false 0000895447 --02-02 2020 Q1 Accelerated Filer 2020 P2Y4M24D 0.0010 0.0230 P2Y10M28D 0.022 0.022 0.0036 0.0242 P1Y10M28D P2Y10M24D 0.090 0.090 0000895447 2020-02-02 2020-05-02 xbrli:shares 0000895447 2020-05-29 iso4217:USD 0000895447 2020-05-02 0000895447 2020-02-01 0000895447 2019-05-04 iso4217:USD xbrli:shares 0000895447 2019-02-03 2019-05-04 0000895447 us-gaap:CommonStockMember 2020-02-01 0000895447 us-gaap:TreasuryStockMember 2020-02-01 0000895447 us-gaap:AdditionalPaidInCapitalMember 2020-02-01 0000895447 us-gaap:RetainedEarningsMember 2020-02-01 0000895447 us-gaap:RetainedEarningsMember 2020-02-02 2020-05-02 0000895447 us-gaap:TreasuryStockMember 2020-02-02 2020-05-02 0000895447 us-gaap:AdditionalPaidInCapitalMember 2020-02-02 2020-05-02 0000895447 us-gaap:CommonStockMember 2020-05-02 0000895447 us-gaap:TreasuryStockMember 2020-05-02 0000895447 us-gaap:AdditionalPaidInCapitalMember 2020-05-02 0000895447 us-gaap:RetainedEarningsMember 2020-05-02 0000895447 us-gaap:CommonStockMember 2019-02-02 0000895447 us-gaap:TreasuryStockMember 2019-02-02 0000895447 us-gaap:AdditionalPaidInCapitalMember 2019-02-02 0000895447 us-gaap:RetainedEarningsMember 2019-02-02 0000895447 2019-02-02 0000895447 us-gaap:AccountingStandardsUpdate201602Member us-gaap:RetainedEarningsMember 2019-02-03 2019-05-04 0000895447 us-gaap:AccountingStandardsUpdate201602Member 2019-02-03 2019-05-04 0000895447 us-gaap:RetainedEarningsMember 2019-02-03 2019-05-04 0000895447 us-gaap:TreasuryStockMember 2019-02-03 2019-05-04 0000895447 us-gaap:AdditionalPaidInCapitalMember 2019-02-03 2019-05-04 0000895447 us-gaap:CommonStockMember 2019-02-03 2019-05-04 0000895447 us-gaap:CommonStockMember 2019-05-04 0000895447 us-gaap:TreasuryStockMember 2019-05-04 0000895447 us-gaap:AdditionalPaidInCapitalMember 2019-05-04 0000895447 us-gaap:RetainedEarningsMember 2019-05-04 0000895447 scvl:RestrictedStockUnitsAndPerformanceStockUnitsMember 2020-02-02 2020-05-02 0000895447 scvl:RestrictedStockUnitsAndPerformanceStockUnitsMember 2020-02-02 2020-05-02 0000895447 us-gaap:StockAppreciationRightsSARSMember 2020-02-02 2020-05-02 xbrli:pure 0000895447 scvl:COVID19ImpactsMember 2020-02-02 2020-05-02 0000895447 us-gaap:FairValueInputsLevel1Member 2020-05-02 0000895447 us-gaap:FairValueInputsLevel2Member 2020-05-02 0000895447 us-gaap:FairValueInputsLevel3Member 2020-05-02 0000895447 us-gaap:FairValueInputsLevel1Member 2020-02-01 0000895447 us-gaap:FairValueInputsLevel2Member 2020-02-01 0000895447 us-gaap:FairValueInputsLevel3Member 2020-02-01 0000895447 us-gaap:FairValueInputsLevel1Member 2019-05-04 0000895447 us-gaap:FairValueInputsLevel2Member 2019-05-04 0000895447 us-gaap:FairValueInputsLevel3Member 2019-05-04 0000895447 scvl:RestrictedStockUnitsAndPerformanceStockUnitsMember 2020-02-01 0000895447 scvl:RestrictedStockUnitsAndPerformanceStockUnitsMember 2020-05-02 0000895447 scvl:RestrictedStockUnitsAndPerformanceStockUnitsMember 2019-02-03 2019-05-04 0000895447 us-gaap:RestrictedStockMember 2020-02-01 0000895447 us-gaap:RestrictedStockMember 2020-02-02 2020-05-02 0000895447 us-gaap:RestrictedStockMember 2020-05-02 0000895447 us-gaap:RestrictedStockMember 2019-02-03 2019-05-04 0000895447 us-gaap:StockAppreciationRightsSARSMember 2019-02-03 2020-02-01 0000895447 us-gaap:StockAppreciationRightsSARSMember 2018-02-04 2019-02-02 0000895447 us-gaap:StockAppreciationRightsSARSMember 2020-02-01 0000895447 us-gaap:StockAppreciationRightsSARSMember 2020-02-02 2020-05-02 0000895447 us-gaap:StockAppreciationRightsSARSMember 2020-05-02 0000895447 us-gaap:StockAppreciationRightsSARSMember 2019-02-03 2019-05-04 0000895447 us-gaap:StockAppreciationRightsSARSMember srt:MinimumMember 2020-02-02 2020-05-02 0000895447 us-gaap:StockAppreciationRightsSARSMember srt:MaximumMember 2020-02-02 2020-05-02 0000895447 us-gaap:StockAppreciationRightsSARSMember 2019-05-04 0000895447 us-gaap:StockAppreciationRightsSARSMember srt:MinimumMember 2019-02-03 2019-05-04 0000895447 