UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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[X] | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended November 1, 2014May 2, 2015 |
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[ ] | 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: 1-2191
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BROWN SHOE COMPANY,CALERES, INC.
(Exact name of registrant as specified in its charter) |
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New York (State or other jurisdiction of incorporation or organization) | 43-0197190 (IRS Employer Identification Number) |
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8300 Maryland Avenue St. Louis, Missouri (Address of principal executive offices) | 63105 (Zip Code) |
(314) 854-4000 (Registrant's telephone number, including area code) |
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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. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
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Large accelerated filer þ | Accelerated filer ¨ |
Non-accelerated filer ¨ | Smaller reporting company ¨ |
(Do not check if a smaller reporting company) | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ
As ofNovember 28, 2014, May 29, 201543,760,637, 43,742,093 common shares were outstanding.
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PART I | FINANCIAL INFORMATION |
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ITEM 1 | FINANCIAL STATEMENTS |
| | BROWN SHOE COMPANY, INC. | | |
CALERES, INC. | | |
CONDENSED CONSOLIDATED BALANCE SHEETS | | |
| (Unaudited) | |
| (Unaudited) | |
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($ thousands) | November 1, 2014 |
| November 2, 2013 |
| February 1, 2014 |
| May 2, 2015 |
| May 3, 2014 |
| January 31, 2015 |
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Assets | | |
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Current assets | | |
Cash and cash equivalents | $ | 39,080 |
| $ | 42,406 |
| $ | 82,546 |
| $ | 66,330 |
| $ | 36,668 |
| $ | 67,403 |
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Receivables, net | 138,217 |
| 112,491 |
| 129,217 |
| 126,512 |
| 105,746 |
| 136,646 |
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Inventories, net | 567,777 |
| 544,589 |
| 547,531 |
| 498,513 |
| 512,811 |
| 543,103 |
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Prepaid expenses and other current assets | 37,845 |
| 52,234 |
| 33,136 |
| 41,003 |
| 37,913 |
| 43,744 |
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Current assets – discontinued operations | — |
| 181 |
| 119 |
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Total current assets | 782,919 |
| 751,901 |
| 792,549 |
| 732,358 |
| 693,138 |
| 790,896 |
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Other assets | 139,878 |
| 111,647 |
| 139,621 |
| 144,309 |
| 136,256 |
| 141,586 |
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Goodwill | 13,954 |
| 13,954 |
| 13,954 |
| 13,954 |
| 13,954 |
| 13,954 |
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Intangible assets, net | 121,820 |
| 61,227 |
| 59,719 |
| 119,703 |
| 123,796 |
| 120,633 |
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Property and equipment | 439,166 |
| 428,137 |
| 428,540 |
| 442,273 |
| 428,454 |
| 438,696 |
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Allowance for depreciation | (287,877 | ) | (279,955 | ) | (284,980 | ) | (288,923 | ) | (286,636 | ) | (288,953 | ) |
Net property and equipment | 151,289 |
| 148,182 |
| 143,560 |
| 153,350 |
| 141,818 |
| 149,743 |
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Total assets | $ | 1,209,860 |
| $ | 1,086,911 |
| $ | 1,149,403 |
| $ | 1,163,674 |
| $ | 1,108,962 |
| $ | 1,216,812 |
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Liabilities and Equity | |
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Current liabilities | |
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Borrowings under revolving credit agreement | $ | 14,000 |
| $ | — |
| $ | 7,000 |
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Trade accounts payable | 203,062 |
| 200,706 |
| 226,602 |
| $ | 172,116 |
| $ | 195,703 |
| $ | 215,921 |
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Other accrued expenses | 172,077 |
| 151,142 |
| 152,545 |
| 158,700 |
| 141,718 |
| 181,162 |
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Current liabilities – discontinued operations | — |
| 2,110 |
| 708 |
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Total current liabilities | 389,139 |
| 353,958 |
| 386,855 |
| 330,816 |
| 337,421 |
| 397,083 |
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Other liabilities | |
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Long-term debt | 199,150 |
| 198,963 |
| 199,010 |
| 199,244 |
| 199,057 |
| 199,197 |
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Deferred rent | 37,571 |
| 37,548 |
| 38,593 |
| 41,441 |
| 37,368 |
| 39,742 |
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Other liabilities | 42,983 |
| 44,483 |
| 47,583 |
| 37,853 |
| 42,345 |
| 39,168 |
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Total other liabilities | 279,704 |
| 280,994 |
| 285,186 |
| 278,538 |
| 278,770 |
| 278,107 |
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Equity | |
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Common stock | 437 |
| 432 |
| 434 |
| 437 |
| 437 |
| 437 |
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Additional paid-in capital | 138,682 |
| 125,831 |
| 131,398 |
| 134,373 |
| 133,916 |
| 138,957 |
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Accumulated other comprehensive income (loss) | 15,511 |
| (21 | ) | 16,676 |
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Accumulated other comprehensive income | | 3,672 |
| 17,153 |
| 2,712 |
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Retained earnings | 385,624 |
| 325,059 |
| 328,191 |
| 414,992 |
| 340,567 |
| 398,804 |
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Total Brown Shoe Company, Inc. shareholders’ equity | 540,254 |
| 451,301 |
| 476,699 |
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Total Caleres, Inc. shareholders’ equity | | 553,474 |
| 492,073 |
| 540,910 |
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Noncontrolling interests | 763 |
| 658 |
| 663 |
| 846 |
| 698 |
| 712 |
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Total equity | 541,017 |
| 451,959 |
| 477,362 |
| 554,320 |
| 492,771 |
| 541,622 |
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Total liabilities and equity | $ | 1,209,860 |
| $ | 1,086,911 |
| $ | 1,149,403 |
| $ | 1,163,674 |
| $ | 1,108,962 |
| $ | 1,216,812 |
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See notes to condensed consolidated financial statements.
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BROWN SHOE COMPANY, INC. | | | | |
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS |
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| (Unaudited) |
| Thirteen Weeks Ended | Thirty-nine Weeks Ended |
($ thousands, except per share amounts) | November 1, 2014 |
| November 2, 2013 |
| November 1, 2014 |
| November 2, 2013 |
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Net sales | $ | 729,277 |
| $ | 702,788 |
| $ | 1,956,316 |
| $ | 1,913,150 |
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Cost of goods sold | 438,547 |
| 424,548 |
| 1,163,603 |
| 1,140,268 |
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Gross profit | 290,730 |
| 278,240 |
| 792,713 |
| 772,882 |
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Selling and administrative expenses | 237,517 |
| 233,572 |
| 679,472 |
| 678,522 |
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Restructuring and other special charges, net | — |
| — |
| — |
| 1,262 |
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Impairment of assets held for sale | — |
| — |
| — |
| 4,660 |
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Operating earnings | 53,213 |
| 44,668 |
| 113,241 |
| 88,438 |
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Interest expense | (5,207 | ) | (5,254 | ) | (15,637 | ) | (16,167 | ) |
Interest income | 109 |
| 132 |
| 294 |
| 282 |
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Earnings before income taxes from continuing operations | 48,115 |
| 39,546 |
| 97,898 |
| 72,553 |
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Income tax provision | (14,878 | ) | (12,495 | ) | (31,146 | ) | (24,522 | ) |
Net earnings from continuing operations | 33,237 |
| 27,051 |
| 66,752 |
| 48,031 |
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Discontinued operations: | |
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Earnings (loss) from discontinued operations, net of tax (expense) benefit of $0, ($114), $0 and $6,057, respectively | — |
| 233 |
| — |
| (4,784 | ) |
Disposition/impairment of discontinued operations, net of tax of $0 | — |
| — |
| — |
| (11,512 | ) |
Net earnings (loss) from discontinued operations | — |
| 233 |
| — |
| (16,296 | ) |
Net earnings | 33,237 |
| 27,284 |
| 66,752 |
| 31,735 |
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Net earnings (loss) attributable to noncontrolling interests | 124 |
| (30 | ) | 146 |
| (174 | ) |
Net earnings attributable to Brown Shoe Company, Inc. | $ | 33,113 |
| $ | 27,314 |
| $ | 66,606 |
| $ | 31,909 |
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Basic earnings (loss) per common share: | |
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From continuing operations | $ | 0.76 |
| $ | 0.63 |
| $ | 1.53 |
| $ | 1.12 |
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From discontinued operations | — |
| — |
| — |
| (0.38 | ) |
Basic earnings per common share attributable to Brown Shoe Company, Inc. shareholders | $ | 0.76 |
| $ | 0.63 |
| $ | 1.53 |
| $ | 0.74 |
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Diluted earnings (loss) per common share: | |
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From continuing operations | $ | 0.75 |
| $ | 0.62 |
| $ | 1.52 |
| $ | 1.11 |
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From discontinued operations | — |
| 0.01 |
| — |
| (0.38 | ) |
Diluted earnings per common share attributable to Brown Shoe Company, Inc. shareholders | $ | 0.75 |
| $ | 0.63 |
| $ | 1.52 |
| $ | 0.73 |
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Dividends per common share | $ | 0.07 |
| $ | 0.07 |
| $ | 0.21 |
| $ | 0.21 |
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CALERES, INC. | | |
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS |
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| (Unaudited) |
| Thirteen Weeks Ended |
($ thousands, except per share amounts) | May 2, 2015 |
| May 3, 2014 |
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Net sales | $ | 602,283 |
| $ | 591,162 |
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Cost of goods sold | 353,757 |
| 348,821 |
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Gross profit | 248,526 |
| 242,341 |
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Selling and administrative expenses | 218,190 |
| 213,615 |
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Operating earnings | 30,336 |
| 28,726 |
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Interest expense | (4,463 | ) | (5,306 | ) |
Interest income | 304 |
| 76 |
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Earnings before income taxes | 26,177 |
| 23,496 |
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Income tax provision | (6,786 | ) | (8,020 | ) |
Net earnings | 19,391 |
| 15,476 |
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Net earnings attributable to noncontrolling interests | 130 |
| 47 |
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Net earnings attributable to Caleres, Inc. | $ | 19,261 |
| $ | 15,429 |
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Basic earnings per common share attributable to Caleres, Inc. shareholders | $ | 0.44 |
| $ | 0.35 |
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Diluted earnings per common share attributable to Caleres, Inc. shareholders | $ | 0.44 |
| $ | 0.35 |
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Dividends per common share | $ | 0.07 |
| $ | 0.07 |
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See notes to condensed consolidated financial statements.
| | BROWN SHOE COMPANY, INC. | | | | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |
CALERES, INC. | | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| | | | |
| (Unaudited) | | (Unaudited) | (Unaudited) |
| Thirteen Weeks Ended | | Thirty-nine Weeks Ended | Thirteen Weeks Ended |
($ thousands) | November 1, 2014 |
| November 2, 2013 |
| | November 1, 2014 |
| November 2, 2013 |
| May 2, 2015 |
| May 3, 2014 |
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Net earnings | $ | 33,237 |
| $ | 27,284 |
| | $ | 66,752 |
| $ | 31,735 |
| $ | 19,391 |
| $ | 15,476 |
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Other comprehensive (loss) income, net of tax: | |
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Other comprehensive income (loss), net of tax: | | |
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Foreign currency translation adjustment | (1,159 | ) | (100 | ) | | (28 | ) | (1,690 | ) | 1,392 |
| 887 |
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Pension and other postretirement benefits adjustments | (28 | ) | 138 |
| | (84 | ) | 419 |
| (215 | ) | (23 | ) |
Derivative financial instruments | 57 |
| (32 | ) | | (1,053 | ) | 366 |
| (217 | ) | (387 | ) |
Other comprehensive (loss) income, net of tax | (1,130 | ) | 6 |
| | (1,165 | ) | (905 | ) | |
Other comprehensive income, net of tax | | 960 |
| 477 |
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Comprehensive income | 32,107 |
| 27,290 |
| | 65,587 |
| 30,830 |
| 20,351 |
| 15,953 |
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Comprehensive income (loss) attributable to noncontrolling interests | 93 |
| (25 | ) | | 100 |
| (114 | ) | |
Comprehensive income attributable to Brown Shoe Company, Inc. | $ | 32,014 |
| $ | 27,315 |
| | $ | 65,487 |
| $ | 30,944 |
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Comprehensive income attributable to noncontrolling interests | | 134 |
| 35 |
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Comprehensive income attributable to Caleres, Inc. | | $ | 20,217 |
| $ | 15,918 |
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See notes to condensed consolidated financial statements.
| | BROWN SHOE COMPANY, INC. | | |
CALERES, INC. | | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | | |
| (Unaudited) | (Unaudited) |
| Thirty-nine Weeks Ended | Thirteen Weeks Ended |
($ thousands) | November 1, 2014 |
| November 2, 2013 |
| May 2, 2015 |
| May 3, 2014 |
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Operating Activities | | |
| | |
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Net earnings | $ | 66,752 |
| $ | 31,735 |
| $ | 19,391 |
| $ | 15,476 |
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Adjustments to reconcile net earnings to net cash provided by operating activities: | |
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Depreciation | 26,034 |
| 26,645 |
| 8,558 |
| 8,484 |
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Amortization of capitalized software | 9,548 |
| 9,728 |
| 3,094 |
| 3,235 |
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Amortization of intangible assets | 2,963 |
| 4,741 |
| 930 |
| 988 |
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Amortization of debt issuance costs and debt discount | 1,885 |
| 1,885 |
| 301 |
| 628 |
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Share-based compensation expense | 4,568 |
| 4,066 |
| 1,687 |
| 1,555 |
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Tax benefit related to share-based plans | (2,482 | ) | (2,581 | ) | (2,401 | ) | (1,769 | ) |
Loss on disposal of facilities and equipment | 1,400 |
| 960 |
| 213 |
| 319 |
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Impairment charges for facilities and equipment | 1,248 |
| 1,072 |
| 374 |
| 291 |
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Impairment of assets held for sale | — |
| 4,660 |
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Disposition/impairment of discontinued operations | — |
| 11,512 |
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Net loss on sale of subsidiaries | — |
| 576 |
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Deferred rent | (1,022 | ) | 3,837 |
| 1,699 |
| (1,225 | ) |
Provision for doubtful accounts | 298 |
| 388 |
| (88 | ) | 56 |
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Changes in operating assets and liabilities, net of dispositions: | |
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Receivables | (9,328 | ) | (385 | ) | 10,224 |
| 23,385 |
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Inventories | (20,241 | ) | (41,180 | ) | 45,312 |
| 35,144 |
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Prepaid expenses and other current and noncurrent assets | (1,201 | ) | (6,748 | ) | (2,365 | ) | (1,917 | ) |
Trade accounts payable | (23,661 | ) | (12,933 | ) | (43,918 | ) | (31,081 | ) |
Accrued expenses and other liabilities | 14,376 |
| 23,848 |
| (21,468 | ) | (16,694 | ) |
Other, net | (2,635 | ) | 159 |
| 371 |
| (492 | ) |
Net cash provided by operating activities | 68,502 |
| 61,985 |
| 21,914 |
| 36,383 |
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Investing Activities | |
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Purchases of property and equipment | (36,531 | ) | (37,888 | ) | (12,905 | ) | (7,381 | ) |
Capitalized software | (3,849 | ) | (3,715 | ) | (955 | ) | (1,245 | ) |
Acquisition of trademarks | (65,065 | ) | — |
| — |
| (65,065 | ) |
Investment in nonconsolidated affiliate | (7,000 | ) | — |
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Net proceeds from sale of subsidiaries | — |
| 69,347 |
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Net cash (used for) provided by investing activities | (112,445 | ) | 27,744 |
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Net cash used for investing activities | | (13,860 | ) | (73,691 | ) |
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Financing Activities | |
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Borrowings under revolving credit agreement | 741,000 |
| 966,000 |
| 86,000 |
| 251,000 |
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Repayments under revolving credit agreement | (734,000 | ) | (1,071,000 | ) | (86,000 | ) | (258,000 | ) |
Dividends paid | (9,173 | ) | (9,073 | ) | (3,073 | ) | (3,053 | ) |
Acquisition of treasury stock | | (4,921 | ) | — |
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Issuance of common stock under share-based plans, net | 237 |
| (2,406 | ) | (3,751 | ) | (803 | ) |
Tax benefit related to share-based plans | 2,482 |
| 2,581 |
| 2,401 |
| 1,769 |
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Net cash provided by (used for) financing activities | 546 |
| (113,898 | ) | |
Net cash used for financing activities | | (9,344 | ) | (9,087 | ) |
Effect of exchange rate changes on cash and cash equivalents | (69 | ) | (1,648 | ) | 217 |
| 517 |
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Decrease in cash and cash equivalents | (43,466 | ) | (25,817 | ) | (1,073 | ) | (45,878 | ) |
Cash and cash equivalents at beginning of period | 82,546 |
| 68,223 |
| 67,403 |
| 82,546 |
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Cash and cash equivalents at end of period | $ | 39,080 |
| $ | 42,406 |
| $ | 66,330 |
| $ | 36,668 |
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See notes to condensed consolidated financial statements.
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BROWN SHOE COMPANY,CALERES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
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Note 1 | Basis of Presentation |
On May 28, 2015, the shareholders of Brown Shoe Company, Inc. approved a rebranding initiative that changed the name of the company to Caleres, Inc. (the "Company"). The Company's stock trades on the New York Stock Exchange under the ticker symbol "CAL".
The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the United States Securities and Exchange Commission (“SEC”) and reflect all adjustments and accruals of a normal recurring nature, which management believes are necessary to present fairly the financial position, results of operations, comprehensive income and cash flows of Brown Shoe Company,Caleres, Inc. (the “Company”). These statements, however, do not include all information and footnotes necessary for a complete presentation of the Company's consolidated financial position, results of operations, comprehensive income and cash flows in conformity with accounting principles generally accepted in the United States. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, after the elimination of intercompany accounts and transactions.
The Company’s business is seasonal in nature due to consumer spending patterns, with higher back-to-school and Christmas and Easter holiday season sales. Traditionally, the third fiscal quarter accounts for a substantial portion of the Company’s earnings for the year. Interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole.
Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications did not affect net earnings attributable to Brown Shoe Company,Caleres, Inc.
For further information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended February 1, 2014.January 31, 2015.
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Note 2 | Impact of New Accounting Pronouncements |
In July 2013,May 2014, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update ("ASU") No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This guidance requires entities to present an unrecognized tax benefit as a reduction to a deferred tax asset for a net operating loss (“NOL”) carryforward, similar tax loss, or tax credit carryforward, rather than as a liability, when the uncertain tax position would reduce the NOL or other carryforward under the tax law. The amendments in this ASU do not require new recurring financial disclosures. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, with early adoption permitted. The Company adopted this guidance on February 2, 2014, which did not have an impact on the Company’s condensed consolidated financial statements.
In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The ASU amends the definition of a discontinued operation by raising the threshold for disposals to qualify as discontinued operations and requires new disclosures for disposals of individually significant components that do not meet the new definition of a discontinued operation. Under the new guidance, discontinued operations treatment is required for disposals of a component or group of components that represent a strategic shift that has or will have a major impact on an entity’s operations or financial results. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2014, with early adoption permitted. The Company adopted this guidance during the third quarter of 2014, which did not have an impact on the Company’s condensed consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized, based upon the core principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption prohibited. The Company is currently evaluating the impact of the adoption of this ASU on its condensed consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented as a direct deduction from the associated debt liability in the balance sheet, consistent with the presentation of debt discounts. The amortization of debt issuance costs will continue to be reported as interest expense in the statement of earnings. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03. The ASU, which is to be applied on a retrospective basis and reported as a change in accounting principle, is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. ASU 2015-03 will not affect the Company’s results of operations or cash flows, but it will require the Company to reclassify its deferred financing costs from other assets to borrowings under revolving credit agreement and long-term debt on a retrospective basis.
In May 2015, the FASB issued ASU 2015-07, Disclosures for Investments in Certain Entities that Calculate Net Asset Value Per Share (or its Equivalent). ASU 2015-07 removes the requirement to categorize within the fair value hierarchy investments for which fair values are estimated using the net asset value practical expedient provided by ASC 820, Fair Value Measurement. Disclosures about investments in certain entities that calculate net asset value per share are limited under ASU 2015-07 to those investments for which the entity has elected to estimate the fair value using the net asset value practical expedient. The ASU is
effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, with retrospective application to all periods presented. Early application is permitted. The Company is currently evaluating the impact of the adoption of this ASU on its condensed consolidated financial statements.
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Note 3 | Discontinued OperationsDispositions |
The Company’s discontinued operations include the Avia and Nevados brands of American Sporting Goods Corporation,On December 12, 2014, Caleres Investment Company, Inc. ("CIC") (formerly known as well as the Etienne Aigner and Vera Wang brands. There were no net sales or earnings (loss) from discontinued operations for the thirteen and thirty-nine weeks ended November 1, 2014. In aggregate, discontinued operations included net sales of $1.2 million and $25.5 million for the thirteen and thirty-nine weeks ended November 2, 2013. Discontinued operations also included earnings before income taxes of $0.3 million and a loss before income taxes of $10.8 million for the thirteen and thirty-nine weeks ended November 2, 2013, respectively. For the thirty-nine weeks ended November 2, 2013, discontinued operations also included $11.5 million of costs associated with the Company’s disposition/impairment of discontinued operations.
American Sporting Goods Corporation
On May 14, 2013, Brown Shoe International Corp. (“BSIC”Investment Company, Inc.), the sole shareholder of American Sporting Goods Corporation,Shoes.com, Inc. ("Shoes.com"), simultaneously entered into and simultaneously closed a Stock Purchase Agreement (the “Stock Purchase Agreement”) by and among CIC and an affiliate of ShoeMe Technologies Limited ("the Company, BSIC and Galaxy Brand Holdings, Inc. (“the Buyer”Purchaser"), pursuant to which the BuyerPurchaser acquired all of the outstanding capital stock, inventory and other assets of American Sporting Goods CorporationShoes.com from BSICCIC and the Company agreed to provide certain transition services. In connection with the transaction, American Sporting Goods Corporation sold inventory to a third party unaffiliated with the Buyer and distributed certain assets to BSIC. The aggregate purchase price forof the stock of American Sporting Goods Corporation and the provision of such transition servicessale was $74.0$15.0 million, subject to working capital adjustments, minus the amount of the pre-closing cash dividend declared by American Sporting Goods Corporation and paid to BSIC, representing proceeds from American Sporting Goods Corporation’s sale of inventory.
The Company purchased American Sporting Goods Corporation, comprised of Avia, Nevados, Ryka, AND 1, and other businesses, on February 17, 2011 and subsequently sold AND 1 during fiscal 2011. The Avia and Nevados businesses were sold under the Stock Purchase Agreement and the Company retained and is operating Ryka and other businesses. In this document, “ASG” refers to the subsidiary disposed on May 14, 2013, including the Avia and Nevados brands and excluding the Ryka brand and other retained businesses.
adjustments. The Company received $60.3$4.4 million in cash and a promissory$7.5 million face value secured convertible note of $12.0 million("convertible note") at closing, from the sale of stock, the sale of inventory and forother assets, and the provision of transitiontransitional services, less working capital adjustments. The promissoryconvertible note matured on November 14, 2013. In accordancerequires installments over four years with the termsfirst payment of $1.25 million due on July 1, 2017 and quarterly installments of $0.6 million thereafter, plus accrued interest, until it matures on December 12, 2019. Interest accrues at an annual rate of 6% until December 11, 2016, 7% until December 11, 2017, 8% until December 11, 2018, and 9% until the maturity date. The principal and outstanding accrued interest is convertible into common stock of the promissory note,Purchaser at a conversion price of CAD 21.50 per share, at the Company receivedCompany's option, or automatically upon a payment of $12.2 million on November 14, 2013, representingqualified initial public offering ("IPO") by the note principal and accrued interest.
In anticipation ofPurchaser at the sale of ASG, the Company recorded an impairment charge in the first quarter of 2013 of $12.6 million ($12.6 million after-tax, $0.30 per diluted share), representing the difference in theIPO price. The fair value less costs to sell as compared to the carrying value of the net assets to be sold. During the second quarterconvertible note of 2013, the Company recognized a gain upon disposition of subsidiary of $1.0$7.0 million ($1.0 million after-tax, $0.02 per diluted share). The impairment charge and gain upon disposition are reflected as disposition/impairment of discontinued operations, net of tax in the condensed consolidated statements of earnings. ASG was previouslyat May 2, 2015 is included in the Wholesale Operations segment. Discontinued operations include net sales of zero and $20.3 million for the thirteen and thirty-nine weeks ended November 2, 2013, respectively. Discontinued operations include a loss before income taxes of $0.1 million and $1.5 million for the thirteen and thirty-nine weeks ended November 2, 2013, respectively.
Etienne Aigner
During the second quarter of 2012, the Company terminated the Etienne Aigner license agreement due to a dispute with the licensor. On April 29, 2013, an agreement to resolve the dispute was reached, pursuant to which the Company agreed to pay Etienne Aigner $6.5 million. The financial results of Etienne Aigner and the $6.5 million settlement are reflected as a component of discontinued operations. The results of Etienne Aigner were previously included in the Wholesale Operations segment. Discontinued operations include net sales of zero and $0.4 million for the thirteen and thirty-nine weeks ended November 2, 2013, respectively. Discontinued operations include a loss before income taxes of zero and $6.9 million for the thirteen and thirty-nine weeks ended November 2, 2013, respectively.
Vera Wang
During the first quarter of 2013, the Company communicated its intention not to renew the Vera Wang license agreement. The financial results of Vera Wang are reflected as a component of discontinued operations. The results of Vera Wang were previously included in the Wholesale Operations segment. Discontinued operations include net sales of $1.2 million and $4.8 million for the thirteen and thirty-nine weeks ended November 2, 2013, respectively. Discontinued operations include earnings before income taxes of $0.4 million and a loss before income taxes of $2.4 million for the thirteen and thirty-nine weeks ended November 2, 2013, respectively.
