Payless ShoeSource Inc. is an American discount footwear retailer headquartered in Topeka, Kansas, whose U.S. and Canadian locations are soon to be defunct.[3][4] Established in 1956 by cousins Louis and Shaol Pozez, Payless is a privately held company owned by Blum Capital, and Golden Gate Capital. In 1961, it became a public company as the Volume Shoe Corporation which merged with The May Department Stores Company in 1979. In the 1980s, Payless was widely known in the U.S. for its Pro Wings line of discount sneakers, which often had Velcro straps instead of laces. In 1996, Payless ShoeSource became an independent publicly held company. In 2004, Payless ShoeSource announced it would exit the Parade chain and would close 100 Payless Shoe outlets. On August 17, 2007, the company acquired the Stride Rite Corporation and changed its name to Collective Brands, Inc.[5][6] The company had a total revenue for 2011 of US$ 3.4 billion.[7] The company also has a stunt premium banner, Palessi Shoes.[8]
Private | |
Industry | Shoes, socks, accessories |
---|---|
Fate | U.S. stores to be liquidated due to Chapter 11 bankruptcy |
Founded | 1956; 63 years ago |
Founders | Louis Pozez Shaol Pozez |
Headquarters | Dallas, Texas, U.S. |
Number of locations
|
3,600 (40+ countries) (2018)[1] |
Revenue | US$ 3 billion (2017)[2] |
US$ -149.8 million (FY 2012) | |
Owners | Blum Capital Golden Gate Capital Wolverine World Wide |
Number of employees
|
18,000 (2017)[2] |
Website | Archived official website at the Wayback Machine (archive index) |
It was announced on May 1, 2012, that the company would be purchased by Wolverine World Wide, Blum Capital, and Golden Gate Capital for US$1.32 billion. On December 13, 2016 it was reported that all Payless shoe stores were to be closed in Australia with the loss of 730 jobs.[7][9] On July 14, 2014, Authentic Brands Group acquired some assets from Payless ShoeSource's division Collective Licensing International, LLC, which included brands such as Airwalk, Hind sports clothing, Vision Street Wear, and Above The Rim.[10] In April 2017, Payless Shoesource filed for Chapter 11 bankruptcy and announced the closing of 400 stores in the United States.[11]
On February 14, 2019, Payless ShoeSource filed for bankruptcy again and will close its e-commerce platform and all remaining 2,100 stores in United States.[12] On February 19, 2019, it was announced that all 248 stores in Canada would also close.[4] Its franchise operations and stores in other countries will not be affected.[13]
- 1History
History[edit]
Acquisitions[edit]
Circa 1962–63, Volume Shoe company purchased the original Hill Brothers Shoe Company based in Kansas City, Missouri and converted all 25 of their stores to the 'Payless' name. In 1971, Volume Shoe obtained the second Hill Brothers Shoe Store chain that was started in St. Louis, Mo in 1956 by Al Melnick and Sol Nathanson with the assistance and aid of the original Hill Brothers in Kansas City. The St. Louis version of 'Hill Brothers Self Service Shoe Store' went from 3 to 103 stores in the Midwest and South between 1956 and 1971. Volume Shoe originally operated the 103 stores under the 'Hill Brothers Self Service' name.
Payless ShoeSource store, Briarwood Mall, Ann Arbor, Michigan
Starting in 1972, Volume Shoe began to consolidate stores in proximity and convert others to the 'Payless' brand. The St. Louis operation of 'Hill Brothers Self Service' stores were known for their bare bones minimalism and the slogan 'two for five – man alive!', that is, women and children's shoes were two pair for five dollars.[14]
Payless bought Picway Shoes from the Kobacker department store chain in 1994.[15]
Key dates[edit]
- 1956: Pay-Less National is founded in Topeka, Kansas, by two cousins, Louis and Shaol Pozez, to open self-service stores selling budget footwear.
- 1962: The company goes public as Volume Distributors.
- 1967: The company is renamed Volume Shoe Corporation; an accelerated expansion program is launched.
- 1971: Volume Shoe Corp. acquires the St. Louis based Hill Brothers Self Service Shoe Store
- 1978: The Payless ShoeSource name is adopted for the bulk of the company's retail outlets.
- 1979: Volume Shoe is acquired by the May Department Stores Company.
- 1991: The company name is changed to Payless ShoeSource, Inc.
- 1996: May spins Payless off to shareholders, making it once again an independent, publicly traded firm.
