-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HiZTy7ft4IJmRt0dkL54ME3KTywCjX2sHKmQO3hOpT09Ube3RYBjA2tD2oQDczJk EyJt/6gzZIFDQdGCRuicBQ== 0000950124-99-003639.txt : 19990608 0000950124-99-003639.hdr.sgml : 19990608 ACCESSION NUMBER: 0000950124-99-003639 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990501 FILED AS OF DATE: 19990607 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAYLESS SHOESOURCE INC /DE/ CENTRAL INDEX KEY: 0001060232 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-SHOE STORES [5661] IRS NUMBER: 431813160 STATE OF INCORPORATION: DE FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14770 FILM NUMBER: 99641630 BUSINESS ADDRESS: STREET 1: 3231 SOUTH EAST SIXTH STREET CITY: TOPEKA STATE: KS ZIP: 66607-2207 BUSINESS PHONE: 9132335171 MAIL ADDRESS: STREET 1: 3231 S E 6TH ST CITY: TOPEKA STATE: KS ZIP: 66607-2207 FORMER COMPANY: FORMER CONFORMED NAME: PAYLESS SHOESOURCE HOLDINGS INC DATE OF NAME CHANGE: 19980421 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended May 1, 1999 Commission File Number 1-14770 PAYLESS SHOESOURCE, INC. (Exact name of registrant as specified in its charter) DELAWARE 43-1813160 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3231 SOUTHEAST SIXTH AVENUE, TOPEKA, KANSAS 66607-2207 (Address of principal executive offices) (Zip Code) (785) 233-5171 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value 31,635,614 shares as of May 28, 1999 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (Dollars in millions)
May 1, May 2, Jan. 30, ASSETS 1999 1998 1999 - ------ --------------- --------------- --------------- Current Assets: Cash and cash equivalents $ 112.6 $ 236.9 $ 123.5 Merchandise inventories 403.9 377.2 342.1 Current deferred income taxes 13.5 15.6 14.2 Other current assets 19.1 12.7 16.0 --------------- --------------- --------------- Total current assets 549.1 642.4 495.8 Property and Equipment: Land 7.0 6.0 6.3 Buildings and leasehold improvements 607.9 572.5 594.8 Furniture, fixtures and equipment 291.8 284.1 284.2 Property under capital leases 7.6 7.5 7.6 --------------- --------------- --------------- Total property and equipment 914.3 870.1 892.9 Accumulated depreciation and amortization (424.7) (386.2) (400.1) --------------- ---------------- --------------- Property and equipment 489.6 483.9 492.8 Deferred income taxes 29.3 20.3 25.8 Other assets 4.2 3.5 3.5 --------------- --------------- --------------- Total Assets $ 1,072.2 $ 1,150.1 $ 1,017.9 =============== =============== =============== LIABILITIES AND SHAREOWNERS' EQUITY - ----------------------------------- Current Liabilities: Current maturities of capital lease obligations $ 0.7 $ 1.5 $ 1.5 Accounts payable 107.1 95.1 75.5 Accrued expenses 136.1 137.5 117.9 --------------- --------------- --------------- Total current liabilities 243.9 234.1 194.9 Long-term Debt 71.9 5.5 72.0 Other liabilities 49.8 53.1 48.2 Shareowners' Equity: Common stock 0.3 0.4 0.3 Additional paid-in capital 36.1 21.6 35.0 Unearned restricted stock (2.8) (6.9) (3.3) Retained earnings 673.0 842.3 670.8 --------------- --------------- --------------- Total shareowners' equity 706.6 857.4 702.8 Total Liabilities and Shareowners' Equity $ 1,072.2 $ 1,150.1 $ 1,017.9 =============== =============== ===============
See Notes to Condensed Consolidated Financial Statements. 2 3 PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED) (Dollars in millions, except per share) 13 Weeks Ended -------------------------------------- May 1, May 2, 1999 1998 ---------------- ---------------- Net retail sales $ 689.2 $ 681.0 Cost of sales 468.6 465.4 Selling, general and administrative expenses 161.5 154.9 Interest (income) expense, net 0.4 (2.1) ---------------- ---------------- Earnings before income taxes 58.7 62.8 Provision for income taxes 23.4 25.0 ---------------- ---------------- Net Earnings $ 35.3 $ 37.8 ================ ================ Diluted Earnings per Share $ 1.09 $ 1.00 ================ ================ Basic Earnings per Share $ 1.09 $ 1.01 ================ ================ Diluted Weighted Average Shares Outstanding 32.4 37.8 ================ ================ Basic Weighted Average Shares Outstanding 32.3 37.3 ================ ================ See Notes to Condensed Consolidated Financial Statements. 