<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended July 29, 2000
Commission File Number 1-14770
PAYLESS SHOESOURCE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 43-1813160
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3231 SOUTHEAST SIXTH AVENUE, TOPEKA, KANSAS 66607-2207
(Address of principal executive offices) (Zip Code)
(785) 233-5171
(Registrant's telephone number,
including area code)
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 and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value
22,162,782 shares as of August 25, 2000
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in millions)
Jul. 29, Jul. 31, Jan. 29,
ASSETS 2000 1999 2000
------ --------------- --------------- ---------------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 13.5 $ 180.3 $ 164.2
Merchandise inventories 364.0 348.2 349.7
Current deferred income taxes 8.3 13.9 12.1
Other current assets 49.4 44.5 40.9
--------------- --------------- ---------------
Total current assets 435.2 586.9 566.9
Property and Equipment:
Land 7.2 7.5 7.5
Buildings and leasehold
improvements 746.6 679.3 713.9
Furniture, fixtures and
equipment 322.7 313.3 309.1
Property under capital leases 7.3 7.6 7.3
--------------- --------------- ---------------
Total property and equipment 1,083.8 1,007.7 1,037.8
Accumulated depreciation
and amortization (588.6) (516.4) (554.9)
--------------- --------------- ---------------
Property and equipment, net 495.2 491.3 482.9
Deferred income taxes 30.0 30.7 21.3
Other assets 9.8 4.4 4.4
--------------- --------------- ---------------
Total Assets $ 970.2 $ 1,113.3 $ 1,075.5
=============== =============== ===============
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Current maturities of
long-term debt $ 0.8 $ 0.7 $ 0.7
Accounts payable and
accrued expenses 224.1 209.0 197.1
--------------- --------------- ---------------
Total current liabilities 224.9 209.7 197.8
Long-term debt 323.7 126.7 126.1
Other liabilities 47.9 49.0 47.8
Total shareowners' equity 373.7 727.9 703.8
--------------- --------------- ---------------
Total Liabilities and
Shareowners' Equity $ 970.2 $ 1,113.3 $ 1,075.5
=============== =============== ===============
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 3
PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in millions, except per share)
13 Weeks Ended 26 Weeks Ended
----------------------------------- -----------------------------------
Jul. 29, Jul. 31, Jul. 29, Jul. 31,
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net Retail Sales: $ 816.9 $ 767.6 $ 1,525.4 $ 1,456.8
Cost of sales 545.1 514.2 1,026.7 982.8
Selling, general and
administrative
expenses 183.9 168.2 353.6 329.7
Non-recurring item -- -- 8.0 --
Interest (income)
expense, net 8.0 (0.2) 9.6 0.2
--------------- --------------- --------------- --------------
Earnings before income taxes
and extraordinary loss 79.9 85.4 127.5 144.1
Provision for income
taxes 31.1 34.1 49.6 57.5
--------------- --------------- --------------- --------------
Net Earnings before 48.8 51.3 77.9 86.6
extraordinary loss
Extraordinary loss related to early
extinguishment of debt -- -- 3.6 --
net of income tax
Net Earnings $ 48.8 $ 51.3 $ 74.3 $ 86.6
=============== =============== =============== ===============
Diluted Earnings per Share:
Net earnings before
extraordinary loss 2.16 1.61 3.04 2.70
Extraordinary loss -- -- .14 --
Diluted Earnings $ 2.16 $ 1.61 $ 2.90 $ 2.70
per Share =============== =============== =============== ===============
Basic Earnings per Share:
Net earnings before
extraordinary loss 2.19 1.62 3.07 2.71
Extraordinary loss -- -- .14 --
Basic Earnings $ 2.19 $ 1.62 $ 2.93 $ 2.71
per Share =============== =============== =============== ===============
Diluted Weighted Average
Shares Outstanding 22.6 31.9 25.6 32.1
=============== =============== =============== ===============
Basic Weighted Average
Shares Outstanding 22.3 31.6 25.4 31.9
=============== =============== =============== ===============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in millions) 26 Weeks Ended
-----------------------------------
Jul. 29, Jul.31,
2000 1999
--------------- ----------------
<S> <C> <C>