us-gaap:StockAppreciationRightsSARSMember srt:MaximumMember 2019-02-03 2019-05-04 0000895447 scvl:NonAthleticsMember scvl:WomenMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-02-02 2020-05-02 0000895447 scvl:NonAthleticsMember scvl:WomenMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-02-03 2019-05-04 0000895447 scvl:NonAthleticsMember scvl:MenMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-02-02 2020-05-02 0000895447 scvl:NonAthleticsMember scvl:MenMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-02-03 2019-05-04 0000895447 scvl:NonAthleticsMember scvl:ChildrenMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-02-02 2020-05-02 0000895447 scvl:NonAthleticsMember scvl:ChildrenMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-02-03 2019-05-04 0000895447 scvl:NonAthleticsMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-02-02 2020-05-02 0000895447 scvl:NonAthleticsMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-02-03 2019-05-04 0000895447 scvl:AthleticsMember scvl:WomenMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-02-02 2020-05-02 0000895447 scvl:AthleticsMember scvl:WomenMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-02-03 2019-05-04 0000895447 scvl:AthleticsMember scvl:MenMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-02-02 2020-05-02 0000895447 scvl:AthleticsMember scvl:MenMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-02-03 2019-05-04 0000895447 scvl:AthleticsMember scvl:ChildrenMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-02-02 2020-05-02 0000895447 scvl:AthleticsMember scvl:ChildrenMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-02-03 2019-05-04 0000895447 scvl:AthleticsMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-02-02 2020-05-02 0000895447 scvl:AthleticsMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-02-03 2019-05-04 0000895447 scvl:AccessoriesAndOtherMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-02-02 2020-05-02 0000895447 scvl:AccessoriesAndOtherMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-02-03 2019-05-04 0000895447 us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-02-02 2020-05-02 0000895447 us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-02-03 2019-05-04 0000895447 scvl:NonAthleticsMember scvl:WomenMember 2020-02-02 2020-05-02 0000895447 scvl:NonAthleticsMember scvl:WomenMember 2019-02-03 2019-05-04 0000895447 scvl:NonAthleticsMember scvl:MenMember 2020-02-02 2020-05-02 0000895447 scvl:NonAthleticsMember scvl:MenMember 2019-02-03 2019-05-04 0000895447 scvl:NonAthleticsMember scvl:ChildrenMember 2020-02-02 2020-05-02 0000895447 scvl:NonAthleticsMember scvl:ChildrenMember 2019-02-03 2019-05-04 0000895447 scvl:NonAthleticsMember 2020-02-02 2020-05-02 0000895447 scvl:NonAthleticsMember 2019-02-03 2019-05-04 0000895447 scvl:AthleticsMember scvl:WomenMember 2020-02-02 2020-05-02 0000895447 scvl:AthleticsMember scvl:WomenMember 2019-02-03 2019-05-04 0000895447 scvl:AthleticsMember scvl:MenMember 2020-02-02 2020-05-02 0000895447 scvl:AthleticsMember scvl:MenMember 2019-02-03 2019-05-04 0000895447 scvl:AthleticsMember scvl:ChildrenMember 2020-02-02 2020-05-02 0000895447 scvl:AthleticsMember scvl:ChildrenMember 2019-02-03 2019-05-04 0000895447 scvl:AthleticsMember 2020-02-02 2020-05-02 0000895447 scvl:AthleticsMember 2019-02-03 2019-05-04 0000895447 scvl:AccessoriesAndOtherMember 2020-02-02 2020-05-02 0000895447 scvl:AccessoriesAndOtherMember 2019-02-03 2019-05-04 0000895447 scvl:CreditAgreementMember 2020-04-15 2020-04-16 0000895447 srt:MaximumMember scvl:CreditAgreementMember 2020-04-15 2020-04-16 0000895447 srt:MinimumMember scvl:CreditAgreementMember 2020-04-15 2020-04-16 0000895447 srt:MinimumMember scvl:CreditAgreementMember 2020-04-16 0000895447 srt:MaximumMember scvl:CreditAgreementMember 2020-04-16 0000895447 2020-04-15 2020-04-16 0000895447 srt:MaximumMember 2020-02-02 2020-05-02 0000895447 srt:MinimumMember 2020-02-02 2020-05-02

