10-Q 1 scvl1stqtrq.txt SHOE CARNIVAL, INC. 1ST QUARTER 2003 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 3, 2003 ------------------------------------------------ [ ] 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 -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) 35-1736614 -------------------------------------------------------------------------------- (IRS Employer Identification Number) 8233 Baumgart Road, Evansville, Indiana 47725 -------------------------------------------------------------------------------- (Address of principal executive offices) (812)867-6471 -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) NOT APPLICABLE -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value, 12,650,434 shares outstanding as of June 11, 2003. SHOE CARNIVAL, INC. INDEX TO FORM 10-Q Page Part I Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets............................3 Condensed Consolidated Statements of Income......................4 Condensed Consolidated Statement of Shareholders' Equity.........5 Condensed Consolidated Statements of Cash Flows..................6 Notes to Condensed Consolidated Financial Statements.........7 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.....................9 - 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................................12 Item 4. Controls and Procedures.....................................12 Part II Other Information Item 6. Exhibits and Reports on Form 8-K............................13 Signature............................................................14 Certifications..................................................15 - 16 2 SHOE CARNIVAL, INC. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SHOE CARNIVAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
May 3, February 1, May 4, (In thousands) 2003 2003 2002 -------------- ------------- ------------ Unaudited Unaudited ASSETS Current Assets: Cash and cash equivalents.................................. $ 4,140 $ 5,782 $ 3,616 Accounts receivable........................................ 2,236 1,134 1,392 Merchandise inventories.................................... 150,063 146,091 129,783 Deferred income tax benefit............................... 1,197 901 483 Other...................................................... 1,405 1,890 1,584 -------------- ------------- ------------ Total Current Assets.......................................... 159,041 155,798 136,858 Property and equipment-net.................................... 66,956 63,477 59,607 -------------- ------------- ------------ Total Assets.................................................. $ 225,997 $ 219,275 $ 196,465 ============== ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable........................................... $ 43,736 $ 49,847 $ 37,787 Accrued and other liabilities.............................. 12,771 9,276 11,033 Current portion of long-term debt.......................... 360 427 725 Total Current Liabilities .................................... 56,867 59,550 49,545 Long-term debt................................................ 18,559 15,503 16,269 Deferred lease incentives..................................... 6,270 5,262 4,096 Accrued rent ................................................. 2,536 2,458 2,144 Deferred income taxes......................................... 4,740 4,971 4,078 Other......................................................... 798 640 439 -------------- ------------- ------------ Total Liabilities............................................. $ 89,770 $ 88,384 $ 76,571 ============== ============= ============ Shareholders' Equity: Common stock, $.01 par value, 50,000 shares authorized, 13,363 shares issued at May 3, 2003, February 1, 2003 and May 4, 2002.............................................. 134 134 134 Additional paid-in capital................................... 65,962 65,828 65,264 Retained earnings............................................ 75,171 70,091 59,912 Treasury stock, at cost, 728, 746 and 812 shares at May 3, 2003, February 1, 2003 and May 4, 2002............. (5,040) (5,162) (5,416) -------------- ------------- ------------ Total Shareholders' Equity.................................... 136,227 130,891 119,894 -------------- ------------- ------------ Total Liabilities and Shareholders' Equity.................... $ 225,997 $ 219,275 $ 196,465 ============== ============= ============
See notes to condensed consolidated financial statements. 3 SHOE CARNIVAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME Unaudited
Thirteen Thirteen Weeks Ended Weeks Ended (In thousands, except per share data) May 3, 2003 May 4, 2002 ----------- ----------- Net sales.............................................................. $ 136,850 $ 129,384 Cost of sales (including buying, distribution and occupancy costs).................................................. 95,969 90,302 ---------- ---------- Gross profit........................................................... 40,881 39,082 Selling, general and administrative expenses........................... 32,587 29,761 ---------- ---------- Operating income....................................................... 8,294 9,321 Interest expense-net................................................... 166 264 ---------- ---------- Income before income taxes............................................. 8,128 9,057 Income tax expense..................................................... 3,048 3,396 ---------- ---------- Net income............................................................. $ 5,080 $ 5,661 ========== ========== Net income per share: Basic............................................................... $ .40 $ .45 Diluted ............................................................ $ .39 $ .44 Average shares outstanding: Basic .............................................................. 12,625 12,471 Diluted............................................................. 12,962 12,932
See notes to condensed consolidated financial statements. 4 SHOE CARNIVAL, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Unaudited