Operating Activities:
Net earnings $ 74.3 $ 86.6
Adjustments for noncash items
included in net earnings:
Extraordinary loss related to early
extinguishment of debt 3.6 --
Depreciation and amortization 49.9 48.3
Amortization of unearned
restricted stock 1.6 1.9
Deferred income taxes (4.9) (4.6)
Merchandise inventories (14.3) (6.1)
Other current assets (5.8) (9.7)
Accounts payable and accrued expenses 29.2 (3.2)
Other assets and liabilities, net (1.2) 0.0
--------------- ----------------
Total Operating Activities 132.4 113.2
--------------- ----------------
Investing Activities:
Capital expenditures (63.7) (47.6)
Disposition of property and equipment 1.6 0.8
--------------- ----------------
Total Investing Activities (62.1) (46.8)
--------------- ----------------
Financing Activities:
Issuance of long-term debt 400.0 55.0
Repayment of long-term debt (207.0) (1.1)
Payment of debt issuance costs (8.9) --
Net purchases of common stock (405.1) (63.5)
--------------- ---------------
Total Financing Activities (221.0) (9.6)
--------------- ---------------
Increase (Decrease) in Cash
and Cash Equivalents (150.7) 56.8
Cash and Cash Equivalents,
Beginning of Year 164.2 123.5
--------------- ----------------
Cash and Cash Equivalents,
End of Period $ 13.5 $ 180.3
=============== ================
Cash paid during the period:
Interest $ 13.2 $ 2.8
Income Taxes 45.3 44.4
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
Payless ShoeSource, Inc., a Missouri corporation ("Payless") and its
subsidiaries were reorganized into a Delaware holding company structure
effective June 1, 1998 through a merger (the "Merger") with Payless Merger
Corp., a Missouri corporation, which was an indirect wholly-owned subsidiary of
Payless and a wholly-owned subsidiary of Payless ShoeSource, Inc., a Delaware
corporation ("Company"). The Company was a wholly-owned subsidiary of Payless
immediately prior to the merger. Each of the Company and Payless Merger Corp.
were organized in connection with the Merger. Pursuant to the Merger, Payless
became an indirect wholly-owned subsidiary of the Company and is the principal
operating subsidiary of the Company. The transaction was accounted for as a
reorganization of entities under common control (similar to a pooling of
interest). As a result, immediately following the effective time the Company and
its subsidiaries had the same consolidated net worth as Payless and its
subsidiaries had immediately prior to the Merger.
For purposes of these Notes to Condensed Consolidated Financial Statements, the
"Registrant", or the "Company" refers to Payless ShoeSource, Inc., a Delaware
corporation, and its subsidiaries, unless the context otherwise requires.
NOTE 2. INTERIM RESULTS. The unaudited Condensed Consolidated Financial
Statements of the Company have been prepared in accordance with the instructions
to Form 10-Q of the United States Securities and Exchange Commission and should
be read in conjunction with the Notes to Consolidated Financial Statements
(pages 22-26) in the Company's 1999 Annual Report. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of management,
the unaudited Condensed Consolidated Financial statements are fairly presented
and all adjustments (consisting only of normal recurring adjustments) necessary
for a fair statement of the results for the interim periods have been included;
however, certain items are included in these statements based upon estimates for
the entire year. The results for the quarter and six month period ended July 29,
2000, are not necessarily indicative of the results that may be expected for the
fiscal year ending February 3, 2001.
NOTE 3. INVENTORIES. Merchandise inventories are valued by the retail method and
are stated at the lower of cost, determined using the first-in, first-out (FIFO)
basis, or market.
NOTE 4. LONG-TERM DEBT. In April 2000, the Company repaid its $122 million of
unsecured notes and entered into a new $600 million senior secured credit
facility ("Credit Facility"). The excess of the amount paid over the carrying
value of the Company's unsecured notes was recorded as an extraordinary loss
related to early extinguishment of debt, net of income tax.
5
<PAGE> 6
The Credit Facility consists of a $400 million term loan and a $200 million
revolving loan, both of which mature in 2005, subject to prepayment without
penalty by the Company at any time. The Company had not drawn on its $200
million revolving loan as of July 29, 2000, however, the balance available to
the Company was reduced by $11.4 million outstanding under a letter of credit.
The term loan and revolving loan bear interest at the LIBOR rate, plus a
variable margin of 1.25% to 2.0%. The variable interest rate at July 29, 2000
was 8.7%. A quarterly commitment fee of between 0.25% and 0.50% per annum is
payable on the unborrowed balance of the revolving loan. The margin on the term
loan and the commitment fee varies based upon performance criteria specified in
the credit agreement.
During the second quarter of 2000, the Company made an $80 million pre-payment
on the term loan. Based on the $320 million outstanding indebtedness of the term
loan at July 29, 2000, required principal payments are due as follows (in
thousands):
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
2000 $ --
2001 15,600
2002 64,400
2003 91,100
2004 117,800
Thereafter 31,100
------
Total $320,000
========
</TABLE>
In order to mitigate the Company's exposure to fluctuations in interest rates,
the Company has entered into a series of interest rate swap agreements whereby
the company will receive interest at the three month LIBOR rate on a $320
million notional amount and pay a weighted average rate of 6.9%. Including the
effect of the interest rate swap agreements, the Company's effective interest
rate on the term loan was 8.9% for the quarter ended July 29, 2000.
As the long-term debt under the Credit Facility bears interest at current market
rates, its carrying value approximates market value at July 29, 2000. The fair
value of the interest rate swap agreements approximates $0.5 million at July 29,
2000. The estimated fair value of the interest rate swap agreements approximates
the proceeds to settle the outstanding contracts. Dealer quotations are
available for the Company's interest rate swap agreements.
NOTE 5. COMMON STOCK REPURCHASE. In April 2000, the Company completed a
self-tender through which it repurchased 7,547,169 shares of its common stock at
$53 per share. The aggregate purchase price was approximately $400 million. In
conjunction with the share repurchase, the Company recorded an $8.0 million
non-recurring pre-tax charge consisting principally of the analysis and
consideration of various strategic alternatives and costs associated with the
self-tender.
In the second quarter of 2000, the Company repurchased 150,800 shares of its
common stock for an aggregate price of $7.8 million. For the first six months of
the year, the Company has repurchased 7.7 million shares for an aggregate price
of $407.8 million.
6
<PAGE> 7
NOTE 6. EARNINGS PER SHARE. Basic earnings per share is computed by dividing net
earnings by the weighted average number of shares of common stock outstanding
during the period. Diluted earnings per share include the effect of conversions
of stock options.
NOTE 7. RECLASSIFICATIONS. Certain reclassifications have been made to prior
year balances to conform with the current year presentation.
NOTE 8. FOREIGN CURRENCY TRANSLATION. Local currencies are the functional
currencies for all subsidiaries. Accordingly, assets and liabilities of foreign
subsidiaries are translated at the rate of exchange at the balance sheet date.
Income and expense items of these subsidiaries are translated at average rates
of exchange. The foreign currency translation was immaterial for the second
quarter of 2000 and 1999.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion summarizes the significant factors affecting operating
results for the quarters ended July 29, 2000 (2000) and July 31, 1999 (1999).
This discussion and analysis should be read in conjunction with the unaudited
Condensed Consolidated Financial Statements and Notes to the Condensed
Consolidated Financial Statements included in this Form 10-Q.
REVIEW OF OPERATIONS
NET EARNINGS
Net earnings totaled $48.8 million in the second quarter of 2000 compared with
$51.3 million in the second quarter of 1999. For the first six months of 2000
net earnings were $74.3 million compared with $86.6 million in the 1999 period.
Excluding the non-recurring item and extraordinary loss, net earnings for the
first six months of 2000 would have been $82.8 million.
The following table presents the components of costs and expenses, as a percent
of net retail sales, for the second quarter and first six months of 2000 and
1999.
<TABLE>
<CAPTION>
First
Second Quarter Six Months
-------------- ------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Cost of sales 66.7% 67.0% 67.3% 67.5%
Selling, general and
administrative expenses 22.5 21.9 23.2 22.6
Non-recurring item -- -- 0.5 --
Interest (income)/expense, net 1.0 -- 0.6 --
---- ---- ---- ----
Earnings before income taxes
And extraordinary loss 9.8% 11.1% 8.4% 9.9%
==== ==== ==== ====
Effective income tax rate 38.9% 39.9% 38.9% 39.9%
==== ==== ==== ====
Net earnings before
extraordinary loss 6.0% 6.7% 5.1% 5.9%
Extraordinary loss,
net of income tax -- -- 0.2% --
Net Earnings 6.0% 6.7% 4.9% 5.9%
==== ==== ==== ====
</TABLE>
7
<PAGE> 8
NET RETAIL SALES
Net retail sales represent the sales of stores operating during the period.
Same-store sales represent sales of stores open during comparable periods.
During the second quarter of 2000 total sales increased 6.4% over the second
quarter of 1999, consisting of a 6.1% increase in unit volume and a 0.3%
increase in average selling prices. For the first six months of 2000 total sales
increased 4.7% over the same period in 1999, consisting of a 5.7% increase in
unit volume and a 1.0% decrease in average selling prices. Sales percent
increases (decreases) are as follows:
<TABLE>
<CAPTION>
Second Quarter First Six Months
----------------------------- --------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Retail Sales 6.4% 6.2% 4.7% 3.8%
Same-Store Sales 2.8% 2.6% 1.8% 0.3%
</TABLE>
COST OF SALES
Cost of sales includes cost of merchandise sold, buying and occupancy costs.
Cost of sales was $545.1 million in the second quarter of 2000, up 6.0% from
$514.2 million in the second quarter of 1999. For the first six months of 2000,
cost of sales was $1,026.7 million, a 4.5% increase from $982.8 million in the
1999 period.
For the second quarter and first six months, cost of sales, as a percent of net
retail sales, declined 0.3 percent to 66.7 percent and 0.2 percent to 67.3
percent, respectively. Gross margin improvement in the second quarter and the
first six months of the year was primarily due to continued improvements in our
merchandising margins driven by lower product costs and adjustments to our
merchandising mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $183.9 million in the second
quarter of 2000, up 9.4% from $168.2 million in the second quarter of 1999. For
the first six months of 2000, selling, general and administrative expenses were
$353.6 million compared with $329.7 million in the 1999 period, a 7.2% increase.
As a percent of net retail sales, selling, general and administrative expenses
were 22.5 percent during the second quarter of 2000 compared with 21.9 percent
in the second quarter of 1999. For the first six months of 2000, selling,
general and administrative expenses as a percent of net retail sales were 23.2
percent in 2000 compared with 22.6 percent in 1999.
The increase during the second quarter of 2000 was attributed to an increase in
stores payroll due to higher hourly wage rates while the increase for the first
six months of 2000 was primarily due to higher wage rates in the stores and
increased advertising costs.
CASH FLOW
Cash flow from operations during the six months ended July 29, 2000, was $132.4
million. This figure represented 8.7 percent of net retail sales during the
first six months of 2000 compared with 7.8 percent during the first six months
of 1999. Internally generated funds are expected to continue being the most
important component of the Company's capital resources and are expected to fund
capital expansion.
8
<PAGE> 9
CAPITAL EXPENDITURES
Capital expenditures during the first six months of 2000 totaled $63.7 million
with an additional $86.3 million estimated to be incurred during the remainder
of fiscal year 2000. The Company anticipates that cash flow from operations and
the Company's existing credit facility should be sufficient to finance projected
capital expenditures.