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended May 2, 2020

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

incorporation or organization)

 

(IRS Employer

Identification Number)

 

 

 

7500 East Columbia Street

Evansville, IN

 

47715

(Address of principal executive offices)

 

(Zip code)

 

(812) 867-6471

(Registrant’s telephone number, including area code)

 

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

SCVL

 

The Nasdaq Stock Market LLC

 

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   No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No

 

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Number of Shares of Common Stock, par value $0.01 per share, outstanding at May 29, 2020 was 14,087,896.

 

 


SHOE CARNIVAL, INC.

INDEX TO FORM 10-Q

 

 

 

 

Page

Part I

Financial Information

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

Condensed Consolidated Balance Sheets

3

 

 

Condensed Consolidated Statements of Income

4

 

 

Condensed Consolidated Statements of Shareholders’ Equity

5

 

 

Condensed Consolidated Statements of Cash Flows

6

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

 

 

 

 

 

Item 4.

Controls and Procedures

21

 

 

 

Part II

Other Information

 

 

 

 

 

 

Item 1A.

Risk Factors

22

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

22

 

 

 

 

 

Item 6.

Exhibits

23

 

 

 

 

Signature

24

2


SHOE CARNIVAL, INC.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

 

(In thousands, except share data)

 

May 2, 2020

 

 

February 1, 2020

 

 

May 4, 2019

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,084

 

 

$

61,899

 

 

$

21,616

 

Accounts receivable

 

 

6,316

 

 

 

2,724

 

 

 

2,003

 

Merchandise inventories

 

 

303,988

 

 

 

259,495

 

 

 

289,356

 

Other

 

 

14,186

 

 

 

5,529

 

 

 

9,769

 

Total Current Assets

 

 

337,574

 

 

 

329,647

 

 

 

322,744

 

Property and equipment – net

 

 

64,928

 

 

 

67,781

 

 

 

72,313

 

Deferred income taxes

 

 

7,249

 

 

 

7,833

 

 

 

8,159

 

Other noncurrent assets

 

 

9,454

 

 

 

8,106

 

 

 

760

 

Operating lease right-of-use assets

 

 

210,345

 

 

 

215,007

 

 

 

224,642

 

Total Assets

 

$

629,550

 

 

$

628,374

 

 

$

628,618

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

90,040

 

 

$

60,665

 

 

$

56,488

 

Accrued and other liabilities

 

 

12,517

 

 

 

18,695

 

 

 

17,611

 

Current portion of operating lease liabilities

 

 

49,078

 

 

 

43,146

 

 

 

47,089

 

Total Current Liabilities

 

 

151,635

 

 

 

122,506

 

 

 

121,188

 

Long-term portion of operating lease liabilities

 

 

184,896

 

 

 

194,108

 

 

 

202,517

 

Deferred compensation

 

 

12,646

 

 

 

13,345

 

 

 

13,386

 

Other

 

 

915

 

 

 

1,052

 

 

 

24

 

Total Liabilities

 

 

350,092

 

 

 

331,011

 

 

 

337,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $.01 par value, 50,000,000 shares authorized,

   20,524,601 shares, 20,524,601 shares and 20,527,905 shares issued,

   respectively

 

 

205

 

 

 

205

 

 

 

205

 

Additional paid-in capital

 

 

76,910

 

 

 

79,914

 

 

 

76,282

 

Retained earnings

 

 

378,352

 

 

 

395,761

 

 

 

370,453

 

Treasury stock, at cost, 6,436,087 shares, 6,516,875

   shares and 5,837,164 shares, respectively

 

 

(176,009

)

 

 

(178,517

)

 

 

(155,437

)

Total Shareholders’ Equity

 

 

279,458

 

 

 

297,363

 

 

 

291,503

 

Total Liabilities and Shareholders’ Equity

 

$

629,550

 

 

$

628,374

 

 

$

628,618

 

 

See notes to Condensed Consolidated Financial Statements.