Common Stock Additional --------------------------- Paid-In Retained Treasury (In thousands) Issued Treasury Amount Capital Earnings Stock Total ------- -------- ------ ----------- -------- --------- --------- Balance at February 1, 2003......... 13,363 (746) $ 134 $ 65,828 $ 70,091 $ (5,162) $ 130,891 Exercise of stock options........... 15 117 103 220 Employee stock purchase plan purchases..................... 3 17 19 36 Net income.......................... 5,080 5,080 ------ ------ ------- ---------- --------- -------- --------- Balance at May 3, 2003.............. 13,363 (728) $ 134 $ 65,962 $ 75,171 $ (5,040) $ 136,227 ====== ====== ======= ========== ========= ======== =========
See notes to condensed consolidated financial statements. 5 SHOE CARNIVAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited
Thirteen Thirteen Weeks Ended Weeks Ended (In thousands) May 3, 2003 May 4, 2002 --------------- ------------- Cash Flows From Operating Activities Net income................................................................... $ 5,080 $ 5,661 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................................. 3,335 2,882 (Gain) loss on retirement of assets....................................... (60) 6 Deferred income taxes..................................................... (527) (179) Other ................................................................... 151 99 Changes in operating assets and liabilities: Accounts receivable................................................... (1,003) (94) Merchandise inventories............................................... (3,972) 5,866 Accounts payable and accrued liabilities.............................. (2,627) (1,688) Other................................................................. 506 231 ----------- ----------- Net cash provided by operating activities....................................... 883 12,784 ----------- ----------- Cash Flows From Investing Activities Purchases of property and equipment.......................................... (6,862) (5,198) Lease incentives............................................................. 1,093 0 ----------- ----------- Net cash used in investing activities........................................... (5,769) (5,198) ----------- ----------- Cash Flows From Financing Activities Net borrowings (payments) under line of credit............................... 3,125 (11,300) Payments on long-term debt................................................... (137) (260) Proceeds from issuance of stock.............................................. 256 2,131 ----------- ----------- Net cash provided by (used in) financing activities............................. 3,244 (9,429) ----------- ----------- Net decrease in cash and cash equivalents....................................... (1,642) (1,843) Cash and cash equivalents at beginning of period................................ 5,782 5,459 ----------- ----------- Cash and Cash Equivalents at End of Period...................................... $ 4,140 $ 3,616 =========== =========== Supplemental disclosures of cash flow information: Cash paid during period for interest......................................... $ 133 $ 387 Cash paid during period for income taxes, net of refunds..................... $ 13 $ (60) Capital lease obligations incurred........................................... $ 0 $ 47
See notes to condensed consolidated financial statements. 6 SHOE CARNIVAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Unaudited Note 1 - Basis of Presentation In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company and the results of its operations and its cash flows for the periods presented. Certain information and disclosures normally included in notes to consolidated financial statements have been condensed or omitted according to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not misleading. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto contained in the Company's Annual Report on Form 10-K for its fiscal year ended February 1, 2003. Note 2 - Net Income Per Share Net income per share of common stock is based on the weighted average number of shares and common share equivalents outstanding during the period. The following table presents a reconciliation of the Company's basic and diluted weighted average common shares outstanding as required by Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share":
(In thousands) Thirteen weeks ended May 3, 2003 May 4, 2002 ----------- ----------- Basic shares.................................................................... 12,625 12,471 Dilutive effect of stock options................................................ 337 461 --------- --------- Diluted shares.................................................................. 12,962 12,932 ========= =========
Options to purchase 301,000 and 104,000 shares of common stock for the first quarter of fiscal 2003 and 2002, respectively, were not included in the computation of diluted shares because the options' exercise prices were greater than the average market price for the period. Note 3 - Stock-Based Compensation SFAS No. 123, "Accounting for Stock-Based Compensation", requires that companies either recognize compensation expense for grants of stock options and other equity instruments based on fair value, or provide pro forma disclosure of net income and net income per share in the notes to the financial statements. At May 3, 2003, the Company has three stock-based compensation plans: the 1993 Stock Option and Incentive Plan, the Outside Directors Stock Option Plan and the 2000 Stock Option and Incentive Plan. The Company accounts for these plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. Accordingly, no compensation cost has been recognized under SFAS No. 123 for the Company's employee stock option plans. Had compensation cost for the awards under those plans been determined based on the grant date fair values, consistent with the method required under SFAS 7 No. 123, the Company's net income and net income per share would have been reduced to the pro forma amounts indicated below:
(In thousands, except per share data) Thirteen weeks ended May 3, 2003 May 4, 2002 ----------- ----------- Net income as reported.......................................................... $ 5,080 $ 5,661 Deduct: Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects.............. (256) (168) --------- -------- Pro forma net income............................................................ $ 4,824 $ 5,493 ========= ======== Basic net income per share As reported................................................................ $ .40 $ .45 Pro forma.................................................................. $ .38 $ .44 Diluted net income per share As reported................................................................ $ .39 $ .44 Pro forma.................................................................. $ .37 $ .42
The weighted-average fair value of options granted was $6.91 at May 3, 2003 and $9.65 at May 4, 2002. The fair value of these options was estimated at grant date using Black-Scholes option pricing model with the following weighted average assumptions:
May 3, 2003 May 4, 2002 ----------- ----------- Risk free interest rate......................................................... 2.6% 4.8% Expected dividend yield......................................................... 0.0% 0.0% Expected volatility............................................................. 62.2% 61.3% Expected term................................................................... 5 Years 5 Years
Note 4 - Reclassifications Certain amounts in the consolidated financial statements have been reclassified to conform to the current presentation. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. The Company also estimates a shrinkage reserve for the period between the last physical count and the balance sheet date. The estimate for the shrinkage reserve can be affected by changes in merchandise mix and changes in actual shrinkage trends. 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 and annually when no such event has occurred. Management evaluates the ongoing value of assets associated with retail stores that have been open longer than one year. When undiscounted cash flows estimated to be generated by those assets are less than the carrying value of those assets, impairment losses are recorded. When events such as these occur, the impaired assets are adjusted to estimated fair value and an impairment loss is recorded in selling, general and administrative expenses. Management's assumptions and estimates used in the evaluation of impairment, including current and future economic trends for stores, are subject to a high degree of judgement and if actual results or market conditions differ from those anticipated, additional losses may be recorded. Deferred Income Taxes - The Company calculates income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes", which requires the use of the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the tax rates in effect in the years when those temporary differences are expected to reverse. Inherent in the measurement of these deferred balances are certain judgments and interpretations of existing tax law and other published guidance as applied to the Company's operations. No valuation allowance has been provided for the deferred tax assets. The Company anticipates that future taxable income will be able to recover the full amount of the net deferred tax assets. The Company's effective tax rate considers management's judgment of expected tax liabilities in the various taxing jurisdictions within which it is subject to tax. The Company has also been involved in domestic tax audits. At any given time, multiple tax years are subject to audit by various taxing authorities. Results of Operations
Number of Stores Store Square Footage Comparable --------------------------------------- ----------------------- Store Sales Beginning End of Net End Increase Quarter Ended Of Period Opened Closed Period Change of Period (Decrease) ------------- ---------- ------ ------ ------ ------ --------- ----------- May 3, 2003 207 13 0 220 146,000 2,547,000 (5.5)% May 4, 2002 182 6 0 188 71,000 2,175,000 1.1%
9 The following table sets forth the Company's results of operations expressed as a percentage of net sales for the periods indicated:
Thirteen Thirteen Weeks Ended Weeks Ended May 3, 2003 May 4, 2002 ------------ ----------- Net sales............................................................... 100.0% 100.0% Cost of sales (including buying, distribution and occupancy costs).................................................... 70.1 69.8 --------- -------- Gross profit............................................................ 29.9 30.2 Selling, general and administrative expenses............................ 23.8 23.0 --------- -------- Operating income........................................................ 6.1 7.2 Interest expense-net.................................................... .1 .2 --------- -------- Income before income taxes.............................................. 6.0 7.0 Income taxes............................................................ 2.3 2.6 --------- -------- Net income.............................................................. 3.7% 4.4% ========= ========
Net Sales Net sales increased $7.5 million to $136.9 million in the first quarter of 2003, a 5.8% increase over net sales of $129.4 million in the first quarter of 2002. The increase was attributable to the sales generated by the 38 new stores opened in 2002 and 2003 offset in part by the comparable store sales decrease of 5.5%. Gross Profit Gross profit increased $1.8 million to $40.9 million in the first quarter of 2003, a 4.6% increase over gross profit of $39.1 million in the comparable prior year period. Included in gross profit for the first quarter of 2003 is a gain of $175,000, or 0.1% of sales, attributable to an insurance settlement for inventory damaged by a tornado in September 2002. The Company's gross profit margin decreased to 29.9% from 30.2% in the prior year. This decrease in profit margin resulted from a 0.6% increase in buying, distribution and occupancy costs due to the deleveraging effect of negative same store sales partially offset by a 0.2% increase in the merchandise margin and the 0.1% gain on the insurance settlement. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $2.8 million to $32.6 million in the first quarter of 2003 from $29.8 million in the comparable prior year period. As a percentage of sales, these expenses increased to 23.8% from 23.0% in the prior year. Total pre-opening costs in the first quarter of 2003 were $772,000 or 0.6% of sales, as compared to $432,000 or 0.3% of sales in the first quarter of 2002. The Company opened 13 new stores in the first quarter of 2003 versus opening six stores in the first quarter of 2002. The increase in pre-opening costs as a percentage of sales coupled with the deleveraging effect from negative same store sales resulted in the 0.8% increase in selling, general and administrative expense. These expenses are net of a gain of $89,000 on fixed assets from the insurance settlement related to the September 2002 tornado damage. Interest Expense The decrease in net interest expense to $166,000 in the first quarter of 2003 from $264,000 in the first quarter of 2002 resulted from lower average borrowings and a lower effective interest rate. 10 Income Taxes The effective income tax rate of 37.5% in the first quarter of 2003 and 2002 differed from the statutory federal rates due primarily to state and local income taxes, net of the federal tax benefit. Liquidity and Capital Resources The Company's primary sources of funds are cash flows from operations and borrowings under its revolving credit facility. Net cash provided by operating activities was $883,000 for the first quarter of 2003 as compared with $12.8 million for the first quarter of 2002. Excluding changes in operating assets and liabilities, cash provided by operating activities was $8.0 million in the first quarter of 2003 versus $8.5 million in the comparable prior year period. Merchandise inventories increased $20.3 million to $150.1 million at May 3, 2003 from $129.8 million at May 4, 2002 as a result of the additional 32 stores opened since the end of the first quarter of 2002. On a per-store basis, inventory decreased 1.2% at the end of the first quarter of 2003 as compared to the same period in 2002. During 2003, the Company's merchandise strategy will continue to focus on maintaining lean overall merchandise levels. Lean inventories in the seasonal fashion categories, particularly women's non- athletic product, are expected to reduce exposure to markdowns. Working capital increased to $102.2 million at May 3, 2003 from $87.3 million at May 4, 2002. The increase in working capital was primarily due to the increase in merchandise inventories net of accounts payable. The current ratio for first quarter of 2003 was consistent with last year at 2.8 to 1. Long-term debt as a percentage of total capital at May 3, 2003 was 12.0% compared to 11.9% at May 4, 2002. Capital expenditures net of lease incentives were $5.8 million in the first quarter of 2003. Of these expenditures, $5.2 million was incurred for new stores. Thirteen new stores were opened in the first quarter of 2003, 11 stores are expected to open in the second quarter and approximately 16 stores are expected to open in the second half of the fiscal year. After closing four stores in the latter half of the year, the Company expects to end the fiscal year with approximately 243 stores. Six new stores were opened in the first quarter of 2002. For fiscal 2003, the Company anticipates capital expenditures net of lease incentives will be between $17 and $19 million. 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 new stores in 2003 are expected to average approximately $320,000. An updated store design, which will be utilized in all new stores in 2003 and beyond, will lower the cost to build a store by approximately 10% from historical levels. 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 $67,000 per store. 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. Borrowings and letters of credit outstanding under the credit facility at May 3, 2003 were $18.4 million and $3.9 million, respectively. As of May 3, 2003, $47.7 million was available to the Company for additional borrowings under the credit facility. The Company anticipates existing cash and cash flow from operations, supplemented by borrowings under the credit facility, will be sufficient to fund planned expansion and other operating cash requirements for at least the next 12 months. 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 opening of a new store are charged to 11 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 selling periods: Easter, back-to-school and Christmas. Factors That May Effect Future Results This report on Form 10-Q 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 relations between China and the United States. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk in that the interest payable under the Company's credit facility 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 facility would have resulted in interest expense fluctuating by approximately $50,000 for the first three months of 2003 and $57,000 for the first three months of 2002. ITEM 4. CONTROLS AND PROCEDURES The Chief Executive Officer and the Chief Financial Officer of the Company have concluded, based on their evaluation as of a date within 90 days prior to the date of the filing of this Form 10-Q, that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of such evaluation. 12 SHOE CARNIVAL, INC. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K On May 15, 2003, the Company furnished Form 8-K reporting under Item 9 the issuance of a press release announcing the Company's operating and financial results for the quarter ended May 3, 2003. 13 SHOE CARNIVAL, INC. SIGNATURE Pursuant to the requirements 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. Date: June 11, 2003 SHOE CARNIVAL, INC. (Registrant) By: /s/ W. Kerry Jackson --------------------- W. Kerry Jackson Senior Vice President and Chief Financial Officer 14 SHOE CARNIVAL, INC. CERTIFICATIONS I, Mark L. Lemond, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Shoe Carnival, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 11, 2003 By: /s/ Mark L. Lemond ----------------------- Mark L. Lemond President and Chief Executive Officer 15 SHOE CARNIVAL, INC. CERTIFICATIONS I, W. Kerry Jackson, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Shoe Carnival, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 11, 2003 By: /s/ W. Kerry Jackson ----------------------- W. Kerry Jackson Senior Vice President and Chief Financial Officer 16