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<SEC-DOCUMENT>0000895447-02-000008.txt : 20020425
<SEC-HEADER>0000895447-02-000008.hdr.sgml : 20020425
ACCESSION NUMBER: 0000895447-02-000008
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 20020202
FILED AS OF DATE: 20020425
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SHOE CARNIVAL INC
CENTRAL INDEX KEY: 0000895447
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-SHOE STORES [5661]
IRS NUMBER: 351736614
STATE OF INCORPORATION: IN
FISCAL YEAR END: 0131
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-21360
FILM NUMBER: 02620403
BUSINESS ADDRESS:
STREET 1: 8233 BAUMGART ROAD
CITY: EVANSVILLE
STATE: IN
ZIP: 47725
BUSINESS PHONE: 8128674039
MAIL ADDRESS:
STREET 1: 8233 BAUMGART RD
CITY: EVANSVILLE
STATE: IN
ZIP: 47725
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>scvl10-k2001.txt
<TEXT>
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 2, 2002
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, 47725
Evansville, Indiana (Zip Code)
(Address of principal executive offices)
(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, $. 01 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 ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant based on the last sale price for such stock at April 19_, 2002 was
approximately $145,425,005 (assuming solely for the purposes of this
calculation that all Directors and executive officers of the Registrant are
"affiliates").
Number of Shares of Common Stock, $.01 par value, outstanding at April 19, 2002
was 12,543,837.
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 5, 2002 is incorporated
by reference into Part III hereof.
1
<PAGE>
Shoe Carnival, Inc.
Evansville, Indiana
Annual Report to Securities and Exchange Commission
February 2, 2002
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. The Company was incorporated in 1988.
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 2, 2002 ("fiscal 2001"), the
average size, annual sales and sales per square foot for Shoe Carnival's stores
open the full year were approximately 11,600 square feet, $2.7 million and $237,
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 distinctive 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 almost 30,000 pairs of shoes in
four general categories -- men's, women's, 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.
2
<PAGE>
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. The Company
offers 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 sales 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.
The Company plans to open approximately 25 stores in 2002. Thereafter, the
Company intends to expand at a rate of approximately 20% per year. During fiscal
2002, new stores are expected to be located primarily in the North Central,
Midwest, South 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
3
<PAGE>
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, sandals and boots. The Company's
stores offer a complete assortment of men's footwear at affordable 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 70% 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 2001, 2000 and 1999.
<TABLE>
<CAPTION>
2001 2000 1999
------------- ------------ ------------
<S> <C> <C> <C>
Women's 25% 27% 28%
Men's 16 17 17
Children's 17 16 16
Athletic 37 35 34
Accessories and Miscellaneous Items 5 5 5
------------- ------------ ------------
100% 100% 100%
============= ============ ============
</TABLE>
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 daily 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. Print ads typically display a selection of special sale
items or desirable new products. Radio and television spots utilize an
entertaining format to capture the consumers attention while highlighting on
sale items or special promotions.
4
<PAGE>
The Company directs about 60% 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, computers, merchandise or cash.
Store Operations
Management of store operations is the responsibility of the Company's Executive
Vice President - Store Operations, who is assisted by divisional managers,
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. Currently there
are two divisions designated as the North and South Divisions. The divisional
managers are currently responsible for approximately ten regions, but ultimately
are expected to manage up to fifteen regions. Each regional manager is
responsible for the operation of between five and fourteen stores and is
required to visit each store periodically, concentrating more heavily on
under-performing stores. Regional managers collectively meet with their
respective divisional manager on a monthly basis, except during peak sales
periods, and quarterly with the Executive 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 four assistant managers, depending on
the sales volume of the store. The sales staff per store can range up to 60
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 all regional and store managers. The incentive plans are
based primarily upon the sales, expense control and profitability of their
respective stores as compared to defined 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
through merchandise placement, signage and timely clearance of slower selling
items.
The Company maintains inventory shrinkage rates (.5% of sales in fiscal 2001)
substantially below the retail industry average. Management attributes this
success to an 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 managers and loss prevention
personnel to the achievement of targeted shrinkage levels raises the awareness
of loss prevention.
Store Location and Design
The number of stores opened and closed for fiscal years 2001, 2000 and 1999 are
as follows:
<TABLE>
<CAPTION>
Fiscal Year 2001 2000 1999
--------- -------- ---------
<S> <C> <C> <C>
Stores open at beginning of year 165 138 111
Opened during year 18 32 28
Closed during year 1 5 1
--------- -------- ---------
Stores open at end of year 182 165 138
========= ======== =========
</TABLE>
At February 2, 2002, the Company had 182 stores located in 23 states, primarily
in the Midwest, South and Southeastern regions of the United States. Although
seven 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.
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
under-performing stores. In a particular market, potential store site selection
5
<PAGE>
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, distinctive 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 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.
As of February 2, 2002 the Company's stores averaged approximately 11,600 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. Currently, the new store
prototype calls for between 12,000 and 15,000 square feet but stores in the
8,000 square foot range will be considered. The size of a store is dependent
upon, among other 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
$350,000, including point-of-sale equipment which has traditionally been
acquired through equipment leasing transactions. The average inventory in a new
store is expected to range from $450,000 to $750,000, 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 approximately $75,000 per store.
Distribution
The Company operates a single 200,000 square foot distribution facility in
Evansville, Indiana. Management estimates that with only a moderate investment
in additional equipment and technology, the existing distribution facility can
service over 300 stores.
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 (when not performed by the manufacturer), 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 computer network connects every
store, providing up-to-date sales and inventory information as required. Each
store has an independent point-of-sale controller, with two to 12 point-of-sale
terminals per store. To provide maximum flexibility and maintain data integrity,
the Company's information 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.
6
<PAGE>
Competition
The retail footwear business is highly competitive. The Company believes that
the principal competitive factors in its industry are merchandise selection,
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 2, 2002, the Company had approximately 3,200 employees, of which
approximately 1,700 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 management level 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 Brittney'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.
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 2001 fiscal year.
7
<PAGE>
Executive Officers of the Company
<TABLE>
<CAPTION>
Name Age Position
- --------------- --- ----------------------------------------------------
<S> <C> <C>
J. Wayne Weaver 67 Chairman of the Board and Director
Mark L. Lemond 47 President, Chief Executive Officer and Director
Timothy T. Baker 45 Executive Vice President-Store Operations
Clifton E. Sifford 48 Executive Vice President-General Merchandise Manager
W. Kerry Jackson 40 Senior Vice President-Chief Financial Officer and
Treasurer
David A. Kapp 38 Vice President-Merchandise Allocation and Secretary
</TABLE>
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, LLC.
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
capacities 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. Baker has been employed by the Company as Executive Vice President - Store
Operations since June 2001. From March 1994 to June 2001, Mr. Baker served as
Senior Vice President - Store Operations. From May 1992 to March 1994, Mr. Baker
served as Vice President - Store Operations. Prior to that time, he served as a
Regional Manager of the Company. From 1983 to June 1989, Mr. Baker held various
retail positions with Payless ShoeSource.
Mr. Sifford has been employed by the Company as Executive Vice President -
General Merchandise Manager since June 2001. From April 13, 1997 to June 2001,
Mr. Sifford served as Senior Vice President - General Merchandise Manager. Prior
to joining the Company, Mr. Sifford served as merchandise manager-shoes for Belk
Store Services, Inc.
Mr. Jackson has been employed by the Company as Senior Vice President - Chief
Financial Officer and Treasurer since June 2001. From September 1996 to June
2001, Mr. Jackson served as Vice President - Chief Financial Officer and
Treasurer. 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 - Merchandise Allocation and Secretary. Prior to assuming his
current position, Mr. Kapp held various accounting and retail positions with the
Company and its predecessor.
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 2002 Annual Meeting of
Shareholders.)
8
<PAGE>
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 2001 and 2000 are as follows:
<TABLE>
<CAPTION>
High Low
------------- -------------
<S> <C> <C>
Fiscal Year 2001
First Quarter $ 11.00 $ 8.22
Second Quarter 13.00 9.30
Third Quarter 13.85 8.60
Fourth Quarter 14.70 8.40
Fiscal Year 2000
First Quarter $ 13.75 $ 7.22
Second Quarter 9.75 4.81
Third Quarter 7.13 4.75
Fourth Quarter 7.00 3.94
</TABLE>
As of February 20, 2002, there were approximately 225 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.
No unregistered equity securities were sold by the Company during fiscal 2001.
9
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. Selected Financial Data
(In thousands, except share and operating data)
Fiscal years (1) 2001 2000 1999 1998 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 476,556 $ 418,164 $ 339,929 $ 280,157 $ 246,520
Cost of sales
(including buying,
distribution and
occupancy costs) 341,425 298,233 238,097 196,141 173,953
--------- --------- --------- --------- ---------
Gross profit 135,131 119,931 101,832 84,016 72,567
Selling, general and
administrative
expenses 112,736 100,692 80,888 66,464 59,438
--------- --------- --------- --------- ---------
Operating income 22,395 19,239 20,944 17,552 13,129
Interest expense 2,275 3,168 1,010 507 912
--------- --------- --------- --------- ---------
Income before income
taxes 20,120 16,071 19,934 17,045 12,217
Income tax expense 7,545 6,348 7,973 6,818 4,826
--------- --------- --------- --------- ---------
Net income $ 12,575 $ 9,723 $ 11,961 $ 10,227 $ 7,391
========= ========= ========= ========= =========
Net income per share:
Basic $ 1.04 $ .79 $ .90 $ .78 $ .57
Diluted $ 1.01 $ .78 $ .88 $ .76 $ .56
Average shares
outstanding:
Basic 12,124 12,354 13,284 13,150 13,049
Diluted 12,483 12,455 13,578 13,429 13,238
Selected Operating
Data (2):
Stores open at end
of year 182 165 138 111 92
Square footage of
store space at
year-end (000's) 2,104 1,911 1,590 1,274 1,021
Average sales per
store (000's) $ 2,743 $ 2,744 $ 2,744 $ 2,791 $ 2,720
Average sales per
square foot $ 237 $ 237 $ 238 $ 250 $ 245
Comparable store
sales 3.0% 2.5% 1.4% 3.6% 6.1%
- --------------------------------------------------------------------------------
Balance Sheet Data:
Working capital $ 91,276 $ 87,691 $ 68,346 $ 47,668 $ 48,889
Total assets 201,919 187,351 162,853 120,761 96,201
Long-term debt and
other indebtedness 27,672 41,137 22,338 1,361 6,133
Total shareholders'
equity 112,102 96,313 93,345 82,667 71,609
- --------------------------------------------------------------------------------
<FN>
(1) The Company's fiscal year is a 52/53 week year ending on the Saturday
closest to January 31. Unless otherwise stated, references to years 2001,
2000, 1999, 1998, and 1997 relate respectively to the fiscal years ended
February 2, 2002, February 3, 2001, January 29, 2000, January 30, 1999,
and January 31, 1998. Fiscal year 2000 consisted of 53 weeks and the other
fiscal years consisted of 52 weeks.
(2) Selected Operating Data has been adjusted to a comparable 52 week basis
for 2000.
</FN>
</TABLE>
10
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company's fiscal year consists of a 52/53 week period ending on the Saturday
closest to January 31. Unless otherwise stated, references to the years 2001,
2000 and 1999 relate respectively to the fiscal years ended February 2, 2002,
February 3, 2001, and January 29, 2000. Fiscal years 2001 and 1999 consisted of
52 weeks and fiscal year 2000 consisted of 53 weeks.
Critical Accounting Policies
It is necessary for management to include certain judgements in the reported
financial results of the Company. These judgements involve estimates that are
inherently uncertain and actual results could differ materially from these
estimates. The accounting policies that require the more significant judgements
by management are:
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.
Valuation of Long-lived Assets - The Company reviews long-lived assets whenever
events or circumstances indicate the carrying value of an asset may not be
recoverable. In evaluating whether an asset has been impaired, the Company
projects the anticipated future cash flows expected to be generated by the
assets. While we believe that our estimates of future cash flows are reasonable,
different assumptions regarding such cash flows could materially affect our
evaluations.
Deferred Income Taxes - Estimates are made by management for deferred income
taxes and the significant items giving rise to deferred assets and liabilities.
These estimates include assessments of future taxes to be paid on items
reflected in the financial statements, giving consideration to both timing and
probability of realization. Actual income taxes could vary from these estimates
due to among other factors future changes in the income tax laws or changes
resulting from audit of tax returns by taxing authorities.
Results of Operations
The following table sets forth the Company's results of operations expressed as
a percentage of net sales for the following fiscal years:
<TABLE>
<CAPTION>
2001 2000 1999
---------- --------- ---------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales (including buying,
distribution and occupancy costs) 71.6 71.3 70.0
--------- --------- ---------
Gross profit 28.4 28.7 30.0
Selling, general and
administrative expenses 23.7 24.1 23.8
---------- --------- ---------
Operating income 4.7 4.6 6.2
Interest expense 0.5 0.8 0.3
---------- --------- ---------
Income before income taxes 4.2 3.8 5.9
Income tax expense 1.6 1.5 2.4
---------- --------- ---------
Net income 2.6% 2.3% 3.5%
========== ========= =========
</TABLE>
11
<PAGE>
2001 Compared to 2000
Net Sales
Net sales increased $58.4 million to $476.6 million in 2001, a 14.0% increase
over net sales of $418.2 million in 2000. The increase was attributable to the
sales generated by the 18 stores opened in 2001, the effect of a full year's
worth of sales for the 27 stores opened in 2000 (net of five stores closed) and
a comparable store sales increase of 3.0%. Partially offsetting the sales
increase was an additional week of sales included in 2000. Excluding the impact
of the extra week of sales, total sales increased 15.5% from the year
2000 to the year 2001. The increase in comparable store sales was generated by
athletic footwear and children's non-athletic footwear.
Gross Profit
Gross profit increased $15.2 million to $135.1 million in 2001, a 12.7% increase
from gross profit of $119.9 million in 2000. The Company's gross profit margin
decreased to 28.4% from 28.7% in 2000 due to a decrease in the merchandise gross
profit margin. Buying, distribution and occupancy costs, as a percentage of
sales, were flat with last year. The decrease in merchandise margins resulted
from a decline in the gross profit margins realized from the sale and
liquidation of fall and winter product during the fourth quarter. Due to
unseasonably warm weather and a very competitive retail environment throughout
the fourth quarter, it was necessary to take substantial markdowns, particularly
in the seasonal dress and casual shoes, and boots.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $12.0 million to $112.7
million in 2001 from $100.7 million in 2000. As a percentage of sales, these
expenses decreased 0.4% in 2001 primarily as a result of lower pre-opening
costs. The aggregate of pre-opening expenses for the 18 new stores in 2001 was
approximately $1.2 million, or 0.3% of sales, and $2.4 million, or 0.6% of
sales, for the 32 new stores in 2000.
