10-Q 1 scvl-20220430.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended April 30, 2022

or

 

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

 

For the transition period from  to

 

Commission File Number:

0-21360

 

 

Shoe Carnival, Inc.

(Exact name of registrant as specified in its charter)

 

Indiana

 

35-1736614

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification Number)

 

 

 

7500 East Columbia Street

Evansville, IN

 

47715

(Address of principal executive offices)

 

(Zip code)

 

(812) 867-4034

(Registrant’s telephone number, including area code)

 

NOT APPLICABLE

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

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

SCVL

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

 

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

 

 

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

 

☐ Large accelerated filer

Accelerated filer

☐ Non-accelerated filer

 Smaller reporting company

 Emerging growth company

 

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

 

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

 

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

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

 

Number of Shares of Common Stock, par value $0.01 per share, outstanding at May 27, 2022 was 27,587,354.

 


 

SHOE CARNIVAL, INC.

INDEX TO FORM 10-Q

 

 

 

 

Page

Part I

Financial Information

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

Condensed Consolidated Balance Sheets

3

 

 

Condensed Consolidated Statements of Income

4

 

 

Condensed Consolidated Statements of Shareholders’ Equity

5

 

 

Condensed Consolidated Statements of Cash Flows

6

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

 

 

Item 2.

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

13

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

19

 

 

 

 

 

Item 4.

Controls and Procedures

19

 

 

 

Part II

Other Information

 

 

 

 

 

 

Item 1A.

Risk Factors

20

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

20

 

 

 

 

 

Item 6.

Exhibits

21

 

 

 

 

Signature

22

 

2


 

SHOE CARNIVAL, INC.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

 

(In thousands, except share data)

 

April 30, 2022

 

 

January 29, 2022

 

 

May 1, 2021

 

Assets

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

86,179

 

 

$

117,443

 

 

$

174,643

 

Marketable securities

 

 

10,965

 

 

 

14,961

 

 

 

0

 

Accounts receivable

 

 

14,442

 

 

 

14,159

 

 

 

7,477

 

Merchandise inventories

 

 

345,021

 

 

 

285,205

 

 

 

268,629

 

Other

 

 

14,592

 

 

 

10,264

 

 

 

11,896

 

Total Current Assets

 

 

471,199

 

 

 

442,032

 

 

 

462,645

 

Property and equipment – net

 

 

110,033

 

 

 

88,533

 

 

 

62,038

 

Operating lease right-of-use assets

 

 

222,259

 

 

 

220,952

 

 

 

207,571

 

Intangible assets

 

 

32,600

 

 

 

32,600

 

 

 

0

 

Goodwill

 

 

11,698

 

 

 

11,384

 

 

 

0

 

Deferred income taxes

 

 

0

 

 

 

2,699

 

 

 

4,965

 

Other noncurrent assets

 

 

13,945

 

 

 

14,064

 

 

 

12,870

 

Total Assets

 

$

861,734

 

 

$

812,264

 

 

$

750,089

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

116,837

 

 

$

69,092

 

 

$

102,405

 

Accrued and other liabilities

 

 

31,243

 

 

 

33,053

 

 

 

55,011

 

Current portion of operating lease liabilities

 

 

51,287

 

 

 

51,563

 

 

 

42,895

 

Total Current Liabilities

 

 

199,367

 

 

 

153,708

 

 

 

200,311

 

Long-term portion of operating lease liabilities

 

 

195,426

 

 

 

194,788

 

 

 

185,205

 

Deferred income taxes

 

 

409

 

 

 

0

 

 

 

0

 

Deferred compensation

 

 

10,482

 

 

 

10,901

 

 

 

11,614

 

Other

 

 

336

 

 

 

334

 

 

 

2,684

 

Total Liabilities

 

 

406,020

 

 

 

359,731

 

 

 

399,814

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, 50,000,000 shares authorized and
   
41,049,190 shares issued in each period, respectively

 

 

410

 

 

 

410

 

 

 

410

 