- 1997: The mid-priced shoe chain Parade of Shoes is acquired from J. Baker, Inc.; the first Canadian Payless stores open.
- 1999: The firm launches e-commerce at payless.com; Payless opens locations on the sales floor inside Shopko discount stores, replacing J. Baker.
- 2000: Payless enters into a joint venture to expand into the Central American region.
- 2004: As part of a major restructuring, Payless announces that it will close down the Parade chain and close hundreds of Payless ShoeSource outlets.[16]
- 2012: Collective Brands Inc., which owns footwear brands such as Sperry Top-Sider and Keds as well as the retailer Payless ShoeSource, will be split in two by multiple buyers, Wolverine Worldwide, Blum Capital and Golden Gate Capital, in a purchase valued at $2 billion, including debt.[17][18][19]
- 2017: Payless Shoesource filed for Chapter 11 bankruptcy and closed 400 stores nationwide.[20]
- 2019: Payless to file for second bankruptcy.[21]
Expansion[edit]
Interior of a Payless ShoeSource in Groveton, Virginia
Payless ShoeSource in Fairview Mall
On June 27, 2006, Payless announced that it was launching a new logo created to represent a more stylish, upscale and contemporary company. This is the first rollout of stores in 2012 and beyond.[citation needed]
- Canada: At the end of 2018, Payless had 248 stores in Canada, however, it was announced in February 2019 that all of the stores would be closed.
- St. Lucia: In 2014, Payless opened its first store in St. Lucia at the Baywalk Mall in Gros-Islet. This is one of two Payless stores located on the island of St. Lucia.
- Australia: In 2013, Payless ShoesSource bought Payless Shoes Australia's full 150 stores, which has operated since 1980 out of administration. Previously, these two companies did not have any affiliation.[22] On December 13, 2016, it was reported that all Payless shoe stores were to be closed in Australia with the loss of 730 jobs.[7][9]
- Trinidad and Tobago: Payless Shoesource has a total of 22 stores across Trinidad and Tobago, having first opened its doors in 2001.
- Barbados: In 2012, Payless expanded into the Barbados market by opening the first ten-employee store at Haggatt Hall, St. Michael. The group's CEO announced four more are also planned to open, and this will increase its local operations to 50 employees.
- Jamaica: Payless ShoeSource opened in Jamaica in January 2011, and today has a total of 12 stores on the island.
Payless in Santo Domingo, Dominican Republic
- Philippines: As of March 2019, Payless has 76 stores in the Philippines.[23]
- Indonesia, Singapore, and Malaysia: In April 2011, Payless launched its first store in Jakarta, Indonesia followed by one store in Kuala Lumpur and Singapore within the same year and under the same management. Payless Shoesource operates 19 stores throughout Indonesia currently.
- Thailand: The Central Marketing Group (CMG), a business unit of the Central Group, has signed a franchise agreement with Kansas-based Payless ShoeSource that will see outlets next year in Bangkok – Chonburi, making Thailand its 15th franchise country. It will also adopt Payless's new Hot Zone format and purchase products directly from the seasonal assortments, with slight adjustments for local needs.[24]
- United Arab Emirates: It belongs to AlShaya group in the UAE. It has opened different branches in Dubai Mall, Mirdif City Center and Sahara Center, and also in Bawadi Mall in Al-Ain City.[citation needed]
Collective Licensing International, LLC[edit]
Payless ShoeSource, operating as Collective Brands, Inc. formed a division called Collective Licensing International, LLC (CLI) in January 2004, which was based in Englewood, Colorado. CLI held and owned various clothing and sport brands, particularly 'youth lifestyle brands' and board-sport brands such as Airwalk, Vision Street Wear, Sims, Lamar and LTD, World Snowboarding Championships, Sugarboards, Carve, genetic, Dukes, Rage, Ultra-Wheels, Hind, Spot Bilt and Skate Attack.[25] The primary purpose of the division was to develop brands and provide them with marketing and branding guidance in various markets.[26]
In 2010, CLI acquired Above The Rim from Reebok International for an undisclosed amount.
On July 14, 2014, Authentic Brands Group acquired some assets from Payless ShoeSource's division Collective Licensing International, LLC.