Interest Expense
Interest expense decreased to $2.3 million (net of interest income of $72,000)
in 2001 from $3.2 million (net of interest income of $49,000) in 2000. The
decrease was attributable to a lower effective interest rate. Partially
offsetting the benefit of the lower interest rates was a slight increase in the
average borrowings outstanding over last year. The weighted average interest
rate on total debt was 5.6% in 2001 and 8.2% in 2000.
Income Taxes
The effective income tax rate decreased to 37.5% for 2001 from 39.5% for 2000.
The decrease resulted from lower state income taxes. The effective income tax
rate for both years differed from the statutory rate due primarily to state and
local income taxes, net of the federal tax benefit.
2000 Compared to 1999
Net Sales
Net sales increased $78.2 million to $418.2 million in 2000, a 23.0% increase
over net sales of $339.9 million in 1999. The increase was attributable to the
sales generated by the 27 stores opened in 2000 (net of five stores closed), the
effect of a full year's worth of sales for the 27 stores opened in 1999 (net of
one store closed), sales in the additional week included in 2000 and a
comparable store sales increase of 2.5%. Increases in comparable store sales
were realized in all major footwear categories with the exception of the women's
non-athletic category.
Gross Profit
Gross profit increased $18.1 million to $119.9 million in 2000, a 17.8% increase
from gross profit of $101.8 million in 1999. The Company's gross profit margin
decreased to 28.7% from 30.0% in 1999. As a percentage of sales, the merchandise
gross profit margin decreased by 1.0% and buying, distribution and occupancy
costs increased by .3%.The decrease in merchandise margins resulted from a
12
<PAGE>
decline in the gross profit margins realized from the sale and liquidation of
spring season product, particularly sandals and dress shoes. This was partially
offset by higher gross margins realized on fall season product, especially
women's, men's and children's boots. The increase in the buying, distribution
and occupancy costs was largely the result of higher occupancy costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $19.8 million to $100.7
million in 2000 from $80.9 million in 1999. As a percentage of sales, these
expenses increased .3% in 2000 primarily as a result of higher advertising
costs. The aggregate of pre-opening expenses for the 32 new stores in 2000 was
approximately $2.4 million, or .6% of sales, and $2.1 million, or 0.6% of sales,
for the 28 new stores in 1999.
Interest Expense
Interest expense increased to $3.2 million (net of interest income of $49,000)
in 2000 from $1.0 million (net of interest income of $32,000) in 1999. The
increase was attributable to a higher effective interest rate and increased
borrowings used to fund the Company's store expansion and the common share
repurchase program. The weighted average interest rate on total debt was 8.2% in
2000 and 7.3% in 1999.
Income Taxes
The effective income tax rate for 2000 was 39.5% and 40% for 1999. The effective
income tax rate for both years differed from the statutory rate due primarily to
state and local income taxes, net of the federal tax benefit.
Liquidity and Capital Resources
The Company's sources and uses of cash are summarized as follows:
<TABLE>
<CAPTION>
(000's)
Fiscal years 2001 2000 1999
---------- -------- ---------
<S> <C> <C> <C>
Net income plus depreciation
and amortization $ 23,747 $ 20,069 $ 20,339
Deferred income taxes 116 1,237 1,131
Working capital increases (1,594) (18,100) (20,787)
Other operating activities 61 (96) (328)
---------- -------- ---------
Net cash provided by operating activities 22,330 3,110 355
Net cash used in investing activities (9,369) (12,979) (19,441)
Net cash used to repurchase common shares 0 (7,576) (2,424)
Net cash (used in) provided by other
financing activities (10,729) 18,997 21,241
---------- -------- ---------
Net increase (decrease) in cash and cash
equivalents 2,232 1,552 (269)
Cash and cash equivalents at beginning
of year 3,227 1,675 1,944
---------- -------- ---------
Cash and cash equivalents at end of year $ 5,459 $ 3,227 $ 1,675
========== ======== =========
</TABLE>
The Company's primary sources of funds are cash flows from operations and
borrowings under its revolving credit facility. Cash provided from operating
activities was $22.3 million, $3.1 million and $355,000 in 2001, 2000 and 1999,
respectively. Excluding changes in operating assets and liabilities, $23.9
million, $21.2 million and $21.1 million was provided by operating activities
in 2001, 2000 and 1999, respectively. Merchandise inventories increased $12.6
million (10.3%) to $135.6 million at February 2, 2002 compared with $123.0
million at February 3, 2001. The increase in merchandise inventories resulted
primarily from the 17 additional stores operated at February 2, 2002(a 10.3%
increase).
Working capital was $91.3 million at February 2, 2002 and $87.7 million at
February 3, 2001. The current ratio at February 2, 2002 was 2.7 as compared to
3.1 at February 3, 2001. The decrease from the prior year was primarily a result
of an increase in accounts payable and accrued and other liabilities. Long-term
debt as a percentage of total capital (long-term debt plus shareholders' equity)
decreased to 19.8% at February 2, 2002 as compared to 29.9% at February 3, 2001.
Cash generated by operations in 2001 was used in pay down long-term debt.
13
<PAGE>
Capital expenditures, net of lease incentives, were $9.8 million in 2001, $13.8
million in 2000 and $20.3 million in 1999. These amounts include $440,000,
$783,000 and $808,000 of capital lease obligations incurred in 2001, 2000 and
1999, respectively. Of the 2001 expenditures, $6.6 million was incurred for new
stores and $1.2 million was incurred for the remodeling of certain stores. The
remaining capital expenditures in 2001 were primarily for various store
improvements, loss prevention and technology.
Capital expenditures, including assets acquired through leasing arrangements but
net of lease incentives, are expected to be $13 million to $14 million in fiscal
2002. 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 fiscal 2002, the Company intends to open approximately 25 stores at an
expected aggregate cost of between $8.5 million and $9 million. The remaining
capital expenditures are expected to be incurred for store remodels, visual
presentation enhancements and various other store improvements along with
continued investments in technology.
The Company's current store prototype utilizes between 8,000 and 15,000 square
feet depending upon, among other factors, the location of the store and the
population base the store is expected to service. Net capital expenditures for a
new store are expected to average approximately $350,000, 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 $450,000 to $750,000, 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 and supplies, are expected to average approximately
$75,000 per store. On a per-store basis, for the 18 stores opened during 2001,
the initial inventory investment averaged $627,000, capital expenditures
averaged $348,000 and pre-opening expenses averaged $67,000.
The Company's unsecured credit facility provides for up to $70 million in cash
advances on a revolving basis and commercial letters of credit. Borrowings under
the revolving credit line are based on eligible inventory. Cash generated by
operations in 2001 was partially used to reduce the outstanding borrowings under
this facility by $13 million. Borrowings outstanding under the credit facility
were $27 million at February 2, 2002 and $40 million at February 3, 2001.
Letters of credit outstanding at February 2, 2002 were $8.6 million. On March
18, 2002, the credit agreement was amended to extend the maturity date to March
31, 2004.
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.
Significant contractual obligations as of February 2, 2002 and the periods in
which payments are due include:
<TABLE>
<CAPTION>
(000's) Payments Due By Period
----------------------------------------------------
Less Than 1-3 4-5 After 5
Contractual Obligations Total 1 Year Years Years Years
- ----------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Line of credit $ 27,000 $ 27,000
Capital lease
obligations 1,646 $ 923 676 $ 47
Operating leases 179,672 25,798 47,590 40,978 $ 65,306
-------- -------- -------- -------- ---------
Total Contractual
Cash Obligations $208,318 $ 26,721 $ 75,266 $ 41,025 $ 65,306
========= ======== ======== ======== =========
</TABLE>
See Note 5 for a discussion of long-term debt and Note 6 for a discussion of
leases.
The Company has other commercial commitments in the form of letters of credit
where payment is contingent upon the occurrence of certain events. As of
February 2, 2002, letters of credit outstanding were $8.6 million.
14
<PAGE>
Seasonality
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 as incurred. Therefore, the
Company's results of operations may be adversely affected in any quarter in
which the Company incurs pre-opening expenses related to the opening of 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 potential impact of national and international
security concerns on the retail environment; the impact of competition and
pricing; changes in weather patterns, consumer buying trends and the ability of
the Company to identify and respond to emerging fashion trends; risks associated
with the seasonality of the retail industry; the availability of desirable store
locations at acceptable lease terms and the ability of the Company to open new
stores in a timely manner; higher than anticipated costs associated with the
closing of underperforming stores; the inability of manufacturers to deliver
products in a timely manner; and changes in the political and economic
environments in the People's Republic of China, a major manufacturer of
footwear, and the continued favorable trade relationships between China and the
United States.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk in that the interest payable on the
Company's Credit Agreement is based on variable interest rates and therefore is
affected by changes in market rates. The Company does not use interest rate
derivative instruments to manage exposure to changes in market interest rates. A
1% change in the weighted average interest rate charged under the Credit
Agreement would have resulted in interest expense fluctuating by approximately
$335,000 in 2001 and $370,000 in 2000.
15
<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
consolidated 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 consolidated 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 consolidated balance sheets of Shoe Carnival,
Inc., as of February 2, 2002 and February 3, 2001 and the related consolidated
statements of income, shareholders' equity and cash flows for the years ended
February 2, 2002, February 3, 2001 and January 29, 2000. 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 and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 consolidated financial statements present fairly, in all
material respects, the financial position of Shoe Carnival, Inc., at February 2,
2002 and February 3, 2001 and the results of its operations and its cash flows
for the years ended February 2, 2002, February 3, 2001 and January 29, 2000, in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
San Francisco, California
March 8, 2002 (March 18, 2002 as to Note 5)
16
<PAGE>
<TABLE>
<CAPTION>
Shoe Carnival, Inc.
Consolidated Balance Sheets
February 2, February 3,
(In thousands) 2002 2001
----------------- -----------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 5,459 $ 3,227
Accounts receivable 1,298 1,067
Merchandise inventories 135,648 123,035
Deferred income tax benefit 449 728
Other 1,816 1,434
------------- -------------
Total Current Assets 144,670 129,491
Property and equipment-net 57,249 57,860
------------- -------------
Total Assets $ 201,919 $ 187,351
============= =============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 42,108 $ 33,030
Accrued and other liabilities 10,452 7,896
Current portion of long-term debt 834 874
------------- -------------
Total Current Liabilities 53,394 41,800
Long-term debt 27,672 41,137
Deferred lease incentives 4,197 3,651
Deferred income taxes 4,223 4,386
Other 331 64
------------- -------------
Total Liabilities 89,817 91,038
------------- -------------
Shareholders' Equity:
Common stock, $. 01 par value,
50,000 shares authorized 13,363
shares issued 134 134
Additional paid-in capital 64,752 64,288
Retained earnings 54,251 41,676
Treasury stock, at cost,
1,000 and 1,406 shares (7,035) (9,785)
-------------- -------------
Total Shareholders' Equity 112,102 96,313
-------------- -------------
Total Liabilities and Shareholders'
Equity $ 201,919 $ 187,351
============== =============
</TABLE>
See notes to consolidated financial statements
17
<PAGE>
<TABLE>
<CAPTION>
Shoe Carnival, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
Fiscal years ended February 2, February 3, January 29,
2002 2001 2000
------------ ------------ -------------
<S> <C> <C> <C>
Net sales $ 476,556 $ 418,164 $ 339,929
Cost of sales (including
buying, distribution
and occupancy costs) 341,425 298,233 238,097
------------ ------------- -------------
Gross profit 135,131 119,931 101,832
Selling, general and
administrative expenses 112,736 100,692 80,888
------------ ------------- -------------
Operating income 22,395 19,239 20,944
Interest expense 2,275 3,168 1,010
------------ ------------- -------------
Income before income taxes 20,120 16,071 19,934
Income tax expense 7,545 6,348 7,973
------------ ------------- -------------
Net income $ 12,575 $ 9,723 $ 11,961
============ ============= =============
Net income per share:
Basic $ 1.04 $ .79 $ .90
Diluted $ 1.01 $ .78 $ .88
Average shares outstanding:
Basic 12,124 12,354 13,284
Diluted 12,483 12,455 13,578
</TABLE>
See notes to consolidated financial statements
18
<PAGE>
<TABLE>
<CAPTION>
Shoe Carnival, Inc.