The detail of ASG, Etienne Aigner, and Vera Wangother assets and liabilities reported as discontinued operations inon the condensed consolidated balance sheets is as follows:sheets.
|
| | | | | | | | | |
($ thousands) | November 1, 2014 |
| November 2, 2013 |
| February 1, 2014 |
|
| | | |
Assets of Discontinued Operations | |
| |
| |
|
Current assets | |
| |
| |
|
Receivables, net | $ | — |
| $ | 73 |
| $ | — |
|
Inventories, net | — |
| 75 |
| 111 |
|
Prepaid expenses and other current assets | — |
| 33 |
| 8 |
|
Current assets - discontinued operations | — |
| 181 |
| 119 |
|
Total assets - discontinued operations | $ | — |
| $ | 181 |
| $ | 119 |
|
| | | |
Liabilities of Discontinued Operations | |
| |
| |
|
Current liabilities | |
| |
| |
|
Trade accounts payable | $ | — |
| $ | 178 |
| $ | 139 |
|
Other accrued expenses | — |
| 1,932 |
| 569 |
|
Current liabilities - discontinued operations | — |
| 2,110 |
| 708 |
|
Total liabilities - discontinued operations | $ | — |
| $ | 2,110 |
| $ | 708 |
|
The operating results of Shoes.com were included in the Famous Footwear segment in continuing operations through December 12, 2014. The operations of Shoes.com were not significant to the Famous Footwear segment or the Company's financial results. In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which the Company adopted during the third quarter of 2014, the financial position and operating results of Shoes.com have not been classified as a discontinued operation as the disposition did not represent a strategic shift resulting in a major impact on the Company's operations or financial results.
Earnings (loss) from discontinued operations, net of tax for the thirteen and thirty-nine weeks ended November 1, 2014 and November 2, 2013 is as follows:
|
| | | | | | | | | | | | |
| Thirteen Weeks Ended | Thirty-nine Weeks Ended |
($ thousands) | November 1, 2014 |
| November 2, 2013 |
| November 1, 2014 |
| November 2, 2013 |
|
Net sales | $ | — |
| $ | 1,171 |
| $ | — |
| $ | 25,482 |
|
Cost of goods sold | — |
| 748 |
| — |
| 19,599 |
|
Gross profit | — |
| 423 |
| — |
| 5,883 |
|
Selling and administrative expenses | — |
| 60 |
| — |
| 5,942 |
|
Restructuring and other special charges, net | — |
| — |
| — |
| 10,768 |
|
Operating earnings (loss) | — |
| 363 |
| — |
| (10,827 | ) |
Interest expense | — |
| (16 | ) | — |
| (14 | ) |
Earnings (loss) before income taxes from discontinued operations | — |
| 347 |
| — |
| (10,841 | ) |
Income tax (provision) benefit | — |
| (114 | ) | — |
| 6,057 |
|
Earnings (loss) from discontinued operations, net of tax | — |
| 233 |
| — |
| (4,784 | ) |
Disposition/impairment of discontinued operations, net of tax | — |
| — |
| — |
| (11,512 | ) |
Net earnings (loss) from discontinued operations | $ | — |
| $ | 233 |
| $ | — |
| $ | (16,296 | ) |
|
| |
Note 4 | Earnings (Loss) Per Share |
The Company uses the two-class method to compute basic and diluted earnings (loss) per common share attributable to Brown Shoe Company,Caleres, Inc. shareholders. In periods of net loss, no effect is given to the Company’s participating securities since they do not contractually participate in the losses of the Company. The following table sets forth the computation of basic and diluted earnings (loss) per common share attributable to Brown Shoe Company,Caleres, Inc. shareholders for the periods ended November 1, 2014May 2, 2015 and November 2, 2013:May 3, 2014:
|
| | | | | | | | | | | | |
| Thirteen Weeks Ended | Thirty-nine Weeks Ended |
($ thousands, except per share amounts) | November 1, 2014 |
| November 2, 2013 |
| November 1, 2014 |
| November 2, 2013 |
|
NUMERATOR | |
| |
| |
| |
|
Net earnings from continuing operations | $ | 33,237 |
| $ | 27,051 |
| $ | 66,752 |
| $ | 48,031 |
|
Net (earnings) loss attributable to noncontrolling interests | (124 | ) | 30 |
| (146 | ) | 174 |
|
Net earnings allocated to participating securities | (1,208 | ) | (1,097 | ) | (2,486 | ) | (2,098 | ) |
Net earnings from continuing operations | 31,905 |
| 25,984 |
| 64,120 |
| 46,107 |
|
Net earnings (loss) from discontinued operations | — |
| 233 |
| — |
| (16,296 | ) |
Net (earnings) loss allocated to participating securities | — |
| (9 | ) | — |
| 712 |
|
Net earnings (loss) from discontinued operations | — |
| 224 |
| — |
| (15,584 | ) |
Net earnings attributable to Brown Shoe Company, Inc. after allocation of earnings to participating securities | $ | 31,905 |
| $ | 26,208 |
| $ | 64,120 |
| $ | 30,523 |
|
| | | | |
DENOMINATOR | |
| |
| |
| |
|
Denominator for basic continuing and discontinued earnings per common share attributable to Brown Shoe Company, Inc. shareholders | 42,144 |
| 41,447 |
| 42,035 |
| 41,288 |
|
Dilutive effect of share-based awards for continuing operations and discontinued operations | 184 |
| 319 |
| 210 |
| 283 |
|
Denominator for diluted continuing and discontinued earnings per common share attributable to Brown Shoe Company, Inc. shareholders | 42,328 |
| 41,766 |
| 42,245 |
| 41,571 |
|
| | | | |
Basic earnings (loss) per common share: | |
| |
| |
| |
|
From continuing operations | $ | 0.76 |
| $ | 0.63 |
| $ | 1.53 |
| $ | 1.12 |
|
From discontinued operations | — |
| — |
| — |
| (0.38 | ) |
Basic earnings per common share attributable to Brown Shoe Company, Inc. shareholders | $ | 0.76 |
| $ | 0.63 |
| $ | 1.53 |
| $ | 0.74 |
|
| | | | |
Diluted earnings (loss) per common share: | |
| |
| |
| |
|
From continuing operations | $ | 0.75 |
| $ | 0.62 |
| $ | 1.52 |
| $ | 1.11 |
|
From discontinued operations | — |
| 0.01 |
| — |
| (0.38 | ) |
Diluted earnings per common share attributable to Brown Shoe Company, Inc. shareholders | $ | 0.75 |
| $ | 0.63 |
| $ | 1.52 |
| $ | 0.73 |
|
|
| | | | | | |
| Thirteen Weeks Ended |
($ thousands, except per share amounts) | May 2, 2015 |
| May 3, 2014 |
|
NUMERATOR | |
| |
|
Net earnings | $ | 19,391 |
| $ | 15,476 |
|
Net earnings attributable to noncontrolling interests | (130 | ) | (47 | ) |
Net earnings allocated to participating securities | (654 | ) | (592 | ) |
Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities | $ | 18,607 |
| $ | 14,837 |
|
| | |
DENOMINATOR | |
| |
|
Denominator for basic earnings per common share attributable to Caleres, Inc. shareholders | 42,313 |
| 41,887 |
|
Dilutive effect of share-based awards | 145 |
| 229 |
|
Denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders | 42,458 |
| 42,116 |
|
| | |
Basic earnings per common share attributable to Caleres, Inc. shareholders | $ | 0.44 |
| $ | 0.35 |
|
| | |
Diluted earnings per common share attributable to Caleres, Inc. shareholders | $ | 0.44 |
| $ | 0.35 |
|
Options to purchase 64,49762,997 and 86,24774,997 shares of common stock for the thirteen weeks ended November 1,May 2, 2015 and May 3, 2014, and November 2, 2013, respectively, and 64,497 and 214,403 shares of common stock for the thirty-nine weeks ended November 1, 2014 and November 2, 2013, respectively, were not included in the denominator for diluted earnings per common share attributable to Brown Shoe Company,Caleres, Inc. shareholders because the effect would be anti-dilutive.
|
| |
Note 5 | Restructuring and Other Initiatives |
Portfolio Realignment
The Company's portfolio realignment efforts includeincluded the sale of ASG;American Sporting Goods Corporation; the sale of the AND 1 division; exiting certain women’swomen's specialty and private label brands; exiting the children’schildren's wholesale business; the sale and closure of sourcing and supply chain assets; closing or relocating numerous underperforming or poorly aligned retail stores; the termination of the Etienne Aigner license agreement; the election not to renew the Vera Wang license in accordance with agreement terms; and other infrastructure changes. These portfolio realignment efforts began in 2011 and are complete.were completed in 2013.
During the thirteen and thirty-nine weeks ended November 1, 2014, the Company incurred no expenses for portfolio realignment initiatives. The followingFollowing is a summary of the Company’s portfolio realignment expense for our continuing and discontinued operations for the thirteen and thirty-nine weeks ended November 2, 2013:
|
| | | | | | | | | | | | | | | | | | |
| Thirteen Weeks Ended | Thirty-nine Weeks Ended |
($ millions, except per share data) | Pre-tax Expense |
| After-tax Expense |
| Loss Per Diluted Share |
| Pre-tax Expense |
| After-tax Expense |
| Loss Per Diluted Share |
|
November 2, 2013 | |
| |
| |
| |
| |
| |
|
Continuing Operations | |
| |
| |
| |
| |
| |
|
Business exits and cost reductions | $ | — |
| $ | — |
| $ | — |
| $ | 1.2 |
| $ | 0.8 |
| $ | 0.02 |
|
Non-cash impairments/dispositions | — |
| — |
| — |
| 4.7 |
| 4.7 |
| 0.11 |
|
Total Continuing Operations | — |
| — |
| — |
| 5.9 |
| 5.5 |
| 0.13 |
|
Discontinued Operations | |
| |
| |
| |
| |
| |
|
Business exits and cost reductions | — |
| — |
| — |
| 13.3 |
| 6.4 |
| 0.13 |
|
Non-cash impairments/dispositions | — |
| — |
| — |
| 11.5 |
| 11.5 |
| 0.28 |
|
Total Discontinued Operations | — |
| — |
| — |
| 24.8 |
| 17.9 |
| 0.41 |
|
Total | $ | — |
| $ | — |
| $ | — |
| $ | 30.7 |
| $ | 23.4 |
| $ | 0.54 |
|
All of the continuing operations portfolio realignment costs incurred during the thirty-nine weeks ended November 2, 2013 are included in the Wholesale Operations segment. The expenses related to business exits and cost reductions of the Company’s continuing operations were recorded within restructuring and other special charges, net in the condensed consolidated statements of earnings. The expenses related to business exits and cost reductions of the Company’s discontinued operations were recorded within earnings (loss) from discontinued operations, net of tax, in the condensed consolidated statements of earnings. The non-cash impairments/dispositions of the Company’s continuing operations were recorded within impairment of assets held for sale in the condensed consolidated statements of earnings. The non-cash impairments/dispositions of the Company’s discontinued operations were recorded within disposition/impairment of discontinued operations, net of tax in the condensed consolidated statements of earnings. The non-cash impairments/dispositions are included in Other in the following table.
The following is a summary of the charges and settlements by category of costs. The Company expects all portfolio realignment costs to be settled by the end of fiscal 2016.
|
| | | | | | | | | |
($ millions) | Employee |
| Facility |
| Total |
|
Reserve balance at February 1, 2014 | $ | 1.0 |
| $ | 1.4 |
| $ | 2.4 |
|
Amounts settled in first quarter 2014 | (0.4 | ) | (0.1 | ) | (0.5 | ) |
Reserve balance at May 3, 2014 | $ | 0.6 |
| $ | 1.3 |
| $ | 1.9 |
|
Additional settlements in 2014 | (0.5 | ) | (0.3 | ) | (0.8 | ) |
Reserve balance at January 31, 2015 | $ | 0.1 |
| $ | 1.0 |
| $ | 1.1 |
|
Amounts settled in first quarter 2015 | (0.1 | ) | (0.1 | ) | (0.2 | ) |
Reserve balance at May 2, 2015 | $ | — |
| $ | 0.9 |
| $ | 0.9 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | Total by Classification |
($ millions) | Employee | Markdowns and Royalty Shortfalls | Facility | Other | Total | Continuing Operations | Discontinued Operations |
Reserve balance at February 2, 2013 | $ | 1.7 |
| $ | 0.2 |
| $ | 3.3 |
| $ | 0.3 |
| $ | 5.5 |
| $ | 5.3 |
| $ | 0.2 |
|
Additional charges in 2013 | 2.6 |
| 2.7 |
| 0.1 |
| 25.3 |
| 30.7 |
| 5.9 |
| 24.8 |
|
Amounts settled in 2013 | (3.3 | ) | (2.9 | ) | (2.0 | ) | (25.6 | ) | (33.8 | ) | (9.7 | ) | (24.1 | ) |
Reserve balance at February 1, 2014 | $ | 1.0 |
| $ | — |
| $ | 1.4 |
| $ | — |
| $ | 2.4 |
| $ | 1.5 |
| $ | 0.9 |
|
Amounts settled in first quarter 2014 | (0.4 | ) | — |
| (0.1 | ) | — |
| (0.5 | ) | (0.1 | ) | (0.4 | ) |
Reserve balance at May 3, 2014 | $ | 0.6 |
| $ | — |
| $ | 1.3 |
| $ | — |
| $ | 1.9 |
| $ | 1.4 |
| $ | 0.5 |
|
Amounts settled in second quarter 2014 | (0.4 | ) | — |
| (0.1 | ) | — |
| (0.5 | ) | — |
| (0.5 | ) |
Reserve balance at August 2, 2014 | $ | 0.2 |
| $ | — |
| $ | 1.2 |
| $ | — |
| $ | 1.4 |
| $ | 1.4 |
| $ | — |
|
Amounts settled in third quarter 2014 | (0.1 | ) | — |
| (0.1 | ) | — |
| (0.2 | ) | (0.2 | ) | — |
|
Reserve balance at November 1, 2014 | $ | 0.1 |
| $ | — |
| $ | 1.1 |
| $ | — |
| $ | 1.2 |
| $ | 1.2 |
| $ | — |
|
Sale of Sourcing and Supply Chain Assets
As part of its portfolio realignment efforts, the Company entered into an agreement to sell certain of its supply chain and sourcing assets (“Sale Agreement”) on April 30, 2013 for $9.0 million, including $1.5 million in cash and a $7.5 million promissory note, subject to working capital adjustments. The sale closed during the second quarter of 2013. In anticipation of this transaction, the Company classified the related assets and liabilities of the supply chain and sourcing assets as held for sale as of May 4, 2013 on the condensed consolidated balance sheet and recognized an impairment charge in the first quarter of 2013 of $4.7 million ($4.7 million after tax, or $0.11 per diluted share) to adjust the assets to their estimated fair value. The promissory note required installments over two years with the first payment of $3.0 million due no later than 45 days from the closing date and the remaining balance payable in eight quarterly payments of $0.6 million, subject to working capital adjustments, plus accrued interest of 5%, compounded monthly, starting no later than three months after the closing date. In accordance with the terms of the promissory note, as of November 1, 2014 the Company has received a total of $5.7 million of installment payments. As part of the Sale Agreement, the Company agreed to purchase, under specific performance criteria, a minimum of four million pairs of shoes each year for two years following the closing date at market pricing, which can be fulfilled from a group of facilities owned by the purchaser.
|
| |
Note 6 | Business Segment Information |
During the fourth quarter of 2014, following the sale of Shoes.com, the Company revised its reportable segments. This change reflects the Company's omni-channel approach to managing its branded footwear business across all distribution channels.
Following is a summary of certain key financial measures for the Company’s business segments for the periods ended November 1, 2014May 2, 2015 and November 2, 2013. All financial measures below exclude discontinued operations.May 3, 2014.
| | | Famous | Wholesale | Specialty | | Famous Footwear | Brand Portfolio | |
($ thousands) | Footwear | Operations | Retail | Other | Total | Other | Total |
Thirteen Weeks Ended November 1, 2014 | |
Thirteen Weeks Ended May 2, 2015 | | Thirteen Weeks Ended May 2, 2015 |
External sales | $ | 435,380 |
| $ | 242,562 |
| $ | 51,335 |
| $ | — |
| $ | 729,277 |
| $ | 360,020 |
| $ | 242,263 |
| $ | — |
| $ | 602,283 |
|
Intersegment sales | 552 |
| 39,852 |
| — |
| — |
| 40,404 |
| — |
| 17,326 |
| — |
| 17,326 |
|
Operating earnings (loss) | 37,554 |
| 27,848 |
| (355 | ) | (11,834 | ) | 53,213 |
| 27,960 |
| 11,060 |
| (8,684 | ) | 30,336 |
|
Segment assets - continuing operations | 529,608 |
| 479,855 |
| 57,806 |
| 142,591 |
| 1,209,860 |
| |
Segment assets | | 486,585 |
| 450,600 |
| 226,489 |
| 1,163,674 |
|
| | |
Thirteen Weeks Ended November 2, 2013 | |
Thirteen Weeks Ended May 3, 2014 | | Thirteen Weeks Ended May 3, 2014 |
External sales | $ | 439,605 |
| $ | 205,269 |
| $ | 57,914 |
| $ | — |
| $ | 702,788 |
| $ | 366,726 |
| $ | 224,436 |
| $ | — |
| $ | 591,162 |
|
Intersegment sales | 543 |
| 51,343 |
| — |
| — |
| 51,886 |
| — |
| 20,550 |
| — |
| 20,550 |
|
Operating earnings (loss) | 37,047 |
| 16,782 |
| 221 |
| (9,382 | ) | 44,668 |
| 26,730 |
| 11,203 |
| (9,207 | ) | 28,726 |
|
Segment assets - continuing operations | 485,217 |
| 379,249 |
| 93,747 |
| 128,517 |
| 1,086,730 |
| |
| | |
Thirty-nine Weeks Ended November 1, 2014 | |
External sales | $ | 1,183,633 |
| $ | 628,616 |
| $ | 144,067 |
| $ | — |
| $ | 1,956,316 |
| |
Intersegment sales | 1,611 |
| 125,110 |
| — |
| — |
| 126,721 |
| |
Operating earnings (loss) | 91,983 |
| 60,851 |
| (6,833 | ) | (32,760 | ) | 113,241 |
| |
| | |
Thirty-nine Weeks Ended November 2, 2013 | |
External sales | $ | 1,180,143 |
| $ | 567,334 |
| $ | 165,673 |
| $ | — |
| $ | 1,913,150 |
| |
Intersegment sales | 1,753 |
| 152,276 |
| — |
| — |
| 154,029 |
| |
Operating earnings (loss) | 95,057 |
| 28,085 |
| (2,934 | ) | (31,770 | ) | 88,438 |
| |
Segment assets | | 515,852 |
| 459,304 |
| 133,806 |
| 1,108,962 |
|
The Other category includes corporate assets, administrative expenses and other costs and recoveries, which are not allocated to the operating segments.
Following is a reconciliation of operating earnings to earnings before income taxes from continuing operations:taxes:
| | | Thirteen Weeks Ended | Thirty-nine Weeks Ended | Thirteen Weeks Ended |
($ thousands) | November 1, 2014 |
| November 2, 2013 |
| November 1, 2014 |
| November 2, 2013 |
| May 2, 2015 |
| May 3, 2014 |
|
Operating earnings | $ | 53,213 |
| $ | 44,668 |
| $ | 113,241 |
| $ | 88,438 |
| $ | 30,336 |
| $ | 28,726 |
|
Interest expense | (5,207 | ) | (5,254 | ) | (15,637 | ) | (16,167 | ) | (4,463 | ) | (5,306 | ) |
Interest income | 109 |
| 132 |
| 294 |
| 282 |
| 304 |
| 76 |
|
Earnings before income taxes from continuing operations | $ | 48,115 |
| $ | 39,546 |
| $ | 97,898 |
| $ | 72,553 |
| |
Earnings before income taxes | | $ | 26,177 |
| $ | 23,496 |
|
|
| |
Note 7 | Goodwill and Intangible Assets |
Goodwill and intangible assets were attributable to the Company's operating segments as follows:
| | ($ thousands) | November 1, 2014 |
| November 2, 2013 |
| February 1, 2014 |
| May 2, 2015 |
| May 3, 2014 |
| January 31, 2015 |
|
Intangible Assets | |
| |
| |
| |
| |
| |
|
Famous Footwear | $ | 2,800 |
| $ | 2,800 |
| $ | 2,800 |
| $ | 2,800 |
| $ | 3,000 |
| $ | 2,800 |
|
Wholesale Operations | 183,068 |
| 118,003 |
| 118,003 |
| |
Specialty Retail | 200 |
| 200 |
| 200 |
| |
Brand Portfolio | | 183,068 |
| 183,068 |
| 183,068 |
|
Total intangible assets | 186,068 |
| 121,003 |
| 121,003 |
| 185,868 |
| 186,068 |
| 185,868 |
|
Accumulated amortization | (64,248 | ) | (59,776 | ) | (61,284 | ) | (66,165 | ) | (62,272 | ) | (65,235 | ) |
Total intangible assets, net | 121,820 |
| 61,227 |
| 59,719 |
| 119,703 |
| 123,796 |
| 120,633 |
|
Goodwill | |
| |
| |
| |
| |
| |
|
Wholesale Operations | 13,954 |
| 13,954 |
| 13,954 |
| |
Brand Portfolio | | 13,954 |
| 13,954 |
| 13,954 |
|
Total goodwill | 13,954 |
| 13,954 |
| 13,954 |
| 13,954 |
| 13,954 |
| 13,954 |
|
Goodwill and intangible assets, net | $ | 135,774 |
| $ | 75,181 |
| $ | 73,673 |
| $ | 133,657 |
| $ | 137,750 |
| $ | 134,587 |
|
Intangible assets consist primarily of owned and licensed trademarks, of which $20.8 million as of May 2, 2015 and January 31, 2015 and $21.0 million as of whichMay 3, 2014, are not subject to amortization. The remaining intangible assets are subject to amortization with the remainder being amortized over
and have useful lives ranging from four15 to 40 years as of November 1, 2014.May 2, 2015. Amortization expense related to intangible assets was $1.0$0.9 million and $1.5$1.0 million for the thirteen weeks ended May 2, 2015 and $3.0 million and $4.5 million for the thirty-nine weeks ended November 1,May 3, 2014, and November 2, 2013, respectively.
On February 3, 2014, the Company entered into and simultaneously closed an Asset Purchase Agreement (the “Asset Purchase Agreement”), pursuant to which the Company acquired the Franco Sarto trademarks. As consideration, the Company paid a cash purchase price of $65.0 million at the time of closing. As a result of entering into and closing the Asset Purchase Agreement, the Company’s license agreement, granting the Company the right to sell footwear and other products using the Franco Sarto trademarks through 2019, was terminated. The purchase price of $65.0 million, as well as transaction costs of $0.1 million, will beare being amortized over its useful life of 40 years.