2017 bankruptcy[edit]
A closing Payless store at Springfield Town Center
In April 2017, the company, struggling with the migration of retail shopping to e-commerce, filed for Chapter 11 bankruptcy.[27] It plans to immediately liquidate nearly 400 stores in the United States and Canada. Prior to the bankruptcy, heavily loaded with debt due to a private equity buy out, the company's credit rating was downgraded by Moody's. It has $100 million in loans that will come due in the next five years.[28] The company's bankruptcy announcement was part of a trend of retail closures in 2016–2017 known as the retail apocalypse.[29]
Payless emerged from bankruptcy court protection in August 2017. The company was the first among a group of retailers going through bankruptcy since 2016 to successfully complete the process of restructuring.[20]
2019 bankruptcy and liquidation[edit]
On February 14, 2019, Payless ShoeSource filed for bankruptcy again and closed all 2,100 stores in the United States by May 2019.[12] On February 19, 2019, it announced would also close 248 stores in Canada.[4] The 790 stores across Latin America and internationally would not be affected.[30]
References[edit]
- ^'International Presence – Global Scale'. Retrieved 19 Dec 2018.[self-published source?]
- ^ ab'Payless Holdings on the Forbes America's Largest Private Companies List'. Retrieved 15 February 2019.
- ^Tyko, Kelly (15 February 2019). 'Payless ShoeSource closing all 2,100 U.S. stores, starting liquidation sales Sunday'. USA Today. Retrieved 16 February 2019.
- ^ abcGlobal News (19 February 2019). 'Payless to close all 248 Canadian stores, liquidation sales expected'. Global Television. The Canadian Press.
- ^'Find Articles'.[permanent dead link]
- ^'PAYLESS SHOESOURCE ANNOUNCES CLOSE OF STRIDE RITE ACQUISITION AND HOLDING COMPANY NAME CHANGE TO COLLECTIVE BRANDS, INC. – Payless'. Archived from the original on 4 May 2016. Retrieved 9 June 2016.
- ^ abcHawley, Brenna (May 1, 2012), 'Payless ShoeSource owner agrees to $2B sale', Kansas City Business Journal, bizjournals.com, retrieved May 27, 2012
- ^Will Burns (30 November 2018). 'Payless Boosts Value Of Products With Brilliant 'Palessi' Stunt'. Forbes Magazine.
- ^ ab'Owner of Payless, Stride Rite stores being sold'. Archived from the original on May 2, 2012. Retrieved March 17, 2017.
- ^Steinberg, Haley (July 30, 2014). 'Authentic Brands Group, LLC Acquires Collective Licensing, LP, Including Iconic Global Lifestyle Brand 'Airwalk,' From Payless Holdings LLC'. PR Newswire. Retrieved March 16, 2017.
- ^Gustafson, Krystina (2017-04-04). 'Payless ShoeSource files for Chapter 11 bankruptcy'. CNBC. Retrieved 2017-11-20.
- ^ ab'Report: Payless ShoeSource closing all stores after filing for bankruptcy'. MYSTATELINE. Feb 14, 2019. Retrieved Feb 16, 2019.
- ^'Payless ShoeSource closing all 2,100 stores, starting liquidation sales Sunday'. www.msn.com. Retrieved 2019-02-16.
- ^Oltrogge, Sarah C. Images of America: East Village. Arcadia Publishing SC: February 2010. Page 43.
- ^'Picway Shoe Stores to Go Out of Business after Takeover by Payless. (Originated from Akron Beacon Journal, Ohio)'. 29 August 1994. Archived from the original on 4 March 2016. Retrieved 9 June 2016.
- ^'History of Payless ShoeSource, Inc. – FundingUniverse'. Retrieved 9 June 2016.
- ^'San Francisco's Golden Gate Capital, Blum Capital slip into Payless ShoeSource – San Francisco Business Times'. Retrieved 9 June 2016.
- ^'Payless and Keds to be split in $1.32 billion buyout'. 1 May 2012. Retrieved 9 June 2016 – via Reuters.
- ^Rusli, Evelyn M. 'Investor Group Carves Up Collective Brands'. Retrieved 9 June 2016.
- ^ ab'Payless emerges from bankruptcy court protection after closing more than 673 stores'. USA TODAY. Retrieved 2017-08-31.
- ^Bursztynsky, Lauren Hirsch, Jessica (2019-02-08). 'Payless preparing for bankruptcy with store closures'. www.cnbc.com. Retrieved 2019-02-10.
- ^'Payless buys Payless Shoes from administration'. 15 March 2013. Retrieved 9 June 2016.