Consolidated Statements of Shareholders' Equity
(In thousands)
Common Stock Additional
---------------------- Paid-In Retained Treasury
Issued Treasury Amount Capital Earnings Stock Total
------ -------- ------ ------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 30, 1999 13,179 0 $ 132 $62,543 $19,992 $ 0 $ 82,667
Exercise of stock
options 153 1 1,002 1,003
Employee stock
purchase plan
purchases 13 138 138
Common stock
repurchased (292) (2,424) (2,424)
Net income 11,961 11,961
------ -------- ------ ------- ------- -------- -------
Balance at
January 29, 2000 13,345 (292) 133 63,683 31,953 (2,424) 93,345
Exercise of stock
options 18 17 1 605 90 696
Employee stock
purchase plan
purchases 22 125 125
Common stock
repurchased (1,153) (7,576) (7,576)
Net income 9,723 9,723
------ -------- ------ ------- ------- -------- -------
Balance at
February 3, 2001 13,363 (1,406) 134 64,288 41,676 (9,785) 96,313
Exercise of stock
options 392 464 2,622 3,086
Employee stock
purchase plan
purchases 14 128 128
Net income 12,575 12,575
------ -------- ------ ------- ------- -------- --------
Balance at
February 2, 2002 13,363 (1,000)$ 134 $ 64,752 $ 54,251 $(7,035) $112,102
====== ======== ====== ======== ======== ======= ========
See notes to consolidated financial statements
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Shoe Carnival, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Fiscal years ended
February 2, February 3, January 29,
2002 2001 2000
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income $ 12,575 $ 9,723 $ 11,961
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 11,172 10,346 8,378
Loss on retirement of assets 283 321 35
Deferred income taxes 116 1,237 1,131
Other (222) (417) (363)
Changes in operating assets and
liabilities:
Merchandise inventories (12,613) (18,305) (29,340)
Accounts receivable (231) (373) (128)
Accounts payable and accrued
liabilities 11,650 844 8,628
Other (400) (266) 53
----------- ----------- ----------
Net cash provided by operating
activities 22,330 3,110 355
----------- ----------- ----------
Cash Flows From Investing Activities
Purchases of property and equipment (10,395) (14,029) (20,478)
Lease incentives 1,026 1,048 1,016
Other 0 2 21
----------- ----------- ----------
Net cash used in investing activities (9,369) (12,979) (19,441)
------------ ----------- ----------
Cash Flows From Financing Activities
Borrowings under line of credit 417,525 413,400 203,625
Payments on line of credit (430,525) (394,400) (182,625)
Payments on long-term debt (943) (824) (899)
Proceeds from issuance of stock 3,214 821 1,140
Common stock repurchased 0 (7,576) (2,424)
----------- ----------- ----------
Net cash (used in) provided by
financing activities (10,729) 11,421 18,817
----------- ----------- ----------
Net increase (decrease) in cash and
cash equivalents 2,232 1,552 (269)
Cash and cash equivalents at beginning
of year 3,227 1,675 1,944
----------- ----------- ----------
Cash and Cash Equivalents at End
of Year $ 5,459 $ 3,227 $ 1,675
=========== =========== ==========
Supplemental disclosures of cash flow
information:
Cash paid during year for interest $ 2,506 $ 2,013 $ 901
Cash paid during year for income
taxes 7,226 4,627 6,443
Capital lease obligations incurred 440 783 808
</TABLE>
See notes to consolidated financial statements
20
<PAGE>
Shoe Carnival, Inc.
Notes to Consolidated Financial Statements
Note 1 - Organization and Description of Business
The consolidated financial statements include the accounts of Shoe Carnival,
Inc. and its wholly-owned subsidiary SCHC, Inc. (collectively the "Company").
Shoe Carnival, Inc., 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. SCHC, Inc. was incorporated on May 1, 2001 and has a
wholly-owned subsidiary SCLC, Inc. which was incorporated on February 1, 1999.
On May 1, 2001 the ownership of SCLC, Inc. was transferred from Shoe Carnival,
Inc. to SCHC, Inc. 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
The Company's fiscal year consists of a 52/53 week period ending on the Saturday
closest to January 31. Unless otherwise stated, references to the years 2001,
2000 and 1999 relate respectively to the fiscal years ended February 2, 2002,
February 3, 2001 and January 29, 2000. Fiscal years 2001 and 1999 consisted of
52 weeks and fiscal 2000 consisted of 53 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
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.
21
<PAGE>
Shoe Carnival, Inc.
Notes to Consolidated Financial Statements - Continued
Store Opening Costs
Non-capital expenditures, such as advertising, payroll and supplies, incurred
prior to the opening of a new store are charged to expense in the period they
are incurred.
Advertising Costs
Print, radio and television communication costs are generally expensed when
incurred. Internal production costs are expensed when incurred and external
production costs are expensed in the year the advertisement first takes place.
Advertising expenses included in selling, general and administrative expenses
were $22.8 million in 2001, $19.7 million in 2000 and $14.8 million in 1999.
Comprehensive Income
Statement of Financial Accounting Standards ("SFAS") No. 130, "Comprehensive
Income," requires the presentation of comprehensive income, in addition to the
existing income statement. Comprehensive income is defined as the change in
equity during a period from transactions and other events, excluding changes
resulting from investments by owners and distributions to owners. For all years
presented, there are no items requiring separate disclosure in accordance with
this statement.
Segments of an Enterprise and Related Information
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" requires the disclosure of segment related information based on how
management makes decisions about allocating resources to segments and measuring
their performance. The Company has one business segment that offers the same
principal product and service throughout the Midwest, South and Southeastern
regions of the United States. Based on the current organizational structure of
the Company, the financial information presented is in compliance with this
accounting pronouncement.
Derivative Instruments and Hedging Activities
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as
amended, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and hedging activities. The Company has adopted SFAS No. 133 effective
February 4, 2001. The adoption of SFAS No. 133 did not have a significant impact
on the financial position, results of operations or cash flows of the Company.
New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
No. 141, "Business Combinations," and Statement No. 142, "Goodwill and Other
Intangible Assets." Statement 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001.
Statement 141 also specifies criteria that must be met in order for intangible
assets acquired in a purchase method business combination to be recognized and
reported apart from goodwill. Statement 142 requires goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead reviewed
for impairment at least annually. SFAS No. 142 is effective for the Company's
2002 fiscal year. Management does not believe any impairment charges will result
from the adoption of this statement.
In August 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations." Statement 143 requires recording the fair market value
of an asset retirement cost as a liability in the period in which a legal
obligation associated with the retirement of tangible long-lived assets is
incurred. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset. SFAS No. 143 is effective for the
Company's 2003 fiscal year. Management has not determined the impact, if any,
that this statement will have on its consolidated financial position or results
of operations.
22
<PAGE>
Shoe Carnival, Inc.
Notes to Consolidated Financial Statements - Continued
In October 2001, the FASB issued Statement No. 144, "Accounting for Impairment
or Disposal of Long-Lived Assets." Statement 144 addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. SFAS No. 144
is effective for the Company's 2002 fiscal year. Management does not expect the
adoption of SFAS No. 144 will have a significant impact on the financial
position or results from operations.
Use of Management Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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:
<TABLE>
<CAPTION>
(000's) February 2, February 3,
2002 2001
------------- -------------
<S> <C> <C>
Land $ 205 $ 205
Buildings 9,034 8,953
Furniture, fixtures and equipment 56,329 50,899
Leasehold improvements 37,607 33,913
Equipment under capital leases 4,259 3,818
------------- -------------
Total 107,434 97,788
Less accumulated depreciation
and amortization 50,185 39,928
------------- -------------
Property and equipment-net $ 57,249 $ 57,860
============= =============
</TABLE>
Note 4 - Accrued and Other Liabilities
Accrued and other liabilities consisted of the following:
<TABLE>
<CAPTION>
(000's) February 2, February 3,
2002 2001
------------- -------------
<S> <C> <C>
Employee compensation and benefits $ 4,027 $ 2,906
Accrued rent 2,217 1,863
Other 4,208 3,127
------------- -------------
Total accrued and other liabilities $ 10,452 $ 7,896
============= =============
</TABLE>
Note 5 - Long-Term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
(000's) February 2, February 3,
2002 2001
------------- -------------
<S> <C> <C>
Credit agreement $ 27,000 $ 40,000
Capital lease obligations (see Note 6) 1,506 2,011
------------- -------------
</TABLE>
23
<PAGE>
Shoe Carnival, Inc.
Notes to Consolidated Financial Statements - Continued
<TABLE>
<S> <C> <C>
Total 28,506 42,011
Less current portion 834 874
------------- -------------
Total long-term debt, net of
current portion $ 27,672 $ 41,137
============= =============
</TABLE>
The Company has an unsecured credit agreement (the "Credit Agreement") with a
bank group, which allows for both cash advances and the issuance of letters of
credit. On March 24, 2000, the credit agreement was amended to increase the
total facility to $55 million and extend the maturity date to March 31, 2002. On
November 8, 2000, the credit agreement was amended to increase the total credit
facility to $70 million and to extend the maturity date to March 31, 2003. On
March 18, 2002, the credit agreement was amended to extend the maturity date to
March 31, 2004.
Borrowings under the amended facility are based on eligible inventory and bear
interest, at the Company's option, at the agent bank's prime rate (4.75% at
February 2, 2002) minus 0.5% or LIBOR plus from 0.75% to 1.5%, depending on the
Company's achievement of certain performance criteria. A commitment fee is
charged, at the Company's option, at 0.3% per annum on the unused portion of the
bank group's commitment or 0.15% per annum of the total commitment. The Credit
Agreement contains various restrictive and financial covenants, including the
maintenance of specific financial ratios. At February 2, 2002 outstanding
letters of credit were approximately $8.6 million.
Note 6 - Leases
The Company leases all of its retail locations and certain equipment under
operating leases expiring at various dates through 2015. One hundred and
sixty-five 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 2005.
Rental expense for the Company's operating leases consisted of:
<TABLE>
<CAPTION>
(000's)
Fiscal years 2001 2000 1999
---------- ----------- ----------
<S> <C> <C> <C>
Rentals for real property $ 25,670 $ 22,102 $ 17,394
Equipment rentals 446 419 386
---------- ----------- ----------
Total $ 26,116 $ 22,521 $ 17,780
========== =========== ==========
</TABLE>
Future minimum lease payments at February 2, 2002 are as follows:
<TABLE>
<CAPTION>
(000's) Operating Capital
Fiscal years Leases Leases
----------- -----------
<S> <C> <C>
2002 $ 25,798 $ 923
2003 24,934 454
2004 22,656 222
2005 20,991 47
2006 19,987
Thereafter to 2014 65,306
----------- -----------
Minimum lease payments $ 179,672 1,646
==========
Less imputed interest at rates
ranging from 7.5% to 9.3% 140
-----------
Present value of net minimum lease
payments of which $834 is
included in current liabilities $ 1,506
===========
</TABLE>
24
<PAGE>
Shoe Carnival, Inc.
Notes to Consolidated Financial Statements - Continued
The present value of minimum lease payments for equipment under capital lease is
included in long-term debt (see Note 5).
Investment in equipment under capital lease, which is included in property and
equipment, was:
<TABLE>
<CAPTION>
(000's) February 2, February 3,
2002 2001
----------- -----------
<S> <C> <C>
Equipment $ 4,259 $ 3,818
Less accumulated
amortization 2,205 1,485
----------- -----------
Equipment under capital
lease-net $ 2,054 $ 2,333
=========== ===========
</TABLE>
Note 7 - Income Taxes
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
(000's)
Fiscal years 2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal $ 6,845 $ 4,518 $ 5,857
State 584 593 985
----------- ----------- -----------
Total current 7,429 5,111 6,842
----------- ----------- -----------
Deferred:
Federal 109 1,096 990
State 7 141 141
----------- ----------- -----------
Total deferred 116 1,237 1,131
----------- ----------- -----------
Total provision $ 7,545 $ 6,348 $ 7,973
=========== =========== ============
</TABLE>
Included in other current assets are income tax receivables in the amounts of
$263,000 and $1,000 as of February 2, 2002 and February 3, 2001, respectively.
The Company realized a tax benefit of $464,000 in 2001 and $38,000 in 2000 as a
result of the exercise of stock options.
A reconciliation between the statutory federal income tax rate and the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
Fiscal years 2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
U.S. Federal statutory
tax rate 35.0% 35.0% 35.0%
State and local income
taxes, net of federal
tax benefit 1.9 5.0 5.1
Other 0.6 (0.5) (0.1)
----------- ----------- -----------
Effective income tax rate 37.5% 39.5% 40.0%
=========== =========== ===========
</TABLE>
25
<PAGE>
Shoe Carnival, Inc.
Notes to Consolidated Financial Statements - Continued
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:
<TABLE>
<CAPTION>
(000's) February 2, February 3,
2002 2001
------------ -----------
<S> <C> <C>
Deferred tax assets:
Accrued rent $ 769 $ 653
Accrued compensation 313 252
Accrued employee benefits 246 122
Federal net operating loss carryforward 41 87
Lease incentives 10 37
Other 180 49
------------ -----------
Total deferred tax assets $ 1,559 $ 1,200
============ ===========
Deferred tax liabilities:
Depreciation $ 2,246 $ 2,484
Purchase accounting adjustments 654 788
Inventory valuation 1,075 559
Inventory purchase discounts 1,358 1,027
------------ -----------
Total deferred tax liabilities $ 5,333 $ 4,858
============ ===========
</TABLE>
Note 8 - 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
16 investment options at the participants' direction. The Company contributions
to the participants' accounts become fully vested upon completion of three years
of participation in the Retirement Plan. Contributions charged to expense in
2001, 2000 and 1999 were $304,000, $334,000 and $256,000, respectively.
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 a 10%
owner of the Company's stock, at 85% of the then fair market value up to a
maximum of $5,000 in any calendar year. During 2001, 14,000 shares of common
stock were purchased by participants in the plan and proceeds to the Company for
the sale of those shares were approximately $128,000.
26
<PAGE>
Shoe Carnival, Inc.
Notes to Consolidated Financial Statements - Continued
Deferred Compensation Plan
In 2000, the Company established a non-qualified deferred compensation plan for
certain key employees who, due to Internal Revenue Service guidelines, cannot
take full advantage of the Company sponsored 401(k) plan. Participants in the
plan elect on an annual basis to defer, on a pre-tax basis, portions of their
current compensation until retirement, or earlier if so elected. While not
required to, the Company can match a portion of the employees' contributions,
which would be subject to vesting requirements. The plan is currently unfunded.
Compensation expense for the Company's match and earnings on the deferred
amounts for 2001 and 2000 were $65,000 and $18,000, respectively. Total deferred
compensation liability at February 2, 2002 and February 3, 2001 was $331,000 and
$64,000, respectively.
Note 9 - Stock Option and Incentive Plans
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 1,500,000 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 2, 2002, 144,326 shares of unissued common stock
were reserved for future grants under the plan.
Outside Directors Stock Option Plan
Effective March 4, 1999, the Company's Board of Directors approved the Outside
Directors Stock Option Plan (the "Directors Plan"). The Directors Plan reserves
for issuance 25,000 shares of the Company's common stock (subject to adjustment
for any subsequent stock splits, stock dividends and certain other changes to
the common stock). The Directors Plan calls for each non-employee Director to
receive on April 1st of each year an option to purchase 1,000 shares of the
Company's common stock at the market price on the date of grant. The option will
vest six months from the grant date and expire ten years from the date of grant.
At February 2, 2002, 19,000 shares of unissued common stock were reserved for
future grants under the plan.
2000 Stock Option and Incentive Plan
Effective June 8, 2000, the Company's Board of Directors and shareholders
approved the 2000 Stock Option and Incentive Plan (the "2000 Plan"). The 2000
Plan reserves for issuance 1,000,000 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 2000 Plan. The 2000 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 2, 2002, 593,500 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," in accounting for employee stock options.
Accordingly, no compensation expense has been recognized for the 1993 Plan, the
Directors Plan or the 2000 Plan.
