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 endedOctober 31, 2015 April 30, 2016 |
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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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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 of NovemberMay 27, 2015, 43,697,1712016, 43,396,318 common shares were outstanding.
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PART I | FINANCIAL INFORMATION |
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ITEM 1 | FINANCIAL STATEMENTS |
| | CALERES, INC. | | | | | | | | | | |
CONDENSED CONSOLIDATED BALANCE SHEETS | | | | | | | | | | |
| (Unaudited) | | |
| (Unaudited) | | |
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($ thousands) | October 31, 2015 |
| | November 1, 2014 |
| | January 31, 2015 |
| April 30, 2016 |
| | May 2, 2015 |
| | January 30, 2016 |
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Assets | | | | | |
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Current assets | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | $ | 86,298 |
| | $ | 39,080 |
| | $ | 67,403 |
| $ | 149,534 |
| | $ | 66,330 |
| | $ | 118,151 |
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Receivables, net | 148,192 |
| | 138,217 |
| | 136,646 |
| 116,961 |
| | 126,512 |
| | 153,664 |
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Inventories, net | 544,341 |
| | 567,777 |
| | 543,103 |
| 487,876 |
| | 498,513 |
| | 546,745 |
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Prepaid expenses and other current assets | 40,815 |
| | 37,845 |
| | 43,744 |
| 39,809 |
| | 41,003 |
| | 56,505 |
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Total current assets | 819,646 |
| | 782,919 |
| | 790,896 |
| 794,180 |
| | 732,358 |
| | 875,065 |
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Other assets | 145,377 |
| | 139,878 |
| | 141,586 |
| 116,347 |
| | 141,969 |
| | 118,349 |
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Goodwill | 13,954 |
| | 13,954 |
| | 13,954 |
| 13,954 |
| | 13,954 |
| | 13,954 |
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Intangible assets, net | 117,864 |
| | 121,820 |
| | 120,633 |
| 116,025 |
| | 119,703 |
| | 116,945 |
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Property and equipment | 455,038 |
| | 439,166 |
| | 438,696 |
| 484,280 |
| | 442,273 |
| | 475,750 |
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Allowance for depreciation | (291,596 | ) | | (287,877 | ) | | (288,953 | ) | (298,694 | ) | | (288,923 | ) | | (296,740 | ) |
Net property and equipment | 163,442 |
| | 151,289 |
| | 149,743 |
| 185,586 |
| | 153,350 |
| | 179,010 |
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Total assets | $ | 1,260,283 |
| | $ | 1,209,860 |
| | $ | 1,216,812 |
| $ | 1,226,092 |
| | $ | 1,161,334 |
| | $ | 1,303,323 |
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Liabilities and Equity | |
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Current liabilities | |
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Borrowings under revolving credit agreement | $ | — |
| | $ | 14,000 |
| | $ | — |
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Current liabilities: | | |
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Trade accounts payable | 200,251 |
| | 203,062 |
| | 215,921 |
| $ | 189,154 |
| | $ | 172,116 |
| | $ | 237,802 |
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Other accrued expenses | 175,649 |
| | 172,077 |
| | 181,162 |
| 125,405 |
| | 137,732 |
| | 152,497 |
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Total current liabilities | 375,900 |
| | 389,139 |
| | 397,083 |
| 314,559 |
| | 309,848 |
| | 390,299 |
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Other liabilities | |
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Other liabilities: | | |
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Long-term debt | 200,000 |
| | 199,150 |
| | 199,197 |
| 196,659 |
| | 196,904 |
| | 196,544 |
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Deferred rent | 43,231 |
| | 37,571 |
| | 39,742 |
| 46,728 |
| | 41,441 |
| | 46,506 |
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Other liabilities | 39,297 |
| | 42,983 |
| | 39,168 |
| 60,169 |
| | 58,821 |
| | 67,502 |
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Total other liabilities | 282,528 |
| | 279,704 |
| | 278,107 |
| 303,556 |
| | 297,166 |
| | 310,552 |
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Equity | |
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Equity: | | |
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Common stock | 437 |
| | 437 |
| | 437 |
| 434 |
| | 437 |
| | 437 |
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Additional paid-in capital | 137,927 |
| | 138,682 |
| | 138,957 |
| 127,755 |
| | 134,373 |
| | 138,881 |
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Accumulated other comprehensive income | 2,961 |
| | 15,511 |
| | 2,712 |
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Accumulated other comprehensive (loss) income | | (4,054 | ) | | 3,672 |
| | (5,864 | ) |
Retained earnings | 459,678 |
| | 385,624 |
| | 398,804 |
| 482,744 |
| | 414,992 |
| | 468,030 |
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Total Caleres, Inc. shareholders’ equity | 601,003 |
| | 540,254 |
| | 540,910 |
| 606,879 |
| | 553,474 |
| | 601,484 |
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Noncontrolling interests | 852 |
| | 763 |
| | 712 |
| 1,098 |
| | 846 |
| | 988 |
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Total equity | 601,855 |
| | 541,017 |
| | 541,622 |
| 607,977 |
| | 554,320 |
| | 602,472 |
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Total liabilities and equity | $ | 1,260,283 |
| | $ | 1,209,860 |
| | $ | 1,216,812 |
| $ | 1,226,092 |
| | $ | 1,161,334 |
| | $ | 1,303,323 |
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See notes to condensed consolidated financial statements.
| | CALERES, INC. | | |
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS | | | |
| (Unaudited) | (Unaudited) |
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | Thirteen Weeks Ended |
($ thousands, except per share amounts) | October 31, 2015 |
| November 1, 2014 |
| October 31, 2015 |
| November 1, 2014 |
| April 30, 2016 |
| May 2, 2015 |
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Net sales | $ | 728,639 |
| $ | 729,277 |
| $ | 1,968,756 |
| $ | 1,956,316 |
| $ | 584,733 |
| $ | 602,283 |
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Cost of goods sold | 440,205 |
| 438,547 |
| 1,169,001 |
| 1,163,603 |
| 336,940 |
| 353,757 |
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Gross profit | 288,434 |
| 290,730 |
| 799,755 |
| 792,713 |
| 247,793 |
| 248,526 |
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Selling and administrative expenses | 236,211 |
| 237,517 |
| 681,462 |
| 679,472 |
| 219,050 |
| 218,190 |
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Operating earnings | 52,223 |
| 53,213 |
| 118,293 |
| 113,241 |
| 28,743 |
| 30,336 |
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Interest expense | (4,136 | ) | (5,207 | ) | (12,944 | ) | (15,637 | ) | (3,610 | ) | (4,463 | ) |
Loss on early extinguishment of debt | (1,961 | ) | — |
| (10,651 | ) | — |
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Interest income | 224 |
| 109 |
| 766 |
| 294 |
| 247 |
| 304 |
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Earnings before income taxes | 46,350 |
| 48,115 |
| 95,464 |
| 97,898 |
| 25,380 |
| 26,177 |
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Income tax provision | (12,358 | ) | (14,878 | ) | (25,218 | ) | (31,146 | ) | (7,502 | ) | (6,786 | ) |
Net earnings | 33,992 |
| 33,237 |
| 70,246 |
| 66,752 |
| 17,878 |
| 19,391 |
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Net earnings attributable to noncontrolling interests | 9 |
| 124 |
| 177 |
| 146 |
| 96 |
| 130 |
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Net earnings attributable to Caleres, Inc. | $ | 33,983 |
| $ | 33,113 |
| $ | 70,069 |
| $ | 66,606 |
| $ | 17,782 |
| $ | 19,261 |
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Basic earnings per common share attributable to Caleres, Inc. shareholders | $ | 0.78 |
| $ | 0.76 |
| $ | 1.60 |
| $ | 1.53 |
| $ | 0.41 |
| $ | 0.44 |
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Diluted earnings per common share attributable to Caleres, Inc. shareholders | $ | 0.78 |
| $ | 0.75 |
| $ | 1.59 |
| $ | 1.52 |
| $ | 0.41 |
| $ | 0.44 |
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Dividends per common share | $ | 0.07 |
| $ | 0.07 |
| $ | 0.21 |
| $ | 0.21 |
| $ | 0.07 |
| $ | 0.07 |
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See notes to condensed consolidated financial statements.
| | CALERES, INC. | | | | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | | | | |
| (Unaudited) | (Unaudited) |
| Thirteen Weeks Ended | | Thirty-nine Weeks Ended | Thirteen Weeks Ended |
($ thousands) | October 31, 2015 |
| November 1, 2014 |
| | October 31, 2015 |
| November 1, 2014 |
| April 30, 2016 |
| May 2, 2015 |
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Net earnings | $ | 33,992 |
| $ | 33,237 |
| | $ | 70,246 |
| $ | 66,752 |
| $ | 17,878 |
| $ | 19,391 |
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Other comprehensive income (loss), net of tax: | |
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Foreign currency translation adjustment | 348 |
| (1,159 | ) | | 791 |
| (28 | ) | 2,310 |
| 1,392 |
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Pension and other postretirement benefits adjustments | (230 | ) | (28 | ) | | (688 | ) | (84 | ) | (288 | ) | (215 | ) |
Derivative financial instruments | (184 | ) | 57 |
| | 146 |
| (1,053 | ) | (212 | ) | (217 | ) |
Other comprehensive (loss) income, net of tax | (66 | ) | (1,130 | ) | | 249 |
| (1,165 | ) | |
Other comprehensive income, net of tax | | 1,810 |
| 960 |
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Comprehensive income | 33,926 |
| 32,107 |
| | 70,495 |
| 65,587 |
| 19,688 |
| 20,351 |
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Comprehensive (loss) income attributable to noncontrolling interests | (31 | ) | 93 |
| | 140 |
| 100 |
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Comprehensive income attributable to noncontrolling interests | | 110 |
| 134 |
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Comprehensive income attributable to Caleres, Inc. | $ | 33,957 |
| $ | 32,014 |
| | $ | 70,355 |
| $ | 65,487 |
| $ | 19,578 |
| $ | 20,217 |
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See notes to condensed consolidated financial statements.
| | CALERES, INC. | | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | | |
| (Unaudited) | (Unaudited) |
| Thirty-nine Weeks Ended | Thirteen Weeks Ended |
($ thousands) | October 31, 2015 |
| November 1, 2014 |
| April 30, 2016 |
| May 2, 2015 |
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Operating Activities | | |
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Net earnings | $ | 70,246 |
| $ | 66,752 |
| $ | 17,878 |
| $ | 19,391 |
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Adjustments to reconcile net earnings to net cash provided by operating activities: | |
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Depreciation | 26,452 |
| 26,034 |
| 9,019 |
| 8,558 |
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Amortization of capitalized software | 9,118 |
| 9,548 |
| 3,161 |
| 3,094 |
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Amortization of intangible assets | 2,769 |
| 2,963 |
| 920 |
| 930 |
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Amortization of debt issuance costs and debt discount | 873 |
| 1,885 |
| 432 |
| 301 |
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Loss on early extinguishment of debt | 10,651 |
| — |
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Share-based compensation expense | 5,448 |
| 4,568 |
| 1,987 |
| 1,687 |
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Tax benefit related to share-based plans | (3,049 | ) | (2,482 | ) | (3,163 | ) | (2,401 | ) |
(Gain) loss on disposal of property and equipment | (2,203 | ) | 1,400 |
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Loss on disposal of property and equipment | | 79 |
| 213 |
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Impairment charges for property and equipment | 1,479 |
| 1,248 |
| 465 |
| 374 |
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Deferred rent | 3,489 |
| (1,022 | ) | 222 |
| 1,699 |
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Provision for doubtful accounts | 362 |
| 298 |
| 182 |
| (88 | ) |
Changes in operating assets and liabilities, net of dispositions: | |
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Changes in operating assets and liabilities: | | |
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Receivables | (11,848 | ) | (9,328 | ) | 36,522 |
| 10,224 |
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Inventories | (1,882 | ) | (20,241 | ) | 60,532 |
| 45,312 |
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Prepaid expenses and other current and noncurrent assets | (12,212 | ) | (1,201 | ) | 16,438 |
| (2,365 | ) |
Trade accounts payable | (15,593 | ) | (23,661 | ) | (48,648 | ) | (43,918 | ) |
Accrued expenses and other liabilities | (2,188 | ) | 14,376 |
| (31,631 | ) | (21,468 | ) |
Other, net | 2,138 |
| (2,635 | ) | 765 |
| 371 |
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Net cash provided by operating activities | 84,050 |
| 68,502 |
| 65,160 |
| 21,914 |
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Investing Activities | |
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Purchases of property and equipment | (47,344 | ) | (36,531 | ) | (16,367 | ) | (12,905 | ) |
Proceeds from disposal of property and equipment | 7,433 |
| — |
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Capitalized software | (5,422 | ) | (3,849 | ) | (1,820 | ) | (955 | ) |
Acquisition of trademarks | — |
| (65,065 | ) | |
Investment in nonconsolidated affiliate | — |
| (7,000 | ) | |
Net cash used for investing activities | (45,333 | ) | (112,445 | ) | (18,187 | ) | (13,860 | ) |
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Financing Activities | |
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Borrowings under revolving credit agreement | 117,000 |
| 741,000 |
| 103,000 |
| 86,000 |
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Repayments under revolving credit agreement | (117,000 | ) | (734,000 | ) | (103,000 | ) | (86,000 | ) |
Proceeds from issuance of 2023 senior notes | 200,000 |
| — |
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Redemption of 2019 senior notes | (200,000 | ) | — |
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Debt issuance costs | (3,650 | ) | — |
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Dividends paid | (9,195 | ) | (9,173 | ) | (3,068 | ) | (3,073 | ) |
Acquisition of treasury stock | (4,921 | ) | — |
| (12,130 | ) | (4,921 | ) |
Issuance of common stock under share-based plans, net | (4,606 | ) | 237 |
| (4,149 | ) | (3,751 | ) |
Tax benefit related to share-based plans | 3,049 |
| 2,482 |
| 3,163 |
| 2,401 |
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Net cash (used for) provided by financing activities | (19,323 | ) | 546 |
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Net cash used for financing activities | | (16,184 | ) | (9,344 | ) |
Effect of exchange rate changes on cash and cash equivalents | (499 | ) | (69 | ) | 594 |
| 217 |
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Increase (decrease) in cash and cash equivalents | 18,895 |
| (43,466 | ) | 31,383 |
| (1,073 | ) |
Cash and cash equivalents at beginning of period | 67,403 |
| 82,546 |
| 118,151 |
| 67,403 |
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Cash and cash equivalents at end of period | $ | 86,298 |
| $ | 39,080 |
| $ | 149,534 |
| $ | 66,330 |
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See notes to condensed consolidated financial statements.
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CALERES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
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Note 1 | Basis of Presentation |
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 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 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 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 January 31, 2015.30, 2016.
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Note 2 | Impact of New Accounting Pronouncements |
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), and subsequently issued ASU 2015-14 to defer the effective date and ASUs 2016-08 and 2016-10 to clarify the implementation guidance in ASU 2014-09. The ASU supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. The standardTopic 606 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 ASU 2014-09 also requires additional disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB subsequently issued ASU 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date, that resulted in a one year deferral of ASU 2014-09The ASUs are effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early2017, with early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company is currently evaluating the impact of the adoption of this ASUthese ASUs 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. In August 2015, the FASB subsequently issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated With Line-of-Credit Arrangements: Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting, to clarify that debt issuance costs associated with a revolving line-of-credit arrangement may be presented as an asset, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The ASUs, which are to be applied on a retrospective basis and reported as a change in accounting principle, are 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 and ASU 2015-15 will not affect the Company’s results of operations or cash flows, but it will require the Company to reclassify its deferred financing costs associated with its senior notes from other assets to long-term debt on a retrospective basis upon adoption, anticipated to be in the fourth quarter of 2015. The Company's condensed consolidated balance sheets included deferred financing costs of $3.5 million, $2.6 million and $2.5 million as of October 31, 2015, November 1, 2014 and January 31, 2015, respectively, that will be subject to the ASU.
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 adoption is permitted. The Company is currently evaluating the impact of the adoption of this ASU on its condensed consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which requires entities to measure inventory at "the lower of cost and net realizable value", simplifying the current guidance under which entities must measure inventory at the lower of cost or market. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory measured using LIFO. The ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this ASU on its condensed consolidated financial statements.
In November 2015,February 2016, the FASB issued ASU 2015-17,2016-02, Balance Sheet Classification of Deferred Taxes.Leases (Topic 842), which requires entitieslessees to reclassify all deferred tax assets and liabilities as noncurrentrecognize most leases on the balance sheet. The ASU also eliminates the real estate-specific provisions in the current standard. For lessors, ASU 2016-02 modifies the classification criteria and the accounting for sales-type and direct financing leases. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017,2018, with early adoption permitted. The standard may be adoptedCompany is currently evaluating the impact of the adoption of this ASU on either a prospective or restrospective basis. Upon adoption, anticipatedits condensed consolidated financial statements. Due to be in the fourth quarterlarge number of 2015, ASU 2015-17 will require the Company to reclassify its current deferred tax assets and liabilities to noncurrent deferred tax assets and liabilities.
On December 12, 2014, Caleres Investment Company, Inc. ("CIC") (formerly known as Brown Shoe Investment Company, Inc.), the sole shareholder of Shoes.com, Inc. ("Shoes.com"), simultaneously entered into and closed a Stock Purchase Agreement by and among CIC and an affiliate of ShoeMe Technologies Limited ("the Purchaser"), pursuantretail operating leases to which the Purchaser acquired allCompany is a party, the Company anticipates that the impact to its condensed consolidated financial statements upon adoption in the first quarter of 2019 will be significant. However, the adoption of the outstanding capital stock, inventory andASU is not expected to trigger non-compliance with any covenant or other assetsrestriction under the provisions of Shoes.com from CIC and the Company agreed to provide certain transition services. The aggregate purchase priceany of the sale was $15.0 million, subject to working capital and other adjustments. The Company received $4.4 million in cash and a $7.5 million face value secured convertible note ("convertible note") at closing. The convertible note requires installments over four years with the first 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 Purchaser at a specified conversion price per share, at the Company's option, or automatically upon a qualified initial public offering ("IPO") by the Purchaser at the IPO price. The fair value of the convertible note of $7.2 million and $7.0 million at October 31, 2015 and January 31, 2015, respectively, is included in other assets on the condensed consolidated balance sheets. Interest income of $0.1 million and $0.3 million for the thirteen weeks and thirty-nine weeks ended October 31, 2015, respectively, is included in interest income on the condensed consolidated statements of earnings.Company’s debt obligations.