In December 2014, in conjunction with the disposition of Shoes.com as further described in Note 3 to the condensed consolidated financial statements, the Company sold intangible assets with a carrying value of $0.2 million. The intangible assets were previously included in the Famous Footwear segment.
|
| |
Note 8 | Shareholders’ Equity |
The following tables set forth the changes in Brown Shoe Company,Caleres, Inc. shareholders’ equity and noncontrolling interests for the thirty-ninethirteen weeks ended November 1,May 2, 2015 and May 3, 2014, and November 2, 2013, respectively:
| | | | | | | | | | |
($ thousands) | Brown Shoe Company, Inc. Shareholders’ Equity |
| Noncontrolling Interests |
| Total Equity |
| Caleres, Inc. Shareholders’ Equity |
| Noncontrolling Interests |
| Total Equity |
|
Equity at February 1, 2014 | $ | 476,699 |
| $ | 663 |
| $ | 477,362 |
| |
Equity at January 31, 2015 | | $ | 540,910 |
| $ | 712 |
| $ | 541,622 |
|
Net earnings | 66,606 |
| 146 |
| 66,752 |
| 19,261 |
| 130 |
| 19,391 |
|
Other comprehensive loss | (1,165 | ) | (46 | ) | (1,211 | ) | |
Other comprehensive income | | 960 |
| 4 |
| 964 |
|
Dividends paid | (9,173 | ) | — |
| (9,173 | ) | (3,073 | ) | — |
| (3,073 | ) |
Acquisition of treasury stock | | (4,921 | ) | — |
| (4,921 | ) |
Issuance of common stock under share-based plans, net | 237 |
| — |
| 237 |
| (3,751 | ) | — |
| (3,751 | ) |
Tax benefit related to share-based plans | 2,482 |
| — |
| 2,482 |
| 2,401 |
| — |
| 2,401 |
|
Share-based compensation expense | 4,568 |
| — |
| 4,568 |
| 1,687 |
| — |
| 1,687 |
|
Equity at November 1, 2014 | $ | 540,254 |
| $ | 763 |
| $ | 541,017 |
| |
Equity at May 2, 2015 | | $ | 553,474 |
| $ | 846 |
| $ | 554,320 |
|
| | | | | | | | | | |
($ thousands) | Brown Shoe Company, Inc. Shareholders’ Equity |
| Noncontrolling Interests |
| Total Equity |
| Caleres, Inc. Shareholders’ Equity |
| Noncontrolling Interests |
| Total Equity |
|
Equity at February 2, 2013 | $ | 425,129 |
| $ | 772 |
| $ | 425,901 |
| |
Net earnings (loss) | 31,909 |
| (174 | ) | 31,735 |
| |
Other comprehensive (loss) income | (905 | ) | 60 |
| (845 | ) | |
Equity at February 1, 2014 | | $ | 476,699 |
| $ | 663 |
| $ | 477,362 |
|
Net earnings | | 15,429 |
| 47 |
| 15,476 |
|
Other comprehensive income (loss) | | 477 |
| (12 | ) | 465 |
|
Dividends paid | (9,073 | ) | — |
| (9,073 | ) | (3,053 | ) | — |
| (3,053 | ) |
Issuance of common stock under share-based plans, net | (2,406 | ) | — |
| (2,406 | ) | (803 | ) | — |
| (803 | ) |
Tax benefit related to share-based plans | 2,581 |
| — |
| 2,581 |
| 1,769 |
| — |
| 1,769 |
|
Share-based compensation expense | 4,066 |
| — |
| 4,066 |
| 1,555 |
| — |
| 1,555 |
|
Equity at November 2, 2013 | $ | 451,301 |
| $ | 658 |
| $ | 451,959 |
| |
Equity at May 3, 2014 | | $ | 492,073 |
| $ | 698 |
| $ | 492,771 |
|
Accumulated Other Comprehensive Income (Loss)
The following table sets forth the changes in accumulated other comprehensive income (loss) by component for the thirteen and thirty-nine weeks ended November 1, 2014May 2, 2015 and November 2, 2013:
May 3, 2014:
|
| | | | | | | | | | | | |
| | | | |
($ thousands) | Foreign Currency Translation | Pension and Other Postretirement Transactions | Derivative Transactions | Accumulated Other Comprehensive Income (Loss) |
Balance August 2, 2014 | $ | 3,487 |
| $ | 13,526 |
| $ | (372 | ) | $ | 16,641 |
|
Other comprehensive (loss) income before reclassifications | (1,159 | ) | — |
| 80 |
| (1,079 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) | — |
| (28 | ) | (23 | ) | (51 | ) |
Other comprehensive (loss) income | (1,159 | ) | (28 | ) | 57 |
| (1,130 | ) |
Balance November 1, 2014 | $ | 2,328 |
| $ | 13,498 |
| $ | (315 | ) | $ | 15,511 |
|
| | | | |
Balance August 3, 2013 | $ | 5,322 |
| $ | (5,666 | ) | $ | 317 |
| $ | (27 | ) |
Other comprehensive (loss) income before reclassifications | (100 | ) | — |
| 79 |
| (21 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) | — |
| 138 |
| (111 | ) | 27 |
|
Other comprehensive (loss) income | (100 | ) | 138 |
| (32 | ) | 6 |
|
Balance November 2, 2013 | $ | 5,222 |
| $ | (5,528 | ) | $ | 285 |
| $ | (21 | ) |
| | | | |
Balance February 1, 2014 | $ | 2,356 |
| $ | 13,582 |
| $ | 738 |
| $ | 16,676 |
|
Other comprehensive (loss) income before reclassifications | (28 | ) | — |
| (1,014 | ) | (1,042 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) | — |
| (84 | ) | (39 | ) | (123 | ) |
Other comprehensive (loss) income | (28 | ) | (84 | ) | (1,053 | ) | (1,165 | ) |
Balance November 1, 2014 | $ | 2,328 |
| $ | 13,498 |
| $ | (315 | ) | $ | 15,511 |
|
| | | | |
Balance February 2, 2013 | $ | 6,912 |
| $ | (5,947 | ) | $ | (81 | ) | $ | 884 |
|
Other comprehensive (loss) income before reclassifications | (1,690 | ) | — |
| 714 |
| (976 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) | — |
| 419 |
| (348 | ) | 71 |
|
Other comprehensive (loss) income | (1,690 | ) | 419 |
| 366 |
| (905 | ) |
Balance November 2, 2013 | $ | 5,222 |
| $ | (5,528 | ) | $ | 285 |
| $ | (21 | ) |
|
| | | | | | | | | | | | |
| | | | |
($ thousands) | Foreign Currency Translation | Pension and Other Postretirement Transactions (1) | Derivative Financial Instrument Transactions (2) | Accumulated Other Comprehensive Income (Loss) |
Balance January 31, 2015 | $ | (745 | ) | $ | 3,233 |
| $ | 224 |
| $ | 2,712 |
|
Other comprehensive income (loss) before reclassifications, net of tax | 1,392 |
| — |
| (260 | ) | 1,132 |
|
Reclassifications: | | | | |
Amounts reclassified from accumulated other comprehensive income | — |
| (357 | ) | 71 |
| (286 | ) |
Tax provision (benefit) | — |
| 142 |
| (28 | ) | 114 |
|
Net reclassifications | — |
| (215 | ) | 43 |
| (172 | ) |
Other comprehensive income (loss) | 1,392 |
| (215 | ) | (217 | ) | 960 |
|
Balance May 2, 2015 | $ | 647 |
| $ | 3,018 |
| $ | 7 |
| $ | 3,672 |
|
| | | | |
Balance February 1, 2014 | $ | 2,356 |
| $ | 13,582 |
| $ | 738 |
| $ | 16,676 |
|
Other comprehensive income (loss) before reclassifications | 887 |
| — |
| (333 | ) | 554 |
|
Reclassifications: | | | | |
Amounts reclassified from accumulated other comprehensive income | — |
| (42 | ) | (78 | ) | (120 | ) |
Tax provision | — |
| 19 |
| 24 |
| 43 |
|
Net reclassifications | — |
| (23 | ) | (54 | ) | (77 | ) |
Other comprehensive income (loss) | 887 |
| (23 | ) | (387 | ) | 477 |
|
Balance May 3, 2014 | $ | 3,243 |
| $ | 13,559 |
| $ | 351 |
| $ | 17,153 |
|
The following table sets forth the reclassifications out of accumulated other comprehensive income (loss) and the related tax effect by component for the thirteen and thirty-nine weeks ended November 1, 2014 and November 2, 2013:
|
| | | | | | | | | | | | | | | | |
| Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) | |
| Thirteen Weeks Ended | | Thirty-nine Weeks Ended | Affected Line Item in the Condensed Consolidated Statements of Earnings |
($ thousands) | November 1, 2014 | | November 2, 2013 | | November 1, 2014 | | November 2, 2013 |
Net gains from derivative financial instruments (1) | $ | (30 | ) | | $ | (168 | ) | | $ | (53 | ) | | $ | (530 | ) | Costs of goods sold and selling and administrative expenses |
Tax provision | 7 |
| | 57 |
| | 14 |
| | 182 |
| Income tax provision |
Net gains from derivative financial instruments, net of tax | (23 | ) | | (111 | ) | | (39 | ) | | (348 | ) | |
|
|
| | | | | | | |
Pension and other postretirement benefits actuarial (gain) loss (2) | (58 | ) | | 216 |
| | (173 | ) | | 661 |
| Selling and administrative expenses |
Pension benefits prior service expense (2) | 7 |
| | 4 |
| | 21 |
| | 10 |
| Selling and administrative expenses |
Pension and other postretirement benefits adjustments | (51 | ) | | 220 |
| | (152 | ) | | 671 |
| |
Tax provision (benefit) | 23 |
| | (82 | ) | | 68 |
| | (252 | ) | Income tax provision |
Pension and other postretirement benefits adjustments, net of tax | (28 | ) | | 138 |
| | (84 | ) | | 419 |
| |
Amounts reclassified from accumulated other comprehensive income (loss) | $ | (51 | ) | | $ | 27 |
| | $ | (123 | ) | | $ | 71 |
| |
| |
(1) | Amounts reclassified are included in selling and administrative expenses. See Note 10 to the condensed consolidated financial statements for additional information related to pension and other postretirement benefits. |
| |
(1) (2) | Amounts reclassified are included in costs of goods sold and selling and administrative expenses. See Note 11 and 12 to the condensed consolidated financial statements for additional information related to derivative financial instruments. |
| |
(2)
| See Note 10 to the condensed consolidated financial statements for additional information related to pension and other postretirement benefits.
|
|
| |
Note 9 | Share-Based Compensation |
The Company recognized share-based compensation expense of $1.6$1.7 million and $1.1$1.6 million during the thirteen weeks ended May 2, 2015 and $4.6 million and $4.1 million during the thirty-nine weeks ended November 1,May 3, 2014, and November 2, 2013, respectively.
The Company issued 72,687344,679 and 452,125 shares of common stock during the thirteen weeks ended November 1,May 2, 2015 and May 3, 2014, respectively, for stock-based awards, stock options exercised and directors' fees. The Company issued 586,929 shares of common stock during the thirty-nine weeks ended November 1, 2014 for restricted stock grants, stock options exercised, and directors’ fees.
During the thirteen and thirty-nine weeks ended November 1,May 2, 2015 and May 3, 2014, the Company granted zero285,421 and 279,710270,910 restricted shares, respectively, to certain employees with a weighted-average grant date fair valuevalues of $28.17.$30.06 and $28.18, respectively. Of the 279,710285,421 restricted shares granted 277,910during the thirteen weeks ended May 2, 2015, 272,921 of the shares will vest in four years and share-based12,500 of the shares will vest in five years. Of the 270,910 restricted shares granted during the thirteen weeks ended May 3, 2014, 269,110 of the shares vest in four years and the remaining 1,800 restricted shares vested in one year. Share-based compensation expense will beis recognized on a straight-line basis over the four-year period. The remaining 1,800 restricted shares vest in one year.respective vesting periods. During the thirteen and thirty-nine weeks ended November 1,May 2, 2015 and May 3, 2014, the Company cancelled 4,500canceled 34,850 and 32,100zero shares of restricted stock awards, respectively, as a result of forfeitures.
During the thirteen and thirty-nine weeks ended November 1,May 2, 2015, the Company granted performance share awards for a targeted 177,921 shares with a weighted-average grant date fair value of $30.12. During the thirteen weeks ended May 3, 2014, the Company granted zero and 88,185 performance share awards for a targeted 88,185 units respectively, with a weighted-average grant date fair value of $28.18. Vesting of performance-based unitsawards is dependent upon the financial performance of the Company and the attainment of certain financial goals during the next three years. Performance share units are settled in cash based on the Company’s stock price upon payout. At the end of the vesting period, the employee will have earned an amount of shares or units between 0% and 200% of the targeted award, depending on the achievement of specified financial goals for the service period.
Compensation expense is being recognized based on the fair value of the award and the anticipated number of units to be awarded in accordance with the vesting schedule of the units over the three-year service period. The performance share units are settled in cash and their fair value is based on the unadjusted quoted market price for the Company’s common stock on each measurement date.
During the thirteen weeks ended May 2, 2015, the Company granted 16,667 stock options with a weighted-average grant date fair value of $29.18. Of the 16,667 stock options granted, 8,333 will vest in four years and 8,334 will vest in five years.
The Company also granted 847704 and 41,234910 restricted stock units to non-employee directors during the thirteen weeks ended May 2, 2015 and May 3, 2014, respectively, with weighted-average grant date fair values of $26.72$32.30 and $28.64, respectively, during the thirteen and thirty-nine weeks ended November 1, 2014.$26.63, respectively. All restricted stock units for dividend equivalents vested immediately and compensation expense was fully recognized during the thirteen weeks ended November 1,May 2, 2015 and May 3, 2014.
|
| |
Note 10 | Retirement and Other Benefit Plans |
The following tables set forth the components of net periodic benefit (income) cost for the Company, including domestic and Canadian plans:
| | | Pension Benefits | Other Postretirement Benefits | Pension Benefits | Other Postretirement Benefits |
| Thirteen Weeks Ended | Thirteen Weeks Ended |
($ thousands) | November 1, 2014 |
| November 2, 2013 |
| November 1, 2014 |
| November 2, 2013 |
| May 2, 2015 |
| May 3, 2014 |
| May 2, 2015 |
| May 3, 2014 |
|
Service cost | $ | 2,413 |
| $ | 2,583 |
| $ | — |
| $ | — |
| $ | 3,329 |
| $ | 2,587 |
| $ | — |
| $ | — |
|
Interest cost | 3,558 |
| 3,305 |
| 12 |
| 35 |
| 3,586 |
| 3,556 |
| 15 |
| 13 |
|
Expected return on assets | (6,190 | ) | (6,200 | ) | — |
| — |
| (7,655 | ) | (6,184 | ) | — |
| — |
|
Amortization of: | |
| |
| |
| |
| |
| |
| |
| |
|
Actuarial loss (gain) | 50 |
| 238 |
| (108 | ) | (20 | ) | 166 |
| 35 |
| (48 | ) | (85 | ) |
Prior service expense | 7 |
| 4 |
| — |
| — |
| |
Prior service (income) expense | | (475 | ) | 8 |
| — |
| — |
|
Total net periodic benefit (income) cost | $ | (162 | ) | $ | (70 | ) | $ | (96 | ) | $ | 15 |
| $ | (1,049 | ) | $ | 2 |
| $ | (33 | ) | $ | (72 | ) |
| | |
| Pension Benefits | Other Postretirement Benefits | |
| Thirty-nine Weeks Ended | |
($ thousands) | November 1, 2014 |
| November 2, 2013 |
| November 1, 2014 |
| November 2, 2013 |
| |
Service cost | $ | 7,239 |
| $ | 8,057 |
| $ | — |
| $ | — |
| |
Interest cost | 10,674 |
| 9,940 |
| 36 |
| 105 |
| |
Expected return on assets | (18,571 | ) | (18,576 | ) | — |
| — |
| |
Amortization of: | |
| |
| |
| |
| |
Actuarial loss (gain) | 152 |
| 723 |
| (325 | ) | (60 | ) | |
Prior service expense | 21 |
| 10 |
| — |
| — |
| |
Total net periodic benefit (income) cost | $ | (485 | ) | $ | 154 |
| $ | (289 | ) | $ | 45 |
| |
|
| |
Note 11 | Risk Management and Derivatives |
In the normal course of business, the Company’s financial results are impacted by currency rate movements in foreign currency denominated assets, liabilities and cash flows as it makes a portion of its purchases and sales in local currencies. The Company has established policies and business practices that are intended to mitigate a portion of the effect of these exposures. The Company uses derivative financial instruments, primarily forward contracts, to manage its currency exposures. These derivative instruments are viewed as risk management tools and are not used for trading or speculative purposes. Derivatives entered into by the Company are designated as cash flow hedges of forecasted foreign currency transactions.
Derivative financial instruments expose the Company to credit and market risk. The market risk associated with these instruments resulting from currency exchange movements is expected to offset the market risk of the underlying transactions being hedged. The Company does not believe there is a significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with major financial institutions and have varying maturities through October 2015.April 2016. Credit risk is managed through the continuous monitoring of exposures to such counterparties.
The Company’s hedging strategy principally uses foreign currency forward contracts as cash flow hedges, which are recorded in the condensed consolidated balance sheet at fair value, to offset a portion of the effects of exchange rate fluctuations. The Company’s cash flow exposures include anticipated foreign currency transactions, such as foreign currency denominated sales, costs, expenses, and intercompany charges, as well as collections and payments. The effective portion of gains and losses resulting from changes in the fair value of these hedge instruments are deferred in accumulated other comprehensive income (loss) and reclassified to earnings in the period that the hedged transaction is recognized in earnings. The Company performs a quarterly assessment of the effectiveness of the hedge relationship and measures and recognizes any hedge ineffectiveness in the condensed consolidated statement of earnings.
Hedge ineffectiveness is evaluated using the hypothetical derivative method. The amount of hedge ineffectiveness for the thirteen and thirty-nine weeks ended November 1,May 2, 2015 and May 3, 2014 and November 2, 2013 was not material.
As of November 1,May 2, 2015, May 3, 2014 November 2, 2013, and February 1, 2014,January 31, 2015, the Company had forward contracts maturing at various dates through OctoberApril 2016, May 2015 October 2014, and January 2015,2016, respectively. The contract notional amount represents the net amount of all purchase and sale contracts of a foreign currency.
| | | Contract Notional Amount | Contract Notional Amount |
(U.S. $ equivalent in thousands) | November 1, 2014 |
| November 2, 2013 |
| February 1, 2014 |
| May 2, 2015 |
| May 3, 2014 |
| January 31, 2015 |
|
Financial Instruments | | |
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars) | $ | 20,391 |
| $ | 18,024 |
| $ | 20,197 |
| $ | 17,635 |
| $ | 22,369 |
| $ | 19,633 |
|
Chinese yuan | 14,659 |
| 14,860 |
| 15,278 |
| 10,978 |
| 14,386 |
| 14,512 |
|
Euro | 14,583 |
| 8,729 |
| 11,270 |
| 16,449 |
| 14,284 |
| 16,152 |
|
Japanese yen | 1,505 |
| 1,657 |
| 1,586 |
| 1,483 |
| 1,625 |
| 1,523 |
|
New Taiwanese dollars | | 528 |
| 524 |
| 599 |
|
Other currencies | 1,540 |
| 1,372 |
| 1,345 |
| 932 |
| 794 |
| 970 |
|
Total financial instruments | $ | 52,678 |
| $ | 44,642 |
| $ | 49,676 |
| $ | 48,005 |
| $ | 53,982 |
| $ | 53,389 |
|
The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of November 1,May 2, 2015, May 3, 2014 November 2, 2013, and February 1, 2014January 31, 2015 are as follows:
|
| | | | | | | | | |
| Asset Derivatives | | Liability Derivatives |
($ thousands) | Balance Sheet Location | Fair Value |
| | Balance Sheet Location | Fair Value |
|
| | | | | |
Foreign exchange forward contracts: | |
| | | |
|
| | | | | |
November 1, 2014 | Prepaid expenses and other current assets | $ | 440 |
| | Other accrued expenses | $ | 923 |
|
November 2, 2013 | Prepaid expenses and other current assets | 417 |
| | Other accrued expenses | 184 |
|
February 1, 2014 | Prepaid expenses and other current assets | 1,056 |
| | Other accrued expenses | 222 |
|
|
| | | | | | | | | |
| Asset Derivatives | | Liability Derivatives |
($ thousands) | Balance Sheet Location | Fair Value |
| | Balance Sheet Location | Fair Value |
|
| | | | | |
Foreign exchange forward contracts: | |
| | | |
|
| | | | | |
May 2, 2015 | Prepaid expenses and other current assets | $ | 973 |
| | Other accrued expenses | $ | 1,032 |
|
May 3, 2014 | Prepaid expenses and other current assets | 446 |
| | Other accrued expenses | 364 |
|
January 31, 2015 | Prepaid expenses and other current assets | 1,863 |
| | Other accrued expenses | 1,784 |
|
For the thirteen and thirty-nine weeks ended November 1,May 2, 2015 and May 3, 2014, and November 2, 2013, the effect of derivative instruments in cash flow hedging relationships on the condensed consolidated statements of earnings was as follows:
| | | Thirteen Weeks Ended | Thirteen Weeks Ended |
($ thousands) | November 1, 2014 | November 2, 2013 | May 2, 2015 | May 3, 2014 |
| | |
Foreign exchange forward contracts: Income Statement Classification Gains (Losses) - Realized | Gain (Loss) Recognized in OCI on Derivatives |
| Gain (Loss) Reclassified from Accumulated OCI into Earnings |
| Gain (Loss)Recognized in OCI on Derivatives |
| Gain Reclassified from Accumulated OCI into Earnings |
| Gain (Loss) Recognized in OCI on Derivatives |
| Gain (Loss) Reclassified from Accumulated OCI into Earnings |
| (Loss) Gain Recognized in OCI on Derivatives |
| Gain Reclassified from Accumulated OCI into Earnings |
|
| | |
Net sales | $ | 114 |
| $ | 16 |
| $ | 161 |
| $ | 59 |
| $ | 25 |
| $ | 54 |
| $ | (7 | ) | $ | 13 |
|
Cost of goods sold | (388 | ) | 30 |
| (163 | ) | 24 |
| (201 | ) | (129 | ) | 19 |
| 53 |
|
Selling and administrative expenses | 268 |
| (16 | ) | 145 |
| 85 |
| (88 | ) | 4 |
| (456 | ) | 12 |
|
Interest expense | 5 |
| — |
| (3 | ) | — |
| (22 | ) | — |
| (11 | ) | — |
|
|
| | | | | | | | | | | | |
| Thirty-nine Weeks Ended | Thirty-nine Weeks Ended |
($ in thousands) | November 1, 2014 | November 2, 2013 |
| | | | |
Foreign exchange forward contracts: Income Statement Classification Gains (Losses) - Realized | Gain (Loss) Recognized in OCI on Derivatives |
| Gain Reclassified from Accumulated OCI into Earnings |
| Gain Recognized in OCI on Derivatives |
| Gain Reclassified from Accumulated OCI into Earnings |
|
| | | | |
Net sales | $ | 110 |
| $ | 32 |
| $ | 278 |
| $ | 207 |
|
Cost of goods sold | (1,145 | ) | 19 |
| 382 |
| 51 |
|
Selling and administrative expenses | (442 | ) | 2 |
| 354 |
| 272 |
|
Interest expense | (12 | ) | — |
| 8 |
| — |
|
All gains and losses currently included within accumulated other comprehensive income (loss) associated with the Company’s foreign exchange forward contracts are expected to be reclassified into net earnings within the next 12 months. Additional information
related to the Company’s derivative financial instruments are disclosed within Note 12 to the condensed consolidated financial statements.
|
| |
Note 12 | Fair Value Measurements |
Fair Value Hierarchy
FASB guidance on fair value measurements and disclosures specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (“observable inputs”) or reflect the Company’s own assumptions of market participant valuation (“unobservable inputs”). In accordance with the fair value guidance, the hierarchy is broken down into three levels based on the reliability of the inputs as follows:
Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly;
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.risk. Classification of the financial or non-financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Measurement of Fair Value
The Company measures fair value as an exit price, the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date, using the procedures described below for all financial and non-financial assets and liabilities measured at fair value.
Money Market Funds
The Company has cash equivalents consisting of short-term money market funds backed by U.S. Treasury securities. The primary objective of these investing activities is to preserve the Company’s capital for the purpose of funding operations. The Company does not enter into money market funds for trading or speculative purposes. The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1).
Deferred Compensation Plan Assets and Liabilities
The Company maintains a non-qualified deferred compensation plan (the “Deferred Compensation Plan”) for the benefit of certain management employees. The investment funds offered to the participant generally correspond to the funds offered in the Company’s 401(k) plan, and the account balance fluctuates with the investment returns on those funds. The Deferred Compensation Plan permits the deferral of up to 50% of base salary and 100% of compensation received under the Company’s annual incentive plan. The deferrals are held in a separate trust, which has been established by the Company to administer the Deferred Compensation Plan. The assets of the trust are subject to the claims of the Company’s creditors in the event that the Company becomes insolvent. Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e., a “Rabbi Trust”). The liabilities of the Deferred Compensation Plan are presented in other accrued expenses and the assets held by the trust are classified as trading securities within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets. Changes in deferred compensation plan assets and liabilities are charged to selling and administrative expenses. The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1).
Deferred Compensation Plan for Non-Employee Directors
Non-employee directors are eligible to participate in a deferred compensation plan with deferred amounts valued as if invested in the Company’s common stock through the use of phantom stock units (“PSUs”). Under the plan, each participating director’s account is credited with the number of PSUs that is equal to the number of shares of the Company’s common stock which the participant could purchase or receive with the amount of the deferred compensation, based upon the average of the high and low prices of the Company’s common stock on the last trading day of the fiscal quarter when the cash compensation was earned. Dividend equivalents are paid on PSUs at the same rate as dividends on the Company’s common stock and are re-invested in additional PSUs at the next fiscal quarter-end. The liabilities of the plan are based on the fair value of the outstanding PSUs and
are presented in other liabilities in the accompanying condensed consolidated balance sheets. Gains and losses resulting from changes in the fair value of the PSUs are presented in selling and administrative expenses in the Company’s condensed consolidated statement of earnings. The fair value of each PSU is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1).
Restricted Stock Units for Non-Employee Directors
Under the Company’s incentive compensation plans, cash-equivalent restricted stock units (“RSUs”) of the Company may be granted at no cost to non-employee directors. The RSUs are subject to a vesting requirement (usually one year), earn dividend-equivalent units, and are settled in cash on the date the director terminates service or such earlier date as a director may elect, subject to restrictions, based on the then current fair value of the Company’s common stock. The fair value of each RSU is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1). Additional information related to restricted stock units for non-employee directors is disclosed in Note 9 to the condensed consolidated financial statements.
Performance Share Units
Under the Company’s incentive compensation plans, common stock or cash may be awarded at the end of the performance period at no cost to certain officers and key employees if certain financial goals are met. Under the plan, employees are granted performance share awards at a target number of shares or units, which generally vest over a three-year service period. At the end of the vesting period, the employee will have earned an amount of shares or units between 0% and 200% of the targeted award, depending on the achievement of specified financial goals for the service period. Each of the Company’s current unvested performance share awards utilize performance share units, which are settled in cash, rather than common stock. The fair value of each performance share unit is based on an unadjusted quoted market price of the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1). Additional information related to performance share units is disclosed in Note 9 to the condensed consolidated financial statements.
Derivative Financial Instruments
The Company uses derivative financial instruments, primarily foreign exchange contracts, to reduce its exposure to market risks from changes in foreign exchange rates. These foreign exchange contracts are measured at fair value using quoted forward foreign exchange prices from counterparties corroborated by market-based pricing (Level 2). Additional information related to the Company’s derivative financial instruments areis disclosed within Note 11 to the condensed consolidated financial statements.
Secured Convertible Note
The Company received a secured convertible note as partial consideration for the disposition of Shoes.com, as further described in Note 3 to the condensed consolidated financial statements. The convertible note is measured at fair value using unobservable inputs (Level 3). The change in fair value during the thirteen weeks ended May 2, 2015 reflects an immaterial amount of interest income.