3


SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Unaudited

 

(In thousands, except per share data)

 

Thirteen

Weeks Ended

May 2, 2020

 

 

Thirteen

Weeks Ended

May 4, 2019

 

Net sales

 

$

147,495

 

 

$

253,810

 

Cost of sales (including buying, distribution

   and occupancy costs)

 

 

116,031

 

 

 

178,670

 

Gross profit

 

 

31,464

 

 

 

75,140

 

Selling, general and administrative expenses

 

 

54,725

 

 

 

59,532

 

Operating (loss)/income

 

 

(23,261

)

 

 

15,608

 

Interest income

 

 

(89

)

 

 

(331

)

Interest expense

 

 

56

 

 

 

36

 

(Loss)/income before income taxes

 

 

(23,228

)

 

 

15,903

 

Income tax (benefit)/expense

 

 

(7,038

)

 

 

2,030

 

Net (loss)/income

 

$

(16,190

)

 

$

13,873

 

Net (loss)/income per share:

 

 

 

 

 

 

 

 

Basic

 

$

(1.16

)

 

$

0.95

 

Diluted

 

$

(1.16

)

 

$

0.91

 

Weighted average shares:

 

 

 

 

 

 

 

 

Basic

 

 

13,992

 

 

 

14,612

 

Diluted

 

 

13,992

 

 

 

15,192

 

 

See notes to Condensed Consolidated Financial Statements.

4


SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Unaudited

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Retained

 

 

Treasury

 

 

 

 

 

(In thousands, except per share data)

 

Issued

 

 

Treasury

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Stock

 

 

Total

 

Balance at February 1, 2020

 

 

20,525

 

 

 

(6,517

)

 

$

205

 

 

$

79,914

 

 

$

395,761

 

 

$

(178,517

)

 

$

297,363

 

Dividends declared ($0.085 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,219

)

 

 

 

 

 

 

(1,219

)

Employee stock purchase plan purchases

 

 

 

 

 

 

4

 

 

 

 

 

 

 

(34

)

 

 

 

 

 

 

97

 

 

 

63

 

Restricted stock awards

 

 

 

 

 

 

148

 

 

 

 

 

 

 

(4,111

)

 

 

 

 

 

 

4,111

 

 

 

0

 

Shares surrendered by employees to pay taxes

   on restricted stock

 

 

 

 

 

 

(71

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,700

)

 

 

(1,700

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,141

 

 

 

 

 

 

 

 

 

 

 

1,141

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,190

)

 

 

 

 

 

 

(16,190

)

Balance at May 2, 2020

 

 

20,525

 

 

 

(6,436

)

 

$

205

 

 

$

76,910

 

 

$

378,352

 

 

$

(176,009

)

 

$

279,458

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at February 2, 2019

 

 

20,529

 

 

 

(5,154

)

 

$

205

 

 

$

75,631

 

 

$

360,443

 

 

$

(131,846

)

 

$

304,433

 

Adoption of Accounting Standards Codification

   Topic 842, Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,649

)

 

 

 

 

 

 

(2,649

)

Dividends declared ($0.080 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,214

)

 

 

 

 

 

 

(1,214

)

Employee stock purchase plan purchases

 

 

 

 

 

 

2

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

57

 

 

 

63

 

Restricted stock awards

 

 

(1

)

 

 

47

 

 

 

 

 

 

 

(1,304

)

 

 

 

 

 

 

1,304

 

 

 

0

 

Shares surrendered by employees to pay taxes

   on restricted stock

 

 

 

 

 

 

(321

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,940

)

 

 

(10,940

)

Purchase of common stock for treasury

 

 

 

 

 

 

(411

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,012

)

 

 

(14,012

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,949

 

 

 

 

 

 

 

 

 

 

 

1,949

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,873

 

 

 

 

 

 

 

13,873

 

Balance at May 4, 2019

 

 

20,528

 

 

 

(5,837

)

 

$

205

 

 

$

76,282

 

 

$

370,453

 

 

$

(155,437

)

 

$

291,503

 

 

See notes to Condensed Consolidated Financial Statements.

5


SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

 

(In thousands)

 

Thirteen

Weeks Ended

May 2, 2020

 

 

Thirteen

Weeks Ended

May 4, 2019

 

Cash Flows From Operating Activities

 

 

 

 

 

 

 

 

Net (loss)/income

 

$

(16,190

)

 

$

13,873

 

Adjustments to reconcile net (loss)/income to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,831

 

 

 

4,277

 

Stock-based compensation

 

 

1,054

 

 

 

1,958

 

Loss on retirement and impairment of assets

 

 

2,089

 

 

 

164

 

Deferred income taxes

 

 

584

 

 

 

1,463

 

Non-cash operating lease expense

 

 

10,250

 

 

 

10,993

 

Other

 

 

(1,065

)

 

 

1,278

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,592

)

 

 

(783

)

Merchandise inventories

 

 

(44,493

)

 

 