- ^Payless PH Official site
- ^http://www.bangkokpost.com/business/retail/269054/cmg-walks-off-with-payless-franchise CMG walks off with Payless franchise Published: 3/12/2011
- ^'Collective Brands, Inc. Acquires Above The Rim Brand(R) From Reebok International'. SEC Marketwire. January 15, 2010. Retrieved March 21, 2017.
- ^'Company Overview of Collective Licensing International, LLC'. Bloombert. Retrieved March 16, 2017.
- ^'Payless Restructuring Plan'. Payless. Retrieved April 22, 2017.
- ^Gustafson, Krystina (April 4, 2017). 'Payless ShoeSource files for Chapter 11 bankruptcy'. CNBC. Retrieved April 4, 2017.
- ^'Changing retail: Is everything you know about 'retail apocalypse' wrong?'. USA TODAY. Retrieved 2017-11-20.
- ^'Payless Files for Voluntary Chapter 11 Protection in the U.S. and Intends to File for CCAA Protection in Canada'. www.businesswire.com. 2019-02-19. Retrieved 2019-02-19.
External links[edit]
- Official website (Archive)
Retrieved from 'https://en.wikipedia.org/w/index.php?title=Payless_ShoeSource&oldid=903027490'
Notes to Consolidated Financial Statements
Summary of Significant Accounting Policies Description of Business and Basis of Presentation Payless ShoeSource, Inc. (Payless, or the Company), a Missouri corporation, is the largest family footwear retailer in the United States. As of January 31, 1998, Payless operated 4,256 self-service Payless ShoeSource family shoe stores. Payless ShoeSource stores are located in all 50 states, the District of Columbia, Puerto Rico, Guam, Saipan, the U.S. Virgin Islands and Canada. Payless also operates Parade of Shoes, a 175-store division offering fashionable women's footwear at moderate prices. Payless utilizes a network of agents with factories in 14 foreign countries and the United States to source its products, which are manufactured to meet the Company's specifications and standards. Factories in the People's Republic of China are a source of approximately 80 percent of Payless merchandise.
Payless was a subsidiary of The May Department Stores Company (May Company) until its spin-off in May 1996. The consolidated financial statements for all years presented include entire fiscal year results and the accounts of Payless and all wholly owned subsidiaries.
Fiscal Year
The Payless fiscal year ends on the Saturday closest to January 31. Fiscal year 1997 ended on January 31, 1998, and included 52 weeks. Fiscal year 1996 ended on February 1, 1997, and included 52 weeks. Fiscal year 1995, which included 53 weeks, ended on February 3, 1996. References to years in these financial statements and notes relate to fiscal years rather than calendar years.
The Payless fiscal year ends on the Saturday closest to January 31. Fiscal year 1997 ended on January 31, 1998, and included 52 weeks. Fiscal year 1996 ended on February 1, 1997, and included 52 weeks. Fiscal year 1995, which included 53 weeks, ended on February 3, 1996. References to years in these financial statements and notes relate to fiscal years rather than calendar years.
Net Retail Sales
Net retail sales (sales) represent the sales of all stores operated during the period, are net of returns and exclude sales tax.
Net retail sales (sales) represent the sales of all stores operated during the period, are net of returns and exclude sales tax.
Cost of Sales
Cost of sales includes the cost of merchandise sold, buying and occupancy costs.
Cost of sales includes the cost of merchandise sold, buying and occupancy costs.
Earnings Per Share
During 1997 Payless adopted Statement of Financial Accounting Standards No. 128, Earnings per Share. Basic earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share includes the effect of conversions of stock options. For 1995 earnings per share was calculated using the number of common shares as of May 4, 1996, the date of the spin-off from May Company.
During 1997 Payless adopted Statement of Financial Accounting Standards No. 128, Earnings per Share. Basic earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share includes the effect of conversions of stock options. For 1995 earnings per share was calculated using the number of common shares as of May 4, 1996, the date of the spin-off from May Company.
The following is a reconciliation of the net earnings and shares of the basic and diluted earnings per share:
(Joseph Sanchez Selling Star Store
Manager Southwest Division)
Manager Southwest Division)
'Running a productive store is
a team effort. I concentrate
on building a more effective
team by focusing on associate [PHOTO] satisfaction. Like our
mission statement says,
success starts with satisfied
associates. If my associates
get the job done, customers
are happy; after that,
everything else falls into
place.
a team effort. I concentrate
on building a more effective
team by focusing on associate [PHOTO] satisfaction. Like our
mission statement says,
success starts with satisfied
associates. If my associates
get the job done, customers
are happy; after that,
everything else falls into
place.
