UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: February 1, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number: 0-21360
SHOE CARNIVAL, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1736614
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8233 Baumgart Road
Evansville, Indiana 47711
(Address of principal executive offices) (Zip Code)
(812) 867-6471
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, WITHOUT PAR VALUE
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 of Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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 [ X ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant based on the last sale price for such stock at March 21, 1997 was
approximately $37,040,963 (assuming solely for the purposes of this calculation
that all Directors and executive officers of the Registrant are "affiliates").
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Number of Shares of Common Stock, without par value, outstanding at April 25,
1997 was 13,037,211.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Definitive Proxy Statement for the Annual
Meeting of Shareholders of Registrant to be held on June 11, 1997 is
incorporated by reference into Part III hereof.
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Shoe Carnival, Inc.
Evansville, Indiana
Annual Report to Securities and Exchange Commission
February 1, 1997
PART I
ITEM 1. BUSINESS
GENERAL
Shoe Carnival, Inc. (the "Company") is a high volume, value-oriented retailer of
family footwear operating predominately in the Midwest, South and Southeastern
regions of the United States. The Company adheres to a highly promotional
marketing concept that enables it to be competitive in the retail markets it
enters. The Company's stores are characterized by a high energy atmosphere
designed to encourage customer participation and provide a fun and exciting
shopping experience.
BUSINESS STRATEGY
The Company's goal is to establish itself as one of the nation's leading family
footwear retailers and the dominant footwear retailer in each market it serves.
To accomplish its goal, the Company provides a selection and variety of footwear
normally associated with a "category killer" superstore in an exciting retail
environment. In the 52 week period ended February 1, 1997 ("fiscal 1996"), the
average size, annual sales and sales per square foot for Shoe Carnival's stores
open the full year were approximately 10,900 square feet, $2.5 million and $233,
respectively, each substantially above the industry averages.
Management believes that shoppers prefer the value, convenience and selection of
the superstore retail format and that, as a result, superstores will continue to
grow and increase their market share at the expense of department stores, mass
merchandisers and traditional specialty retailers. This trend is evidenced by
the acceptance of superstores in other specialty niches, including, among
others, toys, office products, consumer electronics and do-it-yourself home
improvement. Management believes that the Company differentiates itself from its
competitors and gains significant competitive advantage through certain business
strategies which include:
DISTINCTIVE RETAIL APPROACH. The Company's stores are larger than traditional
shoe stores. The Company seeks to create a carnival-like atmosphere in each of
its stores by decorating with bright lights, colors and neon signs, and by
featuring an in-store "barker" who advertises current specials, organizes
contests and games, and assists and educates customers with the features and
location of merchandise. This exciting in-store atmosphere is designed to
encourage customer participation and spontaneity, producing a sense of urgency
to buy. Management believes this highly promotional atmosphere results in
various competitive advantages, including increased multiple unit sales, the
building of a loyal repeat customer base and the creation of word-of-mouth
advertising.
BROAD MERCHANDISE ASSORTMENT. The Company's merchandising strategy is to
provide superior value to its customers by offering a broad selection of
competitively priced name brand and private label merchandise. The average store
carries over 31,000 pairs of shoes in four general categories -- men's, women's,
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children's and athletics. The Company buys dress, casual and athletic shoes as
well as boots and sandals from a wide variety of vendors. In addition to
footwear, Shoe Carnival stores also carry selected accessory items complimentary
to the sale of footwear.
EMPHASIS ON VALUE. Management believes that its wide selection of popular
styles of name brand merchandise at competitive prices generates broad customer
appeal. To supplement its name brand offerings, the Company has established a
private label program that offers the consumer quality footwear at lower prices
than name brand merchandise. Sales of private label merchandise generally result
in higher gross profit margins for the Company than sales of name brand
merchandise. The Company believes that providing a wide selection of
competitively priced name brand and quality private label footwear provides
superior value to its customers.
LOW OPERATING COSTS. The Company's operating methods, cost control programs
and store locations are all designed to minimize operating costs. Merchandise in
the Company's stores is displayed by style and color on the selling floor,
enabling customers who so choose to serve themselves. This approach, in
conjunction with wage and inventory control programs, results in lower labor
costs than those incurred by department stores and traditional shoe stores. In
addition, the Company prefers to locate stores predominantly in strip shopping
centers, as opposed to enclosed malls, to take advantage of the generally lower
occupancy costs.
COMPETITIVE PRICING. The Company, as a result of its low-cost operating
structure and high volume, is able to price its merchandise below that of
traditional department stores and shoe store chains. During 1996 the Company
eliminated the policy of "lowest price guarantee" on any shoe. Instead, the
Company has focused on offering value to customers with specialized promotions,
competitive pricing and a vast selection of name brand and private label
merchandise.
EMPHASIS ON INFORMATION TECHNOLOGY. The Company has invested significant
resources in information technology. The Company's systems are designed to
provide management with the timely information necessary to monitor and control
all phases of operations. Management is planning further technological
enhancements related to point-of-sale, purchasing and inventory control, labor
management and distribution, which should enable the Company to better manage
its operations.
EXPANSION STRATEGY
The majority of the Company's sale and earnings growth is expected to result
from the opening of new stores. The opening of new stores will be dependent
upon, among other things, the availability of desirable locations, the
negotiation of acceptable lease terms and general economic and business
conditions affecting consumer spending in the areas the Company targets for
expansion. The Company's strategy is to expand into new markets and to
consolidate and improve its market share position in its existing markets
through the clustering of stores. Clustering involves the operation of multiple
locations in a particular metropolitan area or in several smaller markets
located in reasonable proximity to one another. Management believes this
strategy enables the Company to obtain economies of scale with respect to
advertising, distribution and management costs.
Management intends to devote significant resources in the first half of 1997 on
remodeling approximately 60 of its existing stores to an updated format that has
been implemented in all new and remodeled stores since the fourth quarter of
1995. Due to the remodeling effort, the Company will limit the number of new
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stores to between seven and 10 in fiscal 1997, and has planned the majority of
the store openings to occur in the second half of 1997. Thereafter, the Company
intends to expand at a rate of approximately 15% to 20% per year. During fiscal
1997 and 1998, new stores are expected to be located primarily in the North
Central, Midwest, Midsouth and Southeast. The Company intends to enter larger
markets (populations greater than 400,000) by opening two or more stores at
approximately the same time. In smaller markets that can only support a single
store, the Company will seek locations in reasonably close proximity to other
Company markets. This strategy allows for more efficient management and reduces
distribution costs. In addition to new market expansion and consistent with its
clustering approach the Company has targeted certain of its existing markets for
additional new stores when appropriate store locations become available.
Although opening new stores in existing markets may adversely affect the sales
of existing stores, management believes that cost efficiencies and overall
incremental sales gains should more than offset any detrimental effect.
Prior to entering a new market, the Company performs a market, demographic and
competition analysis to evaluate the suitability of the potential market.
Potential store site selection criteria include, among other factors, market
demographics, traffic counts, the retail mix of a potential strip center,
visibility within the center and from major thoroughfares, overall retail
activity of the area and proposed lease terms. The time required to open a store
after signing a lease depends primarily upon the landlord's ability to deliver
the premises to the Company. Upon acceptance of the premises from the landlord,
the Company can generally open a store within 30 to 45 days.
MERCHANDISING
The Company's merchandising strategy is designed to provide a very large
selection of quality family footwear at a price competitive with or slightly
below that of competitors. The Company's stores carry a broad assortment of
current season name brand footwear, supplemented with the Company's private
label merchandise and select name brand close-out merchandise.
The combination of name brand and private label footwear gives the Company a
merchandise assortment that enables it to compete effectively. The mix of
merchandise and the name brands offered in a particular store are based upon the
demographics of each market, among other factors. The Company typically offers
lower prices on both name brand and private label merchandise than department
stores and traditional shoe stores. Furthermore, the Company competes with
off-price retailers, mass merchandisers and discount stores by offering a wider
and deeper selection of merchandise at competitive prices. The Company's stores
also carry selected other merchandise such as handbags, wallets, shoe care
items, socks and sports apparel.
WOMEN'S. The women's department offers current season name brand, branded
close-out and private label merchandise providing a wider selection than that of
most of the Company's competitors. This department is further segmented into
women's dress shoes, casual shoes, sandals, boots and sport shoes, thus covering
all facets of a woman's footwear needs.
MEN'S. The men's department offers primarily name brand footwear and is
segmented into men's dress shoes, casual shoes and work and western boots. The
Company's stores offer a complete assortment of men's footwear at affordable
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prices. As in the women's department, this assortment is supplemented with name
brand close-outs and private label products.
CHILDREN'S. Children's footwear is segmented into dress shoes, casual shoes,
boots, athletic shoes, sandals and infant shoes, again offering a complete
selection of footwear for the child. Approximately 84% of the children's
business is done in the athletic shoe category.
ATHLETICS. The men's and women's athletic business is divided into a number of
buying groups representing a complete assortment of athletic footwear. The
Company carries court shoes, fitness and aerobic shoes, leisure shoes, walking
shoes, running shoes and many specialty shoes such as cleats and soccer shoes.
The table below sets forth the Company's percentage of sales by product category
for fiscal 1996, 1995 and 1994.
1996 1995 1994
-------- -------- --------
Women's 27.2% 28.6% 28.5%
Men's 17.7 17.8 18.9
Children's 16.4 15.0 14.9
Athletic 34.0 33.3 32.4
Accessories and Miscellaneous Items 4.7 5.3 5.3
-------- -------- --------
100.0% 100.0% 100.0%
======== ======== ========
PRICING
The Company's pricing strategy is designed to emphasize value. Initial pricing
decisions are guided by gross profit margin targets which vary by merchandise
category and depend on whether the item is name brand or private label
merchandise. Markdowns are centrally managed by the buying staff through the use
of weekly sales and inventory analysis generated by the Company's management
information system.
In-store signage is used extensively to highlight special promotional markdowns
and to advertise markdowns to meet or beat competitors' sale prices.
ADVERTISING AND PROMOTION
In-store promotions are a key ingredient in the Company's marketing effort.
Although most in-store promotions are pre-planned, store managers are encouraged
to use their own creativity in devising on-the-spot promotional activities, such
as customer contests and games. The Company has several standardized promotions,
including a Spin-N-Win(TM) wheel, where a customer can win instant discounts,
and a "Money Machine," where randomly selected customers attempt to catch cash
and coupons during a 30-second period inside a transparent booth where cash and
coupons are blown furiously around them. Both of these promotions exemplify the
Company's emphasis on fun and excitement in order to enhance the customer's
total shopping experience.
The Company uses various forms of media advertising in conjunction with its
extensive in-store promotions. The focus of the Company's media advertising is
to communicate the exceptional value offered by the Company on name brand and
private label footwear. The Company's advertisements are designed to convey the
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high energy style of retailing employed in the stores. Print ads typically
display a selection of special sale items or desirable new products. Radio and
television spots utilize a quick, snappy, up-beat delivery while focusing on
sale items or special promotions.
The Company directs approximately 65% of its total advertising budget to
television and radio, but also utilizes print media (including newspaper inserts
and direct mail) and outdoor advertising. A special effort is made to utilize
the cooperative advertising dollars offered by vendors whenever possible. By
widely advertising through newspaper, television and radio prior to a grand
opening, the Company strives to make each new store opening a major retail
event. Major promotions during the grand openings and peak selling periods allow
customers to win prizes such as cruises, cars, computers, merchandise or cash.
STORE OPERATIONS
Management of store operations is the responsibility of the Company's Senior
Vice President - Store Operations, who is assisted by regional managers and the
individual store managers. The Company's store management structure is flat
relative to most other retailers. This permits the Company to reduce management
expense by eliminating the district manager position and delegating more
responsibility to store managers. Each regional manager is responsible for the
operation of between five and thirteen stores and is required to visit each
store periodically, concentrating more heavily on underperforming stores.
Regional managers meet collectively each quarter with the Senior Vice President
- - Store Operations and other members of senior management to discuss Company
strategies, merchandise, advertising, financial performance and personnel
requirements.
Each store has a store manager and one to three assistant managers, depending on
the sales volume of the store. The sales staff ranges from seven to 78 employees
depending on the size of the store and the time of year. Store managers and most
assistant managers are paid a salary, while all other store employees are paid
on an hourly basis. The Company provides an incentive compensation plan for
virtually all employees. Regional and store manager incentive plans are based
primarily upon the sales and profitability of their respective stores as
compared to defined goals. Assistant store managers and other store employees
earn incentive compensation based on the store exceeding inventory shrinkage
goals.
Administrative functions are centrally controlled from corporate headquarters.
These functions include accounting, purchasing, store maintenance, information
systems, advertising, distribution and pricing. Regional and store managers are
expected and encouraged to provide feedback to all corporate departments to
improve efficiencies. Regional and store managers are charged with making
merchandising decisions necessary to maximize sales and profits primarily though
merchandise placement, signage and timely clearance of slower selling items.
The Company maintains inventory shrinkage rates (.5% of sales in fiscal 1996)
substantially below the retail industry average. Management attributes this
success to an expanded in-store loss prevention staff, improved information
reporting and surveillance systems in many of the Company's stores. Management
also believes that tying incentive compensation for store employees to the
achievement of targeted shrinkage levels raises employee awareness of loss
prevention.
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STORE LOCATION AND DESIGN
The number of stores opened and closed for fiscal years 1996, 1995 and 1994 are
as follows:
Fiscal Year 1996 1995 1994
------ ------ ------
Stores open at beginning of year 95 87 57
Opened during year 5 9 30
Closed during year 7 1
------ ------ ------
Stores open at end of year 93 95 87
====== ====== ======
At February 1, 1997, the Company had 93 stores located in 17 states, primarily
in the Midwest, South and Southeastern regions of the United States. Although
five stores are located in enclosed malls, the Company prefers strip shopping
center locations, where occupancy costs are typically lower and the Company
enjoys greater operating freedom to implement its non-traditional retail
methods. Management feels that most consumers enjoy the convenience offered by
strip shopping centers as opposed to enclosed malls. Additionally, the Company's
preferred co-tenants are other growth oriented, high volume retail chains.
All of the Company's stores are leased rather than owned. Management believes
that the flexibility afforded by leasing allows the Company to avoid the
inherent risk of owning real estate, particularly with respect to
underperforming stores. In a particular market, potential store site selection
criteria include, among other factors, market demographics, traffic counts, the
retail mix of a potential retail strip center, visibility within the center and
from major thoroughfares, overall retail activity of the area and proposed lease
terms.
The Company's stores are designed and fixtured to reflect the high energy level
of its retail concept and to convey a carnival-like atmosphere. Stores are
typically equipped with a sound system, microphone, "Money Machine" and
Spin-N-Win(TM) wheel. Open-stock inventories, neon signs, flashing colored
lights and large mirrors, striking fixtures and colorful carpet are utilized to
make the stores appear larger and more exciting. Merchandise is typically
displayed within a store by category, with athletic footwear (and licensed team
sports apparel in certain stores) generally located in the center of the store
to provide a transition between women's and men's footwear. Checkout counters
are located at the front of each store, supermarket style, to facilitate
high-volume throughput and minimize inventory shrinkage. The average store has
approximately five checkout lanes.
The Company has utilized a new store prototype design in all new and remodeled
stores since the fourth quarter of 1995. The design further emphasizes the
entertainment aspect of the store concept and enhances the ease of shopping by
widening the aisles, adds additional seating and merchandise displays, improves
the graphics identifying the various departments and opens the sitelines
throughout the store.
As of February 1, 1997, the Company's stores averaged approximately 10,900
square feet, ranging in size from 6,600 to 26,500 square feet, except for an
atypical mall store of approximately 2,100 square feet. The size of the new
prototype stores have increased from the Company's prior prototype of 10,000
square feet to between 12,000 and 18,000 square feet depending upon, among other
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factors, the location of the store and the population base the store is expected
to service. The sales area of most stores is approximately 85% of the gross
store size.
Capital expenditures for new stores are expected to average approximately
$450,000, including point-of-sale equipment which is generally acquired through
equipment leasing transactions. The average inventory in a new store is expected
to range from $550,000 to $850,000, depending on the size and sales expectation
of the store and the timing of the new store opening. Pre-opening expenses, such
as advertising, salaries, supplies and utilities are expected to average $60,000
to $80,000 per store.