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:
27
<PAGE>
Shoe Carnival, Inc.
Notes to Consolidated Financial Statements - Continued
<TABLE>
<CAPTION>
Fiscal years 2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Risk free interest rate 4.3% 5.9% 5.4%
Expected dividend yield 0.0% 0.0% 0.0%
Expected volatility 70.8% 71.5% 72.1%
Expected term 5 Years 5 Years 5 Years
</TABLE>
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:
<TABLE>
<CAPTION>
(000's, except per share data)
Fiscal years 2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Pro forma net income $ 11,714 $ 8,675 $ 11,243
Pro forma net income
per share-Basic $ .97 $ .70 $ .85
Pro forma net income
per share-Diluted $ .94 $ .70 $ .83
</TABLE>
The weighted-average fair value of options granted was $6.82, $3.68 and $7.03
for 2001, 2000 and 1999, respectively.
The following table summarizes the transactions pursuant to the stock option
plans for the three-year period ended February 2, 2002:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
-------------------------- --------------------------
Outstanding Exercisable Outstanding Exercisable
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at
January 30, 1999 857,274 517,842 $7.34 $ 6.30
Granted 322,750 11.09
Cancelled (18,094) 10.32
Exercised (152,584) 6.58
----------- ------
Balance at
January 29, 2000 1,009,346 534,382 8.60 $ 6.68
Granted 579,800 5.79
Cancelled (66,750) 9.80
Exercised (35,735) 8.96
----------- ------
Balance at
February 3, 2001 1,486,661 656,131 7.50 $ 7.66
Granted 15,000 11.08
Cancelled (55,954) 6.97
Exercised (392,791) 6.68
----------- ------
Balance at
February 2, 2002 1,052,916 681,741 $ 7.89 $ 8.21
=========== ======
</TABLE>
The following table summarizes information regarding outstanding and exercisable
options at February 2, 2002:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------- ------------------------
Weighted Weighted Weighted
Number Average Average Number Average
Range of of Options Remaining Exercise of Options Exercise
Exercise Price Outstanding Life Price Exercisable Price
- --------------- ----------- ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 4.38 - $ 6.00 481,003 7.0 $ 4.91 302,982 $ 5.19
$ 6.25 - $10.88 177,281 6.8 $ 8.63 79,076 $ 8.60
$11.00 - $11.50 372,632 6.8 $11.08 288,017 $11.07
$11.63 - $17.25 22,000 6.2 $13.19 11,666 $13.40
</TABLE>
28
<PAGE>
Shoe Carnival, Inc.
Notes to Consolidated Financial Statements - Continued
Note 10 - Shareholders' Equity
On January 7, 2000, the Company's Board of Directors authorized a share
repurchase program that allowed the Company to purchase up to $10 million of the
outstanding common stock. During 1999 the Company purchased 291,900 shares at an
approximate cost of $2.4 million. An additional 1,153,450 shares were purchased
in 2000 at an approximate cost of $7.6 million to complete the repurchase
program.
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.
Note 12 - Other Related Party Transactions
The Company's Chairman and Principal Shareholder and his son are principal
shareholders of LC Footwear, LLC and PL Footwear, Inc. The Company purchases
name brand merchandise from LC Footwear, LLC, while PL Footwear, Inc. serves as
an import agent for the Company. PL Footwear, Inc. represents the Company on a
commission basis in dealings with shoe factories in mainland China, where most
of the Company's private label shoes are manufactured.
The Company purchased approximately $146,000, $352,000 and $798,000 of
merchandise from LC Footwear, LLC in 2001, 2000 and 1999, respectively.
Commissions paid to PL Footwear, Inc. were $1.0 million, $1.2 million and $1.1
million in 2001, 2000 and 1999, respectively.
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 2001 and 2000 include results for 13 weeks except
for the fourth quarter of 2000, which includes results for 14 weeks. The
following table summarizes results for 2001 and 2000:
<TABLE>
<CAPTION>
(000's, except per share data)
First Second Third Fourth
2001 Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $117,186 $113,986 $124,778 $120,606
Gross profit 34,956 32,254 36,813 31,108
Operating income 7,669 4,629 7,881 2,216
Net income 4,290 2,502 4,625 1,158
Net income per share - Basic $ .36 $ .21 $ .38 $ .09
Net income per share - Diluted $ .35 $ .20 $ .37 $ .09
</TABLE>
<TABLE>
<CAPTION>
(000's, except per share data)
First Second Third Fourth
2000 Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 95,405 $ 95,611 $114,710 $112,438
Gross profit 28,193 27,391 33,929 30,418
Operating income 6,250 3,655 7,071 2,263
Net income 3,431 1,746 3,805 741
Net income per share - Basic $ .26 $ .14 $ .32 $ .06
Net income per share - Diluted $ .26 $ .14 $ .32 $ .06
</TABLE>
29
<PAGE>
SHOE CARNIVAL, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Charged
Balance at (Credited) to Balance at
Beginning Costs and End of
Descriptions of Period Expenses Period
------------ ------------ ------------- -----------
<S> <C> <C> <C>
Year ended January 29, 2000
Reserve for sales returns
and allowances $ 114,492 $ 0 $ 114,492
Inventory reserve $1,600,000 $ 0 $1,600,000
Year ended February 3, 2001
Reserve for sales returns
and allowances $ 114,492 $ 0 $ 114,492
Inventory reserve $1,600,000 $ 550,000 $2,150,000
Year ended February 2, 2002
Reserve for sales returns
and allowances $ 114,492 $ 0 $ 114,492
Inventory reserve $2,150,000 $ (100,000) $2,050,000
</TABLE>
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.
30
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item concerning the Directors and nominees for
Director of the Company and concerning any disclosure of delinquent filers under
Section 16(a) of the Exchange Act is incorporated herein by reference to the
Company's definitive Proxy Statement for its 2002 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.
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 2002 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 2002 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 2002 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.
31
<PAGE>
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.
Report of Management
Independent Auditors' Report
Consolidated Balance Sheets at February 2, 2002 and
February 3, 2001.
Consolidated Statements of Income for the years ended February 2,
2002, February 3, 2001 and January 29, 2000.
Consolidated Statements of Shareholders' Equity for the years ended
February 2, 2002, February 3, 2001 and January 29, 2000.
Consolidated Statements of Cash Flows for the years ended
February 2, 2002, February 3, 2001 and January 29, 2000.
Notes to Consolidated 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 2, 2002.
32
<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 4, 2002 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 4, 2002
- ------------------------
J. Wayne Weaver
/s/ Mark L. Lemond President, Chief Executive Officer April 4, 2002
- ------------------------ and Director
Mark L. Lemond (Principal Executive Officer)
/s/ William E. Bindley Director April 4, 2002
- ------------------------
William E. Bindley
/s/ Gerald W. Schoor Director April 4, 2002
- ------------------------
Gerald W. Schoor
/s/ James A. Aschleman Director April 4, 2002
- ------------------------
James A. Aschleman
/s/ W. Kerry Jackson Senior Vice President - Chief April 4, 2002
- ------------------------ Financial Officer and Treasurer
W. Kerry Jackson (Principal Financial and Accounting
Officer)
33
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Description
- -------- ------------------------------------------------------------------
3-A (i) Restated Articles of Incorporation of Registrant
(1)(ii) Articles of Amendment of Restated Articles of Incorporation
of Registrant
3-B By-laws of Registrant, as amended to date
4 (2)(i) Amended and Restated Credit Agreement and Promissory Notes
dated April 16, 1999, between Registrant and Mercantile Bank
National Association, First Union National Bank and Old
National Bank
(3)(ii) Amendment to Amended and Restated Credit Agreement and
Promissory Notes dated March 24, 2000, between Registrant and
Mercantile Bank National Association, First Union National Bank
and Old National Bank
(4)(iii) Second Amendment to Amended and Restated Credit Agreement
and Promissory Notes dated November 8, 2000, between Registrant
and Firstar Bank N.A., First Union National Bank, Old National
Bank and LaSalle Bank National Association
(iv) Third Amendment to Amended and Restated Credit Agreement
and Promissory Notes dated March 18, 2000, between Registrant and
U.S. Bank National Association, First Union National Bank, Old
National Bank and LaSalle Bank National Association
10-D* (5)1989 Stock Option Plan of Registrant and amendments to such Plan
10-E* (6)1993 Stock Option and Incentive Plan of Registrant, as amended
10-F* (5)Executive Incentive Compensation Plan of Registrant
10-G* (7)Outside Directors Stock Option Plan
10-I (5)Non-competition Agreement dated as of January 15, 1993, between
Registrant and J. Wayne Weaver
10-K (5)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* (6)Employee Stock Purchase Plan of Registrant, as amended
10-O* (8)2000 Stock Option and Incentive Plan of Registrant
10-P* (9)Employment and Noncompetition agreement dated August 1, 2001,
between Registrant and Timothy T. Baker
10-Q* (9)Employment and Noncompetition agreement dated August 1, 2001,
between Registrant and Clifton E. Sifford
21 A list of subsidiaries of Shoe Carnival, Inc.
23 Written consent of Deloitte & Touche LLP
-------------------------------------------
34
<PAGE>
* 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 exhibit number 3-A(i) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
August 1, 1998 is incorporated herein by reference.
(2) The copy of this exhibit as exhibit 4(i) to the Company's Annual
Report on Form 10-K for the year ended January 30, 1999 is
incorporated herein by reference.
(3) 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 29,
2000 is incorporated herein by reference.
(4) 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, 2000 is incorporated herein by reference.
(5) 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.
(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
August 2, 1997 is incorporated herein by reference.
(7) The copy of this exhibit filed as exhibit number 4.4 to the
Company's Registration Statement on Form S-8 (Registration No.
333-82819) is incorporated herein by reference.
(8) The copy of this exhibit filed as exhibit number 4.4 to the
Company's Registration Statement on Form S-8 Registration No.
333-60114) is incorporated herein by reference.
(9) 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
August 4, 2001 is incorporated herein by reference.
35
<PAGE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.(I)
<SEQUENCE>4
<FILENAME>articlesofincorp.txt
<TEXT>
RESTATED ARTICLES OF INCORPORATION
OF
SHOE CARNIVAL, INC.
(FORMERLY KNOWN AS SCI INDIANA, INC.)
SCI Indiana, Inc., an Indiana corporation (the "Corporation"),
and the survivor of a merger with Shoe Carnival, Inc., a Delaware corporation,
effected pursuant to a Plan and Agreement of Merger dated April 25, 1996,
desiring to amend and restate its Articles of Incorporation, pursuant to the
Indiana Business Corporation Law (the "IBCL") and to change its name, submits
the following Restated Articles of Incorporation:
ARTICLE I
The name of the Corporation is Shoe Carnival, Inc.
ARTICLE II
The address of its registered office is 8233 Baumgart Road,
Evansville, Indiana 47711, and the name of its registered agent at such address
is Mark L. Lemond.
ARTICLE III
The nature of the business or purposes to be conducted or
promoted are:
(a) To engage in any lawful act or activity for which
corporations may be organized under the IBCL; and
(b) In general, to possess and exercise all the powers and
privileges granted by the IBCL or by any other law of Indiana or by these
Restated Articles of Incorporation, together with any powers incidental thereto,
so far as such powers and privileges are necessary or convenient to the conduct,
promotion or attainment of the business or purposes of the Corporation.
ARTICLE IV
Section 1. Capital Stock. The total number of shares of all
classes of capital stock which the Corporation shall have authority to issue is
55,000,000 shares, consisting of 50,000,000 shares of Common Stock, par value
$.01 per share ("Common Stock"), and 5,000,000 shares of Preferred Stock, par
value $.01 per share("Preferred Stock").
Section 2. Common Stock.
(a) Subject to any voting rights that may be conferred upon
the holders of any series of the Preferred Stock established by the Board of
Directors pursuant to authority herein provided, and except as otherwise
provided by law, the shares of Common Stock shall entitle the holders thereof to
one vote for each share upon all matters upon which shareholders have the right
to vote.
(b) Subject to any limitations prescribed in this Article IV
and any further limitations prescribed in accordance therewith, and subject to
any prior rights that may be conferred upon the holders of any series of the
Preferred Stock established by the Board of Directors pursuant to authority
herein provided, and except as otherwise provided by law, the holders of shares
of Common Stock shall be entitled to receive when and as declared by the Board
of Directors, out of the assets of the Corporation which are by law available
therefor, pro rata dividends payable either in cash, in property or securities
of the Corporation.
(c) Subject to any prior rights that may be conferred upon the
holders of any series of the Preferred Stock established by the Board of
Directors pursuant to authority herein provided, holders of shares of Common
Stock will be entitled to receive pro rata all of the remaining assets of the
<PAGE>
Corporation available for distribution to its shareholders in the event of any
liquidation, dissolution or winding up of the Corporation.
Section 3. Preferred Stock.
(a) Except as required by the IBCL or by the provisions of
these Restated Articles of Incorporation adopted by the Board of Directors
pursuant to subsection (b) of this Section 3 describing the terms of the
Preferred Stock or a series thereof, the holders of Preferred Stock shall have
no voting rights or powers. Shares of Preferred Stock shall, when validly issued
by the Corporation, entitle the record holder thereof to vote as and on such
matters, but only as and on such matters, as the holders thereof are entitled to
vote under the IBCL or under the provisions of these Restated Articles of
Incorporation adopted by the Board of Directors pursuant to subsection (b) of
this Section 3 describing the terms of the Preferred Stock or a series thereof
(which provisions may provide for special, conditional, limited, or unlimited
voting rights, including multiple or fractional votes per share, or for no right
to vote, except to the extent required by the IBCL) and subject to such
shareholder disclosure and recognition procedures (which may include voting
prohibition sanctions) as the Corporation may by action of the Board of
Directors establish.
(b) Preferred Stock may be issued from time to time in one or
more series, each such series to have such distinctive designation and such
preferences, limitations, and relative voting and other rights as shall be set
forth in these Restated Articles of Incorporation. Subject to the requirements
of the IBCL and subject to all other provisions of these Restated Articles of
Incorporation, the Board of Directors of the Corporation may create one or more
series of Preferred Stock and may determine the preferences, limitations, and
relative voting and other rights of one or more series of Preferred Stock before
the issuance of any shares of that series by the adoption of an amendment to
these Restated Articles of Incorporation that specifies the terms of the series
of Preferred Stock. All shares of a series of Preferred Stock must have
preferences, limitations, and relative voting and other rights identical with
those of other shares of the same series and, if the description of the series
set forth in these Restated Articles of Incorporation so provides, no series of
Preferred Stock need have preferences, limitations, or relative voting or other
rights identical with those of any other series of Preferred Stock.