Payless ShoeSource
Cash and Cash Equivalents
Payless considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value.
Payless considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value.
Merchandise Inventories
Merchandise inventories are valued by the retail method and are stated at the lower of cost, determined using the first-in, first-out (FIFO) basis, or market.
Merchandise inventories are valued by the retail method and are stated at the lower of cost, determined using the first-in, first-out (FIFO) basis, or market.
Property and Equipment
Property and equipment are recorded at cost. Property and equipment are depreciated on a straight-line basis over their estimated useful lives. Investments in properties under capital leases and leasehold improvements are amortized over the shorter of their useful lives or their related lease terms. Property and equipment to be held and used or disposed of are reviewed to determine whether the carrying amount of the assets is recoverable.
Property and equipment are recorded at cost. Property and equipment are depreciated on a straight-line basis over their estimated useful lives. Investments in properties under capital leases and leasehold improvements are amortized over the shorter of their useful lives or their related lease terms. Property and equipment to be held and used or disposed of are reviewed to determine whether the carrying amount of the assets is recoverable.
Insurance Programs
Under the Company's insurance programs, Payless retains its normal expected losses related primarily to workers' compensation, physical loss to property and business interruption resulting from such loss and comprehensive general, product, and vehicle liability, and purchases third party coverage for losses in excess of the normal expected level. Provisions for losses expected under these programs are recorded based upon the Company's estimates of the aggregate liability for claims incurred utilizing independent actuarial assumptions.
Under the Company's insurance programs, Payless retains its normal expected losses related primarily to workers' compensation, physical loss to property and business interruption resulting from such loss and comprehensive general, product, and vehicle liability, and purchases third party coverage for losses in excess of the normal expected level. Provisions for losses expected under these programs are recorded based upon the Company's estimates of the aggregate liability for claims incurred utilizing independent actuarial assumptions.
Foreign Currency Translation
Local currencies are the functional currencies for all subsidiaries. Accordingly, assets and liabilities of foreign subsidiaries are translated at the rate of exchange at the balance sheet date. Income and expense items of these subsidiaries are translated at average rates of exchange. The foreign currency translation was immaterial.
Local currencies are the functional currencies for all subsidiaries. Accordingly, assets and liabilities of foreign subsidiaries are translated at the rate of exchange at the balance sheet date. Income and expense items of these subsidiaries are translated at average rates of exchange. The foreign currency translation was immaterial.
Pre-opening Expenses
Costs associated with the opening of new stores are expensed during the year incurred.
Costs associated with the opening of new stores are expensed during the year incurred.
Income Taxes
Payless was included in the consolidated tax return filed by May Company for federal, state and local income tax purposes for the years prior to 1996 and for the period from February 4, 1996, through May 4, 1996. The provision for income taxes for those periods is calculated on a separate return basis.
Payless was included in the consolidated tax return filed by May Company for federal, state and local income tax purposes for the years prior to 1996 and for the period from February 4, 1996, through May 4, 1996. The provision for income taxes for those periods is calculated on a separate return basis.
Income taxes are accounted for using a balance sheet approach known as the liability method. The liability method accounts for deferred income taxes by applying the statutory tax rates in effect at the date of the balance sheet to differences between the book basis and the tax basis of assets and liabilities. Adjustments to deferred income taxes resulting from statutory rate changes are included within the tax provision in the year of the change.
Advertising Costs
Advertising costs and sales promotion costs are expensed at the time the advertising takes place. Included in selling, general and administrative expenses are advertising and sales promotion costs of $76.0 million, $66.4 million and $60.6 million in 1997, 1996 and 1995, respectively.
Advertising costs and sales promotion costs are expensed at the time the advertising takes place. Included in selling, general and administrative expenses are advertising and sales promotion costs of $76.0 million, $66.4 million and $60.6 million in 1997, 1996 and 1995, respectively.
Derivatives Policy
The Company's derivatives policy permits the use of financial derivatives only to reduce foreign exchange risk. Gains and losses related to forward foreign exchange contracts used to hedge firm commitments are deferred and recognized in operating results or included in balance sheet amounts when the transactions are settled. The amounts of derivative financial instruments in place during 1997, 1996 and 1995 were immaterial. As of January 31, 1998 and February 1, 1997, there were no derivative financial instruments in place.