DISTRIBUTION
The Company operates a single distribution facility in Evansville, Indiana. The
facility is 108,000 square feet, with a maximum processing capability of over
40,000 cases per week.
The distribution center processes virtually all merchandise prior to shipping to
the stores. At a minimum, this includes count verification, price and bar code
labeling of each unit, redistribution of an order into size assortments and
allocation of shipments to individual stores. Once a distribution order form is
received from the buying staff, the remainder of the distribution process,
including packing, allocating, storing and shipping is essentially paperless.
Merchandise is shipped to each store from one to two times a week, depending on
store volume, proximity to other stores and proximity to the distribution
center. The majority of shipments are handled by a dedicated carrier, with
occasional use of common carriers.
MANAGEMENT INFORMATION SYSTEMS
The Company has devoted significant resources to expand its sophisticated
information technology systems. The corporate mainframe is connected to every
store via a Wide Area Network, providing up-to-date sales and inventory
information as required. Each store has an independent point-of-sale controller,
with two to 13 point-of-sale terminals per store. To provide maximum flexibility
and maintain data integrity, the Company's mainframe systems are based upon
relational database technology. The Company's distribution facility utilizes a
spread spectrum radio frequency network to assure accurate, real-time
information throughout the distribution operation. Each member of the buying and
distribution staff has on-line access to up-to-date sales and inventory
information broken down by store, style, color, size and width. Additional data
analysis can be quickly provided on demand by using either a fourth generation
language programming tool or personal computer tools that access the Company's
database.
State of the art point-of-sales systems utilize bar code technology to capture
sales, gross margin and inventory information. The system provides, in addition
to other features, full price management (including price look-up), promotional
tracking capabilities (in support of the spontaneous nature of the in-store
price promotions), real-time margin analysis by product category at the store
level, check approval and customer tracking.
COMPETITION
The retail footwear business is highly competitive. The Company believes that
the principal competitive factors in its industry are merchandise selection,
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price, fashion, quality, location, store environment and service. The Company
competes primarily with department stores, shoe stores, sporting goods stores
and mass merchandisers.
Many of the Company's competitors are significantly larger and have
substantially greater financial and other resources than the Company. However,
management believes that its distinctive retail format, in combination with its
wide merchandise selection, competitive prices and low operating costs, enable
the Company to compete effectively in each market that it enters.
EMPLOYEES
At February 1, 1997, the Company had approximately 1880 employees, of which
approximately 830 were employed on a part-time or seasonal basis. The number of
employees fluctuates during the year primarily due to seasonality. None of the
Company's employees is represented by a labor union.
Management attributes a large portion of the Company's success in various areas
of cost control to its inclusion of virtually all employees in incentive
compensation plans. The Company also contributes all or a portion of the cost of
medical, disability and life insurance coverage for those employees who are
eligible to participate in Company sponsored plans. All employees also receive
discounts on Company merchandise. The Company considers its relationship with
its employees to be satisfactory.
TRADEMARKS
The Company owns the following federally registered trademarks and servicemarks:
Shoe Carnival(R), The Carnival(R), Nuff Said(R), Donna Lawrence(R), Oak
Meadow(R), Victoria Spenser(R), Chase and Brittany's(R), Via Nova(R), Fresh
Stuff(R), Innocence(R) and Carnival Lites(R). The Company believes its marks are
valuable and, accordingly, intends to maintain its marks and the related
registrations. The Company is not aware of any pending claims of infringement or
other challenges to the Company's right to use its marks.
ITEM 2. PROPERTIES
The Company leases all existing stores and intends to lease all future stores.
All leases for existing stores provide for fixed minimum rentals and most
provide for contingent rental payments based upon various specified percentages
of sales above minimum levels. Certain leases also contain escalator clauses for
increases in minimum rentals, operating costs and taxes.
The Company owns its headquarters and distribution center which are located at
8233 Baumgart Road, Evansville, Indiana. See ITEM 1 "Business--Distribution."
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings incidental to the conduct
of its business. Management does not expect that any such proceedings will have
a material adverse effect on the Company's financial position and results of
operations.
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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
fourth quarter of the 1996 fiscal year.
Executive Officers of the Company
Name Age Position
J. Wayne Weaver 62 Chairman of the Board and Director
Mark L. Lemond 42 President, Chief Executive Officer and Director
David H. Russell 52 Vice Chairman of the Board and Director
Timothy T. Baker 40 Senior Vice President - Store Operations
Larry L. Linville 54 Vice President - Information Systems
W. Kerry Jackson 35 Vice President - Chief Financial Officer and
Treasurer
David A. Kapp 33 Vice President - Inventory Controller and
Secretary
Roger A. Sparling 44 Vice President - Store Planning
Mr. Weaver is the Company's principal shareholder and has served as Chairman of
the Board of the Company since March 1988. From 1978 until February 2, 1993, Mr.
Weaver had served as president and chief executive officer of Nine West Group
Inc., a designer, developer and marketer of women's footwear. He has over 40
years of experience in the footwear industry. Mr. Weaver is a former director of
Nine West Group Inc. Mr. Weaver serves as chairman and chief executive officer
of Jacksonville Jaguars, LTD and chairman and chief executive officer of LC
Footwear, Inc.
Mr. Lemond has been employed by the Company as President and Chief Executive
Officer since September 1996. From March 1988 to September 1996, Mr. Lemond
served as Executive Vice President, Chief Financial Officer, Treasurer and
Assistant Secretary. On February 3, 1994, Mr. Lemond was promoted to the
position of Chief Operating Officer. Mr. Lemond has served as a director of the
Company since March 1988. Prior to March 1988, he served in similar officer
capabilities with Russell's Shoe Biz, Inc. Prior to joining Russell's Shoe Biz,
Inc. in 1987, Mr. Lemond was a partner with a public accounting firm. He is a
Certified Public Accountant.
Mr. Russell has been employed by the Company as Vice Chairman of the Board since
September 1996. From March 1988 to September 1996, Mr. Russell served as
President and Chief Executive Officer. Mr. Russell has served as a director of
the Company since March 1988. Prior to March 1988, he served as president and
chief executive officer of the Company's predecessor, Russell's Shoe Biz, Inc.
Mr. Russell has over 35 years experience in the retail shoe business, having
held various management positions with Kinney Shoe Stores prior to founding
Russell's Shoe Biz, Inc. in 1978.
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Mr. Baker has been employed by the Company as Vice President - Store Operations
since May 1992. Prior to that time, he served as a Regional Manager of the
Company. Mr. Baker was promoted to Senior Vice President on March 25, 1994. From
1983 to June 1989, Mr. Baker held various retail positions with Payless
ShoeSource.
Mr. Linville has been employed by the Company as Vice President - Management
Information Systems since August 1994. From February 1990 to February 1994, he
served as vice president of information systems for Dollar General Corporation.
Prior to 1990, Mr. Linville was employed in various management positions within
the information systems areas of Hecks Department Stores (2 years) and Service
Merchandise, Inc. (11 years).
Mr. Jackson has been employed by the Company as Vice President - Chief Financial
Officer and Treasurer since September 1996. From January 1993 to September 1996
Mr. Jackson served as Vice President - Controller and Chief Accounting Officer.
Prior to January 1993, Mr. Jackson held various accounting positions with the
Company. Prior to joining the Company in 1988, Mr. Jackson was associated with a
public accounting firm. He is a Certified Public Accountant.
Mr. Kapp has been employed by the Company since March 1988, most recently as
Vice President - Inventory Controller and Secretary. Prior to assuming his
current position, Mr. Kapp held various accounting and retail positions with the
Company and its predecessor. He is a Certified Cash Manager.
Mr. Sparling has been employed by the Company as Vice President - Store Planning
since March 1996. From January 1990 to February 1996 he served as Vice President
- - Store Planning and Real Estate. Prior to January 1990, he served as Vice
President - Store Planning for the Company and its predecessor, except for a
period of eight months in 1989, during which he was employed by Inside Clothes,
Inc. as vice president - store planning. Prior to joining Russell's Shoe Biz,
Inc., Mr. Sparling was employed by The Limited, Inc. Mr. Sparling resigned from
the Company effective May 1, 1997.
Executive officers of the Company serve at the discretion of the Board of
Directors. There is no family relationship between any of the directors or
executive officers of the Company.
(Pursuant to General Instruction G(3) of Form 10-K, the foregoing information is
included as an unnumbered Item in Part I of this Annual Report in lieu of being
included in the Company's Proxy Statement for its 1997 Annual Meeting of
Shareholders.)
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock has been quoted on the Nasdaq Stock Market under the trading
symbol "SCVL" since March 16, 1993. The quarterly high and low trading prices
for 1996 and 1995 are as follows:
High Low
--------- ---------
Fiscal year 1996
First Quarter $4.88 $2.75
Second Quarter 5.88 3.13
Third Quarter 5.63 3.38
Fourth Quarter 6.13 3.63
Fiscal Year 1995
First Quarter $6.25 $4.25
Second Quarter 7.50 5.38
Third Quarter 6.00 3.75
Fourth Quarter 4.50 3.13
On March 23, 1993, the Company consummated its initial public offering of
3,622,500 shares of Common Stock at a price to the public of $8.67 per share.
As of April 25, 1996, there were approximately 423 holders of record of the
Common Stock.
The Company does not currently intend to pay cash dividends on its Common Stock
in the foreseeable future. The payment of any future dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among other
things, future earnings, operations, capital requirements, the general financial
condition of the Company and general business conditions. The Company's credit
agreement with various banks limits the payment of dividends (except for any
stock split or stock dividends) to 30% of the prior year's net income.
No unregistered equity securities were sold by the Company during fiscal 1996.
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ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share and operating data)
Fiscal years (1) 1996 1995 1994 1993 1992
-------------------------------------------------
Income Statement Data (2):
Net sales $233,945 $228,263 $214,528 $157,329 $127,123
Cost of sales (including
buying, distribution and
occupancy costs) 168,814 176,019 158,614 111,666 91,136
-------------------------------------------------
Gross profit 65,131 52,244 55,914 45,663 35,987
Selling, general and
administrative expenses 57,405 58,946 52,907 35,370 27,084
Restructuring (credit) charge (474) 3,282 267
-------------------------------------------------
Operating income (loss) 8,200 (9,984) 2,740 10,293 8,903
Interest expense 1,242 1,626 665 726 1,745
-------------------------------------------------
Income (loss) before income
taxes 6,958 (11,610) 2,075 9,567 7,158
Income tax expense (benefit) 2,818 (4,420) 874 4,464 57
-------------------------------------------------
Net income (loss) $ 4,140 $(7,190) $1,201 $5,103 $7,101
=================================================
Net income (loss) per share $ .32 $ (.55) $ .09
=============================
Weighted average common
shares and common equivalent
shares outstanding 13,029 13,031 13,051
- ------------------------------------------------------------------------------
Pro Forma Income Statement Data (3):
Net income $5,905 $4,523
Net income per share $ .55 $ .55
Weighted average common
shares and common equivalent
shares outstanding 10,759 8,222
Supplemental pro forma net
income per share $ .54 $ .51
- ------------------------------------------------------------------------------
Selected Operating Data (4):
Stores open at end of period 93 95 87 57 39
Square footage of store space
at year end (000's) 1,026 1,024 939 640 463
Average sales per store (000's) $2,543 $2,497 $3,145 $3,454 $ 3,387
Average sales per square foot $ 233 $ 230 $ 277 $ 291 $ 278
Comparable store sales (1.1%) (10.0%) (3.4%) 4.4% 5.0%
- ------------------------------------------------------------------------------
14
<PAGE>
Balance Sheet Data:
Working capital $45,090 $50,206 $60,766 $51,789 $21,137
Total assets 93,926 102,265 105,155 79,619 40,194
Long-term debt and other
indebtedness 9,621 18,922 20,597 768 21,547
Total shareholders' equity 63,772 59,571 67,577 66,332 9,098
- ------------------------------------------------------------------------------
(1) On February 9, 1995, the Company's Board of Directors approved a change in
the fiscal year to a 52/53 week year ending on the Saturday closest to January
31. Unless otherwise stated, references to years 1996, 1995, 1994, 1993 and 1992
relate respectively to the fiscal years ended February 1, 1997, February 3,
1996, December 31, 1994, January 1, 1994 and January 2, 1993. Fiscal years 1995
and 1992 consisted of 53 weeks and the other fiscal years consisted of 52 weeks.
The Company recorded a net loss of $816,000 for the four week transition period
ended January 28, 1995.
(2) Certain reclassifications have been made to prior years' data to conform
with the current year's presentation.
(3) Reflects (i) the reduction of interest expense of $113,000 and $508,000 in
1993 and 1992, respectively, that would have resulted from the repayment of the
$6.5 million subordinated notes to the Company's principal shareholder, (ii) the
issuance of the number of shares (749,711) sold by the Company at the Initial
Offering price of $8.67 per share that would have been necessary to fund such
repayment as if the Initial Offering had occurred on December 29, 1991, and
(iii) federal and state income taxes (assuming an effective tax rate of 39% for
1993 and 41% for 1992) as if the Company had been a C Corporation for all
periods presented, but excludes the impact of the non-recurring charge relating
to the change in the tax status of the Company from an S Corporation to a C
Corporation, which resulted in an increase in income tax expense of $888,000 in
1993 pursuant to the provisions of SFAS No. 109. Pro forma income taxes were
$3,775,000 and $3,143,000 in 1993 and 1992, respectively.
(4) Selected Operating Data has been adjusted to a comparable 52 week basis for
1995 and 1992.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On February 9, 1995, the Company's Board of Directors approved a change in the
fiscal year to a 52/53 week year ending on the Saturday closest to January 31.
Unless otherwise stated, references to the years 1996, 1995 and 1994 relate
respectively to the fiscal years ended February 1, 1997, February 3, 1996 and
December 31, 1994. Fiscal year 1995 consisted of 53 weeks and the other fiscal
years consisted of 52 weeks.
Restructuring (see Note 7 of Notes to Financial Statements)
During the fourth quarter of 1995, the Company recorded a restructuring charge
of $3.3 million to close eight unprofitable stores. The charge included $2.0
million for store closing and lease termination costs and $1.3 million for
non-cash write-offs of equipment and leasehold improvements. In 1996 and 1995,
the eight stores generated sales of $3.9 million and $9.6 million, and operating
losses of $1.7 million and $1.8 million (net of depreciation expense of $127,000
and $375,000), respectively. Pursuant to the 1995 restructuring plan, seven
stores were closed in fiscal 1996 and one store was closed in February 1997. The
results of operations in the fourth quarter of 1996 includes a credit of
$474,000 resulting from the partial reversal of the restructuring expense
recorded in 1995. The expense reversal was primarily due to the favorable
negotiation of lease termination costs for the stores closed in 1996.
During the fourth quarter of 1994, the Company accrued $267,000 for costs
expected to be incurred in the closing of two stores.
Results of Operations
The following table sets forth the Company's results of operations expressed as
a percentage of net sales for the fiscal years ended:
February 1, February 3, December 31,
1997 1996 1994
---------------------------------------
Net sales 100.0% 100.0% 100.0%
Cost of sales (including
buying, distribution and
occupancy costs) 72.2 77.1 73.9
---------------------------------------
Gross profit 27.8 22.9 26.1
Selling, general and
administrative expenses 24.5 25.8 24.7
Restructuring (credit)charge (0.2) 1.5 0.1
---------------------------------------
Operating income (loss) 3.5 (4.4) 1.3
Interest expense 0.5 0.7 0.3
---------------------------------------
Income (loss) before
income taxes 3.0 (5.1) 1.0
Income tax expense (benefit) 1.2 (1.9) 0.4
---------------------------------------
Net income (loss) 1.8% (3.2%) 0.6%
=======================================
16
<PAGE>
1996 Compared to 1995
Net Sales
Net sales increased $5.7 million to $233.9 million in 1996, a 2.5% increase over
net sales of $228.3 million in 1995. The increase was attributable to the
opening of five stores in 1996 and nine stores in 1995, partially offset by a
comparable store sales decrease of 1.1% on a 52 week basis, the closing of seven
stores in 1996 and sales in the additional week in 1995. Average sales per
square foot in stores open the full year increased 1.3% to $233 in 1996 from
$230 in 1995. The increase was attributable to the exclusion in 1996 of the
eight low productivity stores which were closed in 1996 and 1997. Sales of
private label and non-name brand footwear constituted 17.3% and 19.5% of total
footwear sales in 1996 and 1995, respectively.