Before issuing any shares of a series of Preferred Stock, the
Board of Directors shall adopt an amendment to these Restated Articles of
Incorporation, which shall be effective without any shareholder approval or
other action, that sets forth the preferences, limitations, and relative voting
and other rights of the series, and authority is hereby expressly vested in the
Board of Directors, by such amendment:
(1) To fix the distinctive designation of such series and the
number of shares which shall constitute such series, which number may
be increased or decreased (but not below the number of shares thereof
then outstanding) from time to time by action of the Board of
Directors;
(2) To fix the voting rights of such series, which may consist
of special, conditional, limited, or unlimited voting rights, including
multiple or fractional votes per share, or no right to vote (except to
the extent required by the IBCL);
(3) To fix the dividend or distribution rights of such series
and the manner of calculating the amount and time for payment of
dividends or distributions, including, but not limited to:
(A) the dividend rate, if any, of such series;
(B) any limitations, restrictions, or conditions on
the payment of dividends or other distributions, including
whether dividends or other distributions shall be
noncumulative or cumulative or partially cumulative and, if
so, from which date or dates;
(C) the relative rights of priority, if any, of
payment of dividends or other distributions on shares of that
series in relation to Common Stock and shares of any other
series of Preferred Stock; and
(D) the form of dividends or other distributions, which
may be payable at the option of the Corporation, the
2
<PAGE>
shareholder, or another person (and in such case to prescribe
the terms and conditions of exercising such option), or upon
the occurrence of a designated event in cash, indebtedness,
stock or other securities or other property, or in any
combination thereof, and to make provisions, in the case of
dividends or other distributions payable in stock or other
securities, for adjustment of the dividend or distribution
rate in such events as the Board of Directors shall determine;
(4) To fix the price or prices at which, and the terms and
conditions on which, the shares of such series may be redeemed or
converted, which may be
(A) at the option of the Corporation, the shareholder,
or another person or upon the occurrence of a designated
event;
(B) for cash, indebtedness, securities, or other
property or any combination thereof; and
(C) in a designated amount or in an amount determined
in accordance with a designated formula or by reference to
extrinsic data or events;
(5) To fix the amount or amounts payable upon the shares of
such series in the event of any liquidation, dissolution, or winding up
of the Corporation and the relative rights of priority, if any, of
payment upon shares of such series in relation to Common Stock and
shares of any other series of special shares; and to determine whether
or not any such preferential rights upon dissolution need be considered
in determining whether or not the Corporation may make dividends,
repurchases, or other distributions;
(6) To determine whether or not the shares of such series
shall be entitled to the benefit of a sinking fund to be applied to the
purchase or redemption of such series and, if so entitled, the amount
of such fund and the manner of its application;
(7) To determine whether or not the issue of any additional
shares of such series or of any other series in addition to such series
shall be subject to restrictions in addition to restrictions, if any,
on the issue of additional shares imposed in the provisions of these
Restated Articles of Incorporation fixing the terms of any outstanding
series of Preferred Stock theretofore issued pursuant to this Section 3
and, if subject to additional restrictions, the extent of such
additional restrictions; and
(8) Generally to fix the other preferences or rights, and any
qualifications, limitations, or restrictions of such preferences or
rights, of such series to the full extent permitted by the IBCL;
provided, however, that no such preferences, rights, qualifications,
limitations, or restrictions shall be in conflict with these Restated
Articles of Incorporation or any amendment hereof.
(c) Preferred Stock of any series that has been redeemed (whether
through the operation of a sinking fund or otherwise) or purchased by the
Corporation, or which, if convertible, has been converted into shares of the
Corporation of any other class or series, may be reissued as a part of such
series or of any other series of Preferred Stock, subject to such limitations
(if any) as may be fixed by the Board of Directors with respect to such series
of Preferred Stock in accordance with subsection (b) of this Section 3.
ARTICLE V
Section 1. Classification of Board of Directors. The Board of
Directors shall be divided into three classes, as nearly equal in number as the
then total number of directors constituting the entire Board permits with the
term of office of one class expiring each year. The term of the first class of
directors shall expire at the annual meeting of shareholders in 1997, and the
term of the second and third classes of directors shall expire at the annual
meetings of shareholders in 1998 and 1999, respectively. Upon expiration of the
3
<PAGE>
terms set forth herein, each class of directors shall be elected for a three
year term expiring at the third succeeding annual meeting of shareholders. As of
the date of adoption of these Restated Articles of Incorporation, the directors
of the Corporation and their classes are as follows: David H. Russell - first
class; William E. Bindley and Mark L. Lemond - second class; and J. Wayne Weaver
and Gerald W. Schoor - third class. Any vacancies in the Board of Directors for
any reason, and any directorships resulting from any increase in the number of
directors, may be filled by the Board of Directors, acting by a majority of the
directors then in office, although less than a quorum, and any directors so
chosen shall hold office until the next election of the class for which such
directors shall have been chosen and until their successors shall be elected and
qualified. Notwithstanding the foregoing, and except as otherwise required by
law, whenever the holders of any one or more series of Preferred Stock shall
have the right, voting separately as a class, to elect one or more directors of
the Corporation, the terms of the director or directors elected by such holders
shall expire at the next succeeding annual meeting of shareholders. Subject to
the foregoing, at each annual meeting of shareholders the successors to the
class of directors whose term shall then expire shall be elected to hold office
for a term expiring at the third succeeding annual meeting.
Section 2. Removal of Directors. Notwithstanding any other
provisions of the IBCL, these Restated Articles of Incorporation or the By- Laws
of the Corporation (and notwithstanding the fact that some lesser percentage may
be specified by law, these Restated Articles of Incorporation or the By-Laws of
the Corporation), one or more directors of the Corporation may be removed at any
time, with or without cause, by the affirmative vote of the holders of a
majority or more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the shareholders called for that
purpose, or by a majority vote of the entire Board of Directors. Notwithstanding
the foregoing, and except as otherwise required by law, whenever the holders of
any one or more series of Preferred Stock shall have the right, voting
separately as a class, to elect one or more directors of the Corporation, the
provisions of this Section shall not apply with respect to the director or
directors elected by such holders of Preferred Stock.
ARTICLE VI
The Corporation shall, to the fullest extent permitted by
Indiana law, as amended from time to time, indemnify, and advance expenses to,
each of its now acting and former directors, officers, employees and agents,
whenever any such currently acting or former director, officer, employee or
agent is made a party or threatened to be made a party in any action, suit or
proceeding by reason of his service as such with the Corporation.
ARTICLE VII
Section 1. Supermajority Vote for Business Combinations.
Except as provided in Sections 2 and 3 hereof, neither the Corporation nor its
Subsidiaries, if any, shall become a party to any Business Combination with a
Related Person without the prior affirmative vote at a meeting of the
Corporation's shareholders:
(a) Of at least 80% of the outstanding shares of all classes
of Voting Stock of the Corporation considered for purposes of this
Article VII as a single class, and
(b) Of an Independent Majority of Shareholders.
Such favorable votes shall be in addition to any shareholder
vote which would be required without reference to this Section 1 and shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified by law or elsewhere in these Restated
Articles of Incorporation or the By-Laws of the Corporation or otherwise.
Section 2. Fair Price Exception. The provisions of Section 1
of this Article VII shall not apply to a Business Combination if all of the
conditions set forth in subsections (a) through (d) are satisfied.
(a) The fair market value of the property, securities, or
other consideration to be received per share by holders of each class or series
of capital stock of the Corporation in the Business Combination is not less, as
of the date of the consummation of the Business Combination (the
"Consummation Date"), than the higher of the following: (1) the highest per
4
<PAGE>
share price (with appropriate adjustments for recapitalizations and for stock
splits, stock dividends, and like distributions), including brokerage
commissions and solicitation fees paid by the Related Person in acquiring any of
its holdings of such class or series of capital stock within the two-year period
immediately prior to the first public announcement of the proposed Business
Combination ("Announcement Date") plus interest compounded annually from the
date that the Related Person became a Related Person (the "Determination Date"),
or if later from a date two years before the Consummation Date, through the
Consummation Date, at the rate publicly announced as the "prime rate" of
interest of Citibank, N.A. (or of such other major bank headquartered in New
York as may be selected by a majority of the Continuing Directors) from time to
time in effect, less the aggregate amount of any cash dividends paid and the
fair market value of any dividends paid in other than cash on each share of such
stock from the date from which interest accrues under the preceding clause
through the Consummation Date up to but not exceeding the amount of interest so
payable per share; OR (2) the fair market value per share of such class or
series on the Announcement Date as determined by the highest closing sale price
during the 30-day period immediately preceding the Announcement Date if such
stock is listed on a securities exchange registered under the Securities
Exchange Act of 1934 or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to such stock during the 30-day
period preceding the Announcement Date on the National Association of Securities
Dealers, Inc. Automated Quotation System or any similar system then in use, or
if no such quotations are available, the fair market value of such stock
immediately prior to the first public announcement of the proposed Business
Combination as determined by the Continuing Directors in good faith. In the
event of a Business Combination upon the consummation of which the Corporation
would be the surviving corporation or company or would continue to exist (unless
it is provided, contemplated, or intended that as part of such Business
Combination or within one year after consummation thereof a plan of liquidation
or dissolution of the Corporation will be effected), the term "other
consideration to be received" shall include (without limitation) Common Stock
and/or the shares of any other class of stock retained by shareholders of the
Corporation other than Related Persons who are parties to such Business
Combination;
(b) The consideration to be received in such Business
Combination by holders of each class or series of capital stock of the
Corporation other than the Related Person involved shall, except to the extent
that a shareholder agrees otherwise as to all or part of the shares which he or
she owns, be in the same form and of the same kind as the consideration paid by
the Related Person in acquiring the majority of the shares of capital stock of
such class or series already Beneficially Owned by it;
(c) After such Related Person became a Related Person and
prior to the consummation of such Business Combination: (1) such Related Person
shall have taken steps to ensure that the Board of Directors of the Corporation
included at all times representation by Continuing Directors proportionate to
the ratio that the number of shares of Voting Stock of the Corporation from time
to time owned by shareholders who are not Related Persons bears to all shares of
Voting Stock of the Corporation outstanding at the time in question (with a
Continuing Director to occupy any resulting fractional position among the
Directors); (2) such Related Person shall not have acquired from the
Corporation, directly or indirectly, any shares of capital stock of the
Corporation (except upon conversion of convertible securities acquired by it
prior to becoming a Related Person or as a result of a pro rata stock dividend,
stock split, or division of shares or in a transaction which satisfied all
applicable requirements of this Article VII); (3) such Related Person shall not
have acquired any additional shares of Voting Stock of the Corporation or
securities convertible into or exchangeable for shares of Voting Stock except as
a part of the transaction which resulted in such Related Person's becoming a
Related Person; and (4) such Related Person shall not have received the benefit,
directly or indirectly (except proportionately as a shareholder), of any loans,
advances, guarantees, pledges, or other financial assistance or tax credits
provided by the Corporation or any Subsidiary, or made any major change in the
Corporation's business or equity capital structure or entered into any contract,
arrangement, or understanding with the Corporation except any such change,
contract, arrangement, or understanding as may have been approved by the
favorable vote of not less than a majority of the Continuing Directors of the
Corporation; and
(d) A proxy or information statement complying with the
requirements of the Securities Exchange Act of 1934 and the rules and
regulations of the Securities and Exchange Commission thereunder, as then in
force for corporations subject to the requirements of Section 14 of such Act
(even if the Corporation is not otherwise subject to Section 14 of such Act),
5
<PAGE>
shall have been mailed to all holders of shares of the Corporation's capital
stock entitled to vote with respect to such Business Combination. Such proxy or
information statement shall contain on the face page thereof, in a prominent
place, any recommendations as to the advisability (or inadvisability) of the
Business Combination which the Continuing Directors, or any of them, may have
furnished in writing and, if deemed advisable by a majority of the Continuing
Directors, a fair summary of an opinion of a reputable investment banking firm
addressed to the Corporation as to the fairness (or lack of fairness) of the
terms of such Business Combination from the point of view of the holders of
shares of Voting Stock other than any Related Person (such investment banking
firm to be selected by a majority of the Continuing Directors, to be furnished
with all information it reasonably requests, and to be paid a reasonable fee for
its services upon receipt by the Corporation of such opinion).
Section 3. Director Approval Exception. The provisions of
Section 1 of this Article VII shall not apply to a Business Combination if:
(a) The Continuing Directors of the Corporation, by an
affirmative vote of not less than a majority of all Continuing Directors, (1)
have expressly approved a memorandum of understanding with the Related Person
with respect to the Business Combination prior to the time that the Related
Person became a Related Person and the Business Combination is effected on
substantially the same terms and conditions as are provided by the memorandum of
understanding, or (2) have otherwise approved the Business Combination (this
provision is incapable of satisfaction unless there is at least one Continuing
Director); or
(b) The Business Combination is solely between the Corporation
and another corporation, one hundred percent (100%) of the Voting Stock of which
is owned directly or indirectly by the Corporation.
Section 4. Definitions. For purposes of this Article VII:
(a) A "Business Combination" means:
(1) The sale, exchange, lease, transfer, or other disposition
to or with a Related Person or any Affiliate or Associate of such
Related Person by the Corporation or any Subsidiaries (in a single
transaction or a Series of Related Transactions) of all or
substantially all, or any Substantial Part, of its or their assets or
businesses (including, without limitation, securities issued by a
Subsidiary, if any);
(2) The purchase, exchange, lease, or other acquisition by the
Corporation or any Subsidiaries (in a single transaction or a Series of
Related Transactions) of all or substantially all, or any Substantial
Part, of the assets or business of a Related Person or any Affiliate or
Associate of such Related Person;
(3) Any merger or consolidation of the Corporation or any
Subsidiary thereof into or with a Related Person or any Affiliate or
Associate of such Related Person or into or with another Person which,
after such merger or consolidation, would be an Affiliate or an
Associate of a Related Person, in each case irrespective of which
Person is the surviving entity in such merger or consolidation;
(4) Any reclassification of securities, recapitalization, or
other transaction (other than a redemption in accordance with the terms
of the security redeemed) which has the effect, directly or any
Subsidiary thereof which are Beneficially Owned by a Related Person, or
any partial or complete liquidation, spinoff, splitoff, or splitup of
the Corporation or any Subsidiary thereof; provided, however, that this
Section 4(a)(4) shall not relate to any transaction that has been
approved by a majority of the Continuing Directors; or
(5) The acquisition upon the issuance thereof of Beneficial
Ownership by a Related Person of shares of Voting Stock or securities
convertible into shares of Voting Stock or any voting securities or
securities convertible into voting securities of any Subsidiary of the
Corporation, or the acquisition upon the issuance thereof of Beneficial
Ownership by a Related Person of any rights, warrants, or options to
acquire any of the foregoing or any combination of the foregoing shares
of Voting Stock or voting securities of a Subsidiary, if any.