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at November 1,May 2, 2015, May 3, 2014 November 2, 2013, and February 1, 2014.January 31, 2015. The Company did not have any transfers between Level 1 and Level 2 during 20132014 or the thirty-ninethirteen weeks ended November 1, 2014.May 2, 2015.
| | | |
| Fair Value Measurements | |
| | Fair Value Measurements |
($ thousands) | Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| | Level 1 |
| Level 2 |
| Level 3 |
|
Asset (Liability) | |
| |
| |
| |
| |
| | |
| |
| |
|
As of November 1, 2014: | | |
As of May 2, 2015: | | | | |
Cash equivalents – money market funds | $ | 7,463 |
| $ | 7,463 |
| $ | — |
| $ | — |
| $ | 50,602 |
| | $ | 50,602 |
| $ | — |
| $ | — |
|
Non-qualified deferred compensation plan assets | 2,849 |
| 2,849 |
| — |
| — |
| 3,795 |
| | 3,795 |
| — |
| — |
|
Non-qualified deferred compensation plan liabilities | (2,849 | ) | (2,849 | ) | — |
| — |
| (3,795 | ) | | (3,795 | ) | — |
| — |
|
Deferred compensation plan liabilities for non-employee directors | (1,923 | ) | (1,923 | ) | — |
| — |
| (2,200 | ) | | (2,200 | ) | — |
| — |
|
Restricted stock units for non-employee directors | (8,019 | ) | (8,019 | ) | — |
| — |
| (9,683 | ) | | (9,683 | ) | — |
| — |
|
Performance share units | (1,240 | ) | (1,240 | ) | — |
| — |
| (2,526 | ) | | (2,526 | ) | — |
| — |
|
Derivative financial instruments, net | (483 | ) | — |
| (483 | ) | — |
| (59 | ) | | — |
| (59 | ) | — |
|
As of November 2, 2013: | | |
Secured convertible note | | 7,049 |
| | — |
| — |
| 7,049 |
|
As of May 3, 2014: | | | | |
Cash equivalents – money market funds | $ | 4,472 |
| $ | 4,472 |
| $ | — |
| $ | — |
| $ | 24 |
| | $ | 24 |
| $ | — |
| $ | — |
|
Non-qualified deferred compensation plan assets | 2,081 |
| 2,081 |
| — |
| — |
| 2,687 |
| | 2,687 |
| — |
| — |
|
Non-qualified deferred compensation plan liabilities | (2,081 | ) | (2,081 | ) | — |
| — |
| (2,687 | ) | | (2,687 | ) | — |
| — |
|
Deferred compensation plan liabilities for non-employee directors | (1,565 | ) | (1,565 | ) | — |
| — |
| (1,697 | ) | | (1,697 | ) | — |
| — |
|
Restricted stock units for non-employee directors | (7,068 | ) | (7,068 | ) | — |
| — |
| (8,182 | ) | | (8,182 | ) | — |
| — |
|
Performance share units | (1,868 | ) | (1,868 | ) | — |
| — |
| (507 | ) | | (507 | ) | — |
| — |
|
Derivative financial instruments, net | 233 |
| — |
| 233 |
| — |
| 82 |
| | — |
| 82 |
| — |
|
As of February 1, 2014: | | |
As of January 31, 2015: | | | | |
Cash equivalents – money market funds | $ | 41,236 |
| $ | 41,236 |
| $ | — |
| $ | — |
| $ | 35,533 |
| | $ | 35,533 |
| $ | — |
| $ | — |
|
Non-qualified deferred compensation plan assets | 2,191 |
| 2,191 |
| — |
| — |
| 2,904 |
| | 2,904 |
| — |
| — |
|
Non-qualified deferred compensation plan liabilities | (2,191 | ) | (2,191 | ) | — |
| — |
| (2,904 | ) | | (2,904 | ) | — |
| — |
|
Deferred compensation plan liabilities for non-employee directors | (1,668 | ) | (1,668 | ) | — |
| — |
| (2,066 | ) | | (2,066 | ) | — |
| — |
|
Restricted stock units for non-employee directors | (7,769 | ) | (7,769 | ) | — |
| — |
| (8,857 | ) | | (8,857 | ) | — |
| — |
|
Performance share units | (2,300 | ) | (2,300 | ) | — |
| — |
| (5,147 | ) | | (5,147 | ) | — |
| — |
|
Derivative financial instruments, net | 834 |
| — |
| 834 |
| — |
| 79 |
| | — |
| 79 |
| — |
|
Secured convertible note | | 6,957 |
| | — |
| — |
| 6,957 |
|
Impairment Charges
The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important that could trigger an impairment review include underperformance relative to expected historical or projected future operating results, a significant change in the manner of the use of the asset, or a negative industry or economic trend. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the aforementioned factors, impairment is measured based on a projected discounted cash flow method. Certain factors, such as estimated store sales and expenses, used for this nonrecurring fair value measurement are considered Level 3 inputs as defined by FASB ASC 820, Fair Value Measurements and DisclosuresMeasurement. Long-lived assets held and used with a carrying amount of $87.9$86.4 million were assessed for indicators of impairment and written down to their fair value, resulting in impairment charges of $0.5$0.4 million for the thirteen weeks ended November 1, 2014.May 2, 2015. Of the $0.5$0.4 million impairment charge included in selling and administrative expenses, $0.3 million related to the Famous Footwear segment and $0.2$0.1 million related to the Specialty RetailBrand Portfolio segment. AnLong-lived assets held and used with a carrying amount of $79.0 million were assessed for indicators of impairment and written down to their fair value, resulting in impairment charges of $0.3 million for the thirteen weeks ended May 3, 2014. Of the $0.3 million impairment charge of $1.2 million was recordedincluded in selling and administrative expenses, for the thirty-nine weeks ended November 1, 2014, of which $0.7$0.2 million related to the Famous Footwear segment and $0.5$0.1 million related to the Specialty RetailBrand Portfolio segment.
During the first quarter of 2013, the Company recognized an impairment charge of $4.7 million ($4.7 million after tax, $0.11 per diluted share) related to certain supply chain and sourcing assets, which represented the excess net asset value over the estimated fair value of the assets less costs to sell. The fair value of net assets was estimated based on the anticipated sales proceeds. This was considered a Level 2 input as the assets were not sold on an active market. The impairment charge was recorded as impairment of assets held for sale in the condensed consolidated statement of earnings and was included in the Wholesale Operations segment. These assets were sold in the second quarter of 2013, and the Company recognized an additional loss on sale of $0.6 million. Refer to Note 5 to the condensed consolidated financial statements for additional information.
During the second quarter of 2013, the Company sold ASG. The assets of ASG were determined to be held for sale at May 4, 2013, and an impairment charge of $12.6 million was recorded in the first quarter of 2013 within disposition/impairment of discontinued operations, net of tax in the condensed consolidated statement of earnings. The Company recognized a gain on disposition of $1.0 million in the second quarter of 2013. ASG was previously included within the Wholesale Operations segment. The fair value of assets was estimated based on the anticipated sales proceeds less costs to sell. This was considered a Level 2 input as the assets were not sold on an active market. Refer to Note 3 and Note 5 to the condensed consolidated financial statements for additional information.
Fair Value of the Company’s Other Financial Instruments
The fair values of cash and cash equivalents (excluding money market funds discussed above), receivables and trade accounts payable and borrowings under the revolving credit agreement approximate their carrying values due to the short-term nature of these instruments.
| | | November 1, 2014 | November 2, 2013 | February 1, 2014 | May 2, 2015 | May 3, 2014 | January 31, 2015 |
| Carrying |
| Fair |
| Carrying |
| Fair |
| Carrying |
| Fair |
| Carrying |
| Fair |
| Carrying |
| Fair |
| Carrying |
| Fair |
|
($ thousands) | Amount |
| Value |
| Amount |
| Value |
| Amount |
| Value |
| Amount |
| Value |
| Amount |
| Value |
| Amount |
| Value |
|
Long-term debt – Senior Notes | $ | 199,150 |
| $ | 208,500 |
| $ | 198,963 |
| $ | 210,500 |
| $ | 199,010 |
| $ | 210,500 |
| $ | 199,244 |
| $ | 207,500 |
| $ | 199,057 |
| $ | 210,750 |
| $ | 199,197 |
| $ | 208,000 |
|
The fair value of the Company’s Senior Notes was based upon quoted prices in an inactive market as of the end of the respective periods (Level 2).
The Company’s effective tax rate can vary considerably from period to period, depending on a number of factors. The Company’s consolidated effective tax rates from continuing operations were 30.9%25.9% and 31.6%34.1% for the thirteen weeks ended May 2, 2015 and 31.8% and 33.8% for the thirty-nine weeks ended November 1,May 3, 2014, and November 2, 2013, respectively. The effectiveCompany recognized a discrete tax rate was higher inbenefit of $1.6 million during the thirty-nine weeks ended November 2, 2013 duequarter, following the conversion of one of its primary operating subsidiaries to a limited liability company. As a result of that conversion, the Company now projects utilizing certain operating loss carryforwards that previously had been reserved on the Company’s condensed consolidated balance sheets. Accordingly, the Company recognized a tax benefit of $1.5 million upon the reversal of valuation allowances. The Company also recognized a tax benefit of $0.1 million related to the non-deductible naturevaluation of the $4.7 million impairment charge in the first quarter of 2013, as further described in Note 5 to the condensed consolidated financial statements.other deferred taxes impacted by this conversion.
|
| |
Note 14 | Related Party Transactions |
C. banner International Holdings Limited
The Company has a joint venture agreement with a subsidiary of C. banner International Holdings Limited (“CBI”, formerly known as Hongguo International Holdings Limited) to market Naturalizer footwear in China. The Company is a 51% owner of the joint venture (“B&H Footwear”), with CBI owning the other 49%. B&H Footwear sells Naturalizer footwear to a retail affiliate of CBI on a wholesale basis, which in turn sells the Naturalizer products through department store shops and free-standing stores in China. During 2013, B&H Footwear transferred the operation of 25 retail stores in China to CBI. B&H Footwear continues to sell footwear to CBI on a wholesale basis. During the thirteen and thirty-nine weeks ended November 1,May 2, 2015 and May 3, 2014, the Company through its consolidated subsidiary, B&H Footwear, sold $3.6$2.6 million and $7.1$2.0 million, respectively, of Naturalizer footwear on a wholesale basis to CBI with $1.9 million and $4.1 million in corresponding sales during the thirteen and thirty-nine weeks ended November 2, 2013.through its consolidated subsidiary, B&H Footwear.
|
| |
Note 15 | Commitments and Contingencies |
Environmental Remediation
Prior operations included numerous manufacturing and other facilities for which the Company may have responsibility under various environmental laws for the remediation of conditions that may be identified in the future. The Company is involved in environmental remediation and ongoing compliance activities at several sites and has been notified that it is or may be a potentially responsible party at several other sites.
Redfield
The Company is remediating, under the oversight of Colorado authorities, the groundwater and indoor air at its owned facility in Colorado (the “Redfield site” or, when referring to remediation activities at or under the facility, the “on-site remediation”) and residential neighborhoods adjacent to and near the property (the “off-site remediation”) that have been affected by solvents previously used at the facility. The on-site remediation calls for the operation of a pump and treat system (which prevents migration of contaminated groundwater off the property) as the final remedy for the site, subject to monitoring and periodic review of the on-site conditions and other remedial technologies that may be developed in the future. Off-site groundwater concentrations have been reducing over time since installation of the pump and treat system in 2000 and injection of clean water beginning in 2003. However, localized areas of contaminated bedrock just beyond the property line continue to impact off-site groundwater. The modified workplan for addressing this condition includes converting the off-site bioremediation system into a monitoring well network and employing different remediation methods in these recalcitrant areas. In accordance with the workplan, a pilot test was conducted of certain groundwater remediation methods and the results of that test were used to develop more detailed plans for remedial activities in the off-site areas, which were approved by the authorities and are being implemented in a phased manner. The results of groundwater monitoring are being used to evaluate the effectiveness of these activities. The liability for the on-site
remediation was discounted at 4.8%. On an undiscounted basis, the on-site remediation liability would be $15.7$15.4 million as of November 1, 2014.May 2, 2015. The Company expects to spend approximately $0.2 million in each of the next five years and $14.7$14.4 million in the aggregate thereafter related to the on-site remediation.
The cumulative expenditures for both on-site and off-site remediation through November 1, 2014May 2, 2015 were $26.6$27.2 million. The Company has recovered a portion of these expenditures from insurers and other third parties. The reserve for the anticipated future remediation activities at November 1, 2014May 2, 2015 is $9.8 million, of which $8.9$9.1 million is recorded within other liabilities and $0.9$0.7 million is recorded within other accrued expenses. Of the total $9.8 million reserve, $5.1 million is for on-site remediation and $4.7 million is for off-site remediation.
Other
The Company has completed its remediation efforts at its closed New York tannery and two associated landfills. In 1995, state environmental authorities reclassified the status of these sites as being properly closed and requiring only continued maintenance and monitoring through 2024. The Company has an accrued liability of $1.4$1.3 million at November 1, 2014May 2, 2015 to complete the cleanup, maintenance and monitoring at these sites, which has been discounted at 6.4%. Of the $1.4$1.3 million reserve, $1.2$1.1 million is recorded in other liabilities and $0.2 million is recorded in other accrued expenses. On an undiscounted basis, this liability would be $2.0$1.8 million. The Company expects to spend approximately $0.2 million in each of the next five years and $1.0$0.8 million in the aggregate thereafter related to these sites. In addition, various federal and state authorities have identified the Company as a potentially responsible party for remediation at certain other sites. However, the Company does not currently believe that its liability for such sites, if any, would be material.
The Company continues to evaluate its estimated costs in conjunction with its environmental consultants and records its best estimate of such liabilities. However, future actions and the associated costs are subject to oversight and approval of various governmental authorities. Accordingly, the ultimate costs may vary, and it is possible costs may exceed the recorded amounts.
Litigation
The Company is involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such ordinary course of business proceedings and litigation currently pending is not expected to have a material adverse effect on the Company’s results of operations or financial position. Legal costs associated with litigation are generally expensed as incurred.
25During 2014, the Company signed a settlement agreement to resolve a putative class action lawsuit involving wage and hour claims in California for an amount not to exceed $1.5 million. The court has granted preliminary approval of the settlement, pursuant to which the Company will pay a minimum of $1.0 million in attorneys' fees, costs of administering the settlement and settlement payments to class members who submit claims. The ultimate amount paid to resolve the case may exceed that amount depending on the number of valid claims submitted. In the event that the settlement is not consummated, the parties will continue to litigate whether the action should proceed as a class action. The reserve for this matter as of May 2, 2015 is $1.5 million.
|
| |
Note 16 | Financial Information for the Company and its Subsidiaries |
Brown ShoeThe Company Inc. issued senior notes, which are fully and unconditionally and jointly and severally guaranteed by all of its existing and future subsidiaries that are guarantors under its existing revolving credit facility agreement. The following table presents the consolidating financial information for each of Brown Shoe Company,Caleres, Inc. (“Parent”), the Guarantors, and subsidiaries of the Parent that are not Guarantors (the “Non-Guarantors”), together with consolidating eliminations, as of and for the periods indicated. The Guarantors are 100% owned by the Parent. On May 14, 2013, during the second quarter of 2013, ASG was sold and ceased to be a borrower under the Credit Agreement. ASG is included as a “Guarantor” in the financial statements through the sale date. The proceeds from the sale were utilized to pay down the Company’s revolving credit facility. See Note 3 to the condensed consolidated financial statements for further information on the sale of ASG.
The condensed consolidating financial statements have been prepared using the equity method of accounting in accordance with the requirements for presentation of such information. Management believes that the information, presented in lieu of complete financial statements for each of the Guarantors, provides meaningful information to allow investors to determine the nature of the assets held by, and operations and cash flows of, each of the consolidated groups.
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET |
AS OF MAY 2, 2015 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Assets | |
| |
| |
| |
| |
|
Current assets | |
| |
| |
| |
| |
|
Cash and cash equivalents | $ | 8,528 |
| $ | 413 |
| $ | 57,389 |
| $ | — |
| $ | 66,330 |
|
Receivables, net | 101,968 |
| 1,657 |
| 22,887 |
| — |
| 126,512 |
|
Inventories, net | 95,948 |
| 396,642 |
| 5,923 |
| — |
| 498,513 |
|
Prepaid expenses and other current assets | 18,820 |
| 24,335 |
| 4,149 |
| (6,301 | ) | 41,003 |
|
Intercompany receivable – current | 1,082 |
| 432 |
| 15,800 |
| (17,314 | ) | — |
|
Total current assets | 226,346 |
| 423,479 |
| 106,148 |
| (23,615 | ) | 732,358 |
|
Other assets | 130,781 |
| 12,931 |
| 597 |
| — |
| 144,309 |
|
Goodwill and intangible assets, net | 117,226 |
| 16,431 |
| — |
| — |
| 133,657 |
|
Property and equipment, net | 34,186 |
| 117,144 |
| 2,020 |
| — |
| 153,350 |
|
Investment in subsidiaries | 998,697 |
| 219,134 |
| — |
| (1,217,831 | ) | — |
|
Intercompany receivable – noncurrent | 431,964 |
| 601,993 |
| 268,758 |
| (1,302,715 | ) | — |
|
Total assets | $ | 1,939,200 |
| $ | 1,391,112 |
| $ | 377,523 |
| $ | (2,544,161 | ) | $ | 1,163,674 |
|
| | | | | |
Liabilities and Equity | |
| |
| |
| |
|
Current liabilities | |
| |
| |
| |
| |
|
Trade accounts payable | $ | 8,381 |
| $ | 141,613 |
| $ | 22,122 |
| $ | — |
| $ | 172,116 |
|
Other accrued expenses | 66,040 |
| 91,553 |
| 7,408 |
| (6,301 | ) | 158,700 |
|
Intercompany payable – current | 2,034 |
| 237 |
| 15,043 |
| (17,314 | ) | — |
|
Total current liabilities | 76,455 |
| 233,403 |
| 44,573 |
| (23,615 | ) | 330,816 |
|
Other liabilities | |
| |
| |
| |
| |
|
Long-term debt | 199,244 |
| — |
| — |
| — |
| 199,244 |
|
Other liabilities | 41,212 |
| 37,890 |
| 192 |
| — |
| 79,294 |
|
Intercompany payable – noncurrent | 1,068,815 |
| 121,122 |
| 112,778 |
| (1,302,715 | ) | — |
|
Total other liabilities | 1,309,271 |
| 159,012 |
| 112,970 |
| (1,302,715 | ) | 278,538 |
|
Equity | |
| |
| |
| |
| |
|
Caleres, Inc. shareholders’ equity | 553,474 |
| 998,697 |
| 219,134 |
| (1,217,831 | ) | 553,474 |
|
Noncontrolling interests | — |
| — |
| 846 |
| — |
| 846 |
|
Total equity | 553,474 |
| 998,697 |
| 219,980 |
| (1,217,831 | ) | 554,320 |
|
Total liabilities and equity | $ | 1,939,200 |
| $ | 1,391,112 |
| $ | 377,523 |
| $ | (2,544,161 | ) | $ | 1,163,674 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME |
FOR THE THIRTEEN WEEKS ENDED MAY 2, 2015 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net sales | $ | 192,351 |
| $ | 391,793 |
| $ | 43,462 |
| $ | (25,323 | ) | $ | 602,283 |
|
Cost of goods sold | 137,594 |
| 206,772 |
| 31,773 |
| (22,382 | ) | 353,757 |
|
Gross profit | 54,757 |
| 185,021 |
| 11,689 |
| (2,941 | ) | 248,526 |
|
Selling and administrative expenses | 52,976 |
| 159,710 |
| 8,445 |
| (2,941 | ) | 218,190 |
|
Operating earnings | 1,781 |
| 25,311 |
| 3,244 |
| — |
| 30,336 |
|
Interest expense | (4,462 | ) | (1 | ) | — |
| — |
| (4,463 | ) |
Interest income | 251 |
| 11 |
| 42 |
| — |
| 304 |
|
Intercompany interest income (expense) | 3,678 |
| (3,794 | ) | 116 |
| — |
| — |
|
Earnings before income taxes | 1,248 |
| 21,527 |
| 3,402 |
| — |
| 26,177 |
|
Income tax benefit (provision) | 1,684 |
| (7,848 | ) | (622 | ) | — |
| (6,786 | ) |
Equity in earnings of subsidiaries, net of tax | 16,329 |
| 2,650 |
| — |
| (18,979 | ) | — |
|
Net earnings | 19,261 |
| 16,329 |
| 2,780 |
| (18,979 | ) | 19,391 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| — |
| 130 |
| — |
| 130 |
|
Net earnings attributable to Caleres, Inc. | $ | 19,261 |
| $ | 16,329 |
| $ | 2,650 |
| $ | (18,979 | ) | $ | 19,261 |
|
| | | | | |
Comprehensive income | $ | 20,217 |
| $ | 17,054 |
| $ | 2,838 |
| $ | (19,758 | ) | $ | 20,351 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| — |
| 134 |
| — |
| 134 |
|
Comprehensive income attributable to Caleres, Inc. | $ | 20,217 |
| $ | 17,054 |
| $ | 2,704 |
| $ | (19,758 | ) | $ | 20,217 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS |
FOR THE THIRTEEN WEEKS ENDED MAY 2, 2015 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net cash (used for) provided by operating activities | $ | (5,418 | ) | $ | 18,086 |
| $ | 9,246 |
| $ | — |
| $ | 21,914 |
|
| | | | | |
Investing activities | |
| |
| |
| |
| |
|
Purchases of property and equipment | (2,435 | ) | (10,321 | ) | (149 | ) | — |
| (12,905 | ) |
Capitalized software | (750 | ) | (205 | ) | — |
| — |
| (955 | ) |
Intercompany investing | (151 | ) | 151 |
| — |
| — |
| — |
|
Net cash used for investing activities | (3,336 | ) | (10,375 | ) | (149 | ) | — |
| (13,860 | ) |
| | | | | |
Financing activities | |
| |
| |
| |
| |
|
Borrowings under revolving credit agreement | 86,000 |
| — |
| — |
| — |
| 86,000 |
|
Repayments under revolving credit agreement | (86,000 | ) | — |
| — |
| — |
| (86,000 | ) |
Dividends paid | (3,073 | ) | — |
| — |
| — |
| (3,073 | ) |
Acquisition of treasury stock | (4,921 | ) | — |
| — |
| — |
| (4,921 | ) |
Issuance of common stock under share-based plans, net | (3,751 | ) | — |
| — |
| — |
| (3,751 | ) |
Tax benefit related to share-based plans | 2,401 |
| — |
| — |
| — |
| 2,401 |
|
Intercompany financing | 12,735 |
| (16,285 | ) | 3,550 |
| — |
| — |
|
Net cash provided by (used for) financing activities | 3,391 |
| (16,285 | ) | 3,550 |
| — |
| (9,344 | ) |
Effect of exchange rate changes on cash and cash equivalents | — |
| 217 |
| — |
| — |
| 217 |
|
(Decrease) increase in cash and cash equivalents | (5,363 | ) | (8,357 | ) | 12,647 |
| — |
| (1,073 | ) |
Cash and cash equivalents at beginning of period | 13,891 |
| 8,770 |
| 44,742 |
| — |
| 67,403 |
|
Cash and cash equivalents at end of period | $ | 8,528 |
| $ | 413 |
| $ | 57,389 |
| $ | — |
| $ | 66,330 |
|
|
| | | | | | | | | | | | | | | |
CONDENSED CONSOLIDATING BALANCE SHEET |
AS OF JANUARY 31, 2015 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Assets | |
| |
| |
| |
| |
|
Current assets | |
| |
| |
| |
| |
|
Cash and cash equivalents | $ | 13,891 |
| $ | 8,770 |
| $ | 44,742 |
| $ | — |
| $ | 67,403 |
|
Receivables, net | 89,030 |
| 5,398 |
| 42,218 |
| — |
| 136,646 |
|
Inventories, net | 148,082 |
| 386,468 |
| 8,553 |
| — |
| 543,103 |
|
Prepaid expenses and other current assets | 41,494 |
| 24,397 |
| 5,344 |
| (27,491 | ) | 43,744 |
|
Intercompany receivable – current | 1,194 |
| 279 |
| 8,471 |
| (9,944 | ) | — |
|
Total current assets | 293,691 |
| 425,312 |
| 109,328 |
| (37,435 | ) | 790,896 |
|
Other assets | 127,879 |
| 13,104 |
| 603 |
| — |
| 141,586 |
|
Goodwill and intangible assets, net | 117,792 |
| 16,795 |
| — |
| — |
| 134,587 |
|
Property and equipment, net | 29,237 |
| 118,525 |
| 1,981 |
| — |
| 149,743 |
|
Investment in subsidiaries | 982,640 |
| 200,946 |
| — |
| (1,183,586 | ) | — |
|
Intercompany receivable – noncurrent | 459,774 |
| 581,594 |
| 264,673 |
| (1,306,041 | ) | — |
|
Total assets | $ | 2,011,013 |
| $ | 1,356,276 |
| $ | 376,585 |
| $ | (2,527,062 | ) | $ | 1,216,812 |
|
| | | | | |
Liabilities and Equity | | |
| |
| |
| |
|
Current liabilities | |
| |
| |
| |
| |
|
Trade accounts payable | $ | 60,377 |
| $ | 117,899 |
| $ | 37,645 |
| $ | — |
| $ | 215,921 |
|
Other accrued expenses | 106,682 |
| 94,108 |
| 7,863 |
| (27,491 | ) | 181,162 |
|
Intercompany payable – current | 4,948 |
| 361 |
| 4,635 |
| (9,944 | ) | — |
|
Total current liabilities | 172,007 |
| 212,368 |
| 50,143 |
| (37,435 | ) | 397,083 |
|
Other liabilities | |
| |
| |
| |
| |
|
Long-term debt | 199,197 |
| — |
| — |
| — |
| 199,197 |
|
Other liabilities | 41,847 |
| 36,869 |
| 194 |
| — |
| 78,910 |
|
Intercompany payable – noncurrent | 1,057,052 |
| 124,399 |
| 124,590 |
| (1,306,041 | ) | — |
|
Total other liabilities | 1,298,096 |
| 161,268 |
| 124,784 |
| (1,306,041 | ) | 278,107 |
|
Equity | |
| |
| |
| |
| |
|
Caleres, Inc. shareholders’ equity | 540,910 |
| 982,640 |
| 200,946 |
| (1,183,586 | ) | 540,910 |
|
Noncontrolling interests | — |
| — |
| 712 |
| — |
| 712 |
|
Total equity | 540,910 |
| 982,640 |
| 201,658 |
| (1,183,586 | ) | 541,622 |
|
Total liabilities and equity | $ | 2,011,013 |
| $ | 1,356,276 |
| $ | 376,585 |
| $ | (2,527,062 | ) | $ | 1,216,812 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET |
AS OF MAY 3, 2014 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Assets | |
| |
| |
| |
| |
|
Current assets | |
| |
| |
| |
| |
|
Cash and cash equivalents | $ | — |
| $ | 25,528 |
| $ | 11,140 |
| $ | — |
| $ | 36,668 |
|