Additional paid-in capital

 

 

79,595

 

 

 

80,681

 

 

 

77,041

 

Retained earnings

 

 

577,823

 

 

 

553,487

 

 

 

447,875

 

Treasury stock, at cost, 13,461,836 shares, 12,882,789
   shares and
12,702,788 shares, respectively

 

 

(202,114

)

 

 

(182,045

)

 

 

(175,051

)

Total Shareholders’ Equity

 

 

455,714

 

 

 

452,533

 

 

 

350,275

 

Total Liabilities and Shareholders’ Equity

 

$

861,734

 

 

$

812,264

 

 

$

750,089

 

 

See notes to Condensed Consolidated Financial Statements.

3


 

SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Unaudited

 

(In thousands, except per share data)

 

Thirteen
Weeks Ended
 April 30, 2022

 

 

Thirteen
Weeks Ended
 May 1, 2021

 

Net sales

 

$

317,527

 

 

$

328,457

 

Cost of sales (including buying, distribution
   and occupancy costs)

 

 

204,664

 

 

 

198,299

 

Gross profit

 

 

112,863

 

 

 

130,158

 

Selling, general and administrative expenses

 

 

77,479

 

 

 

72,555

 

Operating income

 

 

35,384

 

 

 

57,603

 

Interest income

 

 

(32

)

 

 

(4

)

Interest expense

 

 

95

 

 

 

119

 

Income before income taxes

 

 

35,321

 

 

 

57,488

 

Income tax expense

 

 

8,424

 

 

 

14,246

 

Net income

 

$

26,897

 

 

$

43,242

 

Net income per share:

 

 

 

 

 

 

Basic

 

$

0.96

 

 

$

1.53

 

Diluted

 

$

0.95

 

 

$

1.51

 

Weighted average shares:

 

 

 

 

 

 

Basic

 

 

27,996

 

 

 

28,258

 

Diluted

 

 

28,331

 

 

 

28,647

 

 

See notes to Condensed Consolidated Financial Statements.

4


 

SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Unaudited

 

 

 

Thirteen Weeks Ended

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Retained

 

 

Treasury

 

 

 

 

(In thousands, except per share data)

 

Issued

 

 

Treasury

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Stock

 

 

Total

 

Balance at January 29, 2022

 

 

41,049

 

 

 

(12,883

)

 

$

410

 

 

$

80,681

 

 

$

553,487

 

 

$

(182,045

)

 

$

452,533

 

Dividends declared ($0.09 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,561

)

 

 

 

 

 

(2,561

)

Employee stock purchase plan purchases

 

 

 

 

 

2

 

 

 

 

 

 

18

 

 

 

 

 

 

27

 

 

 

45

 

Stock-based compensation awards

 

 

 

 

 

170

 

 

 

 

 

 

(2,467

)

 

 

 

 

 

2,467

 

 

 

0

 

Shares surrendered by employees to pay taxes
   on stock-based compensation awards

 

 

 

 

 

(68

)

 

 

 

 

 

 

 

 

 

 

 

(2,048

)

 

 

(2,048

)

Purchase of common stock for treasury

 

 

 

 

 

(683

)

 

 

 

 

 

 

 

 

 

 

 

(20,515

)

 

 

(20,515

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

1,363

 

 

 

 

 

 

 

 

 

1,363

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,897

 

 

 

 

 

 

26,897

 

Balance at April 30, 2022

 

 

41,049

 

 

 

(13,462

)

 

$

410

 

 

$

79,595

 

 

$

577,823

 

 

$

(202,114

)

 

$

455,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 30, 2021

 

 

41,049

 

 

 

(12,839

)

 

$

410

 

 

$

78,737

 

 

$

406,655

 

 

$

(175,626

)

 

$

310,176

 

Dividends declared ($0.07 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,022

)

 

 

 

 

 

(2,022

)

Employee stock purchase plan purchases

 

 

 

 

 

2

 

 

 

 

 

 

31

 

 

 

 

 

 

33

 

 

 

64

 