FINANCING ACTIVITIES
In April 2000, the Company completed a self-tender through which it repurchased
7,547,169 shares of its common stock at $53 per share. This represented
approximately 25.5 percent of the Company's 29.6 million shares outstanding on
April 10, 2000. The aggregate purchase price was approximately $400 million.
In conjunction with the self-tender, the Company entered into a new $600 million
senior secured credit facility. The credit facility consists of a $400 million
term loan and a $200 million revolving loan, both of which mature in 2005
subject to prepayment without penalty by the Company at any time. During the
first quarter, the Company took a $13.9 million pre-tax, $8.5 million after-tax,
charge for non-recurring and extraordinary items principally for costs
associated with the analysis and consideration of various strategic
alternatives, refinancing costs and costs associated with the self-tender.
In the second quarter of 2000, the Company repurchased 150,800 shares of its
common stock for an aggregate price of $7.8 million. For the first six months of
the year, the Company has repurchased 7.7 million shares for an aggregate price
of $407.8 million.
During the second quarter of 2000, the Company made an $80 million pre-payment
on the long-term debt, paying off 20 percent of the term loan amount.
AVAILABLE CREDIT
While no amounts had been drawn against the Company's $200 million revolving
loan at July 29, 2000, the balance available to the Company was reduced by $11.4
million outstanding under a letter of credit.
FINANCIAL CONDITION RATIOS
A summary of key financial information for the periods indicated is as follows:
<TABLE>
<CAPTION>
Jul. 29, Jul. 31, Jan. 29,
2000 1999 2000
-------------- -------------- --------------
<S> <C> <C> <C>
Current Ratio 1.9 2.8 2.9
Debt-Capitalization Ratio* 46.5% 14.9% 15.3%
Fixed Charge Coverage** 3.4x 3.9x 3.8x
</TABLE>
* Debt-to-capitalization has been computed by dividing total debt, which
includes current and long-term capital lease obligations, by
capitalization, which includes current and long-term capital lease
obligations, non-current deferred income taxes and equity. The
debt-to-capitalization ratio, including the present value of future
minimum rental payments under operating leases as debt and
capitalization, would be 75.8%, 57.0% and 58.1% respectively, for the
periods referred to above. The increase in debt to capitalization
ratio at July 29, 2000 is primarily the result of the $400 million
self-tender and the additional debt issued in April 2000.
9
<PAGE> 10
** Fixed charge coverage, which is presented for the trailing 52 weeks in
each period ended above, is defined as earnings before income taxes,
gross interest expense, and the interest component of rent expense,
divided by gross interest expense and the interest component of rent
expense. The decrease in the fixed charge coverage ratio at July 29,
2000 is primarily the result of the increase in interest expense
resulting from the additional debt issued in April 2000 and the charge
for the non-recurring and extraordinary item in the first quarter of
2000.
STORE ACTIVITY
At the end of the second quarter of 2000, the Company operated 4,629 Payless
ShoeSource stores in 50 states, Canada, the District of Columbia, Guam, Saipan,
Puerto Rico and the U.S. Virgin Islands and 239 Parade stores. The following
table presents the change in store count for the second quarter and first half
of 2000 and 1999.
<TABLE>
<CAPTION>
PAYLESS SHOESOURCE First
Second Quarter Six Months
-------------- ------------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Beginning of quarter/year 4,488 4,387 4,492 4,357
Stores opened 233 63 289 127
Stores closed (92) (37) (152) (71)
----- ----- ----- -----
Ending store count 4,629 4,413 4,629 4,413
===== ===== ===== =====
<CAPTION>
PARADE First
Second Quarter Six Months
-------------- ------------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Beginning of quarter/year 221 215 220 213
Stores opened 24 0 32 3
Stores closed (6) (1) (13) (2)
----- ----- ----- -----
Ending store count 239 214 239 214
===== ===== ===== =====
</TABLE>
10
<PAGE> 11
INTEREST RATE RISK
Interest on the Company's Credit Facility is based on the London Interbank
Offered Rate ("LIBOR") plus a variable margin as defined in the credit
agreement. Therefore, the Company's future borrowing costs may fluctuate
depending upon the volatility of LIBOR. The Company currently mitigates a
portion of its interest rate risk through the use of interest rate swap
agreements, whereby the Company has agreed to exchange, at specific intervals,
the difference between fixed and variable interest amounts calculated by
reference to an agreed-upon notional amount.