During 1995 and 1996, the Company's primary initiatives were to significantly
reduce inventory levels and reposition the women's inventory to a more branded
focus. These initiatives negatively impacted comparable store sales in the first
half of the year, but significantly improved profitability. On a per-store
basis, inventories were 18% lower at the beginning of 1996 as compared with
inventories at the beginning of 1995.
As part of the effort to enhance the image of Shoe Carnival, the Company intends
to raise the quality of merchandise carried in inventory. The higher quality
merchandise is expected to raise the average sales price of units sold and
increase overall profitability. The increased sales prices on higher quality
merchandise may negatively impact unit sales of footwear, particularly in the
first half of 1997, but is not expected to result in negative comparable store
sales.
Gross Profit
Gross profit increased $12.9 million to $65.1 million in 1996, a 24.7% increase
from gross profit of $52.2 million in 1995. The Company's gross profit margin
increased to 27.8% from 22.9%. As a percentage of sales, buying, distribution
and occupancy costs decreased 0.3% while the merchandise gross profit margin
increased by 4.6%. The increase in the merchandise margin was broad based with
most categories improving over the prior year due to lower inventories which
helped to minimize the exposure to markdowns. The largest increase in gross
margin was realized on the sale of women's private label footwear. During 1995,
the writedown of inventory to the lower of cost or market reduced gross profit
by $1.3 million.
The Company expects gross profit margins to continue to improve in 1997 due to
the increased sales prices anticipated on higher quality merchandise being
carried in inventory.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $1.5 million to $57.4
million in 1996 from $58.9 million in 1995. The Company incurred $2 million less
in store selling expenses in the seven stores closed in 1996 as compared with
the prior year. However, this decrease was partially offset by the additional
17
<PAGE>
costs incurred for the stores opened in 1995 and 1996. Additionally, general and
administrative expenses decreased by $600,000 due to tighter expense control. As
a percentage of sales, these expenses decreased 1.3% in 1996, primarily as a
result of the positive effect of the increase in net sales and lower advertising
costs.
The Company's policy is to expense all non-capital expenditures incurred prior
to the opening of a new store in the month of opening. Pre-opening expenses for
new stores aggregated approximately $234,000, or 0.2% of sales for five new
stores in 1996, and $605,000, or 0.3% of sales for nine new stores in 1995.
Interest Expense
Net interest expense of $1.2 million in 1996 resulted from interest expense of
$1.3 million and interest income of $43,000. Net interest expense of $1.6
million in 1995 resulted from interest expense of $1.7 million and interest
income of $51,000. The decrease in interest expense was attributable to lower
average debt balances in 1996 and a decrease in the weighted average interest
rate on total debt to 8.3% in 1996 from 8.7% in 1995.
Income Taxes
The higher effective income tax expense (benefit) rate for 1996 of 40.5%, as
compared to (38.1)% for 1995, was primarily the result of unfavorable tax
treatment of the 1995 net operating losses in certain states. The effective
income tax rate in 1996 differed from the statutory rate due primarily to state
and local income taxes, net of the federal tax benefit.
1995 Compared to 1994
Net Sales
Net sales increased $13.8 million to $228.3 million in 1995, a 6.4% increase
over net sales of $214.5 million in 1994. The increase was attributable to the
opening of nine stores in 1995 and 30 stores in 1994 and sales in the additional
week in 1995, partially offset by a comparable store sales decrease of 10.0% on
a 52-week basis and the closing of one store in January 1995. Average sales per
square foot in stores open the full year decreased 17.0% to $230 in 1995 from
$277 in 1994. Sales of private label and non-name brand footwear constituted
19.5% and 23.5% of total footwear sales in 1995 and 1994, respectively.
The Company's two primary strategic initiatives during 1995 were to
significantly reduce inventory levels and to reposition its women's inventory to
consist of approximately 70% branded merchandise and 30% private label
merchandise. Merchandise inventories on a per-store basis were reduced by
approximately 17% from December 31, 1994 to February 3, 1996 and the women's
inventory at February 3, 1996 consisted of 72% branded merchandise and 28%
private label merchandise. This strategy combined with a weak apparel retail
environment negatively impacted sales and gross profit margin in 1995.
Gross Profit
Gross profit declined $3.7 million to $52.2 million in 1995, a 6.6% decrease
from gross profit of $55.9 million in 1994. The Company's gross profit margin
decreased to 22.9% from 26.1%. As a percentage of sales, buying, distribution
and occupancy costs increased 1.5% while the merchandise gross profit margin
18
<PAGE>
decreased by 1.7%. The decline in the merchandise margin was largely the result
of reduced margins realized on the sale of women's footwear. The net reduction
in gross profit in 1995 and 1994 attributable to the write-down of inventory to
the lower of cost or market value was $1.3 million and $2.1 million,
respectively.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $6 million to $58.9
million in 1995 from $52.9 million in 1994. As a percentage of sales, these
expenses increased 1.1% in 1995, primarily as a result of the negative impact of
the comparable store sales decrease and higher operating costs associated with
stores which opened in 1995 and 1994. Pre-opening expenses for new stores
aggregated approximately $605,000, or 0.3% of sales for nine new stores in 1995,
and $2 million, or 0.9% of sales for 30 new stores in 1994.
Interest Expense
Net interest expense of $1.6 million in 1995 resulted from interest expense of
$1.7 million and interest income of $51,000. Net interest expense of $665,000 in
1994 resulted from interest expense of $812,000 and interest income of $147,000.
The increased interest expense was attributable to higher average debt balances
in 1995 and an increase in the weighted average interest rate on total debt to
8.7% in 1995 from 7.5% in 1994. During the first quarter of 1994, the Company
utilized proceeds from its equity offering in November 1993 to fund its store
expansion. Therefore, no amounts were outstanding under the revolving credit
facility during that period.
Income Taxes
The lower effective income tax expense (benefit) rate for 1995 of (38.1%), as
compared to 42.1% for 1994, was primarily the result of unfavorable tax
treatment of net operating losses in certain states.
Liquidity and Capital Resources
The Company's sources and uses of cash are summarized as follows:
(000's)
Fiscal years 1996 1995 1994
--------------------------------
Net income (loss) plus depreciation
and amortization $9,376 $(2,479) $4,572
Restructuring (credit) charge (474) 3,282 267
Deferred income taxes 1,550 (1,818) 84
Working capital decreases (increases) 6,059 8,403 (18,876)
Other operating activities 117 45 40
Net cash used in investing activities (6,577) (4,546) (13,660)
Net cash (used in) provided by
financing activities (9,326) (3,746) 18,012
--------------------------------
Net increase (decrease) in cash and
cash equivalents 725 (859) (9,561)
Cash and cash equivalents at
beginning of year 900 1,759 11,391
--------------------------------
Cash and cash equivalents at end
of year $1,625 $ 900 $1,830
================================
19
<PAGE>
The Company's primary sources of funds are cash flows from operations and
borrowings under its revolving credit facility. As a result of its improvement
in net income and lower inventory levels, cash provided from operating
activities was $16.6 million during 1996 as compared with $7.4 million in 1995.
Inventories decreased $3.5 million to $59.2 million at February 1, 1997 from
$62.7 million at February 3, 1996. Cash provided by operating activities was
used during 1996 to fund capital expenditures and to reduce long-term debt by
$9.2 million (net of capital lease obligations incurred). Excluding changes in
operating assets and liabilities, $10.6 million and $5.0 million was provided by
operating activities in 1996 and 1994, respectively, while $1 million was used
in operating activities in 1995.
Working capital decreased to $45.1 million at February 1, 1997 from $50.2
million at February 3, 1996 and $61.7 million at January 28, 1995 primarily as a
result of the decrease in inventories. The current ratio at February 1, 1997 was
3.5 as compared to 3.4 at February 3, 1996 and 5.1 at January 28, 1995.
Long-term debt as a percentage of total capital (long-term debt plus
shareholders' equity) was 13.1%, 24.1% and 25.2% at February 1, 1997, February
3, 1996, and January 28, 1995, respectively.
Capital expenditures were $6.5 million in 1996, $5.3 million in 1995 and $17
million in 1994 (including $162,000, $257,000, and $2.1 million of capital lease
assets in 1996, 1995 and 1994, respectively). Of the 1996 expenditures, $1.9
million was incurred for new stores and $3 million was incurred for improvements
to and the remodeling of existing stores. The remaining capital expenditures in
1996 were primarily for various store improvements and enhancements to computer
systems.
Capital expenditures are expected to be $9 million to $11 million in fiscal
1997. The actual amount of cash required for capital expenditures depends in
part on the number of new stores opened, the amount of lease incentives, if any,
received from landlords and the number of stores remodeled. The opening of new
stores will be dependent upon, among other things, the availability of desirable
locations, the negotiation of acceptable lease terms and general economic and
business conditions affecting consumer spending in areas the Company targets for
expansion.
In 1997, the Company intends to open approximately seven to 10 stores and
remodel approximately 60 of the existing stores that do not have the new
prototype design at an expected aggregate cost of between $6 million and $8
million. The remaining capital expenditures are expected to be incurred for
various store improvements, enhancements to computer systems and administrative
and distribution equipment.
As part of the Company's effort to upgrade the image of its stores, a new
prototype design has been utilized in all new and remodeled stores since the
fourth quarter of 1995. The size of stores utilizing the new prototype design
has increased from 10,000 square feet to between 12,000 and 18,000 square feet
depending upon, among other factors, the location of the store and the
population base the store is expected to service. Accordingly, capital
expenditures for new stores have increased to an average of approximately
$450,000, including point-of-sale equipment which is generally acquired through
equipment leasing transactions. The average inventory investment in a new store
is expected to range from $550,000 to $850,000, depending on the size and sales
expectation of the store and the timing of the new store opening. Pre-opening
20
<PAGE>
expenses, such as advertising, salaries, supplies and utilities, are expected to
average $60,000 to $80,000 per-store. On a per-store basis, for the five stores
opened during 1996, the initial inventory investment averaged $664,000, capital
expenditures averaged $426,000 and pre-opening expenses averaged $85,000.
At February 1, 1997, the Company's credit facility provided for $35 million in
cash advances and letters of credit issuances. Borrowings under the credit
facility are based on eligible inventory. The credit agreement limits capital
expenditures in 1997 to $12 million. Borrowings and letters of credit
outstanding under this facility at February 1, 1997 were $8.5 million and $6
million, respectively.
The Company anticipates that its existing cash and cash flow from operations,
supplemented by borrowings under its revolving credit line will be sufficient to
fund its planned expansion and other operating cash requirements for at least
the next 12 months.
Effect of New Accounting Pronouncements
Earnings Per Share
In February 1997, The Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share," which will be effective for the Company in the fourth
quarter of 1997. SFAS No. 128 simplifies the computation for earnings per share
by excluding the dilutive effect of common stock equivalents from basic earnings
per share and makes the earnings per share calculation comparable to
international standards. The Company has determined that the impact of adopting
this standard will not have a material impact on previously reported earnings
per share.
Seasonality and Inflation
The Company's quarterly results of operations have fluctuated, and are expected
to continue to fluctuate in the future, primarily as a result of seasonal
variances and the timing of sales and costs associated with opening new stores.
Non-capital expenditures, such as advertising and payroll, incurred prior to the
opening of a new store are charged to expense in the month the store is opened.
Therefore, results of operations may be adversely affected in any quarter in
which the Company opens new stores.
The Company has three distinct peak selling periods: Easter, back-to-school and
Christmas.
Factors That May Effect Future Results
This Annual Report contains certain forward looking statements that involve a
number of risks and uncertainties. Among the factors that could cause actual
results to differ materially are the following: general economic conditions in
the areas of the United States in which the Company's stores are located;
changes in the overall retail environment and more specifically in the apparel
and footwear retail sectors; the impact of competition, weather patterns,
consumer buying trends and the ability of the Company to identify and respond to
emerging fashion trends; the availability of desirable store locations and
management's ability to negotiate acceptable lease terms and open new stores in
a timely manner; and changes in the political and economic environments in the
People's Republic of China, where most of the Company's private label products
are manufactured, and the continued favorable trade relationships between China
and the United States.
21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Management
Management of the Company is responsible for the preparation, integrity and
objectivity of the financial information included in this annual report. The
financial statements have been prepared in conformity with generally accepted
accounting principles and necessarily include amounts which are based upon
estimates and judgments by management.
Management maintains internal accounting control systems designed to provide
reasonable assurance that assets are safeguarded, transactions are executed in
accordance with management's authorization and the accounting records may be
relied upon for the preparation of financial statements and other financial
information. This system of internal controls has been designed and is
maintained in recognition of the concept that the cost of controls should not
exceed the benefit derived therefrom.
The Audit Committee of the Board of Directors meets periodically with management
and the independent auditors to review matters relating to the Company's
financial reporting, the adequacy of internal control systems and the scope and
results of the annual audit. Representatives of the independent auditors have
free access to the Audit Committee and the Board of Directors.
The Company's financial statements have been audited by Deloitte & Touche LLP,
whose report, which follows, expresses an opinion as to the fair presentation of
the financial statements and is based on an independent audit performed in
accordance with generally accepted auditing standards.
Independent Auditors' Report
To the Board of Directors and Shareholders of Shoe Carnival, Inc.:
We have audited the accompanying balance sheets of Shoe Carnival, Inc., as of
February 1, 1997, February 3, 1996, and January 28, 1995 and the related
statements of income, shareholders' equity and cash flows for the years ended
February 1, 1997, February 3, 1996, December 31, 1994, and the one-month period
ended January 28, 1995. Our audits also included the financial statement
schedule listed in the Index at Item 14. These financial statements and
financial statement schedule 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 our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Shoe Carnival, Inc., at February 1, 1997,
February 3, 1996 and December 31, 1994, and the results of its operations and
its cash flows for the years ended February 1, 1997, February 3, 1996, December
31, 1994, and the one-month period ended January 28, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Stamford, Connecticut
March 7, 1997
22
<PAGE>
Shoe Carnival, Inc.
Balance Sheets
February 1, February 3, January 28,
(In thousands, except share data) 1997 1996 1995
--------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 1,625 $ 900 $ 1,759
Accounts receivable 916 986 561
Notes receivable from shareholders 22 40 74
Merchandise inventories 59,240 62,699 70,369
Deferred income tax benefit 400 1,820 710
Other 906 4,660 3,457
--------------------------------------
Total Current Assets 63,109 71,105 76,930
Property and equipment-net 30,817 31,160 30,831
--------------------------------------
Total Assets $ 93,926 $102,265 $107,761
======================================
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 12,159 $ 12,783 $ 10,131
Accrued and other liabilities 5,172 7,504 4,510
Current portion of long-term debt 688 612 573
--------------------------------------
Total Current Liabilities 18,019 20,899 15,214
Long-term debt 9,621 18,922 22,450
Deferred lease incentives 1,458 1,948 1,703
Deferred income taxes 1,056 925 1,633
--------------------------------------
Total Liabilities 30,154 42,694 41,000
--------------------------------------
Shareholders' Equity:
Common stock, no and $.10 par value,
50,000,000 shares authorized,
13,032,115, 13,018,588 and
13,018,588 shares issued and
outstanding 0 1,302 1,302
Additional paid-in capital 61,398 60,035 60,035
Retained earnings (deficit) 2,374 (1,766) 5,424
--------------------------------------
Total Shareholders' Equity 63,772 59,571 66,761
--------------------------------------
Total Liabilities and Shareholders'
Equity $ 93,926 $102,265 $107,761
======================================
See notes to financial statements
23
<PAGE>
Shoe Carnival, Inc.
Statements of Income
(In thousands, except share data)
For fiscal years or period ended (1)
February 1, February 3, January 28, December 31,
1997 1996 1995(1) 1994
------------------------------------------------------
Net sales $233,945 $228,263 $ 12,833 $ 214,528
Cost of sales
(including buying,
distribution and
occupancy costs) 168,814 176,019 10,372 158,614
------------------------------------------------------
Gross profit 65,131 52,244 2,461 55,914
Selling, general
and administrative
expenses 57,405 58,946 3,681 52,907
Restructuring (credit)
charge (474) 3,282 267
------------------------------------------------------
Operating income (loss) 8,200 (9,984) (1,220) 2,740
Interest expense 1,242 1,626 140 665
------------------------------------------------------
Income (loss) before
income taxes 6,958 (11,610) (1,360) 2,075
Income tax expense
(benefit) 2,818 (4,420) (544) 874
------------------------------------------------------
Net income (loss) $ 4,140 $ (7,190) $ (816) $ 1,201
======================================================
Net income (loss)
per share $ .32 $ (.55) $ (.06) $ .09
======================================================
Weighted average common
shares and common
equivalent shares
outstanding 13,028,584 13,030,576 13,018,588 13,051,084
======================================================
(1) Relates to the four week transition period ended January 28, 1995.