Stock-based compensation awards

 

 

 

 

 

210

 

 

 

 

 

 

(2,878

)

 

 

 

 

 

2,878

 

 

 

0

 

Shares surrendered by employees to pay taxes
   on stock-based compensation awards

 

 

 

 

 

(76

)

 

 

 

 

 

 

 

 

 

 

 

(2,336

)

 

 

(2,336

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

1,151

 

 

 

 

 

 

 

 

 

1,151

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43,242

 

 

 

 

 

 

43,242

 

Balance at May 1, 2021

 

 

41,049

 

 

 

(12,703

)

 

$

410

 

 

$

77,041

 

 

$

447,875

 

 

$

(175,051

)

 

$

350,275

 

 

See notes to Condensed Consolidated Financial Statements.

5


 

SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

 

(In thousands)

 

Thirteen
Weeks Ended
April 30, 2022

 

 

Thirteen
Weeks Ended
May 1, 2021

 

Cash Flows From Operating Activities

 

 

 

 

 

 

Net income

 

$

26,897

 

 

$

43,242

 

Adjustments to reconcile net income to net cash
    provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

4,677

 

 

 

4,315

 

Stock-based compensation

 

 

1,240

 

 

 

1,227

 

Loss on retirement and impairment of assets, net

 

 

22

 

 

 

757

 

Deferred income taxes

 

 

3,108

 

 

 

670

 

Non-cash operating lease expense

 

 

11,998

 

 

 

11,434

 

Other

 

 

304

 

 

 

1,187

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(283

)

 

 

(381

)

Merchandise inventories

 

 

(59,816

)

 

 

(35,363

)

Operating leases

 

 

(12,942

)

 

 

(16,682

)

Accounts payable and accrued liabilities

 

 

41,697

 

 

 

61,519

 

Other

 

 

801

 

 

 

4,595

 

Net cash provided by operating activities

 

 

17,703

 

 

 

76,520

 

Cash Flows From Investing Activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(26,907

)

 

 

(4,083

)

Investments in marketable securities and other

 

 

(6

)

 

 

0

 

Sales of marketable securities and other

 

 

3,040

 

 

 

0

 

Net cash used in investing activities

 

 

(23,873

)

 

 

(4,083

)

Cash Flows From Financing Activities

 

 

 

 

 

 

Proceeds from issuance of stock

 

 

45

 

 

 

64

 

Dividends paid

 

 

(2,576

)

 

 

(2,054

)

Purchase of common stock for treasury

 

 

(20,515

)

 

 

0

 

Shares surrendered by employees to pay taxes on stock-based compensation awards

 

 

(2,048

)

 

 

(2,336

)

Net cash used in financing activities

 

 

(25,094

)

 

 

(4,326

)

Net (decrease) increase in cash and cash equivalents

 

 

(31,264

)

 

 

68,111

 

Cash and cash equivalents at beginning of period

 

 

117,443

 

 

 

106,532

 

Cash and cash equivalents at end of period

 

$

86,179

 

 

$

174,643

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid during period for interest

 

$

30

 

 

$

118

 

Cash paid during period for income taxes

 

$

61

 

 

$

68

 

Capital expenditures incurred but not yet paid

 

$

5,173

 

 

$

1,323

 

Dividends declared but not yet paid

 

$

169

 

 

$

101

 

 

See notes to Condensed Consolidated Financial Statements.

6


 

SHOE CARNIVAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

Note 1 – Basis of Presentation

Shoe Carnival, Inc. is one of the nation’s largest family footwear retailers. We offer customers a broad assortment of dress, casual and athletic footwear and accessories for men, women and children with an emphasis on national name brands through our Shoe Carnival and Shoe Station store banners. We are an omnichannel retailer selling footwear and related products through our retail stores located in 35 states within the continental United States and in Puerto Rico, as well as through our e-commerce platform. We are an Indiana corporation that was initially formed in Delaware in 1993 and reincorporated in Indiana in 1996. References to “Shoe Carnival,” “we,” “us,” “our” and the “Company” in this Quarterly Report on Form 10-Q refer to Shoe Carnival, Inc. and its subsidiaries.