3 4 PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Dollars in millions) 13 Weeks Ended ------------------------------------ May 1, May 2, 1999 1998 --------------- ---------------- Operating Activities: Net earnings $ 35.3 $ 37.8 Adjustments for noncash items included in net earnings: Depreciation and amortization 24.0 23.1 Amortization of unearned restricted stock 0.5 0.7 Deferred income taxes (2.8) 0.9 Changes in working capital: Merchandise inventories (61.8) (52.6) Other current assets (3.1) (1.3) Accounts payable 31.6 31.3 Accrued expenses 18.2 24.6 Other assets and liabilities, net 1.6 1.3 --------------- ---------------- Total Operating Activities 43.5 65.8 --------------- ---------------- Investing Activities: Capital expenditures (21.0) (22.2) Disposition of property and equipment 0.1 1.9 --------------- ---------------- Total Investing Activities (20.9) (20.3) --------------- ---------------- Financing Activities: Repayment of long-term debt (0.9) (0.9) Purchases of common stock (33.7) (18.1) Issuances of common stock 1.1 0.4 --------------- ---------------- Total Financing Activities (33.5) (18.6) --------------- ---------------- Increase (Decrease) in Cash and Cash Equivalents (10.9) 26.9 Cash and Cash Equivalents, Beginning of Year 123.5 210.0 --------------- ---------------- Cash and Cash Equivalents, End of Period $ 112.6 $ 236.9 =============== ================ Cash paid during the period: Interest $ 0.3 $ 0.3 Income Taxes 0.6 0.0 See Notes to Condensed Consolidated Financial Statements. 4 5 PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION Payless ShoeSource, Inc., a Missouri corporation ("Payless") and its subsidiaries were reorganized into a Delaware holding company structure effective June 1, 1998 through a merger (the "Merger") with Payless Merger Corp., a Missouri corporation, which was an indirect wholly-owned subsidiary of Payless and a wholly-owned subsidiary of Payless ShoeSource, Inc., a Delaware corporation (the "Company"). The Company formerly was a wholly-owned subsidiary of Payless immediately prior to the merger. Each of the Company and Payless Merger Corp. were organized in connection with the Merger. Pursuant to the Merger, Payless became a wholly-owned subsidiary of the Company and is the principal operating subsidiary of the Company. The transaction was accounted for as a reorganization of entities under common control (similar to a pooling of interest). As a result, immediately following the effective time of the Merger the Company and its subsidiaries had the same consolidated net worth as Payless and its subsidiaries had immediately prior to the Merger. For purposes of these Notes to Condensed Consolidated Financial Statements, the "Registrant", or the "Company" refers to Payless ShoeSource, Inc., a Delaware corporation, and its subsidiaries, unless the context otherwise requires. NOTE 2. INTERIM RESULTS. These unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with the instructions to Form 10-Q of the United States Securities and Exchange Commission and should be read in conjunction with the Notes to Consolidated Financial Statements (pages 22-26) in the Company's 1998 Annual Report. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the unaudited Condensed Consolidated Financial Statements are fairly presented and all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods have been included; however, certain items are included in these statements based upon estimates for the entire year. The results for the three month period ended May 1, 1999, are not necessarily indicative of the results that may be expected for the fiscal year ending January 29, 2000. NOTE 3. INVENTORIES. Merchandise inventories are valued by the retail method and are stated at the lower of cost, determined using the first-in, first-out (FIFO) basis, or market. NOTE 4. EARNINGS PER SHARE. Basic earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share include the effect of conversions of stock options. 5 6 NOTE 5. RECLASSIFICATIONS. Certain reclassifications have been made to prior year balances to conform with the current year presentation. NOTE 6. FOREIGN CURRENCY TRANSLATION. Local currencies are the functional currencies for all subsidiaries. Accordingly, assets and liabilities of foreign subsidiaries are translated at the rate of exchange at the balance sheet date. Income and expense items of these subsidiaries are translated at average rates of exchange. The foreign currency translation was immaterial for the first quarter of 1999 and 1998. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion summarizes the significant factors affecting operating results for the quarters ended May 1, 1999 (1999) and May 2, 1998 (1998). This discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements included in this Form 10-Q. REVIEW OF OPERATIONS NET EARNINGS Net earnings totaled $35.3 million in the first quarter of 1999 compared with $37.8 million in the first quarter of 1998. The following table presents the components of costs and expenses, as a percent of revenues, for the first quarter of 1999 and 1998. First Quarter -------------- 1999 1998 ------ ------ Cost of sales 68.0% 68.3% Selling, general and administrative expenses 23.4 22.8 Interest (income)/expense, net 0.1 (0.3) ----- ----- Earnings before income taxes 8.5% 9.2% ===== ===== Effective income tax rate 39.9% 39.9% ----- ----- Net Earnings 5.1% 5.5% ===== ===== NET RETAIL SALES Net retail sales represent the sales of stores operating during the period. Same-store sales represent sales of stores open during comparable periods. During the first quarter of 1999 total sales increased 1.2% over the first quarter of 1998, consisting of a 2.7% increase in unit volume and a 1.5% decrease in average selling prices. Sales percent increases (decreases) are as follows: First Quarter ---------------- 1999 1998 ------ ------ Net Retail Sales 1.2% 5.6% Same-Store Sales (2.2%) 3.3% 6 7 COST OF SALES Cost of sales includes cost of merchandise sold, buying and occupancy costs. Cost of sales was $468.6 million in the 1999 first quarter, up 0.7% from $465.4 million in the 1998 first quarter. As a percent of net retail sales, cost of sales declined 0.3% to 68.0 percent in the first quarter of 1999 from 68.3 percent in the first quarter of 1998. Gross margin improvement in the first quarter was primarily due to continued improvements in our merchandising margins driven by better product costs and adjustments in our merchandise mix. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses were $161.5 million in the 1999 first quarter, up 4.3% from $154.9 million in the 1998 first quarter. As a percent of net retail sales, selling, general and administrative expenses were 23.4 percent during the first quarter of 1999 compared with 22.8 percent in the first quarter of 1998. The increase during the first quarter 1999 was attributed to increases in stores payroll required to support our higher store count, combined with the negative leverage we experienced due to a decline in our same-store sales. CASH FLOW Cash flow from operations during the three months ended May 1, 1999, was $43.5 million. This figure represented 6.3 percent of net retail sales in the first quarter of 1999 compared with 9.7 percent in the first quarter of 1998. Internally generated funds are expected to continue to be the most important component of the Company's capital resources and are expected to fund capital expansion. Sources and (uses) of cash flows are summarized below: 13 Weeks Ended ------------------ May 1, May 2, (Dollars in millions) 1999 1998 -------- -------- Net earnings and noncash items $ 57.1 $ 62.5 Working capital decrease (increase) (13.6) 3.3 Investing activities (20.9) (20.3) Purchases of common stock (33.7) (18.1) Issuances of common stock 1.1 0.4 Other financing activity (0.9) (0.9) -------- -------- Increase (decrease) in cash and cash equivalents $ (10.9) $ 26.9 ======== ======== CAPITAL EXPENDITURES Capital expenditures during the first quarter of 1999 totaled $21.0 million with an additional $107.0 million estimated to be incurred in the remainder of fiscal year 1999. The Company anticipates that cash flow from operations and the credit facility will be sufficient to finance projected capital expenditures. FINANCING ACTIVITIES During the first quarter of 1999, the Company acquired 0.7 million shares of its common stock for an aggregate price of $33.7 million. 7 8 AVAILABLE CREDIT The Company has in place a $200 million unsecured revolving credit facility with a bank syndication group. While no amounts had been drawn against the agreement at May 1, 1999, the balance available to the Company was reduced by $11.4 million outstanding under a letter of credit. FINANCIAL CONDITION RATIOS A summary of key financial information for the periods indicated is as follows: May 1, May 2, Jan. 30, 1999 1998 1999 ------ ------ -------- Current Ratio 2.3 2.7 2.5 Debt-Capitalization Ratio* 9.3% 0.8% 9.5% Fixed Charge Coverage** 4.0x 3.7x 4.1x * Debt-to-capitalization has been computed by dividing total debt, which includes current and long-term capital lease obligations, by capitalization, which includes current and long-term capital lease obligations, non-current deferred income taxes and equity. The debt-to-capitalization ratio, including the present value of future minimum rental payments under operating leases as debt and capitalization, would be 56.5%, 49.5% and 56.8% respectively, for the periods referred to above. ** Fixed charge coverage, which is presented for the trailing 52 weeks in each period ended above, is defined as earnings before income taxes, gross interest expense, and the interest component of rent expense, divided by gross interest expense and the interest component of rent expense. All costs and expenses of the Company relating to special retention costs and the special non-recurring charge associated with the spin-off are included in the above calculation. Excluding these costs, the fixed charge coverage would be 4.0x, 3.8x and 4.2x respectively, for the periods referred to above. STORE ACTIVITY At the end of the first quarter of 1999, the Company operated 4,387 Payless ShoeSource stores in 50 states, Canada, Guam, Saipan, Puerto Rico and the U.S. Virgin Islands and 215 Parade of Shoes stores. The following table presents the change in store count for the first quarter of 1999 and 1998. PAYLESS SHOESOURCE First Quarter ------------- 1999 1998 ----- ----- Beginning of quarter 4,357 4,256 Stores opened 64 47 Stores closed (34) (34) ----- ----- Ending store count 4,387 4,269 ===== ===== PARADE OF SHOES First Quarter ------------- 1999 1998 ----- ----- Beginning of quarter 213 175 Stores opened 3 19 Stores closed (1) (3) ----- ----- Ending store count 215 191 ===== ===== 8 9 YEAR 2000 READINESS DISCLOSURE Many existing computer programs were designed and developed without regard for the implications of Year 2000 and beyond. If not corrected, these computer applications could fail or create erroneous results before or at the Year 2000. For the Company, this could disrupt product purchasing and distribution, store operations, finance and other support areas, and affect the Company's ability to timely deliver product to stores, thereby causing potential lost sales opportunities and additional expenses. The Company's State of Readiness. The Company created a Year 2000 Steering Committee comprised of various senior management members and a Year 2000 Project Management Office. This group is responsible for planning and monitoring the Company's overall Year 2000 program and for reporting on a regular basis to the Company's Board of Directors. The Company's Year 2000 program encompasses both information systems and non-information technology within the Company as well as investigation of the readiness of the Company's significant business partners. The Company engaged an international consulting firm to evaluate and assist in the monitoring of its Year 2000 program. The outside consulting firm provides periodic updates on the Company's progress to the Company's Board of Directors. Internally Engineered Systems. With assistance from another international consulting firm, the Company has evaluated and continues to evaluate the extent to which modifications to its internally engineered computer systems will be necessary to accommodate the Year 2000 and is modifying its internally engineered computer systems to enable continued processing of data into and beyond the Year 2000. This phase of the Company's Year 2000 program is nearing completion. The consulting firm has completed its work and the Company anticipates completing remediation and testing of its internally engineered computer systems using internal resources by the end of the second quarter of fiscal 1999. Purchased Systems. The Company inventoried the types of purchased hardware and software systems used within the enterprise and has obtained, where feasible, contractual warranties from system vendors that their products are or will be Year 2000 compliant. This phase of the Company's Year 2000 program is complete. The Company requires Year 2000 contractual warranties from all vendors of new software and hardware. In addition, the Company is testing all significant newly purchased computer hardware and software systems in an effort to ensure their Year 2000 compliance. 9 10 Business Partners. The Company has communicated with most of its suppliers, banks and other business partners or vendors seeking assurances they will be Year 2000 compliant. Although no method exists for achieving certainty that any business' significant partners will function without disruption in the Year 2000, the Company's goal is to obtain as much detailed information as possible about its significant partners' Year 2000 plans and to identify those companies which appear to pose a significant risk of failure to perform their obligations to the Company as a result of the Year 2000. The Company has compiled detailed information regarding all of its significant business partners. The Company is planning, where appropriate, to review such significant partners throughout 1999 to confirm their level of preparedness for the Year 2000 and to make adjustments where necessary to avoid utilization of those partners who present an unacceptable level of risk. The Company currently is not dependent on any single source for any products or services. In the event a significant supplier, bank or other business partner or vendor is unable to provide products or services to the Company due to a Year 2000 failure, the Company believes it has adequate alternate sources for such products or services. There can be no guarantee, however, that similar or identical products or services would be available on the same terms and conditions or that the Company would not experience some adverse effects as a result of switching to such alternate sources. Embedded Systems. The Company has inventoried non-computer equipment (non-information technology) throughout the enterprise to determine whether it is date sensitive. Where appropriate, the Company will seek contractual protections or make contingency plans in an effort to minimize any adverse effect on any such equipment due to the Year 2000. The Company plans to have fully tested such non-computer equipment by the end of the second quarter of 1999. Costs to Address the Year 2000. Spending for modifications is being expensed as incurred and is not expected to have a material impact on the Company's results of operations or cash flows. The cost of the Company's Year 2000 program is being funded with cash flows from operations. The Company's total Year 2000 expenditures (including external and internal expenditures) are estimated to be in the range of $8-10 million. While the foregoing estimate does include internal costs, the Company does not separately track all of the internal costs incurred by it for the Year 2000 program. Such costs are principally the related payroll costs for the Company's Year 2000 Program Management Office and other internal resources who are also contributing their efforts to the Year 2000 program. The largest single Year 2000 expenditure to date has been consulting fees incurred in the context of the remediation of the Company's internally engineered computer systems as discussed above. 10 11 To date, the Company has expended approximately 95 percent of its estimated total Year 2000 expenditures, although the percentage expended cannot necessarily be taken as an indication of the Company`s degree of completion of its Year 2000 program. Risk Analysis. Like most large business enterprises, the Company is dependent upon its own internal computer technology and relies upon timely performance by its business partners. As noted above, a large-scale Year 2000 failure could impair the Company's ability to timely deliver product to stores, resulting in potential lost sales opportunities and additional expenses. Neither the precise magnitude of such lost sales opportunities and additional expenses nor the exact costs of carrying out contingency plans has yet been ascertained by the Company. The Company's Year 2000 program seeks to identify and minimize this risk and includes testing of its internally engineered systems and purchased hardware and software, to ensure, to the extent feasible, all such systems will function before and after the Year 2000. The Company is continually refining its understanding of the risk the Year 2000 poses to its significant business partners based upon information obtained through its surveys and interviews. That refinement will continue throughout 1999. Contingency Plans. Following its risk analysis as described above, the Company's Year 2000 program includes a contingency planning phase in which appropriate plans will be made to attempt to minimize disruption to the Company's operations in the event of a Year 2000 failure. The Company is formulating plans to handle a variety of failure scenarios, including failures of its internal systems, as well as failures of significant business partners. The level of planning required is a function of the risks ascertained through the Company's investigative efforts. The Company anticipates contingency planning across the enterprise will be completed by the end of the third quarter of 1999. While no assurances can be given, because of the Company's extensive efforts to formulate and carry-out an effective Year 2000 program, the Company believes its program will be completed on a timely basis and should effectively minimize disruption to the Company's operations due to the Year 2000. FORWARD-LOOKING STATEMENTS This report contains, and from time to time, the Company may publish, forward-looking statements relating to such matters as anticipated financial performance, business prospects, e-commerce initiatives, technological developments, new products, future store openings, possible strategic alternatives and similar matters. Also, statements including the words "expects," "anticipates," "intends," "plans," "believes," "seeks," or variations of such words and similar expressions are forwarding-looking statements. 11 12 The Company notes that a variety of factors could cause its actual results and experience to differ materially from the anticipated results or other expectations expressed in its forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include, but are not limited to, the following: changes in consumer spending patterns; changes in consumer preferences and overall economic conditions; the impact of competition and pricing; changes in weather patterns; successful implementations of new technologies; Year 2000 matters as discussed herein; the financial condition of the suppliers and manufacturers from whom the Company sources its merchandise; changes in existing or potential duties, tariffs or quotas; changes in relationships between the United States and foreign countries, economic and political instability in foreign countries or restrictive actions by the governments of foreign countries in which suppliers and manufacturers from whom the Company sources are located; changes in trade and foreign tax laws; fluctuations in currency exchange rates; availability of suitable store locations and appropriate terms; the ability to hire and train associates; and general economic, business and social conditions. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. The Company does not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. 12 13 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS There are no material pending legal proceedings, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. The Company and its subsidiaries are parties to ordinary private litigation incidental to their business. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The annual meeting of shareowners of the Registrant was held on May 28, 1999. (b) At the annual meeting of shareowners of the Registrant held on May 28, 1999, action was taken with respect to the election of three directors of the Registrant: 26,154,625 shares were voted for Steven J. Douglass while authority was withheld with respect to 46,249 shares; 26,156,657 shares were voted for Howard R. Fricke while authority was withheld with respect to 44,217 shares; 26,155,513 shares were voted for Ken C. Hicks while authority was withheld with respect to 45,361 shares. Other directors whose term of office continued after the meeting include: Daniel Boggan Jr., Thomas A. Hays, Richard A. Jolosky, Mylle B. Mangum, Michael E. Murphy and Robert L. Stark. (c) In addition, shareowners ratified the appointment of Arthur Andersen LLP as independent auditors (26,082,145 votes in favor, 30,370 votes against and 88,359 votes abstained). ITEM 5 - OTHER INFORMATION On May 27, 1999, the Company launched its online store, Payless.com. The store's Internet address is http://www.payless.com. The online store offers customers another way to take advantage of the value, quality, and selection offered through the Company's Payless ShoeSource stores, with the added convenience of online shopping. On June 4, 1999, Payless ShoeSource, Inc., a Delaware corporation (the "Company"), announced that the Company completed a $55 million financing through a private placement of unsecured notes issued by a wholly-owned subsidiary with five and ten year maturities. The financing consists of $20 million of senior notes maturing in June 2004 and $35 million of senior notes maturing in June 2009, with payments of principal on $15 million of the June 2009 notes beginning in June 2003. A copy of the Company's press release, dated June 4, 1999 is attached hereto as Exhibit 99.1 and is incorporated herein by reference. 13 14 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Number Description ------ ----------- 11.1 Computation of Net Earnings Per Share* 27 Financial Data Schedule* 99.1 Press Release* * Filed herewith (b) Reports on Form 8-K On January 29, 1999, the Company filed a Current Report on Form 8-K, reporting on Item 5, Other Information. In the Report, the Company provided its press release dated January 29, 1999, which announced that the Company had named Ken C. Hicks President and elected him to the Company's Board of Directors. 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PAYLESS SHOESOURCE, INC. Date: 6/7/99 By: /s/ Steven J. Douglass ---------------------- Steven J. Douglass Chairman and Chief Executive Officer Date: 6/7/99 By: /s/ Ullrich E. Porzig --------------------- Ullrich E. Porzig Senior Vice President and Chief Financial Officer 15 16 Exhibit Index Number Description ------ ----------- 11.1 Computation of Net Earnings Per Share 27 Financial Data Schedule 99.1 Press Release EX-11.1 2 COMPUTATION OF NET EARNINGS PER SHARE 1 EXHIBIT 11.1 PAYLESS SHOESOURCE, INC. COMPUTATION OF NET EARNINGS PER SHARE 13 Weeks Ended ------------------ May 1, May 2, (Thousands, except per share) 1999 1998 -------- -------- Basic Computation: - ----------------- Net earnings $ 35,270 $ 37,758 Weighted average common shares outstanding 32,255 37,308 -------- -------- Basic earnings per share $ 1.09 $ 1.01 ======== ======== Diluted Computation: - -------------------- Net earnings $ 35,270 $ 37,758 Weighted average common shares outstanding 32,255 37,308 Net effect of dilutive stock options based on the treasury stock method 174 493 -------- -------- Outstanding shares for diluted earnings per share 32,429 37,801 ======== ======== Diluted earnings per share $ 1.09 $ 1.00 ======== ======== Note: Basic earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share includes the effect of conversions of options. EX-27 3 FINANCIAL DATA SCHEDULE
5 EXHIBIT 27 -- THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PAYLESS SHOESOURCE, INC. CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE 13 WEEKS ENDED MAY 1, 1999, AND CONDENSED CONSOLIDATED BALANCE SHEET AS OF MAY 1, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001060232 PAYLESS SHOESOURCE, INC. 1,000 3-MOS JAN-29-2000 JAN-31-1999 MAY-01-1999 112,600 0 7,800 0 403,900 549,100 914,300 424,700 1,072,200 243,900 71,900 0 0 300 706,300 1,072,200 689,200 689,200 468,600 468,600 0 0 400 58,700 23,400 35,300 0 0 0 35,300 1.09 1.09 Includes cash equivalent securities. Any "securities" are shown under "Cash". Receivables are net after deduction of allowances. Consists of Capital Lease Obligations plus Long-Term Debt. Reflects Retained Earnings and Additional Paid In Capital. Reflects net sales. Expressed in dollars.
EX-99.1 4 PRESS RELEASE 1 Exhibit 99.1 For Immediate Release Contact: Timothy J. Reid (785) 295-6695 PAYLESS SHOESOURCE ANNOUNCES COMPLETION OF $55 MILLION PRIVATE PLACEMENT Topeka, Kan., June 4, 1999 - Payless ShoeSource, Inc. (NYSE:PSS) today announced that the company completed a $55 million financing through a private placement of unsecured notes issued by a wholly owned subsidiary in five and ten year maturities. Proceeds from the financing are intended to be used for general corporate purposes including the funding of a portion of the company's previously announced stock repurchase program. The financing consists of an aggregate of $20 million of senior notes maturing in June 2004 and $35 million of senior notes maturing in June 2009, with payments of principal on $15 million of the June 2009 notes beginning in June 2003. The notes have not been and will not be registered under the Securities Act of 1933 and may not be offered or sold in the United States without registration or an applicable exemption from registration requirements. This announcement does not constitute an offer to sell or a solicitation to buy the notes or any other securities of the company. Payless ShoeSource, Inc., is North America's largest family footwear retailer. The company operates 4,388 Payless ShoeSource stores offering quality family footwear at affordable prices. Payless also operates 215 Parade of Shoes stores featuring fashionable women's footwear. This press release contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements include management's present intentions and expectations of the use of the debt financing. A variety of known and unknown risks, uncertainties and other factors could cause actual results and expectations to differ materially from the anticipated results or expectations. Additional information concerning a number of factors that could cause actual results to differ materially from the information contained in this release can be found in the 1998 Annual Report to Shareowners and the Company's Form 10-K for fiscal 1998, as filed with the Securities and Exchange Commission. -----END PRIVACY-ENHANCED MESSAGE-----