retailing operations,
which also merchandise shoes and accessories provided by other manufacturers.
<PAGE>
ITEM 1. BUSINESS (CONTINUED).
FOOTWEAR MANUFACTURING, IMPORTING AND WHOLESALING
The company manufactures and imports footwear which is sold in medium and
higher price ranges. The company's brands include AMALFI, BANDOLINO, YFA
BANDOLINO, CAPEZIO, COBBIE, EASY SPIRIT, EVAN-PICONE (under license), JOYCE,
PAPPAGALLO, and SELBY. The company also manufactures and markets Western and
casual boots for men, women and children under the TEXAS BRAND BOOTS, EL DORADO,
J. CHISHOLM and WRANGLER (under license) brand names.
GENERAL
There have been no significant changes in the kinds of products
manufactured and imported, or services rendered, by the company since January
30, 1993.
During the last fiscal year, the company's Women's Apparel Retailing Group
purchased merchandise from a substantial number of domestic and foreign
suppliers. Approximately 74% of that merchandise was purchased from domestic
suppliers and the remainder was purchased from foreign suppliers. It is not
practicable for the company to identify separately the domestic and foreign
sources of its domestic purchases. During fiscal 1993, no single supplier
accounted for more than 5% of the merchandise purchased by the Women's Apparel
Retailing Group.
During fiscal 1993, the company's Optical Retailing Group purchased frames
and lenses from various suppliers. Lenses are purchased primarily from domestic
manufacturers and suppliers. However, while most of the frames are purchased
from domestic suppliers, they are primarily manufactured in foreign countries.
The Footwear Group maintains a policy of global sourcing which combines
domestic shoe manufacturing capacity with importing capabilities. Approximately
40% of the company's wholesale footwear volume is accounted for by imported
women's shoes (primarily from South America, the Far East and Europe), which are
designed and manufactured to the company's specifications.
<PAGE>
ITEM 1. BUSINESS (CONTINUED).
The most important raw materials used in the manufacture of shoes are
leather, synthetic materials and fabrics, all of which are purchased by the
company in the open market from various suppliers, and all of which have been
available in adequate quantities. The cost of leather has remained relatively
constant compared with the prior year. Synthetic materials and fabrics have
decreased slightly in price which had no significant impact on the selling price
of the company's products.
The company has granted licenses in foreign countries for the manufacture
and sale of shoes abroad under various trademarks owned by the company. The
company also has granted licenses to a number of operators of domestic shoe
stores, including THE COBBIE SHOP, JOYCE-SELBY SHOES, SHOP FOR PAPPAGALLO and
EASY SPIRIT. Domestic companies also are licensed to manufacture and market
non-footwear products under the company's CAPEZIO and EASY SPIRIT trademarks.
No individual patent, license, franchise or concession held or granted by
the company is considered to have been material to its operations during the
last fiscal year. The company has a number of registered trademarks and
servicemarks, both in the United States and in foreign countries, that are
considered to be of significant value to its business. The registered
trademarks and servicemarks are subject to periodic renewal.
The company experiences seasonal fluctuations in components of working
capital. Inventories of the Women's Apparel Retailing Group are generally at
their highest level at the end of the third quarter prior to the Christmas
holiday season. The sales volume of the Women's Apparel Retailing Group is
normally highest during the fourth fiscal quarter. This peak is generally
attributable to the Christmas season and post-holiday promotional activity. The
company maintains lines of credit that may be used to finance seasonal
fluctuations in working capital on a short-term basis.
During fiscal 1993, no single customer accounted for more than 10% of the
company's consolidated net sales. The company's footwear wholesaling
business sells primarily to
<PAGE>
ITEM 1. BUSINESS (CONTINUED).
independent retailers and department stores across the United States. In fiscal
1993 the wholesaling segment's three largest customers accounted for 8.6%, 7.5%
and 4.8%, respectively, of the segment's net sales.
The company's footwear wholesaling business does not have, nor has it
historically had, a significant backlog of noncancelable orders. Advance orders
are solicited by the company's sales force four to six times each year with
most of such orders being for the spring and fall retail seasons. These advance
orders are placed by wholesale customers for delivery in up to seven months,
which is greatly influenced by the amount of lead time that customers allow when
placing orders for the forthcoming retail season. The footwear wholesaling
business also includes substantial sales under various stock programs. In order
to support these programs, the company maintains stock inventories of certain
high-volume styles that allow customers the ability to replenish fast-moving
items. Accordingly, management does not believe its fiscal year-end order
backlog is a meaningful indicator of the footwear wholesaling division's future
results.
The Women's Apparel Retailing, Optical Retailing and Footwear Groups
operate within highly competitive markets. The company's women's apparel
competitors include national, regional and individual specialty apparel stores,
department stores and direct marketing catalog companies. The Optical Retailing
Group competes with independent optometrists as well as regional and national
chains of optical superstores. The footwear manufacturing/wholesaling divisions
compete with other domestic manufacturers and importers of foreign-produced
footwear in medium-to-higher price ranges. Footwear retailing divisions
compete with stores and leased departments ranging from individual operators to
regional and national chains and department stores.
The company's investment in research and development during the last three
fiscal years was not significant to the company's consolidated operations.
The company does not anticipate that compliance with federal, state and
local laws
<PAGE>
ITEM 1. BUSINESS (CONTINUED).
and regulations relating to the protection of the environment will have a
significant effect on the company's consolidated operations.
The company employs approximately 38,000 people.
ITEM 2. PROPERTIES.
The company's executive offices and certain offices of the Footwear Group
are located in Cincinnati, Ohio, in a 201,000 square foot building owned by the
company. Office space occupied by other divisions in various parts of the
United States totaled approximately 558,000 square feet as of January 29, 1994,
of which 54% was leased. The company also had leased approximately 75,000
square feet of office space in various foreign countries as of that date.
As of January 29, 1994, the Women's Apparel Retailing Group leased one
distribution center/warehouse in Enfield, Connecticut and owned one distribution
center/warehouse in Atlanta, Georgia. Total square footage of these two
distribution centers/warehouses was approximately 471,000. As of that date, the
Women's Apparel Retailing Group operated 1,306 stores, encompassing about 4.7
million square feet of space, located primarily in enclosed malls in 46 states
and the District of Columbia.
As of January 29, 1994, the Optical Retailing Group leased two distribution
centers/warehouses, one in Cincinnati, Ohio and one in Toronto, Ontario. Total
square footage of these locations was approximately 57,000. On that date, the
group operated 543 stores and leased departments, encompassing about 2.7 million
square feet of space. These stores are located primarily in enclosed malls and
strip centers in 45 states (about 2.4 million square feet of space), Puerto Rico
and Canada. The leased optical departments are located in selected Kmart
stores.
As of January 29, 1994, the Footwear Group operated nine footwear
manufacturing plants, a product development facility and two component plants
with an aggregate of approximately 741,000 square feet of space located in
four states in the midwestern United
<PAGE>
ITEM 2. PROPERTIES (CONTINUED).
States. One of the manufacturing plants is leased. The company also leases two
component plants with approximately 93,000 square feet of space in the Dominican
Republic and leases one component plant with approximately 29,000 square feet of
space in Honduras.
The manufacturing plants have an optimum daily production capacity (which
includes production of shoes utilizing fitted upper component parts manufactured
in the company's component plants) of approximately 50,000 pairs of shoes and
boots. During fiscal 1993, the company's plants operated at approximately 90%
of optimum production capacity.
As of January 29, 1994, the group operated four footwear
manufacturing/wholesaling distribution centers, with approximately 934,000
square feet of space, in various parts of the United States. One of the centers
is owned and is located in the complex with the company's executive offices in
Cincinnati, Ohio.
The group also operated a 92,000 square foot footwear retailing
distribution center in Beloit, Wisconsin, in a building owned by the company.
The footwear retailing divisions operated 388 shoe stores and leased shoe
departments at January 29, 1994 encompassing about 1.4 million square feet of
space in 43 states. The shoe stores are located primarily in major shopping
centers and outlet malls. The leased shoe departments are located in strong-
value stores.
The company's operating leases for retail stores expire between 1994 and
2005. The average initial terms of existing retail leases are as follows:
women's apparel stores, 11 years; optical stores, 9 years; shoe stores, 6 years;
leased optical departments, 5 years; and leased shoe departments, 3 years.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
Litigation is instituted from time to time against the company which
involves routine matters incident to the company's business. In the opinion of
management, the ultimate disposition of such litigation will not have a material
effect upon the company's consolidated financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The company did not submit any matters to a vote of security holders during
the last quarter of its fiscal year ended January 29, 1994.
<PAGE>
EXECUTIVE OFFICERS OF REGISTRANT. (As of April 4, 1994)
NAME TITLE AGE
David M. Browne Executive Vice President, President-
Optical Retailing Group 34
James J. Crowe Vice President-Secretary and
General Counsel 58
Edwin C. Gerth Vice President-Corporate Controller 55
Noel E. Hord Executive Vice President, President-
Footwear Group 47
Bannus B. Hudson President and Chief Executive Officer 48
James P. Maloney Vice President-Human Resources 54
Charles S. Mechem, Jr. Chairman of the Board 63
Robert J. Petrik Vice President-Treasurer 45
Michael M. Searles Executive Vice President, President-
Women's Apparel Retailing Group 45
Martin Sherman Senior Vice President-CEO Retail
Development and Services Division 64
K. Brent Somers Executive Vice President and Chief 45
Financial Officer
<PAGE>
EXECUTIVE OFFICERS OF REGISTRANT (CONTINUED).
NAME BUSINESS EXPERIENCE - PAST FIVE YEARS TO PRESENT
David M. Browne Executive Vice President of the company since March
1994; President-Optical Retailing Group since February
1992; President-LensCrafters Division, March 1990-
February 1992; Executive Vice President of the
LensCrafters Division, October 1989-March 1990; Vice
President-Marketing of the LensCrafters Division,
October 1987-October 1989.
James J. Crowe*
Edwin C. Gerth*
Noel E. Hord Executive Vice President of the company since March
1994; President- Footwear Group since May 1993; Group
President of Nine West and Enzo Angiolini divisions of
Nine West Group, Inc. (formerly Fisher-Camuto), January
1991-May 1993; President of Enzo Angiolini division
prior to January 1991.
Bannus B. Hudson President and Chief Executive Officer of the company
since March 1990; President and Chief Operating Officer
of the company, January 1990-March 1990; President of
the LensCrafters Division, October 1987-January 1990.
James P. Maloney Vice President-Human Resources of the company since
January 1994; Vice President-Human Resources of the
Footwear Group, April 1993-January 1994; Vice President-
Human Resources, Howmet Corporation, September 1992-
April 1993; Director-Organization Change, Howmet
Corporation, May 1992-September 1992, Director-Education
and Management Development, Howmet Corporation, January
1988 - May 1992.
Charles S. Mechem, Jr. Chairman of the Board of the company since March 1993;
Commissioner of the Ladies Professional Golf Association
since January 1991; Chairman of the Board of Great
American Broadcasting Company (formerly Taft
Broadcasting Company) 1967 - June 1990, and Chairman of
its Executive Committee, June 1990 - December 1990; Of
Counsel to Taft, Stettinius & Hollister, June 1990 -
December 1990.
Robert J. Petrik Vice President-Treasurer of the company since March
1989; Director-Corporate Financial Planning of the
company prior to March 1989.
Michael M. Searles Executive Vice President of the company since March
1994; President-Women's Apparel Retailing Group since
March 1993; President of the Kids 'R Us division of Toys
R Us, Inc. prior to March 1993.
Martin Sherman*
K. Brent Somers Executive Vice President of the company since March
1994; Chief Financial Officer since April 1990; Vice
President-Finance of the company, April 1990 - March
1994; Vice President-Finance and Accounting and Chief
Financial Officer of the LensCrafters Division, October
1987-April 1990.
* Has served the company in the present position for at least the past five
years.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The information required by this Item is set forth on page 22 of the Annual
Report to Shareholders, and that information is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item is set forth in the "FIVE-YEAR
FINANCIAL SUMMARY" on page 23 of the Annual Report to Shareholders, and that
information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required by this Item is set forth on pages 24 through 29
of the Annual Report to Shareholders, and that information is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The "CONSOLIDATED BALANCE SHEETS" as of January 29, 1994 and January 30,
1993, the "CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS" and
"CONSOLIDATED STATEMENTS OF CASH FLOWS" for each of the three years in the
period ended January 29, 1994, and the "NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS," together with the "REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS"
(which includes an explanatory paragraph with respect to the changes in
accounting methods for accounting for income taxes, effective February 2, 1992,
optical retailing inventory valuation, effective March 1, 1992, and nonpension
postretirement benefits, effective February 3, 1991, as discussed in Note 2 to
the consolidated financial statements), are set forth on pages 30 through 42 of
the Annual Report to Shareholders, and that information is incorporated herein
by reference.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item is set forth in Part I of this Form
10-K under "Executive Officers of Registrant" and on pages 4 through 6 of the
company's definitive proxy statement dated April 22, 1994 (the "Proxy
Statement"), and that information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is set forth on pages 6 through 19 of
the Proxy Statement, and that information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is set forth on pages 2 and 3 of the
Proxy Statement, and that information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is set forth on page 19 of the Proxy
Statement, and that information is incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K.
(a)1. Consolidated Financial Statements (Registrant and subsidiaries).
Consolidated financial statements and the report of independent public
accountants incorporated herein by reference to the company's Annual
Report to Shareholders for the fiscal year ended January 29, 1994
(pages 30 through 42) filed as Exhibit 13:
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (which includes an
explanatory paragraph with respect to changes in certain
accounting methods).
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS for the
fiscal years ended January 29, 1994, January 30, 1993 and
February 1, 1992.
CONSOLIDATED BALANCE SHEETS as of January 29, 1994 and January 30,
1993.
CONSOLIDATED STATEMENTS OF CASH FLOWS for the fiscal years ended
January 29, 1994, January 30, 1993 and February 1, 1992.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
(a)2. Financial Statement Schedules.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (which includes reference to
changes in certain accounting methods).
Schedule V Property, Plant and Equipment.
Schedule VI Accumulated Depreciation and Amortization of Property,
Plant and Equipment.
Schedule VIII Valuation and Qualifying Accounts.
Schedule IX Short-Term Borrowings.
Schedule X Supplementary Income Statement Information.
All other schedules are omitted because they are not applicable or not
required or because the required information is set forth in the
consolidated financial statements or notes thereto.
(a)3. Exhibits.
3.(a) Amended Articles of Incorporation, incorporated herein by
reference to the company's Form 8 Amendment No. 1, dated
August 30, 1985, to its Quarterly Report on Form 10-Q for
the quarter ended April 28, 1984 and filed with the
Commission.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED).
(a)3. Exhibits (continued).
3.(b) Regulations, as amended, incorporated herein by reference to the
company's Current Report on Form 8-K, dated August 30, 1985, and
filed with the Commission.
4.(a) Rights Agreement between the company and Morgan Guaranty Trust
Company of New York, dated as of March 31, 1986, incorporated
herein by reference to the company's Form 8-A, dated April 9,
1986, and filed with the Commission. First Amendment to Rights
Agreement between the company and Morgan Shareholders Services
Trust Company, dated as of March 23, 1988, incorporated herein by
reference to the company's Current Report on Form 8-K, dated
March 23, 1988, and filed with the Commission.
4.(b) 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.
10.(a) The United States Shoe Corporation 1978 Key Personnel Stock
Option Plan, as amended effective March 25, 1982 and May 26,
1983, incorporated herein by reference to the company's
Registration Statement on Form S-8 (No. 2-60244) and filed with
the Commission.
10.(b) The United States Shoe Corporation 1983 Key Personnel Stock
Option Plan, incorporated herein by reference to the company's
Registration Statement on Form S-8 (No. 2-86625) and filed with
the Commission.
10.(c) The United States Shoe Corporation 1985 Outside Directors Stock
Option Plan, incorporated herein by reference to the company's
Registration Statement on Form S-8 (No. 33-6501) and filed with
the Commission.
10.(d) The United States Shoe Corporation 1988 Employee Incentive Plan,
incorporated herein by reference to the company's Registration
Statement on Form S-8 (No. 33-21106) and filed with the
Commission.
10.(e) The United States Shoe Corporation 1991 Outside Directors Stock
Option Plan, incorporated herein by reference to the company's
Registration Statement on Form S-8 (No. 33-44514) and filed with
the Commission.
10.(f) Amendments dated as of January 29, 1991 and March 25, 1992 to The
United States Shoe Corporation Salaried Employees Deferred
Compensation Plan. The United States Shoe Corporation Salaried
Employees Deferred Compensation Plan, incorporated herein by
reference to the company's Annual Report on Form 10-K filed with
the Commission for the fiscal year ended February 2, 1991.
10.(g) The United States Shoe Corporation Deferred Compensation Plan for
Non-Management Directors, incorporated herein by reference to the
company's Annual Report on Form 10-K filed with the Commission
for the fiscal year ended February 1, 1992.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED).
(a)3. Exhibits (continued).
10.(h) Employment Agreement, dated as of August 1, 1990, between the
company and Bannus B. Hudson, incorporated herein by reference to
the company's Annual Report on Form 10-K filed with the
Commission for the fiscal year ended February 2, 1991.
10.(i) Amendment No. 3, dated as of June 24, 1993, to Employment
Agreement between the company and Martin Sherman. Amendment No.
2, dated as of April 6, 1992, incorporated herein by reference to
the company's Annual Report on Form 10-K filed with the
Commission for the fiscal year ended January 30, 1993. Amendment
No. 1, dated as of October 19, 1990, incorporated herein by
reference to the company's Annual Report on Form 10-K filed with
the Commission for the fiscal year ended February 2, 1991.
Employment Agreement, dated as of June 16, 1989, between the
company and Martin Sherman, incorporated herein by reference to
the company's Annual Report on Form 10-K filed with the
Commission for the fiscal year ended February 3, 1990.
10.(j) Employment Agreement, dated as of April 1, 1993, between the
company and K. Brent Somers, incorporated herein by reference to
the company's Annual Report on Form 10-K filed with the
Commission for the fiscal year ended January 30, 1993.
10.(k) Amendment No. 1, dated as of February 3, 1994, to Employment
Agreement between the company and David M. Browne. Employment
Agreement dated as of January 1, 1991, between the company and
David M. Browne, incorporated herein by reference to the
company's Annual Report on Form 10-K filed with the Commission
for the fiscal year ended February 2, 1991.
10.(l) Amendment No. 5, dated as of January 26, 1994, to Severance
Compensation Agreement between the company and Martin Sherman.
Amendment No. 4, dated as of May 22, 1992, incorporated herein by
reference to the company's Annual Report on Form 10-K filed with
the Commission for the fiscal year ended January 30, 1993.
Amendment No. 3, dated as of March 28, 1990, incorporated herein
by reference to the company's Annual Report on Form 10-K filed
with the Commission for the fiscal year ended February 3, 1990.
Severance Compensation Agreement, dated June 1, 1987,
incorporated herein by reference to the company's Annual Report
on Form 10-K filed with the Commission for the fiscal year ended
January 30, 1988. Amendments No. 1 and 2, dated as of March 23,
1988 and August 15, 1988, respectively, to Severance Compensation
Agreement incorporated herein by reference to the company's
Annual Report on Form 10-K filed with the Commission for the
fiscal year ended January 28, 1989.
10.(m) The United States Shoe Corporation Corporate Deferred
Compensation Plan effective May 1, 1991 (commencing June 1,
1992), incorporated herein by reference to the company's Annual
Report on Form 10-K filed with the Commission for the fiscal year
ended January 30, 1993.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED).
(a)3. Exhibits (continued).
10.(n) Amendment No. 5, dated as of January 26, 1994, to Severance
Compensation Agreement between the company and Bannus B. Hudson.
Amendment No. 4 to Severance Compensation Agreement, dated as of
May 22, 1992, incorporated herein by reference to the company's
Annual Report on Form 10-K filed with the Commission for the
fiscal year ended January 30, 1993. Severance Compensation
Agreement dated as of November 1, 1987 and Amendments No. 1
through 3, dated as of March 23, 1988, August 15, 1988 and March
28, 1990, respectively, incorporated herein by reference to the
company's Annual Report on Form 10-K filed with the Commission
for the fiscal year ended February 3, 1990.
10.(o) Amendment No. 2, dated as of January 26, 1994, to Severance
Compensation Agreement between the company and K. Brent Somers.
Amendment No. 1 to Severance Compensation Agreement, dated as of
May 22, 1992, incorporated herein by reference to the company's
Annual Report on Form 10-K filed with the Commission for the
fiscal year ended January 30, 1993. Severance Compensation
Agreement dated as of March 28, 1990 incorporated herein by
reference to the company's Annual Report on Form 10-K filed with
the Commission for the fiscal year ended February 3, 1990.
10.(p) Amendment No. 2, dated as of January 26, 1994, to Severance
Compensation Agreement between the company and David M. Browne.
Amendment No. 1 to Severance Compensation Agreement, dated as of
May 22, 1992, incorporated herein by reference to the company's
Annual Report on Form 10-K filed with the Commission for the
fiscal year ended January 30, 1993. Severance Compensation
Agreement dated as of March 28, 1990 incorporated herein by
reference to the company's Annual Report on Form 10-K filed with
the Commission for the fiscal year ended February 2, 1991.
10.(q) Amendment and Restatement to the Supplemental Executive Salaried
Employees Benefit Plan, dated as of March 27, 1991, incorporated
herein by reference to the company's Annual Report on Form 10-K
filed with the Commission for the fiscal year ended February 1,
1992. Supplemental Executive Salaried Employees Benefit Plan,
incorporated herein by reference to the company's Annual Report
on Form 10-K filed with the Commission for the fiscal year ended
February 2, 1991.
10.(r) Description of the Key Executive Long Term Incentive Program
effective February 2, 1992, incorporated herein by reference to
the company's Annual Report on Form 10-K filed with the
Commission for the fiscal year ended January 30, 1993.
10.(s) Description of the Annual Incentive Bonus Program, incorporated
herein by reference to the company's Annual Report on Form 10-K
filed with the Commission for the fiscal year ended January 30,
1993.
10.(t) Employment Agreement, dated as of March 15, 1993, between the
company and Michael M. Searles.
10.(u) Amendment No. 1, dated as of January 26, 1994, to Severance
Compensation Agreement between the company and Michael M.
Searles. Severance Compensation Agreement, dated as of March 15,
1993.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED).
(a)3. Exhibits (continued).
10.(v) Employment Agreement, dated as of May 19, 1993, between the
Company and Noel E. Hord.
10.(w) Amendment No. 1, dated as of January 26, 1994, to Severance
Compensation Agreement between the company and Noel E. Hord.
Severance Compensation Agreement, dated as of January 24, 1994.
11. Computation of Earnings per Common and Common Equivalent Share.
13. Annual Report to Shareholders for the fiscal year ended January
29, 1994. (Pages 20 and 22-42).
21. List of Subsidiaries.
23. Consent of Independent Public Accountants.
(b) Reports on Form 8-K.
The company did not file a report on Form 8-K during the last quarter of
its fiscal year ended January 29, 1994
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: April 27, 1994 By /s/ Edwin C. Gerth
-----------------------------------
Edwin C. Gerth
Vice President-
Corporate Controller
(Principal accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: April 27, 1994 /s/ Bannus B. Hudson
-----------------------------------
Bannus B. Hudson
President and Chief Executive Officer
(Principal executive officer)
Date: April 27, 1994 /s/ K. Brent Somers
-----------------------------------
K. Brent Somers
Executive Vice President and
Chief Financial Officer
(Principal financial officer)
Date: April 27, 1994 /s/ Joseph H. Anderer
-----------------------------------
Joseph H. Anderer
Director of the Corporation
Date: April 27, 1994 /s/ Philip E. Beekman
-----------------------------------
Philip E. Beekman
Director of the Corporation
Date: April 27, 1994 /s/ Gilbert Hahn, Jr.
-----------------------------------
Gilbert Hahn, Jr.
Director of the Corporation
Date: April 27, 1994 /s/ Roger L. Howe
-----------------------------------
Roger L. Howe
Director of the Corporation
Date: April 27, 1994 /s/ Lorrence T. Kellar
-----------------------------------
Lorrence T. Kellar
Director of the Corporation
Date: April 27, 1994 /s/ Albert M. Kronick
-----------------------------------
Albert M. Kronick
Director of the Corporation
<PAGE>
Date: April 27, 1994 /s/ Thomas Laco
-----------------------------------
Thomas Laco
Director of the Corporation
Date: April 27, 1994 /s/ Charles S. Mechem, Jr.
-----------------------------------
Charles S. Mechem, Jr.
Director of the Corporation
Date: April 27, 1994 /s/ John L. Roy
-----------------------------------
John L. Roy
Director of the Corporation
Date: April 27, 1994 /s/ Phyllis S. Sewell
-----------------------------------
Phyllis S. Sewell
Director of the Corporation
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Directors of
The United States Shoe Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in The United States Shoe
Corporation and subsidiaries' Annual Report to Shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated March 7,
1994. Our report on the consolidated financial statements includes an
explanatory paragraph with respect to the changes in accounting methods for
income taxes and optical retailing inventory valuation in 1992, and nonpension
postretirement benefits in 1991 as discussed in Note 2 to the consolidated
financial statements.