In our opinion, the accompanying unaudited Condensed Consolidated Financial Statements and notes have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and contain all normal recurring adjustments necessary to fairly present our financial position and the results of our operations and our cash flows for the periods presented. Certain information and disclosures normally included in the notes to Condensed Consolidated Financial Statements have been condensed or omitted as permitted by the rules and regulations of the SEC although we believe that the disclosures are adequate to make the information presented not misleading. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

On June 21, 2021, our Board of Directors authorized a two-for-one stock split of the shares of our common stock. The stock split entitled each shareholder of record at the close of business on July 6, 2021 to receive one additional share of common stock for each share of common stock owned as of that date and was paid on July 19, 2021. Upon the completion of the stock split, our outstanding shares increased from approximately 14.1 million shares to approximately 28.2 million shares. In accordance with the provisions of our 2017 Equity Incentive Plan (the “2017 Plan”) and our Employee Stock Purchase Plan, and as determined by the Compensation Committee of our Board of Directors, the following, among other items, were adjusted to equitably reflect the effect of the two-for-one stock split:

 

The number of shares reserved and available for issuance;
The number of shares subject to outstanding equity awards under our stock-based compensation programs;
The exercise prices and maximum gain of our outstanding stock appreciation rights; and
The annual diluted net income per share targets associated with our outstanding performance stock units granted under the 2017 Plan.

All share and per share amounts in this quarterly report on Form 10-Q give effect to the stock split and have been adjusted retroactively for all periods presented.

Note 2 - Acquisition of Shoe Station

On December 3, 2021, we acquired the physical stores and substantially all of the other assets and liabilities of Shoe Station, Inc. ("Shoe Station") for total consideration of $70.7 million, net of $77,000 of cash acquired. The purchase price paid is subject to an adjustment for finalization of the value of the net assets acquired and was funded with available cash on hand. Shoe Station was one of the nation's largest independent shoe retailers, with currently 22 locations in Alabama, Florida, Georgia, Mississippi, and Louisiana. We believe the addition of a new brand and new retail locations to the Shoe Carnival portfolio creates a complementary retail platform to serve a broader family footwear customer base across both urban and suburban demographics.

 

The results of Shoe Station are included in our condensed consolidated financial statements since the acquisition date. We recorded a preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on the estimated fair values as of December 3, 2021. There were no material adjustments to our preliminary purchase price allocation recognized during the first quarter of fiscal 2022. The final determination of the fair values and related impacts will be completed as soon as practicable, and within the measurement period of up to one year from the acquisition date.

7


 

Note 3 - Net Income Per Share

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

 

 

 

Thirteen Weeks Ended

 

 

 

April 30, 2022

 

 

May 1, 2021

 

 

 

 

 

 

(In thousands, except per share data)

 

 

 

 

Basic Net Income per Share:

 

Net
Income

 

 

Shares

 

 

Per Share
Amount

 

 

Net
Income

 

 

Shares

 

 

Per Share
Amount

 

Net income available for basic common shares
   and basic net income per share

 

$

26,897

 

 

 

27,996

 

 

$

0.96

 

 

$

43,242

 

 

 

28,258

 

 

$

1.53

 

Diluted Net Income per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

26,897

 

 

 

 

 

 

 

 

$

43,242

 

 

 

 

 

 

 

Conversion of stock-based compensation
   arrangements

 

 

0

 

 

 

335

 

 

 

 

 

 

0

 

 

 

389

 

 

 

 

Net income available for diluted common
   shares and diluted net income per share

 

$

26,897

 

 

 

28,331

 

 

$

0.95

 

 

$

43,242

 

 

 

28,647

 

 

$

1.51

 

The computation of basic net income per share of common stock is based on the weighted average number of common shares outstanding during the period. The computation of diluted net income per share is based on the weighted average number of shares outstanding plus the dilutive incremental shares that would be outstanding assuming the vesting of stock-based compensation arrangements involving restricted stock, restricted stock units and performance stock units. The computation of diluted net income per share for the thirteen weeks ended April 30, 2022 excluded approximately 24,000 unvested stock-based awards that will be settled in shares because the impact would have been anti-dilutive. During the thirteen weeks ended May 1, 2021, approximately 6,000 unvested stock-based awards that will be settled in shares were excluded from the computation of diluted net income per share because the impact would have been anti-dilutive.