The operating resultsIn March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies accounting for certain aspects of Shoes.com were includedshare-based payments to employees, including income taxes, forfeitures and statutory income tax withholding requirements, as well as classification in the Famous Footwear segment in continuing operations throughstatement of cash flows. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 12, 2014.15, 2016, with early adoption permitted. The operationsCompany is currently evaluating the impact of Shoes.com were not significant to the Famous Footwear segment or the Company'sadoption of this ASU on its condensed consolidated 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 were not 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.statements.
|
| |
Note 43 | Earnings Per Share |
The Company uses the two-class method to compute basic and diluted earnings per common share attributable to 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 per common share attributable to Caleres, Inc. shareholders for the periods ended October 31, 2015April 30, 2016 and November 1, 2014:May 2, 2015:
| | | Thirteen Weeks Ended | Thirty-nine Weeks Ended | Thirteen Weeks Ended |
($ thousands, except per share amounts) | October 31, 2015 |
| November 1, 2014 |
| October 31, 2015 |
| November 1, 2014 |
| April 30, 2016 |
| May 2, 2015 |
|
NUMERATOR | |
| |
| |
| |
| |
| |
|
Net earnings | $ | 33,992 |
| $ | 33,237 |
| $ | 70,246 |
| $ | 66,752 |
| $ | 17,878 |
| $ | 19,391 |
|
Net earnings attributable to noncontrolling interests | (9 | ) | (124 | ) | (177 | ) | (146 | ) | (96 | ) | (130 | ) |
Net earnings allocated to participating securities | (1,063 | ) | (1,208 | ) | (2,272 | ) | (2,486 | ) | (486 | ) | (654 | ) |
Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities | $ | 32,920 |
| $ | 31,905 |
| $ | 67,797 |
| $ | 64,120 |
| $ | 17,296 |
| $ | 18,607 |
|
| | |
DENOMINATOR | |
| |
| |
| |
| |
| |
|
Denominator for basic earnings per common share attributable to Caleres, Inc. shareholders | 42,345 |
| 42,144 |
| 42,483 |
| 42,035 |
| 42,433 |
| 42,313 |
|
Dilutive effect of share-based awards | 120 |
| 184 |
| 132 |
| 210 |
| 163 |
| 145 |
|
Denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders | 42,465 |
| 42,328 |
| 42,615 |
| 42,245 |
| 42,596 |
| 42,458 |
|
| | |
Basic earnings per common share attributable to Caleres, Inc. shareholders | $ | 0.78 |
| $ | 0.76 |
| $ | 1.60 |
| $ | 1.53 |
| $ | 0.41 |
| $ | 0.44 |
|
| | |
Diluted earnings per common share attributable to Caleres, Inc. shareholders | $ | 0.78 |
| $ | 0.75 |
| $ | 1.59 |
| $ | 1.52 |
| $ | 0.41 |
| $ | 0.44 |
|
Options to purchase 56,99766,165 and 62,997 shares of common stock for the thirteen and thirty-nine weeks ended October 31,April 30, 2016 and May 2, 2015, and 64,497 shares of common stock for the thirteen and thirty-nine weeks ended November 1, 2014respectively, were not included in the denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders because the effect would be anti-dilutive.antidilutive.
|
| |
Note 54 | Long-term and Short-term Financing Arrangements |
Credit Agreement
On December 18, 2014, the Company and certain of its subsidiaries (the “Loan Parties”) entered into a Fourth Amended and Restated Credit Agreement, which was further amended on July 20, 2015 to release all of the Company’s subsidiaries that were borrowers under or that guaranteed the Credit Agreement other than Sidney Rich Associates, Inc. and BG Retail, LLC (as so amended, the “Credit Agreement”). After giving effect to the amendment, the Company is the lead borrower, and Sidney Rich Associates, Inc. and BG Retail, LLC are each co-borrowers and guarantors under the Credit Agreement. The Credit Agreement matures on December 18, 2019 and provides for a revolving credit facility in an aggregate amount of up to $600.0 million, subject to the calculated borrowing base restrictions, and provides for an increase at the Company’s option by up to $150.0 million from time to time during the term of the Credit Agreement, subject to satisfaction of certain conditions and the consent of existing or new lenders to assume the increase.
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 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 the Company’s ability to create, incur, assume or permit to exist additional indebtedness and 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 12.5% of the Loan Cap for three consecutive business days or an event of default occurs, the lenders may assume dominion and control over the 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, 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) 10.0% of the lesser of the Loan Cap and (ii) $50.0 million, and the fixed charge coverage ratio is less than 1.0 to 1.0, the Company would be in default under the Credit Agreement. The Credit Agreement also contains certain other covenants and restrictions. We wereThe Company was in compliance with all covenants and restrictions under the Credit Agreement as of October 31, 2015.April 30, 2016.
At October 31, 2015,April 30, 2016, the Company had no borrowings outstanding and $6.3$6.5 million in letters of credit outstanding under the Credit Agreement. Total borrowing availability was $561.8$485.5 million at October 31, 2015.April 30, 2016.
$200 Million Senior Notes Due 2019
On May 11, 2011, the Company issuedclosed on an offering of $200.0 million aggregate principal amount of 7.125% Senior Notes due 2019 (the “2019 Senior Notes”). The 2019 Senior Notes were guaranteed on a senior unsecured basis by each of its subsidiaries that was an obligor under the Credit Agreement, prior to the July 20, 2015 amendment. Interest on the 2019 Senior Notes was payable on May 15 and November 15 of each year. The 2019 Senior Notes were scheduled to mature on May 15, 2019 but were callable at specified redemption prices, plus accrued and unpaid interest.
On July 20, 2015, the Company commenced a cash tender offer (the "Tender Offer") to purchase any and all of the outstanding aggregate principal amount of its 2019 Senior Notes. Upon expiration of the Tender Offer on July 24, 2015, $160.7 million aggregate principal amount of the 2019 Senior Notes (or 80.35% of the aggregate principal amount of the 2019 Senior Notes outstanding) were validly tendered at the redemption price of 103.950%, representing the specified redemption price and a tender premium. On August 26, 2015, the remaining outstanding $39.3 million aggregate principal amount of outstanding 2019 Senior Notes were redeemed at the redemption price of 103.563%. During the thirteen and thirty-nine weeks ended October 31, 2015, the Company recognized a loss on the early extinguishment of the 2019 Senior Notes of $2.0 million and $10.7 million, respectively, representing the tender offer and call premiums, the unamortized debt issuance costs and the original issue discount.
$200 Million Senior Notes Due 2023
On July 27, 2015, the Company issued $200.0 million aggregate principal amount of 6.25% Senior Notes due 2023 (the "2023 Senior Notes") in a private placement. On October 22, 2015, the Company commenced an offer to exchange its 2023 Senior Notes outstanding for substantially identical debt securities registered under the Securities Act of 1933. The exchange offer was completed on November 23, 2015 and did not affect the amount of the Company's indebtedness outstanding. The net proceeds from the issuance of the 2023 Senior Notes were approximately $196.3 million after deducting fees and expenses associated with the offering. The Company used the net proceeds, together with cash on hand, to redeem the outstanding 2019 Senior Notes.
The 2023 Senior Notes are guaranteed on a senior unsecured basis by each of the Company's subsidiaries that is a borrower or guarantor under the Credit Agreement. Interest on the 2023 Senior Notes is payable on February 15 and August 15 of each year, beginning on February 15, 2016. The 2023 Senior Notes will mature on August 15, 2023. Prior to August 15, 2018, the Company may redeem some or all of the 2023 Senior Notes at a redemption price equal to 100% of the principal amount of the 2023 Senior Notes plus a "make-whole" premium (as defined in the 2023 Senior Notes indenture) and accrued and unpaid interest to the redemption date. After August 15, 2018, the Company may redeem all or a part of the 2023 Senior Notes at the redemption prices (expressed as a percentage of principal amount) set forth below plus accrued and unpaid interest, and Additional Interest (as defined in the 2023 Senior Notes indenture), if redeemed during the 12-month period beginning on August 15 of the years indicated below:
|
| | |
Year | Percentage |
|
2018 | 104.688 | % |
2019 | 103.125 | % |
2020 | 101.563 | % |
2021 and thereafter | 100.000 | % |
If the Company experiences specific kinds of changes of control, it would be required to offer to purchase the 2023 Senior Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest and Additional Interest, if any, to, but not including, the date of repurchase.
The 2023 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 October 31, 2015, we wereApril 30, 2016, the Company was in compliance with all covenants and restrictions relating to the 2023 Senior Notes.
The net proceeds from the issuance of the 2023 Senior Notes were approximately $196.3 million after deducting fees and expenses associated with the offering. The Company used the net proceeds, together with cash on hand, to redeem the outstanding 2019 Senior Notes.
|
| |
Note 65 | Business Segment Information |
During the fourth quarter of 2014, following the sale of Shoes.com, the Company revised its reportable segments. This change reflects the Company's omnichannel approach to managing its branded footwear business across all distribution channels.
Following is a summary of certain key financial measures for the Company’s business segments for the periodsthirteen weeks ended October 31, 2015April 30, 2016 and November 1, 2014.May 2, 2015.
| | | Famous Footwear | Brand Portfolio | | Famous Footwear | Brand Portfolio | |
($ thousands) | Other | Total | Other | Total |
Thirteen Weeks Ended October 31, 2015 | |
Thirteen Weeks Ended April 30, 2016 | | Thirteen Weeks Ended April 30, 2016 |
External sales | $ | 456,177 |
| $ | 272,462 |
| $ | — |
| $ | 728,639 |
| $ | 364,596 |
| $ | 220,137 |
| $ | — |
| $ | 584,733 |
|
Intersegment sales | — |
| 21,004 |
| — |
| 21,004 |
| — |
| 15,563 |
| — |
| 15,563 |
|
Operating earnings (loss) | 39,638 |
| 21,042 |
| (8,457 | ) | 52,223 |
| 25,753 |
| 9,623 |
| (6,633 | ) | 28,743 |
|
Segment assets | 541,232 |
| 515,699 |
| 203,352 |
| 1,260,283 |
| 540,914 |
| 428,077 |
| 257,101 |
| 1,226,092 |
|
| | |
Thirteen Weeks Ended November 1, 2014 | |
Thirteen Weeks Ended May 2, 2015 | | Thirteen Weeks Ended May 2, 2015 |
External sales | $ | 449,085 |
| $ | 280,192 |
| $ | — |
| $ | 729,277 |
| $ | 360,020 |
| $ | 242,263 |
| $ | — |
| $ | 602,283 |
|
Intersegment sales | — |
| 26,970 |
| — |
| 26,970 |
| — |
| 17,326 |
| — |
| 17,326 |
|
Operating earnings (loss) | 37,405 |
| 27,642 |
| (11,834 | ) | 53,213 |
| 27,960 |
| 11,060 |
| (8,684 | ) | 30,336 |
|
Segment assets | 541,574 |
| 525,695 |
| 142,591 |
| 1,209,860 |
| 486,585 |
| 450,600 |
| 224,149 |
| 1,161,334 |
|
| | |
Thirty-nine Weeks Ended October 31, 2015 | |
External sales | $ | 1,212,069 |
| $ | 756,687 |
| $ | — |
| $ | 1,968,756 |
| |
Intersegment sales | — |
| 71,292 |
| — |
| 71,292 |
| |
Operating earnings (loss) | 95,269 |
| 48,107 |
| (25,083 | ) | 118,293 |
| |
| | |
Thirty-nine Weeks Ended November 1, 2014 | |
External sales | $ | 1,219,880 |
| $ | 736,436 |
| $ | — |
| $ | 1,956,316 |
| |
Intersegment sales | — |
| 83,654 |
| — |
| 83,654 |
| |
Operating earnings (loss) | 89,659 |
| 56,342 |
| (32,760 | ) | 113,241 |
| |
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:
| | | Thirteen Weeks Ended | Thirty-nine Weeks Ended | Thirteen Weeks Ended |
($ thousands) | October 31, 2015 |
| November 1, 2014 |
| October 31, 2015 |
| November 1, 2014 |
| April 30, 2016 |
| May 2, 2015 |
|
Operating earnings | $ | 52,223 |
| $ | 53,213 |
| $ | 118,293 |
| $ | 113,241 |
| $ | 28,743 |
| $ | 30,336 |
|
Interest expense | (4,136 | ) | (5,207 | ) | (12,944 | ) | (15,637 | ) | (3,610 | ) | (4,463 | ) |
Loss on early extinguishment of debt | (1,961 | ) | — |
| (10,651 | ) | — |
| |
Interest income | 224 |
| 109 |
| 766 |
| 294 |
| 247 |
| 304 |
|
Earnings before income taxes | $ | 46,350 |
| $ | 48,115 |
| $ | 95,464 |
| $ | 97,898 |
| $ | 25,380 |
| $ | 26,177 |
|
|
| |
Note 76 | Goodwill and Intangible Assets |
Goodwill and intangible assets attributable to the Company's operating segments were as follows:
| | ($ thousands) | October 31, 2015 |
| November 1, 2014 |
| January 31, 2015 |
| April 30, 2016 |
| May 2, 2015 |
| January 30, 2016 |
|
Intangible Assets | |
| |
| |
| |
| |
| |
|
Famous Footwear | $ | 2,800 |
| $ | 3,000 |
| $ | 2,800 |
| $ | 2,800 |
| $ | 2,800 |
| $ | 2,800 |
|
Brand Portfolio | 183,068 |
| 183,068 |
| 183,068 |
| 183,068 |
| 183,068 |
| 183,068 |
|
Total intangible assets | 185,868 |
| 186,068 |
| 185,868 |
| 185,868 |
| 185,868 |
| 185,868 |
|
Accumulated amortization | (68,004 | ) | (64,248 | ) | (65,235 | ) | (69,843 | ) | (66,165 | ) | (68,923 | ) |
Total intangible assets, net | 117,864 |
| 121,820 |
| 120,633 |
| 116,025 |
| 119,703 |
| 116,945 |
|
Goodwill | |
| |
| |
| |
| |
| |
|
Brand Portfolio | 13,954 |
| 13,954 |
| 13,954 |
| 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 | $ | 131,818 |
| $ | 135,774 |
| $ | 134,587 |
| $ | 129,979 |
| $ | 133,657 |
| $ | 130,899 |
|
Intangible assets consist primarily of owned and licensed trademarks, of which $20.8 million as of October 31,April 30, 2016, May 2, 2015 and January 31, 2015 and $21.0 million as of November 1, 2014,30, 2016, are not subject to amortization. The remaining intangible assets are subject to amortization and have useful lives ranging from 15 to 40 years as of October 31, 2015.April 30, 2016. Amortization expense related to intangible assets was $0.9 million and $1.0 million for the thirteen weeks ended April 30, 2016 and $2.8 million and $3.0 million for the thirty-nine weeks ended October 31, 2015 and November 1, 2014, respectively.May 2, 2015.
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, are 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 $0.2 million. The intangible assets were previously included in the Famous Footwear segment.
|
| |
Note 87 | Shareholders’ Equity |
The following tables set forth the changes in Caleres, Inc. shareholders’ equity and noncontrolling interests for the thirty-ninethirteen weeks ended October 31,April 30, 2016 and May 2, 2015, and November 1, 2014, respectively:
| | ($ thousands) | Caleres, Inc. Shareholders’ Equity |
| Noncontrolling Interests |
| Total Equity |
| Caleres, Inc. Shareholders’ Equity |
| Noncontrolling Interests |
| Total Equity |
|
Equity at January 31, 2015 | $ | 540,910 |
| $ | 712 |
| $ | 541,622 |
| |
Equity at January 30, 2016 | | $ | 601,484 |
| $ | 988 |
| $ | 602,472 |
|
Net earnings | 70,069 |
| 177 |
| 70,246 |
| 17,782 |
| 96 |
| 17,878 |
|
Other comprehensive income (loss) | 249 |
| (37 | ) | 212 |
| |
Other comprehensive income | | 1,810 |
| 14 |
| 1,824 |
|
Dividends paid | (9,195 | ) | — |
| (9,195 | ) | (3,068 | ) | — |
| (3,068 | ) |
Acquisition of treasury stock | (4,921 | ) | — |
| (4,921 | ) | (12,130 | ) | — |
| (12,130 | ) |
Issuance of common stock under share-based plans, net | (4,606 | ) | — |
| (4,606 | ) | (4,149 | ) | — |
| (4,149 | ) |
Tax benefit related to share-based plans | 3,049 |
| — |
| 3,049 |
| 3,163 |
| — |
| 3,163 |
|
Share-based compensation expense | 5,448 |
| — |
| 5,448 |
| 1,987 |
| — |
| 1,987 |
|
Equity at October 31, 2015 | $ | 601,003 |
| $ | 852 |
| $ | 601,855 |
| |
Equity at April 30, 2016 | | $ | 606,879 |
| $ | 1,098 |
| $ | 607,977 |
|
| | ($ thousands) | Caleres, 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 |
|
Accumulated Other Comprehensive (Loss) Income
The following table sets forth the changes in accumulated other comprehensive (loss) income by component for the thirteen and thirty-nine weeks ended October 31, 2015April 30, 2016 and November 1, 2014:May 2, 2015:
|
| | | | | | | | | | | | |
($ thousands) | Foreign Currency Translation | Pension and Other Postretirement Transactions (1) | Derivative Financial Instrument Transactions (2) | Accumulated Other Comprehensive Income (Loss) |
Balance August 1, 2015 | $ | (302 | ) | $ | 2,775 |
| $ | 554 |
| $ | 3,027 |
|
Other comprehensive income (loss) before reclassifications | 348 |
| — |
| (189 | ) | 159 |
|
Reclassifications: | | | | |
Amounts reclassified from accumulated other comprehensive income | — |
| (382 | ) | 16 |
| (366 | ) |
Tax provision (benefit) | — |
| 152 |
| (11 | ) | 141 |
|
Net reclassifications | — |
| (230 | ) | 5 |
| (225 | ) |
Other comprehensive income (loss) | 348 |
| (230 | ) | (184 | ) | (66 | ) |
Balance October 31, 2015 | $ | 46 |
| $ | 2,545 |
| $ | 370 |
| $ | 2,961 |
|
| | | | |
Balance August 2, 2014 | $ | 3,487 |
| $ | 13,526 |
| $ | (372 | ) | $ | 16,641 |
|
Other comprehensive (loss) income before reclassifications | (1,159 | ) | — |
| 80 |
| (1,079 | ) |
Reclassifications: | | | | |
Amounts reclassified from accumulated other comprehensive income | — |
| (51 | ) | (30 | ) | (81 | ) |
Tax provision | — |
| 23 |
| 7 |
| 30 |
|
Net reclassifications | — |
| (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 January 31, 2015 | $ | (745 | ) | $ | 3,233 |
| $ | 224 |
| $ | 2,712 |
|
Other comprehensive income before reclassifications, net of tax | 791 |
| — |
| 176 |
| 967 |
|
Reclassifications: | | | | |
Amounts reclassified from accumulated other comprehensive income | — |
| (1,140 | ) | (22 | ) | (1,162 | ) |
Tax provision (benefit) | — |
| 452 |
| (8 | ) | 444 |
|
Net reclassifications | — |
| (688 | ) | (30 | ) | (718 | ) |
Other comprehensive income (loss) | 791 |
| (688 | ) | 146 |
| 249 |
|
Balance October 31, 2015 | $ | 46 |
| $ | 2,545 |
| $ | 370 |
| $ | 2,961 |
|
| | | | |
Balance February 1, 2014 | $ | 2,356 |
| $ | 13,582 |
| $ | 738 |
| $ | 16,676 |
|
Other comprehensive loss before reclassifications | (28 | ) | — |
| (1,014 | ) | (1,042 | ) |
Reclassifications: | | | | |
Amounts reclassified from accumulated other comprehensive income | — |
| (152 | ) | (53 | ) | (205 | ) |
Tax provision | — |
| 68 |
| 14 |
| 82 |
|
Net reclassifications | — |
| (84 | ) | (39 | ) | (123 | ) |
Other comprehensive loss | (28 | ) | (84 | ) | (1,053 | ) | (1,165 | ) |
Balance November 1, 2014 | $ | 2,328 |
| $ | 13,498 |
| $ | (315 | ) | $ | 15,511 |
|
|
| | | | | | | | | | | | |
($ thousands) | Foreign Currency Translation |
| Pension and Other Postretirement Transactions (1) |
| Derivative Financial Instrument Transactions (2) |
| Accumulated Other Comprehensive (Loss) Income |
|
Balance January 30, 2016 | $ | (900 | ) | $ | (5,356 | ) | $ | 392 |
| $ | (5,864 | ) |
Other comprehensive income (loss) before reclassifications | 2,310 |
| — |
| (288 | ) | 2,022 |
|
Reclassifications: | | | | |
Amounts reclassified from accumulated other comprehensive (loss) income | — |
| (477 | ) | 123 |
| (354 | ) |
Tax provision (benefit) | — |
| 189 |
| (47 | ) | 142 |
|
Net reclassifications | — |
| (288 | ) | 76 |
| (212 | ) |
Other comprehensive income (loss) | 2,310 |
| (288 | ) | (212 | ) | 1,810 |
|
Balance April 30, 2016 | $ | 1,410 |
| $ | (5,644 | ) | $ | 180 |
| $ | (4,054 | ) |
| | | | |
Balance January 31, 2015 | $ | (745 | ) | $ | 3,233 |
| $ | 224 |
| $ | 2,712 |
|
Other comprehensive income (loss) before reclassifications | 1,392 |
| — |
| (260 | ) | 1,132 |
|
Reclassifications: | | | | |
Amounts reclassified from accumulated other comprehensive (loss) 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 |
|
| |
(1) | Amounts reclassified are included in selling and administrative expenses. See Note 109 to the condensed consolidated financial statements for additional information related to pension and other postretirement benefits. |
| |
(2) | Amounts reclassified are included in net sales, costs of goods sold and selling and administrative expenses. See Notes 1110 and 1211 to the condensed consolidated financial statements for additional information related to derivative financial instruments. |
|
| |
Note 98 | Share-Based Compensation |
The Company recognized share-based compensation expense of $1.8$2.0 million and $1.6$1.7 million during the thirteen weeks ended April 30, 2016 and $5.4May 2, 2015, respectively. In addition to share-based compensation expense, the Company recognized cash-
based expense related to performance share units and cash awards granted under the performance share plans of $0.8 million and $4.6$1.7 million during the thirty-ninethirteen weeks ended October 31,April 30, 2016 and May 2, 2015, and November 1, 2014, respectively.