See notes to financial statements
24
<PAGE>
Shoe Carnival, Inc.
Statements of Shareholders' Equity
(In thousands, except share data)
Additional Retained
Common Stock Paid-In Earnings
Shares Amount Capital (Deficit) Total
--------------------------------------------------------
Balance at
January 1, 1994 13,015,488 $1,302 $59,991 $5,039 $66,332
Compensation from stock
option grant 18 18
Exercise of stock
options 3,100 26 26
Net income 1,201 1,201
--------------------------------------------------------
Balance at
December 31, 1994 13,018,588 1,302 60,035 6,240 67,577
Net loss during the
four-week transition
period ended
January 28, 1995 (816) (816)
--------------------------------------------------------
Balance at
January 28, 1995 13,018,588 1,302 60,035 5,424 66,761
Net loss (7,190) (7,190)
--------------------------------------------------------
Balance at
February 3, 1996 13,018,588 1,302 60,035 (1,766) 59,571
Employee stock purchase
plan purchases 13,527 61 61
Elimination of par
value (1,302) 1,302
Net income 4,140 4,140
-------------------------------------------------------
Balance at
February 1, 1997 13,032,115 $ 0 $61,398 $2,374 $63,772
=======================================================
See notes to financial statements
25
<PAGE>
Shoe Carnival, Inc.
Statements of Cash Flows
(In thousands)
Fiscal years or period ended (1)
February 1, February 3, January 28, December 31,
1997 1996 1995 (1) 1994
---------------------------------------------------
Cash Flows From Operating
Activities
Net income (loss) $ 4,140 $(7,190) $(816) $ 1,201
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 5,236 4,711 361 3,371
Restructuring (credit)
charge (474) 3,282 267
Loss on retirement of
assets 305 293 16
Deferred income taxes 1,550 (1,818) (23) 84
Other (188) (248) (9) 24
Changes in operating
assets and liabilities:
Merchandise inventories 3,459 7,670 (1,936) (19,863)
Accounts receivable 69 (425) 205 (47)
Accounts payable and
accrued liabilities (1,221) 2,364 1,555 2,767
Other 3,752 (1,206) (794) (1,733)
------------------------------------------------
Net cash provided by (used in)
operating activities 16,628 7,433 (1,457) (13,913)
------------------------------------------------
Cash Flows From Investing
Activities
Purchases of property and
equipment (6,294) (5,074) (465) (14,858)
Notes from shareholders 18 34 156
Lease incentives (303) 494 846
Other 2 196
------------------------------------------------
Net cash used in investing
activities (6,577) (4,546) (465) (13,660)
------------------------------------------------
26
<PAGE>
Cash Flows From Financing
Activities
Borrowings under lines of
credit 174,450 138,625 5,050 82,975
Payments on lines of
credit (183,200) (141,775) (3,150) (64,475)
Payments on long-term debt (637) (596) (49) (514)
Proceeds from issuance of
stock 61 26
-------------------------------------------------
Net cash (used in) provided
by financing activities (9,326) (3,746) 1,851 18,012
-------------------------------------------------
Net increase(decrease) in
cash and cash equivalents 725 (859) (71) (9,561)
Cash and cash equivalents
at beginning of period 900 1,759 1,830 11,391
-------------------------------------------------
Cash and Cash Equivalents
at End of Period $ 1,625 $ 900 $ 1,759 $1,830
=================================================
Supplemental disclosures of cash flow information:
Cash paid during period
for interest $ 1,337 $1,814 $ 63 $ 686
Cash (refunded) paid during
period for income taxes (2,150) (919) 21 2,079
Capital lease obligations
incurred 162 257 2,123
(1) Relates to the four week transition period ended January 28, 1995.
See notes to financial statements
27
<PAGE>
Shoe Carnival, Inc.
Notes to Financial Statements
Note 1 - Organization and Description of Business
Shoe Carnival, Inc. (the "Company"), was incorporated on February 25, 1988 under
the name of DAR Group Investments, Inc. The Company changed its name to Shoe
Carnival, Inc., on January 15, 1993. The Company's primary activity is the sale
of footwear and related products through Company-operated retail stores in the
Midwest, South and Southeastern regions of the United States.
Note 2 - Summary of Significant Accounting Policies
Fiscal Year
On February 9, 1995, the Board of Directors approved a change in the fiscal year
from a 52/53 week fiscal year ending the Saturday closest to December 31 to a
52/53 week fiscal year ending on the Saturday closest to January 31, effective
for the fiscal year ended February 3, 1996. As a result of the change, the
Company reported a short fiscal year transition period of four weeks from
January 1, 1995 through January 28, 1995. Footnotes for this transition period
have been included where applicable. Unless otherwise stated, references to the
years 1996, 1995, and 1994 relate respectively to the fiscal years ended
February 1, 1997, February 3, 1996, and December 31, 1994. Fiscal year 1995
consisted of 53 weeks and fiscal years 1996 and 1994 consisted of 52 weeks.
Cash and Cash Equivalents
The Company considers all certificates of deposit and other short-term
investments with an original maturity date of three months or less to be cash
equivalents.
Merchandise Inventories
Merchandise inventories are stated at the lower of cost or market using the
first-in, first-out (FIFO) method. In determining market value, management
estimates the future sales price of items of merchandise contained in the
inventory as of the balance sheet date. Factors considered in this determination
include among others, current and recently recorded sales prices, the length of
time product has been held in inventory and quantities of various product styles
contained in inventory. The ultimate amount realized from the sale of certain
product could differ materially from management's estimates.
Property and Equipment
Property and equipment is stated at cost. Depreciation and amortization of
property, equipment and leasehold improvements are provided on the straight-line
method over the shorter of the estimated useful lives of the assets or the
applicable lease terms. Lives used in computing depreciation and amortization
range from two to 30 years. Expenditures for maintenance and repairs are charged
to expense as incurred. Expenditures which materially increase values, improve
capacities or extend useful lives are capitalized. Upon sale or retirement, the
28
<PAGE>
costs and related accumulated depreciation or amortization are eliminated from
the respective accounts and any resulting gain or loss is included in
operations.
Deferred Lease Incentives
All incentives received from landlords for leasehold improvements and fixturing
of new stores are recorded as deferred income and amortized over the life of the
lease on a straight-line basis as a reduction of rental expense.
Revenue Recognition
Sales are recorded net of an estimate for returns and allowances.
Store Opening Costs
Non-capital expenditures incurred prior to the opening of a new store are
charged to expense in the month the store is opened.
Reclassifications
Certain reclassifications to the 1994 financial statements have been made to
conform with the current year's presentation.
Earnings Per Share
In February 1997, The Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share," which will be effective for the Company in the fourth
quarter of 1997. SFAS No. 128 simplifies the computation for earnings per share
by excluding the dilutive effect of common stock equivalents from basic earnings
per share and makes the earnings per share calculation comparable to
international standards. The Company has determined that the impact of adopting
this standard will not have a material impact on previously reported earnings
per share.
Use of Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires that management make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. The reported amounts of revenues and expenses during the reporting
period may be affected by the estimates and assumptions management is required
to make. Actual results could differ from those estimates.
Note 3 - Property and Equipment-net
The following is a summary of property and equipment:
(000's) February 1, February 3, January 28,
1997 1996 1995
------------------------------------------
Land $ 205 $ 205 $ 205
Buildings 5,813 5,807 3,793
Furniture, fixtures
and equipment 22,052 19,201 17,380
29
<PAGE>
Leasehold improvements 16,573 15,517 13,952
Equipment under capital leases 3,737 3,574 3,428
Construction in progress 1,587
------------------------------------------
Total 48,380 44,304 40,345
Less accumulated depreciation
and amortization 17,563 13,144 9,514
------------------------------------------
Property and equipment-net $30,817 $31,160 $30,831
==========================================
Note 4 - Accrued and Other Liabilities
Accrued and other liabilities consisted of the following:
(000's) February 1, February 3, January 28,
1997 1996 1995
-----------------------------------------
Restructuring reserve
(See Note 7) $ 318 $ 3,468 $ 229
Advertising 1,515 981 1,149
Employee compensation and
benefits 1,179 958 1,128
Sales and use tax 597 476 578
Other 1,563 1,621 1,426
-----------------------------------------
Total accrued and other
liabilities $ 5,172 $ 7,504 $ 4,510
=========================================
Note 5 - Long-Term Debt
Long-term debt consisted of the following:
(000's) February 1, February 3, January 28,
1997 1996 1995
-----------------------------------------
Revolving line of credit $ 8,500 $17,250 $20,400
Capital lease obligations
(see Note 6) 1,809 2,284 2,623
-----------------------------------------
Total 10,309 19,534 23,023
Less current portion 688 612 573
-----------------------------------------
Total long-term debt, net of
current portion $ 9,621 $18,922 $22,450
=========================================
At February 3, 1996, the Company had an unsecured $40 million credit agreement
(the "Credit Agreement") with a bank group which provided for a $30 million
revolving line of credit and a $10 million line of credit reserved for the
issuance of letters of credit.
30
<PAGE>
On April 10, 1996, the Credit Agreement, including the financial convenants
contained therein, was amended, reducing the total credit facility to $35
million. Sublimits for cash borrowings and letter of credit issuances were
eliminated under the amended Credit Agreement. Borrowings are based on eligible
inventory and bear interest, at the Company's option, at the agent bank's prime
rate (8.25% at February 1, 1997) or the applicable London Inter-Bank Offered
Rate (LIBOR) plus from 1.0% to 2.0%, depending on the Company's achievement of
certain performance criteria. A commitment fee of .25% per annum is charged on
the unused portion of the first $30 million of the bank group's commitment. The
Credit Agreement contains various restrictive and financial covenants, including
the maintenance of specific financial ratios, and a limitation on the payment of
dividends. The most restrictive convenant limits capital expenditures to $12
million in fiscal 1997. At February 1, 1997, outstanding letters of credit were
approximately $6 million.
On February 1, 1997, the Credit Agreement was amended to extend the expiration
date to March 31, 1999 and to adjust certain financial covenants to be less
restrictive.
Note 6 - Leases
The Company leases all of its retail locations and certain equipment under
operating leases expiring at various dates through 2015. Seventy-one leases
provide for contingent rental payments of between 2% and 5% of sales in excess
of stated amounts. Certain leases also contain escalation clauses for increases
in minimum rentals, operating costs and taxes. In addition, the Company leases
equipment under capitalized leases expiring at various dates through 2001. The
present value of minimum lease payments for equipment under capital lease is
included in long-term debt (see Note 5).
Rental expense for the Company's operating leases consisted of:
(000's)
Fiscal years 1996 1995 1994
--------------------------
Rentals for real property $12,208 $12,062 $9,182
Equipment rentals 411 397 266
--------------------------
Total $12,619 $12,459 $9,448
==========================
Future minimum lease payments at February 1, 1997 are as follows:
(000's) Operating Capital
Fiscal years Leases Leases
--------------------
1997 $10,289 $ 839
1998 9,564 770
1999 9,109 391
2000 8,712 78
2001 8,157 5
Thereafter to 2015 22,194 0
--------------------
Minimum lease payments $68,025 2,083
========
31
<PAGE>
Less imputed interest at rates
ranging from 8.2% to 11.9% 274
-------
Present value of net minimum lease
payments of which $688,000 is
included in current liabilities $ 1,809
=======
Investment in equipment under capital lease, which is included in property and
equipment, was:
(000's) February 1, February 3, January 28,
1997 1996 1995
-----------------------------------------
Equipment $3,737 $3,574 $3,428
Less accumulated amortization 2,124 1,390 799
-----------------------------------------
Equipment under capital
lease-net $1,613 $2,184 $2,629
=========================================
Note 7 - Restructuring Charge
In the fourth quarters of 1995 and 1994, the Company recorded restructuring
charges related to its plan to close a total of nine unprofitable stores. At
February 1, 1997, eight stores had been closed with the final store closing in
February 1997. The components of the restructuring charge and an analysis of the
amounts charged against the reserve are outlined in the following table:
(000's) February 1, February 3, January 28, December 31,
1997 1996 1995 1994
-----------------------------------------------------
Beginning restructuring
reserve $3,468 $ 229 $ 234
Restructuring (credit)
charge:
Store closing and lease
termination costs (474) 1,953 $ 105
Equipment and leasehold
improvement write-offs 1,329 162
-----------------------------------------------------
Total restructuring
(credit) charge (474) 3,282 267
Costs applied against reserve:
Store closing and lease
termination costs (1,418) (43) (5)
Equipment and leasehold
improvement write-offs (1,258) (33)
-----------------------------------------------------
Ending restructuring
reserve $ 318 $3,468 $ 229 $ 234
=====================================================
32
<PAGE>
In the aggregate, the eight stores closed in fiscal 1996 and February 1997
generated sales of $3.9 million and $9.6 million, and operating losses of $1.7
million and $1.8 million (including depreciation expense of $127,000 and
$375,000) during 1996 and 1995, respectively. Cash outlays in 1996 of $1.7
million were for lease termination and store closing costs of $1.4 million and
the repayment of $293,000 of lease incentives which were recorded as a deferred
liability. The restructuring credit recorded in the fourth quarter of 1996
resulted primarily from favorable negotiation of lease termination costs.
The remaining restructuring charges of $318,000 at February 1, 1997 include
management's best estimates of amounts required to be paid for store closing and
lease termination costs of the final store which closed in February 1997. The
total amount of the cash payments ultimately required could differ from the
amounts recorded if management is unable to negotiate an acceptable lease
termination agreement with the landlord.
Note 8 - Income Taxes
The provision (benefit) for income taxes consisted of:
(000's)
Fiscal years 1996 1995 1994
--------------------------
Current:
Federal $ 976 $(2,211) $ 572
State 292 (392) 218
--------------------------
Total current 1,268 (2,603) 790
--------------------------
Deferred:
Federal 1,390 (1,575) 65
State 160 (242) 19
--------------------------
Total deferred 1,550 (1,817) 84
--------------------------
Total provision (benefit) $2,818 $(4,420) $ 874
==========================
33
<PAGE>
Included in other current assets are income tax receivables in the amounts of
$285,000, $3.9 million and $2.2 million as of February 1, 1997, February 3,
1996, and January 28, 1995 respectively.
A reconciliation between the statutory federal income tax rate and the effective
income tax rate is as follows:
Fiscal years 1996 1995 1994
--------------------------
U.S. Federal statutory
tax rate 34.0% (34.0%) 34.0%
State and local income
taxes, net of federal
tax benefit 5.5 (3.9) 7.4
Other 1.0 (.2) .7
--------------------------
Effective tax rate 40.5% (38.1%) 42.1%
==========================
Deferred income taxes are the result of temporary differences in the recognition
of revenue and expense for tax and financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
(000's) February 1, February 3,
1997 1996
------------------------------
Deferred tax assets:
Restructuring reserve $ 121 $1,523
Alternative minimum tax
credit carryforward 723 936
Accrued rent 244 190
Accrued compensation 166 147
State net operating loss carry forwards 60 114
Lease incentives 19 42
Other 99 128
------------------------------
Total deferred tax assets $1,432 $3,080
==============================
Deferred tax liabilities:
Depreciation $ 928 $1,119
Purchase accounting adjustments 932 926
Inventory valuation 227 140
------------------------------
Total deferred tax liabilities $2,087 $2,185
==============================
Note 9 - Employee Benefit Plans
Retirement Savings Plan
On February 24, 1994, the Company's Board of Directors approved the Shoe
Carnival Retirement Savings Plan (the "Retirement Plan"). The Retirement Plan is
open to all employees who have been employed for one year, are at least 21 years
of age and who work at least 1,000 hours per year. The primary savings mechanism
under the Retirement Plan is a 401(k) plan under which an employee may
contribute up to 15% of earnings with the Company matching the first 4% at a
rate of 50%. Employee and Company contributions are paid to a trustee and
invested in up to six investment options at the participants' direction. The
Company contributions to the participants' accounts become fully vested upon
completion of five years of participation in the Retirement Plan. Contributions
charged to expense in 1996, 1995 and 1994 were $198,000, $172,000 and $121,000
respectively.