Note 4 - Fair Value Measurements

The following table presents financial instruments that are measured at fair value on a recurring basis at April 30, 2022, January 29, 2022 and May 1, 2021:

 

 

 

Fair Value Measurements

 

(In thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

As of April 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market mutual funds

 

$

90,598

 

 

$

0

 

 

$

0

 

 

$

90,598

 

Marketable securities - mutual funds that fund
    deferred compensation

 

 

10,965

 

 

 

0

 

 

 

0

 

 

 

10,965

 

Total

 

$

101,563

 

 

$

0

 

 

$

0

 

 

$

101,563

 

As of January 29, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market mutual funds

 

$

115,528

 

 

$

0

 

 

$

0

 

 

$

115,528

 

Marketable securities - mutual funds that fund
    deferred compensation

 

 

14,961

 

 

 

 

 

 

 

 

 

14,961

 

Total

 

$

130,489

 

 

$

0

 

 

$

0

 

 

$

130,489

 

As of May 1, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market mutual funds

 

$

175,612

 

 

$

0

 

 

$

0

 

 

$

175,612

 

During fiscal 2021, we invested in publicly traded mutual funds with readily determinable fair values. These marketable securities are designed to mitigate volatility in our Condensed Consolidated Statements of Income associated with our non-qualified deferred compensation plan. As of April 30, 2022, these marketable securities were principally invested in equity-based mutual funds, consistent with the allocation in our deferred compensation plan. As of April 30, 2022, the balance in our deferred compensation plan was $10.5 million, of which $53,000 was in Accrued and other liabilities based on scheduled payments due within the next 12 months and the remaining balance was in Deferred compensation, a long-term liability. To the extent there are funds in excess of the total non-qualified deferred compensation plan liability, such funds are invested in a stable value mutual fund. We classify these marketable securities as current assets because we have the ability to convert the securities into cash at our discretion and these marketable securities are not held in a rabbi trust. We have recognized unrealized losses of $2.6 million related to equity securities still held at April 30, 2022.

The fair values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities approximate their carrying values because of their short-term nature.

8


 

Long-Lived Asset Impairment Testing

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

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

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

During the thirteen weeks ended May 1, 2021, we recorded impairment charges of $724,000 associated with two stores. These charges were included in selling, general and administrative expenses. No impairment charges were recorded during the thirteen weeks ended April 30, 2022, and no impairments of operating right-of-use assets have been recorded in either period.

Note 5 - Stock-Based Compensation

Stock-based compensation includes share-settled awards issued pursuant to our 2017 Plan in the form of restricted stock units, performance stock units, and restricted and other stock awards. Additionally, we recognize stock-based compensation expense for the discount on shares sold to employees through our Employee Stock Purchase Plan and for cash-settled stock appreciation rights. For the thirteen weeks ended April 30, 2022 and May 1, 2021, stock-based compensation expense was comprised of the following:

 

(In thousands)

 

Thirteen
Weeks Ended April 30, 2022

 

 

Thirteen
Weeks Ended May 1, 2021

 

Share-settled equity awards

 

$

1,355

 

 

$

1,140

 

Stock appreciation rights

 

 

(123

)

 

 

76

 

Employee stock purchase plan

 

 

8

 

 

 

11

 

Total stock-based compensation expense

 

$

1,240

 

 

$

1,227

 

Income tax effect at statutory rates

 

$

(296

)

 

$

(304

)

Additional income tax benefit on vesting of share-settled awards

 

$

(495

)

 

$