The Company issued 14,216387,605 and 72,687344,679 shares of common stock during the thirteen weeks ended April 30, 2016 and 379,058 and 586,929 during the thirty-nine weeks ended October 31,May 2, 2015, and November 1, 2014, respectively, for stock-based awards, stock options exercised and directors' fees.
The following tables summarizetable summarizes restricted stock activity for the periodsthirteen weeks ended October 31, 2015April 30, 2016 and November 1, 2014:May 2, 2015:
| | | Thirteen Weeks Ended October 31, 2015 | | Thirteen Weeks Ended November 1, 2014 | Thirteen Weeks Ended April 30, 2016 | | Thirteen Weeks Ended May 2, 2015 |
| | | Weighted- Average Grant Date Fair Value | | | | Weighted- Average Grant Date Fair Value | | | Weighted- Average Grant Date Fair Value | | | | Weighted- Average Grant Date Fair Value |
| Total Number of Restricted Shares | | Total Number of Restricted Shares | | Total Number of Restricted Shares | | Total Number of Restricted Shares | |
| | Weighted- Average Grant Date Fair Value | | | Weighted- Average Grant Date Fair Value | |
August 1, 2015 | 1,395,616 |
| | $ | 18.97 |
| 1,598,470 |
| | $ | 15.60 |
| |
January 30, 2016 | | 1,262,449 |
| | $ | 19.55 |
| 1,562,470 |
| | $ | 15.61 |
|
Granted | 8,000 |
| | 33.14 |
| | Granted | — |
| | — |
| 336,800 |
| | 26.64 |
| | Granted | 285,421 |
| | 30.06 |
|
Forfeited | (42,500 | ) | | 17.64 |
| | Forfeited | (4,500 | ) | | 20.39 |
| (29,250 | ) | | 20.53 |
| | Forfeited | (34,850 | ) | | 21.01 |
|
Vested | (17,000 | ) | | 7.30 |
| | Vested | (7,000 | ) | | 11.96 |
| (419,250 | ) | | 9.18 |
| | Vested | (350,625 | ) | | 14.58 |
|
October 31, 2015 | 1,344,116 |
| | $ | 19.24 |
| | November 1, 2014 | 1,586,970 |
| | $ | 15.60 |
| |
April 30, 2016 | | 1,150,749 |
| | $ | 25.38 |
| | May 2, 2015 | 1,462,416 |
| | $ | 18.57 |
|
|
| | | | | | | | | | | | | | |
| Thirty-nine Weeks Ended October 31, 2015 | | | Thirty-nine Weeks Ended November 1, 2014 |
| | | Weighted- Average Grant Date Fair Value | | | | | Weighted- Average Grant Date Fair Value |
| Total Number of Restricted Shares | | | | Total Number of Restricted Shares | |
| | | | |
January 31, 2015 | 1,562,470 |
| | $ | 15.63 |
| | February 1, 2014 | 1,700,098 |
| | $ | 13.25 |
|
Granted | 301,421 |
| | 30.19 |
| | Granted | 279,710 |
| | 28.17 |
|
Forfeited | (92,350 | ) | | 18.65 |
| | Forfeited | (32,100 | ) | | 16.39 |
|
Vested | (427,425 | ) | | 13.88 |
| | Vested | (360,738 | ) | | 14.21 |
|
October 31, 2015 | 1,344,116 |
| | $ | 19.24 |
| | November 1, 2014 | 1,586,970 |
| | $ | 15.60 |
|
All ofOf the 336,800 restricted shares granted during the thirteen weeks ended October 31, 2015 and November 1, 2014April 30, 2016, all of the shares will vest in four years. Of the 301,421285,421 restricted shares granted during the thirty-ninethirteen weeks ended October 31,May 2, 2015, 288,921 will vest in four years and 12,500 of the shares will vest in five years. Of the 279,710 restricted shares granted during the thirty-nine weeks ended November 1, 2014, 277,910272,921 will vest in four years and the remaining 1,80012,500 restricted shares vestedwill vest in one year.five years. Share-based compensation expense is recognized on a straight-line basis over the respective vesting periods.
During the thirteen weeks ended October 31,April 30, 2016 and May 2, 2015, and November 1, 2014, the Company granted no performance share awards. During the thirty-nine weeks ended October 31, 2015 and November 1, 2014, the Company granted performance share awards for a targeted 159,000 and 177,921 shares, and 88,185 units, respectively, with a weighted-average grant date fair value of $30.12$26.64 and $28.18,$30.12, respectively. Vesting of performance-based awards is dependent upon the financial performance of the Company and the attainment of certain financial goals during the three-year period following the grant. 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 the specified financial goals for the service period. Compensation expense is recognized based on the fair value of the award and the anticipated number of shares or 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.
DuringThe following table summarizes stock option activity for the thirteen and thirty-nine weeks ended October 31, 2015, the Company granted zeroApril 30, 2016 and 16,667 stock options, respectively, with a weighted-average grant date fair value of $12.81. May 2, 2015:
|
| | | | | | | | | | | | | | |
| Thirteen Weeks Ended April 30, 2016 | | | Thirteen Weeks Ended May 2, 2015 |
| | | Weighted- Average Grant Date Fair Value | | | | | Weighted- Average Grant Date Fair Value |
| Total Number of Stock Options | | | | Total Number of Stock Options | |
| | | | |
January 30, 2016 | 301,295 |
| | $ | 8.95 |
| | January 31, 2015 | 416,803 |
| | $ | 8.42 |
|
Granted | — |
| | — |
| | Granted | 16,667 |
| | 12.81 |
|
Exercised | (50,066 | ) | | 7.17 |
| | Exercised | (58,633 | ) | | 6.98 |
|
Forfeited | (7,499 | ) | | 15.94 |
| | Forfeited | (1,500 | ) | | 15.94 |
|
Expired | (14,625 | ) | | 10.75 |
| | Expired | (36,451 | ) | | 6.95 |
|
April 30, 2016 | 229,105 |
| | $ | 8.99 |
| | May 2, 2015 | 336,886 |
| | $ | 9.01 |
|
Of the 16,667 stock options granted during the thirteen weeks ended May 2, 2015, 8,333 will vest in four years and 8,334 will vest in five years. There were no
The Company also granted 853 and 704 restricted stock options granted during the corresponding periods in 2014. There were 6,216
and 72,000 stock options exercisedunits to non-employee directors during the thirteen weeks ended October 31,April 30, 2016 and May 2, 2015, respectively, with weighted-average grant date fair values of $28.09 and November 1, 2014,$32.30, respectively. There were 76,849All restricted stock units for dividend equivalents vested immediately and 305,086 stock options exercisedcompensation expense was fully recognized during the thirty-ninethirteen weeks ended October 31, 2015April 30, 2016 and November 1, 2014, respectively.
The following tables summarize restricted stock unit (RSU) activity for the periods ended October 31, 2015 and November 1, 2014:
|
| | | | | | | | | | | | | | |
Thirteen Weeks Ended October 31, 2015 | | Thirteen Weeks Ended November 1, 2014 |
| | | Weighted- Average Grant Date Fair Value | | | | | Weighted- Average Grant Date Fair Value |
| Total Number of RSUs | | | | Total Number of RSUs | |
| | | | |
August 1, 2015 | 368,438 |
| | $ | 29.02 |
| | August 2, 2014 | 386,692 |
| | $ | 22.07 |
|
Granted (1) | 784 |
| | 30.40 |
| | Granted (1) | 847 |
| | 26.72 |
|
October 31, 2015 | 369,222 |
| | $ | 29.02 |
| | November 1, 2014 | 387,539 |
| | $ | 22.08 |
|
May 2, 2015.
|
| | | | | | | | | | | | | | |
Thirty-nine Weeks Ended October 31, 2015 | | Thirty-nine Weeks Ended November 1, 2014 |
| | | Weighted- Average Grant Date Fair Value | | | | | Weighted- Average Grant Date Fair Value |
| Total Number of RSUs | | | | Total Number of RSUs | |
| | | | |
January 31, 2015 | 330,994 |
| | $ | 28.72 |
| | February 1, 2014 | 346,305 |
| | $ | 21.30 |
|
Granted (1) | 38,228 |
| | 31.66 |
| | Granted (1) | 41,234 |
| | 28.64 |
|
October 31, 2015 | 369,222 |
| | $ | 29.02 |
| | November 1, 2014 | 387,539 |
| | $ | 22.08 |
|
| |
(1) | Granted RSUs include 784 RSUs and 847 RSUs for the thirteen weeks and 2,228 RSUs and 2,534 RSUs for the thirty-nine weeks ended October 31, 2015 and November 1, 2014, respectively, resulting from dividend equivalents earned on outstanding RSUs, which vested immediately. |
|
| |
Note 109 | Retirement and Other Benefit Plans |
The following tables settable sets forth the components of net periodic benefit income for the Company, including domestic and Canadian plans:
|
| | | | | | | | | | | | |
| Pension Benefits | Other Postretirement Benefits |
| Thirteen Weeks Ended | Thirteen Weeks Ended |
($ thousands) | April 30, 2016 |
| May 2, 2015 |
| April 30, 2016 |
| May 2, 2015 |
|
Service cost | $ | 2,263 |
| $ | 3,329 |
| $ | — |
| $ | — |
|
Interest cost | 3,861 |
| 3,586 |
| 15 |
| 15 |
|
Expected return on assets | (7,223 | ) | (7,655 | ) | — |
| — |
|
Amortization of: | |
| |
| |
| |
|
Actuarial loss (gain) | 38 |
| 166 |
| (55 | ) | (48 | ) |
Prior service income | (460 | ) | (475 | ) | — |
| — |
|
Total net periodic benefit income | $ | (1,521 | ) | $ | (1,049 | ) | $ | (40 | ) | $ | (33 | ) |
|
| | | | | | | | | | | | |
| Pension Benefits | Other Postretirement Benefits |
| Thirteen Weeks Ended | Thirteen Weeks Ended |
($ thousands) | October 31, 2015 |
| November 1, 2014 |
| October 31, 2015 |
| November 1, 2014 |
|
Service cost | $ | 3,160 |
| $ | 2,413 |
| $ | — |
| $ | — |
|
Interest cost | 3,580 |
| 3,558 |
| 14 |
| 12 |
|
Expected return on assets | (7,919 | ) | (6,190 | ) | — |
| — |
|
Amortization of: | |
| |
| |
| |
|
Actuarial loss (gain) | 152 |
| 50 |
| (56 | ) | (108 | ) |
Prior service (income) expense | (478 | ) | 7 |
| — |
| — |
|
Total net periodic benefit income | $ | (1,505 | ) | $ | (162 | ) | $ | (42 | ) | $ | (96 | ) |
| | | | |
| Pension Benefits | Other Postretirement Benefits |
| Thirty-nine Weeks Ended | Thirty-nine Weeks Ended |
($ thousands) | October 31, 2015 |
| November 1, 2014 |
| October 31, 2015 |
| November 1, 2014 |
|
Service cost | $ | 9,482 |
| $ | 7,239 |
| $ | — |
| $ | — |
|
Interest cost | 10,744 |
| 10,674 |
| 42 |
| 36 |
|
Expected return on assets | (23,764 | ) | (18,571 | ) | — |
| — |
|
Amortization of: | |
| |
| |
| |
|
Actuarial loss (gain) | 461 |
| 152 |
| (167 | ) | (325 | ) |
Prior service (income) expense | (1,434 | ) | 21 |
| — |
| — |
|
Total net periodic benefit income | $ | (4,511 | ) | $ | (485 | ) | $ | (125 | ) | $ | (289 | ) |
|
| |
Note 1110 | 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 international financial institutions and have varying maturities through October 2016.April 2017. 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,hedging instruments, which are recorded in the Company's condensed consolidated balance sheets 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, inventory purchases, expenses and intercompany charges, as well as collections and payments.value. The effective portion of gains and losses resulting from changes in the fair value of these hedge instruments are deferred in accumulated other comprehensive (loss) income 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 statements of earnings.
Hedge ineffectiveness is evaluated using the hypothetical derivative method. The amount of hedge ineffectiveness for the thirteen and thirty-nine weeks ended October 31,April 30, 2016 and May 2, 2015 and November 1, 2014 was not material.
As of October 31,April 30, 2016, May 2, 2015 November 1, 2014 and January 31, 2015,30, 2016, the Company had forward contracts maturing at various dates through OctoberApril 2017, April 2016 October 2015 and January 2016,2017, 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) | October 31, 2015 |
| November 1, 2014 |
| January 31, 2015 |
| April 30, 2016 |
| May 2, 2015 |
| January 30, 2016 |
|
Financial Instruments | | |
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars) | $ | 17,820 |
| $ | 20,391 |
| $ | 19,633 |
| $ | 15,767 |
| $ | 17,635 |
| $ | 14,118 |
|
Euro | 16,178 |
| 14,583 |
| 16,152 |
| 15,182 |
| 16,449 |
| 15,499 |
|
Chinese yuan | 15,828 |
| 14,659 |
| 14,512 |
| 14,066 |
| 10,978 |
| 14,623 |
|
Japanese yen | 1,184 |
| 1,505 |
| 1,523 |
| 1,152 |
| 1,483 |
| 1,159 |
|
United Arab Emirates dirham
| 866 |
| 921 |
| 970 |
| 900 |
| 932 |
| 930 |
|
New Taiwanese dollars | 610 |
| 619 |
| 599 |
| 514 |
| 528 |
| 570 |
|
Other currencies | 243 |
| — |
| — |
| 170 |
| — |
| 219 |
|
Total financial instruments | $ | 52,729 |
| $ | 52,678 |
| $ | 53,389 |
| $ | 47,751 |
| $ | 48,005 |
| $ | 47,118 |
|
The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of October 31,April 30, 2016, May 2, 2015 November 1, 2014 and January 31, 201530, 2016 are as follows:
|
| | | | | | | | | |
| Asset Derivatives | | Liability Derivatives |
($ thousands) | Balance Sheet Location | Fair Value |
| | Balance Sheet Location | Fair Value |
|
| | | | | |
Foreign exchange forward contracts: | |
| | | |
|
| | | | | |
October 31, 2015 | Prepaid expenses and other current assets | $ | 513 |
| | Other accrued expenses | $ | 598 |
|
November 1, 2014 | Prepaid expenses and other current assets | 440 |
| | Other accrued expenses | 923 |
|
January 31, 2015 | Prepaid expenses and other current assets | 1,863 |
| | Other accrued expenses | 1,784 |
|
|
| | | | | | | | | |
| Asset Derivatives | | Liability Derivatives |
($ thousands) | Balance Sheet Location | Fair Value |
| | Balance Sheet Location | Fair Value |
|
| | | | | |
Foreign exchange forward contracts: | |
| | | |
|
| | | | | |
April 30, 2016 | Prepaid expenses and other current assets | $ | 615 |
| | Other accrued expenses | $ | 962 |
|
May 2, 2015 | Prepaid expenses and other current assets | 973 |
| | Other accrued expenses | 1,032 |
|
January 30, 2016 | Prepaid expenses and other current assets | 1,000 |
| | Other accrued expenses | 846 |
|
For the thirteen and thirty-nine weeks ended October 31,April 30, 2016 and May 2, 2015, and November 1, 2014, 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) | October 31, 2015 | November 1, 2014 |
| | | | |
Foreign exchange forward contracts: Income Statement Classification (Losses) Gains - Realized | (Loss) Gain Recognized in OCI on Derivatives |
| Gain (Loss) Reclassified from Accumulated OCI into Earnings |
| Gain (Loss) Recognized in OCI on Derivatives |
| Gain (Loss) Reclassified from Accumulated OCI into Earnings |
|
| | | | |
Net sales | $ | (35 | ) | $ | 19 |
| $ | 114 |
| $ | 16 |
|
Cost of goods sold | 413 |
| 74 |
| (388 | ) | 30 |
|
Selling and administrative expenses | (603 | ) | (109 | ) | 268 |
| (16 | ) |
Interest expense | (13 | ) | — |
| 5 |
| — |
|
| | | Thirty-nine Weeks Ended | Thirteen Weeks Ended |
($ thousands) | October 31, 2015 | November 1, 2014 | April 30, 2016 | May 2, 2015 |
| | |
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 |
| |
Foreign exchange forward contracts: Income Statement Classification (Losses) Gains - Realized | | (Loss) Gain Recognized in OCI on Derivatives |
| (Loss) Gain Reclassified from Accumulated OCI into Earnings |
| Gain (Loss) Recognized in OCI on Derivatives |
| Gain (Loss) Reclassified from Accumulated OCI into Earnings |
|
| | |
Net sales | $ | 24 |
| $ | 132 |
| $ | 110 |
| $ | 32 |
| $ | (164 | ) | $ | (36 | ) | $ | 25 |
| $ | 54 |
|
Cost of goods sold | 945 |
| (48 | ) | (1,145 | ) | 19 |
| (113 | ) | 83 |
| (201 | ) | (129 | ) |
Selling and administrative expenses | (570 | ) | (62 | ) | (442 | ) | 2 |
| 51 |
| (170 | ) | (88 | ) | 4 |
|
Interest expense | (27 | ) | — |
| (12 | ) | — |
| (38 | ) | — |
| (22 | ) | — |
|
All gains and losses currently included within accumulated other comprehensive (loss) income 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 1211 to the condensed consolidated financial statements.
|
| |
Note 1211 | Fair Value Measurements |
Fair Value Hierarchy
FASB guidance on fairFair value measurements and disclosures specifiesmeasurement disclosure requirements specify 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 inputs to valuation techniques used to measure fair value are categorized 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; and
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 uses 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.risk in its assessment of fair value. 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 Companyoperations and it 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 participants 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 whichthat 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 accrued expenses (current portion) or 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 98 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 may beare 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. 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 98 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 is disclosed within Note 1110 to the condensed consolidated financial statements.
Secured Convertible Note
The Company received a $7.5 million face value secured convertible note as partial consideration for the December 2014 disposition of Shoes.com, as further described in Note 3 toShoes.com. The convertible note requires installments over four years with the condensed consolidated financial statements.first 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 an affiliate of ShoeMe Technologies Limited ("the Purchaser") at a specified conversion price per share, at the Company's option, or automatically upon a qualified initial public offering ("IPO") by the Purchaser at the IPO price. The convertible note is measured at fair value using unobservable inputs (Level 3). The fair value of the convertible note of $7.2 million, $7.0 million and $7.1 million at April 30, 2016, May 2, 2015 and January 30, 2016, respectively, is included in other assets on the condensed consolidated balance sheets. The change in fair value during the thirteen and thirty-nine weeks ended October 31,April 30, 2016 and May 2, 2015 reflects an immaterial amountinterest income of interest income.$0.1 million for the respective periods.