34
<PAGE>
Stock Purchase Plan
On May 11, 1995, the Company's shareholders approved the Shoe Carnival, Inc.
Employee Stock Purchase Plan (the "Stock Purchase Plan") as adopted by the
Company's Board of Directors on February 9, 1995. The Stock Purchase Plan
reserves 300,000 shares of the Company's common stock (subject to adjustment for
any subsequent stock splits, stock dividends and certain other changes in the
common stock) for issuance and sale to any employee who has been employed for
more than a year at the beginning of the calendar year, and who is not an
executive officer or director, at 85% of the then fair market value up to a
maximum of $5,000 in any calendar year. During 1996, 14,000 shares of common
stock were purchased by participants in the plan. Proceeds to the Company for
the sale of the shares was approximately $61,000.
Note 10 - Stock Option and Incentive Plans
1989 Stock Option Plan
Non-qualified stock options for a total of 1,500,000 shares of common stock were
granted to certain officers, directors and other key employees prior to 1993. On
November 1, 1992, the participants exercised all outstanding stock options and
the plan was effectively terminated. Net proceeds to the Company from the sale
of such shares were $239,000. In November 1992, the Company loaned an aggregate
of $633,000 on a fully recourse basis to the participants to permit them to pay
an estimated amount of income taxes due as a result of the stock option
exercise. Of this amount, $239,000 was classified as a reduction to paid-in
capital and $158,000 was recorded as a current asset. The notes evidencing such
loans bear interest at a rate of 6% per annum and were originally due in four
equal annual installments, the first of which was paid in 1993. The 1995
principal payment was extended for one year for participants who were employees
of the Company on the date the payment was originally due. In 1996, certain
participants paid an aggregate of $18,000 in principal (plus accrued interest)
to the Company to retire their outstanding notes. The 1995 and 1996 principal
payment for the remaining participants was extended for one year. The aggregate
principal balance outstanding on the loans to the participants was $261,000 and
$279,000 as of February 1, 1997 and February 3, 1996, respectively.
1993 Stock Option and Incentive Plan
Effective January 15, 1993, the Company's Board of Directors and shareholders
approved the 1993 Stock Option and Incentive Plan (the "1993 Plan"). The 1993
Plan reserves for issuance 900,000 shares of the Company's common stock (subject
to adjustment for any subsequent stock splits, stock dividends and certain other
changes in the common stock) pursuant to any incentive awards granted by the
Stock Option Committee of the Board of Directors which administers the 1993
Plan. The 1993 Plan provides for the grant of incentive awards in the form of
stock options or restricted stock to officers and other key employees of the
Company. Stock options granted under the plan may be either options intended to
qualify for federal income tax purposes as "incentive stock options" or options
not qualifying for favorable tax treatment ("non-qualified stock options"). At
February 1, 1997, options to purchase 207,374 common shares were exercisable and
252,975 shares of unissued common stock were reserved for future grants under
the plan.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB No. 25), in accounting for employee stock
options. Accordingly, no compensation expense has been recognized for the 1993
Plan.
35
<PAGE>
Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, "Accounting for Stock-Based Compensation," and has been determined
as if the Company had accounted for its stock options under SFAS No. 123's fair
value method. The fair value of these options was estimated at grant date using
Black-Scholes option pricing model with the following weighted average
assumptions:
Fiscal years 1996 1995
------ ------
Risk free interest rate 6.8% 7.6%
Expected dividend yield 0.0% 0.0%
Expected volatility 50.5% 45.7%
Expected term 5 Years 5 Years
For the purpose of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
(000's, except per share data)
Fiscal years 1996 1995
------ ------
Pro forma net income (loss) $3,984 $(7,263)
Pro forma net income (loss) per share $.31 $(.56)
The weighted-average fair value of options granted was $2.79 and $2.37 for 1996
and 1995, respectively.
The following table summarizes the transactions pursuant to the stock option
plans for the three-year period ended February 1, 1997:
Weighted Average
Shares Exercise Price
-------------------------------
Balance at January 1, 1994 249,225 $9.14
Granted 261,000 12.04
Cancelled (49,200) 10.30
Exercised (3,100) 8.67
-------------------------------
Balance at December 31, 1994 457,925 10.82
Granted 155,500 4.83
Cancelled (55,125) 9.63
-------------------------------
Balance at February 3, 1996 558,300 9.27
Granted 339,500 5.31
Cancelled (253,875) 11.94
-------------------------------
Balance at February 1, 1997 643,925 $6.15
===============================
Note 11 - Contingencies
Litigation
The Company is involved in various routine legal proceedings incidental to the
conduct of its business, none of which is expected to have a material adverse
effect on the Company's financial position.
36
<PAGE>
Note 12 - Other Related Party Transactions
The Company's Chairman and Principal Shareholder is the principal shareholder of
LC Footwear, Inc. The Company purchased approximately $258,000 and $229,000 of
merchandise from LC Footwear, Inc. in 1996 and 1995, respectively.
Weaver International Footwear, Inc. ("Weaver International"), a corporation
owned and operated by the son of the Principal Shareholder, serves as one of the
Company's import agents. Weaver International has represented the Company on a
commission basis in dealings with shoe factories in mainland China (and
previously Brazil), where most of the Company's private label shoes are
manufactured. Commissions paid to Weaver International were $915,000, $1,256,000
and $1,548,000 in 1996, 1995 and 1994, respectively. All payments associated
with the importation of goods through Weaver International are settled in U.S.
dollars.
Note 13 - Quarterly Results (Unaudited)
Quarterly results are determined in accordance with the accounting policies used
for annual data and include certain items based upon estimates for the entire
year. All fiscal quarters in 1996 and 1995 include results for 13 weeks except
for the fourth quarter of 1995 which includes results for 14 weeks. The
following table summarizes results for 1996 and 1995:
(000's, except per share data)
First Second Third Fourth
1996 Quarter Quarter Quarter Quarter
-------------------------------------
Net sales $58,208 $57,597 $63,882 $54,258
Gross profit 16,349 15,928 19,018 13,836
Operating income 2,000 1,842 3,971 387
Net income (1) 921 891 2,197 131
Net income per share $ .07 $ .07 $ .17 $ .01
(000's, except per share data)
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter
-------------------------------------
Net sales $55,063 $55,483 $60,166 $57,551
Gross profit 14,195 14,845 16,284 6,920
Operating income (loss) 962 1,411 1,500 (13,857)
Net income (loss)(2) 283 625 634 (8,732)
Net income (loss) per share $.02 $.05 $.05 $(.67)
(1) The results of operations in the fourth quarter of 1996 includes a pre-tax
credit of $474,000 resulting from the partial reversal of the restructuring
charge taken in 1995.
(2) The net loss in the fourth quarter of 1995 includes a pre-tax charge of $3.3
million to establish a reserve for expected costs to be incurred in the closing
of eight stores and a $2.9 million charge to cost of sales for anticipated
losses to be incurred in the liquidation of clearance product.
37
<PAGE>
SHOE CARNIVAL, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Charged
Balance at (Credited) to Balance at
Beginning Costs and End of
Descriptions of Period Expenses Period
------------ ---------- ------------ ----------
Year ended December 31, 1994
Reserve for sales returns
and allowances.............. $ 75,000 $ 39,492 $ 114,492
Inventory reserve............ 936,127 2,063,873 3,000,000
One-month period ended
January 28, 1995
Reserve for sales returns
and allowances............. 114,492 0 114,492
Inventory reserve............ 3,000,000 0 3,000,000
Year ended February 3, 1996
Reserve for sales returns
and allowances............. 114,492 0 114,492
Inventory reserve............ 3,000,000 1,300,000 4,300,000
Year ended February 1, 1997
Reserve for sales returns
and allowances............ 114,492 0 114,492
Inventory reserve........... 4,300,000 (3,000,000) 1,300,000
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's independent
accountants on accounting or financial disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item concerning the Directors and nominee for
Director of the Company is incorporated herein by reference to the Company's
definitive Proxy Statement for its 1997 Annual Meeting of Shareholders, to be
filed with the Commission pursuant to Regulation 14A within 120 days after the
end of the Company's fiscal year. Information concerning the executive officers
of the Company is included under the caption "Executive Officers of the Company"
at the end of Part I of this Annual Report. Such information is incorporated
herein by reference, in accordance with General Instruction G(3) to Form 10-K
and Instruction 3 to Item 401(b) of Regulation S-K.
38
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item concerning remuneration of the Company's
officers and Directors and information concerning material transactions
involving such officers and Directors is incorporated herein by reference to the
Company's definitive Proxy Statement for its 1997 Annual Meeting of Shareholders
which will be filed pursuant to Regulation 14A within 120 days after the end of
the Company's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item concerning the stock ownership of
management and five percent beneficial owners is incorporated herein by
reference to the Company's definitive Proxy Statement for its 1997 Annual
Meeting of Shareholders which will be filed pursuant to Regulation 14A within
120 days after the end of the Company's last fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item concerning certain relationships and
related transactions is incorporated herein by reference to the Company's
definitive Proxy Statement for its 1997 Annual Meeting of Shareholders which
will be filed pursuant to Regulation 14A within 120 days after the end of the
Company's last fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a). 1. Financial Statements:
The following financial statements of the Company are set forth in
Part II, Item 8.
Index to Financial Statements
Report of Management
Independent Auditors' Report
Balance Sheets at February 1, 1997, February 3, 1996
and January 28, 1995
Statements of Income for the years ended February 1, 1997,
February 3, 1996, January 28, 1995 and
December 31, 1994
Statements of Cash Flows for the years ended February 1, 1997,
February 3, 1996, January 28, 1995 and December 31, 1994
39
<PAGE>
Statements of Shareholders' Equity for the years ended February 1,
1997, February 3, 1996, January 28, 1995 and December 31, 1994
Notes to Financial Statements
2. Financial Statement Schedules:
The following financial statement schedule of the Company is set
forth in Part II, Item 8.
Schedule II Valuation and Qualifying Accounts
3. Exhibits:
A list of exhibits required to be filed as part of this report is
set forth in the Index to Exhibits, which immediately precedes
such exhibits, and is incorporated herein by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
February 1, 1997.
40
<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.
Shoe Carnival, Inc.
Date: April 29, 1997 By: /s/ Mark L. Lemond
-----------------------------
Mark L. Lemond
President and Chief Executive 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.
Signature Title Date
--------- ----- ----
/s/ J. Wayne Weaver Chairman of the Board and Director April 29, 1997
- ----------------------
J. Wayne Weaver
/s/ Mark L. Lemond President, Chief Executive Officer April 29, 1997
- ---------------------- and Director
Mark L. Lemond (Principal Executive Officer)
/s/ David H. Russell Vice Chairman of the Board and April 29, 1997
- ---------------------- Director
David H. Russell
/s/ William E. Bindley Director April 29, 1997
- ----------------------
William E. Bindley
/s/ Gerald W. Schoor Director April 29, 1997
- ----------------------
Gerald W. Schoor
/s/ W. Kerry Jackson Vice President - Chief Financial April 29, 1997
- ---------------------- Officer and Treasurer
W. Kerry Jackson (Principal Financial and Accounting
Officer)
41
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Description
- ------- -----------------------------------------------
3-A (9) Restated Articles of Incorporation of Registrant
3-B (10) By-laws of Registrant, as amended to date
4 (2) (i) Credit Agreement dated February 16, 1994 between Registrant
and Mercantile Bank of St. Louis National Association and Firstar
Bank of Milwaukee, N.A.; (ii) Promissory Notes of Registrant
dated February 16, 1994
(3) (ii) Amendment to Loan and Security Agreement and Promissory
Notes dated October 1, 1994
(4) (iii) Amended and Restated Credit Agreement and Promissory Notes
dated November 15, 1994
(4) (iv) Amendment to Amended and Restated Credit Agreement and
Promissory Notes dated November 22, 1994
(4) (v) Second Amendment to Amended and Restated Credit Agreement and
Promissory Notes dated February 10, 1995
(6) (vi) Third Amendment to Amended and Restated Credit Agreement and
Promissory Notes dated June 26, 1995
(7) (vii) Fourth Amendment to Amended and Restated Credit Agreement
and Promissory Notes dated November 15, 1995
(8) (viii) Fifth Amendment to Amended and Restated Credit Agreement
and Promissory Notes dated April 10, 1996
(ix) Sixth Amendment to Amended and Restated Credit Agreement and
Promissory Notes dated February 1, 1997
10-A (1) (i) Lease dated October 28, 1986, between Evansville
Associates, as landlord, and Registrant, as tenant, with respect
to Eastland Place Store
(2) (ii) Amendment to Lease, dated July 14, 1993, between Evansville
Associates, as landlord, and Registrant, as tenant, with respect
to Evansville Eastland Place Store
10-B (1) Lease dated March 31, 1987, between FPC Development Company,
as landlord, and Registrant, as tenant, with respect to Lexington
Loehmann's Plaza Store
42
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Description
- ------- -----------------------------------------------
10-C Schedule of Leases
10-D* (1) 1989 Stock Option Plan of Registrant and amendments to such Plan
10-E* (1) (i)1993 Stock Option and Incentive Plan of Registrant
(5) (ii) First Amendment to 1993 Stock Option and Incentive Plan of
Registrant
10-F* (1) Executive Incentive Compensation Plan of Registrant
10-I (1) Non-competition Agreement dated as of January 15, 1993, between
Registrant J. Wayne Weaver
10-K (1) Form of stock option exercise documents dated November 1, 1992,
between Registrant and each of fourteen executive officers and
key employees, including: (I) Exercise Notice; (ii) Subscription
Agreement; (iii) Promissory Note; (iv) Pledge Agreement; (v)
Stock Power
10-L* (5) Employee Stock Purchase Plan of Registrant
23 Written consent of Deloitte & Touche LLP
27 Financial Data Schedule
- -------------------------
* The indicated exhibit is a management contract, compensatory plan or
arrangement required to filed by Item 601 of Regulation S-K.
(1) The copy of this exhibit filed as the same exhibit number to the Company's
Registration Statement on Form S-1 (Registration No. 33-57902) is
incorporated herein by reference.
(2) The copy of this exhibit filed as the same exhibit number to the Company's
Annual Report on Form 10-K for the year ended January 1, 1994 is
incorporated herein by reference.
(3) The copy of this exhibit filed as the same exhibit number to the Company's
Quarterly Report on Form 10-Q for the quarter ended October 1, 1994 is
incorporated herein by reference.
43
<PAGE>
(4) The copy of this exhibit filed as the same exhibit number to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994 is
incorporated herein by reference.
(5) The copy of this exhibit filed as the same exhibit number to the Company's
Quarterly Report on Form 10-Q for the quarter ended April 29, 1995 is
incorporated herein by reference.
(6) The copy of this exhibit filed as the same exhibit number to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 29, 1995 is
incorporated herein by reference.
(7) The copy of this exhibit filed as the same exhibit number to the Company's
Quarterly Report on Form 10-Q for the quarter ended October 28, 1995 is
incorporated herein by reference.
(8) The copy of this exhibit filed as the same exhibit number to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 4, 1996 is
incorporated herein by reference.
(9) The copy of this exhibit filed as exhibit number 3.1 to the Company's
current Report on Form 8-K dated July 17, 1996 is incorporated herein by
reference.
(10) The copy of this exhibit filed as the same exhibit number to the
Company's Quarterly Report on Form 10-Q for the quarter ended November 2,
1996 is incorporated herein by reference.
44
<PAGE>
SIXTH AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, effective as
of the 1st day of February, 1997 is made by and between MERCANTILE BANK NATIONAL
ASSOCIATION, successor by merger to and formerly known as Mercantile Bank of St.
Louis National Association ("Mercantile"), FIRSTAR BANK MILWAUKEE, N.A.
("Firstar"), FIRST UNION NATIONAL BANK OF FLORIDA ("First Union," and
collectively with Mercantile and Firstar referred to herein as the "Banks"),
MERCANTILE BANK NATIONAL ASSOCIATION, as Agent (in such capacity, the "Agent"),
and SHOE CARNIVAL, INC. ("Borrower").