Receivables, net | 83,713 |
| 1,412 |
| 20,621 |
| — |
| 105,746 |
|
Inventories, net | 93,159 |
| 414,424 |
| 5,228 |
| — |
| 512,811 |
|
Prepaid expenses and other current assets | 34,476 |
| 507 |
| 2,930 |
| — |
| 37,913 |
|
Intercompany receivable – current | 981 |
| 368 |
| 10,655 |
| (12,004 | ) | — |
|
Total current assets | 212,329 |
| 442,239 |
| 50,574 |
| (12,004 | ) | 693,138 |
|
Other assets | 120,941 |
| 14,678 |
| 637 |
| — |
| 136,256 |
|
Goodwill and intangible assets, net | 119,666 |
| 18,084 |
| — |
| — |
| 137,750 |
|
Property and equipment, net | 27,303 |
| 112,630 |
| 1,885 |
| — |
| 141,818 |
|
Investment in subsidiaries | 879,965 |
| 169,843 |
| — |
| (1,049,808 | ) | — |
|
Intercompany receivable – noncurrent | 450,481 |
| 500,580 |
| 242,150 |
| (1,193,211 | ) | — |
|
Total assets | $ | 1,810,685 |
| $ | 1,258,054 |
| $ | 295,246 |
| $ | (2,255,023 | ) | $ | 1,108,962 |
|
| | | | | |
Liabilities and Equity | | |
| |
| |
| |
|
Current liabilities | |
| |
| |
| |
| |
|
Trade accounts payable | $ | 48,509 |
| $ | 123,656 |
| $ | 23,538 |
| $ | — |
| $ | 195,703 |
|
Other accrued expenses | 69,665 |
| 64,082 |
| 7,971 |
| — |
| 141,718 |
|
Intercompany payable – current | 2,367 |
| 59 |
| 9,578 |
| (12,004 | ) | — |
|
Total current liabilities | 120,541 |
| 187,797 |
| 41,087 |
| (12,004 | ) | 337,421 |
|
Other liabilities | |
| |
| |
| |
| |
|
Long-term debt | 199,057 |
| — |
| — |
| — |
| 199,057 |
|
Other liabilities | 33,499 |
| 44,745 |
| 1,469 |
| — |
| 79,713 |
|
Intercompany payable – noncurrent | 965,515 |
| 145,547 |
| 82,149 |
| (1,193,211 | ) | — |
|
Total other liabilities | 1,198,071 |
| 190,292 |
| 83,618 |
| (1,193,211 | ) | 278,770 |
|
Equity | |
| |
| |
| |
| |
|
Caleres, Inc. shareholders’ equity | 492,073 |
| 879,965 |
| 169,843 |
| (1,049,808 | ) | 492,073 |
|
Noncontrolling interests | — |
| — |
| 698 |
| — |
| 698 |
|
Total equity | 492,073 |
| 879,965 |
| 170,541 |
| (1,049,808 | ) | 492,771 |
|
Total liabilities and equity | $ | 1,810,685 |
| $ | 1,258,054 |
| $ | 295,246 |
| $ | (2,255,023 | ) | $ | 1,108,962 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME |
FOR THE THIRTEEN WEEKS ENDED MAY 3, 2014 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net sales | $ | 179,160 |
| $ | 401,580 |
| $ | 40,165 |
| $ | (29,743 | ) | $ | 591,162 |
|
Cost of goods sold | 127,466 |
| 218,366 |
| 29,191 |
| (26,202 | ) | 348,821 |
|
Gross profit | 51,694 |
| 183,214 |
| 10,974 |
| (3,541 | ) | 242,341 |
|
Selling and administrative expenses | 49,197 |
| 159,967 |
| 7,992 |
| (3,541 | ) | 213,615 |
|
Operating earnings | 2,497 |
| 23,247 |
| 2,982 |
| — |
| 28,726 |
|
Interest expense | (5,305 | ) | (1 | ) | — |
| — |
| (5,306 | ) |
Interest income | 1 |
| 59 |
| 16 |
| — |
| 76 |
|
Intercompany interest income (expense) | 3,974 |
| (4,079 | ) | 105 |
| — |
| — |
|
Earnings before income taxes | 1,167 |
| 19,226 |
| 3,103 |
| — |
| 23,496 |
|
Income tax benefit (provision) | 464 |
| (7,954 | ) | (530 | ) | — |
| (8,020 | ) |
Equity in earnings of subsidiaries, net of tax | 13,798 |
| 2,526 |
| — |
| (16,324 | ) | — |
|
Net earnings | 15,429 |
| 13,798 |
| 2,573 |
| (16,324 | ) | 15,476 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| — |
| 47 |
| — |
| 47 |
|
Net earnings attributable to Caleres, Inc. | $ | 15,429 |
| $ | 13,798 |
| $ | 2,526 |
| $ | (16,324 | ) | $ | 15,429 |
|
| | | | | |
Comprehensive income | $ | 15,918 |
| $ | 14,355 |
| $ | 2,520 |
| $ | (16,840 | ) | $ | 15,953 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| — |
| 35 |
| — |
| 35 |
|
Comprehensive income attributable to Caleres, Inc. | $ | 15,918 |
| $ | 14,355 |
| $ | 2,485 |
| $ | (16,840 | ) | $ | 15,918 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS |
FOR THE THIRTEEN WEEKS ENDED MAY 3, 2014 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net cash (used for) provided by operating activities | $ | (3,343 | ) | $ | 25,854 |
| $ | 13,872 |
| $ | — |
| $ | 36,383 |
|
| | | | | |
Investing activities | |
| |
| |
| |
| |
|
Purchases of property and equipment | (1,866 | ) | (5,411 | ) | (104 | ) | — |
| (7,381 | ) |
Capitalized software | (1,171 | ) | (43 | ) | (31 | ) | — |
| (1,245 | ) |
Acquisition of trademarks | (65,065 | ) | — |
| — |
| — |
| (65,065 | ) |
Intercompany investing | (533 | ) | 533 |
| — |
| — |
| — |
|
Net cash used for investing activities | (68,635 | ) | (4,921 | ) | (135 | ) | — |
| (73,691 | ) |
| | | | | |
Financing activities | |
| |
| |
| |
| |
|
Borrowings under revolving credit agreement | 251,000 |
| — |
| — |
| — |
| 251,000 |
|
Repayments under revolving credit agreement | (258,000 | ) | — |
| — |
| — |
| (258,000 | ) |
Dividends paid | (3,053 | ) | — |
| — |
| — |
| (3,053 | ) |
Issuance of common stock under share-based plans, net | (803 | ) | — |
| — |
| — |
| (803 | ) |
Tax benefit related to share-based plans | 1,769 |
| — |
| — |
| — |
| 1,769 |
|
Intercompany financing | 81,065 |
| (25,924 | ) | (55,141 | ) | — |
| — |
|
Net cash provided by (used for) financing activities | 71,978 |
| (25,924 | ) | (55,141 | ) | — |
| (9,087 | ) |
Effect of exchange rate changes on cash and cash equivalents | — |
| 517 |
| — |
| — |
| 517 |
|
Decrease in cash and cash equivalents | — |
| (4,474 | ) | (41,404 | ) | — |
| (45,878 | ) |
Cash and cash equivalents at beginning of period | — |
| 30,002 |
| 52,544 |
| — |
| 82,546 |
|
Cash and cash equivalents at end of period | $ | — |
| $ | 25,528 |
| $ | 11,140 |
| $ | — |
| $ | 36,668 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET |
AS OF NOVEMBER 1, 2014 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Assets | |
| |
| |
| |
| |
|
Current assets | |
| |
| |
| |
| |
|
Cash and cash equivalents | $ | — |
| $ | 23,217 |
| $ | 15,863 |
| $ | — |
| $ | 39,080 |
|
Receivables, net | 115,520 |
| 1,413 |
| 21,284 |
| — |
| 138,217 |
|
Inventories, net | 128,709 |
| 431,679 |
| 7,389 |
| — |
| 567,777 |
|
Prepaid expenses and other current assets | 33,828 |
| 971 |
| 3,046 |
| — |
| 37,845 |
|
Intercompany receivable – current | 466 |
| 521 |
| 15,487 |
| (16,474 | ) | — |
|
Total current assets | 278,523 |
| 457,801 |
| 63,069 |
| (16,474 | ) | 782,919 |
|
Other assets | 124,472 |
| 14,785 |
| 621 |
| — |
| 139,878 |
|
Goodwill and intangible assets, net | 118,416 |
| 17,358 |
| — |
| — |
| 135,774 |
|
Property and equipment, net | 28,000 |
| 121,554 |
| 1,735 |
| — |
| 151,289 |
|
Investment in subsidiaries | 935,580 |
| 190,534 |
| — |
| (1,126,114 | ) | — |
|
Intercompany receivable – noncurrent | 410,794 |
| 524,296 |
| 252,220 |
| (1,187,310 | ) | — |
|
Total assets | $ | 1,895,785 |
| $ | 1,326,328 |
| $ | 317,645 |
| $ | (2,329,898 | ) | $ | 1,209,860 |
|
| | | | | |
Liabilities and Equity | |
| |
| |
| |
|
Current liabilities | |
| |
| |
| |
| |
|
Borrowings under revolving credit agreement | $ | 14,000 |
| $ | — |
| $ | — |
| $ | — |
| $ | 14,000 |
|
Trade accounts payable | 53,944 |
| 129,350 |
| 19,768 |
| — |
| 203,062 |
|
Other accrued expenses | 91,738 |
| 70,881 |
| 9,458 |
| — |
| 172,077 |
|
Intercompany payable – current | 2,803 |
| 173 |
| 13,498 |
| (16,474 | ) | — |
|
Total current liabilities | 162,485 |
| 200,404 |
| 42,724 |
| (16,474 | ) | 389,139 |
|
Other liabilities | |
| |
| |
| |
| |
|
Long-term debt | 199,150 |
| — |
| — |
| — |
| 199,150 |
|
Other liabilities | 36,267 |
| 44,082 |
| 205 |
| — |
| 80,554 |
|
Intercompany payable – noncurrent | 957,629 |
| 146,262 |
| 83,419 |
| (1,187,310 | ) | — |
|
Total other liabilities | 1,193,046 |
| 190,344 |
| 83,624 |
| (1,187,310 | ) | 279,704 |
|
Equity | |
| |
| |
| |
| |
|
Brown Shoe Company, Inc. shareholders’ equity | 540,254 |
| 935,580 |
| 190,534 |
| (1,126,114 | ) | 540,254 |
|
Noncontrolling interests | — |
| — |
| 763 |
| — |
| 763 |
|
Total equity | 540,254 |
| 935,580 |
| 191,297 |
| (1,126,114 | ) | 541,017 |
|
Total liabilities and equity | $ | 1,895,785 |
| $ | 1,326,328 |
| $ | 317,645 |
| $ | (2,329,898 | ) | $ | 1,209,860 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) |
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 1, 2014 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net sales | $ | 233,606 |
| $ | 488,876 |
| $ | 41,363 |
| $ | (34,568 | ) | $ | 729,277 |
|
Cost of goods sold | 165,734 |
| 274,595 |
| 32,786 |
| (34,568 | ) | 438,547 |
|
Gross profit | 67,872 |
| 214,281 |
| 8,577 |
| — |
| 290,730 |
|
Selling and administrative expenses | 62,554 |
| 172,758 |
| 2,205 |
| — |
| 237,517 |
|
Operating earnings | 5,318 |
| 41,523 |
| 6,372 |
| — |
| 53,213 |
|
Interest expense | (5,207 | ) | — |
| — |
| — |
| (5,207 | ) |
Interest income | 6 |
| 56 |
| 47 |
| — |
| 109 |
|
Intercompany interest income (expense) | 3,608 |
| (3,504 | ) | (104 | ) | — |
| — |
|
Earnings before income taxes | 3,725 |
| 38,075 |
| 6,315 |
| — |
| 48,115 |
|
Income tax benefit (provision) | 551 |
| (14,190 | ) | (1,239 | ) | — |
| (14,878 | ) |
Equity in earnings of subsidiaries, net of tax | 28,837 |
| 4,952 |
| — |
| (33,789 | ) | — |
|
Net earnings | 33,113 |
| 28,837 |
| 5,076 |
| (33,789 | ) | 33,237 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| — |
| 124 |
| — |
| 124 |
|
Net earnings attributable to Brown Shoe Company, Inc. | $ | 33,113 |
| $ | 28,837 |
| $ | 4,952 |
| $ | (33,789 | ) | $ | 33,113 |
|
| | | | | |
Comprehensive income | $ | 32,014 |
| $ | 27,896 |
| $ | 5,107 |
| $ | (32,910 | ) | $ | 32,107 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| — |
| 93 |
| — |
| 93 |
|
Comprehensive income attributable to Brown Shoe Company, Inc. | $ | 32,014 |
| $ | 27,896 |
| $ | 5,014 |
| $ | (32,910 | ) | $ | 32,014 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) |
FOR THE THIRTY-NINE WEEKS ENDED NOVEMBER 1, 2014 | |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net sales | $ | 596,364 |
| $ | 1,335,655 |
| $ | 134,483 |
| $ | (110,186 | ) | $ | 1,956,316 |
|
Cost of goods sold | 429,633 |
| 736,588 |
| 107,568 |
| (110,186 | ) | 1,163,603 |
|
Gross profit | 166,731 |
| 599,067 |
| 26,915 |
| — |
| 792,713 |
|
Selling and administrative expenses | 168,900 |
| 509,956 |
| 616 |
| — |
| 679,472 |
|
Operating (loss) earnings | (2,169 | ) | 89,111 |
| 26,299 |
| — |
| 113,241 |
|
Interest expense | (15,636 | ) | (1 | ) | — |
| — |
| (15,637 | ) |
Interest income | 19 |
| 181 |
| 94 |
| — |
| 294 |
|
Intercompany interest income (expense) | 11,410 |
| (12,118 | ) | 708 |
| — |
| — |
|
(Loss) earnings before income taxes | (6,376 | ) | 77,173 |
| 27,101 |
| — |
| 97,898 |
|
Income tax benefit (provision) | 2,698 |
| (30,106 | ) | (3,738 | ) | — |
| (31,146 | ) |
Equity in earnings of subsidiaries, net of tax | 70,284 |
| 23,217 |
| — |
| (93,501 | ) | — |
|
Net earnings | 66,606 |
| 70,284 |
| 23,363 |
| (93,501 | ) | 66,752 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| — |
| 146 |
| — |
| 146 |
|
Net earnings attributable to Brown Shoe Company, Inc. | $ | 66,606 |
| $ | 70,284 |
| $ | 23,217 |
| $ | (93,501 | ) | $ | 66,606 |
|
| | | | | |
Comprehensive income | $ | 65,487 |
| $ | 69,892 |
| $ | 23,373 |
| $ | (93,165 | ) | $ | 65,587 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| — |
| 100 |
| — |
| 100 |
|
Comprehensive income attributable to Brown Shoe Company, Inc. | $ | 65,487 |
| $ | 69,892 |
| $ | 23,273 |
| $ | (93,165 | ) | $ | 65,487 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS |
FOR THE THIRTY-NINE WEEKS ENDED NOVEMBER 1, 2014 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net cash (used for) provided by operating activities | $ | (31,850 | ) | $ | 71,874 |
| $ | 28,478 |
| $ | — |
| $ | 68,502 |
|
| | | | | |
Investing activities | |
| |
| |
| |
| |
|
Purchases of property and equipment | (5,142 | ) | (31,092 | ) | (297 | ) | — |
| (36,531 | ) |
Capitalized software | (3,787 | ) | (32 | ) | (30 | ) | — |
| (3,849 | ) |
Acquisition of trademarks | (65,065 | ) | — |
| — |
| — |
| (65,065 | ) |
Investment in nonconsolidated affiliate | (7,000 | ) | — |
| — |
| — |
| (7,000 | ) |
Intercompany investing | (717 | ) | 717 |
| — |
| — |
| — |
|
Net cash used for investing activities | (81,711 | ) | (30,407 | ) | (327 | ) | — |
| (112,445 | ) |
| | | | | |
Financing activities | |
| |
| |
| |
| |
|
Borrowings under revolving credit agreement | 741,000 |
| — |
| — |
| — |
| 741,000 |
|
Repayments under revolving credit agreement | (734,000 | ) | — |
| — |
| — |
| (734,000 | ) |
Dividends paid | (9,173 | ) | — |
| — |
| — |
| (9,173 | ) |
Issuance of common stock under share-based plans, net | 237 |
| — |
| — |
| — |
| 237 |
|
Tax benefit related to share-based plans | 2,482 |
| — |
| — |
| — |
| 2,482 |
|
Intercompany financing | 113,015 |
| (48,183 | ) | (64,832 | ) | — |
| — |
|
Net cash provided by (used for) financing activities | 113,561 |
| (48,183 | ) | (64,832 | ) | — |
| 546 |
|
Effect of exchange rate changes on cash and cash equivalents | — |
| (69 | ) | — |
| — |
| (69 | ) |
Decrease in cash and cash equivalents | — |
| (6,785 | ) | (36,681 | ) | — |
| (43,466 | ) |
Cash and cash equivalents at beginning of period | — |
| 30,002 |
| 52,544 |
| — |
| 82,546 |
|
Cash and cash equivalents at end of period | $ | — |
| $ | 23,217 |
| $ | 15,863 |
| $ | — |
| $ | 39,080 |
|
|
| | | | | | | | | | | | | | | |
CONDENSED CONSOLIDATING BALANCE SHEET |
AS OF FEBRUARY 1, 2014 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Assets | |
| |
| |
| |
| |
|
Current assets | |
| |
| |
| |
| |
|
Cash and cash equivalents | $ | — |
| $ | 30,002 |
| $ | 52,544 |
| $ | — |
| $ | 82,546 |
|
Receivables, net | 84,428 |
| 2,349 |
| 42,440 |
| — |
| 129,217 |
|
Inventories, net | 119,131 |
| 421,101 |
| 7,299 |
| — |
| 547,531 |
|
Prepaid expenses and other current assets | 38,069 |
| 16,024 |
| 3,984 |
| (24,941 | ) | 33,136 |
|
Current assets – discontinued operations | 119 |
| — |
| — |
| — |
| 119 |
|
Intercompany receivable – current | 602 |
| 191 |
| 8,860 |
| (9,653 | ) | — |
|
Total current assets | 242,349 |
| 469,667 |
| 115,127 |
| (34,594 | ) | 792,549 |
|
Other assets | 123,066 |
| 15,864 |
| 691 |
| — |
| 139,621 |
|
Goodwill and intangible assets, net | 55,225 |
| 18,448 |
| — |
| — |
| 73,673 |
|
Property and equipment, net | 27,201 |
| 114,359 |
| 2,000 |
| — |
| 143,560 |
|
Investment in subsidiaries | 865,700 |
| 165,970 |
| — |
| (1,031,670 | ) | — |
|
Intercompany receivable – noncurrent | 457,507 |
| 482,180 |
| 230,572 |
| (1,170,259 | ) | — |
|
Total assets | $ | 1,771,048 |
| $ | 1,266,488 |
| $ | 348,390 |
| $ | (2,236,523 | ) | $ | 1,149,403 |
|
| | | | | |
Liabilities and Equity | | |
| |
| |
| |
|
Current liabilities | |
| |
| |
| |
| |
|
Borrowings under revolving credit agreement | $ | 7,000 |
| $ | — |
| $ | — |
| $ | — |
| $ | 7,000 |
|
Trade accounts payable | 72,349 |
| 116,604 |
| 37,649 |
| — |
| 226,602 |
|
Other accrued expenses | 81,902 |
| 87,045 |
| 8,539 |
| (24,941 | ) | 152,545 |
|
Current liabilities – discontinued operations | 708 |
| — |
| — |
| — |
| 708 |
|
Intercompany payable – current | 4,689 |
| 766 |
| 4,198 |
| (9,653 | ) | — |
|
Total current liabilities | 166,648 |
| 204,415 |
| 50,386 |
| (34,594 | ) | 386,855 |
|
Other liabilities | |
| |
| |
| |
| |
|
Long-term debt | 199,010 |
| — |
| — |
| — |
| 199,010 |
|
Other liabilities | 38,657 |
| 46,055 |
| 1,464 |
| — |
| 86,176 |
|
Intercompany payable – noncurrent | 890,034 |
| 150,318 |
| 129,907 |
| (1,170,259 | ) | — |
|
Total other liabilities | 1,127,701 |
| 196,373 |
| 131,371 |
| (1,170,259 | ) | 285,186 |
|
Equity | |
| |
| |
| |
| |
|
Brown Shoe Company, Inc. shareholders’ equity | 476,699 |
| 865,700 |
| 165,970 |
| (1,031,670 | ) | 476,699 |
|
Noncontrolling interests | — |
| — |
| 663 |
| — |
| 663 |
|
Total equity | 476,699 |
| 865,700 |
| 166,633 |
| (1,031,670 | ) | 477,362 |
|
Total liabilities and equity | $ | 1,771,048 |
| $ | 1,266,488 |
| $ | 348,390 |
| $ | (2,236,523 | ) | $ | 1,149,403 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET |
AS OF NOVEMBER 2, 2013 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Assets | |
| |
| |
| |
| |
|
Current assets | |
| |
| |
| |
| |
|
Cash and cash equivalents | $ | — |
| $ | 29,722 |
| $ | 12,684 |
| $ | — |
| $ | 42,406 |
|
Receivables, net | 93,097 |
| 1,275 |
| 18,119 |
| — |
| 112,491 |
|
Inventories, net | 98,548 |
| 439,807 |
| 6,234 |
| — |
| 544,589 |
|
Prepaid expenses and other current assets | 37,418 |
| 11,423 |
| 3,393 |
| — |
| 52,234 |
|
Current assets – discontinued operations | 158 |
| — |
| 23 |
| — |
| 181 |
|
Intercompany receivable – current | 162 |
| 210 |
| 8,780 |
| (9,152 | ) | — |
|
Total current assets | 229,383 |
| 482,437 |
| 49,233 |
| (9,152 | ) | 751,901 |
|
Other assets | 95,221 |
| 15,812 |
| 614 |
| — |
| 111,647 |
|
Goodwill and intangible assets, net | 56,369 |
| 18,812 |
| — |
| — |
| 75,181 |
|
Property and equipment, net | 26,908 |
| 118,976 |
| 2,298 |
| — |
| 148,182 |
|
Investment in subsidiaries | 851,906 |
| 152,992 |
| — |
| (1,004,898 | ) | — |
|
Intercompany receivable – noncurrent | 431,414 |
| 483,444 |
| 225,061 |
| (1,139,919 | ) | — |
|
Total assets | $ | 1,691,201 |
| $ | 1,272,473 |
| $ | 277,206 |
| $ | (2,153,969 | ) | $ | 1,086,911 |
|
| | | | | |
Liabilities and Equity | | |
| |
| |
| |
|
Current liabilities | |
| |
| |
| |
| |
|
Trade accounts payable | 44,889 |
| 136,669 |
| 19,148 |
| — |
| 200,706 |
|
Other accrued expenses | 58,289 |
| 83,483 |
| 9,370 |
| — |
| 151,142 |
|
Current liabilities – discontinued operations | 2,065 |
| — |
| 45 |
| — |
| 2,110 |
|
Intercompany payable – current | 2,979 |
| 147 |
| 6,026 |
| (9,152 | ) | — |
|
Total current liabilities | 108,222 |
| 220,299 |
| 34,589 |
| (9,152 | ) | 353,958 |
|
Other liabilities | |
| |
| |
| |
| |
|
Long-term debt | 198,963 |
| — |
| — |
| — |
| 198,963 |
|
Other liabilities | 29,395 |
| 51,192 |
| 1,444 |
| — |
| 82,031 |
|
Intercompany payable – noncurrent | 903,320 |
| 149,076 |
| 87,523 |
| (1,139,919 | ) | — |
|
Total other liabilities | 1,131,678 |
| 200,268 |
| 88,967 |
| (1,139,919 | ) | 280,994 |
|
Equity | |
| |
| |
| |
| |
|
Brown Shoe Company, Inc. shareholders’ equity | 451,301 |
| 851,906 |
| 152,992 |
| (1,004,898 | ) | 451,301 |
|
Noncontrolling interests | — |
| — |
| 658 |
| — |
| 658 |
|
Total equity | 451,301 |
| 851,906 |
| 153,650 |
| (1,004,898 | ) | 451,959 |
|
Total liabilities and equity | $ | 1,691,201 |
| $ | 1,272,473 |
| $ | 277,206 |
| $ | (2,153,969 | ) | $ | 1,086,911 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) |
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 2, 2013 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net sales | $ | 213,028 |
| $ | 498,383 |
| $ | 36,753 |
| $ | (45,376 | ) | $ | 702,788 |
|
Cost of goods sold | 157,500 |
| 282,617 |
| 29,807 |
| (45,376 | ) | 424,548 |
|
Gross profit | 55,528 |
| 215,766 |
| 6,946 |
| — |
| 278,240 |
|
Selling and administrative expenses | 53,327 |
| 178,810 |
| 1,435 |
| — |
| 233,572 |
|
Operating earnings | 2,201 |
| 36,956 |
| 5,511 |
| — |
| 44,668 |
|
Interest expense | (5,254 | ) | — |
| — |
| — |
| (5,254 | ) |
Interest income | 4 |
| 69 |
| 59 |
| — |
| 132 |
|
Intercompany interest income (expense) | 3,558 |
| (3,693 | ) | 135 |
| — |
| — |
|
Intercompany dividend | — |
| 7,778 |
| (7,778 | ) | — |
| — |
|
Earnings (loss) before income taxes from continuing operations | 509 |
| 41,110 |
| (2,073 | ) | — |
| 39,546 |
|
Income tax provision | (5,011 | ) | (6,822 | ) | (662 | ) | — |
| (12,495 | ) |
Equity in earnings (loss) from continuing operations of subsidiaries, net of tax | 31,583 |
| (2,705 | ) | — |
| (28,878 | ) | — |
|
Net earnings (loss) from continuing operations | 27,081 |
| 31,583 |
| (2,735 | ) | (28,878 | ) | 27,051 |
|
Discontinued operations: | |
| |
| |
| |
| |
|
Earnings (loss) from discontinued operations, net of tax | 300 |
| (44 | ) | (23 | ) | — |
| 233 |
|
Equity in loss from discontinued operations of subsidiaries, net of tax | (67 | ) | (23 | ) | — |
| 90 |
| — |
|
Net earnings (loss) from discontinued operations | 233 |
| (67 | ) | (23 | ) | 90 |
| 233 |
|
Net earnings (loss) | 27,314 |
| 31,516 |
| (2,758 | ) | (28,788 | ) | 27,284 |
|
Less: Net loss attributable to noncontrolling interests | — |
| — |
| (30 | ) | — |
| (30 | ) |
Net earnings (loss) attributable to Brown Shoe Company, Inc. | $ | 27,314 |
| $ | 31,516 |
| $ | (2,728 | ) | $ | (28,788 | ) | $ | 27,314 |
|
| | | | | |
Comprehensive income (loss) | $ | 27,315 |
| $ | 31,308 |
| $ | (2,758 | ) | $ | (28,575 | ) | $ | 27,290 |
|
Less: Comprehensive loss attributable to noncontrolling interests | — |
| — |
| (25 | ) | — |
| (25 | ) |
Comprehensive income (loss) attributable to Brown Shoe Company, Inc. | $ | 27,315 |
| $ | 31,308 |
| $ | (2,733 | ) | $ | (28,575 | ) | $ | 27,315 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) |
FOR THE THIRTY-NINE WEEKS ENDED NOVEMBER 2, 2013 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net sales | $ | 551,962 |
| $ | 1,361,742 |
| $ | 136,825 |
| $ | (137,379 | ) | $ | 1,913,150 |
|
Cost of goods sold | 412,736 |
| 754,229 |
| 110,682 |
| (137,379 | ) | 1,140,268 |
|
Gross profit | 139,226 |
| 607,513 |
| 26,143 |
| — |
| 772,882 |
|
Selling and administrative expenses | 169,097 |
| 504,351 |
| 5,074 |
| — |
| 678,522 |
|
Restructuring and other special charges, net | 686 |
| 576 |
| — |
| — |
| 1,262 |
|
Impairment of assets held for sale | — |
| — |
| 4,660 |
| — |
| 4,660 |
|
Operating (loss) earnings | (30,557 | ) | 102,586 |
| 16,409 |
| — |
| 88,438 |
|
Interest expense | (16,076 | ) | (91 | ) | — |
| — |
| (16,167 | ) |
Interest income | 17 |
| 201 |
| 64 |
| — |
| 282 |
|
Intercompany interest income (expense) | 10,487 |
| (10,879 | ) | 392 |
| — |
| — |
|
Intercompany dividend | — |
| 7,778 |
| (7,778 | ) | — |
| — |
|
(Loss) earnings before income taxes from continuing operations | (36,129 | ) | 99,595 |
| 9,087 |
| — |
| 72,553 |
|
Income tax benefit (provision) | 2,630 |
| (26,995 | ) | (157 | ) | — |
| (24,522 | ) |
Equity in earnings from continuing operations of subsidiaries, net of tax | 81,704 |
| 9,104 |
| — |
| (90,808 | ) | — |
|
Net earnings from continuing operations | 48,205 |
| 81,704 |
| 8,930 |
| (90,808 | ) | 48,031 |
|
Discontinued operations: | |
| |
| |
| |
| |
|
(Loss) earnings from discontinued operations, net of tax | (5,582 | ) | 1,137 |
| (339 | ) | — |
| (4,784 | ) |
Disposition/impairment of discontinued operations, net of tax | — |
| 1,042 |
| (12,554 | ) | — |
| (11,512 | ) |
Equity in loss from discontinued operations of subsidiaries, net of tax | (10,714 | ) | (12,893 | ) | — |
| 23,607 |
| — |
|
Net loss from discontinued operations | (16,296 | ) | (10,714 | ) | (12,893 | ) | 23,607 |
| (16,296 | ) |
Net earnings (loss) | 31,909 |
| 70,990 |
| (3,963 | ) | (67,201 | ) | 31,735 |
|
Less: Net loss attributable to noncontrolling interests | — |
| — |
| (174 | ) | — |
| (174 | ) |
Net earnings (loss) attributable to Brown Shoe Company, Inc. | $ | 31,909 |
| $ | 70,990 |
| $ | (3,789 | ) | $ | (67,201 | ) | $ | 31,909 |
|
| | | | | |
Comprehensive income (loss) | $ | 30,944 |
| $ | 69,709 |
| $ | (7,285 | ) | $ | (62,538 | ) | $ | 30,830 |
|
Less: Comprehensive loss attributable to noncontrolling interests | — |
| — |
| (114 | ) | — |
| (114 | ) |
Comprehensive income (loss) attributable to Brown Shoe Company, Inc. | $ | 30,944 |
| $ | 69,709 |
| $ | (7,171 | ) | $ | (62,538 | ) | $ | 30,944 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS |
FOR THE THIRTY-NINE WEEKS ENDED NOVEMBER 2, 2013 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net cash provided by (used for) operating activities | $ | 27,271 |
| $ | 60,573 |
| $ | (25,859 | ) | $ | — |
| $ | 61,985 |
|
| | | | | |
Investing activities | |
| |
| |
| |
| |
|
Purchases of property and equipment | (3,389 | ) | (33,737 | ) | (762 | ) | — |
| (37,888 | ) |
Capitalized software | (3,591 | ) | (117 | ) | (7 | ) | — |
| (3,715 | ) |
Intercompany investing | (1,024 | ) | 1,024 |
| — |
| — |
| — |
|
Net proceeds from sale of subsidiaries | — |
| 69,347 |
| — |
| — |
| 69,347 |
|
Net cash (used for) provided by investing activities | (8,004 | ) | 36,517 |
| (769 | ) | — |
| 27,744 |
|
| | | | | |
Financing activities | |
| |
| |
| |
| |
|
Borrowings under revolving credit agreement | 966,000 |
| — |
| — |
| — |
| 966,000 |
|
Repayments under revolving credit agreement | (1,071,000 | ) | — |
| — |
| — |
| (1,071,000 | ) |
Dividends paid | (9,073 | ) | — |
| — |
| — |
| (9,073 | ) |
Issuance of common stock under share-based plans, net | (2,406 | ) | — |
| — |
| — |
| (2,406 | ) |
Tax benefit related to share-based plans | 2,581 |
| — |
| — |
| — |
| 2,581 |
|
Intercompany financing | 94,631 |
| (97,780 | ) | 3,149 |
| — |
| — |
|
Net cash (used for) provided by financing activities | (19,267 | ) | (97,780 | ) | 3,149 |
| — |
| (113,898 | ) |
Effect of exchange rate changes on cash and cash equivalents | — |
| (1,648 | ) | — |
| — |
| (1,648 | ) |
Decrease in cash and cash equivalents | — |
| (2,338 | ) | (23,479 | ) | — |
| (25,817 | ) |
Cash and cash equivalents at beginning of period | — |
| 32,060 |
| 36,163 |
| — |
| 68,223 |
|
Cash and cash equivalents at end of period | $ | — |
| $ | 29,722 |
| $ | 12,684 |
| $ | — |
| $ | 42,406 |
|
|
| |
ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Our first quarter financial results exceeded our expectations. Strong operating results atsales from our Wholesale OperationsBrand Portfolio segment and steady performance atgross margin and operating margin gains from our Famous Footwear segment were the primary drivers of our solid thirdfirst quarter performance. Our Wholesale OperationsBrand Portfolio segment reported improvementsa 7.9% improvement in net sales, and gross profit of 18.2% and 22.4%, respectively, while our Famous Footwear segment delivered improvements in gross profit and operating earnings driven by solid performance during the back-to-school selling season. Same-store sales were up 1.6% for the 10 weeks that make up this key selling season. For the nine months ended November 1, 2014, our Famous Footwear segment achieved record-setting sales.of 1.7% and 4.6%, respectively.
