UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the quarterly period ended |
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or |
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the transition period from to . |
Commission File Number: |
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(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification Number) |
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(Address of principal executive offices) |
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(Zip code) |
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(Registrant’s telephone number, including area code) |
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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 |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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. ☒
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). ☒
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 |
☒ |
☐ Non-accelerated filer |
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
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 $0.01 per share, outstanding at August 28, 2024 was
SHOE CARNIVAL, INC.
INDEX TO FORM 10-Q
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Page |
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Part I |
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Item 1. |
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3 |
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5 |
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6 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 |
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Item 3. |
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Item 4. |
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Part II |
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Item 1A. |
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Item 2. |
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Item 5. |
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Item 6. |
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24 |
2
SHOE CARNIVAL, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands, except share data) |
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August 3, 2024 |
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February 3, 2024 |
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July 29, 2023 |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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Marketable securities |
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Accounts receivable |
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Merchandise inventories |
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Other |
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Total Current Assets |
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Property and equipment – net |
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Operating lease right-of-use assets |
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Intangible assets |
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Goodwill |
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Other noncurrent assets |
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Total Assets |
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$ |
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$ |
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$ |
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Liabilities and Shareholders’ Equity |
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Current Liabilities: |
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Accounts payable |
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$ |
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$ |
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$ |
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Accrued and other liabilities |
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Current portion of operating lease liabilities |
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Total Current Liabilities |
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Long-term portion of operating lease liabilities |
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Deferred income taxes |
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Deferred compensation |
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Other |
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Total Liabilities |
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Shareholders’ Equity: |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Treasury stock, at cost, |
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( |
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( |
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( |
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Total Shareholders’ Equity |
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Total Liabilities and Shareholders’ Equity |
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$ |
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$ |
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$ |
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See notes to Condensed Consolidated Financial Statements.
3
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data) |
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Thirteen |
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Thirteen |
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Twenty-six |
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Twenty-six |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales (including buying, distribution |
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Gross profit |
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Selling, general and administrative expenses |
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Operating income |
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Interest income |
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( |
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( |
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( |
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( |
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Interest expense |
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Income before income taxes |
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Income tax expense |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Net income per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average shares: |
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Basic |
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Diluted |
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See notes to Condensed Consolidated Financial Statements.
4
SHOE CARNIVAL, INC.
Unaudited
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Thirteen Weeks Ended |
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Common Stock |
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Additional |
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Retained |
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Treasury |
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(In thousands, except per share data) |
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Issued |
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Treasury |
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Amount |
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Capital |
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Earnings |
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Stock |
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Total |
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Balance at May 4, 2024 |
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( |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Dividends declared ($ |
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( |
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( |
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Employee stock purchase plan purchases |
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Stock-based compensation awards |
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( |
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Stock-based compensation expense |
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Net income |
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Balance at August 3, 2024 |
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( |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Balance at April 29, 2023 |
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( |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Dividends declared ($ |
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( |
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( |
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Employee stock purchase plan purchases |
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Stock-based compensation awards |
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( |
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Stock-based compensation expense |
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Net income |
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Balance at July 29, 2023 |
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( |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Twenty-six Weeks Ended |
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Common Stock |
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Additional |
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Retained |
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Treasury |
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(In thousands, except per share data) |
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Issued |
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Treasury |
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Amount |
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Capital |
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Earnings |
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Stock |
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Total |
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Balance at February 3, 2024 |
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( |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Dividends declared ($ |
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( |
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( |
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Employee stock purchase plan purchases |
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Stock-based compensation awards |
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( |
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Shares surrendered by employees to pay taxes |
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( |
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( |
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( |
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Stock-based compensation expense |
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Net income |
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Balance at August 3, 2024 |
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( |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Balance at January 28, 2023 |
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( |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Dividends declared ($ |
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( |
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( |
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Employee stock purchase plan purchases |
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Stock-based compensation awards |
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( |
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Shares surrendered by employees to pay taxes |
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( |
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( |
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( |
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Stock-based compensation expense |
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Net income |
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Balance at July 29, 2023 |
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( |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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See notes to Condensed Consolidated Financial Statements.