WITNESSETH:
WHEREAS, Mercantile, Firstar, Harris Trust and Savings Bank ("Harris") and
Borrower are parties to a certain Amended and Restated Credit Agreement dated as
of November 15, 1994, as previously amended by such parties and First Union
pursuant to an Amendment to Amended and Restated Credit Agreement dated as of
November 22, 1994, as further amended by Banks, Harris, Agent and Borrower
pursuant to a Second Amendment to Amended and Restated Credit Agreement dated as
of February 10, 1995, as further amended by Banks, Harris, Agent and Borrower
pursuant to a Third Amendment to Amended and Restated Credit Agreement dated as
of June 26, 1995, as further amended by Banks, Harris, Agent and Borrower
pursuant to a Fourth Amendment to Amended and Restated Credit Agreement dated as
of November 15, 1995 and as further amended by Banks, Harris, Agent and Borrower
pursuant to a Fifth Amendment to Amended and Restated Credit Agreement dated as
of April 10, 1996 (as amended, the "Agreement"), pursuant to which Banks and
Harris have agreed to loan Borrower such sums, not to exceed $35,000,000.00
outstanding at any one time, as Borrower may request from time to time, which
obligations of Borrower are presently evidenced by the Agreement and by a
certain Amended and Restated Promissory Note dated April 10, 1996 made by
Borrower payable to the order of Mercantile in the original principal amount of
Ten Million Five Hundred Thousand Dollars ($10,500,000.00), by a certain Amended
and Restated Promissory Note dated April 10, 1996 made by Borrower payable to
the order of Firstar in the original principal amount of Ten Million Five
Hundred Thousand Dollars ($10,500,000.00), by a certain Promissory Note dated
April 10, 1996 made by Borrower payable to the order of First Union in the
original principal amount of Seven Million Dollars ($7,000,000.00) and by a
certain Amended and Restated Promissory Note dated April 10, 1996 made by
Borrower payable to the order of Harris in the original principal amount of
Seven Million Dollars ($7,000,000.00) (as amended, the "Notes");
WHEREAS, Harris has requested to terminate its participation as a lender to
Borrower under the Agreement and each of the Banks is willing to assume a
portion of the Harris' loans to the Borrower;
WHEREAS, Borrower and Banks wish to further amend the Agreement and the
Notes to reduce the maximum aggregate principal amount available thereunder to
<PAGE>
$35,000,000.00, to change certain covenants contained in the Agreement and to
make certain other revisions to the Agreement as hereinafter set forth;
NOW, THEREFORE, in order to effect such amendments and in consideration of
the premises herein set forth, Borrower and Banks agree as follows:
1. The definition of "Commitment" in Section 1.1 of the Agreement is hereby
amended to provide as follow:
"Commitment" means Thirty-Five Million Dollars ($35,000,000.00), and with
respect to each Bank, the amount specified as such Bank's Commitment and set
forth opposite the name of such Bank on the signature pages of that certain
Sixth Amendment to Amended and Restated Credit Agreement dated as of February 1,
1997 made by and among Borrower, Agent and Banks.
2. Paragraph (b) in the definition of "Interest Period" in Section 1.1 of
the Agreement is hereby amended to provide as follows:
(b) Any Interest Period which includes March 31, 1999 shall end on such
date.
3. The definition of "Notes" in Section 1.1 of the Agreement is hereby
amended to provide as follows:
"Notes" mean the amended and restated promissory notes of Borrower in the
form of Exhibits A, B and I attached to that certain Sixth Amendment to Amended
and Restated Credit Agreement dated as of February 1, 1997, evidencing the
obligation of Borrower to repay the Loans and amounts outstanding under any
Reimbursement Agreements.
4. The Note of Borrower payable to the order of Mercantile shall hereafter
be amended and restated in the form of that Note attached to this Sixth
Amendment as Exhibit A and incorporated herein by reference. The Note of
Borrower payable to the order of Firstar shall hereafter be amended and restated
in the form of that Note attached to this Sixth Amendment as Exhibit B and
incorporated herein by reference. The Note of Borrower payable to the order of
First Union shall hereafter be amended and restated in the form of that Note
attached to this Sixth Amendment as Exhibit I and incorporated herein by
reference. The Note of Borrower payable to the order of Harris has been
terminated and Exhibit C to the Agreement is hereby deleted and is left blank
intentionally. Hereafter, all references in the Agreement, in any other
documents or agreements executed in connection with the Agreement or securing
Borrower's Obligations thereunder and herein to the "Notes" shall be amended and
deemed to refer only to the Amended and Restated Promissory Notes of Borrower in
favor of Mercantile, Firstar and First Union as attached hereto, as the same may
be amended, modified, renewed or restated hereafter.
- 2 -
<PAGE>
5. The definition of "Term" in Section 1.1 of the Agreement is hereby
amended to provide as follows:
"Term" means the period from the Effective Date up to and including March
31, 1999; except that (i) all, but not less than all, of the Banks may, in their
sole discretion, extend such Term for additional one-year periods by notifying
Borrower of each such extension at least 12 months prior to the expiration of
the then current Term end of their intention to extend the Term by an additional
year; and (ii) Agent may terminate Banks' obligations hereunder at any time
prior to such stated maturity date or any extension thereof pursuant to Article
6 herein.
6. Section 5.1(e)(i) of the Agreement is hereby amended to provide as
follows:
(e) Financial Covenants. Borrower will:
(i) Have a ratio of Total Liabilities to Net Worth of not more than 0.80 to
1 as of the end of each fiscal quarter during the Term hereof. For purposes of
this subsection (i) only, "Total Liabilities" shall mean total liabilities,
determined in accordance with generally accepted accounting principles,
consistently applied.
7. Section 5.1(e)(ii) of the Agreement is hereby deleted in its entirety
and is left blank intentionally.
8. Section 5.1(e)(iii) of the Agreement is hereby amended to provide as
follows:
(iii) Have a Net Worth of not less than $63,000,000.00 as of the end of
each fiscal quarter during the Term hereof.
9. Section 5.1(e)(iv) of the Agreement is hereby amended to provide as
follows:
(iv) Have a ratio of Funded Debt to EBITDA of not more than 2.0 to 1.0 at
each fiscal quarter-end during the Term hereof. As used herein, the term
"EBITDA" shall mean Borrower's net income before taxes, plus interest expense,
plus depreciation, plus amortization, as determined in accordance with generally
accepted accounting principles consistently applied, for the four fiscal quarter
period ending on the date of such calculation. As used herein, the term "Funded
Debt" shall mean all Indebtedness of Borrower for borrowed money, including, but
not limited to, all liabilities of Borrower under any Capitalized Leases.
- 3 -
<PAGE>
10. Section 5.1(e)(v) of the Agreement is hereby deleted in its entirety
and is left blank intentionally.
11. Section 5.2(m) of the Agreement is hereby amended to provide as
follows:
(m) Capital Expenditures. Borrower shall not make or incur any obligation
to make any Capital Expenditures or enter into any Capitalized Leases in excess
of Twelve Million Dollars ($12,000,000.00) in the aggregate for all such
obligations during any fiscal year during the Term hereof.
12. The Compliance Certificate (as defined in the Agreement) attached as
Exhibit D to the Agreement, shall be amended and restated in the form of that
certain Compliance Certificate attached hereto as Exhibit D. All references in
the Agreement to the "Compliance Certificate" and other references of similar
import shall hereafter be amended and deemed to refer to the Compliance
Certificate in the form of that attached hereto as Exhibit D, which shall be
submitted by Borrower to Banks as required in the Agreement.
13. Borrower hereby represents and warrants to Agent and to Banks that:
(a) The execution, delivery and performance by Borrower of this Sixth
Amendment are within the corporate powers of Borrower, have been duly authorized
by all necessary corporate action and require no action by or in respect of, or
filing with, any governmental or regulatory body, agency or official. The
execution, delivery and performance by Borrower of this Sixth Amendment do not
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under or result in any violation of, and Borrower is not
now in default under or in violation of, the terms of the Articles of
Incorporation or Bylaws of Borrower, any applicable law, any rule, regulation,
order, writ, judgment or decree of any court or governmental or regulatory
agency or instrumentality, or any agreement or instrument to which Borrower is a
party or by which it is bound or to which it is subject;
(b) This Sixth Amendment has been duly executed and delivered and
constitutes the legal, valid and binding obligation of Borrower enforceable in
accordance with its terms; and
(c) As of the date hereof, all of the covenants, representations and
warranties of Borrower set forth in the Agreement are true and correct and no
"Event of Default" (as defined therein) under or within the meaning of the
Agreement, as hereby amended, has occurred and is continuing.
14. The Agreement, as hereby amended, and the Notes, as hereby amended, are
and shall remain the binding obligations of Borrower, and except to the extent
amended by this Sixth Amendment, all of the terms, provisions, conditions,
agreements, covenants, representations, warranties and powers contained in the
Agreement and the Notes shall be and remain in full force and effect and the
same are hereby ratified and confirmed. This Sixth Amendment amends the
Agreement and is not a novation thereof.
- 4 -
<PAGE>
15. All references in the Agreement to "this Agreement" and to the "Notes"
and any other references of similar import shall henceforth mean the Agreement
or the Notes, as the case may be, as amended by this Sixth Amendment. All
references in the Notes or other documents to "the Agreement" and to the "Notes"
and any other references of similar import shall henceforth mean the Agreement
or the Notes, as the case may be, as amended by this Sixth Amendment.
16. This Sixth Amendment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that
Borrower may not assign, transfer or delegate any of its rights or obligations
hereunder.
17. This Sixth Amendment is made solely for the benefit of Borrower, Agent
and Banks as set forth herein, and is not intended to be relied upon or enforced
by any other person or entity.
18. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER, AGENT AND BANKS FROM
ANY MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER,
AGENT AND BANKS COVERING SUCH MATTERS ARE CONTAINED IN THIS SIXTH AMENDMENT, THE
NOTES AND THE AGREEMENT, WHICH CONSTITUTE A COMPLETE AND EXCLUSIVE STATEMENT OF
THE AGREEMENTS BETWEEN BORROWER, AGENT AND BANKS EXCEPT AS BORROWER, AGENT AND
BANKS MAY LATER AGREE IN WRITING TO MODIFY. THIS SIXTH AMENDMENT, THE NOTES AND
THE AGREEMENT EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES
HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS (ORAL OR WRITTEN)
RELATING TO THE SUBJECT MATTER HEREOF.
19. This Sixth Amendment shall be governed by and construed in accordance
with the internal laws of the State of Missouri.
20. In the event of any inconsistency or conflict between this Sixth
Amendment and the Agreement or the Notes, the terms, provisions and conditions
of this Sixth Amendment shall govern and control.
- 5 -
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Sixth Amendment to
Amended and Restated Credit Agreement and Promissory Notes as of the day and
year first above written on this 1st day of February, 1997.
SHOE CARNIVAL, INC.
By: /s/ W. Kerry Jackson
W. Kerry Jackson, Vice President,
Chief Financial Officer and Treasurer
Commitment: MERCANTILE BANK
Facility A: $12,500,000.00 (35.714%) NATIONAL ASSOCIATION
By: /s/ Joseph L. Sooter, Jr.
Joseph L. Sooter, Jr., Vice President
Commitment: FIRSTAR BANK MILWAUKEE, N.A.
Facility A: $10,000,000.00 (28.572%)
By: /s/ Douglas A. Gallun
Douglas A. Gallun, Vice President
Commitment: FIRST UNION NATIONAL BANK OF FLORIDA
Facility A: $12,500,000.00 (35.714%)
By: /s/ Richard P. Silva
Richard P. Silva, Vice President
MERCANTILE BANK
NATIONAL ASSOCIATION, AS AGENT
By: /s/ Joseph L. Sooter, Jr.
Joseph L. Sooter, Jr., Vice President
- 6 -
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
PROMISSORY NOTE
$12,500,000.00 St. Louis, Missouri
February 1, 1997
FOR VALUE RECEIVED, SHOE CARNIVAL, INC., an Indiana corporation (formerly a
Delaware corporation) ("Borrower"), hereby promises to pay to the order of
Mercantile Bank National Association, a national banking association ("Bank") on
March 31, 1999, the lesser of (a) Twelve Million Five Hundred Thousand Dollars
($12,500,000.00), or (b) the aggregate unpaid principal amount of all Loans made
by Bank to Borrower in accordance with the terms and conditions hereof and of
that certain Amended and Restated Credit Agreement dated as of November 15,
1994, made by and between Borrower, Mercantile Bank National Association,
formerly known as Mercantile Bank of St. Louis National Association, as Agent
(the "Agent") and the Banks named therein, as from time to time amended (as
amended, the "Credit Agreement") and the unreimbursed amount of any draws under
any Letters of Credit issued for the account of Borrower in accordance with the
terms and conditions of the Credit Agreement and the Reimbursement Agreements
(as defined in the Credit Agreement). The aggregate principal amount which Bank
may have outstanding hereunder at any one time for all Loans shall not exceed
the lesser of (i) Twelve Million Five Hundred Thousand Dollars ($12,500,000.00)
minus the face amount of all Letters of Credit then outstanding under Section
2.1(a) of the Credit Agreement, or (ii) Thirty-Five and 714/1,000ths Percent
(35.714%) of the then current Borrowing Base, which amounts may be borrowed,
paid, reborrowed and repaid, in full or in part, prior to March 31, 1999 subject
to the terms and conditions hereof and of the Credit Agreement. If at any time
the aggregate principal amount of all Loans outstanding under this Note should
exceed the amount set forth in the preceding sentence, whether as a result of a
reduction in the Borrowing Base or otherwise, Borrower shall be automatically
required (without demand or notice of any kind by Bank, all of which are hereby
expressly waived by Borrower), to immediately repay the Loans in an amount
sufficient to reduce such aggregate principal amount of Loans outstanding under
this Note to the amount set forth in the preceding sentence.
Additionally, Borrower promises to pay to the order of Bank all accrued
interest owing on the principal amount of all Loan advances and Letter of Credit
reimbursement obligations outstanding hereunder. Advances hereunder shall bear
interest at the rate per annum equal to such of the following as Borrower, at
its option, shall select:
(a) the interest rate announced from time to time by Agent as its "Prime
Rate" on commercial loans, which rate shall fluctuate as and when said Prime
Rate shall change, or
- 7 -
<PAGE>
(b) the London Interbank Offered Rate plus Eurocurrency Margin (as defined
in the Credit Agreement) for the applicable Interest Period,
determined in each case as of the date of a Prime Rate Loan made hereunder, or
the commencement of a Interest Period for Eurocurrency Loans, as the case may
be. Said interest shall be payable on the dates provided in the Credit
Agreement. After maturity, the unpaid principal hereof shall bear interest at a
rate per annum equal to three percent (3%) in excess of the interest rate
announced from time to time by Agent as its "Prime Rate" on commercial loans,
which rate shall fluctuate as and when said Prime Rate shall change.
Interest shall be computed on the basis of a 360-day year for the actual
number of days elapsed for all Loans made hereunder. Payments of principal,
interest and fees shall be made in lawful money of the United States of America
in immediately available funds at the office of Agent situated at 721 Locust
Street, St. Louis, Missouri 63101 or at such other place as the holder of this
Note may designate, and such payments shall be applied to the payment of
interest or principal (or any combination of the foregoing) owing on this Note
in such order as Bank (or such holder) shall determine.
All advances and all principal payments made hereunder and all Interest
Periods and interest rates applicable to Eurocurrency Loans may be endorsed by
the Bank on its records or the sheet attached to this Note, which information so
endorsed or recorded shall constitute prima facie evidence thereof; provided,
however that the obligation of Borrower to repay each advance made hereunder
shall be absolute and unconditional, notwithstanding any failure of Bank to
endorse or record or any mistake by Bank in connection with any recordation or
with any endorsement on the sheet attached to this Note or to give to Borrower
or receive from Borrower any notice or confirmation of each advance.
Borrower shall be privileged to prepay in whole or in part the principal
outstanding hereunder; provided, however, that (subject to the right of Bank to
accelerate payment hereunder) any Eurocurrency Loan may be prepaid only at the
expiration of the applicable Interest Period; and provided further, however,
that on any such prepayment, Borrower shall also pay all interest accrued on the
principal amount being prepaid to and including the date of such prepayment. Any
payment of a Eurocurrency Loan other than on the last day of the applicable
Interest Period in contravention of this paragraph shall obligate Borrower to
pay to Bank the amount of any funding losses or other breakage costs which may
be incurred by Bank as set forth in Section 2.10 of the Credit Agreement.
Consistent with the terms of this Note, the Agent shall determine each
interest rate applicable to the advances hereunder, which determination shall be
conclusive in the absence of manifest error.
This Note is one of the Notes referred to in the Credit Agreement, which
Credit Agreement, among other things, contains provisions for acceleration of
the maturity hereof upon the occurrence of certain stated events and also for
prepayments on account of principal hereof and interest hereon prior to the
maturity hereof upon the terms and conditions specified therein. Terms defined
in the Credit Agreement are used herein with the same meanings.
- 8 -
<PAGE>
In the event that any payment due hereunder shall not be paid when due,
whether by reason of demand or otherwise, and this Note shall be placed in the
hands of an attorney for collection hereof, Borrower agrees to pay in addition
to all other amounts due hereon the costs and expenses of collection, including
reasonable attorneys' fees and expenses, whether or not litigation is commenced
in aid thereof. Borrower hereby waives presentment, demand, protest, notice of
protest and notice of dishonor.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Missouri.
This Note is a renewal, restatement and continuation of the obligations due
Bank as evidenced by a prior amended and Restated Promissory Note dated April
10, 1996 from Borrower to Bank, and is not a novation thereof. All interest
evidenced by the prior Note being renewed by this instrument shall continue to
be due and payable until paid.
SHOE CARNIVAL, INC.
By: /s/ W. Kerry Jackson
W. Kerry Jackson, Vice President,
Chief Financial Officer and Treasurer
STATE OF INDIANA )
) SS.
COUNTY OF Vanderburgh )
On this 24th day of February, 1997, before me appeared W. Kerry Jackson, to
me personally known, who being by me duly sworn, did say that he is the Vice
President, Chief Financial Officer and Treasurer of Shoe Carnival, Inc., an
Indiana corporation, and that said instrument was signed in behalf of said
corporation by authority of its Board of Directors; and said W. Kerry Jackson
acknowledged said instrument to be the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
(Seal)
Notary Public /s/ Molly A. Graham
My Commission Expires: 6/23/97
- 9 -
<PAGE>
EXHIBIT B
AMENDED AND RESTATED
PROMISSORY NOTE
$10,000,000.00 St. Louis, Missouri
February 1, 1997
FOR VALUE RECEIVED, SHOE CARNIVAL, INC., an Indiana corporation (formerly a
Delaware corporation) ("Borrower"), hereby promises to pay to the order of
Firstar Bank Milwaukee, N.A., a national banking association ("Bank") on March
31, 1999, the lesser of (a) Ten Million Dollars ($10,000,000.00), or (b) the
aggregate unpaid principal amount of all Loans made by Bank to Borrower in
accordance with the terms and conditions hereof and of that certain Amended and
Restated Credit Agreement dated as of November 15, 1994 made by and between
Borrower, Mercantile Bank National Association, formerly known as Mercantile
Bank of St. Louis National Association, as Agent (the "Agent") and the Banks
named therein, as from time to time amended (as amended, the "Credit Agreement")
and the unreimbursed amount of any draws under any Letters of Credit issued for
the account of Borrower in accordance with the terms and conditions of the
Credit Agreement and the Reimbursement Agreements (as defined in the Credit
Agreement). The aggregate principal amount which Bank may have outstanding
hereunder at any one time for all Loans shall not exceed the lesser of (i) Ten
Million Dollars ($10,000,000.00) minus the face amount of all Letters of Credit
then outstanding under Section 2.1(a) of the Credit Agreement, or (ii)
Twenty-Eight and 572/1,000ths Percent (28.572%) of the then current Borrowing
Base, which amounts may be borrowed, paid, reborrowed and repaid, in whole or in
part, prior to March 31, 1999 subject to the terms and conditions hereof and of
the Credit Agreement. If at any time the aggregate principal amount of all Loans
outstanding under this Note should exceed the amount set forth in the preceding
sentence, whether as a result of a reduction in the Borrowing Base or otherwise,
Borrower shall be automatically required (without demand or notice of any kind
by Bank, all of which are hereby expressly waived by Borrower), to immediately
repay the Loans in an amount sufficient to reduce such aggregate principal
amount of Loans outstanding under this Note to the amount set forth in the
preceding sentence.
Additionally, Borrower promises to pay to the order of Bank all accrued
interest owing on the principal amount of all Loan advances outstanding
hereunder. Advances hereunder shall bear interest at the rate per annum equal to
such of the following as Borrower, at its option, shall select:
(a) the interest rate announced from time to time by Agent as its "Prime
Rate" on commercial loans, which rate shall fluctuate as and when said Prime
Rate shall change, or
(b) the London Interbank Offered Rate plus Eurocurrency Margin (as defined
in the Credit Agreement) for the applicable Interest Period,
- 10 -
<PAGE>
determined in each case as of the date of a Prime Rate Loan made hereunder, or
the commencement of a Interest Period for Eurocurrency Loans, as the case may
be. Said interest shall be payable on the dates provided in the Credit
Agreement. After maturity, the unpaid principal hereof shall bear interest at a
rate per annum equal to three percent (3%) in excess of the interest rate
announced from time to time by Agent as its "Prime Rate" on commercial loans,
which rate shall fluctuate as and when said Prime Rate shall change.
Interest shall be computed on the basis of a 360-day year for the actual
number of days elapsed for all Loans made hereunder. Payments of principal,
interest and fees shall be made in lawful money of the United States of America
in immediately available funds at the office of Agent situated at 721 Locust
Street, St. Louis, Missouri 63101 or at such other place as the holder of this
Note may designate, and such payments shall be applied to the payment of
interest or principal (or any combination of the foregoing) owing on this Note
in such order as Bank (or such holder) shall determine.
All advances and all principal payments made hereunder and all Interest
Periods and interest rates applicable to Eurocurrency Loans may be endorsed by
the Bank on its records or the sheet attached to this Note, which information so
endorsed or recorded shall constitute prima facie evidence thereof; provided,
however that the obligation of Borrower to repay each advance made hereunder
shall be absolute and unconditional, notwithstanding any failure of Bank to
endorse or record or any mistake by Bank in connection with any recordation or
with any endorsement on the sheet attached to this Note or to give to Borrower
or receive from Borrower any notice or confirmation of each advance.
Borrower shall be privileged to prepay in whole or in part the principal
outstanding hereunder; provided, however, that (subject to the right of Bank to
accelerate payment hereunder) any Eurocurrency Loan may be prepaid only at the
expiration of the applicable Interest Period; and provided further, however,
that on any such prepayment, Borrower shall also pay all interest accrued on the
principal amount being prepaid to and including the date of such prepayment. Any
payment of a Eurocurrency Loan other than on the last day of the applicable
Interest Period in contravention of this paragraph shall obligate Borrower to
pay to Bank the amount of any funding losses or other breakage costs which may
be incurred by Bank as set forth in Section 2.10 of the Credit Agreement.
Consistent with the terms of this Note, the Agent shall determine each
interest rate applicable to the advances hereunder, which determination shall be
conclusive in the absence of manifest error.
This Note is one of the Notes referred to in the Credit Agreement, which
Credit Agreement, among other things, contains provisions for acceleration of
the maturity hereof upon the occurrence of certain stated events and also for
prepayments on account of principal hereof and interest hereon prior to the
maturity hereof upon the terms and conditions specified therein. Terms defined
in the Credit Agreement are used herein with the same meanings.
In the event that any payment due hereunder shall not be paid when due,
whether by reason of demand or otherwise, and this Note shall be placed in the
hands of an attorney for
- 11 -
<PAGE>
collection hereof, Borrower agrees to pay in addition to all other amounts due
hereon the costs and expenses of collection, including reasonable attorneys'
fees and expenses, whether or not litigation is commenced in aid thereof.
Borrower hereby waives presentment, demand, protest, notice of protest and
notice of dishonor.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Missouri.
This Note is a renewal, restatement and continuation of the obligations due
Bank as evidenced by a prior amended and Restated Promissory Note dated April
10, 1996 from Borrower to Bank, and is not a novation thereof. All interest
evidenced by the prior Note being renewed by this instrument shall continue to
be due and payable until paid.
SHOE CARNIVAL, INC.
By: /s/ W. Kerry Jackson
W. Kerry Jackson, Vice President,
Chief Financial Officer and Treasurer
STATE OF INDIANA )
) SS.
COUNTY OF Vanderburgh )
On this 24th day of February, 1997, before me appeared W. Kerry Jackson, to
me personally known, who being by me duly sworn, did say that he is the Vice
President, Chief Financial Officer and Treasurer of Shoe Carnival, Inc., an
Indiana corporation, and that said instrument was signed in behalf of said
corporation by authority of its Board of Directors; and said W. Kerry Jackson
acknowledged said instrument to be the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
(Seal)
Notary Public /s/ Molly A. Graham
My Commission Expires: 6/23/97
- 12 -
<PAGE>
EXHIBIT I
AMENDED AND RESTATED
PROMISSORY NOTE
$12,500,000.00 St. Louis, Missouri
February 1, 1997
FOR VALUE RECEIVED, SHOE CARNIVAL, INC., an Indiana corporation (formerly a
Delaware corporation) ("Borrower"), hereby promises to pay to the order of First
Union National Bank of Florida, a national banking association ("Bank") on March
31, 1999, the lesser of (a) Twelve Million Five Hundred Thousand Dollars
($12,500,000.00), or (b) the aggregate unpaid principal amount of all Loans made
by Bank to Borrower in accordance with the terms and conditions hereof and of
that certain Amended and Restated Credit Agreement dated as of November 15, 1994
made by and between Borrower, Mercantile Bank National Association, formerly
known as Mercantile Bank of St. Louis National Association, as Agent (the
"Agent") and the Banks named therein, as amended from time to time (as amended,
the "Credit Agreement") and the unreimbursed amount of any draws under any
Letters of Credit issued for the account of Borrower in accordance with the
terms and conditions of the Credit Agreement and the Reimbursement Agreements
(as defined in the Credit Agreement). The aggregate principal amount which Bank
may have outstanding hereunder at any one time for all Loans shall not exceed
the lesser of (i) Twelve Million Five Hundred Thousand Dollars ($12,500,000.00)
minus the face amount of all Letters of Credit then outstanding under Section
2.1(a) of the Credit Agreement, or (ii) Thirty-Five and 714/1,000ths Percent
(35.714%) of the then current Borrowing Base, which amounts may be borrowed,
paid, reborrowed and repaid, in whole or in part, prior to March 31, 1999
subject to the terms and conditions hereof and of the Credit Agreement. If at
any time the aggregate principal amount of all Loans outstanding under this Note
should exceed the amount set forth in the preceding sentence, whether as a
result of a reduction in the Borrowing Base or otherwise, Borrower shall be
automatically required (without demand or notice of any kind by Bank, all of
which are hereby expressly waived by Borrower), to immediately repay the Loans
in an amount sufficient to reduce such aggregate principal amount of Loans
outstanding under this Note to the amount set forth in the preceding sentence.
Additionally, Borrower promises to pay to the order of Bank all accrued
interest owing on the principal amount of all Loan advances and Letter of Credit
reimbursement obligations outstanding hereunder. Advances hereunder shall bear
interest at the rate per annum equal to such of the following as Borrower, at
its option, shall select:
(a) the interest rate announced from time to time by Agent as its "Prime
Rate" on commercial loans, which rate shall fluctuate as and when said Prime
Rate shall change, or
- 13 -
<PAGE>
(b) the London Interbank Offered Rate plus Eurocurrency Margin (as defined
in the Credit Agreement) for the applicable Interest Period,
determined in each case as of the date of a Prime Rate Loan made hereunder, or
the commencement of a Interest Period for Eurocurrency Loans, as the case may
be. Said interest shall be payable on the dates provided in the Credit
Agreement. After maturity, the unpaid principal hereof shall bear interest at a
rate per annum equal to three percent (3%) in excess of the interest rate
announced from time to time by Agent as its "Prime Rate" on commercial loans,
which rate shall fluctuate as and when said Prime Rate shall change.
Interest shall be computed on the basis of a 360-day year for the actual
number of days elapsed for all Loans made hereunder. Payments of principal,
interest and fees shall be made in lawful money of the United States of America
in immediately available funds at the office of Agent situated at 721 Locust
Street, St. Louis, Missouri 63101 or at such other place as the holder of this
Note may designate, and such payments shall be applied to the payment of
interest or principal (or any combination of the foregoing) owing on this Note
in such order as Bank (or such holder) shall determine.
All advances and all principal payments made hereunder and all Interest
Periods and interest rates applicable to Eurocurrency Loans may be endorsed by
the Bank on its records or the sheet attached to this Note, which information so
endorsed or recorded shall constitute prima facie evidence thereof; provided,
however that the obligation of Borrower to repay each advance made hereunder
shall be absolute and unconditional, notwithstanding any failure of Bank to
endorse or record or any mistake by Bank in connection with any recordation or
with any endorsement on the sheet attached to this Note or to give to Borrower
or receive from Borrower any notice or confirmation of each advance.
Borrower shall be privileged to prepay in whole or in part the principal
outstanding hereunder; provided, however, that (subject to the right of Bank to
accelerate payment hereunder) any Eurocurrency Loan may be prepaid only at the
expiration of the applicable Interest Period; and provided further, however,
that on any such prepayment, Borrower shall also pay all interest accrued on the
principal amount being prepaid to and including the date of such prepayment. Any
payment of a Eurocurrency Loan other than on the last day of the applicable
Interest Period in contravention of this paragraph shall obligate Borrower to
pay to Bank the amount of any funding losses or other breakage costs which may
be incurred by Bank as set forth in Section 2.10 of the Credit Agreement.
Consistent with the terms of this Note, the Agent shall determine each
interest rate applicable to the advances hereunder, which determination shall be
conclusive in the absence of manifest error.
This Note is one of the Notes referred to in the Credit Agreement, which
Credit Agreement, among other things, contains provisions for acceleration of
the maturity hereof upon the occurrence of certain stated events and also for
prepayments on account of principal hereof and interest hereon prior to the
maturity hereof upon the terms and conditions specified therein. Terms defined
in the Credit Agreement are used herein with the same meanings.
- 14 -
<PAGE>
In the event that any payment due hereunder shall not be paid when due,
whether by reason of demand or otherwise, and this Note shall be placed in the
hands of an attorney for collection hereof, Borrower agrees to pay in addition
to all other amounts due hereon the costs and expenses of collection, including
reasonable attorneys' fees and expenses, whether or not litigation is commenced
in aid thereof. Borrower hereby waives presentment, demand, protest, notice of
protest and notice of dishonor.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Missouri.
This Note is a renewal, restatement and continuation of the obligations due
Bank as evidenced by a prior amended and Restated Promissory Note dated April
10, 1996 from Borrower to Bank, and is not a novation thereof. All interest
evidenced by the prior Note being renewed by this instrument shall continue to
be due and payable until paid.
SHOE CARNIVAL, INC.
By: /s/ W. Kerry Jackson
W. Kerry Jackson, Vice President,
Chief Financial Officer and Treasurer
STATE OF INDIANA )
) SS.