The Company's derivatives policy permits the use of financial derivatives only to reduce foreign exchange risk. Gains and losses related to forward foreign exchange contracts used to hedge firm commitments are deferred and recognized in operating results or included in balance sheet amounts when the transactions are settled. The amounts of derivative financial instruments in place during 1997, 1996 and 1995 were immaterial. As of January 31, 1998 and February 1, 1997, there were no derivative financial instruments in place.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts. While the financial statements reflect all available information and management's judgment and estimates of current conditions and circumstances and are prepared with the assistance of specialists within and outside Payless, actual results could differ from those estimates.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts. While the financial statements reflect all available information and management's judgment and estimates of current conditions and circumstances and are prepared with the assistance of specialists within and outside Payless, actual results could differ from those estimates.
Reclassification
Certain reclassifications have been made to prior-year balances to conform with the current-year presentation.
Certain reclassifications have been made to prior-year balances to conform with the current-year presentation.
Relationship with May Company
Prior to 1996, May Company provided various services to Payless, including legal, benefit administration, risk management and insurance, income and payroll tax management, and treasury services. In anticipation of the spin-off, Payless became solely responsible for substantially all of these services at the beginning of 1996. However, May Company continued to provide income and payroll tax management and treasury services until the spin-off was completed. These financial statements include specific charges from May Company based upon utilization and are representative of May Company's actual cost. These charges were $1.1 million and $4.2 million in fiscal years
Prior to 1996, May Company provided various services to Payless, including legal, benefit administration, risk management and insurance, income and payroll tax management, and treasury services. In anticipation of the spin-off, Payless became solely responsible for substantially all of these services at the beginning of 1996. However, May Company continued to provide income and payroll tax management and treasury services until the spin-off was completed. These financial statements include specific charges from May Company based upon utilization and are representative of May Company's actual cost. These charges were $1.1 million and $4.2 million in fiscal years
(Mel Sadowsky
Selling Star Store Manager
Parade of Shoes Division)
Selling Star Store Manager
Parade of Shoes Division)
'Participating in the Payless
Stock Purchase Plan makes me
feel more like an owner of the
company. I treat the business [PHOTO] as if it were my own. My team
and I directly impact the
company's success by working
every day to satisfy our
customers' footwear needs.' Effective business communication by murphy 7th edition book pdf free download.
Stock Purchase Plan makes me
feel more like an owner of the
company. I treat the business [PHOTO] as if it were my own. My team
and I directly impact the
company's success by working
every day to satisfy our
customers' footwear needs.' Effective business communication by murphy 7th edition book pdf free download.
1996 and 1995, respectively. These costs could have been different had Payless operated as an independent public company during these periods.
Quarterly Results (Unaudited)
Quarterly results of operations are determined in accordance with annual accounting policies. They include certain items based upon estimates for the entire year. Summarized quarterly results for the last two years are as follows:
Quarterly results of operations are determined in accordance with annual accounting policies. They include certain items based upon estimates for the entire year. Summarized quarterly results for the last two years are as follows:
(1) Earnings per share were computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in average quarterly shares outstanding.
Acquisition
In March 1997 Payless purchased inventory, property and trademarks, and assumed leases on 186 stores of the Parade of Shoes division from J. Baker, Inc. The purchase price was approximately $28 million in cash, funded from operating cash flow. Payless operates Parade of Shoes as a separate division supported by existing Payless sourcing, distribution, information systems, real estate and financial organizations. As of January 31, 1998, Payless operated 175 Parade of Shoes stores in 14 states.
In March 1997 Payless purchased inventory, property and trademarks, and assumed leases on 186 stores of the Parade of Shoes division from J. Baker, Inc. The purchase price was approximately $28 million in cash, funded from operating cash flow. Payless operates Parade of Shoes as a separate division supported by existing Payless sourcing, distribution, information systems, real estate and financial organizations. As of January 31, 1998, Payless operated 175 Parade of Shoes stores in 14 states.
The Parade of Shoes acquisition has been accounted for as a purchase, and accordingly, the operating results of the acquired stores have been included in the Company's consolidated results since the acquisition date. The Parade of Shoes acquisition did not have a material effect on the results of operations or financial position of Payless in 1997.