5
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands) |
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Twenty-six |
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Twenty-six |
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Cash Flows From Operating Activities |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash |
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Depreciation and amortization |
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Stock-based compensation |
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Loss on retirement and impairment of assets, net |
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Deferred income taxes |
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( |
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Non-cash operating lease expense |
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Other |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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( |
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Merchandise inventories |
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( |
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( |
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Operating leases |
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( |
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( |
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Accounts payable and accrued liabilities |
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( |
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Other |
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( |
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( |
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Net cash provided by operating activities |
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Cash Flows From Investing Activities |
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Purchases of property and equipment |
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( |
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( |
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Investments in marketable securities |
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( |
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( |
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Acquisition, net of cash acquired |
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( |
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Net cash used in investing activities |
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( |
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( |
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Cash Flows From Financing Activities |
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Proceeds from issuance of stock |
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Dividends paid |
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( |
) |
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( |
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Shares surrendered by employees to pay taxes on stock-based compensation awards |
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( |
) |
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( |
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Net cash used in financing activities |
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( |
) |
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( |
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Net decrease in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental disclosures of cash flow information: |
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Cash paid during period for interest |
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$ |
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$ |
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Cash paid during period for income taxes |
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$ |
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$ |
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Capital expenditures incurred but not yet paid |
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$ |
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$ |
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Dividends declared but not yet paid |
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$ |
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$ |
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Contingent consideration related to business acquisition |
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$ |
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$ |
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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 omnichannel family footwear retailers, selling footwear and related products through our retail stores located in
Our consolidated financial statements include the accounts of Shoe Carnival, Inc. and its wholly-owned subsidiaries Rogan Shoes, Incorporated, SCHC, Inc. and Shoe Carnival Ventures, LLC, and SCLC, Inc., a wholly-owned subsidiary of SCHC, Inc. All intercompany accounts and transactions have been eliminated. 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 February 3, 2024.
Note 2 - Acquisition of Rogan Shoes
On February 13, 2024, we acquired all of the stock of Rogan Shoes, Incorporated, a privately-held 53-year-old work and family footwear company incorporated in Wisconsin (“Rogan’s”) for an adjusted preliminary purchase price of $
Rogan’s results were included in our consolidated financial statements since the acquisition date. Net Sales from our newly acquired Rogan’s operations totaled $
The following table summarizes the preliminary purchase price and the allocation of the preliminary purchase price to the fair value of the assets acquired and liabilities assumed. We measured these fair values using Level 3 inputs. The excess purchase price over the fair value of net assets acquired was allocated to Goodwill. The allocation of the purchase price shown in the table below is preliminary and subject to change based on the finalization of our detailed valuations and any subsequent change in the purchase price. 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
(In thousands) |
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Preliminary purchase price: |
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Cash consideration, net of cash acquired |
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$ |
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Fair value of contingent consideration |
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Total preliminary purchase price |
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$ |
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Fair value of identifiable assets and liabilities: |
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Accounts receivable |
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$ |
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Merchandise inventories |
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Other assets |
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Operating lease right-of-use assets |
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Identifiable intangible assets |
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Goodwill |
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Total assets |
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$ |
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Accounts payable |
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Operating lease liabilities |
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Accrued and other liabilities |
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Total liabilities |
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$ |
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Total fair value allocation of preliminary purchase price |
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$ |
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Our fair value estimate of the Merchandise Inventories for Rogan’s was determined using the Comparative Sales and Replacement Cost methods. Our fair value estimate of the contingent consideration for the Rogan’s acquisition was determined using a Monte Carlo simulation and other methods that account for the probabilities of various outcomes and was recorded in Other long-term liabilities. Significant assumptions used for the valuation include the discount rate, projected cash flows and calculated volatility. Our fair value estimate related to the identified intangible asset of Rogan’s trade name was determined using the Relief from Royalty method, and the significant assumptions used for the valuation include the royalty rate, estimated projected revenues, long-term growth rate and the discount rate. Our fair value estimates related to Rogan’s customer relationships were determined using the Multi-Period Excess Earnings method, and the significant assumptions used for the valuation include projected cash flows, the discount rate and customer attrition rate.