COUNTY OF Vanderburgh )
On this 24th day of February, 1997, before me appeared W. Kerry Jackson, to
me personally known, who being by me duly sworn, did say that he is the Vice
President, Chief Financial Officer and Treasurer of Shoe Carnival, Inc., an
Indiana corporation, and that said instrument was signed in behalf of said
corporation by authority of its Board of Directors; and said W. Kerry Jackson
acknowledged said instrument to be the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
(Seal)
Notary Public /s/ Molly A. Graham
My Commission Expires: 6/23/97
- 15 -
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF LEASES
EXISTING STORES AS OF 01/31/97
------------------------------
FIXED
ANNUAL
MINIMUM
LEASE DATE LEASE TOTAL TOTAL RENT
STR EXPIR. OF TERM OPTIONS SQ AS OF
# CITY ST MALL/CENTER LANDLORD DATE LEASE (YRS) (YRS) FOOTAGE 01/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2 EVANSVILLE IN EASTLAND MALL EQUITABLE LIFE (GEN. GROWTH) 01/31/04 07/30/96 7 0 2,110 48,528
3 EVANSVILLE IN EASTLAND PLACE EVANSVILLE ASSOCIATES (S & B) 10/28/08 10/28/86 15 0 26,473 252,817
4 OWENSBORO KY TOWNE SQUARE NORTH TSN PARTNERS (HOCKER) 12/31/00 01/30/91 10 0 8,000 84,000
5 INDIANAPOLIS IN GREENWOOD PLACE GREENWOOD PLACE ASSOCIATES 10/31/07 09/08/86 21 10 10,000 125,004
6 INDIANAPOLIS IN CASTLETON PLAZA CASTLETON PLAZA ASSOCIATES 11/30/07 09/08/86 21 10 15,000 210,000
7 INDIANAPOLIS IN LAFAYETTE PLACE LAFAYETTE PLACE ASSOCIATES 10/31/06 09/08/86 20 10 9,000 99,000
8 LEXINGTON KY FAYETTE PLACE FPC DEVELOPMENT (HOCKER) 12/31/02 03/31/87 15 0 16,800 248,304
9 INDIANAPOLIS IN WASHINGTON PLACE WASH. PLACE ASSOC. (S & B) 07/31/07 07/06/87 21 10 11,800 135,696
10 PADUCAH KY KENTUCKY OAKS KY. OAKS MALL CO. 12/31/07 03/16/87 10 5 11,056 93,976
11 CARBONDALE IL UNIVERSITY PLACE CAR 2 COMPANY (HOCKER) 12/31/97 10/10/86 10 0 14,880 158,472
12 FT WAYNE IN THE SHOPPES THE SHOPPES ASSOC. (S & B) 08/31/08 02/12/87 21 10 12,875 154,500
13 DES MOINES IA SOUTHRIDGE MALL EQUITABLE LIFE (GEN. GROWTH) 01/31/98 06/22/87 10 0 14,882 138,577
14 NASHVILLE TN BELL FORGE PAINE WEBER PROPERTIES 08/31/02 08/31/87 15 0 20,230 212,415
15 AUSTIN MN OAK PARK MALL OAK PARK MALL LTD PARTNERSHIP 01/31/98 03/03/87 10 0 7,892 23,676
17 LOUISVILLE KY INDIAN TRAIL DAHLEM ENTERPRISES, INC. 12/31/02 06/16/87 15 0 29,680 156,000
18 LOUISVILLE KY HUNNINGTON PLACE HUNTINGTON ASSOCIATES, INC. 10/31/06 06/15/87 19 0 18,360 215,730
19 ELIZABETHTOWN KY STARLITE STARLITE, LTD. 12/31/02 06/05/87 15 5 16,088 134,204
20 HUNTSVILLE AL THE GALLERY US REALTY PARTNERS 09/14/04 06/30/87 17 0 13,800 165,600
21 BETTENDORF IA DUCK CREEK PLAZA EQUITABLE LIFE (GEN. GROWTH) 01/31/98 03/03/87 10 0 12,508 118,824
22 BLOOMINGTON IN WHITEHALL PLAZA BLOOMINGTON SQUARE ASSOCIATES 07/31/01 06/24/91 10 5 7,200 57,600
23 LIMA OH AMERICAN MALL AMERICAN MALL, INC. 12/31/03 02/10/88 15 0 7,650 68,850
24 BLOOMINGTON IL LAKEWOOD PLAZA DUKE ASSOC. #47 LTD. 08/31/98 08/17/87 10 5 18,000 211,500
25 BOWLING GREEN KY GREENWOOD SQUARE PACIFIC MUTUAL REALTY FINANCE 05/31/03 06/30/87 15 0 16,000 172,369
26 ANDERSON IN APPLEWOOD CENTER SCATTERFIELD ROAD ASSOC. 09/01/98 09/27/87 10 0 10,063 122,504
28 MEMPHIS TN HICKORY RIDGE COMMONS HICKORY RIDGE COMMONS ASSOC 09/30/02 11/30/90 10 10 10,037 139,638
29 GRAND RAPIDS MI EAST PARIS SHOPPES EAST PARIS SHOPPES (S & B) 3/31/06 09/21/88 17 10 10,200 122,706
30 FRANKFORT KY BRIGHTON PARK BRIGHTON PTNRS. (ISAAC COMM.) 11/14/97 07/01/87 10 10 12,450 92,400
31 FAIRVIEW HEIGHTS IL MARKET PLACE PACE PROPERTY, INC. 11/30/02 07/20/87 15 5 16,000 176,000
32 DES MOINES IA HARDING HILLS HARDING HILLS LTD. PARTNERSHIP 01/31/00 06/01/89 10 0 8,563 98,472
33 NASHVILLE TN THE SHOPPES AT RIVERGATE RIVERGATE PROPERTIES LTD. 01/31/04 08/04/89 14 10 10,010 100,100
34 ST. LOUIS MO MACKENZIE POINTE CAPITOL-DIERBERG PROPERTIES 3 08/31/00 04/20/90 10 5 10,000 120,000
35 ST. LOUIS MO NORTH COUNTY FESTIVAL ST. LOUIS INVESTMENT PROPERTIES 01/31/04 05/01/93 10.5 10 12,100 145,200
36 ST. LOUIS MO MID RIVERS PLAZA CREWE LTD. PARTNERSHIP 08/31/00 05/14/90 10 5 10,277 128,460
38 FT. WAYNE IN TIME CORNERS VILLAGE AT TIME CORNERS, ASSOC. 03/31/00 11/13/89 10 10 10,048 129,217
39 EVANSVILLE IN UNIVERSITY VILLAGE REGENCY PROPERTY MGT. INC. 01/31/00 12/04/89 10 0 6,600 64,356
40 ELLISVILLE MO BRADFORD HILLS BRADFORD HILLS ASSOC., L.P. 01/31/03 06/10/92 10 5 9,100 113,750
41 ST. LOUIS MO HILLTOP PLAZA TERRA VENTURE BRIDGETON PROJ. 01/31/03 06/03/92 10 5 9,100 113,748
42 MEMPHIS TN TOWNE CENTRE WESTCO DEVELOPMENT #1 01/31/00 06/19/92 7 5 7,600 76,000
43 CHATTANOOGA TN OVERLOOK @ HAMILTON PLACE JDN STRUCTURED FINANCE 1, INC. 05/31/03 12/30/92 10 10 11,000 93,500
44 WALKER MI GREEN ORCHARD KIMCO GREEN ORCHARD 05/31/03 01/22/93 10 10 8,100 74,925
45 ALEXANDRIA KY ALEXANDRIA VILLAGE GREEN ALEXANDRIA VILLAGE LP 01/31/04 04/07/93 10 10 8,000 78,000
46 CINCINNATI OH GLENWAY CROSSING DEVELOPERS DIVERSIFIED REALTY 06/30/03 04/20/93 10 10 9,108 91,080
47 CINCINNATI OH EASTGATE STATION ESA, L.P. 06/30/03 05/04/93 10 10 10,540 113,305
48 GREENVILLE SC MARKETPLACE CENTER VERDAE PROPERTIES, INC. 01/31/04 05/26/93 10 10 9,522 104,742
49 FLORENCE KY FLORENCE SQUARE B & J DEVELOPMENT 01/31/04 06/22/93 10 10 10,005 100,450
50 NORWOOD OH ROOKWOOD PAVILION ROOKWOOD PAVILION LTD.PTNSHIP 01/31/04 04/07/93 10 10 9,600 124,800
51 SPRINGFIELD IL PARKWAY POINTE LINCOLN LAND DEVELOPMENT CO 03/31/04 06/29/93 10 10 10,186 112,046
52 DULUTH GA VENTURE POINTE CROWN VENTURES 01/31/04 06/16/93 10 10 10,000 131,400
53 AUGUSTA GA AUGUSTA WEST PLAZA DJS HOLDINGS, INC. 01/31/05 04/06/94 10 5 9,800 100,450
54 MORROW GA SOUTHLAKE PAVILION SECURED PROPERTIES INVESTORS 01/31/04 09/08/93 10 10 10,000 130,000
55 CINCINNATI OH TRI-COUNTY COMMONS CROSSROADS LIMITED PARTNERSHIP 01/31/05 06/22/93 10 5 12,000 159,960
56 ASHEVILLE NC OVERLOOK VILLAGE ASHEVILLE RETAIL PARTNERS 01/31/04 07/13/93 10 10 8,840 101,664
57 OVERLAND PARK KS QUIVERA 95 PLAZA Q95 ASSOCIATES, L.P. 12/31/03 07/08/93 10 5 12,600 201,600
58 INDEPENDENCE MO NOLAND FASHION SQUARE NOLAND FASHION SQUARE PARTNERS 01/31/04 07/01/93 10 10 10,000 100,000
59 ATHENS GA PERIMETER SQUARE PERIMETER SQUARE SHOPPING CTR 01/31/04 09/20/93 10 10 11,242 126,473
60 MISHAWAKA IN INDIAN RIDGE PLAZA EQUITY PROPERTIES AND DEV CO. 08/31/03 07/22/93 10 5 10,000 97,500
61 LAFAYETTE IN LAFAYETTE SHOPPES GLENDALE PARTNERS OF LAFAYETTE 01/31/05 07/01/93 10 10 9,600 96,000
62 S. CHARLESTON WV SOUTHRIDGE CENTRE THF-CG CHARLESTON LTD PTNRSHIP 01/31/04 08/31/93 10 10 10,000 110,000
63 KOKOMO IN WAL-MART PLAZA SEDD REALTY COMPANY 01/31/05 09/15/93 10 10 10,200 122,400
65 TAYLOR MI BURLINGTON SQUARE WALPATH CENTERS PARTNERSHIP 04/30/04 03/14/94 10 10 8,805 88,050
66 W. CARROLLTON OH CORNERS AT THE MALL WALPATH CENTERS PARTNERSHIP 05/31/04 03/14/94 10 5 10,416 114,576
67 DAYTON OH SALEM CONSUMER SQUARE BFG ASSOCIATES 07/31/04 03/03/94 10 5 11,415 97,028
68 FRANKLIN TN COOLSPRINGS GALLERIA TENNESSEE EQUITIES, INC. 01/31/15 08/01/94 20 10 10,000 150,000
69 DES MOINES IA WESTRIDGE SHOPPING CTR CAPITAL I., LTD. 01/31/05 03/02/94 10 10 14,325 156,228
70 KENNESAW GA BARRETT PAVILION THOMAS ENTERPRISES, INC. 01/31/05 05/09/94 10 10 10,000 131,400
71 SPRINGFIELD MO PRIMROSE MARKETPLACE KIMCO SPRINGFIELD 625, INC. 01/31/05 01/12/94 10 10 10,022 100,215
74 FARMINGTON MI DOWNTOWN FARMINGTON CTR KIMCO FARMINGTON 146, INC. 01/31/01 08/06/90 10 10 10,250 102,500
75 MADISON HEIGHTS MI MADISON PLACE S & M HEIGHTS/STUART FRANKEL 01/31/01 02/21/90 10 5 10,400 123,804
76 PONTIAC MI OAKLAND POINTE AETNA REAL ESTATE ASSOC, L.P. 01/31/05 05/04/94 10 10 9,930 99,300
80 DEARBORN MI THE HEIGHTS HEIGHTS LIMITED PARTNERSHIP 01/31/01 07/25/91 7 5 8,880 94,460
81 JACKSON TN WEST TOWN COMMONS BROADMOOR INVESTMENT COMPANY 02/28/05 05/10/94 10 10 10,000 100,000
82 PEORIA IL SHERIDAN VILLAGE TUCKER PROPERTIES CORPORATION 01/31/05 03/22/94 10 10 10,000 120,000
83 HOBART IN HOBART CROSSINGS JUBILEE LIMITED PARTNERSHIP 01/31/05 04/01/94 10 10 13,190 123,192
84 COLUMBIA SC HARBISON COURT RELIANCE INSURANCE COMPANY 06/30/04 02/01/94 10 10 10,000 107,500
90 BIRMINGHAM AL ROEBUCK MARKETPLACE ROEBUCK VENTURES, LTD. 01/31/05 05/04/94 10 10 9,300 97,650
92 FLORENCE AL FLORENCE SQUARE FLORENCE SQUARE, LTD. 01/31/05 06/09/94 10 10 10,000 100,000
93 KNOXVILLE TN MARKETPLACE SHOPPING CTR PACIFIC MUTUAL REALTY FINANCE 10/31/04 07/13/94 10 5 10,000 140,000
94 MUSKEGON MI WESTSHORE PLAZA THE FRUITPORT DEVELOPMENT, INC. 01/31/05 07/26/94 10 10 9,984 99,840
113 SNELLVILLE GA PRESIDENTIAL MARKET COUSINS PROPERTIES, INC. 10/31/04 08/24/94 10 10 8,117 107,550
114 PLAINFIELD IN PLAINFIELD SHOPPES PREMIER VENTURE I, LLC 01/31/05 06/06/94 10 15 10,000 100,000
120 WYOMING MI WYOMING VILLAGE WYOMING MALL, LTD. 01/31/05 07/05/94 10 10 10,127 101,270
121 COLUMBIA SC EAST FORREST PLAZA DEVELOPERS DIVERSIFIED REALTY 01/31/06 09/19/94 10 10 10,000 100,000
122 SPARTANBURG SC FRANKLIN SQUARE PAINE WEBER RETAIL PROP INVEST 01/31/05 12/21/94 10 10 9,600 93,600
123 MACON GA WESTGATE CENTER WESTGATE MALL ASSOCIATES, LTD 01/31/06 04/11/95 10 10 12,100 137,500
124 CLARKSVILLE TN AUSTIN SQUARE TENNESSEE INVESTMENT PROPERTIES 01/31/06 04/14/95 10 10 10,000 105,000
127 LEXINGTON KY THE KROGER PLAZA BRYAN STATION LEXINGTON, LLC 01/31/06 07/20/95 10 10 10,350 108,675
129 ST LOUIS MO TELEGRAPH CROSSING THF TELEGRAPH DEVELOPMENT, L.P. 01/31/06 09/11/95 10 10 10,000 115,000
132 BRADLEY IL BRADLEY SQUARE AMERICAN NATIONAL BANK 01/31/08 06/13/95 12 10 10,000 107,500
133 FAYETTEVILLE AR SPRING CREEK CENTRE CLARY DEVELOPMENT CORPORATION 01/31/07 09/01/95 10 10 15,000 150,000
134 GREENVILLE NC UNIVERSITY COMMONS JDN REALTY CORPORATION 01/31/07 09/22/95 10 10 11,250 112,500
135 MOLINE IL ROCK RIVER PLAZA THF-L MOLINE DEVELOPMENT LLC 01/31/07 12/14/95 10 10 11,640 125,136
136 ORLANDO FL INTL DRIVE VALUE CTR FAISON-INTL DR LTD PARTNERSHIP 01/31/07 12/11/95 10 10 17,000 207,228
137 CAPE GIRARDEAU MO CAPE WEST PLAZA DRURY LAND DEVELOPMENT, INC. 01/31/07 08/06/96 10 10 12,000 126,000
</TABLE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement on
Form S-8 (No.33-74050) relating to the 1993 Stock Option and Incentive Plan of
Shoe Carnival, Inc. and the Registration Statement on Form S-8 (No. 33-80979)
relating to the Employee Stock Purchase Plan of Shoe Carnival, Inc. of our
report dated March 7, 1997, appearing in the Annual Report on Form 10-K of Shoe
Carnival, Inc. for the year ended February 1, 1997.
/s/ Deloitte & Touche LLP
Stamford Connecticut
May 1, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE PERIOD ENDED FEBRUARY 1, 1997, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> FEB-01-1997
<CASH> 1,625
<SECURITIES> 0
<RECEIVABLES> 938
<ALLOWANCES> 0
<INVENTORY> 59,240
<CURRENT-ASSETS> 63,109
<PP&E> 48,380
<DEPRECIATION> 17,563
<TOTAL-ASSETS> 93,926
<CURRENT-LIABILITIES> 18,019
<BONDS> 9,621
0
0
<COMMON> 0
<OTHER-SE> 63,772
<TOTAL-LIABILITY-AND-EQUITY> 93,926
<SALES> 233,945
<TOTAL-REVENUES> 233,945
<CGS> 168,814
<TOTAL-COSTS> 168,814
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,242
<INCOME-PRETAX> 6,598
<INCOME-TAX> 2,818
<INCOME-CONTINUING> 4,140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,140
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