(31,817

)

Operating lease liabilities

 

 

(8,881

)

 

 

(11,853

)

Accounts payable and accrued liabilities

 

 

23,508

 

 

 

4,011

 

Other

 

 

(9,958

)

 

 

(2,878

)

Net cash used in operating activities

 

 

(42,863

)

 

 

(9,314

)

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(3,189

)

 

 

(9,199

)

Other

 

 

194

 

 

 

3

 

Net cash used in investing activities

 

 

(2,995

)

 

 

(9,196

)

Cash Flows From Financing Activities

 

 

 

 

 

 

 

 

Borrowings under line of credit

 

 

8,691

 

 

 

0

 

Payments on line of credit

 

 

(8,691

)

 

 

0

 

Proceeds from issuance of stock

 

 

63

 

 

 

63

 

Dividends paid

 

 

(1,320

)

 

 

(2,006

)

Purchase of common stock for treasury

 

 

0

 

 

 

(14,012

)

Shares surrendered by employees to pay taxes on restricted stock

 

 

(1,700

)

 

 

(10,940

)

Net cash used in financing activities

 

 

(2,957

)

 

 

(26,895

)

Net decrease in cash and cash equivalents

 

 

(48,815

)

 

 

(45,405

)

Cash and cash equivalents at beginning of period

 

 

61,899

 

 

 

67,021

 

Cash and cash equivalents at end of period

 

$

13,084

 

 

$

21,616

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during period for interest

 

$

44

 

 

$

36

 

Cash (received)/paid during period for income taxes

 

$

(97

)

 

$

103

 

Capital expenditures incurred but not yet paid

 

$

1,358

 

 

$

575

 

Dividends declared but not yet paid

 

$

64

 

 

$

96

 

 

See notes to Condensed Consolidated Financial Statements.

6


SHOE CARNIVAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

Note 1 – Basis of Presentation

 

Shoe Carnival, Inc. is one of the nation’s largest family footwear retailers, providing the convenience of shopping at any of our store locations or online.  We offer customers a broad assortment of moderately priced dress, casual and athletic footwear for men, women and children with an emphasis on national name brands. We differentiate our retail concept from our competitors by our distinctive, fun and promotional marketing efforts.  We are an Indiana corporation that was initially formed in Delaware in 1993 and reincorporated in Indiana in 1996.  References to “Shoe Carnival,” “we,” “us,” “our” and the “Company” in this Quarterly Report on Form 10-Q refer to Shoe Carnival, Inc. and its subsidiaries.

 

In our opinion, the accompanying Unaudited Condensed Consolidated Financial Statements and notes have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and contain all normal recurring adjustments necessary to fairly present our financial position and the results of our operations and our cash flows for the periods presented. Certain information and disclosures normally included in the notes to Condensed Consolidated Financial Statements have been condensed or omitted according to the rules and regulations of the SEC, although we believe that the disclosures are adequate to make the information presented not misleading. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended February 1, 2020.

Note 2 - Net (Loss)/Income Per Share

The following tables set forth the computation of basic and diluted net (loss)/income per share as shown on the face of the accompanying Condensed Consolidated Statements of Income:

 

 

 

Thirteen Weeks Ended

 

 

 

May 2, 2020

 

 

May 4, 2019

 

 

 

 

 

 

 

(In thousands, except per share data)

 

 

 

 

 

Basic Net (Loss)/Income per Share:

 

Net

(Loss)/Income

 

 

Shares

 

 

Per Share

Amount

 

 

Net

(Loss)/Income

 

 

Shares

 

 

Per Share

Amount

 

Net (loss)/income

 

$

(16,190

)

 

 

 

 

 

 

 

 

 

$

13,873

 

 

 

 

 

 

 

 

 

Conversion of share-based compensation

   arrangements

 

 

0

 

 

 

 

 

 

 

 

 

 

 

(44

)

 

 

 

 

 

 

 

 

Net (loss)/income available for basic common shares

   and basic net (loss)/income per share

 

$

(16,190

)

 

 

13,992

 

 

$

(1.16

)

 

$

13,829

 

 

 

14,612

 

 

$

0.95

 

Diluted Net (Loss)/Income per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)/income

 

$

(16,190

)

 

 

 

 

 

 

 

 

 

$

13,873

 

 

 

 

 

 

 

 

 

Conversion of share-based compensation

   arrangements

 

 

0

 

 

 

0

 

 

 

 

 

 

 

(43

)

 

 

580

 

 

 

 

 

Net (loss)/income available for diluted common

   shares and diluted net (loss)/income per share

 

$

(16,190

)

 

 

13,992

 

 

$

(1.16

)

 

$

13,830

 

 

 

15,192

 

 

$

0.91

 

 

 

The computation of basic net (loss)/income per share of common stock is based on the weighted average number of common shares outstanding during the period. The computation of diluted net (loss)/income per share is based on the weighted average number of shares outstanding plus the dilutive incremental shares that would be outstanding assuming the vesting of restricted stock awards, restricted stock units and performance stock units, of which a small portion have a non-forfeitable right to dividends. The computation of diluted net (loss)/income per share excluded approximately 198,000 unvested share-settled equity awards for the first quarter of fiscal 2020 because the impact would be anti-dilutive.  During the first quarter of fiscal 2019 all unvested share-settled equity awards were dilutive.