Special and Nonrecurring Items
During the 1995 fourth quarter, in connection with the spin-off from May Company, Payless committed to close or relocate underperforming stores and implemented a plan to reduce central office overhead by means of a personnel reduction program. A pretax special and nonrecurring charge of $71.8 million was recorded in 1995 for these initiatives. The original $71.8 million charge was sufficient for management to execute and complete the plans to close or relocate underperforming stores and restructure the central office during 1995, 1996 and 1997. No additional charges for these initiatives were recorded in 1996 or 1997. As of January 31, 1998, the entire special and nonrecurring charge of $71.8 million had been utilized.
During the 1995 fourth quarter, in connection with the spin-off from May Company, Payless committed to close or relocate underperforming stores and implemented a plan to reduce central office overhead by means of a personnel reduction program. A pretax special and nonrecurring charge of $71.8 million was recorded in 1995 for these initiatives. The original $71.8 million charge was sufficient for management to execute and complete the plans to close or relocate underperforming stores and restructure the central office during 1995, 1996 and 1997. No additional charges for these initiatives were recorded in 1996 or 1997. As of January 31, 1998, the entire special and nonrecurring charge of $71.8 million had been utilized.
The special and nonrecurring reserve is included in Accrued Expenses and consists of the following:
Also in connection with the spin-off from May Company, Payless initiated the Payless ShoeSource, Inc. Spin-off Stock Plan and the Payless ShoeSource, Inc. Spin-off Cash Plan as retention programs. Under these retention programs, Payless committed to pay out 408,558 shares of restricted stock and cash payments ranging from 10.0 percent to 37.5 percent of certain associates' base salaries. These retention incentives are contingent upon continued employment for up to two years after May 4, 1996. The costs related to these incentives are expensed as earned during the retention period. The amount of
expense for retention incentives recorded as special and nonrecurring items was $4.7 million and $12.5 million in 1997 and 1996, respectively. The estimate of retention incentive expense for 1998 is $0.8 million.
Profit Sharing Plan
As of April 1, 1996, Payless associates began to participate in the Payless ShoeSource, Inc. Profit Sharing Plan (Payless Profit Sharing Plan). Substantially all of the associates' balances in The May Department Stores Company Profit Sharing Plan (May Profit Sharing Plan), including amounts invested in May Company common stock, were transferred to the Payless Profit Sharing Plan.
Contributions to the Payless Profit Sharing Plan are related to the Company's performance each year. At the Board of Directors discretion each year, Payless expects to contribute 2.5 percent of its pretax earnings to the Payless Profit Sharing Plan. Associates may voluntarily contribute to the Payless Profit Sharing Plan on both a before-tax and after-tax basis. Total profit sharing expenses were $5.5 million and $4.6 million in 1997 and 1996, respectively. Payless profit sharing expenses under the May Profit Sharing Plan were $1.8 million in 1995.
Retirement Plan
Payless does not have a tax-qualified retirement plan. Before the spin-off, The May Department Stores Company Retirement Plan (May Retirement Plan) expenses were charged to Payless by May Company based upon the actuarially determined portion of Payless service costs. May Company charged Payless $3.6 million in 1995.
Payless associates who were covered by the May Retirement Plan prior to the spin-off date will continue to vest in the benefits earned under that plan. Benefits accrued through the spin-off date have been 'frozen' and will be paid out in the future.
Payless has a supplementary retirement plan generally covering associates who, at one time, had compensation in a calendar year equal to at least twice the amount of 'wages' then subject to the payment of old age, survivor and disability insurance taxes. The supplementary retirement plan is unfunded. The accumulated benefit obligation, included in other liabilities, was $3.5 million and $2.5 million at January 31, 1998, and February 1, 1997, respectively.
Income Taxes
The provision for income taxes for the last three years consisted of the following:
The reconciliation between the statutory federal income tax rate and the effective income tax rate for the last three years was as follows:
Major components of deferred income tax assets and (liabilities) were as follows:
Accrued Expenses
Components of accrued expenses included:
Components of accrued expenses included:
Other Liabilities
Major components of other liabilities included:
Major components of other liabilities included:
Lines of Credit
Payless has in place a $200 million unsecured revolving credit facility with a bank syndication group. At January 31, 1998, there were no amounts outstanding.
Payless has in place a $200 million unsecured revolving credit facility with a bank syndication group. At January 31, 1998, there were no amounts outstanding.
Lease Obligations
Payless leases substantially all of its stores. Rental expense for the Payless operating leases consisted of:
Payless leases substantially all of its stores. Rental expense for the Payless operating leases consisted of:
Certain Payless lease agreements include escalating rents over the lease terms. Cumulative expense recognized on the straight-line basis in excess of cumulative payments was $27.8 million, and is included in accrued expenses and other liabilities.