Our audit was made for the purpose of forming an opinion
on those statements taken as a whole. The schedules listed in the accompanying
index are the responsibility of the company's management and are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Cincinnati, Ohio,
March 7, 1994
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (a)
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
----------------------------------------------------------------------------
(Thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- - - - - - ----------------------------------------------- ------------- ----------- ------------- --------------- -------------
Balance at Other Balance at
Beginning of Additions Changes End of
Classification Year at cost Retirements Add(Deduct)(b) Year
- - - - - - ----------------------------------------------- ------------- ----------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY 29, 1994:
Leasehold Improvements $ 350,565 $ 14,847 $ 46,551 $ 2,573 $ 321,434
Furniture, Fixtures, and Machinery 405,062 45,736 34,166 (3,853) 412,779
Buildings, Land, and Land Improvements 91,230 855 132 (230) 91,723
------------- ----------- ------------- --------------- -------------
$ 846,857 $ 61,438 $ 80,849 $ (1,510) $ 825,936
------------- ----------- ------------- --------------- -------------
------------- ----------- ------------- --------------- -------------
FOR THE YEAR ENDED JANUARY 30, 1993:
Leasehold Improvements $ 347,526 $ 32,424 $ 28,109 $ (1,276) $ 350,565
Furniture, Fixtures, and Machinery 404,759 38,457 36,295 (1,859) 405,062
Buildings, Land, and Land Improvements 90,650 980 436 36 91,230
------------- ----------- ------------- --------------- -------------
$ 842,935 $ 71,861 $ 64,840 $ (3,099) $ 846,857
------------- ----------- ------------- --------------- -------------
------------- ----------- ------------- --------------- -------------
FOR THE YEAR ENDED FEBRUARY 1, 1992:
Leasehold Improvements $ 360,905 $ 24,223 $ 37,669 $ 67 $ 347,526
Furniture, Fixtures, and Machinery 393,235 34,752 21,525 (1,703) 404,759
Buildings, Land, and Land Improvements 90,438 857 731 86 90,650
------------- ----------- ------------- --------------- -------------
$ 844,578 $ 59,832 $ 59,925 $ (1,550) $ 842,935
------------- ----------- ------------- --------------- -------------
------------- ----------- ------------- --------------- -------------
<FN>
NOTES:
(a) Refer to "Notes to Consolidated Financial Statements", Note (1) Significant Accounting Policies on page 35 of the company's
1993 Annual Report to Shareholders for depreciation methods and useful lives.
(b) Amounts represent capitalization of leases and transfers among balance sheet accounts.
</TABLE>
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
-----------------------------------------------------------------------------
(Thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- - - - - - -------------------------------------------------- ------------- ------------- ------------- --------------- --------------
Additions
Balance at Charged to Other Balance at
Beginning of Costs and Changes End of
Classification Year Expenses Retirements Add(Deduct)(a) Year
- - - - - - -------------------------------------------------- ------------- ------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY 29, 1994:
Leasehold Improvements $ 178,875 $ 34,136 $ 32,174 $ 911 $ 181,748
Furniture, Fixtures, and Machinery 233,074 45,873 24,824 (2,116) 252,007
Buildings, Land, and Land Improvements 28,783 2,910 69 0 31,624
------------- ------------- ------------- --------------- --------------
$ 440,732 $ 82,919 (b) $ 57,067 $ (1,205) $ 465,379
------------- ------------- ------------- --------------- --------------
------------- ------------- ------------- --------------- --------------
FOR THE YEAR ENDED JANUARY 30, 1993:
Leasehold Improvements $ 164,600 $ 34,256 $ 19,626 $ (355) $ 178,875
Furniture, Fixtures, and Machinery 214,517 45,436 26,605 (274) 233,074
Buildings, Land, and Land Improvements 26,007 2,922 159 13 28,783
------------- ------------- ------------- --------------- --------------
$ 405,124 $ 82,614 (b) $ 46,390 $ (616) $ 440,732
------------- ------------- ------------- --------------- --------------
------------- ------------- ------------- --------------- --------------
FOR THE YEAR ENDED FEBRUARY 1, 1992:
Leasehold Improvements $ 152,139 $ 35,719 $ 23,574 $ 316 $ 164,600
Furniture, Fixtures, and Machinery 185,798 43,983 13,427 (1,837) 214,517
Buildings, Land, and Land Improvements 23,561 2,929 482 (1) 26,007
------------- ------------- ------------- --------------- --------------
$ 361,498 $ 82,631 (b) $ 37,483 $ (1,522) $ 405,124
------------- ------------- ------------- --------------- --------------
------------- ------------- ------------- --------------- --------------
<FN>
NOTES:
(a) Amounts represent transfers among balance sheet accounts.
(b) The provision for depreciation and amortization of $84,298, $83,522, and $83,186 in 1993, 1992 and 1991, respectively, in the
"Consolidated Statements of Cash Flows" on page 34 of the company's 1993 Annual Report to Shareholders includes $1,379 in 1993,
$908 in 1992 and $555 in 1991 for amortization of intangible assets.
</TABLE>
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
-----------------------------------------------------------------------------
(Thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- - - - - - ------------------------------------------------- ------------ --------------------------------- --------------- -------------
Additions
---------------------------------
Balance at Charged to Balance at
Beginning Costs and Charged to End
Description of Year Expenses Other Accounts Deductions of Year
- - - - - - ------------------------------------------------- ------------ ------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY 29, 1994:
Allowance for Doubtful Accounts $ 10,832 $ 1,889 $ -- $ 5,101 (a) $ 7,620
Reserves for Returns and Allowances $ 9,682 $ 25,436 $ -- $ 24,436 (b) $ 10,682
Accrued Restructuring costs $ 21,945 $ -- $ -- $ 9,724 (c) $ 12,221
FOR THE YEAR ENDED JANUARY 30, 1993:
Allowance for Doubtful Accounts $ 9,878 $ 6,998 $ -- $ 6,044 (a) $ 10,832
Reserves for Returns and Allowances $ 6,399 $ 27,360 $ -- $ 24,077 (b) $ 9,682
Accrued Restructuring costs $ 50,840 $ -- $ -- $ 28,895 (c) $ 21,945
FOR THE YEAR ENDED FEBRUARY 1, 1992:
Allowance for Doubtful Accounts $ 7,631 $ 5,191 $ -- $ 2,944 (a) $ 9,878
Reserves for Returns and Allowances $ 9,377 $ 26,142 $ -- $ 29,120 (b) $ 6,399
Accrued Restructuring costs $ 80,000 $ -- $ -- $ 29,160 (c) $ 50,840
<FN>
NOTES:
(a) Represents uncollectible accounts charged off and miscellaneous reclassifications.
(b) Represents credits issued to customers. The change in the reserve balance is affected by the timing of the
issuance of credits to customers.
(c) Represents primarily store and plant closing costs, lease termination costs, severance pay,
write-down of the related assets and operating losses until sale or closing.
</TABLE>
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT TERM BORROWINGS
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
------------------------------------------------------------------------------
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- - - - - - ----------------------------- ----------- ----------- ------------ ------------ ---------------
Maximum Average Weighted
Weighted Amount Amount Average
Balance at Average Outstanding Outstanding Interest
Category of Aggregate End of Interest During the During the Rate During
Short-term Borrowings Year Rate Year Year (b) the Year (b)
- - - - - - ----------------------------- ----------- ----------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY 29, 1994:
Bank Borrowings $ -- -- % $ 1,177 $ 297 6.00%
FOR THE YEAR ENDED JANUARY 30, 1993:
Bank Borrowings $ -- -- % $ 1,211 $ 260 7.37%
FOR THE YEAR ENDED FEBRUARY 1, 1992:
Bank Borrowings $ -- -- % $ 1,301 $ 583 9.94%
Commercial Paper (a) $ -- -- % $ 12,700 $ 340 7.70%
<FN>
NOTES:
(a) Commercial paper generally has maturities within sixty (60) days of issuance.
(b) Computed on a weekly basis.
</TABLE>
<PAGE>
Schedule X
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993
--------------------------------------------------------
AND FEBRUARY 1, 1992
---------------------
(Thousands)
<TABLE>
<CAPTION>
Column A Column B
----------------------------------------- ---------------------------
Charged to
Item* Costs and Expenses
----------------------------------------- ---------------------------
<S> <C>
FOR THE YEAR ENDED JANUARY 29, 1994:
Advertising costs $160,702
--------
--------
FOR THE YEAR ENDED JANUARY 30, 1993:
Advertising costs $164,430
--------
--------
FOR THE YEAR ENDED FEBRUARY 1, 1992:
Advertising costs $161,787
--------
--------
<FN>
* Items omitted do not exceed one percent of net sales as
reported in the consolidated statements of earnings.
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
No.
- - - - - - -------
3.(a) Amended Articles of Incorporation, incorporated herein by
reference to the company's Form 8 Amendment No. 1, dated August
30, 1985, to its Quarterly Report on Form 10-Q for the quarter
ended April 28, 1984 and filed with the Commission.
3.(b) Regulations, as amended, incorporated herein by reference to the
company's Current Report on Form 8-K, dated August 30, 1985, and
filed with the Commission.
4.(a) Rights Agreement between the company and Morgan Guaranty Trust
Company of New York, dated as of March 31, 1986, incorporated
herein by reference to the company's Form 8-A, dated April 9,
1986, and filed with the Commission. First Amendment to Rights
Agreement between the company and Morgan Shareholders Services
Trust Company, dated as of March 23, 1988, incorporated herein by
reference to the company's Current Report on Form 8-K, dated
March 23, 1988, and filed with the Commission.
4.(b) 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.
10.(a) The United States Shoe Corporation 1978 Key Personnel Stock
Option Plan, as amended effective March 25, 1982 and May 26,
1983, incorporated herein by reference to the company's
Registration Statement on Form S-8 (No. 2-60244) and filed with
the Commission.
10.(b) The United States Shoe Corporation 1983 Key Personnel Stock
Option Plan, incorporated herein by reference to the company's
Registration Statement on Form S-8 (No. 2-86625) and filed with
the Commission.
10.(c) The United States Shoe Corporation 1985 Outside Directors Stock
Option Plan, incorporated herein by reference to the company's
Registration Statement on Form S-8 (No. 33-6501) and filed with
the Commission.
10.(d) The United States Shoe Corporation 1988 Employee Incentive Plan,
incorporated herein by reference to the company's Registration
Statement on Form S-8 (No. 33-21106) and filed with the
Commission.
10.(e) The United States Shoe Corporation 1991 Outside Directors Stock
Option Plan, incorporated herein by reference to the company's
Registration Statement on Form S-8 (No. 33-44514) and filed with
the Commission.
10.(f) Amendments dated as of January 29, 1991 and March 25, 1992 to The
United States Shoe Corporation Salaried Employees Deferred
Compensation Plan. The United States Shoe Corporation Salaried
Employees Deferred Compensation Plan, incorporated herein by
reference to the company's Annual Report on Form 10-K filed with
the Commission for the fiscal year ended February 2, 1991.
<PAGE>
INDEX TO EXHIBITS
Exhibit
No.
- - - - - - -------
10.(g) The United States Shoe Corporation Deferred Compensation Plan for
Non-Management Directors, incorporated herein by reference to the
company's Annual Report on Form 10-K filed with the Commission
for the fiscal year ended February 1, 1992.
10.(h) Employment Agreement, dated as of August 1, 1990, between the
company and Bannus B. Hudson, incorporated herein by reference to
the company's Annual Report on Form 10-K filed with the
Commission for the fiscal year ended February 2, 1991.
10.(i) Amendment No. 3, dated as of June 24, 1993, to Employment
Agreement between the company and Martin Sherman. Amendment No.
2, dated as of April 6, 1992, incorporated herein by reference to
the company's Annual Report on Form 10-K filed with the
Commission for the fiscal year ended January 30, 1993. Amendment
No. 1, dated as of October 19, 1990, incorporated herein by
reference to the company's Annual Report on Form 10-K filed with
the Commission for the fiscal year ended February 2, 1991.
Employment Agreement, dated as of June 16, 1989, between the
company and Martin Sherman, incorporated herein by reference to
the company's Annual Report on Form 10-K filed with the
Commission for the fiscal year ended February 3, 1990.
10.(j) Employment Agreement, dated as of April 1, 1993, between the
company and K. Brent Somers, incorporated herein by reference to
the company's Annual Report on Form 10-K filed with the
Commission for the fiscal year ended January 30, 1993.
10.(k) Amendment No. 1, dated as of February 3, 1994, to Employment
Agreement between the company and David M. Browne. Employment
Agreement dated as of January 1, 1991, between the company and
David M. Browne, incorporated herein by reference to the
company's Annual Report on Form 10-K filed with the Commission
for the fiscal year ended February 2, 1991.
10.(l) Amendment No. 5, dated as of January 26, 1994, to Severance
Compensation Agreement between the company and Martin Sherman.
Amendment No. 4, dated as of May 22, 1992, incorporated herein by
reference to the company's Annual Report on Form 10-K filed with
the Commission for the fiscal year ended January 30, 1993.
Amendment No. 3, dated as of March 28, 1990, incorporated herein
by reference to the company's Annual Report on Form 10-K filed
with the Commission for the fiscal year ended February 3, 1990.
Severance Compensation Agreement, dated June 1, 1987,
incorporated herein by reference to the company's Annual Report
on Form 10-K filed with the Commission for the fiscal year ended
January 30, 1988. Amendments No. 1 and 2, dated as of March 23,
1988 and August 15, 1988, respectively, to Severance Compensation
Agreement incorporated herein by reference to the company's
Annual Report on Form 10-K filed with the Commission for the
fiscal year ended January 28, 1989.
10.(m) The United States Shoe Corporation Corporate Deferred
Compensation Plan effective May 1, 1991 (commencing June 1,
1992), incorporated herein by reference to the company's Annual
Report on Form 10-K filed with the Commission for the fiscal year
ended January 30, 1993.
<PAGE>
INDEX TO EXHIBITS
Exhibit
No.
- - - - - - -------
10.(n) Amendment No. 5, dated as of January 26, 1994, to Severance
Compensation Agreement between the company and Bannus B. Hudson.
Amendment No. 4 to Severance Compensation Agreement, dated as of
May 22, 1992, incorporated herein by reference to the company's
Annual Report on Form 10-K filed with the Commission for the
fiscal year ended January 30, 1993. Severance Compensation
Agreement dated as of November 1, 1987 and Amendments No. 1
through 3, dated as of March 23, 1988, August 15, 1988 and March
28, 1990, respectively, incorporated herein by reference to the
company's Annual Report on Form 10-K filed with the Commission
for the fiscal year ended February 3, 1990.
10.(o) Amendment No. 2, dated as of January 26, 1994, to Severance
Compensation Agreement between the company and K. Brent Somers.
Amendment No. 1 to Severance Compensation Agreement, dated as of
May 22, 1992, incorporated herein by reference to the company's
Annual Report on Form 10-K filed with the Commission for the
fiscal year ended January 30, 1993. Severance Compensation
Agreement dated as of March 28, 1990 incorporated herein by
reference to the company's Annual Report on Form 10-K filed with
the Commission for the fiscal year ended February 3, 1990.
10.(p) Amendment No. 2, dated as of January 26, 1994, to Severance
Compensation Agreement between the company and David M. Browne.
Amendment No. 1 to Severance Compensation Agreement, dated as of
May 22, 1992, incorporated herein by reference to the company's
Annual Report on Form 10-K filed with the Commission for the
fiscal year ended January 30, 1993. Severance Compensation
Agreement dated as of March 28, 1990 incorporated herein by
reference to the company's Annual Report on Form 10-K filed with
the Commission for the fiscal year ended February 2, 1991.
10.(q) Amendment and Restatement to the Supplemental Executive Salaried
Employees Benefit Plan, dated as of March 27, 1991, incorporated
herein by reference to the company's Annual Report on Form 10-K
filed with the Commission for the fiscal year ended February 1,
1992. Supplemental Executive Salaried Employees Benefit Plan,
incorporated herein by reference to the company's Annual Report
on Form 10-K filed with the Commission for the fiscal year ended
February 2, 1991.
10.(r) Description of the Key Executive Long Term Incentive Program
effective February 2, 1992, incorporated herein by reference to
the company's Annual Report on Form 10-K filed with the
Commission for the fiscal year ended January 30, 1993.
10.(s) Description of the Annual Incentive Bonus Program, incorporated
herein by reference to the company's Annual Report on Form 10-K
filed with the Commission for the fiscal year ended January 30,
1993.
10.(t) Employment Agreement, dated as of March 15, 1993, between the
company and Michael M. Searles.
10.(u) Amendment No. 1, dated as of January 26, 1994, to Severance
Compensation Agreement between the company and Michael M.
Searles. Severance Compensation Agreement, dated as of March 15,
1993.
<PAGE>
INDEX TO EXHIBITS
Exhibit
No.
- - - - - - -------
10.(v) Employment Agreement, dated as of May 19, 1993, between the
Company and Noel E. Hord.
10.(w) Amendment No. 1, dated as of January 26, 1994, to Severance
Compensation Agreement between the company and Noel E. Hord.
Severance Compensation Agreement, dated as of January 24, 1994.
11. Computation of Earnings per Common and Common Equivalent Share.
13. Annual Report to Shareholders for the fiscal year ended January
29, 1994. (Pages 20 and 22-42).
21. List of Subsidiaries.
23. Consent of Independent Public Accountants.
<PAGE>
Exhibit 10(i)
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
THIS AMENDED AGREEMENT is made this 24th day of June, 1993, between THE
UNITED STATES SHOE CORPORATION, an Ohio corporation with principal offices at
One Eastwood Drive, Cincinnati, Ohio 45227 (hereinafter called the "Company")
and MARTIN SHERMAN, whose address is 10625 Adventure Lane, Cincinnati, Ohio
45224 (hereinafter called "Employee").
WHEREAS, the Company and Employee entered into an Employment Agreement
dated June 21, 1989, which was amended on October 10, 1990 and April 6, 1992
(the "Agreement").
WHEREAS, the Company and Employee wish to further amend the Agreement,
effective as of June 24, 1993;
NOW, THEREFORE, the Agreement is hereby amended by the deletion of
paragraphs 1(a), 1(b), 2(a), 2(b), 3, 8, 9 and Appendices A and B and the
insertion of new paragraphs 1(a), 1(b), 2, 8, 9 and Appendix A, as follows:
1.(a) During the term of this Agreement, the Company agrees to employ
Employee and Employee agrees to serve the Company, including its subsidiaries,
in a senior executive capacity with such title and duties consistent with such
senior executive status as may be fixed by the Company from time to time, but
presently as Chairman of the Retail Development and Services Division (the
"Division"). In that position, Employee will serve as Chief Executive Officer
of the Division and will report to the Company's Chief Executive Officer. He
will remain a salaried employee of the Corporation until June 30, 1996, when his
employment and this Agreement
<PAGE>
will be terminated. Employee also will be available for and, if requested, will
perform consulting and advisory services as directed by the Company's Chief
Executive Officer.
1.(b) Employee agrees to devote to the Company's business and affairs his
time and attention as set forth in paragraph 2 below; to give and devote his
best and loyal efforts and skills to the Company; and, in all other respects, to
do his utmost to enhance the Company's welfare. During the term of this
Agreement, Employee may engage or participate in other businesses, ventures or
projects; provided, however, that such activities do not interfere with
Employee's performance of his duties under this Agreement and, provided further
that Employee may not engage or participate in business activities which compete
in any respect with the Company's businesses set forth in Appendix A or other
businesses in which the Company may engage during the term of this Agreement,
but Employee may continue his participation in any business activity which
predates the Company's initial participation in a similar business. Employee
also may devote time and efforts to charitable, social and civic matters to the
extent that such activities do not interfere with Employee's performance of his
duties under this Agreement. If Employee engages in other businesses, ventures
or projects, or charitable, social and civic matters, Employee will promptly
provide written notification to the Chief Executive Officer of the Company,
describing the activity and his anticipated time requirement for such activity.
2. The Company agrees to pay Employee an annual salary of $307,000,
payable in equal bi-weekly installments, until June 30, 1996. In consideration
of such salary payments, Employee will work an average of not less than 30 hours
per week from July 1, 1993 until June 30, 1996. If the Company requests
Employee to perform services in excess of such average hours, the Company will
compensate Employee for the additional hours on the same basis. In addition,
Employee shall be entitled to participate, on a pro rata basis and to the extent
<PAGE>
consistent with his senior executive position in the incentive bonus plan, in
any deferred compensation program, retirement plan, vacation program, group
insurance and other so-called fringe benefit programs from time to time in force
for the benefit of Company employees generally and/or for any group of employees
of which Employee is a member, provided that he meets the eligibility
requirements of any such program or plan. While a member of the Management
Committee, Employee also will be eligible to participate on a pro rata basis in
the key executive long-term incentive compensation program.
8. Employee and the Company have entered into a Severance Compensation
Agreement dated as of June 1, 1987 (the "Severance Compensation Agreement")
which provides that Employee shall have the right to terminate his employment
for Good Reason as provided in such Severance Compensation Agreement. In the
event that Employee shall exercise his right to terminate his employment for
Good Reason under the Severance Compensation Agreement, this Agreement also
shall terminate, but such termination shall not relieve the Company from
liability to Employee resulting from any breach of the terms of this Agreement
by the Company.
9. For a period ending on the later of (i) one year after Employee ceases
to be employed by the Company (other than termination by Employee for Good
Reason pursuant to the Severance Compensation Agreement) or (ii) June 30, 1997,
Employee agrees that without the prior written consent of the Company, he will
not, directly or indirectly, as sole proprietor, partner, employee, officer,
director, shareholder, trustee, advisor, consultant or independent contractor,
or in any other manner or capacity whatsoever, engage in or provide services to
any business which offers and sells products competing directly with the primary
products offered by any of the primary businesses of the Company, or with any of
the primary businesses of any of its subsidiaries, which subsidiaries are in
existence at the date of execution of this Agreement
-3-
<PAGE>
or are acquired by the Company while Employee is employed hereunder; provided
that Employee shall not be precluded from engaging in or providing services to
any business in any geographical area where the Company or any of its
subsidiaries (i) is not doing business on the date Employee ceases to be
employed by the Company, or (ii) cannot document that it has a plan to commence
doing business within the next twelve months after the date Employee ceases to
be employed by the Company. As used in the preceding sentence, the term
"primary businesses" shall mean (i) the specific businesses which the Company
(or any of its subsidiaries) owns or operates and (ii) the term "primary
products" shall mean the specified categories of women's apparel carried by the
retail stores comprising the Women's Apparel Retailing Group, the ophthalmic
goods, non-prescription sunglasses and prescription contact lens carried by the
retail outlets comprising the Optical Retailing Group and also shall mean men's
and women's footwear, with all such primary businesses and primary products
identified in Appendix A, which is to be amended by appropriate and timely
additions or deletions from time to time in writing by the Company to Employee.
Employee agrees that the remedy at law for any breach of the foregoing will be
inadequate, and that the Company will be entitled to injunctive relief (as well
as any other form of remedy available to the Company) for any such breach.
Except as amended above, the terms and conditions of the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 3 to
Employment Agreement as of the date first above mentioned.
THE UNITED STATES SHOE CORPORATION
ATTEST:
/s/ James J. Crowe /s/ Bannus B. Hudson
- - - - - - ------------------------------------- ----------------------------------
James J. Crowe, Secretary Bannus B. Hudson, President and
Chief Executive Officer
/s/ Martin Sherman
----------------------------------
Martin Sherman
-4-
<PAGE>
June 24, 1993
APPENDIX A
1. Women's Apparel Retailing Group
This group consists of women's apparel specialty stores which operate under
the names CASUAL CORNER, UPS 'N DOWNS, CAREN CHARLES, PETITE SOPHISTICATE,
AUGUST MAX WOMAN, CAPEZIO and CAREER IMAGE COMPANY STORE. The primary
products sold by the stores listed above are as follows:
a) CASUAL CORNER sells women's and misses' suits, dresses, separates and
sportswear.
b) UPS N' DOWNS/CAPEZIO sells pants, jeans, blouses, sweaters and
sportswear for young women.
c) CAREN CHARLES/PAPPAGALLO sells women's and misses dresses, separates,
sportswear, shoes and accessories.
d) PETITE SOPHISTICATE sells dresses, suits, coats and sportswear for
petite women.
e) AUGUST MAX WOMAN sells dresses, suits and sportswear for women wearing
larger sizes.
f) CAREER IMAGE COMPANY STORE sells misses' sportswear and career
clothing.
2. Optical Retailing Group
LensCrafters operates LENSCRAFTERS optical superstores and SIGHT & SAVE
stores and leased departments which provide complete ophthalmic goods and
services. Where permitted by law, LENSCRAFTERS and SIGHT & SAVE stores and
leased departments also offer optometric services.