 

Note 3 – COVID-19 Impacts

 

Our operations are currently experiencing significant disruption associated with the outbreak of a novel strain of coronavirus (“COVID-19”).  On March 11, 2020, the World Health Organization declared the COVID 19 outbreak a pandemic. The U.S. Government as well as the vast majority of states and local municipalities have taken unprecedented measures to control the spread of COVID-19 and to provide stimulus as a mitigating measure to deteriorating economic conditions and increasing unemployment.

7


The COVID-19 pandemic began significantly impacting our store operations, sales and costs beginning in the first quarter of fiscal 2020.  Impacts included the temporary closure of our brick-and-mortar stores effective March 19, 2020, reduced foot traffic and sales, deteriorating economic conditions for our customer base and some disruption to our global supply chain.  As a result, substantially all of our brick-and-mortar stores were closed for approximately 50% of the first quarter of fiscal 2020 and our net sales and gross profit significantly decreased year-over-year.  Our website and mobile app continued to process e-commerce orders, which were generally fulfilled at our store locations.  We began re-opening stores in accordance with applicable public health guidelines in late April, and as of June 4, 2020, approximately 97% of our stores have re-opened. The COVID-19 pandemic will likely continue to impact our financial condition and results of operations for the foreseeable future.    

Note 4 - Fair Value Measurements

The accounting guidance related to fair value measurements defines fair value and provides a consistent framework for measuring fair value under the authoritative literature. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect market assumptions. This guidance only applies when other guidance requires or permits the fair value measurement of assets and liabilities. The guidance does not expand the use of fair value measurements. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities;

 

 

Level 2 – Quoted prices in active or inactive markets for similar assets or liabilities that are either directly or indirectly observable; and

 

 

Level 3 – Significant unobservable inputs that are not corroborated by market data. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, and are based on the best information available, including our own data. Fair values of our long-lived assets are estimated using an income-based approach and are classified within Level 3 of the valuation hierarchy.

Fair Value of Financial Instruments

The following table presents financial instruments that are measured at fair value on a recurring basis at May 2, 2020, February 1, 2020 and May 4, 2019.

 

 

 

Fair Value Measurements

 

(In thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

As of May 2, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market mutual funds

 

$

3,128

 

 

$

0

 

 

$

0

 

 

$

3,128

 

As of February 1, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market mutual funds

 

$

48,080

 

 

$

0

 

 

$

0

 

 

$

48,080

 

As of May 4, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market mutual funds

 

$

28,779

 

 

$

0

 

 

$

0

 

 

$

28,779

 

 

The fair values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities approximate their carrying values because of their short-term nature.  We have no material liabilities measured at fair value on a recurring or non-recurring basis.

Long-Lived Asset Impairment Testing

We periodically evaluate our long-lived assets if events or circumstances indicate that the carrying value may not be recoverable.  The carrying value of long-lived assets is considered impaired when the carrying value of the assets exceeds the expected future cash flows to be derived from their use.  Assets are grouped, and the evaluation is performed, at the lowest level for which there are identifiable cash flows, which is generally at a store level.  Store level asset groupings typically include property and equipment and operating lease right-of-use assets.  If the estimated, undiscounted future cash flows for a store are determined to be less than the carrying value of the store’s assets, an impairment loss is recorded for the difference between estimated fair value and carrying value.  Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in selling, general and administrative expenses.  If the operating lease right-of-use asset is impaired, we would amortize the remaining right-of-use asset on a straight-line basis over the remaining lease term.

8


We estimate the fair value of our long-lived assets using store specific cash flow assumptions discounted by a rate commensurate with the risk involved with such assets while incorporating marketplace assumptions.  Our estimates are derived from an income-based approach considering the cash flows expected over the remaining lease term for each location. These projections are primarily based on management’s estimates of store-level sales, gross margins, direct expenses, exercise of future lease renewal options and resulting cash flows and, by their nature, include judgments about how current initiatives will impact future performance. We estimate the fair value of operating right-of-use assets using the market value of rents applicable to the leased asset, discounted using the remaining lease term.