The following is a summary of the financial highlights for the thirdfirst quarter of 2014:2015:
Consolidated net sales increased $26.5$11.1 million, or 3.8%1.9%, to $729.3$602.3 million for the thirdfirst quarter of 2014,2015, compared to $702.8$591.2 million for the thirdfirst quarter of 2013.2014. Our Wholesale OperationsBrand Portfolio segment experienced continued improvement as net sales increased by $37.3$17.9 million, or 18.2%7.9%. Our Specialty RetailFamous Footwear segment reported a decline in net sales of $6.6$6.7 million, primarily driven by a lower store count, a decreasethe disposition of our e-commerce subsidiary, Shoes.com in same-store sales, and a lower Canadian dollar exchange rate. Our Famous Footwear segment experienced slightly lowerDecember 2014, which contributed $12.1 million in net sales of $4.2 million duringin the thirdfirst quarter of 2014, reflecting a lower store count and a declinepartially offset by an increase in same-store sales of 0.2%3.1%.
Consolidated operating earnings increased $8.5$1.6 million, or 19.1%5.6%, to $53.2$30.3 million in the thirdfirst quarter of 2014,2015, compared to $44.7$28.7 million for the thirdfirst quarter of 2013, driven by higher sales and better leveraging of our expense base.2014.
Consolidated net earnings attributable to Brown Shoe Company,Caleres, Inc. were $33.1$19.3 million, or $0.75$0.44 per diluted share, in the thirdfirst quarter of 2014,2015, compared to net earnings of $27.3$15.4 million, or $0.63$0.35 per diluted share, in the thirdfirst quarter of 2013.
The following items impacted our third quarter results in 2014 and 2013 and should be considered in evaluating the comparability of our results:
Franco Sarto Trademarks Acquisition – On February 3, 2014, we acquired the Franco Sarto trademarks for $65.0 million. As a result of acquiring the trademarks, our license agreement, which granted us the right to sell footwear and other products using the Franco Sarto trademarks through 2019, was terminated. The license agreement required us to pay royalty expense on sales of Franco Sarto branded products. Beginning February 3, 2014, the date of acquisition, we are no longer required to record royalty expense for these sales, resulting in lower cost of goods sold and higher gross profit. See Note 7 to the condensed consolidated financial statements for additional information.
Portfolio Realignment – Our portfolio realignment efforts included the sale of our Avia and Nevados divisions; the sale of AND 1; exiting certain women’s specialty and private label brands; exiting the children’s wholesale business; the sale and closure of certain sourcing and supply chain assets; closing or relocating numerous underperforming or poorly aligned retail stores; the termination of the Etienne Aigner license agreement; the election not to renew the Vera Wang license; and other infrastructure changes. Refer to Note 3 and Note 5 to the condensed consolidated financial statements for further discussion.2014.
Our debt-to-capital ratio, as defined herein, decreased to 28.3%26.4% at November 1, 2014,May 2, 2015, compared to 30.6%28.8% at November 2, 2013May 3, 2014 and 30.1%26.9% at February 1, 2014.January 31, 2015. The improvement from November 2, 2013May 3, 2014 and January 31, 2015 was driven by higher shareholder's equity due to our strong cash provided by operating activities, partially offset bynet earnings for 2014 and the acquisitionfirst quarter of the Franco Sarto trademarks and higher borrowings under our revolving credit agreement. As of November 1, 2014, we had $14.0 million of outstanding borrowings under the revolving credit agreement.2015. Our current ratio, as defined herein, was 2.012.21 to 1 at November 1, 2014,May 2, 2015, compared to 2.12 to 1 at November 2, 2013 and 2.05 to 1 at FebruaryMay 3, 2014 and 1.99 to 1 2014.at January 31, 2015. The improvement from May 3, 2014 and January 31, 2015 was driven by our cash provided by operating activities.
Outlook for the Remainder of 20142015
Despite potential shifts in consumer sentiment and industry-wide trends for the promotional holiday environment,With our strong first quarter results, we see continued growth potential for the fourth quarterremainder of 2014 and anticipate a solid end to the year. Based on our thirdfirst quarter results, we expect consolidated net sales for the year to be between $2.58$2.61 billion and $2.59$2.63 billion. We also expect to earn between $1.65$1.84 and $1.69$1.94 per diluted share in 2014. 2015.
Following are the consolidated results and the results by segment:
| | CONSOLIDATED RESULTS | | Thirteen Weeks Ended |
| Thirty-nine Weeks Ended | Thirteen Weeks Ended |
| November 1, 2014 | November 2, 2013 |
| November 1, 2014 | November 2, 2013 | May 2, 2015 | | May 3, 2014 |
| | % of Net Sales |
| | % of Net Sales |
|
| | % of Net Sales |
| | % of Net Sales |
| | | % of Net Sales |
| | | | % of Net Sales |
|
| |
| | | | | |
($ millions) | |
| | | | | |
Net sales | $ | 729.3 |
| 100.0 | % | $ | 702.8 |
| 100.0 | % |
| $ | 1,956.3 |
| 100.0 | % | $ | 1,913.2 |
| 100.0 | % | $ | 602.3 |
| | 100.0 | % | | $ | 591.2 |
| | 100.0 | % |
Cost of goods sold | 438.6 |
| 60.1 | % | 424.6 |
| 60.4 | % |
| 1,163.6 |
| 59.5 | % | 1,140.3 |
| 59.6 | % | 353.8 |
| | 58.7 | % | | 348.9 |
| | 59.0 | % |
Gross profit | 290.7 |
| 39.9 | % | 278.2 |
| 39.6 | % |
| 792.7 |
| 40.5 | % | 772.9 |
| 40.4 | % | 248.5 |
| | 41.3 | % | | 242.3 |
| | 41.0 | % |
Selling and administrative expenses | 237.5 |
| 32.6 | % | 233.5 |
| 33.2 | % |
| 679.5 |
| 34.7 | % | 678.5 |
| 35.5 | % | 218.2 |
| | 36.3 | % | | 213.6 |
| | 36.1 | % |
Restructuring and other special charges, net | — |
| — | % | — |
| — | % |
| — |
| — | % | 1.3 |
| 0.1 | % | |
Impairment of assets held for sale | — |
| — | % | — |
| — | % |
| — |
| — | % | 4.7 |
| 0.2 | % | |
Operating earnings | 53.2 |
| 7.3 | % | 44.7 |
| 6.4 | % |
| 113.2 |
| 5.8 | % | 88.4 |
| 4.6 | % | 30.3 |
| | 5.0 | % | | 28.7 |
| | 4.9 | % |
Interest expense | (5.2 | ) | (0.7 | )% | (5.3 | ) | (0.8 | )% |
| (15.6 | ) | (0.8 | )% | (16.1 | ) | (0.8 | )% | (4.4 | ) | | (0.7 | )% | | (5.3 | ) | | (0.9 | )% |
Interest income | 0.1 |
| 0.0 | % | 0.1 |
| — | % |
| 0.3 |
| — | % | 0.3 |
| 0.0 | % | 0.3 |
| | 0.0 | % | | 0.1 |
| | 0.0 | % |
Earnings before income taxes from continuing operations | 48.1 |
| 6.6 | % | 39.5 |
| 5.6 | % |
| 97.9 |
| 5.0 | % | 72.6 |
| 3.8 | % | |
Earnings before income taxes | | 26.2 |
| | 4.3 | % | | 23.5 |
| | 4.0 | % |
Income tax provision | (14.9 | ) | (2.1 | )% | (12.4 | ) | (1.7 | )% |
| (31.2 | ) | (1.6 | )% | (24.6 | ) | (1.2 | )% | (6.8 | ) | | (1.1 | )% | | (8.0 | ) | | (1.4 | )% |
Net earnings from continuing operations | 33.2 |
| 4.5 | % | 27.1 |
| 3.9 | % |
| 66.7 |
| 3.4 | % | 48.0 |
| 2.6 | % | |
Discontinued operations: | |
| |
| |
| |
|
| |
| |
| |
| |
| |
Earnings (loss) from discontinued operations, net of tax | — |
| — | % | 0.2 |
| 0.0 | % |
| — |
| — | % | (4.8 | ) | (0.3 | )% | |
Disposition/impairment of discontinued operations, net of tax | — |
| — | % | — |
| — | % |
| — |
| — | % | (11.5 | ) | (0.6 | )% | |
Net earnings (loss) from discontinued operations | — |
| — | % | 0.2 |
| 0.0 | % |
| — |
| — | % | (16.3 | ) | (0.9 | )% | |
Net earnings | 33.2 |
| 4.5 | % | 27.3 |
| 3.9 | % |
| 66.7 |
| 3.4 | % | 31.7 |
| 1.7 | % | 19.4 |
| | 3.2 | % | | 15.5 |
| | 2.6 | % |
Net earnings (loss) attributable to noncontrolling interests | 0.1 |
| 0.0 | % | — |
| — | % |
| 0.1 |
| 0.0 | % | (0.2 | ) | (0.0 | )% | |
Net earnings attributable to Brown Shoe Company, Inc. | $ | 33.1 |
| 4.5 | % | $ | 27.3 |
| 3.9 | % |
| $ | 66.6 |
| 3.4 | % | $ | 31.9 |
| 1.7 | % | |
Net earnings attributable to noncontrolling interests | | 0.1 |
| | 0.0 | % | | 0.1 |
| | 0.0 | % |
Net earnings attributable to Caleres, Inc. | | $ | 19.3 |
| | 3.2 | % | | $ | 15.4 |
| | 2.6 | % |
Net Sales
Net sales increased $26.5$11.1 million, or 3.8%1.9%, to $729.3$602.3 million for the thirdfirst quarter of 2014,2015, compared to $702.8$591.2 million for the thirdfirst quarter of 2013.2014. Net sales at our Wholesale OperationsBrand Portfolio segment increased while net sales at our Specialty Retail and Famous Footwear segmentssegment decreased. Our Wholesale OperationsBrand Portfolio segment reported a $37.3$17.9 million increase in net sales, driven by strong sales of our Dr. Scholl's, Sam Edelman Naturalizer, Franco Sarto, Dr. Scholl’s, Vince, and Via SpigaNaturalizer brands during the quarter. Our Specialty Retail segment reportedquarter, partially offset by a $6.6 million decrease in net sales due to a lower store count, a 6.9% decrease in same-store sales, and a lower Canadian dollar exchange rate.of our Franco Sarto brand. Net sales of our Famous Footwear segment decreased $4.2$6.7 million, reflecting a lower store count and a 0.2% decreasethe sale of Shoes.com in same-store sales.
Net sales increased $43.1 million, or 2.3%, to $1,956.3 million for the nine months ended November 1,December 2014, compared to $1,913.2 million for the nine months ended November 2, 2013. Our sales growth was led by our Wholesale Operations segment, which reported a $61.3 million increase in net sales, driven by strong sales of our Sam Edelman, Vince, Dr. Scholl's, Via Spiga, Franco Sarto, and Naturalizer brands. Our Famous Footwear segment reported a $3.5 million increase in net sales, reflecting a same-store sales increase of 0.8%, partially offset by a lower store count. Famous Footwear's record-setting sales for the nine months ended November 1, 2014 were driven by an improved customer conversion rate, an3.1% increase in pairs per transaction, and higher average unit retail prices, partially offset by a decline in customer traffic. Net sales of our Specialty Retail segment decreased $21.6 million due to a lower store count, lower sales from our e-commerce subsidiary, a decrease in same-store sales of 3.5%, and a lower Canadian dollar exchange rate.sales.
Same-store sales changes are calculated by comparing the sales in stores that have been open at least 13 months. Relocated stores are treated as new stores, and closed stores are excluded from the calculation. Sales change from new and closed stores, net reflects the change in net sales due to stores that have been opened or closed during the period and are therefore excluded from the same-store sales calculation. E-commerce sales for those e-commerce websites that function as an extension of a retail chain are included in the same-store sales calculation.
Gross Profit
Gross profit increased $12.5$6.2 million, or 4.5%2.6%, to $290.7$248.5 million for the thirdfirst quarter of 2014,2015, compared to $278.2$242.3 million for the thirdfirst quarter of 2013,2014, reflecting higher gross profit in both our Wholesale OperationsBrand Portfolio and Famous Footwear segments, partially offset by lower gross profit in our Specialty Retail segment.segments. As a percentage of net sales, gross profit increased to 39.9%41.3% for the thirdfirst quarter of 2014,2015, compared to 39.6%41.0% for the thirdfirst quarter of 2013,2014, driven by our Famous Footwear segment, which reported a gross profit rate of 43.4%46.7% for the thirdfirst quarter of 2015, compared to 45.1% for the first quarter of 2014, compared to 42.6% for the third quarter of 2013, and improvementpartially offset by a decline in the Wholesale OperationsBrand Portfolio segment gross profit rate to 32.9%33.2% in the thirdfirst quarter of 2015, compared to 34.3% in the first quarter of 2014 compared to 31.8% in the third quarter of 2013. The increase in our Wholesale Operations gross profit rate was driven by margin improvement from several of our brands as well as the elimination of the Franco Sarto royalty expense due to the acquisition of those trademarks in February 2014. These increases were partially offset byand a lowerhigher consolidated mix of wholesale versus retail sales during the quarter.sales. Gross profit rates in our retail businesses are higher, on average, than in our wholesale business. Retail and Wholesale Operationswholesale net sales were 67%65% and 33%35%, respectively, in the thirdfirst quarter of 2014,2015, compared to 71%68% and 29%32% in the thirdfirst quarter of 2013.
Gross profit increased $19.8 million, or 2.6%, to $792.7 million for the nine months ended November 1, 2014, compared to $772.9 million for the nine months ended November 2, 2013, reflecting higher sales and gross profit in our Wholesale Operations and Famous Footwear segments, partially offset by lower sales and gross profit in our Specialty Retail segment. As a percentage of net sales, gross profit was 40.5% for the nine months ended November 1, 2014, compared to 40.4% for the nine months ended November 2, 2013. Our Wholesale Operations segment reported an improved gross profit rate of 32.6% for the nine months ended November 1, 2014, compared to 31.5% for the nine months ended November 2, 2013 driven by margin improvement from several of our wholesale brands as well as the elimination of the Franco Sarto royalty. These increases were partially offset by a lower mix of retail sales during the nine months ended November 1, 2014. Retail and Wholesale Operations net sales were 68% and 32%, respectively, in the nine months ended November 1, 2014, compared to 70% and 30% in the nine months ended November 2, 2013.
We classify certain warehousing, distribution, sourcing and other inventory procurement costs in selling and administrative expenses. Accordingly, our gross profit and selling and administrative expense rates, as a percentage of net sales, may not be comparable to other companies.
Selling and Administrative Expenses
Selling and administrative expenses increased $4.0$4.6 million, or 1.7%2.1%, to $237.5$218.2 million for the thirdfirst quarter of 2014,2015, compared to $233.5$213.6 million in the thirdfirst quarter of 20132014 driven by higher expenses in both our Wholesale OperationsBrand Portfolio and Famous Footwear segments, partially offset by lowersegments. We incurred higher store rent and depreciation expenses and higher salaries and benefits costs, due in our Specialty Retail segment. On a consolidated basis,part to an increase in expenses
for our cash and stock-based incentive plans were higher by $2.5 million in the third quarter of 2014 as compared to the third quarter of 2013.plans. As a percentage of net sales, selling and administrative expenses decreasedincreased to 32.6%36.3% for the thirdfirst quarter of 20142015 from 33.2%36.1% for the thirdfirst quarter of 2013, reflecting better leveraging of our expense base over higher net sales.
Selling and administrative expenses increased $1.0 million, or 0.1%, to $679.5 million for the nine months ended November 1, 2014, compared to $678.5 million in the nine months ended November 2, 2013. As a percentage of net sales, selling and administrative expenses decreased to 34.7% for the nine months ended November 1, 2014 from 35.5% for the nine months ended November 2, 2013, reflecting better leveraging of our expense base over higher net sales.
Restructuring and Other Special Charges, Net
We recorded $1.3 million of restructuring and other special charges for the nine months ended November 2, 2013 related to our portfolio realignment efforts, as further discussed in Note 5 to the condensed consolidated financial statements. There were no corresponding charges during the nine months ended November 1, 2014.
Impairment of Assets Held for Sale
During the nine months ended November 2, 2013, we recorded an impairment charge of $4.7 million to adjust certain sourcing and supply chain assets held for sale to their estimated fair value, as further discussed in Note 5 to the condensed consolidated financial statements. There was no corresponding charge during the nine months ended November 1, 2014.
Operating Earnings
Operating earnings increased $8.5$1.6 million, or 19.1%5.6%, to $53.2$30.3 million for the thirdfirst quarter of 2014,2015, compared to $44.7$28.7 million for the thirdfirst quarter of 2013,2014, reflecting higher net sales and gross profit rate, partially offset by higher selling and administrative expenses, as described above. As a percentage of net sales, operating earnings improved to 7.3%5.0% for the thirdfirst quarter of 2014,2015, compared to 6.4%4.9% for the thirdfirst quarter of 2013.
Operating earnings increased $24.8 million, or28.0%, to $113.2 million for thenine months ended November 1, 2014, compared to $88.4 million for thenine months ended November 2, 2013, driven by higher sales and margins and the non-recurrence of the 2013 charges for impairment of assets held for sale andrestructuring and other special charges,net,as described above. As a percentage of net sales, operating earnings improved to5.8% for thenine months ended November 1, 2014, compared to4.6% for the nine months ended November 2, 2013.2014.
Interest Expense
Interest expense decreased $0.1$0.9 million, or 0.9%15.9%, to $5.2$4.4 million for the thirdfirst quarter of 2014,2015, compared to $5.3 million for the thirdfirst quarter of 2013,2014, primarily reflecting lower average borrowings under our revolving credit agreement. agreement and lower fees resulting from our credit agreement amendment in the fourth quarter of 2014, as further discussed in Liquidity and Capital Resources.
Interest expense decreased $0.5 million, or 3.3%, to $15.6 million for the nine months ended November 1, 2014, compared to $16.1 million for the nine months ended November 2, 2013, reflecting lower average borrowings under our revolving credit agreement.
Income Tax Provision
Our effective tax rate can vary considerably from period to period, depending on a number of factors. Our consolidated effective tax rate from continuing operations was 30.9%25.9% for the thirdfirst quarter of 2014,2015, compared to our third34.1% for the first quarter of 2013 rate2014. We recognized discrete tax benefits of 31.6%. For$1.6 million during the nine months ended November 1, 2014,quarter, following the conversion of one of our consolidated effective tax rate from continuing operations was 31.8%, as comparedprimary operating subsidiaries to 33.8% in the prior year. The effective tax rate was higher in the nine months ended November 2, 2013 due to the non-deductible nature of the $4.7 million impairment charge discussed above. a limited liability company.