Identifiable intangible assets include Rogan’s trade name and customer relationships. We assigned an indefinite life to Rogan’s trade name; therefore, Goodwill and Rogan’s trade name will be charged to expense only if impaired. Impairment reviews will be conducted at least annually and involve a comparison of fair value to the carrying amount. If fair value is less than the carrying amount, an impairment loss would be recognized in Selling, General and Administrative Expenses. Customer relationships are subject to amortization and will be amortized over a period of
Note 3 - Net Income Per Share
The following table sets forth the computation of Basic and Diluted Net Income per Share as shown on the face of the accompanying Condensed Consolidated Statements of Income:
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Thirteen Weeks Ended |
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August 3, 2024 |
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July 29, 2023 |
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(In thousands, except per share data) |
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Basic Net Income per Share: |
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Net |
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Shares |
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Per Share |
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Net |
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Shares |
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Per Share |
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Net income available for basic common shares |
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$ |
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$ |
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$ |
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$ |
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Diluted Net Income per Share: |
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||||||
Net income |
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$ |
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$ |
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||||||
Conversion of stock-based compensation |
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Net income available for diluted common |
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$ |
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$ |
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$ |
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$ |
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8
|
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Twenty-six Weeks Ended |
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August 3, 2024 |
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July 29, 2023 |
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(In thousands, except per share data) |
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Basic Net Income per Share: |
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Net |
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Shares |
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Per Share |
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Net |
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Shares |
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Per Share |
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Net income available for basic common shares |
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$ |
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$ |
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$ |
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$ |
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Diluted Net Income per Share: |
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|
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Net income |
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$ |
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$ |
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Conversion of stock-based compensation |
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Net income available for diluted common |
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$ |
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$ |
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$ |
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$ |
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The computation of Basic Net Income per Share 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.
Note 4 - Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The guidance improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in the ASU will be applied retrospectively to all prior periods presented in the financial statements, using the significant segment expense categories identified and disclosed in the period of adoption. We are continuing to evaluate the impact of this new guidance but believe the adoption will not have a material impact on our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The ASU is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in the ASU should be applied on a prospective basis, but retrospective application is permitted. We are continuing to evaluate the impact of this new guidance but believe the adoption will not have a material impact on our consolidated financial statements.
9
Note 5 - Fair Value Measurements
Financial Instruments
The following table presents financial instruments that are measured at fair value on a recurring basis at August 3, 2024, February 3, 2024 and July 29, 2023:
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Fair Value Measurements |
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(In thousands) |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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As of August 3, 2024 |
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Cash equivalents - money market mutual funds |
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$ |
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$ |
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$ |
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$ |
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Marketable securities - mutual funds that fund |
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Total |
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$ |
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$ |
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$ |
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$ |
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As of February 3, 2024 |
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Cash equivalents - money market mutual funds |
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$ |
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$ |
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$ |
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$ |
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Marketable securities - mutual funds that fund |
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Total |
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$ |
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$ |
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$ |
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$ |
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As of July 29, 2023 |
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Cash equivalents - money market mutual funds |
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$ |
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$ |
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$ |
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$ |
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Marketable securities - mutual funds that fund |
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Total |
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$ |
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$ |
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$ |
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$ |
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We invest in publicly traded mutual funds with readily determinable fair values. These Marketable Securities are designed to mitigate volatility in our Consolidated Statements of Income associated with our non-qualified deferred compensation plan. As of August 3, 2024, these Marketable Securities were principally invested in equity-based mutual funds, consistent with the allocation in our deferred compensation plan. To the extent there is a variation in invested funds compared to the total non-qualified deferred compensation plan liability, such fund variance is managed through 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. Changes in these Marketable Securities and deferred compensation plan liabilities are charged to Selling, General and Administrative Expenses.
Deferred Compensation Plan Liabilities and Related Marketable Securities
The following tables present the balances and activity of the Company’s deferred compensation plan liabilities and related Marketable Securities:
(In thousands) |
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August 3, 2024 |
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February 3, 2024 |
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July 29, 2023 |
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Deferred compensation plan current liabilities |
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$ |
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$ |
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$ |
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Deferred compensation plan long-term liabilities |
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Total deferred compensation plan liabilities |
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$ |
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$ |
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$ |
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Marketable securities - mutual funds that fund deferred compensation |
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$ |
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|
$ |
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|
$ |
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(In thousands) |
|
Thirteen |
|
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Thirteen |
|
|
Twenty-six |
|
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Twenty-six |
|
||||
Deferred compensation liabilities |
|
|
|
|
|
|
|
|
|
|
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|
||||
Employer contributions, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
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Investment earnings |
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Marketable Securities |
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Mark-to-market gains (1) |
|
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Net deferred compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
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(1)