External factors, such as the local environment in which the store resides, including store traffic and competition, are evaluated in terms of their effect on sales trends. Changes in sales and operating income assumptions or unfavorable changes in external factors can significantly impact the estimated future cash flows.  An increase or decrease in the projected cash flow can significantly decrease or increase the fair value of these assets, which may have an effect on the impairment recorded.  If actual operating results or market conditions differ from those anticipated, the carrying value of certain of our assets may prove unrecoverable and we may incur additional impairment charges in the future.

During the thirteen weeks ended May 2, 2020 and May 4, 2019, we recorded impairment charges of $2.3 million and $40,000 associated with seven stores and one store, respectively.   These charges were included in selling, general and administrative expenses.  No impairments of operating right-of-use assets were recorded in either period.

Note 5 - Stock-Based Compensation

At our 2017 annual meeting of shareholders, our shareholders approved a new equity incentive plan, the Shoe Carnival, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which replaced our 2000 Stock Option and Incentive Plan, as amended (the “2000 Plan”).  Under the 2017 Plan, we may issue stock units, restricted stock, stock appreciation rights, stock options and other stock-based awards to eligible participants.  According to the terms of the 2017 Plan, no further awards may be made under the 2000 Plan.  A maximum of 1,000,000 shares of our common stock are available for issuance and sale under the 2017 Plan.  In addition, any shares of our common stock subject to an award granted under the 2017 Plan, or to an award granted under the 2000 Plan that was outstanding on the date our shareholders approved the 2017 Plan, that expires, is cancelled or forfeited, or is settled for cash will, to the extent of such cancellation, forfeiture, expiration or cash settlement, automatically become available for future awards under the 2017 Plan.

Stock-based compensation includes restricted stock units and performance stock units, restricted stock awards, and cash-settled stock appreciation rights (“SARs”). Additionally, we recognize stock-based compensation expense for the discount on shares sold to employees through our employee stock purchase plan. Stock-based compensation expense for the employee stock purchase plan was $11,000 before the income tax benefit of $3,000 and $11,000 before the income tax benefit of $1,000 for the thirteen weeks ended May 2, 2020 and May 4, 2019, respectively.

Share-Settled Equity Awards

The following table summarizes transactions for our restricted stock units and performance stock units pursuant to our stock-based compensation plans:

 

 

 

Number of

Shares

 

 

Weighted-

Average Grant

Date Fair Value

 

Restricted stock units and performance stock units at

   February 1, 2020

 

 

263,135

 

 

$

29.44

 

Granted

 

 

158,439

 

 

 

14.88

 

Vested

 

 

(163,099

)

 

 

26.76

 

Forfeited

 

 

(1,717

)

 

 

31.94

 

Restricted stock units and performance stock units at

   May 2, 2020

 

 

256,758

 

 

$

22.14

 

 

The total fair value at grant date of restricted stock units and performance stock units that vested during the thirteen-week periods ended May 2, 2020 and May 4, 2019 was $4.4 million and $2.0 million, respectively. The weighted-average grant date fair value of restricted stock units and performance stock units granted during the thirteen-week periods ended May 2, 2020 and May 4, 2019 was $14.88 and $31.36, respectively.

 

9


The following table summarizes transactions for our restricted stock awards pursuant to our stock-based compensation plans:

 

 

 

Number of

Shares

 

 

Weighted-

Average Grant

Date Fair Value

 

Restricted stock at February 1, 2020

 

 

67,435

 

 

$

24.23

 

Vested

 

 

(49,619

)

 

 

24.36

 

Forfeited or expired

 

 

(14,816

)

 

 

24.37

 

Restricted stock at May 2, 2020

 

 

3,000

 

 

$

21.46

 

 

There were no restricted stock awards granted during the thirteen-week periods ended May 2, 2020 or May 4, 2019. The total fair value at grant date of restricted stock awards that vested during the thirteen-week periods ended May 2, 2020 and May 4, 2019 was $1.2 million and $16.9 million, respectively.

The following table summarizes information regarding stock-based compensation expense recognized for all share-settled equity awards (restricted stock units, performance stock units and restricted stock awards):

 

(In thousands)

 

Thirteen

Weeks Ended May 2, 2020

 

 

Thirteen

Weeks Ended May 4, 2019

 

Stock-based compensation expense before the

   recognized income tax effect

 

$

1,130

 

 

$

1,938

 

Income tax effect

 

$

342

 

 

$

247

 

 

Included in the thirteen-week period ended May 2, 2020 was a tax expense of $45,000 in connection with the vesting of equity-based compensation. The thirteen-week period ended May 4, 2019 included a tax benefit in connection with the vesting of equity-based compensation of approximately $1.9 million.  As of May 2, 2020, there was approximately $3.8 million of unrecognized compensation expense remaining related to both our restricted stock units and performance stock units and performance-based and service-based restricted stock awards. The cost is expected to be recognized over a weighted average period of approximately 1.9 years. This incorporates our current assumptions with respect to the estimated requisite service period required to achieve the designated performance conditions for performance-based stock awards.