3. Footwear Group
The Company manufactures, imports and sells at wholesale complete lines of
women's footwear and a line of men's footwear (which do not currently
include non-leather, action footwear) and men's and women's western boots.
The Company also sells men's and women's footwear in retail outlets which
contain the names EASY SPIRIT, BANISTER, JOYCE-SELBY SHOES, PAPPAGALLO, RED
CROSS FACTORY STORE, CAPEZIO FACTORY DIRECT and NATURAL FOOTGEAR. The
Cincinnati Shoe Division operates leased shoe departments.
-5-
<PAGE>
Exhibit 10(k)
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 3rd day of February, 1994, between THE
UNITED STATES SHOE CORPORATION (hereinafter called the "Company") and DAVID M.
BROWNE (hereinafter called "Employee"), with regard to employment of the
Employee of the Company.
WHEREAS, the Company and Employee entered into an Employment Agreement
dated as of January 1, 1991 (the "Agreement"); and
WHEREAS, the Company and Employee wish to amend the Agreement, including
extension of its term to December 31, 1996;
NOW, THEREFORE, the Company and Employee hereby amend the Agreement by
deletion of paragraphs 2,3,4, and 9 and Exhibit A and insertion of new
paragraphs 2(a), 2(b), 2(c), 2(d), 3(a), 3(b) 4, and 9 and Exhibit A, as
follows:
2. (a) The extended term of this Agreement shall commence January 1,
1994 and end December 31, 1996. This Agreement and all of its terms shall be
extended from year to year thereafter, unless either party notifies the other in
writing delivered on or before July 1, 1996, or July 1 of any subsequent year,
of its or his desire to terminate the same on December 31, 1996 or any
subsequent December 31.
(b) If either party exercises its or his right to terminate the
Agreement as of December 31, 1996 or any subsequent December 31, the Company
shall pay Employee a termination payment equal to his then current annual
salary. The termination payment shall be payable in 12 equal monthly
installments on the last day of each month, beginning on January 1 immediately
following such December 31.
<PAGE>
-2-
(c) In the event that Employee is assigned to another senior
executive position in the Optical Retailing Group, or to a position anywhere in
the Company of less authority and responsibility than President and Chief
Executive Officer of the Optical Retailing Group, during the term of this
Agreement pursuant to paragraph 1(a) hereof, Employee shall have the option to
terminate the Agreement upon 90 days prior written notice. In the event that
Employee exercises such option to terminate the Agreement, Employee will be
entitled to a termination payment equal to his then current annual salary,
payable in 12 equal monthly installments on the last day of each month,
beginning in the month following such termination.
(d) No termination payment shall be made when any disability payments
are payable by the Company pursuant to paragraph 4 of this Agreement, or if the
Agreement has been terminated by the Company for Cause. In the event of the
failure by Employee to perform his duties pursuant to this Agreement, the
Company may terminate the Agreement for Cause, but will provide written notice
and an opportunity to cure prior to such termination. In addition, the Company
may terminate this Agreement immediately for Cause on the basis of fraud,
misappropriation, embezzlement, or material intentional violations of Company
policies on the part of the Employee.
3. (a) During the term of this Agreement, the Company agrees to pay
Employee an annual salary of not less than $325,000 until April 30, 1994 and not
less than $425,000 thereafter, or that amount determined pursuant to periodic
salary reviews, payable in equal bi-weekly installments; provided, however, that
if this Agreement is terminated due to Employee's death or disability, by the
Company for Cause, by mutual agreement or pursuant to paragraphs 2 or 7 hereof,
Employee's salary shall be prorated to the date of such termination. In
addition, Employee shall be
<PAGE>
-3-
entitled to participate, on a basis and to the extent consistent with his senior
executive position in any incentive plan, deferred compensation program,
retirement plan, stock option plans, group insurance and other so-called fringe
benefit programs from time to time in force for the benefit of Company employees
generally and/or for any group of employees of which Employee is a member,
provided that he meets the eligibility requirements of any such program or plan.
Employee shall be entitled to annual vacations in accordance with attached
Exhibit A.
(b) Employee will receive a restricted share award with maximum
market value on March 25, 1994 in the amount of $50,000, based upon the average
of the high and low market price of the Company's common shares on the New York
Stock Exchange on that date. The value of the award will be determined by the
amount by which the Optical Retailing Group's Operating Income for fiscal 1993
exceeds 100% of target for the Group. If the Group earns 100% of target or
less, no award will be given. If the Group earns 120% of target or more, the
full award will be given. If the Group earns in excess of 100% of target but
less than 120%, the award will be prorated accordingly. The common shares so
awarded will be subject to the terms and conditions of the 1988 Employee
Incentive Plan and will vest over a period of three years following the date of
the award.
4. If, during the term of this Agreement, Employee shall become
permanently disabled so as to be unable to carry out his duties hereunder for a
period of six consecutive months, this Agreement shall terminate at the end of
such six-month period, although Employee shall still be entitled during such
six-month period to his salary and all other emoluments and benefits to which he
would otherwise be entitled. The Company shall have no obligation to make the
termination payment provided in paragraph 2 of this Agreement, but the Company
shall pay Employee a total
<PAGE>
-4-
disability benefit equal to twice his annual salary for the calendar year during
which he becomes so disabled; provided, however, that the disability benefit
payable by the Company shall be reduced (but not below zero) by the amount of
any disability payments which Employee actually receives, during the period that
such disability benefit is being paid, under any Company-paid group insurance
program. The disability benefit payable by the Company shall not be reduced by
the amount of any disability payments which are attributable to premiums paid by
Employee. Such disability benefit payable by the Company shall be paid in 120
equal monthly installments on the last day of each month, commencing with the
month following such permanent disability. If Employee dies after such
termination of this Agreement, but prior to his receipt of the full 120 monthly
installments of the disability benefit, the remaining monthly installments shall
be paid by the Company when due to the person or persons, including trustees, he
has designated as beneficiary thereof or, in the event he has made no such
designation, to his estate.
9. In consideration of the termination payment payable pursuant to
paragraph 2, the disability payments payable pursuant to paragraph 4 and other
valuable consideration provided in this Agreement, for a period ending on the
later of (i) one year after Employee ceases to be employed by the Company (other
than termination by Employee for Good Reason pursuant to the Severance
Compensation Agreement) or (ii) December 31, 1996, he will not, without the
prior written consent of the Company, directly or indirectly, as sole
proprietor, partner, employee, officer, director, shareholder, trustee, advisor,
consultant or independent contractor, or in any other manner or capacity
whatsoever, engage or participate in the retail sale of eye glasses, contact or
eye-glass lenses, eye-glass frames and related products within a radius of
twenty-five (25) miles of any optical retail location or outlet (i) operated by
or (ii) the subject of a documented plan to
<PAGE>
-5-
be opened within one year by the Company, any of its subsidiaries or any of its
franchisees in any state of the United States, in Canada, Mexico, Central or
South America or in the Economic Community of Europe, as of the date that
Employee ceases to be employed by the Company. Employee agrees that the remedy
at law for any breach of the foregoing will be inadequate, and that the Company
will be entitled to injunctive relief (as well as any other form of remedy
available to the Company, including but not limited to the forfeiture of any
rights remaining under the Agreement) for any such breach.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above mentioned.
THE UNITED STATES SHOE CORPORATION
ATTEST
/s/ James J. Crowe /s/ Bannus B. Hudson
- - - - - - ------------------------------- ---------------------------------
James J. Crowe, Secretary Bannus B. Hudson, President and
Chief Executive Officer
/s/ David M. Browne
---------------------------------
David M. Browne
<PAGE>
February 3, 1994 EXHIBIT A
David M. Browne - Vacation Agreement
------------------------------------
- Five weeks of vacation currently.
- Six weeks of vacation after ten years of service.
- Employee has option to sell back to Company or to
carry over not more than one week of vacation each year.
<PAGE>
Exhibit 10(l)
AMENDMENT NO. 5 TO SEVERANCE COMPENSATION AGREEMENT
THIS AMENDED AGREEMENT, dated as of January 26, 1994, is between THE UNITED
STATES SHOE CORPORATION, an Ohio corporation (the "Company") and MARTIN SHERMAN
(the "Executive").
The Company and Executive have previously executed the Severance
Compensation Agreement dated as of June 1, 1987 (the "Agreement"), and the Board
of Directors has determined that it is appropriate to amend such Agreement in
certain respects. The Agreement is hereby amended by deleting Section 1 and
inserting a new Section 1, as follows:
1. TERM. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) June 30 of any year after 1995, provided that either party has
given at least 60 days prior written notice to the other party of its or his
intention to terminate this Agreement under this clause (i); (ii) the
termination of the Executive's employment with the Company based on death,
Disability (as defined in Section 3(b)), Retirement (as defined in Section 3(c))
or Cause (as defined in Section 3(d)); or by the Executive other than for Good
Reason (as defined in Section 3(e)); and (iii) two years from the date of a
Change in Control of the Company if the Executive has not terminated his
employment for Good Reason as of such time.
Except as amended above, the Agreement will continue in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE UNITED STATES SHOE CORPORATION
ATTEST:
/s/ James J. Crowe /s/ K. Brent Somers
- - - - - - --------------------------------- ----------------------------------
James J. Crowe, Secretary K. Brent Somers
Vice President-Finance
EXECUTIVE
/s/ Martin Sherman
-----------------------------------
Martin Sherman
<PAGE>
Exhibit 10(n)
AMENDMENT NO. 5 TO SEVERANCE COMPENSATION AGREEMENT
THIS AMENDED AGREEMENT, dated as of January 26, 1994, is between THE UNITED
STATES SHOE CORPORATION, an Ohio corporation (the "Company") and BANNUS B.
HUDSON (the "Executive").
The Company and Executive have previously executed the Severance
Compensation Agreement dated as of November 1, 1987 (the "Agreement"), and the
Board of Directors has determined that it is appropriate to amend such Agreement
in certain respects. The Agreement is hereby amended by deleting Section 1 and
inserting a new Section 1, as follows:
1. TERM. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) June 30 of any year after 1995, provided that either party has
given at least 60 days prior written notice to the other party of its or his
intention to terminate this Agreement under this clause (i); (ii) the
termination of the Executive's employment with the Company based on death,
Disability (as defined in Section 3(b)), Retirement (as defined in Section 3(c))
or Cause (as defined in Section 3(d)); or by the Executive other than for Good
Reason (as defined in Section 3(e)); and (iii) two years from the date of a
Change in Control of the Company if the Executive has not terminated his
employment for Good Reason as of such time.
Except as amended above, the Agreement will continue in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE UNITED STATES SHOE CORPORATION
ATTEST:
/s/ James J. Crowe /s/ K. Brent Somers
- - - - - - ------------------------------ ----------------------------------
James J. Crowe, Secretary K. Brent Somers
Vice President-Finance
EXECUTIVE
/s/ Bannus B. Hudson
----------------------------------
Bannus B. Hudson
<PAGE>
Exhibit 10(o)
AMENDMENT NO. 2 TO SEVERANCE COMPENSATION AGREEMENT
THIS AMENDED AGREEMENT, dated as of January 26, 1994, is between THE UNITED
STATES SHOE CORPORATION, an Ohio corporation (the "Company") and K. BRENT SOMERS
(the "Executive").
The Company and Executive have previously executed the Severance
Compensation Agreement dated as of March 28, 1990 (the "Agreement"), and the
Board of Directors has determined that it is appropriate to amend such Agreement
in certain respects. The Agreement is hereby amended by deleting Section 1 and
inserting a new Section 1, as follows:
1. TERM. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) June 30 of any year after 1995, provided that either party has
given at least 60 days prior written notice to the other party of its or his
intention to terminate this Agreement under this clause (i); (ii) the
termination of the Executive's employment with the Company based on death,
Disability (as defined in Section 3(b)), Retirement (as defined in Section 3(c))
or Cause (as defined in Section 3(d)); or by the Executive other than for Good
Reason (as defined in Section 3(e)); and (iii) two years from the date of a
Change in Control of the Company if the Executive has not terminated his
employment for Good Reason as of such time.
Except as amended above, the Agreement will continue in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE UNITED STATES SHOE CORPORATION
ATTEST:
/s/ James J. Crowe /s/ Bannus B. Hudson
- - - - - - ------------------------------ ----------------------------------
James J. Crowe, Secretary Bannus B. Hudson
President and CEO
EXECUTIVE
/s/ K. Brent Somers
----------------------------------
K. Brent Somers
<PAGE>
Exhibit 10(p)
AMENDMENT NO. 2 TO SEVERANCE COMPENSATION AGREEMENT
THIS AMENDED AGREEMENT, dated as of January 26, 1994, is between THE UNITED
STATES SHOE CORPORATION, an Ohio corporation (the "Company") and DAVID M. BROWNE
(the "Executive").
The Company and Executive have previously executed the Severance
Compensation Agreement dated as of March 28, 1990 (the "Agreement"), and the
Board of Directors has determined that it is appropriate to amend such Agreement
in certain respects. The Agreement is hereby amended by deleting Section 1 and
inserting a new Section 1, as follows:
1. TERM. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) June 30 of any year after 1995, provided that either party has
given at least 60 days prior written notice to the other party of its or his
intention to terminate this Agreement under this clause (i); (ii) the
termination of the Executive's employment with the Company based on death,
Disability (as defined in Section 3(b)), Retirement (as defined in Section 3(c))
or Cause (as defined in Section 3(d)); or by the Executive other than for Good
Reason (as defined in Section 3(e)); and (iii) two years from the date of a
Change in Control of the Company if the Executive has not terminated his
employment for Good Reason as of such time.
Except as amended above, the Agreement will continue in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE UNITED STATES SHOE CORPORATION
ATTEST:
/s/ James J. Crowe /s/ K. Brent Somers
- - - - - - ------------------------------ ------------------------------------
James J. Crowe, Secretary K. Brent Somers
Vice President-Finance
EXECUTIVE
/s/ David M. Browne
-------------------------------------
David M. Browne
<PAGE>
Exhibit 10(t)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 15th day of March, 1993, between THE
UNITED STATES SHOE CORPORATION, an Ohio corporation with principal offices at
One Eastwood Drive, Cincinnati, Ohio 45227 (hereinafter called the "Company")
and MICHAEL M. SEARLES, whose address is 4 Powder Hill Road, Saddle River, New
Jersey 07458 (hereinafter called "Employee"), with regard to employment of the
Employee by the Company.
1. (a) During the term of this Agreement, the Company agrees to employ
Employee and Employee agrees to serve the Company, including its subsidiaries,
in a senior executive capacity with such title and duties as may be fixed by the
Company from time to time, but consistent with, and initially as President and
Chief Executive Officer of the Women's Apparel Retailing Group. Employee
acknowledges that he will serve in that capacity at the discretion of the
President and Chief Executive Officer of the Company and may be assigned to
other senior executive positions during the term of this Agreement.
(b) During the term of this Agreement, Employee also agrees to devote
to the Company's business and affairs his full business time and attention, so
as to assure full and efficient performance of his duties hereunder; to give and
devote his best and loyal efforts and skills to the Company; and, in all other
respects, to do his utmost to enhance the Company's welfare. During the term of
this Agreement, Employee shall not, without the Company's prior written consent,
engage or participate, directly or indirectly, in any other business as a sole
proprietor, partner, employee, officer, shareholder, trustee, advisor or
consultant, or accept appointment or election as a director or in any other
fiduciary or honorary capacity in any other business, venture or project;
provided, however, that nothing in this Agreement shall preclude Employee from
devoting his nonbusiness time and efforts to charitable, social and civic
matters to the extent that such activities do not interfere with Employee's
performance of his duties under this Agreement. Employee shall not be precluded
from making investments as a limited partner or from owning securities which are
traded on a national exchange or which are
<PAGE>
-2-
regularly quoted on the over-the-counter market and reported in the financial
press, provided that with respect to any one limited partnership, Employee's
interest in the capital and profits of such limited partnership does not exceed
5% and with respect to any one issuer such securities do not exceed 5% of the
outstanding securities of such issuer.
2. The original term of this Agreement shall commence March 15, 1993 and
end March 31, 1996. This Agreement and all of its terms shall be extended from
year to year thereafter, unless either party notifies the other in writing
delivered on or before September 30, 1995, or September 30 of any subsequent
year, of its or his desire to terminate the same on March 31, 1996 or any
subsequent March 31. If either party exercises its or his right to terminate
the Agreement as of March 31, 1996 or any subsequent March 31, the Company shall
pay Employee a termination payment equal to his then current annual salary. The
termination payment shall be payable in 12 equal monthly installments on the
last day of each month, beginning on April 30 immediately following such
termination. However, no termination payment shall be made when any disability
payments are payable by the Company pursuant to paragraph 5 of this agreement,
or if the agreement has been terminated by the Company for cause. The Company
may terminate this agreement immediately for cause due to breach of any of the
provisions of this agreement, fraud, misrepresentation, theft or embezzlement of
the Company's assets, or intentional violations of law or company policies by
Employee. In the event that Employee is assigned to another senior executive
position during the term of this agreement pursuant to paragraph 1(a) hereof,
the Company and Employee each shall have the option to terminate this agreement
upon 90 days prior written notice. In the event that either party exercises the
option to terminate this Agreement, Employee will be entitled to a termination
payment equal to his then current annual salary, payable in 12 equal monthly
installments on the last day of each month, beginning in the month following
such termination.
3. Upon execution of this Agreement, the Company agrees to pay Employee a
single payment of $500,000 and, during the term hereof, an annual salary of not
less than
<PAGE>
-3-
$500,000, payable in equal biweekly installments; provided, however, that if
this Agreement is terminated due to Employee's death or disability, by the
Company for cause, by mutual agreement or pursuant to paragraphs 2 or 8 hereof,
Employee's salary shall be prorated to the date of such termination. Employee
also will receive a nonqualified stock option award of 100,000 shares pursuant
to the Company's 1988 Employee Incentive Plan, with such award to be approved at
the next meeting of the Company's Board of Directors to be held on March 24,
1993. Employee will receive four weeks paid vacation each year. In addition,
Employee shall be entitled to participate, on a basis and to the extent
consistent with his senior executive position in any deferred compensation
program, retirement plan, stock option plan, group insurance and other so-called
fringe benefit programs from time to time in force for the benefit of Company
employees generally and/or for any group of employees of which Employee is a
member, provided that he meets the eligibility requirements of any such program
or plan.
4. In addition to Employee's annual salary set forth in paragraph 3
above, Employee may earn incentive compensation in the fiscal years ending
January 29, 1994, January 28, 1995 and February 3, 1996, equal to 0.7% (seven-
tenths percent) of operating income (after capital costs) of the Women's Apparel
Retailing Group. Such incentive compensation for the fiscal years ending
January 29, 1994 and January 28, 1995 will be not less than $150,000. Employee
will receive such payments upon distribution of executive bonuses for that
fiscal year. Commencing February 4, 1996, Employee will be eligible to
participate in the executive bonus and key executive long term incentive
programs.
5. If, during the term of this Agreement, Employee shall become
permanently disabled so as to be unable to carry out his duties hereunder for a
period of six consecutive months, this Agreement shall terminate at the end of
such six-month period and the Company shall have no obligation to make the
termination payment provided in paragraph 2 of this Agreement, but the Company
shall pay Employee a total disability benefit equal to twice his annual salary
in the calendar year during which he becomes so disabled; provided, however,
that the disability
<PAGE>
-4-
benefit payable by the Company shall be reduced by the amount of any disability
payments which Employee actually receives, during the period that such
disability benefit is being paid, under any Company-paid group insurance
program. Such disability benefit payable by the Company shall be paid in 120
equal monthly installments on the last day of each month, commencing with the
month following such permanent disability. If Employee dies after such
termination of this Agreement, but prior to his receipt of the full 120 monthly
installments of the disability benefit, the remaining monthly installments shall
be paid by the Company when due to the person or persons, including trustees, he
has designated as beneficiary thereof or, in the event he has made no such
designation, to his estate.
6. If Employee and the Company are unable to agree as to whether or not
Employee is permanently disabled to carry out his duties hereunder, the question
of permanent disability shall be submitted to three doctors, one of whom shall
be appointed by Employee or his legal representative, one by the Company and the
third by the first two appointed, and the decision of any two of them shall be
final and binding. If the question of permanent disability is raised, Employee
agrees to submit to medical examination of such three doctors and to permit the
Company to have access to their findings, provided that the Company shall bear
all costs of the medical examinations and preparation of the medical reports by
the three doctors.
7. Employee expressly covenants and agrees that he will not at any time,
either during the term of this Agreement or thereafter, directly or indirectly
use, convey or permit the use of any trade secrets or other proprietary and/or
confidential information of, or relating to, the Company or any of its
subsidiaries, in connection with any activity or business, except the business
of the Company or any such subsidiary. Employee also agrees during the term of
this Agreement or thereafter that he will not divulge such information to any
person, firm or corporation whatsoever, except as may be necessary in the
performance of his duties hereunder. The obligations of Employee contained in
this paragraph shall not apply to any information which was known to the public
at the time of its receipt by Employee or shall become known
<PAGE>
-5-
generally to the public in any manner other than by an improper act of Employee.
8. In the event of the merger or consolidation of the Company into
another corporation (hereinafter called the "successor corporation"), or in the
event of the sale of all or substantially all of the Company's assets to another
corporation (hereinafter called the "other corporation"), the Company shall
assign all of its right, title and interest under this Agreement to the
successor or other corporation, and such successor or other corporation shall
assume and agree to perform all of the terms and conditions and provisions
imposed on the Company by this Agreement. After such assignment, all further
rights as well as all further obligations of the Company under this Agreement
shall cease and terminate. The successor or other corporation shall become and
remain liable to Employee to perform all obligations of the Company hereunder
(except the obligation to delegate to him the duties and responsibilities set
forth herein) until the end of the term of this Agreement, provided that
Employee shall have the right to terminate this Agreement at any time within six
months after the merger or consolidation or the sale of assets becomes
effective, by giving the successor or other corporation 90 days prior written
notice. If this Agreement is terminated by Employee during such six-month
period, Employee will be eligible to receive the termination payment in
accordance with paragraph 2 above.
9. Employee and the Company will execute a Severance Compensation
Agreement which will provide that Employee shall have the right to terminate his
employment for Good Reason as provided in such Severance Compensation Agreement.
In the event that Employee shall exercise his right to terminate his employment
for Good Reason under the Severance Compensation Agreement, this Agreement also
shall terminate, but such termination shall not relieve the Company from
liability to Employee resulting from any breach of the terms of this Agreement
by the Company. If Employee shall terminate his employment for Good Reason
pursuant to the Severance Compensation Agreement and becomes entitled to
payments thereunder, he will not be eligible to receive termination payments
pursuant to paragraphs 2 or 8 of this Agreement.
10. If Employee's employment under this Agreement terminates, other than
by mutual
<PAGE>
-6-
agreement, Employee agrees that -
(i) with respect to termination by the Company at any time for
Cause or termination by Employee prior to March 31, 1996, for the
period of 12 months after the date of such termination, or
(ii) with respect to termination under any other circumstances,
for the period ending on the last day of the month in which the final
payment under paragraph 2 is paid to Employee.
He will not, without the prior written consent of the Company, directly or
indirectly, as sole proprietor, partner, employee, officer, director,
shareholder, trustee, advisor, consultant or independent contractor, or in any
other manner or capacity whatsoever, engage or participate in women's apparel
retailing within a radius of fifty (50) miles of any women's apparel retail
location or outlet (i) operated by or (ii) the subject of a documented plan to
be opened by the Company or any of its subsidiaries in any state of the United
States or in Canada, as of the date that Employee ceases to be employed by the
Company. Employee agrees that the remedy at law for any breach of the foregoing
will be inadequate, and that the Company will be entitled to injunctive relief
(as well as any other form of remedy available to the Company, including but not
limited to the forfeiture of any rights remaining under the Agreement) for any
such breach.
11. Any notice or notification provided for herein shall be in writing and
shall not be deemed to have been duly given unless mailed by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
other party at his or its address stated herein or such other address as either
party may from time to time establish by notice in writing to the other. If
notice or notification is given to the Company by Employee hereunder, it shall
be addressed to the President and Chief Executive Officer of the Company with a
copy to the Company's General Counsel.
12. This Agreement, together with the Severance Compensation Agreement,
expresses in full the understanding of the Company and Employee, and all
promises, representations,
<PAGE>
-7-
understandings, arrangements and prior agreements with regard to Employee's
employment by the Company (other than those set forth in the Severance
Compensation Agreement) are merged herein. This Agreement may not be altered,
amended or revoked except by a writing signed by Employee and the Company or a
successor or other corporation.
13. If any provision of this Agreement or its application to any
circumstances shall be determined by any court of competent jurisdiction to be
invalid or unenforceable to any extent, the remainder of this Agreement, or the
application of such provision to circumstances other than those as to which it
is so determined invalid or unenforceable, shall not be affected thereby; and
each provision thereof shall be valid and shall be enforced to the fullest
extent permitted by law. If the Company claims that Employee has violated this
Agreement and litigation results with respect to such claims, or if it becomes
necessary for Employee to commence litigation to enforce his rights under this
Agreement, each party shall be responsible for their own costs and expenses of
the litigation, including reasonable attorney's fees.
14. This Agreement shall be subject to and construed in accordance with the
laws of Ohio; and it shall inure to the benefit of and be binding upon the
parties hereto and upon the Company's successors and assigns. Neither this
Agreement nor the right and obligations of Employee hereunder shall be
transferable or assignable by Employee.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above mentioned.
THE UNITED STATES SHOE CORPORATION
ATTEST
/s/ James J. Crowe /s/ Bannus B. Hudson
- - - - - - ---------------------------- ----------------------------------
James J. Crowe, Secretary Bannus B. Hudson, President and
Chief Executive Officer
/s/ Michael M. Searles
----------------------------------
Michael M. Searles
<PAGE>
Exhibit 10(u)
AMENDMENT NO. 1 TO SEVERANCE COMPENSATION AGREEMENT
THIS AMENDED AGREEMENT, dated as of January 26, 1994, is between THE UNITED
STATES SHOE CORPORATION, an Ohio corporation (the "Company") and MICHAEL SEARLES
(the "Executive").
The Company and Executive have previously executed the Severance
Compensation Agreement dated as of March 15, 1993 (the "Agreement"), and the
Board of Directors has determined that it is appropriate to amend such Agreement
in certain respects. The Agreement is hereby amended by deleting Section 1 and
inserting a new Section 1, as follows:
1. TERM. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) June 30 of any year after 1995, provided that either party has
given at least 60 days prior written notice to the other party of its or his
intention to terminate this Agreement under this clause (i); (ii) the
termination of the Executive's employment with the Company based on death,
Disability (as defined in Section 3(b)), Retirement (as defined in Section 3(c))
or Cause (as defined in Section 3(d)); or by the Executive other than for Good
Reason (as defined in Section 3(e)); and (iii) two years from the date of a
Change in Control of the Company if the Executive has not terminated his
employment for Good Reason as of such time.
Except as amended above, the Agreement will continue in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE UNITED STATES SHOE CORPORATION
ATTEST:
/s/ James J. Crowe /s/ K. Brent Somers
- - - - - - -------------------------- ----------------------------------
James J. Crowe, Secretary K. Brent Somers
Vice President-Finance
EXECUTIVE
/s/ Michael Searles
------------------------------------
Michael Searles
<PAGE>
Exhibit 10(u), continued
SEVERANCE COMPENSATION AGREEMENT
THIS AGREEMENT, dated as of March 15,1993, is between THE UNITED
STATES SHOE CORPORATION, an Ohio corporation (the "Company"), and MICHAEL
SEARLES.
The Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to his assigned
duties without distraction in potentially disturbing circumstances arising from
the possibility of a Change in Control of the Company.
This Agreement sets forth the severance compensation which the
Company agrees it will pay to the Executive under one of the circumstances
described herein following a Change in Control of the Company (as defined
herein).
1. TERM. This Agreement shall terminate, except to the extent that
any obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) June 30 of any year after 1993, provided that either party has
given at least 60 days' prior written notice to the other party of its or his
intention to terminate this Agreement under this clause (i); (ii) the
termination of the Executive's employment with the Company based on death,
Disability (as defined in Section 3(b)) Retirement (as defined in Section 3(c))
or Cause (as defined in Section 3(d) or by the Executive other than for Good
Reason (as defined in Section 3(e)); and (iii) two years from the date of a
Change in Control of the Company if the Executive has not terminated his
employment for Good Reason as of such time.
2. CHANGE IN CONTROL. No compensation shall be payable under this
Agreement unless and until (a) there shall have been a Change in Control of the
Company while the Executive is still an employee of the Company and (b) the
Executive either shall be employed by the Company on the date six months
following the Change in Control of the Company or the Executive's employment by
the Company shall have been terminated in accordance with Section 3. For
purposes of this Agreement, a Change in Control of the Company shall be deemed
to have occurred if:
(i) there shall be consummated any consolidation or merger of the Company
and, as a result of such consolidation or merger (x) less than 50% of the
outstanding common shares and 50% of the voting shares of the surviving or
resulting corporation are owned, immediately after such consolidation or merger,
by the owners of the Company's common shares immediately prior to such
consolidation or merger, or (y) any person (as such term is used in Section
13(d) and 14(d) (2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of 25% or more of the surviving or resulting
corporation's outstanding common shares, and (z) in each such case, within two
years after such consolidation or merger, individuals who were directors of the
Company immediately prior to such consolidation or merger cease to constitute a
majority of the Board of Directors of the Company or its
<PAGE>
- Page 2 -
successor by consolidation or merger, or
(ii) there shall be consummated any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of (A) all, or
substantially all, of the assets of the Company or (B) all, or substantially
all, of the assets of one or more of the Women's Enclosed Mall Apparel Retailing
Group, the Footwear Manufacturing, Wholesaling and Retailing Group or the
LensCrafters Group (collectively, the "Company Groups"), or
(iii) the shareholders of the Company shall approve any plan or proposal
for the liquidation or dissolution of Company, or
(iv) any person (as such term is used in Sections 13(d) and 14(d) (2) of
the Exchange Act) shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of 25% or more of the Company's outstanding common
shares, and within two years after such person becomes such beneficial owner,
individuals who were directors of the Company immediately prior to the time such
person became such beneficial owner, cease to constitute a majority of the Board
of Directors of the Company, or
(v) during any period of two consecutive years, individuals who at the
beginning of such period constitute the entire Board of Directors shall cease
for any reason to constitute a majority thereof unless the election or the
nomination for election by the Company's shareholders of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
3. EFFECT OF CHANGE IN CONTROL; DEFINITIONS.
(a) If a Change in Control of the Company shall have occurred while the
Executive is still an employee of the Company, the Executive shall be entitled
to the compensation provided in Section 4 in accordance with the terms thereof.
(b) DISABILITY. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his duties
with the Company on a full-time basis for six months and within 30 days after
written notice of termination is thereafter given by the Company the Executive
shall not have returned to the full-time performance of the Executive's duties,
the Company may terminate this Agreement for "Disability."
(c) RETIREMENT. The term "Retirement" , as used in this Agreement, shall
mean termination by the Company or the Executive of the Executive's employment
based on the Executive having reached age 65 or such other age as shall have
been fixed in any arrangement established with the Executive's consent with
respect to the Executive.
(d) CAUSE. The Company may terminate the Executive's employment for
Cause. For purposes of this Agreement only, the Company shall have "Cause" to
terminate the Executive's employment hereunder only on the basis of fraud,
misappropriation or embezzlement on the part of the Executive. Notwithstanding
the foregoing, the Executive shall not be deemed to have been
<PAGE>
- Page 3 -
terminated for the Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three quarters of the entire membership of the Company's Board of
Directors at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that in the good faith opinion of the Board, the Executive was guilty of conduct
set forth in the second sentence of this Section 3(d) and specifying the
particulars thereof in detail.
(e) GOOD REASON. The Executive may terminate the Executive's employment
for Good Reason at any time during the term of this Agreement. For purposes of
this Agreement, "good Reason" shall mean any of the following (without the
Executive's express written consent):
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities and
status with the Company immediately prior to a Change in Control of the
Company, or a change in the Executive's titles or offices as in effect
immediately prior to a Change in Control of the Company, or any removal of
the Executive from or any failure to re-elect the Executive to any of the
such positions, except in connection with the termination of his employment
for Disability, Retirement or Cause or as a result of the Executive's death
or by the Executive other than for Good Reason;
(ii) a reduction by the Company in the Executive's base salary as in
effect on the date hereof;
(iii) any failure by the Company to continue in effect any benefit
plan or arrangement (including, without limitation, the Company's
retirement plan, group life insurance plan, and medical, dental, accident
and disability plans) in which the Executive is participating at the time
of a Change in Control of the Company (or any other plans providing the
Executive with substantially similar benefits) (hereinafter referred to as
"Benefit Plans"), or the taking of any action by the Company which would
adversely affect the Executive's participation in or materially reduce the
Executive's benefits under any such Benefit Plan or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of a
Change in Control of the Company;
(iv) any failure by the Company to continue the Executive's
eligibility to participate in annual executive bonus' arrangements in which
the Executive is participating at the time of a Change in Control of the
Company (or any plans or arrangements providing him with substantially
similar benefits) (hereinafter referred to as "Incentive Plans") or the
taking of any action by the Company which would significantly reduce the
Executive's opportunity to earn incentive compensation which is related to
performance results as compared to performance expectations periodically
determined by the Company;
<PAGE>
- Page 4 -
(v) a relocation of the Company's principal executive offices to a
location outside Cincinnati, Ohio, or the Executive's relocation to any
place other than the location at which the Executive performed the
Executive's duties prior to a Change in Control of the Company, except for
required travel by the Executive on the Company's business to an extent
substantially consistent with the Executive's business travel obligations
at the time of a Change in Control of the Company;
(vi) any failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is entitled at the time
of a Change in Control of the Company;
(vii) any material breach by the Company of any provisions of this
Agreement;
(viii) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company; or
(ix) any purported termination of the Executive's employment which
is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(f), and for purposes of this Agreement, no such
purported termination shall be effective.
(f) NOTICE OF TERMINATION. Any termination by the Company or by the
Executive shall be communicated by a Notice of Termination. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate those specific termination provisions in this Agreement relied
upon and which sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. For purposes of this Agreement, no such purported
termination by the Company or by the Executive shall be effective without such
Notice of Termination.
(g) DATE OF TERMINATION. "Date of Termination" shall mean:
(i) if this Agreement is terminated by the Company for Disability
30 days after Notice of Termination is given to the Executive (provided
that the Executive shall not have returned to the performance of the
Executive's duties on a full-time basis during such 30-day period), or
(ii) if the Executive's employment is terminated by the Company for
any other reason or if the Executive shall terminate his employment, the
date on which a Notice of Termination is given; provided that if within 30
days after any Notice of Termination is given the party receiving notice
notifies the other party that a dispute exists concerning the termination,
the Date of Termination shall be the date the dispute is finally
determined, whether by mutual agreement by the parties or upon final
judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected).
<PAGE>
- Page 5 -
4. COMPENSATION UNDER THIS AGREEMENT.
(a) If the Executive's employment is terminated under the below
enumerated conditions or if the Executive is employed by the Company on or after
six months following a Change in Control, the Company shall pay to the Executive
the following amounts:
(i) TERMINATION OF THE EXECUTIVE'S EMPLOYMENT BEFORE THE EXPIRATION
OF SIX MONTHS FOLLOWING A CHANGE IN CONTROL. If the Executive's employment
is terminated, other than by reason of the Executive's death, before the
expiration of the date six months after a Change in Control and such
termination is by the Company, other than pursuant to Section 3(b), 3(c),
or 3(d), or by the Executive for Good Reason, then the Company shall pay to
the Executive (1) the full base salary to which the Executive is entitled
through the Date of Termination, (2) credit for unused vacation, (3) a
lump-sum payment equal to the greater of Executive's annual base salary on
the date hereof or on the Date of Termination, and (4) severance pay in an
amount equal to the excess over $100 of three times the average of the
aggregate annual compensation paid to the Executive by the Company and any
subsidiary which is a member of its "affiliated group" (as defined in
Sections 1504 and 280(d) (5) of the Internal Revenue Code of 1986, as
amended (the "Code")) during the Executive's five taxable years preceding
the Change in Control of the Company (or such portion of such five-year
period during which the Executive was employed by the Company or such
member of its affiliated group), reduced by the amount of the lump-sum
payment made to the Executive pursuant to Section 4(a)(i)(3).
(ii) COMPENSATION ON OR AFTER THE EXPIRATION OF SIX MONTHS FOLLOWING
A CHANGE IN CONTROL. If the Executive is employed by the Company on the
date six months following a Change in Control, then the Company shall pay
to the Executive a lump-sum payment equal to the greater of Executive's
annual base salary on the date hereof or on the date six months following a
Change in Control; provided, however, that (A) if the Executive is a member
of the corporate staff (rather than assigned to one of the Company Groups)
at the time of such Change in Control, the Executive shall not be entitled
to such payment if the Change In Control is described in Section 2(ii) (B)
and, immediately after such Change in Control, the Company continues to own
substantially all of the assets of two of the Company Groups, or (B) if the
Executive is assigned to one of the Company Groups at the time of such
Change in Control, the Executive shall not be entitled to such payment if
the Change in Control is described in Section 2(ii) (B) and, immediately
after such Change in Control, the Company continues to own substantially
all of the assets of the Company Group to which the Executive is assigned.
In addition, without regard to whether the Executive is entitled to payment
under the preceding sentence, if the Executive's employment is thereafter
terminated during the term of this Agreement, other than by reason of the
Executive's death, and such termination is by the Company, other than
pursuant to Section 3(b), 3(c), or 3(d), or
<PAGE>
- Page 6 -
by the Executive for Good Reason, then the Company shall pay to the
Executive (1) the full base salary to which the Executive is entitled
through the Date of Termination, (2) credit for unused vacation, and (3) a
lump-sum payment equal to the greater of Executive's annual base salary on
the date hereof or on the Date of Termination, and (4) severance pay in an
amount equal to the excess of $100 of three times the average of the
aggregate annual compensation paid to the Executive by the Company and any
subsidiary which is a member of its affiliated group during the Executive's
five taxable years preceding the Change in Control of the Company (or such
portion of such five-year period during which the Executive was employed by
the Company or such member of its affiliated group.) The amount payable
under Section 4(a)(ii)(4) shall be reduced by any payment made under the
first sentence of this Section 4(a)(ii), or under Section 4(a)(ii)(3).
(b) The severance payments described in Sections 4(a)(i)(4) and
4(a)(ii)(4) are subject to the following limitations:
(i) If there are fewer than 24 whole or partial months remaining
from the Date of Termination to the date on which the Executive attains age
65, the severance pay to which the Executive is entitled shall be reduced
to a lesser sum determined by multiplying the amount otherwise due by a
fraction, the numerator of which is the number of whole or partial months
remaining from the Date of Termination to the date on which the Executive
attains his 65th birthday and the denominator of which is 24.
(ii) If the severance pay, after the adjustment described in Section
4(b)(i), either alone or together with the other payments which the
Executive has the right to receive from any source, would constitute
"excess parachute payments" (as defined in Section 280G of the Code), such
severance pay shall be reduced to the largest amount as will result in no
portion of the severance pay being subject to the excise tax imposed by
Section 4999 of the Code. If the Company and the Executive cannot agree on
the reduction, if any, in the severance pay pursuant to the foregoing
provision, the determination of the amount of such reduction shall be made
by tax counsel selected by the Company's independent auditors and
acceptable to the Executive, and such determination shall be conclusive and
binding on the parties.
(c) The amounts described in Sections 4(a)(i) and 4(a)(ii) shall be paid
as follows:
(i) The amounts specified in Sections 4(a)(i)(1), (2) and (3), as
well as Sections 4(a)(ii)(1), (2) and (3) shall be paid in cash in a lump
sum on the fifth business day following the Date of Termination. The
amount specified in the first sentence of Section 4(a)(ii) shall be paid in
cash in a lump sum on the fifth business day following the date on which
the Executive has been employed by the Company for six months following the
Change in Control. The amounts described in Section
<PAGE>
- Page 7 -
4(a)(i)(4) and Section 4(a)(ii)(4) shall be paid in 52 equal bi-weekly
installments corresponding to the Company's normal pay periods, commencing
with the first bi-weekly pay period following the Date of Termination;
provided, however, that to the extent, if any, the Executive receives
compensation from other employment during the period the Executive is
receiving payments under Section 4(a)(i)(4) or 4(a)(ii)(4), the bi-weekly
installment payments to be made by the Company shall be correspondingly
reduced, but in no event shall the Executive be required to repay to the
Company any amounts already paid to him by the Company. The Executive,
upon obtaining employment during the period he is receiving such payments,
promptly shall notify the Company of the amount of compensation received or
to be received from such employment and of any changes therein, and shall,
from time to time, but not more often than quarterly, provide to the
Company such records and other information as the Company may reasonable
request to verify the amount of such compensation. Notwithstanding the
foregoing, the Executive shall have no obligation to seek other employment
or take any other action in order to mitigate damages or the amount of any
payment provided for under this Agreement.
(d) Any payments required under this Section 4 shall be paid net of
applicable federal, state and local tax withholding.
(e) The Company shall maintain in full force and effect, for the
continued benefit of the Executive until the earlier of:
(i) two years after the Date of Termination, or
(ii) commencement of full-time employment by the Executive with a
new employer, all life insurance, medical, health and accident, and
disability plans, programs or arrangements in which the Executive was
entitled to participate immediately prior to the Date of Termination,
provided that continued participation by the Executive is possible under
the general terms and provisions of such plans and programs. In the event
that participation in any such plan or program is barred, the Company shall
arrange to provide to the Executive benefits substantially similar to those
which the Executive is entitled to receive under such plans and programs.
5. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS. The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under the Company's Economic Bridge Policy or
any Benefit Plan, Incentive Plan or Securities Plan, employment agreement or
other contract, plan or arrangement.
6. SUCCESSOR TO THE COMPANY.
(a) The Company will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
<PAGE>
- Page 8 -
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if not
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good Reason. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor or assign to its business and/or assets as aforesaid which executes
and delivers the Agreement provided for in this Section 6 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law. If at any time during the term of this Agreement the Executive is employed
by any corporation a majority of the voting securities of which is then owned by
the Company, "Company" as used in Sections 3, 4, 11 and 12 hereof shall in
addition include such employer. In such event, the Company agrees that it shall
pay or shall cause such employer to pay any amounts owed to the Executive
pursuant to Section 4 hereof.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts are still payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's devisee, legatee, or other designee or, if
there be no such designee, to the Executive's estate.
7. NOTICES. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid, as
follows:
If to the Company:
The United States Shoe Corporation
One Eastwood Drive
Cincinnati, Ohio 45227
Attn: Chairman and Chief Executive Officer
If to the Executive:
Michael Searles
c/o Women's Specialty Retailing Group
107 Phoenix Avenue
Enfield, CT 06082
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
<PAGE>
- Page 9 -
8. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representatives, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
9. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
12. CONFIDENTIALITY. The Executive shall retain in confidence any and
all confidential information known to the Executive concerning the Company and
its business so long as such information is not otherwise publicly disclosed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE UNITED STATES SHOE CORPORATION
ATTEST:
/s/ James J. Crowe /s/ Bannus B. Hudson
- - - - - - -------------------------- ----------------------------------
James J. Crowe, Secretary Bannus B. Hudson, President and
Chief Executive Officer
EXECUTIVE
/s/ Michael M. Searles
----------------------------------
Michael Searles
<PAGE>
Exhibit 10(v)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 19th day of May, 1993, between THE UNITED
STATES SHOE CORPORATION, an Ohio corporation with principal offices at One
Eastwood Drive, Cincinnati, Ohio 45227 (hereinafter called the "Company") and
NOEL E. HORD, whose address is 20 Bragdon Avenue, Danbury, Connecticut 06811
(hereinafter called "Employee"), with regard to employment of the Employee by
the Company.
1. (a) During the term of this Agreement, the Company agrees to employ
Employee and Employee agrees to serve the Company, including its subsidiaries,
in a senior executive capacity with such title and duties as may be fixed by the
Company from time to time, but consistent with, and initially as President and
Chief Executive Officer of the Footwear Group. Employee acknowledges that he
will serve in that capacity at the discretion of the President and Chief
Executive Officer of the Company and may be assigned to other senior executive
positions during the term of this Agreement.
(b) During the term of this Agreement, Employee also agrees to devote to
the Company's business and affairs his full business time and attention, so as
to assure full and efficient performance of his duties hereunder; to give and
devote his best and loyal efforts and skills to the Company; and, in all other
respects, to do his utmost to enhance the Company's welfare. During the term of
this Agreement, Employee shall not, without the Company's prior written consent,
engage or participate, directly or indirectly, in any other business as a sole
proprietor, partner, employee, officer, shareholder, trustee, advisor or
consultant, or accept appointment or election as a director or in any other
fiduciary or honorary capacity in any other business, venture or project;
provided, however, that nothing in this Agreement shall preclude Employee from
devoting his nonbusiness time and efforts to charitable, social and civic
matters to the extent that such activities do not interfere with Employee's
performance of his duties under this Agreement. Employee shall not be precluded
from making investments as a limited partner or from owning securities which are
traded on a national exchange or which are
<PAGE>
-2-
regularly quoted on the over-the-counter market and reported in the financial
press, provided that with respect to any one limited partnership, Employee's
interest in the capital and profits of such limited partnership does not exceed
5% and with respect to any one issuer such securities do not exceed 5% of the
outstanding securities of such issuer.
2. (a) The original term of this Agreement shall commence May 19, 1993 and
end May 31, 1997. This Agreement and all of its terms shall be extended for
successive one year terms from year to year thereafter, unless either party
notifies the other in writing delivered on or before November 30, 1996, or
November 30 of any subsequent year, of its or his desire to terminate the same
on May 31, 1997 or any subsequent May 31.
(b) If Employee exercises his right to terminate the Agreement as of May
31, 1997 or any subsequent May 31, the Company shall pay Employee a termination
payment equal to his then current annual salary. The termination payment shall
be payable in 12 equal monthly installments on the last day of each month,
beginning on June 30 immediately following such termination. In the event that
Employee is assigned to another senior executive position in the Footwear Group
during the term of this Agreement pursuant to paragraph 1(a) hereof, Employee
shall have the option to terminate the Agreement upon 90 days prior written
notice. In the event that Employee exercises such option to terminate the
Agreement, Employee will be entitled to a termination payment equal to his then
current annual salary, payable in 12 equal monthly installments on the last day
of each month, beginning in the month following such termination.
(c) If the Company exercises its right to terminate the Agreement as of
May 31, 1997, or any subsequent May 31, the Company shall pay Employee a
severance payment equal to his then annual salary, payable in 12 equal monthly
installments. If Employee accepts new employment while receiving such severance
payment, each monthly installment will be reduced by the amount of monthly
compensation which Employee receives from his new employment. While unemployed
and receiving such severance payment pursuant to this paragraph 2(c),
<PAGE>
-3-
Employee also will continue to participate in those fringe benefit programs and
plans provided to Employee while he was employed by the Company, in accordance
with and to the extent permitted by such benefit programs and plans.
(d) No termination payments shall be made when any disability payments
are payable by the Company pursuant to paragraph 5 of this Agreement or if the
Agreement is terminated by the Company at any time for Cause. The Company may
terminate this Agreement immediately for Cause, which shall mean breach of any
of the provisions of this Agreement, fraud, misrepresentation, theft or
embezzlement of the Company's assets, or intentional violations of law or
Company policies by Employee.
3. Upon execution of this Agreement, the Company agrees to pay Employee
during the term hereof an annual salary of not less than $450,000, payable in
equal biweekly installments; provided, however, that if this Agreement is
terminated due to Employee's death or disability, by the Company for cause, by
mutual agreement or pursuant to paragraph 2 or if the Company's obligations
shall cease and terminate pursuant to paragraph 8 hereof, Employee's salary
shall be prorated to the date of such termination. Employee also will receive a
restricted stock award of 20,000 shares and a nonqualified stock option award of
50,000 shares pursuant to the Company's 1988 Employee Incentive Plan, with such
awards to be approved at the meeting of the Company's Board of Directors to be
held on May 20, 1993. Employee will receive four weeks paid vacation each year.
In addition, Employee shall be entitled to participate, on a basis and to the
extent consistent with his senior executive position, in any deferred
compensation program, retirement plan, stock option plan, group insurance and
other so-called fringe benefit programs from time to time in force for the
benefit of Company employees generally and/or for any group of employees of
which Employee is a member, provided that he meets the eligibility requirements
of any such program or plan.
4. In addition to Employee's annual salary set forth in paragraph 3 above,
Employee may earn incentive compensation in the fiscal years ending January 29,
1994, January 28, 1995,
<PAGE>
-4-
February 3, 1996 and February 1, 1997, equal to 1.5% (one and one-half percent)
of operating income (after capital costs) of the Footwear Group. Such incentive
compensation for the fiscal years ending January 29, 1994, January 28, 1995 and
February 3, 1996 will be not less than $250,000. Employee will receive the
guaranteed payment for the fiscal year ending January 29, 1994 upon execution of
this Agreement and subsequent payments upon distribution of executive bonuses
for each fiscal year. The basis for incentive compensation for the fiscal year
ending January 31, 1998 and subsequent fiscal years shall be annually
determined.
5. If, during the term of this Agreement, Employee shall become permanently
disabled so as to be unable to carry out his duties hereunder for a period of
six consecutive months, this Agreement shall terminate at the end of such
six-month period and the Company shall have no obligation to make termination
payments pursuant to paragraph 2 of this Agreement. The Company shall pay
Employee a total disability benefit equal to twice his annual salary at the time
disability began; provided, however, that the disability benefit payable by the
Company shall be reduced by the amount of any disability payments which Employee
actually receives, during the period that such disability benefit is being paid,
under any Company-paid group insurance program. Such disability benefit payable
by the Company shall be paid in 120 equal monthly installments on the last day
of each month, commencing with the month following such six consecutive months
of permanent disability. If Employee dies after such termination of this
Agreement, but prior to his receipt of the full 120 monthly installments of the
disability benefit, the remaining monthly installments shall be paid by the
Company when due to the person or persons, including trustees, he has designated
as beneficiary thereof or, in the event he has made no such designation, to his
estate.
6. If Employee and the Company are unable to agree as to whether or not
Employee is permanently disabled so as to be unable to carry out his duties
hereunder, the question of permanent disability shall be submitted to three
doctors, one of whom shall be appointed by
<PAGE>
-5-
Employee or his legal representative, one by the Company and the third by the
first two appointed, and the decision of any two of them shall be final and
binding. If the question of permanent disability is raised, Employee agrees to
submit to medical examination of such three doctors and to permit the Company to
have access to their findings, provided that the Company shall bear all costs of
the medical examinations and preparation of the medical reports by the three
doctors.
7. (a) Employee and the Company mutually agree that, during the term of
this Agreement, Employee will neither use nor disclose legally protected
intellectual property, trade secrets or confidential business information of
Employee's former employer.
(b) Employee expressly covenants and agrees that he will not at any
time, either during the term of this Agreement or thereafter, directly or
indirectly use, convey or permit the use of any trade secrets or other
proprietary and/or confidential information of, or relating to, the Company or
any of its subsidiaries, in connection with any activity or business, except the
business of the Company or any such subsidiary. Employee also agrees during the
term of this Agreement or thereafter that he will not divulge such information
to any person, firm or corporation whatsoever, except as may be necessary in the
performance of his duties hereunder. The obligations of Employee contained in
this paragraph shall not apply to any information which was known to the public
at the time of its receipt by Employee or shall become known generally to the
public in any manner other than by an improper act of Employee.
8. In the event of the merger or consolidation of the Company into another
corporation (hereinafter called the "successor corporation"), or in the event of
the sale of all or substantially all of the Company's assets to another
corporation (hereinafter called the "other corporation"), the Company shall
assign all of its right, title and interest under this Agreement to the
successor or other corporation, and shall require such successor or other
corporation to assume and agree to perform all of the terms and conditions and
provisions imposed on the Company by this Agreement. After such assignment,
assumption and agreement, all further
<PAGE>
-6-
rights as well as all further obligations of the Company under this Agreement
shall cease and terminate. The successor or other corporation shall become and
remain liable to Employee to perform all obligations of the Company hereunder
(except the obligation to delegate to him the duties and responsibilities set
forth herein) until the end of the term of this Agreement, provided that
Employee shall have the right to terminate this Agreement at any time within six
months after the merger or consolidation or the sale of assets becomes
effective, by giving the successor or other corporation 90 days prior written
notice. If this Agreement is terminated by Employee during such six-month
period, Employee will be entitled to receive the termination payment in
accordance with paragraph 2 above.
9. Employee and the Company will execute a Severance Compensation Agreement
which will provide that Employee shall have the right to terminate his
employment for Good Reason as provided in such Severance Compensation Agreement.
In the event that Employee shall exercise his right to terminate his employment
for Good Reason under the Severance Compensation Agreement, this Agreement also
shall terminate, but such termination shall not relieve the Company from
liability to Employee resulting from any breach of the terms of this Agreement
by the Company. If Employee shall terminate his employment for Good Reason
pursuant to the Severance Compensation Agreement and become entitled to payments
thereunder, he will not be eligible to receive termination payments pursuant to
paragraphs 2 or 8 of this Agreement.
10. If Employee's employment under this Agreement terminates, other than by
mutual agreement, Employee's disability or because the Company exercises its
right to terminate effective May 31, 1997 or any subsequent May 31, Employee
agrees that -
(i) with respect to termination by the Company at any time for
Cause or termination by Employee prior to May 31, 1997, for the period
of 12 months following the date of such termination, or
(ii) with respect to termination under any other proper
circumstances, for the period ending on the last day of the month in
which the final termination payment
<PAGE>
-7-
under paragraph 2 is paid to Employee.
He will not, without the prior written consent of the Company, directly or
indirectly, as sole proprietor, partner, employee, officer, director,
shareholder, trustee, advisor, consultant or independent contractor, or in any
other manner or capacity whatsoever, engage or participate in manufacturing,
importing, exporting, distributing or retailing of footwear or related products
in any state of the United States or in Canada.
11. For a period of 12 months following the date of termination of
Employee's employment by the Company for any reason whatsoever, Employee will
not, without the express written consent of the Company, recruit, solicit or
induce any employees of the Company to terminate their employment with the
Company.
12. Employee agrees that the remedy at law for his breach of the provisions
of paragraphs 10 or 11 will be inadequate, and that the Company will be entitled
to injunctive relief (as well as any other form of remedy available to the
Company, including but not limited to the forfeiture of any rights remaining
under this Agreement) for any such breach.
13. Any notice or notification provided for herein shall be in writing and
shall not be deemed to have been duly given unless mailed by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
other party at his or its address stated herein or such other address as either
party may from time to time establish by notice in writing to the other. If
notice or notification is given to the Company by Employee hereunder, it shall
be addressed to the President and Chief Executive Officer of the Company with a
copy to the Company's General Counsel.
14. This Agreement, together with the Severance Compensation Agreement,
expresses in full the understanding of the Company and Employee, and all
promises, representations, understandings, arrangements and prior agreements
with regard to Employee's employment by the Company (other than those set forth
in the Severance Compensation Agreement) are merged herein. This Agreement may
not be altered, amended or revoked except by a writing signed by
<PAGE>
-8-
Employee and the Company or a successor or other corporation.
15. If any provision of this Agreement or its application to any
circumstances shall be determined by any court of competent jurisdiction to be
invalid or unenforceable to any extent, the remainder of this Agreement, or the
application of such provision to circumstances other than those as to which it
is so determined invalid or unenforceable, shall not be affected thereby; and
each provision thereof shall be valid and shall be enforced to the fullest
extent permitted by law. If the Company claims that Employee has violated this
Agreement and litigation results with respect to such claims, or if Employee
commences litigation to enforce his rights under this Agreement, each party
shall be responsible for that party's own costs and expenses of the litigation,
including reasonable attorney's fees.
16. This Agreement shall be subject to and construed in accordance with the
laws of Ohio; and it shall inure to the benefit of and be binding upon the
parties hereto and upon the Company's successors and assigns. Neither this
Agreement nor the right and obligations of Employee hereunder shall be
transferable or assignable by Employee.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above mentioned.
THE UNITED STATES SHOE CORPORATION
ATTEST
/s/ James J. Crowe /s/ Bannus B. Hudson
- - - - - - -------------------------------- ---------------------------------------
James J. Crowe, Secretary Bannus B. Hudson, President and
Chief Executive Officer
/s/ Noel E. Hord
---------------------------------------
Noel E. Hord
<PAGE>
Exhibit 10(w)
AMENDMENT NO. 1 TO SEVERANCE COMPENSATION AGREEMENT
THIS AMENDED AGREEMENT, dated as of January 26, 1994, is between THE UNITED
STATES SHOE CORPORATION, an Ohio corporation (the "Company") and NOEL E. HORD
(the "Executive").
The Company and Executive have previously executed the Severance
Compensation Agreement dated as of January 24, 1994 (the "Agreement"), and the
Board of Directors has determined that it is appropriate to amend such Agreement
in certain respects. The Agreement is hereby amended by deleting Section 1 and
inserting a new Section 1, as follows:
1. TERM. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) June 30 of any year after 1995, provided that either party has
given at least 60 days prior written notice to the other party of its or his
intention to terminate this Agreement under this clause (i); (ii) the
termination of the Executive's employment with the Company based on death,
Disability (as defined in Section 3(b)), Retirement (as defined in Section 3(c))
or Cause (as defined in Section 3(d)); or by the Executive other than for Good
Reason (as defined in Section 3(e)); and (iii) two years from the date of a
Change in Control of the Company if the Executive has not terminated his
employment for Good Reason as of such time.
Except as amended above, the Agreement will continue in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE UNITED STATES SHOE CORPORATION
ATTEST:
/s/ James J. Crowe /s/ K. Brent Somers
- - - - - - ------------------------------- ----------------------------------
James J. Crowe, Secretary K. Brent Somers
Vice President-Finance
EXECUTIVE
/s/ Noel E. Hord
----------------------------------
Noel E. Hord
<PAGE>
Exhibit 10(w), continued
SEVERANCE COMPENSATION AGREEMENT
THIS AGREEMENT, dated as of January 24,1994, is between THE UNITED
STATES SHOE CORPORATION, an Ohio corporation (the "Company"), and NOEL E. HORD,
whose address is 7600 Foxgate Lane, Cincinnati, Ohio 45243 (the "Executive").
The Company's Board of Directors has determined that it is appropriate
to reinforce and encourage the continued attention and dedication of members of
the Company's management, including the Executive, to his assigned duties
without distraction in potentially disturbing circumstances arising from the
possibility of a Change in Control of the Company.
This Agreement sets forth the severance compensation which the Company
agrees it will pay to the Executive under one of the circumstances described
herein following a Change in Control of the Company (as defined herein).
1. TERM. This Agreement shall terminate, except to the extent that
any obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) June 30 of any year after 1993, provided that either party has
given at least 60 days' prior written notice to the other party of its or his
intention to terminate this Agreement under this clause (i); (ii) the
termination of the Executive's employment with the Company based on death,
Disability (as defined in Section 3(b)) Retirement (as defined in Section 3(c))
or Cause (as defined in Section 3(d) or by the Executive other than for Good
Reason (as defined in Section 3(e)); and (iii) two years from the date of a
Change in Control of the Company if the Executive has not terminated his
employment for Good Reason as of such time.
2. CHANGE IN CONTROL. No compensation shall be payable under this
Agreement unless and until (a) there shall have been a Change in Control of the
Company while the Executive is still an employee of the Company and (b) the
Executive either shall be employed by the Company on the date six months
following the Change in Control of the Company or the Executive's employment by
the Company shall have been terminated in accordance with Section 3. For
purposes of this Agreement, a Change in Control of the Company shall be deemed
to have occurred if:
(i) there shall be consummated any consolidation or merger of the Company
and, as a result of such consolidation or merger (x) less than 50% of the
outstanding common shares and 50% of the voting shares of the surviving or
resulting corporation are owned, immediately after such consolidation or merger,
by the owners of the Company's common shares immediately prior to such
consolidation or merger, or (y) any person (as such term is used in Section
13(d) and 14(d) (2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of 25% or more of the surviving or resulting
corporation's outstanding common shares, and (z) in each such case, within two
years after such consolidation or merger, individuals who were directors of the
Company immediately prior to such consolidation or merger cease to
<PAGE>
- Page 2 -
constitute a majority of the Board of Directors of the Company or its successor
by consolidation or merger, or
(ii) there shall be consummated any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of (A) all, or
substantially all, of the assets of the Company or (B) all, or substantially
all, of the assets of one or more of the Women's Enclosed Mall Apparel Retailing
Group, the Footwear Manufacturing, Wholesaling and Retailing Group or the
LensCrafters Group (collectively, the "Company Groups"), or
(iii) the shareholders of the Company shall approve any plan or proposal
for the liquidation or dissolution of Company, or
(iv) any person (as such term is used in Sections 13(d) and 14(d) (2) of
the Exchange Act) shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of 25% or more of the Company's outstanding common
shares, and within two years after such person becomes such beneficial owner,
individuals who were directors of the Company immediately prior to the time such
person became such beneficial owner, cease to constitute a majority of the Board
of Directors of the Company, or
(v) during any period of two consecutive years, individuals who at the
beginning of such period constitute the entire Board of Directors shall cease
for any reason to constitute a majority thereof unless the election or the
nomination for election by the Company's shareholders of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
3. EFFECT OF CHANGE IN CONTROL; DEFINITIONS.
(a) If a Change in Control of the Company shall have occurred while the
Executive is still an employee of the Company, the Executive shall be entitled
to the compensation provided in Section 4 in accordance with the terms thereof.
(b) DISABILITY. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his duties
with the Company on a full-time basis for six months and within 30 days after
written notice of termination is thereafter given by the Company the Executive
shall not have returned to the full-time performance of the Executive's duties,
the Company may terminate this Agreement for "Disability."
(c) RETIREMENT. The term "Retirement" , as used in this Agreement, shall
mean termination by the Company or the Executive of the Executive's employment
based on the Executive having reached age 65 or such other age as shall have
been fixed in any arrangement established with the Executive's consent with
respect to the Executive.
(d) CAUSE. The Company may terminate the Executive's employment for Cause.
For purposes of this Agreement only, the Company shall have "Cause" to terminate
the Executive's employment hereunder only on the basis of fraud,
misappropriation or embezzlement on the part of the Executive.
<PAGE>
- Page 3 -
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for the Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three quarters of the entire membership of the Company's Board of
Directors at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that in the good faith opinion of the Board, the Executive was guilty of conduct
set forth in the second sentence of this Section 3(d) and specifying the
particulars thereof in detail.
(e) GOOD REASON. The Executive may terminate the Executive's employment
for Good Reason at any time during the term of this Agreement. For purposes of
this Agreement, "good Reason" shall mean any of the following (without the
Executive's express written consent):
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities and
status with the Company immediately prior to a Change in Control of the
Company, or a change in the Executive's titles or offices as in effect
immediately prior to a Change in Control of the Company, or any removal of
the Executive from or any failure to re-elect the Executive to any of the
such positions, except in connection with the termination of his employment
for Disability, Retirement or Cause or as a result of the Executive's death
or by the Executive other than for Good Reason;
(ii) a reduction by the Company in the Executive's base salary as in
effect on the date hereof;
(iii) any failure by the Company to continue in effect any benefit
plan or arrangement (including, without limitation, the Company's
retirement plan, group life insurance plan, and medical, dental, accident
and disability plans) in which the Executive is participating at the time
of a Change in Control of the Company (or any other plans providing the
Executive with substantially similar benefits) (hereinafter referred to as
"Benefit Plans"), or the taking of any action by the Company which would
adversely affect the Executive's participation in or materially reduce the
Executive's benefits under any such Benefit Plan or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of a
Change in Control of the Company;
(iv) any failure by the Company to continue the Executive's
eligibility to participate in annual executive bonus' arrangements in which
the Executive is participating at the time of a Change in Control of the
Company (or any plans or arrangements providing him with substantially
similar benefits) (hereinafter referred to as "Incentive Plans") or the
taking of any action by the Company which would significantly reduce the
Executive's opportunity to earn incentive compensation which is related to
performance results as compared to performance expectations periodically
determined by the Company;
<PAGE>
- Page 4 -
(v) a relocation of the Company's principal executive offices to a
location outside Cincinnati, Ohio, or the Executive's relocation to any
place other than the location at which the Executive performed the
Executive's duties prior to a Change in Control of the Company, except for
required travel by the Executive on the Company's business to an extent
substantially consistent with the Executive's business travel obligations
at the time of a Change in Control of the Company;
(vi) any failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is entitled at the time
of a Change in Control of the Company;
(vii) any material breach by the Company of any provisions of this
Agreement;
(viii) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company; or
(ix) any purported termination of the Executive's employment which
is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(f), and for purposes of this Agreement, no such
purported termination shall be effective.
(f) NOTICE OF TERMINATION. Any termination by the Company or by the
Executive shall be communicated by a Notice of Termination. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate those specific termination provisions in this Agreement relied
upon and which sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. For purposes of this Agreement, no such purported
termination by the Company or by the Executive shall be effective without such
Notice of Termination.
(g) DATE OF TERMINATION. "Date of Termination" shall mean:
(i) if this Agreement is terminated by the Company for Disability 30
days after Notice of Termination is given to the Executive (provided that
the Executive shall not have returned to the performance of the Executive's
duties on a full-time basis during such 30-day period), or
(ii) if the Executive's employment is terminated by the Company for
any other reason or if the Executive shall terminate his employment, the
date on which a Notice of Termination is given; provided that if within 30
days after any Notice of Termination is given the party receiving notice
notifies the other party that a dispute exists concerning the termination,
the Date of Termination shall be the date the dispute is finally
determined, whether by mutual agreement by the parties or upon final
judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected).
<PAGE>
- Page 5 -
4. COMPENSATION UNDER THIS AGREEMENT.
(a) If the Executive's employment is terminated under the below enumerated
conditions or if the Executive is employed by the Company on or after six months
following a Change in Control, the Company shall pay to the Executive the
following amounts:
(i) TERMINATION OF THE EXECUTIVE'S EMPLOYMENT BEFORE THE EXPIRATION
OF SIX MONTHS FOLLOWING A CHANGE IN CONTROL. If the Executive's employment
is terminated, other than by reason of the Executive's death, before the
expiration of the date six months after a Change in Control and such
termination is by the Company, other than pursuant to Section 3(b), 3(c),
or 3(d), or by the Executive for Good Reason, then the Company shall pay to
the Executive (1) the full base salary to which the Executive is entitled
through the Date of Termination, (2) credit for unused vacation, (3) a
lump-sum payment equal to the greater of Executive's annual base salary on
the date hereof or on the Date of Termination, and (4) severance pay in an
amount equal to the excess over $100 of three times the average of the
aggregate annual compensation paid to the Executive by the Company and any
subsidiary which is a member of its "affiliated group" (as defined in
Sections 1504 and 280(d) (5) of the Internal Revenue Code of 1986, as
amended (the "Code")) during the Executive's five taxable years preceding
the Change in Control of the Company (or such portion of such five-year
period during which the Executive was employed by the Company or such
member of its affiliated group), reduced by the amount of the lump-sum
payment made to the Executive pursuant to Section 4(a)(i)(3).
(ii) COMPENSATION ON OR AFTER THE EXPIRATION OF SIX MONTHS FOLLOWING
A CHANGE IN CONTROL. If the Executive is employed by the Company on the
date six months following a Change in Control, then the Company shall pay
to the Executive a lump-sum payment equal to the greater of Executive's
annual base salary on the date hereof or on the date six months following a
Change in Control; provided, however, that (A) if the Executive is a member
of the corporate staff (rather than assigned to one of the Company Groups)
at the time of such Change in Control, the Executive shall not be entitled
to such payment if the Change In Control is described in Section 2(ii) (B)
and, immediately after such Change in Control, the Company continues to own
substantially all of the assets of two of the Company Groups, or (B) if the
Executive is assigned to one of the Company Groups at the time of such
Change in Control, the Executive shall not be entitled to such payment if
the Change in Control is described in Section 2(ii) (B) and, immediately
after such Change in Control, the Company continues to own substantially
all of the assets of the Company Group to which the Executive is assigned.
In addition, without regard to whether the Executive is entitled to payment
under the preceding sentence, if the Executive's employment is thereafter
terminated during the term of this Agreement, other than by reason of the
Executive's death, and such termination is
<PAGE>
- Page 6 -
by the Company, other than pursuant to Section 3(b), 3(c), or 3(d), or
by the Executive for Good Reason, then the Company shall pay to the
Executive (1) the full base salary to which the Executive is entitled
through the Date of Termination, (2) credit for unused vacation, and (3) a
lump-sum payment equal to the greater of Executive's annual base salary on
the date hereof or on the Date of Termination, and (4) severance pay in an
amount equal to the excess of $100 of three times the average of the
aggregate annual compensation paid to the Executive by the Company and any
subsidiary which is a member of its affiliated group during the Executive's
five taxable years preceding the Change in Control of the Company (or such
portion of such five-year period during which the Executive was employed by
the Company or such member of its affiliated group.) The amount payable
under Section 4(a)(ii)(4) shall be reduced by any payment made under the
first sentence of this Section 4(a)(ii), or under Section 4(a)(ii)(3).
(b) The severance payments described in Sections 4(a)(i)(4) and 4(a)(ii)(4)
are subject to the following limitations:
(i) If there are fewer than 24 whole or partial months remaining from
the Date of Termination to the date on which the Executive attains age 65,
the severance pay to which the Executive is entitled shall be reduced to a
lesser sum determined by multiplying the amount otherwise due by a
fraction, the numerator of which is the number of whole or partial months
remaining from the Date of Termination to the date on which the Executive
attains his 65th birthday and the denominator of which is 24.
(ii) If the severance pay, after the adjustment described in Section
4(b)(i), either alone or together with the other payments which the
Executive has the right to receive from any source, would constitute
"excess parachute payments" (as defined in Section 280G of the Code), such
severance pay shall be reduced to the largest amount as will result in no
portion of the severance pay being subject to the excise tax imposed by
Section 4999 of the Code. If the Company and the Executive cannot agree on
the reduction, if any, in the severance pay pursuant to the foregoing
provision, the determination of the amount of such reduction shall be made
by tax counsel selected by the Company's independent auditors and
acceptable to the Executive, and such determination shall be conclusive and
binding on the parties.
(c) The amounts described in Sections 4(a)(i) and 4(a)(ii) shall be paid as
follows:
(i) The amounts specified in Sections 4(a)(i)(1), (2) and (3), as
well as Sections 4(a)(ii)(1), (2) and (3) shall be paid in cash in a lump
sum on the fifth business day following the Date of Termination. The
amount specified in the first sentence of Section 4(a)(ii) shall be paid in
cash in a lump sum on the fifth business day following the date on which
the Executive has been employed by the Company for six months
<PAGE>
- Page 7 -
following the Change in Control. The amounts described in Section
4(a)(i)(4) and Section 4(a)(ii)(4) shall be paid in 52 equal bi-weekly
installments corresponding to the Company's normal pay periods, commencing
with the first bi-weekly pay period following the Date of Termination;
provided, however, that to the extent, if any, the Executive receives
compensation from other employment during the period the Executive is
receiving payments under Section 4(a)(i)(4) or 4(a)(ii)(4), the bi-weekly
installment payments to be made by the Company shall be correspondingly
reduced, but in no event shall the Executive be required to repay to the
Company any amounts already paid to him by the Company. The Executive,
upon obtaining employment during the period he is receiving such payments,
promptly shall notify the Company of the amount of compensation received or
to be received from such employment and of any changes therein, and shall,
from time to time, but not more often than quarterly, provide to the
Company such records and other information as the Company may reasonable
request to verify the amount of such compensation. Notwithstanding the
foregoing, the Executive shall have no obligation to seek other employment
or take any other action in order to mitigate damages or the amount of any
payment provided for under this Agreement.
(d) Any payments required under this Section 4 shall be paid net of
applicable federal, state and local tax withholding.
(e) The Company shall maintain in full force and effect, for the continued
benefit of the Executive until the earlier of:
(i) two years after the Date of Termination, or
(ii) commencement of full-time employment by the Executive with a
new employer, all life insurance, medical, health and accident, and
disability plans, programs or arrangements in which the Executive was
entitled to participate immediately prior to the Date of Termination,
provided that continued participation by the Executive is possible under
the general terms and provisions of such plans and programs. In the event
that participation in any such plan or program is barred, the Company shall
arrange to provide to the Executive benefits substantially similar to those
which the Executive is entitled to receive under such plans and programs.
5. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS. The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under the Company's Economic Bridge Policy or
any Benefit Plan, Incentive Plan or Securities Plan, employment agreement or
other contract, plan or arrangement.
6. SUCCESSOR TO THE COMPANY.
(a) The Company will require any successor or assign (whether direct or
<PAGE>
- Page 8 -
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if not
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good Reason. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor or assign to its business and/or assets as aforesaid which executes
and delivers the Agreement provided for in this Section 6 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law. If at any time during the term of this Agreement the Executive is employed
by any corporation a majority of the voting securities of which is then owned by
the Company, "Company" as used in Sections 3, 4, 11 and 12 hereof shall in
addition include such employer. In such event, the Company agrees that it shall
pay or shall cause such employer to pay any amounts owed to the Executive
pursuant to Section 4 hereof.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts are still payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's devisee, legatee, or other designee or, if
there be no such designee, to the Executive's estate.
7. NOTICES. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid, as
follows:
If to the Company:
The United States Shoe Corporation
One Eastwood Drive
Cincinnati, Ohio 45227
Attn: Chairman and Chief Executive Officer
If to the Executive:
Mr. Noel E. Hord
7600 Foxgate Lane
Cincinnati, Ohio 45243
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
<PAGE>
- Page 9 -
8. MISCELLANEOUS. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representatives, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
9. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
12. CONFIDENTIALITY. The Executive shall retain in confidence any and all
confidential information known to the Executive concerning the Company and its
business so long as such information is not otherwise publicly disclosed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE UNITED STATES SHOE CORPORATION
ATTEST:
/s/ Thomas L. Buehler /s/ K. Brent Somers
- - - - - - ---------------------------- ----------------------------------
Asst. Secy. Vice President
EXECUTIVE
/s/ Noel. E. Hord
----------------------------------
Noel E. Hord
<PAGE>
EXHIBIT 11
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
EXHIBIT 11. - COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
----------------------------------------------------------------------------
(thousands except per share amounts)
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
January 29, January 30, February 1,
1994 1993 1992
----------- ----------- ------------
<S> <C> <C> <C>
Weighted average number of common
shares outstanding during the year 45,746 45,489 45,050
Common equivalent shares outstanding (a) -- 33 225
----------- ----------- ------------
Average common and common equivalent
shares outstanding 45,746 45,522 45,275
----------- ----------- ------------
----------- ----------- ------------
Earnings (loss) before cumulative effect of
accounting change $ (15,834) $ 4,368 $ 39,974
Cumulative effect of accounting change
related to nonpension postretirement benefits (b) -- -- (8,771)
----------- ----------- ------------
Net earnings (loss) $ (15,834) $ 4,368 $ 31,203
----------- ----------- ------------
----------- ----------- ------------
Earnings (loss) per common and common
equivalent share -
Earnings (loss) before cumulative
effect of accounting change $ (0.35) $ .10 $ .88
Cumulative effect of accounting change
related to nonpension postretirement benefits -- -- (.19)
----------- ----------- ------------
Net earnings (loss) per common share $ (0.35) $ .10 $ .69
----------- ----------- ------------
----------- ----------- ------------
Fully diluted earnings per share are not significantly different from primary
earnings per share.
<FN>
Notes:
(a) Common equivalent shares are shares issuable upon the exercise of stock
options, when dilutive, net of shares assumed to have been purchased with
the proceeds.
(b) Refer to "Notes to Consolidated Financial Statements", Note (2) Accounting
Changes on page 36 of the company's 1993 Annual Report to Shareholders.
</TABLE>
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
PROFILE OF OPERATIONS
<TABLE>
<CAPTION>
UNITS
-----
AVERAGE
WOMEN'S APPAREL RETAILING STORE SIZE JAN '94 JAN '93 JAN '92
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASUAL CORNER 4,400 sq. ft. 706 735 772
Wear-to-work fashion apparel for the misses
customer for her ready-to-wear, sportswear and
accessory needs. Moderate and upper-moderate
prices targeted to women age 25 to 50.
PETITE SOPHISTICATE 2,400 sq. ft. 361 340 323
Wear-to-work and casual fashion apparel for
women 5'4" and under at moderate and upper-
moderate prices.
CAPEZIO 2,300 sq. ft. 90 54 4
Moderately priced casual and active apparel in
updated feminine styles that emphasize color.
PAPPAGALLO 3,200 sq. ft. 16 7 0
Upper-moderate to better priced apparel,
shoes and accessories for professional
women age 30 to 50.
AUGUST MAX WOMAN 3,000 sq. ft. 107 105 98
Wear-to-work and casual fashion apparel for
women who wear sizes 14-26 at moderate prices.
CAREER IMAGE COMPANY STORE 4,900 sq. ft. 26 8 3
Misses' brand-name fashions at value prices,
with stores located in factory outlet centers.
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL WOMEN'S APPAREL RETAILING 1,306 1,249 1,200
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
OPTICAL RETAILING
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
LENSCRAFTERS
Complete, convenient optical service, including
a large selection of frames and on-site lens
grinding laboratory.
Stores in the United States 5,400 sq. ft. 435 429 419
Stores in Canada 4,400 sq. ft. 60 54 30
SIGHT & SAVE 1,300 sq. ft. 48 19 10
Value-priced eyewear stores and leased
departments offering service in one to four days.
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL OPTICAL RETAILING 543 502 459
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
FOOTWEAR RETAILING
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
CINCINNATI SHOE 3,300 sq. ft. 120 143 139
Leased shoe departments in strong-value
stores across the country.
BANISTER/CAPEZIO FACTORY DIRECT 5,000 sq. ft. 186 194 179
Factory outlet shoe stores located outside
major metropolitan areas.
CONCEPT STORES
Easy Spirit 1,300 sq. ft. 68 38 10
Selby & Co. 1,200 sq. ft. 14 59 98
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL FOOTWEAR RETAILING 388 434 426
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
DISCONTINUED OPERATIONS 0 283 431
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL UNITS SPECIALTY RETAILING 2,237 2,468 2,516
- - - - - - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FOOTWEAR MANUFACTURING/WHOLESALING
- - - - - - -------------------------------------------------------------------------------
FOOTWEAR BRANDS
Easy Spirit Evan-Picone* Selby
Amalfi Pappagallo Joyce
Bandolino Vittorio Ricci Studio* Capezio
YFA Bandolino Cobbie
WESTERN BOOT BRANDS
Texas Brand Boots Wrangler*
El Dorado J. Chisholm
FOOTWEAR/BRAND LICENSING
- - - - - - -------------------------------------------------------------------------------
FOREIGN
Foreign companies in five countries are licensed to manufacture
and market footwear under selected company brand names.
DOMESTIC
Domestic companies are licensed to manufacture and market
non-footwear products under the Capezio and Easy Spirit
trade names.
*UNDER LICENSE
20
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
FINANCIAL REVIEW
SALES AND EARNINGS
- - - - - - --------------------------------------------------------------------------------
Net sales for the year ended January 29, 1994 decreased 0.9% to $2,626
million from $2,651 million for the year ended January 30, 1993. Earnings (loss)
per share was $(.35) in 1993 compared to $.10 per share in 1992.
Women's apparel retailing generated 46% of the company's net sales and
recorded operating losses of $41.7 million in 1993. Women's apparel retailing
operates 1,306 stores, primarily in enclosed malls, encompassing 4.7 million
square feet of space in 46 states and the District of Columbia.
Optical retailing generated 27% of the company's net sales and recorded
earnings from operations of $43.6 million in 1993. Optical retailing operates
543 stores and leased departments encompassing 2.7 million square feet of space
in 45 states, Puerto Rico and Canada.
Footwear generated 27% of the company's net sales and recorded earnings from
operations of $9.5 million in 1993. The footwear retailing divisions operate 388
shoe stores and leased departments encompassing 1.4 million square feet of space
in 43 states. In 1993, the company's footwear manufacturing/wholesaling division
manufactured about 60% of its product domestically and imported the remainder
from countries in Europe, South America and the Far East.
MARKET AND DIVIDEND INFORMATION
- - - - - - --------------------------------------------------------------------------------
The company's common shares are traded on the New York Stock Exchange and the
Pacific Stock Exchange. There were 11,792 shareholders of record of the
company's common shares as of March 18, 1994. Fiscal 1993 dividend payments
marked the 62nd consecutive year that the company has paid cash dividends on its
common shares. The range of market closing prices and the dividends paid per
share, by quarter, for fiscal 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
------------------ 1993 ------------------
High Low Dividend
- - - - - - --------------------------------------------------------------------
<S> <C> <C> <C>
First Quarter $ 12 1/2 $ 10 1/8 $ .13
Second Quarter 10 8 3/4 .08
Third Quarter 11 1/4 8 7/8 .08
Fourth Quarter 15 1/2 10 7/8 .08
-----
$ .37
-----
-----
</TABLE>
<TABLE>
<CAPTION>
------------------ 1992 ------------------
High Low Dividend
- - - - - - --------------------------------------------------------------------
<S> <C> <C> <C>
First Quarter $ 17 $ 13 3/8 $ .13
Second Quarter 16 5/8 11 7/8 .13
Third Quarter 12 5/8 10 1/4 .13
Fourth Quarter 13 5/8 11 5/8 .13
-----
$ .52
-----
-----
</TABLE>
CAPITAL EXPENDITURES
- - - - - - -------------------------------------------------------------------------------
Capital expenditures for 1994, estimated at $65 million, reflect an emphasis
on the expansion of Easy Spirit footwear retailing stores and Career Image
Company Store women's apparel factory outlet stores. Capital expenditures in
1994 will also emphasize the upgrading of management information systems at all
divisions and the refurbishment of certain stores, including Casual Corner.
Capital expenditures are set forth in the table below:
<TABLE>
<CAPTION>
(Millions)
1994
(Estimated) 1993 1992
----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Women's Apparel Retailing $ 21.1 32% $ 20.9 34% $ 33.3 46%
Optical Retailing 30.4 47 25.0 41 25.5 36
Footwear -
Manufacturing/Wholesaling 2.6 4 4.3 7 6.4 9
Retailing 10.9 17 11.2 18 6.7 9
----------------------------------------------
$ 65.0 100% $ 61.4 100% $ 71.9 100%
----------------------------------------------
----------------------------------------------
</TABLE>
22
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
FIVE-YEAR FINANCIAL SUMMARY (MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1993 1992 1991 1990(1) 1989(2)
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FINANCIAL INFORMATION BY INDUSTRY SEGMENT
Net Sales
Women's Apparel Retailing $ 1,217.1 $ 1,262.2 $ 1,364.2 $ 1,335.7 $ 1,234.5
Optical Retailing 698.7 660.1 625.0 580.1 531.7
Footwear -
Manufacturing/Wholesaling 465.1 470.7 454.2 515.4 517.4
Retailing 245.2 257.7 282.4 287.5 273.6
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total $ 2,626.1 $ 2,650.7 $ 2,725.8 $ 2,718.7 $ 2,557.2
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) FROM OPERATIONS
Women's Apparel Retailing $ (41.7) $ 12.1 $ 52.6 $ (4.9) $ 53.2
Optical Retailing 43.6 40.4 33.2 13.3 48.3
Footwear 9.5 (5.5) 18.1 (13.9) 30.0
General Corporate Expense (18.0) (22.4) (18.5) (16.8) (18.4)
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total (6.6) 24.6 85.4 (22.3) 113.1
Interest Expense, net (16.0) (16.9) (17.1) (23.3) (25.1)
Other Income (Expense) -- -- (0.5) 6.8 (5.7)
Credit (Provision) for Income Taxes 6.8 (3.3) (27.8) 11.1 (33.1)
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before cumulative
effect of accounting changes (15.8) 4.4 40.0 (27.7) 49.2
Cumulative effect of accounting changes, for years
ended prior to -
February 3, 1991, related to nonpension
postretirement benefits (net of tax effect of $5.7) -- -- (8.8) -- --
February 4, 1990, related to eyewear product
maintenance contracts (net of tax effect of $2.3) -- -- -- (3.6) --
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) $ (15.8) $ 4.4 $ 31.2 $ (31.3) $ 49.2
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total Assets
Women's Apparel Retailing $ 288.0 $ 344.5 $ 384.6 $ 429.8 $ 433.2
Optical Retailing 250.4 270.6 269.7 288.5 252.1
Footwear 357.5 396.7 414.2 458.4 457.6
Corporate 183.2 159.2 83.6 59.5 21.3
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total $ 1,079.1 $ 1,171.0 $ 1,152.1 $ 1,236.2 $ 1,164.2
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Depreciation and Amortization Expense
Women's Apparel Retailing $ 33.1 $ 33.9 $ 35.1 $ 36.6 $ 34.6
Optical Retailing 37.7 35.3 33.7 28.7 24.4
Footwear 13.5 14.3 14.4 14.8 14.6
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total $ 84.3 $ 83.5 $ 83.2 $ 80.1 $ 73.6
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Capital Expenditures
Women's Apparel Retailing $ 20.9 $ 33.3 $ 28.5 $ 32.6 $ 16.7
Optical Retailing 25.0 25.5 20.8 59.5 40.9
Footwear 15.5 13.1 10.5 16.8 12.6
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total $ 61.4 $ 71.9 $ 59.8 $ 108.9 $ 70.2
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Earnings (loss) per common share before
cumulative effect of accounting changes $ (.35) $ .10 $ .88 $ (.61) $ 1.10
Cumulative effect of accounting changes (see above) -- -- (.19) (.08) --
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) $ (.35) $ .10 $ .69 $ (.69) $ 1.10
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Dividends Per Common Share $ .37 $ .52 $ .52 $ .50 1/2 $ .46
Book Value Per Common Share 10.06 10.71 11.18 11.03 12.22
BALANCE SHEET DATA
Working Capital $ 298.3 $ 277.3 $ 235.5 $ 270.7 $ 286.2
Long-Term Debt and Capital Lease Obligations 189.8 191.7 144.4 244.8 178.4
Shareholders' Investment 461.7 488.5 506.8 498.0 548.6
Return on Average Shareholders' Investment (3)% 1% 6% (6)% 9%
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) 1990 results include restructuring charges of $90 ($57.9 after tax
benefits). $56 was allocated to Women's Apparel Retailing and $34 was
allocated to Footwear.
(2) Fifty-three week year
</TABLE>
23
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
During the past three years the company made major strategic changes to
reposition its businesses in order to make them more competitive. These changes
have included disposing of weak or off-strategy businesses, closing stores, and
cost reduction initiatives. In 1993, extensive management changes were made in
the apparel and footwear groups. The company's results of operations during the
three-year period ended January 29, 1994 reflect these major changes.
The company's net sales for fiscal 1993, the 52-week period ended January 29,
1994, decreased 0.9% to $2,626 million from $2,651 million for fiscal 1992, the
52-week period ended January 30, 1993. This decrease was due principally to the
sale or closing of 389 poorly performing stores, primarily in connection with
the divestiture of the Caren Charles and Ups "N Downs divisions, the effect of
which was partially offset by sales from 158 new stores opened in 1993 and a
0.5% increase in comparable store sales. Net sales for fiscal 1992 decreased 3%
from $2,726 million for fiscal 1991, the 52-week period ended February 1, 1992.
The sales decrease in 1992 was due principally to a 1.5% decrease in comparable
store sales and the sale or closing of 212 poorly performing stores, primarily
in connection with restructuring activities undertaken within the company's
apparel and footwear segments. These decreases were partially offset by sales
from 142 new stores (not including 22 optical stores acquired near yearend)
opened in 1992.
The company reported a net loss of $15.8 million in 1993, or $.35 per share,
compared with net earnings in 1992 of $4.4 million, or $.10 per share, and $31.2
million in 1991, or $.69 per share.
The gross profit percentage in 1993 of 47.2% was comparable to the 1992
percentage of 47.8%. Fiscal 1993 gross profit included a LIFO credit of $11.3
million compared with a LIFO credit of $3.6 million in 1992. The LIFO credit in
1993 was due to a higher level of markdowns taken against excess footwear
inventories, lower inventory quantities at yearend and low rates of inflation on
the company's inventory purchases during 1993.
Selling, general and administrative expenses increased by 0.3% in 1993. Lower
operating expenses in the footwear and apparel groups that resulted from cost
control measures and the effects of a net reduction of 217 women's apparel
stores were more than offset by a series of charges. These charges included
$10.6 million related to the divestiture of the Ups "N Downs and Caren Charles
divisions, $5.5 million related to the divestiture of optical retailing
operations in the United Kingdom, $6.0 million of severance and recruitment
costs related to executive management changes in the footwear and women's
apparel groups, $15.0 million of costs associated with cost reduction
initiatives, the effect of 41 additional optical stores and leased departments
in North America, and $2.6 million of costs associated with business process
redesign initiatives.
In the fourth quarter of 1993 the company undertook a series of cost reduction
initiatives across all operating groups and recorded a charge of $15.0 million
for costs associated with certain of the initiatives. The initiatives include
changes in certain business practices (eg. store labor scheduling and
merchandise return and allowance policies), streamlining field management and
home office operations in all operating groups, early lease termination and
shutdown of 11 poorly performing women's apparel stores, and consolidating
Cincinnati Shoe and Banister footwear retail operations. These actions, which
are projected to have paybacks over twelve to eighteen months, are expected to
result in a significant reduction in operating costs in fiscal 1994 and beyond.
The $15.0 million charge includes costs for employee severance and asset
retirements. Approximately $3.2 million of the charge relates to the noncash
write-off of assets while the remainder will require the future outlay of cash.
The gross profit percentage in 1992 of 47.8% was comparable to 1991. Fiscal
1992 gross profit included a LIFO credit of $3.6 million compared with a LIFO
charge of $11.1 million in 1991. The LIFO credit in 1992 was due primarily to
lower inventory quantities at yearend and low rates of inflation on the
company's inventory purchases during 1992. Selling, general and administrative
expenses increased 2% in 1992. The increase was due primarily to inflationary
increases in operating costs, principally occupancy and payroll costs,
approximately $11.0 million of severance and other costs associated with
business process redesign initiatives and $5.2 million of costs associated with
the establishment of a footwear buying operation in the Far East, offset
somewhat by the effect of a net reduction of 70 retail stores. Fiscal 1991 net
earnings were decreased by an after-tax charge of $8.8 million as a result of
the adoption of Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" (SFAS No. 106).
Net interest expense in 1993 was $16.0 million compared with $16.9 million in
1992 and $17.1 million in 1991. Net interest expense for 1993 reflects a lower
effective interest rate of 8.0% on borrowed funds compared with 8.5% in 1992,
offset by higher average
24
<PAGE>
borrowings ($189 million in 1993 compared to $166 million in 1992) as a result
of the issuance in September 1992 of $75 million of 8 5/8% notes due 2002 (8
5/8% Notes). Interest income increased in 1993 as average short-term
investments increased 48% to $133 million. The decrease in net interest expense
in 1992 compared to 1991 was primarily due to a $43.3 million reduction in the
average outstanding debt balance during the period from February to September
1992, which was partially offset by the issuance of the 8 5/8 % Notes.
The effective tax benefit rate was 30% in 1993 compared to an effective tax
rate of 43% in 1992 and 41% in 1991. The lower 1993 rate reflects a low
effective state tax benefit rate and an increase in the valuation allowance
related to certain state operating loss and foreign tax credit carryforwards.
The tax rate increased in 1992 compared to 1991 due to higher state and local
taxes. Effective February 2, 1992, the company elected to adopt Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". See Notes
to Consolidated Financial Statements for further discussion of this new method
of accounting, the effect of which was not material.
As of the end of fiscal 1993, the company has recorded a $54.6 million net
deferred tax asset that is composed of $88.7 million of deferred tax assets and
$34.1 million of deferred tax liabilities. Approximately 80% of the deferred tax
assets are realizable via offset against taxable income generated over the
allowable carryback period or against reversing deferred tax liabilities over
the relevant period. The remaining deferred tax assets relate primarily to the
accounting for postretirement benefits under SFAS No. 106 and certain deferred
state tax assets. Management believes that these deferred tax assets are fully
realizable, particularly considering the long period that is available to
generate taxable earnings.
The company anticipates that at the end of fiscal 1994, due to a reduction in
taxable income in the carryback period then available, the company will need to
generate pretax earnings of approximately $80 million over the next fifteen
years to ensure the recovery of its deferred tax assets (excluding amounts
related to SFAS No. 106). The realizability of the deferred tax assets will be
evaluated on a quarterly basis; however, management believes that sufficient
earnings will be generated to ensure recovery of the net deferred tax assets.
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (SFAS No. 112). See Notes to Consolidated Financial
Statements for further discussion of SFAS No. 112.
WOMEN'S APPAREL RETAILING GROUP
The Women's Apparel Retailing Group reported net sales in 1993 of $1,217
million, a 3.6% decrease from 1992. The sales decrease resulted from a 0.5%
decrease in comparable store sales and a net reduction of 217 stores. The
decline in comparable store sales during 1993 was due to the poor performance of
spring merchandise in all major divisions except Petite Sophisticate. Comparable
store sales for the group decreased 3% in 1992. The decline in comparable store
sales during 1992 was due primarily to the poor performance of the Casual Corner
division.
The group reported an operating loss in 1993 of $41.7 million compared with
operating earnings of $12.1 million in 1992 and $52.6 million in 1991. The
operating loss in 1993 was principally due to the poor performance in the first
half of the year of the Casual Corner division and significant operating losses
in the Ups "N Downs/Capezio and Caren Charles/Pappagallo divisions. Results for
1993 include a $10.6 million charge related to the divestiture of the Ups "N
Downs and Caren Charles divisions, $6.7 million of costs associated with cost
reduction initiatives, $3.8 million of severance and recruitment costs related
to executive management changes, and $1.7 million of costs associated with
business process redesign initiatives. Results for 1992 include $7.3 million of
costs associated with the group's business process redesign initiatives. Fiscal
1993 operating earnings included a LIFO charge of $0.9 million compared with a
LIFO credit of $1.1 million in 1992 and a charge of $3.4 million in 1991. The
LIFO credit in 1992 was primarily due to a reduction in inventories at yearend
and deflation of 0.5% on 1992 inventory purchases.
Net sales at the Casual Corner division declined in 1993 as a result of a net
reduction of 29 stores, the effect of which was partially offset by a slight
increase in comparable store sales. The division recorded an operating loss for
the year as earnings generated over the last half of the year on stronger sales
performance and lower operating expenses were not sufficient to offset operating
losses in the first half of the year that resulted primarily from the poor
performance of spring merchandise. The Petite Sophisticate division increased
sales on new store volume and an increase in comparable store sales, which
resulted in an increase in operating earnings for the division. The Ups "N
Downs/Capezio and Caren Charles/Pappagallo divisions experienced significant
operating losses as most merchandise categories performed poorly, resulting in
substantial declines in comparable store sales. In consideration of the
continuing poor performance of these divisions, the company sold or closed its
remaining Ups "N Downs and Caren Charles stores over the second
25
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
half of the year. These stores recorded operating losses of $14.1 million in
fiscal 1993. In addition to the operating losses, the company recorded a charge
of $10.6 million in 1993 for the costs associated with the sale and closure of
the stores. The August Max Woman division experienced a significant decline in
comparable store sales and recorded an operating loss for the year compared to
operating earnings in 1992.
In 1992, net sales at the Casual Corner division decreased as a result of a
net reduction of 37 stores and a decline in comparable store sales. The
comparable store sales decline resulted primarily from the weak performance of
the division's spring merchandise. Earnings at the Casual Corner division
declined as a result of lower sales and increased promotional activity,
especially in the first half of the year. The Petite Sophisticate division
experienced a sales increase during 1992, including a slight increase in
comparable store sales, which resulted in increased earnings for the division.
The Ups "N Downs division experienced an operating loss in 1992 as it began
conversion of its stores to the Capezio format. The results of the division
were affected by the poor sell-through of certain merchandise and by quality
problems. Net sales of the Caren Charles/Pappagallo division declined as a
result of a net reduction of 23 stores. The division continued to experience
operating losses; however, the losses narrowed in 1992 compared to the prior
year partly due to the sale or closing of 24 of its more poorly performing
stores and as the division began testing conversion of its store format and
merchandise to the Pappagallo brand.
The group purchases a significant amount (26% in 1993) of its product from the
Far East. In 1991, the group established an apparel purchasing operation
located in the Far East. Operations began in February 1992 and have enabled the
group to purchase apparel from this region of the world more efficiently and at
lower cost.
OPTICAL RETAILING GROUP
The Optical Retailing Group reported net sales of $699 million in 1993, an
increase of 5.8% from 1992. This increase resulted from new store volume (543
stores and leased departments in operation at the end of 1993 compared to 511 at
the end of 1992) and a comparable store sales increase of 2.9%. In 1992, net
sales were 6% above 1991. This increase resulted primarily from a larger number
of retail locations (511 at the end of 1992 and 467 at the end of 1991).
Comparable store sales increased 1% during 1992.
Operating earnings were $43.6 million in 1993, including a $5.5 million charge
associated with the divestiture of optical operations in the United Kingdom,
compared with operating earnings of $40.4 million in 1992. Earnings from the
group's domestic operations improved on higher superoptical sales due to new
store volume and increased comparable store sales. The effects of the increased
sales were partially offset by costs associated with the expansion of the Sight
& Save value optical concept. LensCrafters Canada improved operating earnings on
higher sales as a result of new store volume, including sales at 22 Eyemasters
Ltd. superoptical stores acquired in January 1993, that was partially offset by
a decline in comparable store sales. Canadian operating results were reduced by
costs associated with the transition of the Eyemasters stores to the
LensCrafters format. Operating losses in the United Kingdom, excluding the $5.5
million charge, totaled $1.9 million in 1993 compared to operating losses of
$7.0 million in 1992.
Operating earnings increased 22% in 1992 compared with 1991. Earnings from the
group's domestic superoptical operation improved as a result of continued
control of product and operating costs. Operating losses in the United Kingdom
were lower in 1992 compared with 1991. LensCrafters Canada had flat sales as
increases from new stores were offset by comparable store declines. Operating
earnings in Canada declined partly due to costs associated with the acquisition
of 22 Eyemasters Ltd. superoptical stores. During 1992, the group discontinued
the sale of product maintenance contracts. Revenues from contracts sold prior to
fiscal 1992 are being amortized on a straight-line basis over the term
(generally one year) of those contracts.
FOOTWEAR GROUP
Net sales in the Footwear Group were $710 million in 1993, a decrease of 2.5%
compared with 1992. In the manufacturing/wholesaling divisions, net sales in
1993 were $465 million, a 1.2% decrease. Sales increases in the Easy Spirit
division were offset by decreases in the Texas Boot division and in the Cobbie
division, whose sales were adversely affected by fewer independent store
operators and management's decision to close or convert to the Easy Spirit
concept a majority of company-owned Cobbie retail stores. Sales in other
manufacturing/wholesaling divisions were generally comparable with the prior
year. Sales in the company's footwear retail divisions were $245 million,
declining 4.9% from 1992 sales as a result of a net reduction of 46 stores and a
1.4% decline in comparable store sales. The comparable store sales decline
reflected strong increases in Easy Spirit retail stores that were more than
offset by declines in other divisions.
26
<PAGE>
In 1992, net sales decreased 1% compared with 1991. While Easy Spirit, Selby
and Texas Boot achieved strong sales increases in 1992, most other wholesale
divisions experienced a decline in sales. The most significant decreases
occurred in the Joyce and Cobbie divisions, as demand for these brands by
department stores and independent concept operators (122 in operation at 1992
yearend versus 190 in 1991) continued to decline and as a result of fewer
company-owned concept stores in operation. Sales of the company's footwear
retail divisions declined 9% from the prior year primarily as a result of the
sale in July 1992 of the 38-store Hahn chain. The Banister division increased
sales, as volume from new store openings was partially offset by a reduction in
comparable store sales.
The group reported operating earnings of $9.5 million in 1993 compared with an
operating loss of $5.5 million in 1992 and operating earnings of $18.1 million
in 1991. Operating earnings in 1993 were increased by a LIFO credit of $12.2
million compared with a credit of $2.5 million in 1992 and a charge of $7.7
million in 1991. The higher credit in 1993 resulted from higher levels of
markdowns to clear excess inventories, lower inventory quantities at yearend, a
low rate of inflation (1.4%) on the group's purchased inventory during 1993 and
4.3% deflation of the costs of inventory manufactured by the company during
1993.
The group's 1993 results were also affected by $7.4 million of costs
associated with cost reduction initiatives, $2.2 million of severance and
recruitment costs related to executive management changes, and $0.9 million of
costs associated with business process redesign initiatives. In 1992, results
were affected by $5.2 million of costs associated with the establishment of a
buying operation in the Far East, $3.5 million of costs associated with the
bankruptcy of an independent operator of a substantial number of concept stores,
the consolidation of Marx & Newman operations into the Cincinnati, Ohio footwear
operations, and $2.8 million of costs associated with the group's business
process redesign initiatives. In 1991, footwear results included a $4 million
contract termination charge.
The Easy Spirit for women division generated a substantial increase in
operating earnings in 1993 as a result of a 12.4% increase in sales, higher
margins and lower operating costs. The Easy Spirit for men division achieved
near-breakeven results compared to substantial operating losses in 1992 as
margins stabilized and operating expenses were brought in line with the
division's sales level. The Texas Boot division, while continuing its solid
profitability, saw sales and operating earnings decline. The company's import
brands continued to perform poorly as the problems affecting the group continued
in 1993. Despite improved performance by the Evan Picone brand over the second
half of the year, operating losses of the group increased in 1993, primarily as
a result of increased markdowns taken to clear excess inventories.
In 1993, footwear retailing recorded an operating loss, compared to operating
earnings in 1992, primarily as a result of a decline in operating earnings in
the Banister division. Banister experienced further declines in comparable store
sales and margin erosion, as promotional activity increased to generate sales
and as markdowns were taken to clear older inventory. The Concept division's
operating losses increased due to the poor performance of Cobbie and Joyce-Selby
concept stores and to costs associated with the closure or conversion of a
majority of these stores during the year, the effects of which were only
partially offset by the stronger performance of Easy Spirit concept stores.
During 1993, the company closed 35 Cobbie and Joyce-Selby stores and converted
10 stores to the Easy Spirit format, reducing the number of Cobbie and
Joyce-Selby stores in operation at yearend to 14. The company plans to close or
convert the remaining stores during 1994.
In 1992, Easy Spirit for women operating earnings declined, despite an
increase in sales, as additional margin from the sales increase was offset by
increases in advertising and other operating costs. Selby achieved an increase
in operating earnings as a result of increased sales. Texas Boot operating
earnings also increased on additional sales volume. The earnings from these
divisions were offset by operating losses in the Cobbie, Joyce, Easy Spirit for
men and import divisions. Cobbie and Joyce losses resulted primarily from
declining sales volume. Easy Spirit for men failed to achieve planned sales and
gross profit as it lowered prices to meet market conditions. The company's
import brands performed poorly as a group due to style, quality and delivery
problems that depressed sales and increased markdowns.
Footwear retailing's operating earnings declined in 1992 compared to 1991 as a
result of a reduction in the group's gross profit percentage. The decline was
attributable mainly to lower margins in the Banister division due to increased
promotional activity to maintain sales in the face of increased competition in
the factory outlet sector and in order to clear slow-moving inventory. The
Concept division's operating loss narrowed in 1992 compared to 1991 as a result
of the profitable performance of Easy Spirit concept stores. Cobbie and
Joyce-Selby concept stores continued to perform poorly as the Cobbie and Joyce
brands failed to generate sufficient demand to support a concept store.
27
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The company converted 20 of these stores to the Easy Spirit format in 1992.
Operating earnings of the Cincinnati Shoe division declined in 1992 compared to
1991 primarily as a result of charges related to the planned closing of 41
underperforming stores.
FINANCIAL CONDITION
OVERVIEW
The company maintained its strong financial condition and liquidity in 1993.
Cash and cash equivalents increased to $183.2 million at yearend, despite the
net loss for the year, as the company reduced its investment in inventory,
maintained a conservative capital spending program and reduced dividend
payments.
CASH PROVIDED BY OPERATIONS
Cash provided by operations was $113.9 million in 1993 compared with $126.2
million in 1992. This $12.3 million decrease was principally the result of a
$21.7 million decrease in cash generated from net earnings, adjusted for
non-cash items, in 1993 compared to 1992 that was partially offset by an
increase of $3.0 million in cash provided by changes in working capital. The
increase in cash provided by changes in working capital included $10.2 million
related to a reduction in accounts receivable as a result of improved collection
experience and $18.4 million related to inventories, as the company's inventory
reduction efforts and store closing activities led to a greater reduction in
inventories in 1993 compared with 1992. These and other working capital changes
that increased cash during the year were partially offset by a $34.8 million
decrease in cash that resulted from a reduction in accounts payable related to
the decline in inventories.
Cash provided by operations was $126.2 million in 1992 compared with $209.8
million in 1991. This $83.6 million decrease was principally the result of
changes in the components of working capital that provided $41.5 million less
cash in 1992 than in 1991 and a $43.7 million decrease in cash generated from
net earnings, adjusted for non-cash items, in 1992 compared with 1991. The
decrease in cash provided by changes in working capital included $14.1 million
related to the timing of income tax payments, $11.0 million related to
inventories as the company's inventory reduction efforts and store closing
activity led to a greater reduction in 1991 compared with 1992, and $17.1
million related to the timing of payments on accounts payable. The decrease was
also affected by lower cash payments in 1992 for restructuring costs and by the
timing of rent payments.
CAPITAL EXPENDITURES
Capital expenditures were $61.4 million in 1993, $71.9 million in 1992 and
$59.8 million in 1991. The capital expenditures reflect continued cautious
spending in order to maintain the company's liquidity and consideration of a
soft retail environment.
Capital expenditures in 1993 reflected the continued emphasis on the expansion
of LensCrafters, Petite Sophisticate and Easy Spirit stores, and the
refurbishment of stores, including Casual Corner. Capital expenditures in 1993
also emphasized the upgrading of management information systems at all
divisions.
In 1993, the company opened 158 new retail units, and converted 67 existing
units to new formats. Of the new stores, 57 were women's apparel stores, 50 were
optical stores or leased departments and 51 were footwear stores or leased
departments. In 1992, the company opened or acquired 164 new retail units and
converted 74 existing units to new formats. Of the new stores, 61 were women's
apparel stores, 51 were optical stores and 52 were footwear stores or leased
departments.
The capital expenditures plan has been increased to $65 million in 1994. The
plan reflects emphasis on the continued expansion of Career Image and Easy
Spirit stores, and the refurbishment of stores, including Casual Corner.
Capital expenditures in 1994 will also continue to emphasize the upgrading of
management information systems. The company's capital expenditures 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 company believes that cash generated from operations and
existing cash reserves will adequately finance the 1994 capital expenditures
program.
28
<PAGE>
WORKING CAPITAL
At January 29, 1994, the company's working capital (current assets less
current liabilities) was $298.3 million compared with $277.3 million at January
30, 1993. This $21.0 million increase resulted primarily from an increase in
cash and cash equivalents of $24.0 million and a $41.2 million reduction in
accounts payable. These increases were partially offset by a $58.5 million
reduction in inventories. The lower inventory level reflected a net reduction
of retail stores, a delay in receipt of spring apparel, an increase in markdown
reserves to adjust excess footwear inventories to their estimated net realizable
value and the effects of management's continued inventory reduction efforts.
The decline in accounts payable was directly related to the lower inventory
levels. The company ended the year with a 1.8-to-1 current ratio, versus
1.6-to-1 at the end of 1992.
At January 30, 1993, the company's working capital of $277.3 million
represented a $41.8 million increase from the prior year. The increase resulted
primarily from an increase in cash and cash equivalents of $75.6 million. The
increase in cash and cash equivalents, which included the proceeds from the
issuance of the 8 5/8% Notes, was partially offset by a $40.2 million reduction
in inventories across all divisions. The lower inventory levels reflected a net
reduction of retail stores and lower average inventory per store, as well as a
decrease in wholesale footwear inventories, as management continued its
inventory reduction efforts.
The company continues to maintain lines of credit with domestic and foreign
banks. At January 29, 1994, the company had in place a revolving credit
agreement, with nine participating financial institutions, making available up
to $125 million of credit through February 5, 1996. The revolving credit
agreement, which was amended during 1993, is available to finance working
capital needs. At January 29, 1994 and January 30, 1993, there were no
borrowings outstanding under this facility.
LONG-TERM CAPITAL RESOURCES
Long-term debt (including current maturities) totaled $177.6 million at
yearend 1993, $206.2 million at yearend 1992 and $152.1 million at yearend 1991.
The lower balance in 1993 was due to scheduled repayments made during the year.
The higher balance in 1992 was due to the issuance of the 8 5/8% Notes net of
scheduled repayments of existing debt. The 8 5/8% Notes were issued under a
shelf registration statement filed with the Securities and Exchange Commission
to sell up to $100 million of Senior Debt Securities.
To balance the company's fixed and variable interest rate risk, as of January
29, 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 January 29, 1994) and pays interest at a variable
rate tied to the six-month LIBOR (3.45% weighted-average rate as of January 29,
1994).
At January 29, 1994, the company's debt-to-capital ratio (long-term debt
including capital lease obligations, as a percentage of the sum of total
long-term debt and shareholders' investment) was 29.1% compared with 28.2% in
1992 and 22.2% in 1991. The principal cause of the increase in the ratio in
1992 was the issuance of the 8 5/8% Notes.
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, limit capital expenditures, capital
stock repurchases, asset sales and limit the payment of cash dividends by the
company. Under the most restrictive dividend provision, approximately $28
million of consolidated retained earnings at January 29, 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 January 29, 1994, the company held contracts aggregating
approximately $21.9 million.
EFFECT OF INFLATION
Overall, the company's sales growth and earnings have not been materially
impacted by inflation over the last three years.
29
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
- - - - - - --------------------------------------------------------------------------------
The Board of Directors pursues certain of its responsibilities through the
Audit Committee, which consists of four members of the Board of Directors, none
of whom is or has been an employee of the company. The Audit Committee meets
periodically with management, internal auditors and independent public
accountants to review the work of each and satisfy itself that they are properly
discharging their responsibilities.
REPORT OF MANAGEMENT'S RESPONSIBILITY
- - - - - - --------------------------------------------------------------------------------
Management of The United States Shoe Corporation is responsible for the
integrity and objectivity of the financial information presented in this report.
The financial statements have been prepared in conformity with generally
accepted accounting principles and include, where necessary, estimates and
judgements of management based on currently available information. Management
uses the services of specialists within and outside the company in making such
estimates and judgements. Management depends upon the company's system of
internal controls in meeting its responsibilities for reliable financial
statements. This system is designed to provide reasonable assurance that assets
are safeguarded and that transactions are properly recorded and executed in
accordance with management's authorization. Judgements are required to assess
and balance the relative cost and expected benefits of these controls.
Management continually reviews, modifies and improves its systems of accounting
and controls in response to changes in business conditions and operations and to
recommendations made by the independent public accountants and the internal
auditors. These systems are tested and evaluated regularly by the company's
internal auditors as well as by the independent public accountants in connection
with their annual audit.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- - - - - - --------------------------------------------------------------------------------
ARTHUR ANDERSEN & CO.
To the Shareholders and Directors of The United States Shoe Corporation:
We have audited the accompanying consolidated balance sheets of THE UNITED
STATES SHOE CORPORATION (an Ohio corporation) and subsidiaries as of January 29,
1994 and January 30, 1993, and the related consolidated statements of operations
and retained earnings and cash flows for each of the three years in the period
ended January 29, 1994. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The United States Shoe
Corporation and subsidiaries as of January 29, 1994 and January 30, 1993, and
the results of their operations and their cash flows for each of the three years
in the period ended January 29, 1994, in conformity with generally accepted
accounting principles.
As explained in Note 2 to the consolidated financial statements, the company
changed its method of accounting for income taxes, effective February 2, 1992,
optical retailing inventory valuation, effective March 1, 1992, and nonpension
postretirement benefits, effective February 3, 1991.
Cincinnati, Ohio Arthur Andersen & Co.
March 7, 1994
30
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------
JANUARY 29, 1994 January 30, 1993 February 1, 1992
- - - - - - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 2,626,136 $ 2,650,684 $ 2,725,767
COST OF SALES 1,385,511 1,382,536 1,424,661
- - - - - - ----------------------------------------------------------------------------------------------------------
Gross profit 1,240,625 1,268,148 1,301,106
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,247,267 1,243,598 1,215,727
- - - - - - ----------------------------------------------------------------------------------------------------------
Earnings (loss) from operations (6,642) 24,550 85,379
OTHER INCOME (EXPENSE), NET:
Interest (15,978) (16,890) (17,065)
Other -- -- (561)
- - - - - - ----------------------------------------------------------------------------------------------------------
Earnings (loss) before provision (credit) for
income taxes and cumulative effect of
accounting change (22,620) 7,660 67,753
PROVISION (CREDIT) FOR INCOME TAXES (6,786) 3,292 27,779
- - - - - - ----------------------------------------------------------------------------------------------------------
Earnings (loss) before cumulative effect of
accounting change (15,834) 4,368 39,974
CUMULATIVE EFFECT, FOR YEARS ENDED PRIOR TO
FEBRUARY 3, 1991, OF ACCOUNTING CHANGE
RELATED TO NONPENSION POSTRETIREMENT BENEFITS,
NET OF TAX EFFECT OF $5,721 -- -- (8,771)
- - - - - - ----------------------------------------------------------------------------------------------------------
Net earnings (loss) (15,834) 4,368 31,203
RETAINED EARNINGS AT BEGINNING OF YEAR 421,741 441,012 433,325
Dividends declared
($.37 per share in 1993,
$.52 per share in 1992 and 1991) (16,909) (23,639) (23,516)
- - - - - - ----------------------------------------------------------------------------------------------------------
RETAINED EARNINGS AT END OF YEAR $ 388,998 $ 421,741 $ 441,012
- - - - - - ----------------------------------------------------------------------------------------------------------
- - - - - - ----------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER COMMON SHARE
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $ (.35) $ .10 $ .88
CUMULATIVE EFFECT OF ACCOUNTING CHANGE -- -- (.19)
- - - - - - ----------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) PER SHARE $ (.35) $ .10 $ .69
- - - - - - ----------------------------------------------------------------------------------------------------------
- - - - - - ----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 29, 1994 January 30, 1993
- - - - - - -------------------------------------------------------------------------------------------------------
ASSETS
- - - - - - -------------------------------------------------------------------------------------------------------
- - - - - - -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 183,203 $ 159,225
Receivables, net of allowance for doubtful
accounts of $7,620 in 1993 and $10,832 in 1992 85,600 96,713
Inventories 324,096 382,614
Future income tax benefits 60,473 51,704
Prepaid expenses 15,861 19,535
- - - - - - -------------------------------------------------------------------------------------------------------
Total current assets 669,233 709,791
- - - - - - -------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Leasehold improvements 321,434 350,565
Furniture, fixtures and machinery 412,779 405,062
Buildings, land and land improvements 91,723 91,230
- - - - - - -------------------------------------------------------------------------------------------------------
825,936 846,857
Less: Accumulated depreciation and amortization 465,379 440,732
- - - - - - -------------------------------------------------------------------------------------------------------
360,557 406,125
- - - - - - -------------------------------------------------------------------------------------------------------
OTHER ASSETS:
Excess of cost over fair value of net assets acquired, net 22,247 22,541
Other assets and deferred charges 27,015 32,563
- - - - - - -------------------------------------------------------------------------------------------------------
49,262 55,104
- - - - - - -------------------------------------------------------------------------------------------------------
$ 1,079,052 $ 1,171,020
- - - - - - -------------------------------------------------------------------------------------------------------
- - - - - - -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
32
<PAGE>
<TABLE>
<CAPTION>
JANUARY 29, 1994 January 30, 1993
- - - - - - -------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- - - - - - -------------------------------------------------------------------------------------------------------
- - - - - - -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations $ 865 $ 28,666
Accounts payable 175,709 216,899
Accrued expenses 194,388 186,903
- - - - - - -------------------------------------------------------------------------------------------------------
Total current liabilities 370,962 432,468
- - - - - - -------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 177,416 179,000
- - - - - - -------------------------------------------------------------------------------------------------------
CAPITAL LEASE OBLIGATIONS 12,345 12,744
- - - - - - -------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 5,885 15,148
- - - - - - -------------------------------------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES 50,748 43,137
- - - - - - -------------------------------------------------------------------------------------------------------
SHAREHOLDERS' INVESTMENT:
Cumulative preferred shares, without par value -
1,500,000 shares authorized; none issued or outstanding -- --
Common shares, without par value - 60,000,000 shares authorized;
45,914,246 issued in 1993, 45,664,134 issued in 1992;
68,210 in 1992 held in treasury 75,629 70,307
Foreign currency translation adjustments (2,931) (3,525)
Retained earnings 388,998 421,741
- - - - - - -------------------------------------------------------------------------------------------------------
Total shareholders' investment 461,696 488,523
- - - - - - -------------------------------------------------------------------------------------------------------
$ 1,079,052 $ 1,171,020
- - - - - - -------------------------------------------------------------------------------------------------------
- - - - - - -------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (THOUSANDS)
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------
JANUARY 29, 1994 January 30, 1993 February 1, 1992
----------------------------------------------------
<S> <C> <C> <C>
CASH PROVIDED BY OPERATIONS:
Net earnings (loss) $ (15,834) $ 4,368 $ 31,203
Adjustments to reconcile net earnings (loss) to cash
provided by operations -
Provision for depreciation and amortization 84,298 83,522 83,186
Cumulative effect of accounting changes, net
of taxes -- -- 8,771
Net loss from disposal of property, plant and
equipment 12,770 6,503 4,061
Deferred income tax provision (18,032) (9,300) 1,602
Deferred compensation provision 7,785 7,606 (4,460)
Settlements of tax assessments -- -- 8,602
Other, net 2,209 (4,222) (2,396)
Changes in components of working capital,
net of effects of acquisitions, dispositions
and restructuring -
Receivables 11,113 889 8,084
Inventories 58,518 40,158 51,207
Prepaid expenses 3,674 9,256 (3,456)
Accounts payable (41,190) (6,368) 10,760
Accrued expenses 8,599 (6,235) 12,592
- - - - - - -----------------------------------------------------------------------------------------------------------
Cash provided by operations 113,910 126,177 209,756
- - - - - - -----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Additions to property, plant and equipment (61,438) (71,861) (59,832)
Net proceeds from sale of operating assets 9,897 7,446 5,820
Excess of cost over fair value of net assets acquired (1,085) (13,565) --
Other, net 6,484 (2,595) --
- - - - - - -----------------------------------------------------------------------------------------------------------
Cash used in investing activities (46,142) (80,575) (54,012)
- - - - - - -----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net decrease in short-term borrowings -- -- (14,649)
Proceeds from issuance of long-term debt -- 75,000 --
Payment of long-term debt (27,180) (22,256) (91,536)
Payment of capital lease obligations (2,053) (713) (2,031)
Sale of common shares under stock option plans 457 760 78
Dividend payments (16,909) (23,639) (23,516)
Other, net 1,895 845 --
- - - - - - -----------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities (43,790) 29,997 (131,654)
- - - - - - -----------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 23,978 75,599 24,090
Cash and cash equivalents, beginning of year 159,225 83,626 59,536
- - - - - - -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 183,203 $ 159,225 $ 83,626
- - - - - - -----------------------------------------------------------------------------------------------------------
- - - - - - -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for -
Interest $ 19,839 $ 17,624 $ 19,830
Income taxes 8,766 16,586 20,844
- - - - - - -----------------------------------------------------------------------------------------------------------
- - - - - - -----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
34
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND SEGMENT DATA- The consolidated financial
statements include the accounts of the company and all of its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
The company is a specialty retailer focusing on three major product segments:
women's apparel, optical and footwear. The company also manufactures, imports
and wholesales footwear. Financial information by industry segment for fiscal
1993, 1992 and 1991 is presented in the Five-Year Financial Summary on page 23.
FISCAL YEAR- The company's fiscal year is the 52-53 week period ending on the
Saturday closest to January 31. Fiscal years 1993, 1992 and 1991 each consisted
of 52 weeks and ended on January 29, 1994, January 30, 1993 and February 1,
1992, respectively.
CASH AND CASH EQUIVALENTS- Cash and cash equivalents include cash on hand,
demand deposits and highly liquid investments with a maturity of three months or
less. The carrying amount of cash equivalents is a reasonable
estimate of fair value.
INVENTORIES- Inventories are stated at the lower of cost, principally using the
last-in, first-out (LIFO) method, or market. The company valued 90% and 91% of
its inventories using the LIFO method at January 29, 1994 and January 30, 1993,
respectively. Consolidated inventories, if stated at FIFO, would have exceeded
the reported inventory values by approximately $38.7 million at January 29, 1994
and $50.0 million at January 30, 1993.
During fiscal 1993, inventory quantities were reduced, which resulted in a
liquidation of LIFO inventory layers carried at lower costs which prevailed in
prior years. The effect of this liquidation was to increase net income by $5.5
million ($.12 per share). The LIFO effects of inventory reductions were not
material in 1992 or 1991.
Inventories consisted of the following:
<TABLE>
<CAPTION>
(Thousands)
JANUARY 29, January 30,
1994 1993
---------- ----------
<S> <C> <C>
Finished and in-process goods $ 302,445 $ 362,374
Raw materials 21,651 20,240
--------- ---------
$ 324,096 $ 382,614
--------- ---------
--------- ---------
</TABLE>
DEPRECIATION AND AMORTIZATION- Depreciation and amortization of property, plant
and equipment are provided using principally the straight-line method at rates
designed to allocate the cost of property and equipment over their estimated
useful lives. The useful lives are generally 10 years for land improvements,
20-40 years for buildings, 3-10 years for furniture, fixtures and machinery, and
the remaining lease term, which includes certain renewal periods, for leasehold
improvements.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED- These amounts are being
amortized on a straight-line basis over various periods, not exceeding 40 years.
Accumulated amortization was $6.8 million and $5.5 million at January 29, 1994
and January 30, 1993, respectively.
OPENING AND CLOSING COSTS- Store opening costs are charged to operations as
incurred. The costs associated with closing stores or facilities are accrued
when the decision is made to close the location.
FOREIGN CURRENCY TRANSLATION- Assets and liabilities of the company's foreign
operations are translated at the exchange rates in effect as of the balance
sheet date and results of operations are translated at average exchange rates
prevailing during the period. Translation adjustments are recorded as a separate
component of shareholders' investment.
INCOME TAXES- Deferred income taxes are provided on temporary differences
between financial and tax reporting. Deferred tax assets and liabilities are
classified as current or noncurrent based on the classification of the related
asset or liability for financial reporting. A deferred tax asset or liability
that is not related to an asset or liability for financial reporting is
classified according to the expected reversal date of the temporary difference.
FOREIGN EXCHANGE CONTRACTS- The company uses foreign exchange contracts to hedge
the risk of changes in foreign currency exchange rates associated with
transactions denominated in foreign currencies, primarily footwear purchases
from European countries. Any gain or loss upon settlement of such contracts is
included in the cost of the related purchases.
At January 29, 1994, the company had contracts maturing on various dates between
February 18, 1994 and July 29, 1994 to purchase foreign currency (21,776 million
Italian lire and 1,260 million Spanish pesetas) for $21.9 million. The fair
value of these contracts was approximately $21.6 million and was estimated based
on current foreign exchange contract rates offered to the company for similar
contracts of the same remaining maturities.
35
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EARNINGS PER SHARE- Earnings (loss) per share are based on the weighted-average
number of common shares and equivalents outstanding during each year. Common
share equivalents represent shares issuable upon assumed exercise of stock
options which would have a dilutive effect in years where there are earnings.