Future minimum lease payments at January 31, 1998, are as follows:
At January 31, 1998, the present value of operating leases was $832.5 million.
Common Stock Repurchase Program
In January 1997 the Payless Board of Directors authorized the repurchase of up to $150 million of outstanding Payless common stock in open-market transactions. In September 1997 Payless completed the $150 million repurchase (having purchased approximately 2.8 million shares).
In January 1997 the Payless Board of Directors authorized the repurchase of up to $150 million of outstanding Payless common stock in open-market transactions. In September 1997 Payless completed the $150 million repurchase (having purchased approximately 2.8 million shares).
Stock Compensation Plans
Under the Payless 1996 Stock Incentive Plan (Stock Incentive Plan), officers and key employees may be granted stock options and other stock-based awards. A total of 5,200,000 shares of Payless common stock has been authorized to be issued under the Stock Incentive Plan.
Under the Payless 1996 Stock Incentive Plan (Stock Incentive Plan), officers and key employees may be granted stock options and other stock-based awards. A total of 5,200,000 shares of Payless common stock has been authorized to be issued under the Stock Incentive Plan.
As of January 31, 1998, options for 2,163,963 shares were outstanding under the Stock Incentive Plan, including options for 169,889 shares, which represent options that had previously been issued to Payless employees under The May Department Stores Stock Incentive Plan and were converted to options under the Stock Incentive Plan at the rate of 1.25 Payless options for every one May Company option. The Payless options converted from May Company options and some of the options granted to senior officers of Payless have an exercise price equal to the average of the high and low trading prices of Payless stock for each of the first 30 days on which the stock was traded.
All other options have an exercise price equal to the average of the high and low trading prices of the stock on the date the option is granted. Options converted from May Company become exercisable in installments
of 50 percent per year on each of the first two anniversaries of the grant date. The 1996 stock option grant becomes exercisable in installments of 25 percent per year on each of the first through the fourth anniversaries of the grant date.
The 1997 stock option grant will vest 100 percent on May 14, 2003, although vesting will be accelerated if specific price targets for Payless common stock are met. In January 1998 the first of those specific targets was achieved, resulting in 50 percent of the stock options granted in fiscal 1997 becoming vested. All options have a term of 10 years.
A summary of the status of the various stock option plans at the end of 1997 and 1996, and the changes within years are presented below:
Target 2017 Annual Report
The following table summarizes information about stock options outstanding at January 31, 1998:
Payless is authorized to grant a maximum of 1,125,000 shares of restricted stock to management associates. Restrictions, including performance restrictions, lapse over periods of up to four years, as determined on the date of grant. In 1997 and 1996, Payless granted 211,235 and 408,558 shares of restricted stock. Compensation expense is recognized over the restricted period, and was $4.7 million and $8.9 million for 1997 and 1996, respectively.
Payless Annual Report 2017 18
Payless plans are accounted for by applying Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, no compensation expense has been recognized for stock-based compensation plans other than for restricted stock and performance-based awards. Had compensation cost for the Payless stock options been determined under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, net earnings and earnings per share for Payless would have been as follows:
The option expense is estimated on the date of grant using the Black-Scholes option-pricing model. The respective 1997 and 1996 Black-Scholes assumptions include an expected dividend yield of zero, volatility of 30 percent, risk-free interest rate of 6.66 percent and 6.47 percent and an expected life of 10 years.
Shareowner Rights Plan
Payless has a shareowner rights plan under which one right is attached to each share of Payless common stock. The rights become exercisable only under certain circumstances involving actual or potential acquisitions of Payless common stock by a person or persons affiliated with such persons. Depending on the circumstances, if the rights become exercisable, the holder may be entitled to purchase units of Payless preference stock, shares of Payless common stock or shares of the common stock of the acquiring person. The rights will remain in existence until April 30, 2006, unless they are terminated, extended, exercised or redeemed.
Payless has a shareowner rights plan under which one right is attached to each share of Payless common stock. The rights become exercisable only under certain circumstances involving actual or potential acquisitions of Payless common stock by a person or persons affiliated with such persons. Depending on the circumstances, if the rights become exercisable, the holder may be entitled to purchase units of Payless preference stock, shares of Payless common stock or shares of the common stock of the acquiring person. The rights will remain in existence until April 30, 2006, unless they are terminated, extended, exercised or redeemed.
1997 Annual Report