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at October 31,April 30, 2016, May 2, 2015 November 1, 2014 and January 31, 2015.30, 2016. The Company did not have any transfers between Level 1 and Level 2 during 20142015 or the thirty-ninethirteen weeks ended October 31, 2015. April 30, 2016.
| | | |
| | Fair Value Measurements | |
| | Fair Value Measurements |
($ thousands) | Total |
| | Level 1 |
| Level 2 |
| Level 3 |
| Total |
| | Level 1 |
| Level 2 |
| Level 3 |
|
Asset (Liability) | |
| | |
| |
| |
| |
| | |
| |
| |
|
As of October 31, 2015: | | | | |
As of April 30, 2016: | | | | |
Cash equivalents – money market funds | $ | 64,783 |
| | $ | 64,783 |
| $ | — |
| $ | — |
| $ | 129,576 |
| | $ | 129,576 |
| $ | — |
| $ | — |
|
Non-qualified deferred compensation plan assets | 3,928 |
| | 3,928 |
| — |
| — |
| 4,557 |
| | 4,557 |
| — |
| — |
|
Non-qualified deferred compensation plan liabilities | (3,928 | ) | | (3,928 | ) | — |
| — |
| (4,557 | ) | | (4,557 | ) | — |
| — |
|
Deferred compensation plan liabilities for non-employee directors | (1,932 | ) | | (1,932 | ) | — |
| — |
| (1,657 | ) | | (1,657 | ) | — |
| — |
|
Restricted stock units for non-employee directors | (9,792 | ) | | (9,792 | ) | — |
| — |
| (8,576 | ) | | (8,576 | ) | — |
| — |
|
Performance share units | (3,981 | ) | | (3,981 | ) | — |
| — |
| (1,838 | ) | | (1,838 | ) | — |
| — |
|
Derivative financial instruments, net | (85 | ) | | — |
| (85 | ) | — |
| (347 | ) | | — |
| (347 | ) | — |
|
Secured convertible note | 7,188 |
| | — |
| — |
| 7,188 |
| 7,153 |
| | — |
| — |
| 7,153 |
|
As of November 1, 2014: | | | | |
Cash equivalents – money market funds | $ | 7,463 |
| | $ | 7,463 |
| $ | — |
| $ | — |
| |
Non-qualified deferred compensation plan assets | 2,849 |
| | 2,849 |
| — |
| — |
| |
Non-qualified deferred compensation plan liabilities | (2,849 | ) | | (2,849 | ) | — |
| — |
| |
Deferred compensation plan liabilities for non-employee directors | (1,923 | ) | | (1,923 | ) | — |
| — |
| |
Restricted stock units for non-employee directors | (8,019 | ) | | (8,019 | ) | — |
| — |
| |
Performance share units | (1,240 | ) | | (1,240 | ) | — |
| — |
| |
Derivative financial instruments, net | (483 | ) | | — |
| (483 | ) | — |
| |
As of January 31, 2015: | | | | |
As of May 2, 2015: | | | | |
Cash equivalents – money market funds | $ | 35,533 |
| | $ | 35,533 |
| $ | — |
| $ | — |
| $ | 50,602 |
| | $ | 50,602 |
| $ | — |
| $ | — |
|
Non-qualified deferred compensation plan assets | 2,904 |
| | 2,904 |
| — |
| — |
| 3,795 |
| | 3,795 |
| — |
| — |
|
Non-qualified deferred compensation plan liabilities | (2,904 | ) | | (2,904 | ) | — |
| — |
| (3,795 | ) | | (3,795 | ) | — |
| — |
|
Deferred compensation plan liabilities for non-employee directors | (2,066 | ) | | (2,066 | ) | — |
| — |
| (2,200 | ) | | (2,200 | ) | — |
| — |
|
Restricted stock units for non-employee directors | (8,857 | ) | | (8,857 | ) | — |
| — |
| (9,683 | ) | | (9,683 | ) | — |
| — |
|
Performance share units | (5,147 | ) | | (5,147 | ) | — |
| — |
| (2,526 | ) | | (2,526 | ) | — |
| — |
|
Derivative financial instruments, net | 79 |
| | — |
| 79 |
| — |
| (59 | ) | | — |
| (59 | ) | — |
|
Secured convertible note | 6,957 |
| | — |
| — |
| 6,957 |
| 7,049 |
| | — |
| — |
| 7,049 |
|
As of January 30, 2016: | | | | |
Cash equivalents – money market funds | | $ | 100,694 |
| | $ | 100,694 |
| $ | — |
| $ | — |
|
Non-qualified deferred compensation plan assets | | 3,383 |
| | 3,383 |
| — |
| — |
|
Non-qualified deferred compensation plan liabilities | | (3,383 | ) | | (3,383 | ) | — |
| — |
|
Deferred compensation plan liabilities for non-employee directors | | (1,728 | ) | | (1,728 | ) | — |
| — |
|
Restricted stock units for non-employee directors | | (8,879 | ) | | (8,879 | ) | — |
| — |
|
Performance share units | | (3,780 | ) | | (3,780 | ) | — |
| — |
|
Derivative financial instruments, net | | 154 |
| | — |
| 154 |
| — |
|
Secured convertible note | | 7,117 |
| | — |
| — |
| 7,117 |
|
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 Measurement. Long-lived assets held and used with a carrying amount of $89.4$95.6 million were assessed for indicators of impairment and written down to their fair value, resulting in impairment charges included in selling and administrative expenses of $0.6$0.5 million for the thirteen weeks ended October 31, 2015.April 30, 2016. Of the $0.6$0.5 million impairment charge included in selling and administrative expenses, $0.2charges, $0.3 million related to the Famous Footwear segment and $0.4 million related to the Brand Portfolio segment. Impairment charges of $1.5 million were included in selling and administrative expenses for the thirty-nine weeks ended October 31, 2015, of which $0.7 million related to the Famous Footwear segment and $0.8$0.2 million related to the Brand Portfolio segment. 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 included in selling and administrative expenses 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,charges, $0.3 million related to the Famous Footwear segment and $0.2$0.1 million related to the Brand Portfolio segment. Impairment charges of $1.2 million were included in selling and administrative expenses for the thirty-nine weeks ended November 1, 2014, of which $0.7 million related to the Famous Footwear segment and $0.5 million related to the Brand Portfolio segment.
Fair Value of the Company’s Other Financial Instruments
The fair values of cash and cash equivalents (excluding money market funds discussed above), receivables and trade accounts payable approximate their carrying values due to the short-term nature of these instruments.
The carrying amounts and fair values of the Company's other financial instruments subject to fair value disclosures are as follows:
| | | October 31, 2015 | November 1, 2014 | January 31, 2015 | April 30, 2016 | May 2, 2015 | January 30, 2016 |
| Carrying |
| Fair |
| Carrying |
| Fair |
| Carrying |
| Fair |
| Carrying |
| (1) | | Fair |
| Carrying |
| (1) | | Fair |
| Carrying |
| (1) | | Fair |
|
($ thousands) | Amount |
| Value |
| Amount |
| Value |
| Amount |
| Value |
| Value |
| | Value |
| Value |
| | Value |
| Value |
| | Value |
|
Long-term debt | $ | 200,000 |
| $ | 200,500 |
| $ | 199,150 |
| $ | 208,500 |
| $ | 199,197 |
| $ | 208,000 |
| |
Long-term debt - 2023 Senior Notes | | $ | 196,659 |
| | $ | 205,000 |
| $ | — |
| | $ | — |
| $ | 196,544 |
| | $ | 196,000 |
|
Long-term debt - 2019 Senior Notes | | — |
| | — |
| 196,904 |
| | 207,500 |
| — |
| | — |
|
Total debt | | $ | 196,659 |
| | $ | 205,000 |
| $ | 196,904 |
| | $ | 207,500 |
| $ | 196,544 |
| | $ | 196,000 |
|
|
| |
(1) | The carrying value of the long-term debt is net of deferred issuance costs of $3.3 million, $2.3 million and $3.5 million as of April 30, 2016, May 2, 2015 and January 30, 2016, respectively, as a result of the adoption of ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, during the fourth quarter of 2015. |
The fair value of the Company’s long-term debt 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 were 26.7%29.6% and 30.9%25.9% for the thirteen weeks ended April 30, 2016 and 26.4% and 31.8% for the thirty-nine weeks ended October 31,May 2, 2015, and November 1, 2014, respectively.
During the thirteen weeks ended October 31,April 30, 2016, the Company recognized a discrete tax benefit of $0.7 million reflecting the settlement of a federal tax audit issue. During the thirteen weeks ended May 2, 2015, the Company recognized discrete tax benefits of $1.3$1.6 million relatedfollowing the conversion of one of its primary operating subsidiaries to a limited liability company. As a result of that conversion, the anticipated utilizationCompany recognized a tax benefit of certain tax asset carryforwards$1.5 million upon the reversal of valuation allowances that werehad been previously fully reserved.reserved for certain operating loss carryforwards. If these discrete tax benefits had not been recognized during the thirteen weeks ended October 31,April 30, 2016 and May 2, 2015, the Company's effective tax raterates would have been 29.5%.32.3% and 32.1%, respectively.
During the thirty-nine weeks ended October 31, 2015, the Company recognized discrete tax benefits of $4.2 million. The discrete tax benefits related to a number of factors, including the conversion of one of the Company's operating subsidiaries to an LLC and $1.7 million of tax asset carryforwards that were previously fully reserved related to the disposition of Shoes.com, as further discussed in Note 3 to the condensed consolidated financial statements. If these discrete tax benefits had not been recognized during the thirty-nine weeks ended October 31, 2015, the Company's effective tax rate would have been 30.8%.
|
| |
Note 1413 | 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”) to market Naturalizer footwear in China.China, effective through August 2017. 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 the thirteen and thirty-nine weeks ended October 31,April 30, 2016 and May 2, 2015, the Company, through its consolidated subsidiary, B&H Footwear, sold $2.8$2.2 million and $7.5$2.6 million, respectively, of Naturalizer footwear on a wholesale basis to CBI through its consolidated subsidiary, B&H Footwear, with $3.6 million and $7.1 million in corresponding sales during the thirteen and thirty-nine weeks ended November 1, 2014.CBI.
|
| |
Note 1514 | 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 current 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. In May 2016, the Company submitted a revised plan to address on-site conditions, including direct treatment of source areas, and expects, subject to the approval of the
oversight authorities, to begin implementing the revised plan later in 2016. As the treatment of the on-site source areas progresses, the Company expects to convert the pump and treat system to a passive treatment barrier system. 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 forIn 2014, the on-site remediationCompany submitted a proposed expanded remedy workplan ("Expanded Remedy Workplan") that was discounted at 4.8%. On an undiscounted basis,accepted by the on-site remediation liability would be $15.4 million as of October 31,oversight authorities during 2015. The Company expectscontinues to spend approximately $0.2 million in each ofimplement the next five years and $14.4 million in the aggregate thereafter related to the on-site remediation.Expanded Remedy Workplan.
The cumulative expenditures for both on-site and off-site remediation through October 31, 2015April 30, 2016 were $27.6$28.0 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 October 31, 2015April 30, 2016 is $9.8$9.9 million, of which $9.1 million is recorded within other liabilities and $0.7$0.8 million is recorded within other accrued expenses. Of the total $9.8$9.9 million reserve, $5.0 million is for on-site remediation and $4.8$4.9 million is for off-site remediation. The liability for the on-site remediation was discounted at 4.8%. On an undiscounted basis, the on-site remediation liability would be $15.1 million as of April 30, 2016. The Company expects to spend approximately $0.4 million, $0.3 million, $0.1 million, $0.1 million and $0.2 million during 2016, 2017, 2018, 2019 and 2020, respectively, and $14.0 million in the aggregate thereafter related to the on-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 $1.3$1.2 million at October 31, 2015April 30, 2016 to complete the cleanup, maintenance and monitoring at these sites, which has been discounted at 6.4%. Of the $1.3$1.2 million reserve, $1.1$1.0 million is recorded in other liabilities and $0.2 million is recorded in other accrued expenses. On an undiscounted basis, this liability would be $1.8$1.4 million. The Company expects to spend approximately $0.2 million in each of the next five years and $0.8$0.4 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.
During 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 final approval of the settlement, pursuant to which the Company will pay $1.0 million in attorneys' fees, costs of administering the settlement and settlement payments to class members who submitted claims. The Company will make the payments necessary to satisfy the settlement terms in the fourth quarter of 2015. The reserve for this matter as of October 31, 2015 is $1.0 million.
|
| |
Note 1615 | Financial Information for the Company and its Subsidiaries |
The Company's 2023 Senior Notes are fully and unconditionally and jointly and severally guaranteed by all of its existing and future subsidiaries that are guarantors under the Credit Agreement, as further discussed in Note 54 to the condensed consolidated financial statements. The following table presentstables present the condensed consolidating financial information for each of Caleres, Inc. (“Parent”), the Guarantors, and subsidiaries of the Parent that are not Guarantors (the “Non-Guarantors”), together with consolidating eliminations, as of and for the periods indicated. Guarantors are 100% owned by the Parent.
The condensed consolidating financial statements have been prepared using the equity method of accounting in accordance with the requirements for presentation of such information. Management believes that the information, presented in lieu of complete financial statements for each of the Guarantors, provides meaningful information to allow investors to determine the nature of the assets held by, and operations and cash flows of, each of the consolidated groups.
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET |
AS OF OCTOBER 31, 2015 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Assets | |
| |
| |
| |
| |
|
Current assets | |
| |
| |
| |
| |
|
Cash and cash equivalents | $ | 48,711 |
| $ | 3,999 |
| $ | 33,588 |
| $ | — |
| $ | 86,298 |
|
Receivables, net | 122,291 |
| 1,502 |
| 24,399 |
| — |
| 148,192 |
|
Inventories, net | 134,353 |
| 388,177 |
| 21,811 |
| — |
| 544,341 |
|
Prepaid expenses and other current assets | 12,440 |
| 23,729 |
| 4,646 |
| — |
| 40,815 |
|
Intercompany receivable – current | 267 |
| 117 |
| 11,455 |
| (11,839 | ) | — |
|
Total current assets | 318,062 |
| 417,524 |
| 95,899 |
| (11,839 | ) | 819,646 |
|
Other assets | 123,167 |
| 16,102 |
| 6,108 |
| — |
| 145,377 |
|
Goodwill and intangible assets, net | 116,114 |
| 2,800 |
| 12,904 |
| — |
| 131,818 |
|
Property and equipment, net | 32,943 |
| 120,633 |
| 9,866 |
| — |
| 163,442 |
|
Investment in subsidiaries | 1,012,191 |
| — |
| (19,114 | ) | (993,077 | ) | — |
|
Intercompany receivable – noncurrent | 404,904 |
| 355,069 |
| 537,551 |
| (1,297,524 | ) | — |
|
Total assets | $ | 2,007,381 |
| $ | 912,128 |
| $ | 643,214 |
| $ | (2,302,440 | ) | $ | 1,260,283 |
|
| | | | | |
Liabilities and Equity | |
| |
| |
| |
|
Current liabilities | |
| |
| |
| |
| |
|
Trade accounts payable | $ | 56,536 |
| $ | 126,638 |
| $ | 17,077 |
| $ | — |
| $ | 200,251 |
|
Other accrued expenses | 60,936 |
| 100,913 |
| 13,800 |
| — |
| 175,649 |
|
Intercompany payable – current | 2,884 |
| — |
| 8,955 |
| (11,839 | ) | — |
|
Total current liabilities | 120,356 |
| 227,551 |
| 39,832 |
| (11,839 | ) | 375,900 |
|
Other liabilities | |
| |
| |
| |
| |
|
Long-term debt | 200,000 |
| — |
| — |
| — |
| 200,000 |
|
Other liabilities | 46,368 |
| 33,712 |
| 2,448 |
| — |
| 82,528 |
|
Intercompany payable – noncurrent | 1,039,654 |
| 37,932 |
| 219,938 |
| (1,297,524 | ) | — |
|
Total other liabilities | 1,286,022 |
| 71,644 |
| 222,386 |
| (1,297,524 | ) | 282,528 |
|
Equity | |
| |
| |
| |
| |
|
Caleres, Inc. shareholders’ equity | 601,003 |
| 612,933 |
| 380,144 |
| (993,077 | ) | 601,003 |
|
Noncontrolling interests | — |
| — |
| 852 |
| — |
| 852 |
|
Total equity | 601,003 |
| 612,933 |
| 380,996 |
| (993,077 | ) | 601,855 |
|
Total liabilities and equity | $ | 2,007,381 |
| $ | 912,128 |
| $ | 643,214 |
| $ | (2,302,440 | ) | $ | 1,260,283 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME |
FOR THE THIRTEEN WEEKS ENDED OCTOBER 31, 2015 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net sales | $ | 228,351 |
| $ | 476,462 |
| $ | 59,078 |
| $ | (35,252 | ) | $ | 728,639 |
|
Cost of goods sold | 161,958 |
| 271,445 |
| 33,954 |
| (27,152 | ) | 440,205 |
|
Gross profit | 66,393 |
| 205,017 |
| 25,124 |
| (8,100 | ) | 288,434 |
|
Selling and administrative expenses | 59,708 |
| 168,255 |
| 16,348 |
| (8,100 | ) | 236,211 |
|
Operating earnings | 6,685 |
| 36,762 |
| 8,776 |
| — |
| 52,223 |
|
Interest expense | (4,136 | ) | — |
| — |
| — |
| (4,136 | ) |
Loss on early extinguishment of debt | (1,961 | ) | — |
| — |
| — |
| (1,961 | ) |
Interest income | 194 |
| — |
| 30 |
| — |
| 224 |
|
Intercompany interest income (expense) | 3,440 |
| (3,527 | ) | 87 |
| — |
| — |
|
Earnings before income taxes | 4,222 |