6
<PAGE>
(b) A "Series of Related Transactions" shall be deemed to
include not only a series of transactions with the same Related Person, but also
a series of separate transactions with a Related Person or any Affiliate or
Associate of such Related Person.
(c) A "Person" shall mean any individual, firm, corporation,
or other entity and any partnership, syndicate, or other group.
(d) "Related Person" shall mean any Person (other than the
Corporation or any Subsidiary of the Corporation or the Continuing Directors,
singly or as a group) who or that at any time described in the last sentence of
the penultimate paragraph of this subsection (d):
(1) is the Beneficial Owner, directly or indirectly, of more
than ten percent (10%) of the voting power of the outstanding shares of
Voting Stock and who has not been the Beneficial Owner, directly or
indirectly, of more than ten percent (10%) of the voting power of the
outstanding shares of Voting Stock for a continuous period of two years
prior to the date in question; or
(2) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question (but not
continuously during such two-year period) was the Beneficial Owner,
directly or indirectly, of ten percent (10%) or more of the voting
power of the then outstanding shares of Voting Stock; or
(3) is an assignee of or has otherwise succeeded to any shares
of the Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
Related Person, if such assignment or succession shall have occurred in
the course of a transaction or series of transactions not involving a
public offering within the meaning of the Securities Act of 1933, as
amended.
A Related Person shall be deemed to have acquired a share of
stock of the Corporation at the time when such Related Person became the
Beneficial Owner thereof. For the purposes of determining whether a Person is
the Beneficial Owner of ten percent (10%) or more of the voting power of the
then outstanding Voting Stock, the outstanding Voting Stock shall be deemed to
include any Voting Stock that may be issuable to such Person pursuant to a right
to acquire such Voting Stock and that is therefore deemed to be Beneficially
Owned by such Person pursuant to Section 4(e)(2)(A). A Person who is a Related
Person at (1) the time any definitive agreement relating to a Business
Combination is entered into, (2) the record date for the determination of
shareholders entitled to notice of and to vote on a Business Combination, or (3)
the time immediately prior to the consummation of a Business Combination shall
be deemed a Related Person.
A Related Person shall not include the Board of Directors of
the Corporation acting as a group. In addition, a Related Person shall not
include any Person who is the Beneficial Owner of more than ten percent (10%) of
the outstanding shares of Voting Stock of the predecessor of the Corporation,
Shoe Carnival, Inc., a Delaware corporation, formerly known as DAR Group
Investments, Inc., on January 15, 1993.
(e) A Person shall be a "Beneficial Owner" of any shares of
Voting Stock:
(1) which such Person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(2) which such Person or any of its Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement, or understanding or upon the exercise of
conversion rights, exchange rights, warrants, or options, or otherwise,
or (B) the right to vote pursuant to any agreement, arrangement, or
understanding; or
7
<PAGE>
(3) which are beneficially owned, directly or indirectly, by
any other Person with which such person or any of its Affiliates or
Associates has any agreement, arrangement, or understanding for the
purpose of acquiring, holding, voting, or disposing of any shares of
Voting Stock.
(f) An "Affiliate" of, or a person Affiliated with, a specific
Person means a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified.
(g) The term "Associate" used to indicate a relationship with
any Person, means (1) any corporation or organization (other than this
Corporation or a majority-owned Subsidiary of this Corporation) of which such
Person is an officer or partner or is, directly or indirectly, the Beneficial
Owner of five percent (5%) or more of any class of equity securities, (2) any
trust or other estate in which such Person has a substantial beneficial interest
or as to which such Person serves as trustee or in a similar fiduciary capacity,
(3) any relative or spouse of such Person, or any relative of such spouse, who
has the same home as such Person, or (4) any investment company registered under
the Investment Company Act of 1940, as amended, for which such Person or any
Affiliate of such Person serves as investment adviser.
(h) "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Related Person set forth in Section 4(d) hereof, the term "Subsidiary" shall
mean only a corporation of which a majority of each class of equity security is
owned, directly or indirectly, by the Corporation.
(i) "Continuing Director" means any member of the Board of
Directors of the Corporation (the "Board") who is not associated with the
Related Person and was a member of the Board prior to the time that the Related
Person became a Related Person, and any successor of a Continuing Director who
is not associated with the Related Person and is recommended to succeed a
Continuing Director by not less than two-thirds of the Continuing Directors then
on the Board.
(j) "Independent Majority of Shareholders" shall mean the
holders of the outstanding shares of Voting Stock representing a majority of all
the votes entitled to be cast by all shares of Voting Stock other than shares
Beneficially Owned or controlled, directly or indirectly, by a Related Person.
(k) "Voting Stock" shall mean all outstanding shares of
capital stock of the Corporation or another corporation entitled to vote
generally on the election of Directors, and each reference to a proportion of
shares of Voting Stock shall refer to such proportion of the votes entitled to
be cast by such shares.
(l) "Substantial Part" means properties and assets involved in
any single transaction or a Series of Related Transactions having an aggregate
fair market value of more than ten percent (10%) of the total consolidated
assets of the Person in question as determined immediately prior to such
transaction or Series of Related Transactions.
Section 5. Director Determinations. A majority of the
Continuing Directors shall have the power to determine for the purposes of this
Article VII, on the basis of information known to them: (a) the number of shares
of Voting Stock of which any Person is the Beneficial Owner, (b) whether a
Person is an Affiliate or Associate of another, (c) whether a Person has an
agreement, arrangement, or understanding with another as to the matters referred
to in the definition of "Beneficial Owner," (d) whether the assets subject to
any Business Combination constitute a Substantial Part, (e) whether two or more
transactions constitute a Series of Related Transactions, and (f) such other
matters with respect to which a determination is required under this Article
VII.
Section 6. Fiduciary Obligations Unaffected. Nothing in this
Article VII shall be construed to relieve any Related Person from any fiduciary
duty imposed by law.
Section 7. Article VII Nonexclusive. The provisions of this
Article VII are nonexclusive and are in addition to any other provisions of law
or these Restated Articles of Incorporation or the By-Laws of the Corporation
relating to Business Combinations, Related Persons, or similar matters.
8
<PAGE>
ARTICLE VIII
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Restated Articles of Incorporation in
the manner now or hereafter prescribed by statute. Notwithstanding any other
provision of these Restated Articles of Incorporation or the By-Laws of the
Corporation (and in addition to any other vote that may be required by law,
these Restated Articles of Incorporation or the By-Laws), the affirmative vote
of the holders of at least 80% of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend, alter or
repeal any provision of Articles VI, VII, or VIII of these Restated Articles of
Incorporation.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.(II)
<SEQUENCE>5
<FILENAME>bylaws.txt
<TEXT>
BY-LAWS
OF
SHOE CARNIVAL, INC.
As amended and restated as of July 16, 1996
Article I
Identification
Section 1. Name. The name of the Corporation is Shoe
Carnival, Inc.
Section 2. Registered Office. The registered office of the
Corporation in the State of Indiana shall be 8233 Baumgart Road, Evansville,
Indiana 47711.
Section 3. Principal Office. The principal office of the
Corporation shall be 8233 Baumgart Road, Evansville, Indiana 47711.
Section 4. Other Offices. The Corporation may also have an
office or offices, and keep the books and records of the Corporation, except as
may otherwise be required by law, at such other place or places, either within
or without the State of Delaware, as the Board of Directors may from time to
time determine or the business of the Corporation require.
Article II
Meetings of Shareholders
Section 1. Place of Meeting. All meetings of the shareholders
of the Corporation shall be held at the principal office of the Corporation or
at such other places, within or without the State of Indiana, as may from time
to time be fixed by the Board of Directors.
Section 2. Annual Meetings. The annual meeting of the
shareholders of the Corporation for the election of directors and for the
transaction of such other business as may properly come before the meeting shall
be held on the second Thursday in June in each year, if not a legal holiday
under the laws of the place where the meeting is to be held, and, if a legal
holiday, then on the next succeeding day not a legal holiday under the laws of
such place, or on such other date and at such hour as may from time to time be
fixed by the Board of Directors.
Section 3. Special Meetings. Subject to the rights of the
holders of any class or series of Preferred Stock, special meetings of the
shareholders for any purpose or purposes may be called only by the Chairman of
the Board or a majority of the entire Board of Directors. Only such business as
is specified in the notice of any special meeting of the shareholders shall come
before such meeting.
Section 4. Notice of Meetings. Written notice of each meeting
of the shareholders, whether annual or special, shall be given, either by
personal delivery or by mail, not less than 10 nor more than 60 days before the
date of the meeting to each shareholder of record entitled to notice of such
meeting. If mailed, such notice shall be deemed given when deposited in the
United States mail, postage prepaid, directed to the shareholder at such
shareholder's address as it appears on the records of the Corporation. Each such
notice shall state the place, date and hour of the meeting, and the purpose or
purposes for which the meeting is called. Notice of any meeting of shareholders
shall not be required to be given to any shareholder who shall attend such
meeting in person or by proxy without protesting, prior to or at the
commencement of the meeting, the lack of proper notice to such shareholder, or
who shall waive notice thereof as provided in Article VIII of these By-Laws.
Notice of adjournment of a meeting of shareholders need not be given if the time
and place to which it is adjourned are announced at such meeting, unless the
adjournment is for more than 30 days or, after adjournment, a new record date is
fixed for the adjourned meeting.
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Section 5. Quorum. The holders of a majority of the votes
entitled to be cast by the shareholders entitled to vote, which if any vote is
to be taken by classes shall mean the holders of a majority of the votes
entitled to be cast by the shareholders of each such class, present in person or
by proxy, shall constitute a quorum for the transaction of business at any
meeting of the shareholders.
Section 6. Adjournments. In the absence of a quorum, the
holders of a majority of the votes entitled to be cast by the shareholders,
present in person or by proxy, may adjourn the meeting from time to time. At any
such adjourned meeting at which a quorum may be present, any business may be
transacted which might have been transacted at the meeting as originally called.
Section 7. Order of Business. At each meeting of the
shareholders, the Chairman of the Board, or, in the absence of the Chairman of
the Board, the President or such other person designated by the Board of
Directors, shall act as chairman. At each annual meeting only such business
shall be conducted as shall have been brought before the annual meeting (i) by
or at the direction of the Board of Directors or (ii) by any shareholder who
complies with the procedures set forth in this Section 7.
For business properly to be brought by a shareholder before an
annual meeting, the shareholder must have given timely notice thereof in proper
written form to the Secretary of the Corporation. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal office of
the Corporation not less than 30 days nor more than 60 days prior to the annual
meeting; provided, however, that in the event that less than 40 days' notice or
prior public disclosure of the date of the annual meeting is given or made to
shareholders, notice by the shareholder to be timely must be received not later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. To be in proper written form, a shareholder's notice to the Secretary
shall set forth in writing as to each matter the shareholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting; (ii) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such business; (iii) the class
and number of shares of stock of the Corporation which are beneficially owned by
the shareholder; and (iv) any material interest of the shareholder in such
business. Notwithstanding anything in these By- Laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 7. The chairman of an annual meeting shall,
if the facts warrant, determine and declare to the annual meeting that business
was not properly brought before the annual meeting in accordance with the
provisions of this Section 7 and, if he should so determine, he shall so declare
to the annual meeting and any such business not properly brought before the
annual meeting shall not be transacted.
Section 8. List of Shareholders. It shall be the duty of the
Secretary or other officer of the Corporation who has charge of the stock ledger
to prepare and make, at least 5 business days before each meeting of the
shareholders, a complete list of the shareholders entitled to vote thereat,
arranged in alphabetical order, and showing the address of each shareholder and
the number of shares registered in such shareholder's name. Such list shall be
produced and kept available at the times and places required by law.
Section 9. Voting. Each shareholder of record of any class or
series of Preferred Stock shall be entitled at each meeting of shareholders to
such number of votes for each share of such stock as may be fixed in the
Restated Articles of Incorporation or an amendment thereto adopted by the Board
of Directors providing for the issuance of such stock, and each shareholder of
record of Common Stock shall be entitled at each meeting of shareholders to one
(1) vote for each share of stock registered in such shareholder's name on the
books of the Corporation:
(1) on the date fixed pursuant to Section 6 of Article VI of
these By-Laws as the record date for the determination of shareholders
entitled to notice of and to vote at such meeting; or
(2) if no such record date shall have been so fixed, then at
the close of business on the day next preceding the day on which notice
of such meeting is given, or, if notice is waived, at the close of
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<PAGE>
business on the day next preceding the day on which the meeting is
held, or if no record date for determining shareholders entitled to
express consent to corporate action in writing without a meeting shall
have been fixed, the day on which the first written consent is
expressed.
Each shareholder entitled to vote at any meeting of
shareholders may authorize not in excess of three persons to act for such
shareholder by a proxy signed by such shareholder or such shareholder's
attorney-in-fact. Any such proxy shall be delivered to the secretary of such
meeting at or prior to the time designated for holding such meeting, but in any
event not later than the time designated in the order of business for so
delivering such proxies. No such proxy shall be voted or acted upon after eleven
(11) months from its date, unless the proxy provides for a shorter or longer
period.
At a meeting of the shareholders, except as provided in
Article III, Section 2 with respect to the election of directors or as required
by law, all corporate actions to be taken by vote of the shareholders shall be
authorized if the number of votes cast in favor of the action exceeds the number
of votes cast opposing the action, and where a separate vote by class is
required, the number of votes cast in favor of the action by the shareholders of
such class exceeds the number of votes cast by the shareholders of such class
opposing the action.
Unless required by law or determined by the chairman of the
meeting to be advisable, the vote on any matter, including the election of
directors, need not be by written ballot. In the case of a vote by written
ballot, each ballot shall be signed by the shareholder voting, or by such
shareholder's proxy, and shall state the number of shares voted.