Cash-Settled Stock Appreciation Rights

Cash-settled stock appreciation rights (“SARs”) are granted to certain non-executive employees. Each SAR entitles the holder, upon exercise of their vested shares, to receive cash in an amount equal to the closing price of our stock on the date of exercise less the exercise price, with a maximum amount of gain defined.  The SARs granted during the first quarter of fiscal 2020 will vest and become fully exercisable on March 31, 2021 and any unexercised SARs will expire on March 31, 2023.  SARs granted during the first quarter of fiscal 2019 vested and became fully exercisable on March 31, 2020 and any unexercised SARs will expire on March 31, 2022.  The SARs issued have a defined maximum gain of $10.00 over the exercise price of $13.79 for awards granted in fiscal 2020 and over the exercise price of $34.95 for awards granted in fiscal 2019.

The following table summarizes the SARs activity:

 

 

 

Number of

Shares

 

 

Weighted-

Average

Exercise Price

 

 

Weighted-

Average

Remaining

Contractual

Term (Years)

 

Outstanding at February 1, 2020

 

 

43,200

 

 

$

34.95

 

 

 

 

 

Granted

 

 

43,000

 

 

 

13.79

 

 

 

 

 

Forfeited

 

 

(2,100

)

 

 

34.95

 

 

 

 

 

Exercised

 

 

0

 

 

 

0.00

 

 

 

 

 

Outstanding at May 2, 2020

 

 

84,100

 

 

$

24.13

 

 

 

2.4

 

 

The fair value of these liability awards are remeasured, using a trinomial lattice model, at each reporting period until the date of settlement. Increases or decreases in stock-based compensation expense are recognized over the vesting period, or immediately for vested awards. The weighted-average fair value of outstanding, non-vested SAR awards as of May 2, 2020 was $4.27.

10


The fair value was estimated using a trinomial lattice model with the following assumptions:

 

 

 

May 2, 2020

 

 

May 4, 2019

 

Risk free interest rate yield curve

 

0.10% - 0.36%

 

 

2.30% - 2.42%

 

Expected dividend yield

 

1.5%

 

 

0.9%

 

Expected volatility

 

62.95%

 

 

47.95%

 

Maximum life

 

1.91 - 2.91 Years

 

 

2.9 Years

 

Exercise multiple

 

 

1.29

 

 

 

1.29

 

Maximum payout

 

$

10.00

 

 

$

10.00

 

Employee exit rate

 

2.2% - 9.0%

 

 

2.2% - 9.0%

 

 

The risk free interest rate was based on the U.S. Treasury yield curve in effect at the end of the reporting period. The expected dividend yield was based on our historical quarterly cash dividends, with the assumption that quarterly dividends would continue at that rate. Expected volatility was based on the historical volatility of our common stock. The exercise multiple and employee exit rate were calculated based on historical option data.

The following table summarizes information regarding stock-based compensation (benefit)/expense recognized for SARs:

 

(In thousands)

 

Thirteen

Weeks Ended May 2, 2020

 

 

Thirteen

Weeks Ended May 4, 2019

 

Stock-based compensation (benefit)/expense before the

   recognized income tax effect

 

$

(87

)

 

$

8

 

Income tax effect

 

$

(26

)

 

$

1

 

 

As of May 2, 2020, approximately $219,000 in unrecognized compensation expense remained related to non-vested SARs. This expense is expected to be recognized over a period of approximately 0.9 years.

 

Note 6 – Revenue

Disaggregation of Revenue by Product Category

 

Revenue is disaggregated by product category below. Net sales and percentage of net sales for the thirteen weeks ended May 2, 2020 and May 4, 2019 were as follows:

 

(In thousands)

 

Thirteen Weeks

Ended May 2, 2020

 

 

Thirteen Weeks

Ended May 4, 2019

 

Non-Athletics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Women’s

 

$

28,921

 

 

 

20

%

 

$

60,431

 

 

 

24

%

Men’s

 

 

18,715

 

 

 

13

 

 

 

35,863

 

 

 

14

 

Children’s

 

 

7,009

 

 

 

5

 

 

 

12,368

 

 

 

5

 

Total

 

 

54,645

 

 

 

38

 

 

 

108,662

 

 

 

43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Athletics: