-----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, OBeQaGsmgcynmPZH2RMhNd+iMW8D0cF4WWfGkJJRG0hiXh5wNXBVSDkzGIC03z4d XaRi9NianpfWcr+eH9wFnA== 0000895447-02-000008.txt : 20020425 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 10-K 1 scvl10-k2001.txt 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 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 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 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.
2001 2000 1999 ------------- ------------ ------------ 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% ============= ============ ============
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 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:
Fiscal Year 2001 2000 1999 --------- -------- --------- 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 ========= ======== =========
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 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 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 Executive Officers of the Company
Name Age Position - --------------- --- ---------------------------------------------------- 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
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 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:
High Low ------------- ------------- 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
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
ITEM 6. Selected Financial Data (In thousands, except share and operating data) Fiscal years (1) 2001 2000 1999 1998 1997 --------- --------- --------- --------- --------- 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 - -------------------------------------------------------------------------------- (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.
10 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:
2001 2000 1999 ---------- --------- --------- 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% ========== ========= =========
11 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 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:
(000's) Fiscal years 2001 2000 1999 ---------- -------- --------- 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 ========== ======== =========
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 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:
(000's) Payments Due By Period ---------------------------------------------------- Less Than 1-3 4-5 After 5 Contractual Obligations Total 1 Year Years Years Years - ----------------------- ---------------------------------------------------- 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 ========= ======== ======== ======== =========
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 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 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
Shoe Carnival, Inc. Consolidated Balance Sheets February 2, February 3, (In thousands) 2002 2001 ----------------- ----------------- 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 ============== =============
See notes to consolidated financial statements 17
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 ------------ ------------ ------------- 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
See notes to consolidated financial statements 18
Shoe Carnival, Inc. Consolidated Statements of Shareholders' Equity (In thousands) Common Stock Additional ---------------------- Paid-In Retained Treasury Issued Treasury Amount Capital Earnings Stock Total ------ -------- ------ ------- -------- -------- ----- 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
19
Shoe Carnival, Inc. Consolidated Statements of Cash Flows (In thousands) Fiscal years ended February 2, February 3, January 29, 2002 2001 2000 ----------- ----------- ----------- 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
See notes to consolidated financial statements 20 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 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 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:
(000's) February 2, February 3, 2002 2001 ------------- ------------- 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 ============= =============
Note 4 - Accrued and Other Liabilities Accrued and other liabilities consisted of the following:
(000's) February 2, February 3, 2002 2001 ------------- ------------- 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 ============= =============
Note 5 - Long-Term Debt Long-term debt consisted of the following:
(000's) February 2, February 3, 2002 2001 ------------- ------------- Credit agreement $ 27,000 $ 40,000 Capital lease obligations (see Note 6) 1,506 2,011 ------------- -------------
23 Shoe Carnival, Inc. Notes to Consolidated Financial Statements - Continued Total 28,506 42,011 Less current portion 834 874 ------------- ------------- Total long-term debt, net of current portion $ 27,672 $ 41,137 ============= =============
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:
(000's) Fiscal years 2001 2000 1999 ---------- ----------- ---------- Rentals for real property $ 25,670 $ 22,102 $ 17,394 Equipment rentals 446 419 386 ---------- ----------- ---------- Total $ 26,116 $ 22,521 $ 17,780 ========== =========== ==========
Future minimum lease payments at February 2, 2002 are as follows:
(000's) Operating Capital Fiscal years Leases Leases ----------- ----------- 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 ===========
24 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:
(000's) February 2, February 3, 2002 2001 ----------- ----------- Equipment $ 4,259 $ 3,818 Less accumulated amortization 2,205 1,485 ----------- ----------- Equipment under capital lease-net $ 2,054 $ 2,333 =========== ===========
Note 7 - Income Taxes The provision for income taxes consisted of:
(000's) Fiscal years 2001 2000 1999 ----------- ----------- ----------- 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 =========== =========== ============
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:
Fiscal years 2001 2000 1999 ----------- ----------- ----------- 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% =========== =========== ===========
25 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:
(000's) February 2, February 3, 2002 2001 ------------ ----------- 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 ============ ===========
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 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 Shoe Carnival, Inc. Notes to Consolidated Financial Statements - Continued
Fiscal years 2001 2000 1999 ----------- ----------- ----------- 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
For the purpose of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows:
(000's, except per share data) Fiscal years 2001 2000 1999 ----------- ----------- ----------- 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
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:
Weighted Average Shares Exercise Price -------------------------- -------------------------- Outstanding Exercisable Outstanding Exercisable ----------- ----------- ----------- ----------- 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 =========== ======
The following table summarizes information regarding outstanding and exercisable options at February 2, 2002:
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 - --------------- ----------- ---------- -------- ----------- -------- $ 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
28 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:
(000's, except per share data) First Second Third Fourth 2001 Quarter Quarter Quarter Quarter ------- ------- ------- ------- 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
(000's, except per share data) First Second Third Fourth 2000 Quarter Quarter Quarter Quarter ------- ------- ------- ------- 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
29 SHOE CARNIVAL, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Charged Balance at (Credited) to Balance at Beginning Costs and End of Descriptions of Period Expenses Period ------------ ------------ ------------- ----------- Year ended 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
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 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 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 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 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 * 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 EX-3.(I) 4 articlesofincorp.txt 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 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 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 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 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 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 (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 (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 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. EX-3.(II) 5 bylaws.txt 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. 1 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 2 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 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 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 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 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 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 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 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 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. EX-4 6 scvl10kexhibit1.txt 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: "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 (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 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. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] [SIGNATURES ON NEXT PAGE] 4 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 EX-21 7 subsidiaries.txt 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. EX-23 8 scvlconsent.txt 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 -----END PRIVACY-ENHANCED MESSAGE-----