The table set forth below summarizes the fair values and contract terms of
financial instruments subject to interest rate risk maintained by the Company as
of July 29, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
Maturity Date
------------------------------------------------------ Fair Value at
2000 2001 2002 2003 2004 Thereafter Total July 29, 2000
---- ---- ---- ---- ---- ---------- ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Variable Rate Debt - 15,600 64,400 91,100 117,800 31,100 320,000 320,000
Average interest rate 9.0% 9.0% 9.0% 9.1% 9.1% 9.0%
Variable to Fixed Swaps - 80,000 120,000 120,000 - - 320,000 547
Average Pay Rate 6.9% 6.9% 6.9% 6.9%
Average Receive Rate 6.9% 7.0% 7.0% 7.0%
</TABLE>
The notional amounts of interest rate swap agreements, as presented in the table
above, are used to measure interest to be paid or received and do not represent
the amount of exposure to credit loss. The estimated fair value approximates the
proceeds to settle the outstanding contracts. Interest rates on the variable
debt and the receive rate on the interest rate swaps are estimated using the
average implied LIBOR for the year of maturity based on the yield curve in
effect at July 29, 2000.
11
<PAGE> 12
FORWARD-LOOKING STATEMENTS
This report contains, and from time to time, the Company may publish,
forward-looking statements relating to such matters as anticipated financial
performance, business prospects, e-commerce initiatives, technological
developments, new products, future store openings, possible strategic
alternatives and similar matters. Also, statements including the words
"expects," "anticipates," "intends," "plans," "believes," "seeks," or variations
of such words and similar expressions are forwarding-looking statements.
The Company notes that a variety of factors could cause its actual results and
experience to differ materially from the anticipated results or other
expectations expressed in its forward-looking statements. The risks and
uncertainties that may affect the operations, performance, development and
results of the Company's business include, but are not limited to, the
following: changes in consumer spending patterns; changes in consumer
preferences and overall economic conditions; the impact of competition and
pricing; changes in weather patterns; successful implementations of new
technologies; Year 2000 matters; the financial condition of the suppliers and
manufacturers from whom the Company sources its merchandise; changes in existing
or potential duties, tariffs or quotas; changes in relationships between Canada
or the United States and foreign countries, economic and political instability
in foreign countries or restrictive actions by the governments of foreign
countries in which suppliers and manufacturers from whom the Company sources are
located; changes in trade and foreign tax laws; fluctuations in currency
exchange rates; availability of suitable store locations on acceptable terms;
the ability to achieve expected advantages of operating shoe departments in
specialty discount stores, the ability to hire and train associates; and general
economic, business and social conditions.
All subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by these cautionary statements. The Company does not undertake any
obligation to release publicly any revisions to such forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
There are no material pending legal proceedings, to which the Company or any of
its subsidiaries is a party or of which any of their property is the subject.
The company and its subsidiaries are parties to routine litigation incidential
to their business.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Number Description
------- ------------
<S> <C>
11.1 Computation of Net Earnings Per Share*
27 Financial Data Schedule*
</TABLE>
* Filed herewith
(b) Reports on Form 8-K
NONE
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAYLESS SHOESOURCE, INC.
Date: 9/8/00 /s/ Steven J. Douglass
-------------- -------------------------------
Steven J. Douglass
Chairman of the Board and
Chief Executive Officer
Date: 9/8/00 /s/ Ullrich E. Porzig
-------------- ---------------------------------
Ullrich E. Porzig
Senior Vice President
Chief Financial Officer
and Treasurer
14