Common share equivalents had no material effect in 1993, 1992 or 1991.
RECLASSIFICATIONS- Certain reclassifications have been made to the prior years'
financial statements to conform with the 1993 presentation.
(2) ACCOUNTING CHANGES
Effective February 2, 1992, the company elected to adopt Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". This change did not
have a material effect on the company's financial statements.
The company adopted the LIFO method of determining inventory values for its
optical retailing inventories effective March 1, 1992. Management believes the
LIFO method is preferable because it more closely matches revenues and expenses.
There was no significant effect on 1992 net earnings from this change in
accounting principle. The cumulative effect of this change on retained earnings
at February 2, 1992 was not determinable, nor were the pro forma effects of
retroactive application of LIFO to prior years.
Effective February 3, 1991, the company elected to adopt Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions". The cumulative effect of this change was to decrease net
earnings in 1991 by $8.8 million ($.19 per share).
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (SFAS No. 112), which will require the company to
change its method of accounting for postemployment benefits in the first quarter
of fiscal 1994. The adoption of SFAS No. 112 is not expected to have a material
effect on the company's consolidated financial position or results of
operations.
(3) ACQUISITION AND DISPOSITIONS
On January 27, 1993, the company acquired for cash 100% of the stock of
Eyemasters Ltd., a Canadian chain of 22 optical superstores. The acquisition was
accounted for using the purchase method of accounting. The excess of the cost of
the net assets acquired over their fair values has been recorded as goodwill.
During 1993, the company sold the assets of its optical retailing operations in
the United Kingdom. A $5.5 million charge was recorded in 1993 in conjunction
with the divestiture. Operating losses recognized from operations in the United
Kingdom prior to the sale were $1.9 million in 1993 (excluding the charge to
divest the business), $7.0 million in 1992, and $8.8 million in 1991.
Also during 1993, the company sold 61 Ups 'N Downs and 124 Caren Charles stores.
The sale completed the company's divestiture of these divisions. A $10.6 million
charge was recorded in 1993 in conjunction with the divestiture. Operating
earnings (losses) recognized from the Ups 'N Downs and Caren Charles divisions
prior to the sale and transfer of these stores were $(14.1) million in 1993
(excluding the charge to divest the stores), $1.4 million in 1992, and $8.7
million in 1991.
(4) CONCENTRATION OF CREDIT RISK
The company's footwear wholesaling business sells primarily to independent
retailers and department stores across the United States. Receivables arising
from these sales are not collateralized. Credit risk is affected by conditions
or occurrences within the economy and the retail industry. The company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
No single customer accounted for more than 10% of the company's receivables
balance as of January 29, 1994.
(5) NOTES PAYABLE AND LONG-TERM DEBT
The company maintains lines of credit through both formal and informal credit
arrangements with domestic and foreign banks. At January 29, 1994, the company
had in place an amended revolving credit agreement, with nine participating
financial institutions, making available up to $125 million of credit through
February 5, 1996. The revolving credit agreement is maintained primarily to
finance working capital. Borrowing rates are based on prime rates, Eurodollar
loan rates and certificate of deposit rates. At January 29, 1994 and January 30,
1993 there were no borrowings outstanding under this facility. Commitment fees
of 3/8% to 1/2% per annum are payable on the company's available and unused
portion of its committed credit facilities.
The company also has letter of credit facilities to support the purchase of
inventories. At January 29, 1994, the company had letter of credit facilities of
$100 million, of which $54 million in letter of credit commitments were
outstanding.
36
<PAGE>
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
(Thousands)
January 29, January 30,
1994 1993
---------- ----------
<S> <C> <C>
8.63% Notes, payable in 2002 $ 75,000 $ 75,000
9.60% Notes, payable in 1995 50,000 50,000
Medium-Term Notes, due
in 1993, with an average
interest rate of 9.5% -- 27,000
8% Notes, payable in 1996 50,000 50,000
Other indebtedness, with
various maturities 2,596 4,180
--------- ---------
177,596 206,180
--------- ---------
--------- ---------
Less-Current portion, due
within one year 180 27,180
--------- ---------
$ 177,416 $ 179,000
--------- ---------
--------- ---------
</TABLE>
At January 29, 1994, the company was authorized to issue an additional $25
million of debt under a shelf registration filed with the Securities and
Exchange Commission in August 1992.
The company has zero coupon notes, payable in 2013, that had an aggregate face
value of $15.6 million at January 29, 1994 and January 30, 1993 and are stated
net of the unamortized discount of $14.3 million at January 29, 1994 and $14.4
million at January 30, 1993, with an imputed interest rate of 13%.
The aggregate payments required on long-term debt during the next five fiscal
years are as follows:
<TABLE>
<CAPTION>
(Thousands)
<S> <C>
1994 $ 180
1995 50,180
1996 50,180
1997 180
1998 190
</TABLE>
The fair value of the company's long-term debt was approximately $186.3 million
and $211.6 million at January 29, 1994 and January 30, 1993, respectively, and
was estimated based on current rates, as of those dates, offered to the company
for debt of the same remaining maturities.
The revolving credit agreement, which was amended during 1993, and the
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, capital stock repurchases and asset sales and
limit the payment of cash dividends by the company. Under the most restrictive
dividend provision, approximately $28 million of consolidated retained earnings
at January 29, 1994 is available for payment of cash dividends.
To balance the company's fixed and variable interest rate risk, as of January
29, 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 January 29, 1994) and pays interest at a variable rate tied
to the six-month LIBOR (3.45% weighted average rate as of January 29, 1994). The
differential to be paid or received under the agreements is accrued as interest
rates change and is charged or credited to interest expense over the life of the
agreements. The company monitors the risk of default by the swap counterparties
and does not anticipate nonperformance. The fair value of the agreements was
approximately $1.4 million at January 29, 1994 and was the estimated amount that
the company would receive to terminate the swap agreements.
(6) COMMON SHARES
A summary of the activity of common shares for the last three years is as
follows:
<TABLE>
<CAPTION>
(Thousands)
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year $ 70,307 $ 66,470 $ 64,410
Sale of common shares
issued under stock option
plans, net (shares issued:
35,965 in 1993, 67,055 in
1992 and 15,398 in 1991) 457 760 78
Restricted stock issued
(shares issued: 105,000
in 1993 and 25,000 in 1992) 1,699 384 --
Shares issued under tax
incentive savings plans:
New shares 2,071 -- --
Treasury shares 771 2,620 1,949
Other 324 73 33
-------- -------- --------
Balance at end of year $ 75,629 $ 70,307 $ 66,470
-------- -------- --------
-------- -------- --------
</TABLE>
The company's Executive Committee of its Board of Directors, in 1987, authorized
the open market purchase of up to two million of its outstanding common shares.
As of January 29, 1994, the total shares repurchased under this authorization
was approximately 450,000.
37
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During 1993, 68,210 (198,240 in 1992 and 161,736 in 1991) common shares were
issued out of treasury stock in connection with the company's tax incentive
savings plans. During 1993 the company also issued 194,147 previously unissued
shares in connection with these plans. See Note 8 for further discussion of
these plans.
The company has a Share Purchase Rights Plan adopted in 1986 and amended in
March 1988. Under the plan, shareholders of record on April 14, 1986 received,
in connection with each common share owned, the right to purchase one
one-hundredth of a Series A Preference Share ("Preference Share") at an exercise
price of $200, subject to adjustment (collectively, the "Rights"). The Rights
are exercisable for Preference Shares following (i) the public announcement that
a person or group has acquired, or has obtained the right to acquire, beneficial
ownership of 20% or more of the company's outstanding common shares, or (ii) the
commencement of, or public announcement of an intention to make a tender offer
or exchange offer if, upon consummation, such person or group would be the
beneficial owner of 30% or more of the outstanding common shares. The Rights do
not have any voting rights and are not entitled to dividends.
Additionally, if any person or group acquires 20% or more of the company's
outstanding common shares, the Rights would entitle the holder to purchase
common shares (or other securities or property of the company) in lieu of the
Preference Shares at half the market value. Such purchase rights for common
shares will not be triggered if the 20% acquisition is made pursuant to a tender
or exchange offer for all outstanding common shares which the directors of the
company who are not officers deem to be in the best interests of the company and
its shareholders (a "Permitted Offer").
Upon the occurrence of certain other events (including a merger in which the
company's common shares are exchanged or 50% or more of the company's assets or
earning power is sold or transferred), the Rights would entitle the holder to
purchase common stock in the acquiring entity at half its market value, except
in connection with certain transactions following a Permitted Offer.
All of the Rights may be redeemed by the company at a price of $.05 per Right
until a person or group has acquired beneficial ownership of 20% or more of the
outstanding common shares. After a person or group acquires 20% or more of the
common shares, the company may not redeem the Rights, except in certain limited
circumstances. The Rights also may be redeemed in connection with certain
negotiated transactions. The Rights will expire on April 14, 1996.
(7) STOCK OPTIONS
At January 29, 1994, 4,041,672 (4,289,460 at January 30, 1993 and 4,463,143 at
February 1, 1992) of the company's authorized but unissued common shares were
reserved for issuance to directors, executives and key employees under the
company's stock option and incentive plans. Of such reserved shares, 3,727,267
at January 29, 1994 (3,526,011 at January 30, 1993 and 3,272,244 at February 1,
1992) were subject to options outstanding. A summary of the changes in options
outstanding for the last three years is as follows:
<TABLE>
<CAPTION>
Number of Option Price Range
Shares (Per Share)
--------- ------------------
<S> <C> <C>
Outstanding at
February 2, 1991 2,990,290 $ 5.75 - $31.56
Granted 606,350 12.25 - 14.25
Exercised (17,836) 5.75 - 7.03
Cancelled (306,560) 12.25 - 30.13
---------
Outstanding at
February 1, 1992 3,272,244 $ 7.03 - $31.56
Granted 647,650 10.88 - 16.50
Exercised (100,183) 7.03 - 14.00
Cancelled (293,700) 12.25 - 30.13
---------
Outstanding at
January 30, 1993 3,526,011 $10.88 - $31.56
Granted 709,750 9.00 - 11.94
Exercised (57,150) 10.88 - 14.00
Cancelled (451,344) 10.88 - 28.50
---------
Outstanding at
January 29, 1994 3,727,267 $ 9.00 - $31.56
---------
---------
Exercisable at
January 29, 1994 2,288,548 $ 9.00 - $31.56
---------
---------
</TABLE>
The 1988 incentive plan permits restricted stock to be granted at no cost to key
employees. At January 29, 1994 85,000 shares of restricted stock were
outstanding, subject to forfeiture during a period expiring five years after the
date of grant.
38
<PAGE>
(8) EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PLANS- The company has several noncontributory retirement plans
which provide for pensions to eligible employees upon retirement. Pension
benefits are based on length of service and compensation, under career average
or final average formulas. The company's funding policy is in accordance with
minimum funding requirements. Net periodic pension cost includes the following
components:
<TABLE>
<CAPTION>
(Thousands)
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Service cost $ 6,512 $ 6,056 $ 4,813
Interest cost 8,955 7,834 7,671
Return on plan assets (13,993) (9,350) (28,971)
Net amortization and deferral 279 (3,465) 16,897
-------- -------- --------
Net periodic pension cost $ 1,753 $ 1,075 $ 410
-------- -------- --------
-------- -------- --------
</TABLE>
All of the company's pension plans have assets in excess of accumulated plan
benefits. Plan assets are invested in equity securities, bonds and money market
funds. The plans' funded status and the prepaid pension cost as of January 1,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(Thousands)
1994 1993
-------- --------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested $ 96,431 $ 78,737
Nonvested 8,451 5,583
-------- --------
Accumulated benefit
obligations 104,882 84,320
Effect of salary progression 25,578 24,168
-------- --------
Projected benefit obligations 130,460 108,488
Plan assets at fair value 149,678 142,021
-------- --------
Plan assets in excess of
projected benefit obligations 19,218 33,533
Unrecognized net gain (4,493) (16,956)
Unrecognized prior service cost 4,042 6,523
Unrecognized net transition assets (13,201) (15,775)
-------- --------
Prepaid pension cost $ 5,566 $ 7,325
-------- --------
-------- --------
</TABLE>
The weighted-average discount rates used in determining the actuarial present
value of the projected benefit obligations were 7.5% and 8% at January 1, 1994
and 1993, respectively. The assumed rates of increase in future compensation
levels used to measure the actuarial present value of the projected benefit
obligations were 5.5% and 6% at January 1, 1994 and 1993, respectively. The
expected long-term rate of return on assets used in determining pension cost was
9% at January 1, 1994 and 1993. The impact of the change in assumptions for the
discount rate and the rate of increase in future compensation levels was to
increase the actuarial present value of benefit obligations by $9.4 million at
January 29, 1994. Also, the actuarial present value of the projected benefit
obligations decreased $1.9 million due to a change in the benefit formula to
bring the plans into compliance with current tax regulations.
The company maintains an unfunded supplemental retirement plan for participants
of its pension plans to provide benefits in excess of amounts permitted to be
paid from such plans under the provisions of the tax law. Additionally, the
company provides supplemental retirement benefits to certain retired executives
in accordance with individual retirement agreements. The pension liability
associated with these plans is accrued using the same actuarial methods and
assumptions as those used for the company's qualified plans.
Net periodic pension cost for these supplemental plans includes the following
components:
<TABLE>
<CAPTION>
(Thousands)
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Service cost $ 75 $ 75 $ 67
Interest cost 312 289 312
Net amortization and deferral 6 -- --
----- ----- -----
Net periodic pension cost $ 393 $ 364 $ 379
----- ----- -----
----- ----- -----
</TABLE>
The supplemental plans' funded status and the accrued pension cost are as
follows:
<TABLE>
<CAPTION>
(Thousands)
JANUARY 29, January 30,
1994 1993
---------- ----------
<S> <C> <C>
Accumulated benefit obligations $ 4,212 $ 3,427
Effect of salary progression 3,134 458
--------- ---------
Projected benefit obligations 7,346 3,885
Unrecognized prior service cost (2,809) --
Unrecognized net loss (838) (458)
--------- ---------
Accrued pension cost $ 3,699 $ 3,427
--------- ---------
--------- ---------
</TABLE>
39
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The change in the benefit formula of the salaried employees pension plan
referred to above resulted in a $2.8 million increase in the liability under the
supplemental plans in the form of unrecognized prior service cost.
DEFINED CONTRIBUTION PLANS- The company provides retirement benefits to eligible
employees of some divisions through noncontributory profit sharing plans.
Company contributions are determined by a formula based upon participants'
compensation and profits of the divisions, as defined in the plans. The
company's provision for such contributions was $1.6 million in 1993, $1.7
million in 1992 and $8.8 million in 1991.
The company also sponsors three tax incentive savings plans, as well as a
non-qualified deferred compensation plan. Eligible employees may contribute or
defer a portion of their compensation to these plans. The company makes
quarterly contributions of its common stock to the plans based on a percentage
of employees' contributions or deferrals, as appropriate. The provision for
these stock contributions was $3.3 million in 1993, $3.2 million in 1992 and
$2.6 million in 1991.
During 1992, the company adopted an additional non-qualified, unfunded deferred
compensation plan which permits eligible employees to defer a portion of their
compensation. This plan does not provide for contributions by the company.
HEALTH BENEFIT PLANS- The company partially subsidizes health care benefits for
eligible retirees. Net periodic cost of these benefits included the following
components:
<TABLE>
<CAPTION>
(Thousands)
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Service cost $ 183 $ 623 $ 541
Interest cost 838 1,264 1,192
Amortization of unrecognized
net gain (289) -- --
-------- -------- --------
Net periodic cost $ 732 $ 1,887 $ 1,733
-------- -------- --------
-------- -------- --------
</TABLE>
The accumulated postretirement benefit obligation was as follows:
<TABLE>
<CAPTION>
(Thousands)
JANUARY 29, January 30,
1994 1993
---------- ----------
<S> <C> <C>
Retirees $ 9,706 $ 10,563
Fully eligible active employees 243 1,061
Other active employees 1,638 5,658
Unrecognized reduction in
prior service cost 6,272 --
Unrecognized loss (477) --
-------- --------
Accumulated post-retirement
benefit obligation $ 17,382 $ 17,282
-------- --------
-------- --------
</TABLE>
For 1993, a 13% (14% for 1992) increase in the cost of covered health care
benefits was assumed. This rate was assumed to decrease gradually to 7% for 2001
and remain at that level thereafter. The health care cost trend rate assumption
has a significant effect on the amounts reported. For example, a 1% increase in
the health care trend rate would increase the accumulated postretirement benefit
obligation by $1.0 million as of January 29, 1994 and the net periodic cost by
$0.1 million for the year then ended. The weighted average discount rates used
in determining the accumulated postretirement benefit obligation were 7.5% and
8% at January 29, 1994 and January 30, 1993, respectively. The company funds
these benefits as claims are incurred.
In 1993, the company changed the formula for cost sharing with retirees which
resulted in an unrecognized reduction in prior service cost of approximately
$6.6 million.
(9) INCOME TAXES
The provision (credit) for income taxes, excluding the cumulative effect of
accounting changes, consisted of:
<TABLE>
<CAPTION>
(Thousands)
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Federal income taxes -
Currently payable $ 7,195 $ 8,661 $ 20,598
Deferred (15,085) (6,746) 1,049
State, local and foreign
income taxes -
Currently payable 4,051 3,931 5,579
Deferred (2,947) (2,554) 553
-------- -------- --------
Provision (credit) for
income taxes $ (6,786) $ 3,292 $ 27,779
-------- -------- --------
-------- -------- --------
</TABLE>
40
<PAGE>
The reconciliation of the income tax provision based upon the statutory rate to
the reported income tax provision is as follows:
<TABLE>
<CAPTION>
(Thousands)
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Federal statutory
provision (credit) $ (7,917) $ 2,604 $ 23,036
State, local and foreign
income taxes (net of
federal benefit) (968) 567 4,047
Change in valuation
allowance 2,939 -- --
Change in federal
tax rate (821) -- --
Other, net (19) 121 696
-------- -------- --------
Provision (credit) for
income taxes $ (6,786) $ 3,292 $ 27,779
-------- -------- --------
-------- -------- --------
</TABLE>
The components of the company's future income tax benefits and deferred tax
liabilities were as follows:
<TABLE>
<CAPTION>
(Thousands)
JANUARY 29, January 30,
1994 1993
---------- ----------
<S> <C> <C>
Future income tax benefits:
Compensation and benefits $ 37,598 $ 30,255
Occupancy reserves 13,826 12,126
Accrued restructuring costs 5,418 9,885
Allowance for doubtful
accounts and returns 9,085 8,560
Inventory accounting 6,192 4,061
Other, net 21,047 17,031
-------- --------
93,166 81,918
Valuation allowance (4,423) (1,484)
-------- --------
Total 88,743 80,434
-------- --------
Deferred tax liabilities:
Accelerated depreciation 30,405 35,703
Pension cost 1,771 2,480
Other, net 1,979 5,695
-------- --------
Total 34,155 43,878
-------- --------
Net deferred tax asset $ 54,588 $ 36,556
-------- --------
-------- --------
</TABLE>
The valuation allowance applies to state, local and foreign tax assets and
operating loss carryforwards that may expire before the company can utilize
them.
At January 29, 1994, the company had net operating loss carryforwards and
foreign tax credit carryforwards as follows:
<TABLE>
<CAPTION>
(Millions)
Amount of Expiration
Carryforward Date
------------ ------------
<S> <C> <C>
State and local net
operating loss
carryforwards $ 80.0 1997 to 2008
Foreign net operating
loss carryforwards $ 4.6 2000
U.S. foreign tax credit
carryforwards $ 2.0 1997 to 1998
</TABLE>
(10) COMMITMENTS AND CONTINGENCIES
LEASES AND LICENSES- The company leases various retail store, plant, warehouse
and office facilities, as well as certain of its data processing, automotive and
production equipment under lease arrangements expiring between 1994 and 2005,
with options to renew at varying terms. The company also operates retail shoe
departments within strong-value stores and retail optical departments within
certain Kmart stores under licensing arrangements.
The company has leased certain property under capital leases that are included
in the "Property, Plant and Equipment" caption in the accompanying consolidated
balance sheets as follows:
<TABLE>
<CAPTION>
(Thousands)
JANUARY 29, January 30,
1994 1993
---------- ----------
<S> <C> <C>
Furniture, fixtures and machinery $ 4,565 $ 5,653
Buildings, land and land
improvements 15,472 15,472
-------- --------
20,037 21,125
Less: Accumulated depreciation
and amortization 8,315 7,990
-------- --------
$ 11,722 $ 13,135
-------- --------
-------- --------
</TABLE>
41
<PAGE>
THE UNITED STATES SHOE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Future minimum annual rentals under lease and license arrangements at
January 29, 1994 are as follows:
<TABLE>
<CAPTION>
(Thousands)
Operating
Leases
and License
Fiscal Year Capital Leases Arrangements
- - - - - - ---------- -------------- ------------
<S> <C> <C>
1994 $ 2,885 $ 169,000
1995 2,640 152,507
1996 2,503 127,443
1997 2,316 97,332
1998 2,316 72,146
Thereafter 20,265 163,466
-------- ---------
32,925 $ 781,894
---------
---------
Less: Imputed interest 19,895
--------
Present value of capital
lease obligations $ 13,030
--------
--------
</TABLE>
The lease and license arrangements for the company's retail locations often
include escalation clauses and provisions requiring the payment of incremental
rentals, in addition to any established minimums, contingent upon the
achievement of specified levels of sales volume. Rental expense was as follows:
<TABLE>
<CAPTION>
(Thousands)
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Minimum rent $ 169,597 $ 164,451 $ 168,896
Contingent rent 14,131 15,601 16,189
--------- --------- ---------
$ 183,728 $ 180,052 $ 185,085
--------- --------- ---------
--------- --------- ---------
</TABLE>
CONTINGENCIES- The company is contingently liable as a guarantor of 475 leases
in 36 states, the District of Columbia and the United Kingdom relating to
customer facilities and certain leases that were assigned in connection with
various dispositions. Leases guaranteed by the company expire between 1994 and
2017 and minimum rentals aggregate $86.4 million for the twenty-four-year
period. The company does not hold security for these guarantees. As of January
29, 1994, approximately 57% of the guaranteed aggregate minimum rentals were
concentrated with two primary obligors.
It is not practicable to estimate the fair value of the company's lease
guarantees since quoted prices are not readily available and valuation
techniques would not be practicable due to the number of primary obligors,
inherent differences in the primary obligors' credit risk and the varying lease
terms.
The company has entered into severance compensation agreements with certain of
its executives. Such agreements provide for the payment over a two-year period
to these executives of amounts up to three times their average annual
compensation, plus continuation of certain benefits, if a change in control (as
defined) is followed within two years by a termination (as defined) of
employment. The maximum contingent liability of the company pursuant to all such
agreements is approximately $18 million at January 29, 1994.
LEGAL PROCEEDINGS- Litigation is instituted from time to time against the
company which involves routine matters incident to the company's business. In
the opinion of management, the ultimate disposition of such litigation will not
have a material effect upon the company's consolidated financial position or
results of operations.
(11) QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for fiscal years 1993 and 1992 are as
follows:
<TABLE>
<CAPTION>
(Thousands except per share amounts)
---------------QUARTER--------------
1993 FIRST SECOND THIRD FOURTH
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $ 640,340 $ 639,727 $ 677,038 $ 669,031
GROSS PROFIT 311,649 290,103 323,750 315,123
NET EARNINGS
(LOSS) (9,659) (22,692) 8,246 8,271
EARNINGS (LOSS)
PER SHARE $ (.21) $ (.50) $ .18 $ .18
1992
Net Sales $ 647,547 $ 640,339 $ 674,578 $ 688,220
Gross Profit 316,350 295,474 321,507 334,817
Net Earnings
(Loss) 2,823 (7,381) 8,094 832
Earnings (Loss)
Per Share $ .06 $ (.16) $ .18 $ .02
</TABLE>
Net earnings in the fourth quarter of 1993 and 1992 reflect favorable LIFO
adjustments of $16.8 million ($.37 per share) and $9.6 million ($.21 per share),
respectively.
42
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
The company's subsidiaries (all wholly-owned) as of April 4, 1994 were:
NAME PLACE OF INCORPORATION
The Shops for Pappagallo, Inc. Ohio
Community Urban Redevelopment of
Duck Creek, Inc. Ohio
LensCrafters Canada, Inc. Ontario
LensCrafters International, Inc. Ohio
Eyexam2000 of California, Inc. California
LensCrafters E.C. Corporation Ohio
LensCrafters, Inc. Ohio
U.S. Shoe Far East, Ltd. Hong Kong
WSR Far East, Ltd. Hong Kong
The company has other subsidiaries not listed above. Such unlisted
subsidiaries, if considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in or incorporated by reference in this Form 10-K, into
the company's previously filed Registration Statement File Nos. 33-6501, 2-
86625, 2-60244, 33-20051, 33-21106, 33-44514 and
33-51272.
ARTHUR ANDERSEN & CO.
Cincinnati, Ohio,
April 27, 1994