| 33,235 |
| 8,893 |
| — |
| 46,350 |
|
Income tax provision | (714 | ) | (10,889 | ) | (755 | ) | — |
| (12,358 | ) |
Equity in earnings (loss) of subsidiaries, net of tax | 30,475 |
| — |
| (583 | ) | (29,892 | ) | — |
|
Net earnings | 33,983 |
| 22,346 |
| 7,555 |
| (29,892 | ) | 33,992 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| — |
| 9 |
| — |
| 9 |
|
Net earnings attributable to Caleres, Inc. | $ | 33,983 |
| $ | 22,346 |
| $ | 7,546 |
| $ | (29,892 | ) | $ | 33,983 |
|
| | | | | |
Comprehensive income | $ | 33,957 |
| $ | 22,397 |
| $ | 7,567 |
| $ | (29,995 | ) | $ | 33,926 |
|
Less: Comprehensive loss attributable to noncontrolling interests | — |
| — |
| (31 | ) | — |
| (31 | ) |
Comprehensive income attributable to Caleres, Inc. | $ | 33,957 |
| $ | 22,397 |
| $ | 7,598 |
| $ | (29,995 | ) | $ | 33,957 |
|
|
| | | | | | | | | | | | | | | |
| | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME |
THIRTY-NINE WEEKS ENDED OCTOBER 31, 2015 | |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net sales | $ | 617,512 |
| $ | 1,272,367 |
| $ | 195,228 |
| $ | (116,351 | ) | $ | 1,968,756 |
|
Cost of goods sold | 444,301 |
| 698,799 |
| 118,480 |
| (92,579 | ) | 1,169,001 |
|
Gross profit | 173,211 |
| 573,568 |
| 76,748 |
| (23,772 | ) | 799,755 |
|
Selling and administrative expenses | 172,906 |
| 484,565 |
| 47,763 |
| (23,772 | ) | 681,462 |
|
Operating earnings | 305 |
| 89,003 |
| 28,985 |
| — |
| 118,293 |
|
Interest expense | (12,943 | ) | (1 | ) | — |
| — |
| (12,944 | ) |
Loss on early extinguishment of debt | (10,651 | ) | — |
| — |
| — |
| (10,651 | ) |
Interest income | 642 |
| — |
| 124 |
| — |
| 766 |
|
Intercompany interest income (expense) | 10,549 |
| (10,720 | ) | 171 |
| — |
| — |
|
(Loss) earnings before income taxes | (12,098 | ) | 78,282 |
| 29,280 |
| — |
| 95,464 |
|
Income tax benefit (provision) | 4,621 |
| (26,479 | ) | (3,360 | ) | — |
| (25,218 | ) |
Equity in earnings of subsidiaries, net of tax | 77,546 |
| — |
| (205 | ) | (77,341 | ) | — |
|
Net earnings | 70,069 |
| 51,803 |
| 25,715 |
| (77,341 | ) | 70,246 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| — |
| 177 |
| — |
| 177 |
|
Net earnings attributable to Caleres, Inc. | $ | 70,069 |
| $ | 51,803 |
| $ | 25,538 |
| $ | (77,341 | ) | $ | 70,069 |
|
| | | | | |
Comprehensive income | $ | 70,355 |
| $ | 51,966 |
| $ | 25,843 |
| $ | (77,669 | ) | $ | 70,495 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| — |
| 140 |
| — |
| 140 |
|
Comprehensive income attributable to Caleres, Inc. | $ | 70,355 |
| $ | 51,966 |
| $ | 25,703 |
| $ | (77,669 | ) | $ | 70,355 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS |
THIRTY-NINE WEEKS ENDED OCTOBER 31, 2015 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net cash (used for) provided by operating activities | $ | (34,602 | ) | $ | 81,599 |
| $ | 37,053 |
| $ | — |
| $ | 84,050 |
|
| | | | | |
Investing activities | |
| |
| |
| |
| |
|
Purchases of property and equipment | (12,838 | ) | (33,292 | ) | (1,214 | ) | — |
| (47,344 | ) |
Proceeds from disposal of property and equipment | 7,111 |
| — |
| 322 |
| — |
| 7,433 |
|
Capitalized software | (3,775 | ) | (1,647 | ) | — |
| — |
| (5,422 | ) |
Intercompany investing | (356 | ) | 356 |
| — |
| — |
| — |
|
Net cash used for investing activities | (9,858 | ) | (34,583 | ) | (892 | ) | — |
| (45,333 | ) |
| | | | | |
Financing activities | |
| |
| |
| |
| |
|
Borrowings under revolving credit agreement | 117,000 |
| — |
| — |
| — |
| 117,000 |
|
Repayments under revolving credit agreement | (117,000 | ) | — |
| — |
| — |
| (117,000 | ) |
Proceeds from issuance of 2023 senior notes | 200,000 |
| — |
| — |
| — |
| 200,000 |
|
Redemption of 2019 senior notes | (200,000 | ) | — |
| — |
| — |
| (200,000 | ) |
Debt issuance costs | (3,650 | ) | — |
| — |
| — |
| (3,650 | ) |
Dividends paid | (9,195 | ) | — |
| — |
| — |
| (9,195 | ) |
Acquisition of treasury stock | (4,921 | ) | — |
| — |
| — |
| (4,921 | ) |
Issuance of common stock under share-based plans, net | (4,606 | ) | — |
| — |
| — |
| (4,606 | ) |
Tax benefit related to share-based plans | 3,049 |
| — |
| — |
| — |
| 3,049 |
|
Intercompany financing | 98,603 |
| (43,017 | ) | (55,586 | ) | — |
| — |
|
Net cash provided by (used for) financing activities | 79,280 |
| (43,017 | ) | (55,586 | ) | — |
| (19,323 | ) |
Effect of exchange rate changes on cash and cash equivalents | — |
| — |
| (499 | ) | — |
| (499 | ) |
Increase (decrease) in cash and cash equivalents | 34,820 |
| 3,999 |
| (19,924 | ) | — |
| 18,895 |
|
Cash and cash equivalents at beginning of period | 13,891 |
| — |
| 53,512 |
| — |
| 67,403 |
|
Cash and cash equivalents at end of period | $ | 48,711 |
| $ | 3,999 |
| $ | 33,588 |
| $ | — |
| $ | 86,298 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET |
AS OF APRIL 30, 2016 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Assets | |
| |
| |
| |
| |
|
Current assets | |
| |
| |
| |
| |
|
Cash and cash equivalents | $ | 47,611 |
| $ | 4,104 |
| $ | 97,819 |
| $ | — |
| $ | 149,534 |
|
Receivables, net | 99,021 |
| 761 |
| 17,179 |
| — |
| 116,961 |
|
Inventories, net | 96,450 |
| 370,114 |
| 21,312 |
| — |
| 487,876 |
|
Prepaid expenses and other current assets | 12,950 |
| 21,546 |
| 5,313 |
| — |
| 39,809 |
|
Intercompany receivable – current | 571 |
| 185 |
| 10,084 |
| (10,840 | ) | — |
|
Total current assets | 256,603 |
| 396,710 |
| 151,707 |
| (10,840 | ) | 794,180 |
|
Other assets | 95,244 |
| 13,253 |
| 7,850 |
| — |
| 116,347 |
|
Goodwill and intangible assets, net | 115,002 |
| 2,800 |
| 12,177 |
| — |
| 129,979 |
|
Property and equipment, net | 31,473 |
| 144,427 |
| 9,686 |
| — |
| 185,586 |
|
Investment in subsidiaries | 1,040,178 |
| — |
| (20,061 | ) | (1,020,117 | ) | — |
|
Intercompany receivable – noncurrent | 462,382 |
| 375,975 |
| 561,419 |
| (1,399,776 | ) | — |
|
Total assets | $ | 2,000,882 |
| $ | 933,165 |
| $ | 722,778 |
| $ | (2,430,733 | ) | $ | 1,226,092 |
|
| | | | | |
Liabilities and Equity | |
| |
| |
| |
|
Current liabilities | |
| |
| |
| |
| |
|
Trade accounts payable | $ | 42,121 |
| $ | 131,783 |
| $ | 15,250 |
| $ | — |
| $ | 189,154 |
|
Other accrued expenses | 41,347 |
| 69,268 |
| 14,790 |
| — |
| 125,405 |
|
Intercompany payable – current | 2,228 |
| — |
| 8,612 |
| (10,840 | ) | — |
|
Total current liabilities | 85,696 |
| 201,051 |
| 38,652 |
| (10,840 | ) | 314,559 |
|
Other liabilities | |
| |
| |
| |
| |
|
Long-term debt | 196,659 |
| — |
| — |
| — |
| 196,659 |
|
Other liabilities | 36,925 |
| 66,321 |
| 3,651 |
| — |
| 106,897 |
|
Intercompany payable – noncurrent | 1,074,723 |
| 38,518 |
| 286,535 |
| (1,399,776 | ) | — |
|
Total other liabilities | 1,308,307 |
| 104,839 |
| 290,186 |
| (1,399,776 | ) | 303,556 |
|
Equity | |
| |
| |
| |
| |
|
Caleres, Inc. shareholders’ equity | 606,879 |
| 627,275 |
| 392,842 |
| (1,020,117 | ) | 606,879 |
|
Noncontrolling interests | — |
| — |
| 1,098 |
| — |
| 1,098 |
|
Total equity | 606,879 |
| 627,275 |
| 393,940 |
| (1,020,117 | ) | 607,977 |
|
Total liabilities and equity | $ | 2,000,882 |
| $ | 933,165 |
| $ | 722,778 |
| $ | (2,430,733 | ) | $ | 1,226,092 |
|
|
| | | | | | | | | | | | | | | |
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 |
| $ | — |
| $ | 53,512 |
| $ | — |
| $ | 67,403 |
|
Receivables, net | 89,030 |
| 5,398 |
| 42,218 |
| — |
| 136,646 |
|
Inventories, net | 148,082 |
| 376,254 |
| 18,767 |
| — |
| 543,103 |
|
Prepaid expenses and other current assets | 41,494 |
| 20,777 |
| 8,964 |
| (27,491 | ) | 43,744 |
|
Intercompany receivable – current | 1,194 |
| — |
| 8,750 |
| (9,944 | ) | — |
|
Total current assets | 293,691 |
| 402,429 |
| 132,211 |
| (37,435 | ) | 790,896 |
|
Other assets | 113,922 |
| 13,733 |
| 13,931 |
| — |
| 141,586 |
|
Goodwill and intangible assets, net | 117,792 |
| 2,800 |
| 13,995 |
| — |
| 134,587 |
|
Property and equipment, net | 29,237 |
| 109,720 |
| 10,786 |
| — |
| 149,743 |
|
Investment in subsidiaries | 956,831 |
| — |
| (18,909 | ) | (937,922 | ) | — |
|
Intercompany receivable – noncurrent | 459,774 |
| 306,871 |
| 539,396 |
| (1,306,041 | ) | — |
|
Total assets | $ | 1,971,247 |
| $ | 835,553 |
| $ | 691,410 |
| $ | (2,281,398 | ) | $ | 1,216,812 |
|
| | | | | |
Liabilities and Equity | | |
| |
| |
| |
|
Current liabilities | |
| |
| |
| |
| |
|
Trade accounts payable | $ | 60,377 |
| $ | 114,208 |
| $ | 41,336 |
| $ | — |
| $ | 215,921 |
|
Other accrued expenses | 110,714 |
| 85,638 |
| 12,301 |
| (27,491 | ) | 181,162 |
|
Intercompany payable – current | 4,948 |
| — |
| 4,996 |
| (9,944 | ) | — |
|
Total current liabilities | 176,039 |
| 199,846 |
| 58,633 |
| (37,435 | ) | 397,083 |
|
Other liabilities | |
| |
| |
| |
| |
|
Long-term debt | 199,197 |
| — |
| — |
| — |
| 199,197 |
|
Other liabilities | 41,847 |
| 32,574 |
| 4,489 |
| — |
| 78,910 |
|
Intercompany payable – noncurrent | 1,013,254 |
| 21,078 |
| 271,709 |
| (1,306,041 | ) | — |
|
Total other liabilities | 1,254,298 |
| 53,652 |
| 276,198 |
| (1,306,041 | ) | 278,107 |
|
Equity | |
| |
| |
| |
| |
|
Caleres, Inc. shareholders’ equity | 540,910 |
| 582,055 |
| 355,867 |
| (937,922 | ) | 540,910 |
|
Noncontrolling interests | — |
| — |
| 712 |
| — |
| 712 |
|
Total equity | 540,910 |
| 582,055 |
| 356,579 |
| (937,922 | ) | 541,622 |
|
Total liabilities and equity | $ | 1,971,247 |
| $ | 835,553 |
| $ | 691,410 |
| $ | (2,281,398 | ) | $ | 1,216,812 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET |
AS OF NOVEMBER 1, 2014 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Assets | |
| |
| |
| |
| |
|
Current assets | |
| |
| |
| |
| |
|
Cash and cash equivalents | $ | — |
| $ | — |
| $ | 39,080 |
| $ | — |
| $ | 39,080 |
|
Receivables, net | 115,520 |
| 1,413 |
| 21,284 |
| — |
| 138,217 |
|
Inventories, net | 128,709 |
| 402,048 |
| 37,020 |
| — |
| 567,777 |
|
Prepaid expenses and other current assets | 10,278 |
| 20,839 |
| 6,728 |
| — |
| 37,845 |
|
Intercompany receivable – current | 466 |
| 521 |
| 15,487 |
| (16,474 | ) | — |
|
Total current assets | 254,973 |
| 424,821 |
| 119,599 |
| (16,474 | ) | 782,919 |
|
Other assets | 117,472 |
| 13,609 |
| 8,797 |
| — |
| 139,878 |
|
Goodwill and intangible assets, net | 118,416 |
| 2,800 |
| 14,558 |
| — |
| 135,774 |
|
Property and equipment, net | 28,000 |
| 112,047 |
| 11,242 |
| — |
| 151,289 |
|
Investment in subsidiaries | 914,450 |
| — |
| (19,785 | ) | (894,665 | ) | — |
|
Intercompany receivable – noncurrent | 407,970 |
| 289,222 |
| 487,316 |
| (1,184,508 | ) | — |
|
Total assets | $ | 1,841,281 |
| $ | 842,499 |
| $ | 621,727 |
| $ | (2,095,647 | ) | $ | 1,209,860 |
|
| | | | | |
Liabilities and Equity | | |
| |
| |
| |
|
Current liabilities | |
| |
| |
| |
| |
|
Borrowings under revolving credit agreement | $ | 14,000 |
| $ | — |
| $ | — |
| $ | — |
| $ | 14,000 |
|
Trade accounts payable | 53,944 |
| 123,889 |
| 25,229 |
| — |
| 203,062 |
|
Other accrued expenses | 68,124 |
| 85,358 |
| 18,595 |
| — |
| 172,077 |
|
Intercompany payable – current | 2,803 |
| — |
| 13,671 |
| (16,474 | ) | — |
|
Total current liabilities | 138,871 |
| 209,247 |
| 57,495 |
| (16,474 | ) | 389,139 |
|
Other liabilities | |
| |
| |
| |
| |
|
Long-term debt | 199,150 |
| — |
| — |
| — |
| 199,150 |
|
Other liabilities | 35,986 |
| 37,846 |
| 6,722 |
| — |
| 80,554 |
|
Intercompany payable – noncurrent | 927,020 |
| 38,407 |
| 219,081 |
| (1,184,508 | ) | — |
|
Total other liabilities | 1,162,156 |
| 76,253 |
| 225,803 |
| (1,184,508 | ) | 279,704 |
|
Equity | |
| |
| |
| |
| |
|
Caleres, Inc. shareholders’ equity | 540,254 |
| 556,999 |
| 337,666 |
| (894,665 | ) | 540,254 |
|
Noncontrolling interests | — |
| — |
| 763 |
| — |
| 763 |
|
Total equity | 540,254 |
| 556,999 |
| 338,429 |
| (894,665 | ) | 541,017 |
|
Total liabilities and equity | $ | 1,841,281 |
| $ | 842,499 |
| $ | 621,727 |
| $ | (2,095,647 | ) | $ | 1,209,860 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME |
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 1, 2014 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net sales | $ | 233,606 |
| $ | 458,177 |
| $ | 78,532 |
| $ | (41,038 | ) | $ | 729,277 |
|
Cost of goods sold | 165,734 |
| 258,668 |
| 48,713 |
| (34,568 | ) | 438,547 |
|
Gross profit | 67,872 |
| 199,509 |
| 29,819 |
| (6,470 | ) | 290,730 |
|
Selling and administrative expenses | 62,568 |
| 163,637 |
| 17,782 |
| (6,470 | ) | 237,517 |
|
Operating earnings | 5,304 |
| 35,872 |
| 12,037 |
| — |
| 53,213 |
|
Interest expense | (5,207 | ) | — |
| — |
| — |
| (5,207 | ) |
Interest income | 6 |
| — |
| 103 |
| — |
| 109 |
|
Intercompany interest income (expense) | 3,608 |
| (3,596 | ) | (12 | ) | — |
| — |
|
Earnings before income taxes | 3,711 |
| 32,276 |
| 12,128 |
| — |
| 48,115 |
|
Income tax benefit (provision) | 566 |
| (12,311 | ) | (3,133 | ) | — |
| (14,878 | ) |
Equity in earnings (loss) of subsidiaries, net of tax | 28,836 |
| — |
| (634 | ) | (28,202 | ) | — |
|
Net earnings | 33,113 |
| 19,965 |
| 8,361 |
| (28,202 | ) | 33,237 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| — |
| 124 |
| — |
| 124 |
|
Net earnings attributable to Caleres, Inc. | $ | 33,113 |
| $ | 19,965 |
| $ | 8,237 |
| $ | (28,202 | ) | $ | 33,113 |
|
| | | | | |
Comprehensive income | $ | 32,014 |
| $ | 19,023 |
| $ | 7,390 |
| $ | (26,320 | ) | $ | 32,107 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| — |
| 93 |
| — |
| 93 |
|
Comprehensive income attributable to Caleres, Inc. | $ | 32,014 |
| $ | 19,023 |
| $ | 7,297 |
| $ | (26,320 | ) | $ | 32,014 |
|
|
| | | | | | | | | | | | | | | |
| | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME |
THIRTY-NINE WEEKS ENDED NOVEMBER 1, 2014 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net sales | $ | 596,364 |
| $ | 1,253,507 |
| $ | 237,464 |
| $ | (131,019 | ) | $ | 1,956,316 |
|
Cost of goods sold | 429,633 |
| 692,287 |
| 151,869 |
| (110,186 | ) | 1,163,603 |
|
Gross profit | 166,731 |
| 561,220 |
| 85,595 |
| (20,833 | ) | 792,713 |
|
Selling and administrative expenses | 168,914 |
| 474,421 |
| 56,970 |
| (20,833 | ) | 679,472 |
|
Operating (loss) earnings | (2,183 | ) | 86,799 |
| 28,625 |
| — |
| 113,241 |
|
Interest expense | (15,636 | ) | (1 | ) | — |
| — |
| (15,637 | ) |
Interest income | 19 |
| — |
| 275 |
| — |
| 294 |
|
Intercompany interest income (expense) | 11,410 |
| (11,316 | ) | (94 | ) | — |
| — |
|
(Loss) earnings before income taxes | (6,390 | ) | 75,482 |
| 28,806 |
| — |
| 97,898 |
|
Income tax benefit (provision) | 2,714 |
| (29,540 | ) | (4,320 | ) | — |
| (31,146 | ) |
Equity in earnings (loss) of subsidiaries, net of tax | 70,282 |
| — |
| (840 | ) | (69,442 | ) | — |
|
Net earnings | 66,606 |
| 45,942 |
| 23,646 |
| (69,442 | ) | 66,752 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| — |
| 146 |
| — |
| 146 |
|
Net earnings attributable to Caleres, Inc. | $ | 66,606 |
| $ | 45,942 |
| $ | 23,500 |
| $ | (69,442 | ) | $ | 66,606 |
|
| | | | | |
Comprehensive income | $ | 65,487 |
| $ | 45,550 |
| $ | 23,207 |
| $ | (68,657 | ) | $ | 65,587 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| — |
| 100 |
| — |
| 100 |
|
Comprehensive income attributable to Caleres, Inc. | $ | 65,487 |
| $ | 45,550 |
| $ | 23,107 |
| $ | (68,657 | ) | $ | 65,487 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS |
THIRTY-NINE WEEKS ENDED NOVEMBER 1, 2014 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net cash (used for) provided by operating activities | $ | (31,942 | ) | $ | 68,773 |
| $ | 31,671 |
| $ | — |
| $ | 68,502 |
|
| | | | | |
Investing activities | |
| |
| |
| |
| |
|
Purchases of property and equipment | (5,145 | ) | (27,341 | ) | (4,045 | ) | — |
| (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 | ) | (202 | ) | 919 |
| — |
| — |
|
Net cash used for investing activities | (74,714 | ) | (27,575 | ) | (10,156 | ) | — |
| (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 | 106,110 |
| (41,198 | ) | (64,912 | ) | — |
| — |
|
Net cash provided by (used for) financing activities | 106,656 |
| (41,198 | ) | (64,912 | ) | — |
| 546 |
|
Effect of exchange rate changes on cash and cash equivalents | — |
| — |
| (69 | ) | — |
| (69 | ) |
Decrease in cash and cash equivalents | — |
| — |
| (43,466 | ) | — |
| (43,466 | ) |
Cash and cash equivalents at beginning of period | — |
| — |
| 82,546 |
| — |
| 82,546 |
|
Cash and cash equivalents at end of period | $ | — |
| $ | — |
| $ | 39,080 |
| $ | — |
| $ | 39,080 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME |
FOR THE THIRTEEN WEEKS ENDED APRIL 30, 2016 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net sales | $ | 187,187 |
| $ | 383,046 |
| $ | 38,796 |
| $ | (24,296 | ) | $ | 584,733 |
|
Cost of goods sold | 129,909 |
| 204,627 |
| 22,894 |
| (20,490 | ) | 336,940 |
|
Gross profit | 57,278 |
| 178,419 |
| 15,902 |
| (3,806 | ) | 247,793 |
|
Selling and administrative expenses | 49,542 |
| 157,103 |
| 16,211 |
| (3,806 | ) | 219,050 |
|
Operating earnings (loss) | 7,736 |
| 21,316 |
| (309 | ) | — |
| 28,743 |
|
Interest expense | (3,608 | ) | (2 | ) | — |
| — |
| (3,610 | ) |
Interest income | 157 |
| — |
| 90 |
| — |
| 247 |
|
Intercompany interest income (expense) | 2,254 |
| (2,301 | ) | 47 |
| — |
| — |
|
Earnings (loss) before income taxes | 6,539 |
| 19,013 |
| (172 | ) | — |
| 25,380 |
|
Income tax provision | (866 | ) | (6,304 | ) | (332 | ) | — |
| (7,502 | ) |
Equity in earnings (loss) of subsidiaries, net of tax | 12,109 |
| — |
| (537 | ) | (11,572 | ) | — |
|
Net earnings (loss) | 17,782 |
| 12,709 |
| (1,041 | ) | (11,572 | ) | 17,878 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| — |
| 96 |
| — |
| 96 |
|
Net earnings (loss) attributable to Caleres, Inc. | $ | 17,782 |
| $ | 12,709 |
| $ | (1,137 | ) | $ | (11,572 | ) | $ | 17,782 |
|
| | | | | |
Comprehensive income | $ | 19,578 |
| $ | 12,709 |
| $ | 228 |
| $ | (12,827 | ) | $ | 19,688 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| — |
| 110 |
| — |
| 110 |
|
Comprehensive income attributable to Caleres, Inc. | $ | 19,578 |
| $ | 12,709 |
| $ | 118 |
| $ | (12,827 | ) | $ | 19,578 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS |
FOR THE THIRTEEN WEEKS ENDED APRIL 30, 2016 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Net cash provided by operating activities | $ | 14,658 |
| $ | 42,360 |
| $ | 8,142 |
| $ | — |
| $ | 65,160 |
|
| | | | | |
Investing activities | |
| |
| |
| |
| |
|
Purchases of property and equipment | (590 | ) | (15,434 | ) | (343 | ) | — |
| (16,367 | ) |
Capitalized software | (1,097 | ) | (723 | ) | — |
| — |
| (1,820 | ) |
Intercompany investing | (2,815 | ) | 2,815 |
| — |
| — |
| — |
|
Net cash used for investing activities | (4,502 | ) | (13,342 | ) | (343 | ) | — |
| (18,187 | ) |
| | | | | |
Financing activities | |
| |
| |
| |
| |
|
Borrowings under revolving credit agreement | 103,000 |
| — |
| — |
| — |
| 103,000 |
|
Repayments under revolving credit agreement | (103,000 | ) | — |
| — |
| — |
| (103,000 | ) |
Dividends paid | (3,068 | ) | — |
| — |
| — |
| (3,068 | ) |
Acquisition of treasury stock | (12,130 | ) | — |
| — |
| — |
| (12,130 | ) |
Issuance of common stock under share-based plans, net | (4,149 | ) | — |
| — |
| — |
| (4,149 | ) |
Tax benefit related to share-based plans | 3,163 |
| — |
| — |
| — |
| 3,163 |
|
Intercompany financing | 22,639 |
| (24,914 | ) | 2,275 |
| — |
| — |
|
Net cash provided by (used for) financing activities | 6,455 |
| (24,914 | ) | 2,275 |
| — |
| (16,184 | ) |
Effect of exchange rate changes on cash and cash equivalents | — |
| — |
| 594 |
| — |
| 594 |
|
Increase in cash and cash equivalents | 16,611 |
| 4,104 |
| 10,668 |
| — |
| 31,383 |
|
Cash and cash equivalents at beginning of period | 31,000 |
| — |
| 87,151 |
| — |
| 118,151 |
|
Cash and cash equivalents at end of period | $ | 47,611 |
| $ | 4,104 |
| $ | 97,819 |
| $ | — |
| $ | 149,534 |
|
|
| | | | | | | | | | | | | | | |
CONDENSED CONSOLIDATING BALANCE SHEET |
AS OF JANUARY 30, 2016 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Assets | |
| |
| |
| |
| |
|
Current assets | |
| |
| |
| |
| |
|
Cash and cash equivalents | $ | 31,000 |
| $ | — |
| $ | 87,151 |
| $ | — |
| $ | 118,151 |
|
Receivables, net | 110,235 |
| 2,290 |
| 41,139 |
| — |
| 153,664 |
|
Inventories, net | 151,704 |
| 371,538 |
| 23,503 |
| — |
| 546,745 |
|
Prepaid expenses and other current assets | 29,765 |
| 24,597 |
| 8,109 |
| (5,966 | ) | 56,505 |
|
Intercompany receivable – current | 650 |
| 176 |
| 6,877 |
| (7,703 | ) | — |
|
Total current assets | 323,354 |
| 398,601 |
| 166,779 |
| (13,669 | ) | 875,065 |
|
Other assets | 94,767 |
| 15,772 |
| 7,810 |
| — |
| 118,349 |
|
Goodwill and intangible assets, net | 115,558 |
| 2,800 |
| 12,541 |
| — |
| 130,899 |
|
Property and equipment, net | 32,538 |
| 136,223 |
| 10,249 |
| — |
| 179,010 |
|
Investment in subsidiaries | 1,028,143 |
| — |
| (19,524 | ) | (1,008,619 | ) | — |
|
Intercompany receivable – noncurrent | 431,523 |
| 354,038 |
| 556,259 |
| (1,341,820 | ) | — |
|
Total assets | $ | 2,025,883 |
| $ | 907,434 |
| $ | 734,114 |
| $ | (2,364,108 | ) | $ | 1,303,323 |
|
| | | | | |
Liabilities and Equity | | |
| |
| |
| |
|
Current liabilities | |
| |
| |
| |
| |
|
Trade accounts payable | $ | 78,332 |
| $ | 123,274 |
| $ | 36,196 |
| $ | — |
| $ | 237,802 |
|
Other accrued expenses | 80,053 |
| 62,729 |
| 15,681 |
| (5,966 | ) | 152,497 |
|
Intercompany payable – current | 4,394 |
| — |
| 3,309 |
| (7,703 | ) | — |
|
Total current liabilities | 162,779 |
| 186,003 |
| 55,186 |
| (13,669 | ) | 390,299 |
|
Other liabilities | |
| |
| |
| |
| |
|
Long-term debt | 196,544 |
| — |
| — |
| — |
| 196,544 |
|
Other liabilities | 44,011 |
| 66,302 |
| 3,695 |
| — |
| 114,008 |
|
Intercompany payable – noncurrent | 1,021,065 |
| 39,175 |
| 281,580 |
| (1,341,820 | ) | — |
|
Total other liabilities | 1,261,620 |
| 105,477 |
| 285,275 |
| (1,341,820 | ) | 310,552 |
|
Equity | |
| |
| |
| |
| |
|
Caleres, Inc. shareholders’ equity | 601,484 |
| 615,954 |
| 392,665 |
| (1,008,619 | ) | 601,484 |
|
Noncontrolling interests | — |
| — |
| 988 |
| — |
| 988 |
|
Total equity | 601,484 |
| 615,954 |
| 393,653 |
| (1,008,619 | ) | 602,472 |
|
Total liabilities and equity | $ | 2,025,883 |
| $ | 907,434 |
| $ | 734,114 |
| $ | (2,364,108 | ) | $ | 1,303,323 |
|
|
| | | | | | | | | | | | | | | |
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET |
AS OF MAY 2, 2015 |
| | | Non- |
| | |
($ thousands) | Parent |
| Guarantors |
| Guarantors |
| Eliminations |
| Total |
|
Assets | |
| |
| |
| |
| |
|
Current assets | |
| |
| |
| |
| |
|
Cash and cash equivalents | $ | 3,564 |
| $ | — |
| $ | 62,766 |
| $ | — |
| $ | 66,330 |
|
Receivables, net | 101,968 |
| 1,570 |
| 22,974 |
| — |
| 126,512 |
|
Inventories, net | 95,948 |
| 380,104 |
| 22,461 |
| — |
| 498,513 |
|
Prepaid expenses and other current assets | 12,519 |
| 22,119 |
| 6,365 |
| — |
| 41,003 |
|
Intercompany receivable – current | 1,082 |
| 432 |
| 15,800 |
| (17,314 | ) | — |
|
Total current assets | 215,081 |
| 404,225 |
| 130,366 |
| (17,314 | ) | 732,358 |
|
Other assets | 121,441 |
| 13,551 |
| 6,977 |
| — |
| 141,969 |
|
Goodwill and intangible assets, net | 117,226 |
| 2,800 |
| 13,631 |
| — |
| 133,657 |
|
Property and equipment, net | 34,186 |
| 108,866 |
| 10,298 |
| — |
| 153,350 |
|
Investment in subsidiaries | 955,609 |
| — |
| (18,924 | ) | (936,685 | ) | — |
|
Intercompany receivable – noncurrent | 431,964 |
| 353,117 |
| 517,634 |
| (1,302,715 | ) | — |
|
Total assets | $ | 1,875,507 |
| $ | 882,559 |
| $ | 659,982 |
| $ | (2,256,714 | ) | $ | 1,161,334 |
|
| | | | | |
Liabilities and Equity | | |
| |
| |
| |
|
Current liabilities | |
| |
| |
| |
| |
|
Trade accounts payable | $ | 3,417 |
| $ | 145,328 |
| $ | 23,371 |
| $ | — |
| $ | 172,116 |
|
Other accrued expenses | 66,847 |
| 59,140 |
| 11,745 |
| — |
| 137,732 |
|
Intercompany payable – current | 2,034 |
| — |
| 15,280 |
| (17,314 | ) | — |
|
Total current liabilities | 72,298 |
| 204,468 |
| 50,396 |
| (17,314 | ) | 309,848 |
|
Other liabilities | |
| |
| |
| |
| |
|
Long-term debt | 196,904 |
| — |
| — |
| — |
| 196,904 |
|
Other liabilities | 34,689 |
| 61,678 |
| 3,895 |
| — |
| 100,262 |
|
Intercompany payable – noncurrent | 1,018,142 |
| 37,477 |
| 247,096 |
| (1,302,715 | ) | — |
|
Total other liabilities | 1,249,735 |
| 99,155 |
| 250,991 |
| (1,302,715 | ) | 297,166 |
|
Equity | |
| |
| |
| |
| |
|
Caleres, Inc. shareholders’ equity | 553,474 |
| 578,936 |
| 357,749 |
| (936,685 | ) | 553,474 |
|
Noncontrolling interests | — |
| — |
| 846 |
| — |
| 846 |
|
Total equity | 553,474 |
| 578,936 |
| 358,595 |
| (936,685 | ) | 554,320 |
|
Total liabilities and equity | $ | 1,875,507 |
| $ | 882,559 |
| $ | 659,982 |
| $ | (2,256,714 | ) | $ | 1,161,334 |
|
|
| | | | | | | | | | | | | | | |
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 |
| $ | 380,189 |
| $ | 54,981 |
| $ | (25,238 | ) | $ | 602,283 |
|
Cost of goods sold | 137,594 |
| 201,583 |
| 36,962 |
| (22,382 | ) | 353,757 |
|
Gross profit | 54,757 |
| 178,606 |
| 18,019 |
| (2,856 | ) | 248,526 |
|
Selling and administrative expenses | 52,936 |
| 152,246 |
| 15,864 |
| (2,856 | ) | 218,190 |
|
Operating earnings | 1,821 |
| 26,360 |
| 2,155 |
| — |
| 30,336 |
|
Interest expense | (4,462 | ) | (1 | ) | — |
| — |
| (4,463 | ) |
Interest income | 251 |
| — |
| 53 |
| — |
| 304 |
|
Intercompany interest income (expense) | 3,678 |
| (3,722 | ) | 44 |
| — |
| — |
|
Earnings before income taxes | 1,288 |
| 22,637 |
| 2,252 |
| — |
| 26,177 |
|
Income tax benefit (provision) | 1,300 |
| (7,724 | ) | (362 | ) | — |
| (6,786 | ) |
Equity in earnings (loss) of subsidiaries, net of tax | 16,673 |
| — |
| (15 | ) | (16,658 | ) | — |
|
Net earnings | 19,261 |
| 14,913 |
| 1,875 |
| (16,658 | ) | 19,391 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| — |
| 130 |
| — |
| 130 |
|
Net earnings attributable to Caleres, Inc. | $ | 19,261 |
| $ | 14,913 |
| $ | 1,745 |
| $ | (16,658 | ) | $ | 19,261 |
|
| | | | | |
Comprehensive income | $ | 20,217 |
| $ | 14,913 |
| $ | 2,604 |
| $ | (17,383 | ) | $ | 20,351 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| — |
| 134 |
| — |
| 134 |
|
Comprehensive income attributable to Caleres, Inc. | $ | 20,217 |
| $ | 14,913 |
| $ | 2,470 |
| $ | (17,383 | ) | $ | 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 | $ | (41,223 | ) | $ | 46,835 |
| $ | 16,302 |
| $ | — |
| $ | 21,914 |
|
| | | | | |
Investing activities | |
| |
| |
| |
| |
|
Purchases of property and equipment | (6,328 | ) | (6,302 | ) | (275 | ) | — |
| (12,905 | ) |
Capitalized software | (750 | ) | (205 | ) | — |
| — |
| (955 | ) |
Intercompany investing | (151 | ) | 151 |
| — |
| — |
| — |
|
Net cash used for investing activities | (7,229 | ) | (6,356 | ) | (275 | ) | — |
| (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 | 47,469 |
| (40,479 | ) | (6,990 | ) | — |
| — |
|
Net cash provided by (used for) financing activities | 38,125 |
| (40,479 | ) | (6,990 | ) | — |
| (9,344 | ) |
Effect of exchange rate changes on cash and cash equivalents | — |
| — |
| 217 |
| — |
| 217 |
|
(Decrease) increase in cash and cash equivalents | (10,327 | ) | — |
| 9,254 |
| — |
| (1,073 | ) |
Cash and cash equivalents at beginning of period | 13,891 |
| — |
| 53,512 |
| — |
| 67,403 |
|
Cash and cash equivalents at end of period | $ | 3,564 |
| $ | — |
| $ | 62,766 |
| $ | — |
| $ | 66,330 |
|
|
| |
ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Financial Highlights
Solid inventory planningWe are pleased with our financial performance during the first quarter of 2016 despite a challenging retail environment. Although sales at our retail store locations were impacted by lower customer traffic, we experienced solid gains in our online traffic and careful expense management were the primary drivers of our third quarter performance. sales. Our Famous Footwear segment delivered another successful back-to-school season, reportingreported a 4.4% increase1.3% improvement in same-storenet sales, and a 6.0% increase in operating earnings for the quarter, while our Brand Portfolio segment reported a 2.8% decreasean increase in net sales.gross profit rate to 35.9% for the first quarter of 2016, from 33.2% for the first quarter of 2015.
The following is a summary of the financial highlights for the thirdfirst quarter of 2015:2016:
Consolidated net sales decreased $0.7$17.6 million, or 0.1%2.9%, to $728.6$584.7 million for the thirdfirst quarter of 2015,2016, compared to $729.3$602.3 million for the thirdfirst quarter of 2014. Excluding Shoes.com, which was sold in2015. Cooler weather during the fourth quarter of 2014,negatively impacted our net sales were $13.1 million, or 1.8%, higher than the third quarter of last year.in an already difficult retail environment. Our Famous Footwear segment reported an increase in net sales of $7.1 million. Excluding sales from Shoes.com, which contributed $13.7$4.6 million, of net sales in the third quarter of 2014, Famous Footwear sales were up 4.8%or 1.3%. Our Brand Portfolio segment experienced a decline in net sales of $7.7$22.2 million, or 2.8%9.1%, driven byreflecting lower net sales of our Dr. Scholl's, Naturalizer, Franco SartoSam Edelman and Via SpigaLifeStride brands, partially offset by growth from our LifeStride, Fergie and Vince brands. Both ofbrand. The decline in our segments were impacted by a lower Canadian dollar exchange rate, decreasing consolidatedBrand Portfolio net sales was driven by $3.0 million. In addition, warmer weather during the third quarter softened overall demand for boots, in particular taller shaft and cold weather boots, across eachplanned exit of our segments, as compared to the prior year. The consumer trend has also favored shorter shaft boots and booties, which are sold, in general, atsome lower price points.
margin categories.
Gross profit decreased $2.3$0.7 million or 0.8%, to $288.4$247.8 million for the thirdfirst quarter of 2015,2016, compared to $290.7$248.5 million for the thirdfirst quarter of 2014,2015, reflecting lower gross profit in our Brand Portfolio segment, partially offset by an increase in the Famous Footwear segment. As a percentage of net sales, gross profit decreasedincreased to 39.6%42.4% for the thirdfirst quarter of 2016, compared to 41.3% for the first quarter of 2015, compared to 39.9% forreflecting an improved mix of higher margin brands and the third quarterexit of 2014, reflecting decreasessome lower margin categories within our Brand Portfolio segment and a decrease in both our Famous Footwear and Brand Portfolio segments.
Selling and administrative expenses decreased $1.3 million, or 0.5%, to $236.2 million for the third quarter of 2015, compared to $237.5 million in the third quarter of 2014. As a percentage of net sales, selling and administrative expenses decreased to 32.4% for the third quarter of 2015 from 32.6% for the third quarter of 2014, as we adjusted our plans to optimize our spending in a challenging retail environment.segment.
Consolidated operating earnings decreased $1.0$1.6 million, or 1.9%5.3%, to $52.2$28.7 million in the thirdfirst quarter of 2016, compared to $30.3 million for the first quarter of 2015, compareddue in part to $53.2 million forour investment in the third quarterdevelopment of 2014.
We redeemed the remaining outstanding $39.3 million of the 2019 Senior Notes during the third quarter of 2015, incurring an additional loss on early extinguishment of debt of $2.0 million ($1.2 million on an after-tax basis, or $0.02 per diluted share). On a year to date basis, we have incurred a loss on early extinguishment of debt of $10.7 million ($6.5 million on an after-tax basis, or $0.15 per diluted share).our George Brown and Diane von Furstenberg brands.
Consolidated net earnings attributable to Caleres, Inc. were $34.0$17.8 million, or $0.78$0.41 per diluted share, in the thirdfirst quarter of 2015,2016, compared to net earnings of $33.1$19.3 million, or $0.75$0.44 per diluted share, in the thirdfirst quarter of 2014.2015.
We maintained our focus on managing inventory levels during the third quarter, resulting in a $23.4 million reduction in inventory as compared to last year, due in part to the disposal of Shoes.com. Our Famous Footwear inventory decreased 3.1% on an average store basis. Our Brand Portfolio segment inventory declined $1.0 million, or 0.6%, as we continued to effectively manage our supply chain, and decreased 1.8% on an average store basis.
Our debt-to-capital ratio improved to 24.4% as defined herein, decreased to 24.9% at October 31, 2015,of April 30, 2016, compared to 28.3% at November 1, 201426.2% as of May 2, 2015, and 26.9% at24.6% as of January 31, 2015. The decrease from November 1, 2014 reflects30, 2016, primarily reflecting higher shareholders' equity due to the impact of our net earnings and a $13.2 million decrease in total debt obligations. The decrease from January 31, 2015 reflectshigher shareholders' equity due to net earnings for 2015.earnings. Our current ratio increased to 2.52 to 1 as defined herein, was 2.18of April 30, 2016, compared to 2.36 to 1 at October 31,May 2, 2015, compared to 2.01 to 1 at November 1, 2014 and 1.992.24 to 1 at January 31, 2015.30, 2016. The increase in the current ratio from May 2, 2015 to April 30, 2016 reflects higher cash and cash equivalents and a decrease in other accrued expenses, partially offset by an increase in accounts payable in the first quarter of 2016. The increase in the current ratio from January 30, 2016 to April 30, 2016 reflects a decrease in accounts payable and higher cash and cash equivalents, partially offset by a decrease in inventories and receivables.
Outlook for the Remainder of 20152016
During the thirdfirst quarter, we continued to manage inventory and expenses while investing to grow our business, delivering strong results. Whiledeliver solid results, despite an uncertain retail environment. Throughout 2016, we expect the retail environment to be promotional during the fourth quarter, wewill remain focused on deliveringour long-term strategy to deliver consistent, profitable and sustainable growth. Based ongrowth by investing in company-wide omni-channel efforts, our third quarter results, we expect consolidated net sales to be approximately $2.61 billion. We also expect to earn between $1.80distribution center and $1.85 per diluted share in 2015, inclusiveconsumer fulfillment initiatives and the opening of $0.15 per diluted share related to our loss on debt extinguishment described above. additional Famous Footwear and Sam Edelman retail locations.
Following are the consolidated results and the results by segment:
| | CONSOLIDATED RESULTS | CONSOLIDATED RESULTS | | | | | | CONSOLIDATED RESULTS |
| Thirteen Weeks Ended |
| Thirty-nine Weeks Ended | |
| October 31, 2015 | | November 1, 2014 |
| October 31, 2015 | November 1, 2014 | Thirteen Weeks Ended |
| | | % of Net Sales |
| | | | % of Net Sales |
| | | % of Net Sales |
| | % of Net Sales |
| April 30, 2016 | | May 2, 2015 |
| | | | | | | | % of Net Sales |
| | | | % of Net Sales |
|
($ millions) | | | | | | | | | |
Net sales | $ | 728.6 |
| | 100.0 | % | | $ | 729.3 |
| | 100.0 | % | | $ | 1,968.8 |
| 100.0 | % | $ | 1,956.3 |
| 100.0 | % | $ | 584.7 |
| | 100.0 | % | | $ | 602.3 |
| | 100.0 | % |
Cost of goods sold | 440.2 |
| | 60.4 | % | | 438.6 |
| | 60.1 | % | | 1,169.0 |
| 59.4 | % | 1,163.6 |
| 59.5 | % | 336.9 |
| | 57.6 | % | | 353.8 |
| | 58.7 | % |
Gross profit | 288.4 |
| | 39.6 | % | | 290.7 |
| | 39.9 | % | | 799.8 |
| 40.6 | % | 792.7 |
| 40.5 | % | 247.8 |
| | 42.4 | % | | 248.5 |
| | 41.3 | % |
Selling and administrative expenses | 236.2 |
| | 32.4 | % | | 237.5 |
| | 32.6 | % | | 681.5 |
| 34.6 | % | 679.5 |
| 34.7 | % | 219.1 |
| | 37.5 | % | | 218.2 |
| | 36.3 | % |
Operating earnings | 52.2 |
| | 7.2 | % | | 53.2 |
| | 7.3 | % | | 118.3 |
| 6.0 | % | 113.2 |
| 5.8 | % | 28.7 |
| | 4.9 | % | | 30.3 |
| | 5.0 | % |
Interest expense | (4.1 | ) | | (0.6 | )% | | (5.2 | ) | | (0.7 | )% | | (12.9 | ) | (0.7 | )% | (15.6 | ) | (0.8 | )% | (3.6 | ) | | (0.6 | )% | | (4.4 | ) | | (0.7 | )% |
Loss on early extinguishment of debt | (2.0 | ) | | (0.2 | )% | | — |
| | — |
| | (10.7 | ) | (0.5 | )% | — |
| — | % | |
Interest income | 0.2 |
| | 0.0 | % | | 0.1 |
| | 0.0 | % | | 0.8 |
| 0.0 | % | 0.3 |
| 0.0 | % | 0.3 |
| | 0.0 | % | | 0.3 |
| | 0.0 | % |
Earnings before income taxes | 46.3 |
| | 6.4 | % | | 48.1 |
| | 6.6 | % | | 95.5 |
| 4.8 | % | 97.9 |
| 5.0 | % | 25.4 |
| | 4.3 | % | | 26.2 |
| | 4.3 | % |
Income tax provision | (12.3 | ) | | (1.7 | )% | | (14.9 | ) | | (2.1 | )% | | (25.2 | ) | (1.2 | )% | (31.2 | ) | (1.6 | )% | (7.5 | ) | | (1.3 | )% | | (6.8 | ) | | (1.1 | )% |
Net earnings | 34.0 |
| | 4.7 | % | | 33.2 |
| | 4.5 | % | | 70.3 |
| 3.6 | % | 66.7 |
| 3.4 | % | 17.9 |
| | 3.0 | % | | 19.4 |
| | 3.2 | % |
Net earnings attributable to noncontrolling interests | 0.0 |
| | 0.0 | % | | 0.1 |
| | 0.0 | % | | 0.2 |
| 0.0 | % | 0.1 |
| 0.0 | % | 0.1 |
| | 0.0 | % | | 0.1 |
| | 0.0 | % |
Net earnings attributable to Caleres, Inc. | $ | 34.0 |
| | 4.7 | % | | $ | 33.1 |
| | 4.5 | % | | $ | 70.1 |
| 3.6 | % | $ | 66.6 |
| 3.4 | % | $ | 17.8 |
| | 3.0 | % | | $ | 19.3 |
| | 3.2 | % |
Net Sales
Net sales decreased $0.7$17.6 million, or 0.1%2.9%, to $728.6$584.7 million for the thirdfirst quarter of 2015,2016, compared to $729.3$602.3 million for the thirdfirst quarter of 2014. Excluding Shoes.com, which contributed $13.7 million of net sales in the third quarter of 2014 and was subsequently sold in December 2014, our net sales were $13.1 million, or 1.8% higher than the third quarter of last year.2015. Net sales at our Brand Portfolio segment decreased, while net sales at our Famous Footwear segment increased. Our Brand Portfolio segment reported a $7.7$22.2 million decrease in net sales, driven byreflecting lower net sales of our Dr. Scholl's, Naturalizer, Franco SartoSam Edelman and Via SpigaLifeStride brands, partially offset by growth from our LifeStride, Fergie and Vince brands.brand. Our retail stores were impactedThe decline in our Brand Portfolio net sales was driven by athe planned exit of some lower Canadian dollar exchange rate and a lower store count, partially offset by an increase in same-store sales of 2.5%.margin categories. Net sales of our Famous Footwear segment increased $7.1$4.6 million, or 1.6%1.3%, reflecting a 4.4%1.0% increase in same-store sales partially offset by the disposition of Shoes.com.
Net sales increased $12.5 million, or 0.6%, to $1,968.8 million for the nine months ended October 31, 2015, compared to $1,956.3 million for the nine months ended November 1, 2014. Excluding Shoes.com, ourand a net sales were $48.7 million, or 2.5% higher than the nine months ended November 1, 2014. Net sales at our Brand Portfolio segment increased while net sales at our Famous Footwear segment decreased. Our Brand Portfolio segment reported a $20.3 million increase in net sales driven by strong sales of our Sam Edelman, Vince, LifeStride,from new and Dr. Scholl's brands,closed stores, partially offset by a decrease in net sales of our Franco Sarto and Via Spiga brands. Our retail stores were impacted by a lower Canadian dollar exchange rate, a lower store count and a 1.7% decline in same-store sales. Net sales of our Famous Footwear segment decreased $7.8 million, reflecting a $36.3 million decrease in sales attributable to Shoes.com, partially offset by a 2.6% increase in same-store sales. rate.
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 decreased $2.3$0.7 million, or 0.8%0.3%, to $288.4$247.8 million for the thirdfirst quarter of 2015,2016, compared to $290.7$248.5 million for the thirdfirst quarter of 2014,2015, reflecting lower gross profit in our Brand Portfolio segment, partially offset by an increase in the Famous Footwear segment. As a percentage of net sales, gross profit decreasedincreased to 39.6%42.4% for the thirdfirst quarter of 2015,2016, compared to 39.9%41.3% for the thirdfirst quarter of 2014, reflecting decreases2015. This increase reflects higher rates in both our Famous Footwear and Brand Portfolio segments. The decrease was drivensegment, due to an improved mix of our higher margin brands and the exit of some lower margin categories. In addition, we experienced a higher consolidated mix of retail versus wholesale sales in the quarter, partially offset by a sales mix shift from boots to booties, an increase in freight expense attributable to higher ecommerce sales and an increase in late-season sales of sandals during the quarter, which generally have lower product margins. Retail and wholesale net sales remained consistent at 67% and 33% in both the third quarter of 2015 and the third quarter of 2014.
Gross profit increased $7.1 million, or 0.9%, to $799.8 million for the nine months ended October 31, 2015, compared to $792.7 million for the nine months ended November 1, 2014, reflecting higher gross profit in both our Brand Portfolio and Famous Footwear segments. As a percentage of net sales, gross profit increased to 40.6% for the nine months ended October 31, 2015, compared to 40.5% for the nine months ended November 1, 2014, driven by our Famous Footwear segment, which reported a gross profit rate of 44.8% for the nine months ended October 31, 2015, compared to 44.3% for the nine months ended November 1, 2014. These increases were partially offset by a decline in the Brand Portfolio segment gross profit rate to 34.0% in the nine months ended October 31, 2015, compared to 34.3% in the nine months ended November 1, 2014 and a lower consolidated mix of wholesale versus retaile-commerce sales. Gross profit rates in our retail businesses are higher, on average, than in our wholesale business. Retail and wholesale net sales were 67% and 33%, respectively, in the nine months ended October 31, 2015,first quarter of 2016, compared to 68%65% and 32%35% in the nine months ended November 1, 2014.first quarter of 2015.
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 expensesdecreased $1.3 increased $0.9 million, or 0.5%0.4%, to $236.2$219.1 million for the thirdfirst quarter of 2015,2016, compared to $237.5$218.2 million in the thirdfirst quarter of 2014. 2015. The increase was primarily driven by higher store rent and facilities costs, reflecting the opening and operation of several retail stores in prominent locations, and the investment in the development of our George Brown and Diane von Furstenberg brands. This increase was partially offset by a decrease in cash-based incentive compensation.
As a percentage of net sales, selling and administrative expenses decreasedincreased to 32.4%37.5% for the thirdfirst quarter of 20152016 from 32.6%36.3% for the thirdfirst quarter of 2014.
Selling and administrative expenses increased $2.0 million, or 0.3%, to $681.5 million for the nine months ended October 31, 2015, compared to $679.5 million in the nine months ended November 1, 2014. As a percentage of net sales, selling and administrative expenses decreased to 34.6% for the nine months ended October 31, 2015 from 34.7% for the nine months ended November 1, 2014.2015.
Operating Earnings
Operating earnings decreased $1.0$1.6 million, or 1.9%5.3%, to $52.2$28.7 million for the thirdfirst quarter of 2015,2016, compared to $53.2$30.3 million for the thirdfirst quarter of 2014,2015, reflecting lower net sales and gross profit rate,higher selling and administrative expenses, partially offset by lower selling and administrative expenses.a higher gross profit rate. As a percentage of net sales, operating earnings decreased to 7.2%4.9% for the thirdfirst quarter of 2015,2016, compared to 7.3%5.0% for the thirdfirst quarter of 2014.2015.
Operating earnings increased $5.1 million, or 4.5%, to $118.3 million for the nine months ended October 31, 2015, compared to $113.2 million for the nine months ended November 1, 2014, reflecting higher net sales and gross profit rate. As a percentage of net sales, operating earnings improved to6.0% for thenine months ended October 31, 2015, compared to5.8% for the nine months ended November 1, 2014.
Interest Expense
Interest expense decreased $1.1$0.8 million, or 20.6%19.1%, to $4.1$3.6 million for the thirdfirst quarter of 2016, compared to $4.4 million for the first quarter of 2015, compared to $5.2 million for the third quarter of 2014,primarily reflecting the lower interest rate on our 2023 Senior Notes and lower average borrowings under our revolving credit agreement,senior notes, as a result of the refinancing of $200.0 million of senior notes, which reduced the interest rate from 7.125% to 6.25%, as further discussed in Liquidity and Capital Resources.
Interest expense decreased $2.7In addition, during the first quarter of 2016, we capitalized interest of $0.4 million or 17.2%, to $12.9 million forassociated with the nine months ended October 31, 2015, compared to $15.6 million for the nine months ended November 1, 2014, driven by the factors described above.
Loss on Early Extinguishment of Debt
Loss on early extinguishment of debt was $2.0 million for the third quarterexpansion and $10.7 million for the nine months ended October 31, 2015, reflecting the redemptionmodernization of our 2019 Senior Notes prior to maturity, as further discussed in Note 5 to the condensed consolidated financial statements. We incurredLebanon, Tennessee distribution center, with no corresponding charges duringamounts capitalized in the three or nine months ended November 1, 2014.first quarter of 2015.
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 was 26.7%29.6% for the thirdfirst quarter of 2016, compared to 25.9% for the first quarter of 2015. We recognized a discrete tax benefit of $0.7 million reflecting the settlement of a federal tax audit issue in the first quarter of 2016. During the first quarter of 2015, compared to 30.9% for the third quarter of 2014. Wewe recognized discrete tax benefits of $1.3$1.6 million duringprimarily reflecting the quarter related to the anticipated utilizationreversal of certain tax asset carryforwards that were previously fully reserved. If these discrete tax benefits had not been recognized during the thirteen weeks ended October 31, 2015, the Company's effective tax rate would have been 29.5%.
For the nine months ended October 31, 2015, our consolidated effective tax rate was 26.4%, compared to 31.8% for the nine months ended November 1, 2014. The effective tax rate was lower for the nine months ended October 31, 2015 as a result of $4.2 million of discrete tax benefits recognized during the period. The discrete tax benefits related to a number of factors, includingvaluation allowances following the conversion of one of our primary operating subsidiaries to a limited liability company and the utilization of certain tax asset carry forwards primarily related to the disposition of Shoes.com that were previously fully reserved.company. If these discrete tax benefits had not been recognized during the first quarter of 2016 and first quarter of 2015, our effective tax raterates would have been 30.8% for the nine months ended October 31, 2015.32.3% and 32.1%, respectively.
Net Earnings
Net earnings increased $0.8decreased $1.5 million, or 2.3%7.8%, to $34.0$17.9 million for the thirdfirst quarter of 2015,2016, compared to $33.2$19.4 million for the thirdfirst quarter of 2014,2015, reflecting the factors described above.
Net earnings increased $3.6 million, or 5.2%, to $70.3 million for the nine months ended October 31, 2015, compared to $66.7 million for the nine months ended November 1, 2014, reflecting stronger sales and operating earnings, partially offset by the loss on early extinguishment of debt, as described above.
Net Earnings Attributable to Caleres, Inc.
Net earnings attributable to Caleres, Inc. were $34.0 million and $70.1$17.8 million during the thirdfirst quarter and nine months ended October 31, 2015,of 2016, compared to net earnings of $33.1 million and $66.6$19.3 million during the thirdfirst quarter of 2014 and nine months ended November 1, 2014,2015, as a result of the factors described above.
| | FAMOUS FOOTWEAR | | | | | | | | | | | | | | | | | | | | | |
| Thirteen Weeks Ended | | Thirty-nine Weeks Ended | Thirteen Weeks Ended |
| October 31, 2015 | | November 1, 2014 | | October 31, 2015 | November 1, 2014 | April 30, 2016 | | May 2, 2015 |
| | | % of Net Sales |
| | | | % of Net Sales |
| | | | % of Net Sales |
| | | % of Net Sales |
| | | % of Net Sales |
| | | | % of Net Sales |
|
($ millions, except sales per square | | | | | | | | | |
foot) | | | | | | | | | |
($ millions, except sales per square foot) | | | | % of Net Sales |
| | | | % of Net Sales |
|
Operating Results | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| |
| | |
| |
Net sales | $ | 456.2 |
| | 100.0 | % | | $ | 449.1 |
| | 100.0 | % | | $ | 1,212.1 |
| | 100.0 | % | $ | 1,219.9 |
| | 100.0 | % | $ | 364.6 |
| | 100.0 | % | | $ | 360.0 |
| | 100.0 | % |
Cost of goods sold | 261.3 |
| | 57.3 | % | | 255.3 |
| | 56.8 | % | | 669.5 |
| | 55.2 | % | 679.8 |
| | 55.7 | % | 195.9 |
| | 53.7 | % | | 191.8 |
| | 53.3 | % |
Gross profit | 194.9 |
| | 42.7 | % | | 193.8 |
| | 43.2 | % | | 542.6 |
| | 44.8 | % | 540.1 |
| | 44.3 | % | 168.7 |
| | 46.3 | % | | 168.2 |
| | 46.7 | % |
Selling and administrative expenses | 155.3 |
| | 34.0 | % | | 156.4 |
| | 34.9 | % | | 447.3 |
| | 36.9 | % | 450.4 |
| | 37.0 | % | 142.9 |
| | 39.2 | % | | 140.2 |
| | 38.9 | % |
Operating earnings | $ | 39.6 |
| | 8.7 | % | | $ | 37.4 |
| | 8.3 | % | | $ | 95.3 |
| | 7.9 | % | $ | 89.7 |
| | 7.3 | % | $ | 25.8 |
| | 7.1 | % | | $ | 28.0 |
| | 7.8 | % |
|
|
| | | |
|
| | | |
|
| |
|
|
| |
| | | | | | | |
Key Metrics | |
| | | | |
| | | |
|
| | | |
| | | |
| | | | |
| | |
Same-store sales % change | 4.4 | % | | |
| | (0.2 | )% | | |
| | 2.6 | % | | |
| 0.8 | % | | |
| 1.0 | % | | |
| | 1.8 | % | | |
|
Same-store sales $ change | $ | 18.5 |
| | |
| | $ | (0.9 | ) | | |
| | $ | 29.4 |
| | |
| $ | 9.3 |
| | |
| $ | 3.5 |
| | |
| | $ | 6.2 |
| | |
|
Sales change from new and closed stores, net | $ | 2.9 |
| | | | $ | (3.3 | ) | | | | $ | 0.4 |
| | | $ | (5.8 | ) | | | $ | 1.3 |
| | | | $ | (0.6 | ) | | |
Impact of changes in Canadian exchange rate on sales | $ | (0.6 | ) | | | | $ | — |
| | | | $ | (1.3 | ) | | | $ | — |
| | | $ | (0.2 | ) | | | | $ | (0.2 | ) | | |
Sales change of Shoes.com (sold in December 2014) | $ | (13.7 | ) | | | | $ | (0.3 | ) | | | | $ | (36.3 | ) | | | $ | (5.9 | ) | | | N/A |
| | | | $ | (12.1 | ) | | |
Sales per square foot, excluding e-commerce (thirteen and thirty-nine weeks ended) | $ | 63 |
| | | | $ | 61 |
| | | | $ | 169 |
| | | $ | 166 |
| | | |
Sales per square foot, excluding e-commerce (thirteen weeks ended) | | $ | 50 |
| | | | $ | 50 |
| | |
Sales per square foot, excluding e-commerce (trailing twelve months) | $ | 218 |
| | |
| | $ | 213 |
| | |
| | $ | 218 |
| | |
| $ | 213 |
| | |
| $ | 217 |
| | |
| | $ | 216 |
| | |
|
Square footage (thousand sq. ft.) | 6,951 |
| | |
| | 6,983 |
| | |
| | 6,951 |
| | |
| 6,983 |
| | |
| 6,909 |
| | |
| | 6,954 |
| | |
|
|
|
| | | |
|
| | | |
|
| | |
|
| | | | | | | | | |
Stores opened | 13 |
| | |
| | 12 |
| | |
| | 38 |
| | |
| 40 |
| | |
| 10 |
| | |
| | 15 |
| | |
|
Stores closed | 13 |
| | |
| | 6 |
| | |
| | 32 |
| | |
| 43 |
| | |
| 13 |
| | |
| | 13 |
| | |
|
Ending stores | 1,044 |
| | |
| | 1,041 |
| | |
| | 1,044 |
| | |
| 1,041 |
| | |
| 1,043 |
| | |
| | 1,040 |
| | |
|
Net Sales
Net sales increased $7.1$4.6 million, or 1.6%1.3%, to $456.2$364.6 million for the thirdfirst quarter of 2015,2016, compared to $449.1$360.0 million for the thirdfirst quarter of 2014.2015. The increase was due primarily todriven by a 4.4%1.0% increase in same-store sales and a net increase in sales from new and closed stores, partially offset by a lower Canadian dollar exchange rate. Sales were strong during the dispositionfirst half of Shoes.com in December 2014, which contributed $13.7 million of net sales in the third quarter of 2014.driven by unseasonably warm temperatures, but sluggish during the latter half as cooler weather returned. Famous Footwear reported an improvedincrease in online customer conversion ratetraffic, due in part to a redesigned mobile app during the quarter and higher average unit retail prices,the expansion of our in-store fulfillment program. The strong e-commerce sales were partially offset by a decline in customer traffic inat our stores.Famous Footwearretail store locations. The segment experienced sales growth in the canvas, athletic footwear,lifestyle athletics, while sales of our dress, boots and boot categories.sandals categories declined. During the thirdfirst quarter of 2015,2016, we opened 1310 new stores and closed 13 stores, resulting in 1,0441,043 stores and total square footage of 6.9 million at the end of the first quarter of 2016, compared to 1,040 stores and total square footage of 7.0 million at the end of the thirdfirst quarter of 2015, compared to 1,041 stores and total square footage of 7.0 million at the end of the third quarter of 2014.2015. On a trailing twelve month basis, sales per square foot, excluding e-commerce, increased 2.5%0.7% to $218$217 for the twelve months ended October 31, 2015,April 30, 2016, compared to $213$216 for the twelve months ended November 1, 2014.May 2, 2015. Members of Rewards, our customer loyalty program, continue to account for a majority of the segment’s sales, with approximately 75%76% of our net sales made to members of our Rewards program members in both the thirdfirst quarter of 2015 and2016, compared to 74% in the thirdfirst quarter of 2014. 2015.