Section 10. Inspectors. Either the Board of Directors or, in
the absence of designation of inspectors by the Board, the chairman of any
meeting of shareholders may, in its or such person's discretion, appoint two or
more inspectors to act at any meeting of shareholders. Such inspectors shall
perform such duties as shall be specified by the Board or the chairman of the
meeting. Inspectors need not be shareholders. No director or nominee for the
office of director shall be appointed such inspector.
Article III
Board of Directors
Section 1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors, which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law or by the Restated Articles of
Incorporation of the Corporation directed or required to be exercised or done by
the shareholders.
Section 2. Number, Qualification and Election. Except as
otherwise fixed by or pursuant to the provisions of the Restated Articles of
Incorporation of the Corporation relating to the rights of the holders of any
class or series of Preferred Stock, the number of directors of the Corporation
shall be determined from time to time by vote of a majority of the entire Board
of Directors, provided that the number thereof may not be less than three nor
more than fifteen.
The directors, other than those who may be elected by the
holders of shares of any class or series of Preferred Stock pursuant to the
terms of the Restated Articles of Incorporation or any resolution or resolutions
providing for the issuance of such stock adopted by the Board, shall be
classified, with respect to the time for which they severally hold office, into
three classes as nearly equal in number as possible: one class whose term
expires at the 1997 annual meeting of shareholders, another class whose term
expires at the 1998 annual meeting of shareholders and another class whose term
expires at the 1999 annual meeting of shareholders, with each class to hold
office until its successors are elected and qualified. The membership of each
class shall be initially as set forth in the Restated Articles of Incorporation.
If the number of directors is thereafter changed by the Board of Directors,
any newly created directorships or any decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal as
3
<PAGE>
possible; provided, however, that no decrease in the number of directors shall
shorten the term of any incumbent director. At each annual meeting of the
shareholders of the Corporation, subject to the rights of the holders of any
class or series of stock having a preference over the Common Stock of the
Corporation as to dividends or upon liquidation, the successors of the class of
directors whose term expires at that meeting shall be elected to hold office
for a term expiring at the annual meeting of shareholders held in the third year
following the year of their election.
Directors need not be shareholders of the Corporation.
In any election of directors, the persons receiving a
plurality of the votes cast, up to the number of directors to be elected in such
election, shall be deemed elected.
Section 3. Notification of Nominations. Subject to the rights
of the holders of any class or series of Preferred Stock, nominations for the
election of directors may be made by the Board of Directors or by any
shareholder entitled to vote for the election of directors, but in the case of a
nomination by a shareholder, only if such shareholder gives timely notice
thereof in proper written form to the Secretary of the Corporation. To be
timely, a shareholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 30 days nor
more than 60 days prior to the meeting; provided, however, that in the event
that less than 40 days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be timely
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. To be in proper written form, such
shareholder's notice shall set forth in writing (i) as to each person whom the
shareholder proposes to nominate for election or re-election as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required
under the Securities Exchange Act of 1934, as amended, including, without
limitation, such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected; and (ii) as to the
shareholder giving the notice (x) the name and address, as they appear on the
Corporation's books, of such shareholder and (y) the class and number of shares
of stock of the Corporation which are beneficially owned by such shareholder. At
the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation the information required to be set forth in a shareholder's notice
of nomination which pertains to the nominee. In the event that a shareholder
seeks to nominate one or more directors, the Secretary shall appoint two
inspectors, who shall not be affiliated with the Corporation, to determine
whether a shareholder has complied with this Section 3. If the inspectors shall
determine that a shareholder has not complied with this Section 3, the
inspectors shall direct the chairman of the meeting to declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the By-Laws of the Corporation, and the chairman shall so declare to the meeting
and the defective nomination shall be disregarded.
Section 4. Quorum and Manner of Acting. Except as otherwise
provided by these By-Laws, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business at any meeting of the Board,
and, except as so provided, the vote of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum, a majority of the directors present may adjourn the meeting
to another time and place. At any adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally called.
Section 5. Place of Meeting. The Board of Directors may hold
its meetings at such place or places within or without the State of Indiana as
the Board may from time to time determine or as shall be specified or fixed in
the respective notices or waivers of notice thereof.
Section 6. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board shall from time to
time by resolution determine. If any day fixed for a regular meeting shall be a
legal holiday under the laws of the place where the meeting is to be held, the
meeting which would otherwise be held on that day shall be held at the same hour
on the next succeeding business day.
Section 7. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board or by a
majority of the directors.
Section 8. Notice of Meetings. Notice of regular meetings of
the Board of Directors or of any adjourned meeting thereof need not be given.
4
<PAGE>
Notice of each special meeting of the Board shall be mailed to each director,
addressed to such director at such director's residence or usual place of
business, at least two days before the day on which the meeting is to be held or
shall be sent to such director at such place by telegraph or be given personally
or by telephone, not later than the day before the meeting is to be held, but
notice need not be given to any director who shall, either before or after the
meeting, submit a signed waiver of such notice or who shall attend such meeting
without protesting, prior to or at its commencement, the lack of notice to such
director. Every such notice shall state the time and place but need not state
the purpose of the meeting.
Section 9. Rules and Regulations. The Board of Directors may
adopt such rules and regulations not inconsistent with the provisions of these
By-Laws for the conduct of its meetings and management of the affairs of the
Corporation as the Board may deem necessary or proper. In the absence of the
Chairman of the Board, such person designated by the Board of Directors shall
preside at meetings of the Board.
Section 10. Participation in Meeting by Means of
Communications Equipment. Any one or more members of the Board of Directors or
any committee thereof may participate in any meeting of the Board or of any such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at such
meeting.
Section 11. Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting if all of the members of the Board or of
any such committee consent thereto in writing and the writing or writings are
filed with the minutes of proceedings of the Board or of such committee.
Section 12. Resignations. Any director of the Corporation may
at any time resign by giving written notice to the Board of Directors, the
Chairman of the Board, the President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein or, if the time be
not specified, upon receipt thereof; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 13. Removal of Directors. Directors may be removed
only as provided in the Restated Articles of Incorporation of the Corporation.
Section 14. Vacancies. Subject to the rights of the holders of
any class or series of Preferred Stock, any vacancies on the Board of Directors
resulting from death, resignation, removal or other cause shall only be filled
by the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors, or by a sole remaining
director, and newly created directorships resulting from any increase in the
number of directors shall be filled by the Board, or if not so filled, by the
shareholders at the next annual meeting thereof or at a special meeting called
for that purpose in accordance with Section 3 of Article II of these By-Laws.
Any director elected in accordance with the preceding sentence of this Section
14 shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified.
Section 15. Compensation. Each director who shall not at the
time also be an officer or employee of the Corporation or any of its
subsidiaries (hereinafter referred to as an "outside director"), in
consideration of such person serving as a director, shall be entitled to receive
from the Corporation such amount per annum and such fees for attendance at
meetings of the Board of Directors or of committees of the Board, or both, as
the Board shall from time to time determine. In addition, each director, whether
or not an outside director, shall be entitled to receive from the Corporation
reimbursement for the reasonable expenses incurred by such person in connection
with the performance of such person's duties as a director. Nothing contained in
this Section shall preclude any director from serving the Corporation or any of
its subsidiaries in any other capacity and receiving proper compensation
therefor.
Section 16. Committees. The Board of Directors may, by
resolution adopted by a majority of the entire Board, designate one or more of
its members to constitute members or alternate members of a committee. Such
committee, to the extent provided in the resolution of the Board, shall have and
5
<PAGE>
may exercise the powers and authority of the Board in the management of the
business and affairs of the Corporation, including without limitation, if such
committee is so empowered and authorized in the resolution of the Board, the
power and authority to declare a dividend and to authorize the issuance of
stock, and may authorize the seal of the Corporation, if any, to be affixed to
all papers which may require it, except that no committee shall have such power
or authority in reference to:
(a) authorize dividends or other distributions, except a
committee (or an executive officer of the Corporation designated by the
Board of Directors) may authorize or approve a reacquisition of stock
or other distribution, if done according to a formula or method, or
within a range, prescribed by the Board of Directors;
(b) approve or propose to shareholders action that is
required to be approved by shareholders;
(c) fill vacancies on the Board of Directors or on any of
its committees;
(d) except to the extent permitted by clause (g) below,
amend the Corporation's Restated Articles of Incorporation;
(e) adopt, amend, repeal, or waive provisions of these
By-Laws;
(f) approve a plan of merger not requiring shareholder
approval; or
(g) authorize or approve the issuance or sale or a contract
for sale of stock, or determine the designation and relative rights,
preferences, and limitations of a class or series of Preferred Stock,
except the Board of Directors may authorize a committee (or an
executive officer of the Corporation designated by the Board of
Directors) to take the action described herein within limits prescribed
by the Board of Directors.
A majority of all the members of such committee may determine its action and fix
the time and place of its meetings, unless the Board shall otherwise provide.
The Board shall have power at any time to change the membership of, to fill all
vacancies in and to discharge any such committee, either with or without cause.
Article IV
Officers
Section 1. Number; Term of Office. The officers of the
Corporation shall be a Chairman of the Board, a President, one or more
Vice-Presidents, one or more of whom may be designated as Executive or Senior
Vice-Presidents, a Treasurer, a Secretary, and such other officers or agents
with such titles and such duties as the Board of Directors may from time to time
determine, each to have such authority, functions or duties as in these By-Laws
provided or as the Board may from time to time determine, and each to hold
office for such term as may be prescribed by the Board and until such person's
successor shall have been chosen and shall qualify, or until such person's death
or resignation, or until such person's removal in the manner hereinafter
provided. The Chairman of the Board shall be elected from among the directors.
One person may hold the offices and perform the duties of any two or more of
said officers; provided, however, that no officer shall execute, acknowledge or
verify any instrument in more than one capacity if such instrument is required
by law, the Restated Articles of Incorporation of the Corporation or these
By-Laws to be executed, acknowledged or verified by two or more officers. The
Board may from time to time authorize any officer to appoint and remove any such
other officers and agents and to prescribe their powers and duties. The Board
may require any officer or agent to give security for the faithful performance
of such person's duties.
Section 2. Removal. Any officer may be removed, either with or
without cause, by the Board of Directors at any meeting thereof called for the
purpose, or, except in the case of any officer elected by the Board, by any
6
<PAGE>
committee or superior officer upon whom such power may be conferred by the
Board.
Section 3. Resignation. Any officer may resign at any time by
giving notice to the Board of Directors, the Chairman of the Board, the
President or the Secretary of the Corporation. Any such resignation shall take
effect at the date of receipt of such notice or at any later date specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of
death, resignation, removal or any other cause may be filled for the unexpired
portion of the term in the manner prescribed in these By-Laws for election to
such office.
Section 5. Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the Board of Directors and, if present, preside
at meetings of the shareholders. He shall have such other duties and
responsibilities as may be specified by the Board of Directors.
Section 6. President. The President shall be the chief
executive officer of the Corporation and as such shall have general supervision
and direction of the business and affairs of the Corporation subject to the
control of the Board of Directors. The President shall perform such other duties
as the Board may from time to time determine and shall, in the absence of the
Chairman of the Board, preside at meetings of the shareholders.
Section 7. Vice-Presidents. Each Vice-President shall have
such powers and duties as shall be prescribed by the President or the Board of
Directors.
Section 8. Treasurer. The Treasurer shall perform all duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to the Treasurer by the President or the Board of Directors.
Section 9. Secretary. The Secretary shall see that all notices
required to be given by the Corporation are duly given and served; the Secretary
shall have charge of the stock ledger and also of the other books, records and
papers of the Corporation and of its corporate seal, if any, and shall see that
the reports, statements and other documents required by law are properly kept
and filed; and shall in general perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to such
person by the President or the Board of Directors.
Section 10. Assistant Treasurers or Secretaries. The Assistant
Treasurers and the Assistant Secretaries, if any, shall perform such duties as
shall be assigned to them by the Treasurer or Secretary, or by the President or
the Board of Directors.
Article V
Indemnification of Directors, Officers, Employees and Agents
Section 1 . Indemnification. To the fullest extent permitted
by the laws of the State of Indiana, the Corporation shall indemnify any person
who is or was a party, or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
including appeals.
Section 2. Advance of Expenses. To the fullest extent
permitted by the laws of the State of Indiana, the Corporation shall pay
expenses incurred in defending a civil or criminal action, suit or proceeding
described in Section 1 of this Article V in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Corporation.
Section 3. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
7
<PAGE>
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Article V.
Section 4. Applicability. The provisions of this Article V
shall be applicable to all actions, claims, suits or proceedings made or
commenced after the adoption hereof, whether arising from acts or omissions to
act occurring before or after its adoption. The provisions of this Article V
shall be deemed to be a contract between the Corporation and each director,
officer, employee or agent who serves in such capacity at any time while this
Article V and the relevant provisions of the laws of the State of Indiana and
other applicable law, if any, are in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts or any action, suit or proceeding then or theretofore
existing, or any action, suit or proceeding thereafter brought or threatened
based in whole or in part on any such state of facts. If any provision of this
Article V shall be found to be invalid or limited in application by reason of
any law or regulation, it shall not affect the validity of the remaining
provisions hereof. The rights of indemnification provided in this Article V
shall neither be exclusive of, nor be deemed in limitation of, any rights to
which any such officer, director, employee or agent may otherwise be entitled or
permitted by contract, the Restated Articles of Incorporation, vote of
shareholders or directors or otherwise, or as a matter of law, both as to
actions in his official capacity and actions in any other capacity while holding
such office, it being the policy of the Corporation that indemnification of the
specified individuals shall be made to the fullest extent permitted by law.
Section 5. Certain Definitions. For purposes of this Article
V, references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; references to "serving at the request of
the Corporation" shall include any service as a director, officer, employee or
agent of the Corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit plan,
its participants or beneficiaries.
Article VI
Capital Stock
Section 1. Certificates for Shares. Certificates representing
shares of stock of each class of the Corporation, whenever authorized by the
Board of Directors, shall be in such form as shall be approved by the Board. The
certificates representing shares of stock of each class, or series within a
class, of such stock shall be consecutively numbered as issued. Each certificate
shall state: the name of the Corporation; that it is organized under the laws of
the State of Indiana; the name of the registered holder; the number of shares
and class and the designation of the series, if any, of the stock represented
thereby; and a summary of the designations, relative rights, preferences and
limitations applicable to such class and, if applicable, the variations in
rights, preferences and limitations determined for each series and the authority
of the Board to determine such variations for future series; provided, however,
that such summary may be omitted if the certificate states conspicuously on its
front or back that the Corporation will furnish the shareholder such information
upon written request and without charge.