Net Earnings from Continuing Operations
Net earnings from continuing operations increased $6.1$3.9 million, or 22.9%25.3%, to $33.2$19.4 million for the thirdfirst quarter of 2014,2015, compared to $27.1$15.5 million for the thirdfirst quarter of 2013,2014, as a result of the factors described above.
Net earnings from continuing operations increased $18.7 million, or 39.0%,Earnings Attributable to $66.7 million for the nine months ended November 1, 2014 compared to $48.0 million for the nine months ended November 2, 2013, as a result of the factors described above.
NetEarnings (Loss)from Discontinued OperationsCaleres, Inc.
Net earnings from discontinued operations were $0.2 million in the third quarter of 2013, with no corresponding net earnings during the third quarter of 2014. The net earnings in the third quarter of 2013 were primarily attributable to merchandise sold under the Vera Wang license agreement, as further discussed in Note 3 to the condensed consolidated financial statements.
Net loss from discontinued operations was $16.3 million during the nine months ended November 2, 2013, with no corresponding net loss during the nine months ended November 1, 2014. The net loss is primarily related to a non-cash impairment charge resulting from the sale of our Avia and Nevados divisions of $12.6Caleres, Inc. were $19.3 million during the first quarter of 2013, reflecting the estimated fair value of those assets, partially offset by a gain of $1.0 million recognized upon the sale. There was also a $4.8 million net loss from discontinued operations, primarily related to merchandise sold under the Etienne Aigner license agreement, as further described in Note 3 to the condensed consolidated financial statements.
Net Earnings Attributable to Brown Shoe Company, Inc.
Net earnings attributable to Brown Shoe Company, Inc. were $33.1 million and $66.6 million during the third quarter and nine months ended November 1, 2014,2015, compared to net earnings of $27.3 million and $31.9$15.4 million during the thirdfirst quarter and nine months ended November 2, 2013,of 2014, as a result of the factors described above.
| | FAMOUS FOOTWEAR | FAMOUS FOOTWEAR | | | | | | | |
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | Thirteen Weeks Ended |
| November 1, 2014 | November 2, 2013 | November 1, 2014 | November 2, 2013 | May 2, 2015 | | May 3, 2014 |
| | % of Net Sales |
| | % of Net Sales |
| | % of Net Sales |
| | % of Net Sales |
| | | % of Net Sales |
| | | | % of Net Sales |
|
($ millions, except sales per square | | | | | |
foot) | | | | | |
Operating Results | |
| |
| |
| |
| |
| |
| |
| |
| |
| | |
| | |
| | |
|
Net sales | $ | 435.4 |
| 100.0 | % | $ | 439.6 |
| 100.0 | % | $ | 1,183.6 |
| 100.0 | % | $ | 1,180.1 |
| 100.0 | % | $ | 360.0 |
| | 100.0 | % | | $ | 366.7 |
| | 100.0 | % |
Cost of goods sold | 246.5 |
| 56.6 | % | 252.3 |
| 57.4 | % | 655.3 |
| 55.4 | % | 657.1 |
| 55.7 | % | 191.8 |
| | 53.3 | % | | 201.3 |
| | 54.9 | % |
Gross profit | 188.9 |
| 43.4 | % | 187.3 |
| 42.6 | % | 528.3 |
| 44.6 | % | 523.0 |
| 44.3 | % | 168.2 |
| | 46.7 | % | | 165.4 |
| | 45.1 | % |
Selling and administrative expenses | 151.3 |
| 34.8 | % | 150.3 |
| 34.2 | % | 436.3 |
| 36.8 | % | 427.9 |
| 36.2 | % | 140.2 |
| | 38.9 | % | | 138.7 |
| | 37.8 | % |
Operating earnings | $ | 37.6 |
| 8.6 | % | $ | 37.0 |
| 8.4 | % | $ | 92.0 |
| 7.8 | % | $ | 95.1 |
| 8.1 | % | $ | 28.0 |
| | 7.8 | % | | $ | 26.7 |
| | 7.3 | % |
|
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| | |
Key Metrics | |
| | |
| |
|
| | |
| | |
| | | | |
| | |
Same-store sales % change | (0.2 | )% | |
| 4.9 | % | |
| 0.8 | % | |
| 4.3 | % | |
| 3.1 | % | | |
| | 1.3 | % | | |
|
Same-store sales $ change | $ | (0.9 | ) | |
| $ | 19.5 |
| |
| $ | 9.3 |
| |
| $ | 47.0 |
| |
| $ | 10.4 |
| | |
| | $ | 4.5 |
| | |
|
Sales change from new and closed stores, net | $ | (3.3 | ) | | $ | (16.7 | ) | | $ | (5.8 | ) | | $ | (1.1 | ) | | $ | (4.8 | ) | | | | $ | (2.2 | ) | | |
|
|
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|
| |
Sales per square foot, excluding e-commerce (thirteen and thirty-nine weeks ended) | $ | 61 |
| | $ | 59 |
| | $ | 166 |
| | $ | 160 |
| | |
Impact of changes in Canadian exchange rate on sales | | $ | (0.2 | ) | | | | $ | — |
| | |
Sales change of Shoes.com (sold in December 2014) | | $ | (12.1 | ) | | | | $ | (3.6 | ) | | |
Sales per square foot, excluding e-commerce (thirteen weeks ended) | | $ | 50 |
| | | | $ | 49 |
| | |
Sales per square foot, excluding e-commerce (trailing twelve months) | $ | 213 |
| | $ | 208 |
| | $ | 213 |
| | $ | 208 |
| | $ | 216 |
| | |
| | $ | 209 |
| | |
|
Square footage (thousand sq. ft.) | 6,983 |
| |
| 7,095 |
| |
| 6,983 |
| |
| 7,095 |
| |
| 6,954 |
| | |
| | 6,981 |
| | |
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| | | |
|
| | |
Stores opened | 12 |
| |
| 11 |
| |
| 40 |
| |
| 42 |
| |
| 15 |
| | |
| | 11 |
| | |
|
Stores closed | 6 |
| |
| 22 |
| |
| 43 |
| |
| 49 |
| |
| 13 |
| | |
| | 21 |
| | |
|
Ending stores | 1,041 |
| |
| 1,048 |
| |
| 1,041 |
| |
| 1,048 |
| |
| 1,040 |
| | |
| | 1,034 |
| | |
|
Net Sales
Net sales decreased $4.2$6.7 million, or 1.0%1.8%, to $435.4$360.0 million for the thirdfirst quarter of 2014,2015, compared to $439.6$366.7 million for the third quarter of 2013 reflecting a lower store count and a decrease in same-store sales, including e-commerce, of 0.2% during the thirdfirst quarter of 2014. Despite an overallThe decrease was due primarily to the sale of Shoes.com in December 2014 and the net decline in customer traffic,sales from new and closed stores, partially offset by a 3.1% increase in same-store sales. Famous Footwear reported an improved customer conversion rate, higher average unit retail prices and an increase in pairs per transaction.transaction, partially offset by a decline in customer traffic in our stores. Famous Footwear experienced sales growth in canvas, boots and sandals during the quarter.spring sandals. During the thirdfirst quarter of 2014,2015, we opened 1215 new stores and closed six13 stores, resulting in 1,0411,040 stores and total square footage of 7.0 million at the end of the thirdfirst quarter of 2014,2015, compared to 1,0481,034 stores and total square footage of 7.17.0 million at the end of the thirdfirst quarter of 2013.2014. Sales per square foot, excluding e-commerce, increased 1.8%2.1% to $61$50 in the thirdfirst quarter of 2014,2015, compared to $59$49 in the thirdfirst quarter of 2013.2014. On a trailing twelve month basis, sales per square foot, excluding e-commerce, increased 3.2% to $216 for the twelve months ended May 2, 2015, compared to $209 for the twelve months ended May 3, 2014. Members of our customer loyalty program, Rewards, continue to account for a majority of the segment’s sales, with approximately 75%74% of our net sales made to members of our Rewards program in both the thirdfirst quarter of 2014, compared to approximately 74% in2015 and the thirdfirst quarter of 2013.
Net sales increased $3.5 million, or 0.3%, to $1,183.6 million for the nine months ended November 1, 2014, compared to $1,180.1 million for the nine months ended November 2, 2013. Same-store sales, including e-commerce, increased 0.8% during the nine months ended November 1, 2014, primarily due to an improved customer conversion rate, an increase in pairs per transaction, and higher average unit retail prices, partially offset by a decline in customer traffic. Growth in canvas styles, women’s boots,
athletics, and accessories also contributed to our increase in sales. During the nine months ended November 1, 2014, we opened 40 new stores and closed 43 stores. Sales per square foot, excluding e-commerce, increased 3.2% to $166 in the nine months ended November 1, 2014, compared to $160 in the nine months ended November 2, 2013. On a trailing twelve-month basis, sales per square foot, excluding e-commerce, increased 2.1% to $213 for the twelve months ended November 1, 2014, compared to $208 for the twelve months ended November 2, 2013.2014.
Gross Profit
Gross profit increased $1.6$2.8 million, or 0.8%1.7%, to $188.9$168.2 million for the thirdfirst quarter of 2014,2015, compared to $187.3$165.4 million for the thirdfirst quarter of 2013.2014. As a percentage of net sales, our gross profit was 43.4%46.7% for the thirdfirst quarter of 2014,2015, compared to 42.6%45.1% for the thirdfirst quarter of 2013.2014. The increase in our gross profit rate was driven byreflects a number of factors, including a bettercontinued shift in mix oftoward higher margin products, higher average unit retail prices,product, lower inventory markdowns and lower freight costs.
Gross profit increased $5.3 million, or 1.0%, to $528.3 million forimproved margins resulting from the nine months ended November 1, 2014, compared to $523.0 million for the nine months ended November 2, 2013, due primarily to the growth in net sales. As a percentagedisposal of net sales, our gross profit was 44.6% for the nine months ended November 1, 2014, compared to the gross profit rate of 44.3% for the nine months ended November 2, 2013, reflecting the same factors described above.Shoes.com.
Selling and Administrative Expenses
Selling and administrative expenses increased $1.0$1.5 million, or 0.7%1.2%, to $151.3$140.2 million for the thirdfirst quarter of 2014,2015, compared to $150.3$138.7 million for the thirdfirst quarter of 2013.2014. The increase was primarily attributable to higher store rent and administrative expenses,facilities costs and
higher employee benefit costs, partially offset by lower store employee compensation and marketing expenses.a decrease in expenses due to the disposal of Shoes.com. As a percentage of net sales, selling and administrative expenses increased to 34.8%38.9% for the thirdfirst quarter of 2014,2015, compared to 34.2%37.8% for the thirdfirst quarter of 2013.
Selling and administrative expenses increased $8.4 million, or 1.9%, to $436.3 million for the nine months ended November 1, 2014, compared to $427.9 million for the nine months ended November 2, 2013. The increase was primarily attributable to higher store rent and depreciation expenses and higher administrative expenses, partially offset by lower store employee compensation and marketing expenses. As a percentage of net sales, selling and administrative expenses increased to 36.8% for the nine months ended November 1, 2014, compared to 36.2% for the nine months ended November 2, 2013.2014.
Operating Earnings
Operating earnings increased $0.6$1.3 million, or 1.4%4.6%, to $37.6$28.0 million for the thirdfirst quarter of 2014,2015, compared to $37.0$26.7 million for the thirdfirst quarter of 2013.2014. The increase was due to a higher gross profit rate, partially offset by higher selling and administrative expenses, as described above. As a percentage of net sales, operating earnings increased to 8.6% for thethird quarter of 2014, comparedto 8.4% for thethird quarter of 2013.
Operating earnings decreased $3.1 million, or3.2%, to $92.0 million for thenine months ended November 1, 2014, compared to $95.1 million for thenine months ended November 2, 2013. The decrease wasprimarilydue to higher selling and administrative expenses,partially offset by higher net sales and gross profit, as described above. As a percentage of net sales, operating earnings decreasedto7.8% for the nine months ended November 1, 2014,first quarter of 2015, compared to 8.1%7.3% for the the nine months ended November 2, 2013.first quarter of 2014.
|
| | | | | | | | | | | | | |
BRAND PORTFOLIO |
| Thirteen Weeks Ended |
| May 2, 2015 | | May 3, 2014 |
| | | % of |
| | | | % of |
|
| | | Net |
| | | | Net |
|
($ millions) | | | Sales |
| | | | Sales |
|
Operating Results | |
| | |
| | |
| | |
|
Net sales | $ | 242.3 |
| | 100.0 | % | | $ | 224.4 |
| | 100.0 | % |
Cost of goods sold | 162.0 |
| | 66.8 | % | | 147.4 |
| | 65.7 | % |
Gross profit | 80.3 |
| | 33.2 | % | | 77.0 |
| | 34.3 | % |
Selling and administrative expenses | 69.2 |
| | 28.6 | % | | 65.8 |
| | 29.3 | % |
Operating earnings | $ | 11.1 |
| | 4.6 | % | | $ | 11.2 |
| | 5.0 | % |
|
|
| | | |
|
| | |
Key Metrics | |
| | |
| | |
| | |
|
Wholesale/retail sales mix (%) | 88%/12% |
| | |
| | 85%/15% |
| | |
|
Change in wholesale net sales ($) | $ | 20.5 |
| | | | $ | 10.2 |
| | |
Unfilled order position at end of period | $ | 371.2 |
| | | | $ | 368.6 |
| | |
|
|
| | | |
|
| | |
Same-store sales % change | (2.5 | )% | | | | (5.6 | )% | | |
Same-store sales $ change | $ | (0.7 | ) | | | | $ | (1.8 | ) | | |
Sales change from new and closed stores, net | $ | (0.7 | ) | | | | $ | (3.7 | ) | | |
Impact of changes in Canadian exchange rate on retail sales | $ | (1.2 | ) | | | | $ | (0.9 | ) | | |
|
|
| | | |
|
| | |
Sales per square foot, excluding e-commerce (thirteen weeks ended) | $ | 78 |
| | | | $ | 84 |
| | |
Sales per square foot, excluding e-commerce (trailing twelve months) | $ | 370 |
| | | | $ | 391 |
| | |
Square footage (thousands sq. ft.) | 295 |
| | | | 307 |
| | |
|
|
| | | |
|
| | |
Stores opened | — |
| | | | 1 |
| | |
Stores closed | 6 |
| | | | 8 |
| | |
Ending stores | 165 |
| | | | 172 |
| | |
|
| | | | | | | | | | | | | | | | | | | | |
WHOLESALE OPERATIONS |
| Thirteen Weeks Ended | Thirty-nine Weeks Ended |
| November 1, 2014 | November 2, 2013 | November 1, 2014 | November 2, 2013 |
| | % of Net Sales |
| | % of Net Sales |
| | % of Net Sales |
| | % of Net Sales |
|
| | | | |
($ millions) | | | | |
Operating Results | |
| |
| |
| |
| |
| |
| |
| |
|
Net sales | $ | 242.6 |
| 100.0 | % | $ | 205.3 |
| 100.0 | % | $ | 628.6 |
| 100.0 | % | $ | 567.3 |
| 100.0 | % |
Cost of goods sold | 162.8 |
| 67.1 | % | 140.1 |
| 68.2 | % | 423.5 |
| 67.4 | % | 388.4 |
| 68.5 | % |
Gross profit | 79.8 |
| 32.9 | % | 65.2 |
| 31.8 | % | 205.1 |
| 32.6 | % | 178.9 |
| 31.5 | % |
Selling and administrative expenses | 52.0 |
| 21.4 | % | 48.4 |
| 23.6 | % | 144.2 |
| 22.9 | % | 144.9 |
| 25.5 | % |
Restructuring and other special charges, net | — |
| — |
| — |
| — |
| — |
| — |
| 1.2 |
| 0.2 | % |
Impairment of assets held for sale | — |
| — |
| — |
| — |
| — |
| — |
| 4.7 |
| 0.8 | % |
Operating earnings | $ | 27.8 |
| 11.5 | % | $ | 16.8 |
| 8.2 | % | $ | 60.9 |
| 9.7 | % | $ | 28.1 |
| 5.0 | % |
| | | | | | | | |
Key Metrics | |
| |
| |
| |
| |
| |
| |
| |
|
Unfilled order position at end of period | $ | 333.4 |
| |
| $ | 311.7 |
| |
| |
| |
| |
| |
|
Net Sales
Net sales increased $37.3$17.9 million, or 18.2%7.9%, to $242.6$242.3 million for the thirdfirst quarter of 2014,2015, compared to $205.3$224.4 million for the thirdfirst quarter of 2013.2014. The increase reflects strength in many of our brands including Dr. Scholl's, Sam Edelman and Naturalizer, partially offset by a decrease in our Franco Sarto Dr. Scholl's, Vince,brand. Our retail stores were impacted by a lower Canadian dollar exchange rate, a lower store count and Via Spiga. a decline in same-store sales of 2.5%. During the first quarter of 2015, we closed six stores, resulting in a total of 165 stores and total square footage of 0.3 million at the end of the first quarter of 2015, compared to 172 stores and total square footage of 0.3 million at the end of the first quarter of 2014. Sales per square foot, excluding e-commerce, was $78 for the first quarter of 2015, compared to $84 for the first quarter of 2014. On a trailing twelve month basis, sales per square foot, excluding e-commerce, decreased 8.1% to $370 for the twelve months ended May 2, 2015, compared to $391 for the twelve months ended May 3, 2014. Our unfilled order position increased $21.7$2.6 million, or 7.0%0.7%, to $333.4$371.2 million as of November 1, 2014,May 2, 2015, from $311.7$368.6 million as of November 2, 2013May 3, 2014 primarily due to growth in our Vince, Naturalizer and Sam EdelmanLifeStride brands, partially offset by a decreasedecreases in our Ryka brand.
Net sales increased $61.3 million, or 10.8%, to $628.6 million for the nine months ended November 1, 2014, compared to $567.3 million for the nine months ended November 2, 2013. The increase reflects strength in our Sam Edelman, Vince, Dr. Scholl's, Via Spiga, Franco Sarto and NaturalizerVia Spiga brands.
Gross Profit
Gross profit increased $14.6$3.3 million, or 22.4%4.3%, to $79.8$80.3 million for the thirdfirst quarter of 2015, compared to $77.0 million for the first quarter of 2014, compared to $65.2 million for the third quarter of 2013, reflectingdriven by the increase in net sales volume and higher gross profit rate.sales. As a percentage of net sales, our gross profit was 32.9%33.2% for the thirdfirst quarter of 2014,2015, compared to 31.8%34.3% for the thirdfirst quarter of 2013.2014. The increasedecrease in our gross profit rate was primarily driven by a higher mix of lower margin improvement from several of our wholesale brands as well as lower royalty expense due to the acquisition of the Franco Sarto trademarksproduct in the first quarter of 2014, partially offset by the reduced gross profit impact from lower sales of our wholesale brands through our retail divisions in the third quarter of 2014.
Gross profit increased $26.2 million, or 14.7%, to $205.1 million for the nine months ended November 1, 2014, compared to $178.9 million for the nine months ended November 2, 2013, reflecting the increase in net sales volume2015 and gross profit. As a percentage of net sales, our gross profit increased to 32.6% for the nine months ended November 1, 2014, from 31.5% for the nine months ended November 2, 2013. The increase in our gross profit rate was driven by the same factors described above for the quarter.higher freight expenses.
Selling and Administrative Expenses
Selling and administrative expenses increased $3.6$3.4 million, or 7.4%5.3%, to $52.0$69.2 million for the thirdfirst quarter of 2014,2015, compared to $48.4$65.8 million for the thirdfirst quarter of 2013,2014, driven by higher marketing expenses and an increase in salaries and benefits, due in part to higher anticipated payments under our cash and stock-based incentive plans. As a percentage of net sales, selling and administrative expenses decreased to 21.4%28.6% for the thirdfirst quarter of 2015, compared to 29.3% for the first quarter of 2014, compared to 23.6% forreflecting the third quarterlower mix of 2013, reflecting better leveraging of our expense base over higher netretail versus wholesale sales.
Selling and administrative expenses decreased $0.7 million, or 0.4%, to $144.2 million for the nine months ended November 1, 2014, compared to $144.9 million for the nine months ended November 2, 2013. The decrease was driven in part by lower warehouse expenses, partially offset by higher marketing expenses and an increase in anticipated payments under our cash and
stock-based incentive plans. As a percentage of net sales, selling and administrative expenses decreased to 22.9% for the nine months ended November 1, 2014, compared to 25.5% for the nine months ended November 2, 2013, reflecting better leveraging of our expense base over higher net sales.
Restructuring and Other Special Charges, Net
During the nine months ended November 2, 2013, we incurred $1.2 million of restructuring and other special charges. Our portfolio realignment efforts included the exit of certain brands, the sale and closure of sourcing and supply chain assets, and other changes to our infrastructure, as further discussed in Note 5 to the condensed consolidated financial statements. There were no corresponding charges during the nine months ended November 1, 2014.
Impairment of Assets Held for Sale
During the nine months ended November 2, 2013, we recorded an impairment charge of $4.7 million to adjust certain sourcing and supply chain assets held for sale to their estimated fair value, as further discussed in Note 5 to the condensed consolidated financial statements. There was no corresponding charge during the nine months ended November 1, 2014.
Operating Earnings
Operating earnings increased $11.0decreased $0.1 million, or 65.9%1.3%, to $27.8$11.1 million for the thirdfirst quarter of 2014,2015, compared to $16.8$11.2 million for the thirdfirst quarter of 2013.2014. The increasedecrease was primarily driven by highernet salesanda lower gross profit rate and an increase in selling and administrative expenses, partially offset by an increase in selling and administrative expenses.net sales. As a percentage of net sales, operating earnings increaseddecreased to 11.5%4.6% for the thirdfirst quarter of 2014, compared to8.2% in thethird quarter of 2013.
Operating earnings increased $32.8 million, or 116.7%, to $60.9 million for thenine months ended November 1, 2014, compared to $28.1 million for thenine months ended November 2, 2013. The increase was primarily driven byhighernet salesand gross profit rate and no expenses for impairment of assets held for sale orrestructuring and other special charges. As a percentage of net sales, operating earnings increased to9.7% for thenine months ended November 1, 2014,2015, compared to 5.0% forin the the nine months ended November 2, 2013.
|
| | | | | | | | | | | | | | | | | | | | |
SPECIALTY RETAIL | |
| Thirteen Weeks Ended | Thirty-nine Weeks Ended |
| November 1, 2014 | November 2, 2013 | November 1, 2014 | November 2, 2013 |
| | % of Net Sales |
| | % of Net Sales |
| | % of Net Sales |
| | % of Net Sales |
|
($ millions, except sales per square foot) | | | | |
Operating Results | |
| |
| |
| |
| |
| |
| |
| |
|
Net sales | $ | 51.3 |
| 100.0 | % | $ | 57.9 |
| 100.0 | % | $ | 144.1 |
| 100.0 | % | $ | 165.7 |
| 100.0 | % |
Cost of goods sold | 29.2 |
| 57.0 | % | 32.1 |
| 55.5 | % | 84.8 |
| 58.8 | % | 94.7 |
| 57.1 | % |
Gross profit | 22.1 |
| 43.0 | % | 25.8 |
| 44.5 | % | 59.3 |
| 41.2 | % | 71.0 |
| 42.9 | % |
Selling and administrative expenses | 22.5 |
| 43.7 | % | 25.6 |
| 44.1 | % | 66.1 |
| 45.9 | % | 73.9 |
| 44.7 | % |
Operating (loss) earnings | $ | (0.4 | ) | (0.7 | )% | $ | 0.2 |
| 0.4 | % | $ | (6.8 | ) | (4.7 | )% | $ | (2.9 | ) | (1.8 | )% |
| | | | | | | | |
Key Metrics | |
| |
| |
| |
| |
| |
| |
| |
|
Same-store sales % change | (6.9 | )% | |
| 0.6 | % | |
| (3.5 | )% | |
| 1.7 | % | |
|
Same-store sales $ change | $ | (2.5 | ) | |
| $ | 0.2 |
| |
| $ | (3.5 | ) | |
| $ | 1.8 |
| |
|
Sales change from new and closed stores, net | $ | (2.8 | ) | |
| $ | (1.3 | ) | |
| $ | (9.5 | ) | |
| $ | (3.7 | ) | |
|
Impact of changes in Canadian exchange rate on sales | $ | (1.0 | ) | |
| $ | (0.9 | ) | |
| $ | (2.7 | ) | |
| $ | (1.4 | ) | |
|
Sales change of e-commerce subsidiary | $ | (0.3 | ) | |
| $ | (2.9 | ) | |
| $ | (5.9 | ) | |
| $ | (3.9 | ) | |
|
| | | | | | | | |
Sales per square foot, excluding e-commerce (thirteen and thirty-nine weeks ended) | $ | 100 |
| |
| $ | 109 |
| |
| $ | 289 |
| |
| $ | 302 |
| |
|
Sales per square foot, excluding e-commerce (trailing twelve months) | $ | 384 |
| |
| $ | 400 |
| |
| $ | 384 |
| |
| $ | 400 |
| |
|
Square footage (thousand sq. ft.) | 304 |
| |
| 325 |
| |
| 304 |
| |
| 325 |
| |
|
|
|
| |
|
| |
|
| |
|
| |
Stores opened | 3 |
| |
| 4 |
| |
| 7 |
| |
| 10 |
| |
|
Stores closed | 1 |
| |
| 34 |
| |
| 14 |
| |
| 47 |
| |
|
Ending stores | 172 |
| |
| 185 |
| |
| 172 |
| |
| 185 |
| |
|
Net Sales
Net sales decreased $6.6 million, or 11.4%, to $51.3 million for the thirdfirst quarter of 2014, compared to $57.9 million for the third quarter of 2013. The decrease in net sales reflects a lower store count due in part to the transfer of our China retail operations to C. banner International Holdings Limited, as further discussed in Note 14 to the condensed consolidated financial statements, a 6.9% decrease in same-store sales, a lower Canadian dollar exchange rate, and a decrease in net sales at our e-commerce subsidiary. We opened three new retail stores and closed one store during the third quarter of 2014, resulting in a total of 172 stores and total square footage of 0.3 million at the end of the third quarter of 2014, compared to 185 stores (including two Naturalizer stores in China) and total square footage of 0.3 million at the end of the third quarter of 2013. During 2013, all Naturalizer stores in China were either closed or transferred to our joint venture partner. Sales per square foot, excluding e-commerce, decreased 8.5% to $100 for the third quarter of 2014, compared to $109 for the third quarter of 2013.