The certificates shall be signed by, or in the name of, the
Corporation by the Chairman of the Board or the President or a Vice- President
and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer of the Corporation. Any or all such signatures may be facsimiles if
countersigned by a transfer agent or registrar. Although any officer, transfer
agent or registrar whose manual or facsimile signature is affixed to such a
certificate ceases to be such officer, transfer agent or registrar before such
certificate has been issued, it may nevertheless be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were still
such at the date of its issue.
The stock ledger and blank share certificates shall be kept by
the Secretary or by a transfer agent or by a registrar or by any other officer
or agent designated by the Board.
8
<PAGE>
Section 2. Transfer of Shares. Transfers of shares of stock of
each class of the Corporation shall be made only on the books of the Corporation
by the holder thereof, or by such holder's attorney thereunto authorized by a
power of attorney duly executed and filed with the Secretary of the Corporation
or a transfer agent for such stock, if any, and on surrender of the certificate
or certificates for such shares properly endorsed or accompanied by a duly
executed stock transfer power and the payment of all taxes thereon. The person
in whose name shares stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation; provided, however,
that whenever any transfer of shares shall be made for collateral security and
not absolutely, and written notice thereof shall be given to the Secretary or to
such transfer agent, such fact shall be stated in the entry of the transfer. No
transfer of shares shall be valid as against the Corporation, its shareholders
and creditors for any purpose, except to render the transferee liable for the
debts of the Corporation to the extent provided by law, until it shall have been
entered in the stock records of the Corporation by an entry showing from and to
whom transferred.
Section 3. Addresses of Shareholders. Each shareholder shall
designate to the Secretary or transfer agent of the Corporation an address at
which notices of meetings and all other corporate notices may be served or
mailed to such person, and, if any shareholder shall fail to designate such
address, corporate notices may be served upon such person by mail directed to
such person at such person's post office address, if any, as the same appears on
the share record books of the Corporation or at such person's last known post
office address.
Section 4. Lost, Destroyed and Mutilated Certificates. The
holder of any share of stock of the Corporation shall immediately notify the
Corporation of any loss, theft, destruction or mutilation of the certificate
therefor; the Corporation may issue to such holder a new certificate or
certificates for shares, upon the surrender of the mutilated certificate or, in
the case of loss, theft or destruction of the certificate, upon satisfactory
proof of such loss, theft or destruction; the Board of Directors, or a committee
designated thereby, or the transfer agents and registrars for the stock, may, in
their discretion, require the owner of the lost, stolen or destroyed
certificate, or such person's legal representative, to give the Corporation a
bond in such sum and with such surety or sureties as they may direct to
indemnify the Corporation and said transfer agents and registrars against any
claim that may be made on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
Section 5. Regulations. The Board of Directors may make such
additional rules and regulations as it may deem expedient concerning the issue
and transfer of certificates representing shares of stock of each class of the
Corporation and may make such rules and take such action as it may deem
expedient concerning the issue of certificates in lieu of certificates claimed
to have been lost, destroyed, stolen or mutilated.
Section 6. Fixing Date for Determination of Shareholders of
Record. In order that the Corporation may determine the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment or any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than 70 days before the date of such meeting. A determination of
shareholders entitled to notice of or to vote at a meeting of the shareholders
shall apply to any adjournment of the meeting unless the Board of Directors
fixes a new record date, which it must do if the adjourned meeting is not within
120 days of the date fixed for the original meeting.
Article VII
Fiscal Year
The fiscal year of the Corporation shall be determined by
resolution of the Board of Directors. In the absence of such a resolution, the
fiscal year of the Corporation shall end on the Saturday nearest January 31 of
each year.
Article VIII
Waiver of Notice
9
<PAGE>
Whenever any notice whatsoever is required to be given by
these By-Laws, by the Restated Articles of Incorporation of the Corporation or
by law, the person entitled thereto may, either before or after the meeting or
other matter in respect of which such notice is to be given, waive such notice
in writing, which writing shall be filed with or entered upon the records of the
meeting or the records kept with respect to such other matter, as the case may
be, and in such event such notice need not be given to such person and such
waiver shall be deemed equivalent to such notice.
Article IX
Amendments
Any By-Law (other than this Article IX) may be adopted,
repealed, altered or amended by a majority of the entire Board of Directors at
any meeting thereof, provided that such proposed action in respect thereof shall
be stated in the notice of such meeting.
Article X
Miscellaneous
Section 1. Execution of Documents. The Board of Directors or
any committee thereof shall designate the officers, employees and agents of the
Corporation who shall have power to execute and deliver deeds, contracts,
mortgages, bonds, debentures, notes, checks, drafts and other orders for the
payment of money and other documents for and in the name of the Corporation and
may authorize such officers, employees and agents to delegate such power
(including authority to redelegate) by written instrument to other officers,
employees or agents of the Corporation. Such delegation may be by resolution or
otherwise and the authority granted shall be general or confined to specific
matters, all as the Board of Directors or any such committee may determine. In
the absence of such designation referred to in the first sentence of this
Section, the officers of the Corporation shall have such power so referred to,
to the extent incident to the normal performance of their duties.
Section 2. Deposits. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the credit of the
Corporation or otherwise as the Board of Directors or any committee thereof or
any officer of the Corporation to whom power in that respect shall have been
delegated by the Board of Directors or any such committee shall select.
Section 3. Checks. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation, and all notes or other
evidences of indebtedness of the Corporation, shall be signed on behalf of the
Corporation in such manner as shall from time to time be determined by
resolution of the Board of Directors or of any committee thereof.
Section 4.. Proxies in Respect of Stock or Other Securities of
Other Corporations. The Board of Directors or any committee thereof shall
designate the officers of the Corporation who shall have authority from time to
time to appoint an agent or agents of the Corporation to exercise in the name
and on behalf of the Corporation the powers and rights which the Corporation may
have as the holder of stock or other securities in any other corporation, and to
vote or consent in respect of such stock or securities; such designated officers
may instruct the person or persons so appointed as to the manner of exercising
such powers and rights; and such designated officers may execute or cause to be
executed in the name and on behalf of the Corporation or otherwise, such written
proxies, powers of attorney or other instruments as they may deem necessary or
proper in order that the Corporation may exercise its said powers and rights.
Section 5. By-Laws Subject to Law and Restated Articles of
Incorporation of the Corporation. Each provision of these By-Laws is subject to
any contrary provision of the Restated Articles of Incorporation of the
Corporation or of any applicable law as from time to time in effect, and to the
extent any such provision is inconsistent therewith, such provision shall be
10
<PAGE>
superseded thereby for as long as it is inconsistent, but for all other purposes
of these By-Laws shall continue in full force and effect.
Section 6. Definition of Restated Articles of Incorporation.
The term "Restated Articles of Incorporation" as used in these By-Laws means the
Restated Articles of Incorporation of the Corporation as from time to time in
effect.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>6
<FILENAME>scvl10kexhibit1.txt
<TEXT>
THIRD AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment"), effective as of the 18th day of March, 2002 is made by and between
U.S. BANK NATIONAL ASSOCIATION, a national banking association, formerly known
as Firstar Bank, N. A., successor by merger with Firstar Bank Missouri, National
Association, formerly known as Mercantile Bank National Association ("U.S.
Bank"), FIRST UNION NATIONAL BANK, a national bank ("First Union"), LASALLE BANK
NATIONAL ASSOCIATION, a national banking association ("LaSalle"), and OLD
NATIONAL BANK, a national bank ("Old National," and collectively with U.S. Bank,
First Union and LaSalle referred to herein as the "Banks"), and U.S. BANK
NATIONAL ASSOCIATION, a national banking association, formerly known as Firstar
Bank, N. A., a national banking association, successor by merger with Firstar
Bank Missouri, National Association, formerly known as Mercantile Bank National
Association, in its capacity as agent for the Banks (in such capacity, the
"Agent"), and SHOE CARNIVAL, INC. ("Borrower").
WITNESSETH:
WHEREAS, the Banks, Agent and Borrower are parties to a certain Amended
and Restated Credit Agreement dated as of April 16, 1999, as amended by a
certain Amendment to Amended and Restated Credit Agreement dated as of March 24,
2000 made by and among Borrower, Agent and the Banks and by a certain Second
Amendment to Amended and Restated Credit Agreement dated as of November 8, 2000
made by and among Borrower, Agent and the Banks (as amended, the "Agreement"),
pursuant to which the Banks have agreed to loan Borrower such sums, not to
exceed $70,000,000.00 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 Promissory Note dated November 8, 2000 made by
Borrower payable to the order of U.S. Bank in the original principal amount of
Twenty-One Million Five Hundred Thousand Dollars ($21,500,000.00), by a certain
Promissory Note dated November 8, 2000 made by Borrower payable to the order of
Old National in the original principal amount of Twelve Million Dollars
($12,000,000.00), by a certain Promissory Note dated November 8, 2000 made by
Borrower payable to the order of First Union in the original principal amount of
Twenty-One Million Five Hundred Thousand Dollars ($21,500,000.00) and by a
certain Promissory Note dated November 8, 2000 made by Borrower payable to the
order of LaSalle in the original principal amount of Fifteen Million Dollars
($15,000,000.00) (as amended, the "Notes");
WHEREAS, Borrower, Agent and Banks wish to further amend the Agreement
and the Notes to extend the term thereof, to change certain covenants contained
in the Agreement and to make certain other revisions to the Agreement and the
Notes as hereinafter set forth;
NOW, THEREFORE, in order to effect such amendments and in consideration
of the premises herein set forth, Borrower, Agent and Banks agree as follows:
1. The definition of "Banks" in Section 1.1 of the Agreement is
hereby amended to provide as follows:
<PAGE>
"Banks" mean U.S. Bank National Association, formerly known as
Firstar Bank, N. A., the successor by merger with Firstar Bank
Missouri, National Association, formerly known as Mercantile Bank
National Association and its successors and assigns, Old National Bank
and its successors and assigns, First Union National Bank and its
successors and assigns, and LaSalle Bank National Association and its
successors and assigns.
All references in the Agreement and any of the other Transaction Documents to
"Firstar" are henceforth amended and deemed to refer to
such Bank or Agent by its new name "U.S. Bank."
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, 2004
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, C and D attached to that certain
Third Amendment to Amended and Restated Credit Agreement dated March
18, 2002, 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 U.S. Bank shall
hereafter be amended and restated in the form of that Note attached to this
Amendment as Exhibit A and incorporated herein by reference. The Note of
Borrower payable to the order of Old National shall hereafter be amended and
restated in the form of that Note attached to this 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 Amendment as Exhibit C and incorporated herein by reference.
Borrower shall execute and deliver to LaSalle a new Note in the form of that
Note attached to this Amendment as Exhibit D and incorporated herein by
reference to evidence the Borrower's obligations to LaSalle under the Agreement
and the other Transaction Documents.
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, 2004; 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 deleted in its
entirety and in its place shall be substituted the following:
2
<PAGE>
(i) Have a Net Worth of not less than $112,100,000.00 as of
the end of each fiscal quarter during the Term hereof.
7. The form of Notice of Borrowing (as defined in the Agreement)
attached as Exhibit F to the Agreement, shall be amended and restated in the
form of that certain Notice of Borrowing attached hereto as Exhibit F. All
references in the Agreement to the "Notice of Borrowing" and other references of
similar import shall hereafter be amended and deemed to refer to the Notice of
Borrowing in the form of that attached hereto as Exhibit F.
8. Borrower hereby represents and warrants to Agent and to Banks
that:
(a) The execution, delivery and performance by Borrower of this
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 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 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.
9. 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 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 Amendment amends the Agreement and
is not a novation thereof.
10. 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 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 Amendment.
11. This 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.
12. This 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.
3
<PAGE>
13. 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 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 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.
14. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of Missouri.
15. In the event of any inconsistency or conflict between this
Amendment and the Agreement or the Notes, the terms, provisions and conditions
of this Amendment shall govern and control.
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4
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Third
Amendment to Amended and Restated Credit Agreement as of the day and year first
above written on this 18th day of March, 2002.
SHOE CARNIVAL, INC.
By: /s/ W. Kerry Jackson
W. Kerry Jackson, Senior Vice President,
Chief Financial Officer and Treasurer
Commitment: U.S. BANK NATIONAL ASSOCIATION
Facility A: $21,500,000.00
(30.71429%)
By: /s/ J. Eric Hartman
J. Eric Hartman, Vice President
Commitment OLD NATIONAL BANK
Facility A: $12,000,000.00
(17.14285%)
By: /s/ Justin M. Suer
Justin M. Suer, Assistant Vice
President
Commitment: FIRST UNION NATIONAL BANK
Facility A: $21,500,000.00
(30.71429%)
By: /s/ Miriam D. Howard
Miriam D. Howard, Vice President
Commitment: LASALLE BANK NATIONAL ASSOCIATION
Facility A: $15,000,000.00
(21.42857%)
By: /s/ Mark H. Veach
Mark H. Veach, Vice President
U.S. BANK NATIONAL ASSOCIATION, as Agent
By: /s/ J. Eric Hartman
J. Eric Hartman, Vice President
5
<PAGE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>subsidiaries.txt
<TEXT>
Exhibit 21
SUBSIDIARIES OF SHOE CARNIVAL, INC.
Subsidiary State of Incorporation Percentage of Ownership
SCHC, Inc. Delaware 100%
SCLC, Inc. Delaware 100% Owned by SCHC, Inc.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>8
<FILENAME>scvlconsent.txt
<TEXT>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement on
Form S-8 (No. 33-60114) relating to the 2000 Stock Option and Incentive Plan of
Shoe Carnival, Inc., and the Registration Statements on Form S-8 (Nos. 33-74050
and 333-44047) 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., and the
Registration Statement on Form S-8 (No. 333-82819) relating to the Outside
Directors Stock Option Plan of Shoe Carnival, Inc. of our report dated March 8,
2002 (March 18, 2002 as to Note 5), appearing in this Annual Report on Form 10-K
of Shoe Carnival, Inc. for the year ended February 2, 2002.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
San Francisco, California
April , 2002
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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