Net sales decreased $21.6 million, or 13.0%, to $144.1 million for the nine months ended November 1, 2014, compared to $165.7 million for the nine months ended November 2, 2013. The decrease in net sales reflects a lower store count due in part to the transfer of our China retail operations to C. banner International Holdings Limited as further discussed in Note 14 to the condensed consolidated financial statements, a $5.9 million decrease in net sales at our e-commerce subsidiary, a decrease in same-store sales of 3.5%, and a lower Canadian dollar exchange rate. Sales per square foot, excluding e-commerce, decreased 4.4% to $289 for the nine months ended November 1, 2014, compared to $302 for the nine months ended November 2, 2013. On a trailing twelve-month basis, sales per square foot, excluding e-commerce, decreased 4.2% to $384 for the twelve months ended November 1, 2014 compared to $400 for the twelve months ended November 2, 2013.
Gross Profit
Gross profit decreased $3.7 million, or 14.4%, to $22.1 million for the third quarter of 2014, compared to $25.8 million for the third quarter of 2013, driven by the decrease in net sales and a lower gross profit rate. As a percentage of net sales, our gross profit decreased to 43.0% for the third quarter of 2014 from 44.5% for the third quarter of 2013. The decrease in our gross profit rate was primarily driven by an unfavorable sales mix of lower margin product.
Gross profit decreased $11.7 million, or 16.4%, to $59.3 million for the nine months ended November 1, 2014, compared to $71.0 million for the nine months ended November 2, 2013, driven by the decrease in net sales and a lower gross profit rate. As a percentage of net sales, our gross profit decreased to 41.2% for the nine months ended November 1, 2014 from 42.9% for the nine months ended November 2, 2013, reflecting an unfavorable sales mix of lower margin product and higher inventory markdowns to clear inventory.
Selling and Administrative Expenses
Selling and administrative expenses decreased $3.1 million, or 12.3%, to $22.5 million for the third quarter of 2014, compared to $25.6 million for the third quarter of 2013, reflecting lower facility and employee expenses as a result of our lower store count as well as a lower Canadian dollar exchange rate. As a percentage of net sales, selling and administrative expenses decreased to 43.7% for the third quarter of 2014 from 44.1% for the third quarter of 2013.
Selling and administrative expenses decreased $7.8 million, or 10.5%, to $66.1 million for the nine months ended November 1, 2014, compared to $73.9 million for the nine months ended November 2, 2013, reflecting the same factors described above. As a percentage of net sales, selling and administrative expenses increased to 45.9% for the nine months ended November 1, 2014 from 44.7% for the nine months ended November 2, 2013, reflecting the de-leveraging of the expense base over lower net sales.
Operating (Loss) Earnings
Specialty Retail reported an operating loss of $0.4 million for the third quarter of 2014, compared to operating income of $0.2 million for the third quarter of 2013, driven by lower net sales and gross profit rate, partially offset by lower selling and administrative expenses, as discussed above.
Specialty Retail reported an operating loss of $6.8 million for the nine months ended November 1, 2014, compared to an operating loss of $2.9 million for the nine months ended November 2, 2013. The increase in our operating loss was driven by lower net sales and gross profit rate, partially offset by lower selling and administrative expenses, as discussed above. 2014.
The Other category includes unallocated corporate administrative expenses and other costs and recoveries. Costs of $11.8$8.7 million were incurred for the thirdfirst quarter of 20142015 compared to costs of $9.4$9.2 million for the thirdfirst quarter of 2013. The $2.4 million increase was driven in part by higher anticipated payments under our cash and stock-based incentive plans and an increase in professional service fees. Unallocated corporate administrative expenses and other costs and recoveries were $32.8 million for the nine months ended November 1, 2014, compared to $31.8 million for the nine months ended November 2, 2013.2014.
|
|
LIQUIDITY AND CAPITAL RESOURCES |
Borrowings
| | | November 1, | November 2, | February 1, | | | | | | | |
($ millions) | 2014 | 2013 | 2014 | May 2, 2015 | May 3, 2014 | January 31, 2015 |
Borrowings under revolving credit agreement | $ | 14.0 |
| $ | — |
| $ | 7.0 |
| |
Long-term debt – Senior Notes | 199.2 |
| 199.0 |
| 199.0 |
| $ | 199.2 |
| $ | 199.1 |
| $ | 199.2 |
|
Total debt | $ | 213.2 |
| $ | 199.0 |
| $ | 206.0 |
| |
Total debt obligations increased $14.2 million to $213.2of $199.2 million at November 1, 2014,May 2, 2015 and January 31, 2015, increased $0.1 million compared to $199.0$199.1 million at November 2, 2013, and increased $7.2 million from $206.0 million at February 1, 2014 due to higher borrowings under our revolving credit agreement.May 3, 2014. As a result of lower average borrowings under our revolving credit agreement, which had no borrowings outstanding at May 2, 2015, and lower fees resulting from our credit agreement amendment in the fourth quarter of 2014, interest expense for the nine months ended November 1, 2014first quarter of 2015 decreased $0.5$0.9 million to $15.6$4.4 million, compared to $16.1$5.3 million for the nine months ended November 2, 2013.first quarter of 2014.
Credit Agreement
On January 7, 2011, Brown ShoeDecember 18, 2014, the Company Inc. and certain of ourits subsidiaries (the “Loan Parties”) entered into a ThirdFourth Amended and Restated Credit Agreement which was further amended on February 17, 2011 (as so amended, the “Credit(“Credit Agreement”). The Credit Agreement matures on January 7, 2016December 18, 2019 and provides for a revolving credit facility in an aggregate amount of up to $530.0$600.0 million, subject to the calculated borrowing base restrictions, and provides for an increase at ourthe Company’s option ofby up to $150.0 million from time to time during the term of the Credit Agreement, (the “general purpose accordion feature”) subject to satisfaction of certain conditions and the willingness of existing or new lenders to assume the increase. The Credit
Agreement amended and restated the Third Amended and Restated Credit Agreement, dated as of January 7, 2011 (the "Former Credit Agreement").
Borrowing availability under the Credit Agreement is limited to the lesser of the total commitments and the borrowing base ("Loan Cap"), which is based on stated percentages of the sum of eligible accounts receivable, eligible inventory and inventory,eligible credit card receivables, as defined, less applicable reserves. Under the Credit Agreement, the Loan Parties’ obligations are secured by a first-priority security interest in all accounts receivable, inventory and certain other collateral.
Interest on borrowings is at variable rates based on the London Interbank Offered Rate (“LIBOR”) or the prime rate, as defined in the Credit Agreement, plus a spread. The interest rate and fees for letters of credit vary based upon the level of excess availability under the Credit Agreement. There is an unused line fee payable on the unused portion under the facility and a letter of credit fee payable on the outstanding face amount under letters of credit.
The Credit Agreement limits ourthe Company’s ability to create, incur, assume or permit to exist additional indebtedness createand liens, make investments or specified payments, give guarantees, pay dividends, make capital expenditures and merge or acquire or sell assets. In addition, certain additional covenants would be triggered if excess availability were to fall below specified levels, including fixed charge coverage ratio requirements. Furthermore, if excess availability falls below the greater of (i) 15.0%12.5% of the lesser of (x) the borrowing base or (y) the total commitments and (ii) $35.0 millionLoan Cap for three consecutive business days or an event of default occurs, the lenders may assume dominion and control over ourthe Company’s cash (a “cash dominion event”) until such event of default is cured or waived or the excess availability exceeds such amount for 30 consecutive days. days, provided that a cash dominion event shall be deemed continuing (even if an event of default is no longer continuing and/or excess availability exceeds the required amount for 30 consecutive business days) after a cash dominion event has occurred and been discontinued on two occasions in any twelve month period.
The Credit Agreement contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, judgment defaults in excess of a certain threshold, the failure of any guaranty or security document supporting the agreement to be in full force and effect, and a change of control event. In addition, if the excess availability falls below the greater of (i) 12.5%10.0% of the lesser of (x) the borrowing base or (y) the total commitmentsLoan Cap and (ii) $35.0$50.0 million, and the fixed charge coverage ratio is less than 1.0 to 1.0, wethe Company would be in default under the Credit Agreement. The Credit Agreement also contains certain other covenants and restrictions. We were in compliance with all covenants and restrictions under the Credit Agreement as of November 1, 2014 in all material respects.May 2, 2015.
At November 1, 2014,May 2, 2015, we had $14.0 million ofno borrowings outstanding and $6.4$6.3 million in letters of credit outstanding under the Credit Agreement. Total borrowing availability was $509.6$518.3 million at November 1, 2014.May 2, 2015.
$200 Million Senior Notes Due 2019
On May 11, 2011, we issued $200.0 million aggregate principal amount of 7.125% Senior Notes due 2019 (the “2019 Senior Notes”). We used a portion of the net proceeds to call and redeem the outstanding 8.75% senior notes due in 2012. We used the remaining net proceeds for general corporate purposes, including repaying amounts outstanding under the Credit Agreement.
The 2019 Senior Notes are guaranteed on a senior unsecured basis by each of our subsidiaries that is an obligor under the Credit Agreement. Interest on the 2019 Senior Notes is payable on May 15 and November 15 of each year. The 2019 Senior Notes mature on May 15, 2019. We may redeem all or a part of the 2019 Senior Notes at the redemption prices (expressed as a percentage of principal amount) set forth below plus accrued and unpaid interest, if redeemed during the 12-month period beginning on May 15 of the years indicated below:
| | Year | Percentage |
| Percentage |
|
2014 | 105.344 | % | |
2015 | 103.563 | % | 103.563 | % |
2016 | 101.781 | % | 101.781 | % |
2017 and thereafter | 100.000 | % | 100.000 | % |
The 2019 Senior Notes also contain certain other covenants and restrictions that limit certain activities including, among other things, levels of indebtedness, payments of dividends, the guarantee or pledge of assets, certain investments, common stock repurchases, mergers and acquisitions and sales of assets. As of November 1, 2014,May 2, 2015, we were in compliance with all covenants and restrictions relating to the 2019 Senior Notes in all material respects.Notes.
Working Capital and Cash Flow
| | | Thirty-nine Weeks Ended | |
| | | | | | | |
| November 1, | November 2, | Increase/ | Thirteen Weeks Ended | |
|
($ millions) | 2014 | 2013 | (Decrease) | May 2, 2015 |
| May 3, 2014 |
| Change |
|
Net cash provided by operating activities | $ | 68.5 |
| $ | 62.0 |
| $ | 6.5 |
| $ | 21.9 |
| $ | 36.4 |
| $ | (14.5 | ) |
Net cash (used for) provided by investing activities | (112.4 | ) | 27.7 |
| (140.1 | ) | |
Net cash provided by (used for) financing activities | 0.5 |
| (113.9 | ) | 114.4 |
| |
Net cash used for investing activities | | (13.9 | ) | (73.7 | ) | 59.8 |
|
Net cash used for financing activities | | (9.3 | ) | (9.1 | ) | (0.2 | ) |
Effect of exchange rate changes on cash and cash equivalents | (0.1 | ) | (1.6 | ) | 1.5 |
| 0.2 |
| 0.5 |
| (0.3 | ) |
Decrease in cash and cash equivalents | $ | (43.5 | ) | $ | (25.8 | ) | $ | (17.7 | ) | $ | (1.1 | ) | $ | (45.9 | ) | $ | 44.8 |
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Reasons for the major variances in cash provided (used) in the table above are as follows:
Cash provided by operating activities was $6.5$14.5 million higherlower in the nine months ended November 1, 2014first quarter of 2015 as compared to the nine months ended November 2, 2013,first quarter of 2014, reflecting the following factors:
Higher net earnings; and
A smaller increasedecrease in inventoriesreceivables in the nine months ended November 1, 2014first quarter of 2015 compared to the comparable period in 2013; partially offset by2014;
A larger decrease in trade accounts payable in the nine months ended November 1, 2014first quarter of 2015 compared to the comparable period in 2013 due2014, primarily related to increased levels of domestic cash in the timingfirst quarter of payments;2015 resulting in lower levels of unfunded outstanding checks reclassified to accounts payable at quarter-end; and
A smaller increaselarger decrease in accrued expenses and other liabilities in the nine months ended November 1, 2014first quarter of 2015 compared to the comparable period in 2013first quarter of 2014 primarily due to higher payments related to our stock-based incentive plans in the timingfirst quarter of payments.2015; partially offset by
Higher net earnings.
Cash used for investing activities was $140.1$59.8 million higherlower in the nine months ended November 1, 2014,first quarter of 2015, as compared to the comparable period in 20132014 due primarily to the $65.1 million acquisition of the Franco Sarto trademarks in the first quarter of 2014, the $7.0 million minority investment in Jack Erwin, Inc. in August 2014,partially offset by higher purchases of property and the $69.3 million of net proceeds from the sale of subsidiariesequipment in the nine months ended November 2, 2013.first quarter of 2015, driven by leasehold improvements associated with the relocation of our leased facility in New York City. For fiscal 2014,2015, we expect purchases of property and equipment and capitalized software of approximately $56 million to $59$75 million.
Cash provided byused for financing activities was $114.4$0.2 million higher for the nine months ended November 1, 2014first quarter of 2015 as compared to the comparable period in 20132014 primarily due to $7.0 millionthe acquisition of treasury stock in the first quarter of 2015 and an increase in common stock issued under share-based plans, partially offset by a decrease in net borrowingsrepayments under our Credit Agreement during the nine months ended November 1, 2014 compared to $105.0 million of net repayments during the nine months ended November 2, 2013.revolving credit agreement.
A summary of key financial data and ratios at the dates indicated is as follows:
| | | November 1, 2014 |
| November 2, 2013 |
| February 1, 2014 |
| May 2, 2015 |
| May 3, 2014 |
| January 31, 2015 |
|
Working capital ($ millions) (1) | $ | 393.8 |
| $ | 397.9 |
| $ | 405.7 |
| $ | 401.5 |
| $ | 355.7 |
| $ | 393.8 |
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|
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Current ratio (2) | 2.01:1 |
| 2.12:1 |
| 2.05:1 |
| 2.21:1 |
| 2.05:1 |
| 1.99:1 |
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Debt-to-capital ratio (3) | 28.3 | % | 30.6 | % | 30.1 | % | 26.4 | % | 28.8 | % | 26.9 | % |
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(1) | Working capital has been computed as total current assets less total current liabilities. |
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(2) | The current ratio has been computed by dividing total current assets by total current liabilities. |
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(3) | The debt-to-capital ratio has been computed by dividing total debt by total capitalization. Total debt is defined as long-term debt and borrowings under the revolving credit agreement. Total capitalization is defined as total debt and total shareholders’ equity. |
Working capital at November 1, 2014May 2, 2015 was $393.8$401.5 million, which was $11.9$7.7 million lowerhigher than at February 1, 2014January 31, 2015 and $4.1$45.8 million lowerhigher than at November 2, 2013.May 3, 2014. Our current ratio decreasedincreased to 2.012.21 to 1 as of NovemberMay 2, 2015, compared to 1.99 to 1 2014, compared toat January 31, 2015, and 2.05 to 1 at February 1, 2014, and 2.12 to 1 at November 2, 2013.May 3, 2014. The decreasesincreases in working capital and the current ratio from February 1, 2014January 31, 2015 to November 1, 2014May 2, 2015 reflect higherlower trade accounts payable and other accrued expenses, partially offset by lower inventory levels and a decrease in prepaid expensesaccounts receivable. The increases in working capital and otherthe current assets,ratio from May 3, 2014 to May 2, 2015 reflect higher cash and higher borrowings under our revolving credit agreement, partially offset bycash
equivalents, lower trade accounts payable and an increase in accounts receivable, and higherpartially offset by a decrease in inventory levels. Our debt-to-capital ratio was 28.3%26.4% as of November 1, 2014,May 2, 2015, compared to 30.1%26.9% as of February 1, 2014January 31, 2015 and 30.6%28.8% as of November 2, 2013.May 3, 2014. The decrease in our debt-to-capital ratio from February 1,January 31, 2015 and May 3, 2014 and November 2, 2013 isreflects higher shareholder's equity due to the impact of our net earnings partially offset by higher borrowings under our revolving credit agreement.for 2014 and the first quarter of 2015.
At November 1, 2014,May 2, 2015, we had $39.1$66.3 million of cash and cash equivalents, substantially all of which represents cash and cash equivalents of our foreign subsidiaries. In accordance with Internal Revenue Service guidelines limiting the length of time that our parent company can borrow funds from foreign subsidiaries, Brown Shoethe Company Inc. utilizes the cash and cash equivalents of its foreign subsidiaries to manage the liquidity needs of the consolidated company and minimize interest expense on a consolidated basis.
As further discussed in Note 7 to the condensed consolidated financial statements, on February 3, 2014, we purchased the Franco Sarto trademarks for $65.0 million. In addition, on August 29, 2014, we invested $7.0 million in Jack Erwin, Inc., a men’s shoe line offering a limited assortment of high-quality, handmade, men’s footwear directly to consumers.
We declared and paid dividends of $0.07 per share in both the thirdfirst quarter of 20142015 and the thirdfirst quarter of 2013.2014. The declaration and payment of any future dividend is at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors. However, we presently expect that dividends will continue to be paid.
Our contractual obligations primarily consist of purchase obligations, operating lease commitments, long-term debt, interest on long-term debt, minimum license commitments, borrowings under our revolving credit agreement, obligations for our supplemental executive retirement plan and other postretirement benefits and obligations related to our restructuring initiatives.
Except for changes within the normal course of business (primarily changes in purchase obligations, which fluctuate throughout the year as a result of the seasonal nature of our operations, borrowings under and repayments of our revolving credit agreement, and changes in operating lease commitments as a result of new stores, store closures and lease renewals), there have been no other significant changes to our contractual obligations identified in our Annual Report on Form 10-K for the year ended February 1, 2014.January 31, 2015.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES |
No material changes have occurred related to critical accounting policies and estimates since the end of the most recent fiscal year. The adoption of new accounting pronouncements is described in Note 2 to the condensed consolidated financial statements. For further information, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended February 1, 2014.January 31, 2015.
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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS |
Recently issued accounting pronouncements and their impact on the Company are described in Note 2 to the condensed consolidated financial statements.
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FORWARD-LOOKING STATEMENTS |
This Form 10-Q contains certain forward-looking statements and expectations regarding the Company’s future performance and the performance of its brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These risks include (i) changing consumer demands, which may be influenced by consumers' disposable income, which in turn can be influenced by general economic conditions; (ii) rapidly changing fashion trends and purchasing patterns; (iii) intense competition within the footwear industry; (iv) the ability to accurately forecast sales and manage inventory levels; (v) political and economic conditions or other threats to the continued and uninterrupted flow of inventory from China and other countries, where the Company relies heavily on third-party manufacturing facilities for a significant amount of its inventory; (v) the ability to accurately forecast sales and manage inventory levels; (vi) cybersecurity threats or other major disruption to the Company’s information technology systems; (vii) customer concentration and increased consolidation in the retail industry; (viii) a disruption in the Company’s distribution centers; (ix) the ability to recruit and retain senior management and other key associates; (x) foreign currency fluctuations; (x) additional duties, quotas, tariffs or other trade restrictions; (xi) compliance with applicable laws and standards with respect to labor, trade and product safety issues; (xii) the ability to recruit and retain senior management and other key associates;secure/exit leases on favorable terms; (xiii) the ability to attract, retain and maintain good relationships with licensors and protect intellectual property rights; (xiv) the ability to secure/exit leases on favorable terms; and (xv)(xiv) the ability to maintain relationships with current suppliers. The Company's reports to the Securities and Exchange Commission contain detailed information relating to such factors, including, without limitation, the information under the caption “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended February 1, 2014,January 31, 2015, which information is incorporated by reference herein and updated by the Company’s Quarterly Reports on Form 10-Q. The Company does not undertake any obligation or plan to update these forward-looking statements, even though its situation may change.
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ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
No material changes have taken place in the quantitative and qualitative information about market risk since the end of the most recent fiscal year. For further information, see Part II, Item 7A of the Company's Annual Report on Form 10-K for the year ended February 1, 2014.January 31, 2015.
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ITEM 4 | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
It is the Chief Executive Officer's and Chief Financial Officer's ultimate responsibility to ensure we maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures include mandatory communication of material events, automated accounting processing and reporting, management review of monthly, quarterly and annual results, an established system of internal controls and internal control reviews by our internal auditors.
A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further,Furthermore, the design of a control system must reflect the fact there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to errors or fraud may occur and not be detected. Our disclosure controls and procedures are designed to provide
a reasonable level of assurance that their objectives are achieved. As of November 1, 2014,May 2, 2015, management of the Company, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures were effective at the reasonable assurance level.
There were no significant changes to internal control over financial reporting during the quarter ended November 1, 2014,May 2, 2015, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
We are involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such ordinary course of business proceedings and litigation currently pending will not have a material adverse effect on our results of operations or financial position. All legal costs associated with litigation are expensed as incurred.
Information regarding Legal Proceedings is set forth within Note 15 to the condensed consolidated financial statements and incorporated by reference herein.
No material changes have occurred related to our risk factors since the end of the most recent fiscal year. For further information, see Part I, Item 1A of our Annual Report on Form 10-K for the year ended February 1, 2014.January 31, 2015.
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ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
The following table provides information relating to our repurchases of common stock during the thirdfirst quarter of 2014:2015:
|
| | | | | | | | | | | | | |
| | | | | | Maximum Number of Shares that May Yet be Purchased Under the Program (1) |
| | | | | Total Number Purchased as Part of Publicly Announced Program (1) |
| Total Number of Shares Purchased | | Average Price Paid per Share | |
| | |
Fiscal Period | | |
| | | | | | |
August 3, 2014 – August 30, 2014 | — |
| | $ | — |
| | — |
| 2,500,000 |
|
| | | | | | |
August 31, 2014 – October 4, 2014 | 6,682 |
| (2 | ) | 28.46 |
| (2 | ) | — |
| 2,500,000 |
|
| | | | | | |
October 5, 2014 – November 1, 2014 | 2,475 |
| (2 | ) | 26.11 |
| (2 | ) | — |
| 2,500,000 |
|
| | | | | | |
Total | 9,157 |
| (2 | ) | $ | 27.82 |
| (2 | ) | — |
| 2,500,000 |
|
|
| | | | | | | | | | | |
| | | | | | Maximum Number of Shares that May Yet be Purchased Under the Program (1) |
| | | | | Total Number Purchased as Part of Publicly Announced Program (1) |
| Total Number of Shares Purchased (2) | | Average Price Paid per Share (2) | |
| | |
Fiscal Period | | |
| | | | | | |
February 1, 2015 – February 28, 2015 | 44,355 |
| | $ | 29.23 |
| | — |
| 2,500,000 |
|
| | | | | | |
March 1, 2015 – April 4, 2015 | 259,037 |
| | 31.83 |
| | 151,500 |
| 2,348,500 |
|
| | | | | | |
April 5, 2015 – May 2, 2015 | — |
| | — |
| | — |
| 2,348,500 |
|
| | | | | | |
Total | 303,392 |
| | $ | 31.45 |
| | 151,500 |
| 2,348,500 |
|
| |
(1) | On August 25, 2011, the Board of Directors approved a stock repurchase program authorizing the repurchase of up to 2.5 million shares of our outstanding common stock. We can utilizeuse the repurchase program to repurchase shares on the open market or in private transactions from time to time, depending on market conditions. The repurchase program does not have an expiration date. Under this plan, no151,500 shares were repurchased through the end of the thirdfirst quarter of 2014;2015; therefore, there were 2.52.3 million shares authorized to be purchased under the program as of November 1, 2014.May 2, 2015. Our repurchases of common stock are limited under our debt agreements. |
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(2) | ReflectsIncludes shares that were tendered by employees related to certain share-based awards. Theseawards and shares repurchased on the open market as part of our stock repurchase program. The shares related to employee share-based awards were tendered in satisfaction of the exercise price of stock options and/or to satisfy minimum tax withholding amounts for non-qualified stock options, restricted stock and stock performance awards. Accordingly, these share purchases are not considered a part of our publicly announced stock repurchase program. |
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ITEM 3 | DEFAULTS UPON SENIOR SECURITIES |
None.
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ITEM 4 | MINE SAFETY DISCLOSURES |
Not applicable.
None.
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| | |
Exhibit No. | | |
3.1 | | Restated Certificate of Incorporation of Brown Shoe Company,Caleres, Inc. (the “Company”) incorporated herein by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended May 5, 2007, and8-K filed June 5, 2007.1, 2015. |
3.2 | | Bylaws of the Company as amended through May 29, 2014,28, 2015, incorporated herein by reference to Exhibit 3.13.2 to the Company’s Form 8-K datedfiled June 1, 2015. |
10.1 | † | Company Incentive and Stock Compensation Plan of 2011, as amended and restated as of May 28, 2015, filed herewith. |
10.2 | † | Company Deferred Compensation Plan for Non-Employee Directors, as amended and restated as of May 30, 2014.28, 2015, filed herewith. |
10.3 | † | Company Supplemental Executive Retirement Plan (SERP), as amended and restated as of May 28, 2015, filed herewith. |
10.4 | † | Company Deferred Compensation Plan, as amended and restated as of May 28, 2015, filed herewith. |
10.5 | † | Company Non-Employee Director Share Plan (2009), as amended and restated as of May 28, 2015, filed herewith. |
31.1 | † | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | † | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | † | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS | † | XBRL Instance Document |
101.SCH 101.CAL 101.LAB 101.PRE 101.DEF | † † † † † | XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Presentation Linkbase Document XBRL Taxonomy Definition Linkbase Document |
† Denotes exhibit is filed with this Form 10-Q.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | BROWN SHOE COMPANY,CALERES, INC. |
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Date: December 9, 2014June 10, 2015 | | /s/ Russell C. HammerKenneth H. Hannah |
| | Russell C. Hammer Kenneth H. Hannah
Senior Vice President and Chief Financial Officer on behalf of the Registrant and as the Principal Financial Officer |