Net sales decreased $7.8 million, or 0.6%, to $1,212.1 million for the nine months ended October 31, 2015, compared to $1,219.9 million for the nine months ended November 1, 2014. The decrease was due primarily to the disposition of Shoes.com, which contributed $36.3 million of net sales in the nine months ended November 1, 2014, partially offset by a 2.6% increase in same-store sales. Famous Footwear reported an improved customer conversion rate and higher average unit retail prices, partially offset by a decline in customer traffic in our stores. Famous Footwear experienced sales growth in the canvas, athletic, and boot categories. During the nine months ended October 31, 2015, we opened 38 new stores and closed 32 stores.
Gross Profit
Gross profit increased $1.1$0.5 million, or 0.6%0.3%, to $194.9$168.7 million for the thirdfirst quarter of 2015,2016, compared to $193.8$168.2 million for the thirdfirst quarter of 2014.2015. As a percentage of net sales, our gross profit was 42.7%46.3% for the thirdfirst quarter of 2015,2016, compared to 43.2%46.7% for the thirdfirst quarter of 2014.2015. The decrease in our gross profit rate was primarily driven by lower product margins on sandals and non-athletic footwear, higher inventory markdowns andreflects an increase in freight expense attributabledue to higher sales at Famous.com. Asgrowth in our Famous.com business and, to a result of the unseasonably warm weatherlesser extent, an increase in promotional activity during the quarter, we experienced higher sales of sandals, which generally have lower than average product margins.quarter.
Gross profit increased $2.5 million, or 0.5%, to $542.6 million for the nine months ended October 31, 2015, compared to $540.1 million for the nine months ended November 1, 2014. As a percentage of net sales, our gross profit was 44.8% for the nine months ended October 31, 2015, compared to 44.3% for the nine months ended November 1, 2014. The increase in our gross profit rate reflects a continued shift in mix toward higher margin product and improved margins resulting from the disposal of Shoes.com, partially offset by higher freight expense.
Selling and Administrative Expenses
Selling and administrative expenses decreased $1.1increased $2.7 million, or 0.7%1.9%, to $155.3$142.9 million for the thirdfirst quarter of 2015,2016, compared to $156.4$140.2 million for the thirdfirst quarter of 2014.2015. The decreaseincrease was primarily attributable to lowerhigher store rent and facilities costs, which included expenses due toassociated with the disposalopening and operation of Shoes.com, partially offset by higher marketing expensethree prominent store locations, and higher salarieswarehouse and benefits.distribution costs during the first quarter of 2016. As a percentage of net sales, selling and administrative expenses decreasedincreased to 34.0%39.2% for the thirdfirst quarter of 2015,2016, compared to 34.9%38.9% for the thirdfirst quarter of 2014.2015.
Selling and administrative expenses decreased $3.1 million, or 0.7%, to $447.3 million for the nine months ended October 31, 2015, compared to $450.4 million for the nine months ended November 1, 2014. The decrease was primarily attributable to lower expenses due to the disposal of Shoes.com, partially offset by higher store rent and facilities costs and higher salaries and benefits. As a percentage of net sales, selling and administrative expenses decreased to 36.9% for the nine months ended October 31, 2015, compared to 37.0% for the nine months ended November 1, 2014.
Operating Earnings
Operating earnings increaseddecreased $2.2 million, or 6.0%7.9%, to $39.6$25.8 million for the thirdfirst quarter of 2015,2016, compared to $37.4$28.0 million for the thirdfirst quarter of 2014.2015. The increase was due todecrease reflects higher net sales and lower selling and administrative expenses, partially offset by a lowerhigher net sales and gross profit rate as described above.profit. As a percentage of net sales, operating earnings increaseddecreased to 8.7%7.1% for the thirdfirst quarter of 2015,2016, compared to 8.3%7.8% for the thirdfirst quarter of 2014.
Operating earnings increased $5.6 million, or6.3%, to $95.3 million for thenine months ended October 31, 2015, compared to $89.7 million for thenine months ended November 1, 2014. The increase was due to lower selling and administrative expenses and a higher gross profit rate as described above. As a percentage of net sales, operating earnings increasedto7.9% for thenine months ended October 31, 2015, comparedto 7.3% for thenine months ended November 1, 2014.2015.
| | BRAND PORTFOLIO | BRAND PORTFOLIO | | | BRAND PORTFOLIO |
| Thirteen Weeks Ended | | Thirty-nine Weeks Ended | Thirteen Weeks Ended |
| October 31, 2015 | | November 1, 2014 | | October 31, 2015 | | November 1, 2014 | April 30, 2016 | | May 2, 2015 |
| | | % of |
| | | | % of |
| | | | % of |
| | |
| | % of |
| | | % of Net Sales |
| | | | % of Net Sales |
|
| | | Net |
| | | | Net |
| | | | Net |
| | | | Net |
| |
($ millions) | | | Sales |
| | | | Sales |
| | | | Sales |
| | | | Sales |
| |
($ millions, except sales per square foot) | | | | % of Net Sales |
| | | | % of Net Sales |
|
Operating Results | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| |
Net sales | $ | 272.5 |
| | 100.0 | % | | $ | 280.2 |
| | 100.0 | % | | $ | 756.7 |
| | 100.0 | % | | $ | 736.4 |
| | 100.0 | % | $ | 220.1 |
| | 100.0 | % | | $ | 242.3 |
| | 100.0 | % |
Cost of goods sold | 178.9 |
| | 65.7 | % | | 183.3 |
| | 65.4 | % | | 499.5 |
| | 66.0 | % | | 483.8 |
| | 65.7 | % | 141.0 |
| | 64.1 | % | | 162.0 |
| | 66.8 | % |
Gross profit | 93.6 |
| | 34.3 | % | | 96.9 |
| | 34.6 | % | | 257.2 |
| | 34.0 | % | | 252.6 |
| | 34.3 | % | 79.1 |
| | 35.9 | % | | 80.3 |
| | 33.2 | % |
Selling and administrative expenses | 72.6 |
| | 26.6 | % | | 69.3 |
| | 24.7 | % | | 209.1 |
| | 27.6 | % | | 196.3 |
| | 26.6 | % | 69.5 |
| | 31.5 | % | | 69.2 |
| | 28.6 | % |
Operating earnings | $ | 21.0 |
| | 7.7 | % | | $ | 27.6 |
| | 9.9 | % | | $ | 48.1 |
| | 6.4 | % | | $ | 56.3 |
| | 7.7 | % | $ | 9.6 |
| | 4.4 | % | | $ | 11.1 |
| | 4.6 | % |
| | | | | | | | | | | | | | | | | | | | | | |
Key Metrics | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | |
| | |
| | |
| | |
|
Wholesale/retail sales mix (%) | 87%/13% |
| | |
| | 87%/13% |
| | |
| | 87%/13% |
| | |
| | 85%/15% |
| | | 86%/14% |
| | |
| | 88%/12% |
| | |
|
Change in wholesale net sales ($) | $ | (5.5 | ) | | | | $ | 37.3 |
| | | | $ | 29.5 |
| | | | $ | 61.3 |
| | | $ | (22.3 | ) | | | | $ | 20.5 |
| | |
Unfilled order position at end of period | $ | 318.4 |
| | | | $ | 333.4 |
| | | |
|
| | | |
|
| | | $ | 339.7 |
| | | | $ | 371.2 |
| | |
| | | | | | | | | | | | | | | | | | | | | | |
Same-store sales % change | 2.5 | % | | | | (6.9 | )% | | | | (1.7 | )% | | | | (3.5 | )% | | | (1.7 | )% | | | | (2.5 | )% | | |
Same-store sales $ change | $ | 0.8 |
| | | | $ | (2.5 | ) | | | | $ | (1.6 | ) | | | | $ | (3.5 | ) | | | $ | (0.5 | ) | | | | $ | (0.7 | ) | | |
Sales change from new and closed stores, net | $ | (0.6 | ) | | | | $ | (2.8 | ) | | | | $ | (2.0 | ) | | | | $ | (9.7 | ) | | | $ | 1.1 |
| | | | $ | (0.7 | ) | | |
Impact of changes in Canadian exchange rate on retail sales | $ | (2.4 | ) | | | | $ | (1.0 | ) | | | | $ | (5.6 | ) | | | | $ | (2.7 | ) | | | $ | (0.5 | ) | | | | $ | (1.2 | ) | | |
| | | | | | | | | | | | | | | | | | | | | | |
Sales per square foot, excluding e-commerce (thirteen and thirty-nine weeks ended) | $ | 91 |
| | | | $ | 100 |
| | | | $ | 262 |
| | | | $ | 289 |
| | | |
Sales per square foot, excluding e-commerce (thirteen weeks ended) | | $ | 70 |
| | | | $ | 78 |
| | |
Sales per square foot, excluding e-commerce (trailing twelve months) | $ | 350 |
| | | | $ | 384 |
| | | | $ | 350 |
| | | | $ | 384 |
| | | $ | 335 |
| | | | $ | 370 |
| | |
Square footage (thousands sq. ft.) | 291 |
| | | | 304 |
| | | | 291 |
| | | | 304 |
| | | 304 |
| | | | 295 |
| | |
| | | | | | | | | | | | | | | | | | | | | | |
Stores opened | 2 |
| | | | 3 |
| | | | 3 |
| | | | 7 |
| | | 4 |
| | | | — |
| | |
Stores closed | 1 |
| | | | 1 |
| | | | 10 |
| | | | 14 |
| | | 1 |
| | | | 6 |
| | |
Ending stores | 164 |
| | | | 172 |
| | | | 164 |
| | | | 172 |
| | | 168 |
| | | | 165 |
| | |
Net Sales
Net sales decreased $7.7$22.2 million, or 2.8%9.1%, to $272.5$220.1 million for the thirdfirst quarter of 2015,2016, compared to $280.2$242.3 million for the thirdfirst quarter of 2014.2015. The decrease was driven byreflects lower net sales of our Dr. Scholl's, Naturalizer, Franco Sarto,Sam Edelman and Via SpigaLifeStride brands, partially offset by growth from our LifeStride, Fergie and Vince brands.brand. The decline in net sales was driven by the planned exit of some lower margin categories. Our wholesale business has been impacted by the overall slower retail environment, as cautious retailers were focused on inventory productivity. In general, our strongest category has been lifestyle athletics, while sales of traditional dress footwear have been
more sluggish. Our retail storessales were impacted by a higher store count, partially offset by a lower Canadian dollar exchange rate and a lower store count, partially offset by an increasedecrease in same-store sales of 2.5%1.7%. During the thirdfirst quarter of 2015,2016, we opened twofour stores and closed one store, resulting in a total of 164168 stores and total square footage of 0.3 million at the end of the thirdfirst quarter of 2015,2016, compared to 172165 stores and total square footage of 0.3 million at the end of the thirdfirst quarter of 2014.2015. On a trailing twelve month basis, sales per square foot, excluding e-commerce, decreased 8.6%9.3% to $350$335 for the twelve months ended October 31, 2015,April 30, 2016, compared to $384$370 for the twelve months ended November 1, 2014.May 2, 2015. Our unfilled order position decreased $15.0$31.5 million, or 4.5%8.5%, to $318.4$339.7 million as of October 31, 2015,April 30, 2016, from $333.4$371.2 million as of November 1, 2014May 2, 2015 primarily due to declines in our Naturalizer, and Dr. Scholl's and LifeStride brands, partially offset by an increaseincreases in our Sam Edelman brand.
Net sales increased $20.3 million, or2.7%, to $756.7 million for thenine months ended October 31, 2015, compared to $736.4 million forthe nine months ended November 1, 2014. The increase reflects strength in many of our brands including Sam Edelman, Vince, LifeStride, and Dr. Scholl's, partially offset by a decrease in net sales of our Franco SartoCarlos, Ryka and Via Spiga brands. Our retail stores were impacted by a lower Canadian dollar exchange rate, a lower store count and a 1.7% decline in same-store sales. During the nine months ended October 31, 2015, we opened three stores and closed 10 stores.
Gross Profit
Gross profit decreased $3.3$1.2 million, or 3.5%1.5%, to $93.6$79.1 million for the thirdfirst quarter of 2015,2016, compared to $96.9$80.3 million for the thirdfirst quarter of 2014,2015, driven by the decrease in net sales, andpartially offset by a lowerhigher gross profit rate. As a percentage of net sales, our gross profit was 34.3%increased to 35.9% for the thirdfirst quarter of 2015,2016, compared to 34.6%33.2% for the thirdfirst quarter of 2014. The decrease in our2015. Our gross profit rate was primarily driven bybenefited from an increase in freight expense in the third quarterimproved mix of 2015, due in part to the increase in our ecommerce sales,higher margin brands and the sales mix shift from boots to booties.exit of some lower margin categories.
Gross profit increased $4.6 million, or 1.8%, to $257.2 million for the nine months ended October 31, 2015, compared to $252.6 million for the nine months ended November 1, 2014, driven by increase in net sales, partially offset by a lower gross profit rate. As a percentage of net sales, our gross profit was 34.0% for the nine months ended October 31, 2015, compared to 34.3% for the nine months ended November 1, 2014, primarily driven by higher inventory markdowns and a lower mix of retail sales in the nine months ended October 31, 2015.
Selling and Administrative Expenses
Selling and administrative expenses increased $3.3$0.3 million, or 4.6%0.3%, to $72.6$69.5 million for the thirdfirst quarter of 2016, compared to $69.2 million for the first quarter of 2015, compared to $69.3 million fordriven by higher store rent and facilities costs, reflecting four new Sam Edelman retail stores opened during the thirdfirst quarter, and the investment in the development of 2014, driven byan increase in salariesour George Brown and benefits, higher marketing expenses and investments in our Diane von Furstenberg brand,brands. This increase was partially offset by lower anticipated payments under our cash-based incentive plans. As a percentage of net sales, selling and administrative expenses increased to 26.6%31.5% for the thirdfirst quarter of 2015,2016, compared to 24.7%28.6% for the thirdfirst quarter of 2014. 2015.
Selling and administrative expenses increased $12.8 million, or 6.5%, to $209.1 million for the nine months ended October 31, 2015, compared to $196.3 million for the nine months ended November 1, 2014, driven by the above named factors. As a percentage of net sales, selling and administrative expenses increased to 27.6% for the nine months ended October 31, 2015, compared to 26.6% for the nine months ended November 1, 2014.
Operating Earnings
Operating earnings decreased $6.6$1.5 million, or 23.9%13.0%, to $21.0$9.6 million for the thirdfirst quarter of 2015,2016, compared to $27.6$11.1 million for the thirdfirst quarter of 2014.2015. The decrease was driven bylower net sales and gross profit rate, and an increase in selling and administrative expenses.expenses, partially offset bya highergross profit rate. As a percentage of net sales, operating earnings decreased to 7.7%4.4% for the thirdfirst quarter of 2015,2016, compared to 9.9%4.6% in the thirdfirst quarter of 2014.2015.
Operating earnings decreased $8.2 million, or 14.6%, to $48.1 million for thenine months ended October 31, 2015, compared to $56.3 million for thenine months ended November 1, 2014. The decrease was primarily driven byan increase in selling and administrative expenses and a lower gross profit rate, partially offset by an increase in net sales. As a percentage of net sales, operating earnings decreased to6.4% for thenine months ended October 31, 2015, compared to7.7% in thenine months ended November 1, 2014.
The Other category includes unallocated corporate administrative expenses and other costs and recoveries. Costs of $8.5$6.6 million were incurred for the thirdfirst quarter of 20152016 compared to costs of $11.8$8.7 million for the thirdfirst quarter of 2014.2015. The $3.3 million decrease in costs was primarily attributable to a decrease in salaries and benefits and lower pension expense.
Unallocated corporate administrative expenses and other costs and recoveries were $25.1 million for the nine months ended October 31, 2015, compared to $32.8 million for the nine months ended November 1, 2014. The $7.7$2.1 million decrease in costs was primarily attributable to lower pensionvariable compensation expense related to the Company's performance share and restricted stock units, due to a decline in our stock price during the gain on sale of a vacant building at our Corporate headquarters, partially offset by higher anticipated payments under our cashfirst quarter, as well as lower salaries and stock-based incentive plans for the nine months ended October 31, 2015.benefits.
|
|
LIQUIDITY AND CAPITAL RESOURCES |
Borrowings
| | ($ millions) | October 31, 2015 | November 1, 2014 | January 31, 2015 | April 30, 2016 |
| May 2, 2015 |
| January 30, 2016 |
|
Borrowings under revolving credit agreement | $ | — |
| $ | 14.0 |
| $ | — |
| |
Long-term debt – senior notes | 200.0 |
| 199.2 |
| 199.2 |
| |
Long-term debt – 2023 Senior Notes | | $ | 196.7 |
| $ | — |
| $ | 196.5 |
|
Long-term debt – 2019 Senior notes | | — |
| 196.9 |
| — |
|
Total debt | $ | 200.0 |
| $ | 213.2 |
| $ | 199.2 |
| $ | 196.7 |
| $ | 196.9 |
| $ | 196.5 |
|
Total debt obligations of $200.0$196.7 million at October 31, 2015,April 30, 2016, decreased $13.2$0.2 million compared to $213.2$196.9 million at November 1, 2014May 2, 2015 and increased $0.8$0.2 million compared to $199.2$196.5 million at January 31, 2015.30, 2016. Interest expense for the thirdfirst quarter of 20152016 decreased $1.1$0.8 million to $4.1$3.6 million, compared to $5.2$4.4 million for the thirdfirst quarter of 2014 and decreased $2.7 million to $12.9 million for the nine months ended October 31, 2015 compared to $15.6 million for the nine months ended November 1, 2014 primarily as a result of the lower interest rate on our senior notes as a result of the redemption of our senior notes due in 2019 ("2019 Senior Notes") and the issuance of senior notes due in 2023 ("2023 Senior NotesNotes") reducing our interest rate from 7.125% to 6.25%, as further described below. In addition, we capitalized $0.4 million of interest costs associated with the expansion and lower average borrowings undermodernization of our revolving credit agreement.Lebanon, Tennessee distribution center during the first quarter of 2016.
At October 31, 2015,April 30, 2016, we had no borrowings outstanding and $6.3$6.5 million in letters of credit outstanding under the Credit Agreement. Total borrowing availability was $561.8$485.5 million at October 31, 2015.April 30, 2016. We were in compliance with all covenants and restrictions under the Credit Agreement as of October 31, 2015. April 30, 2016.
$200 Million Senior Notes
As further discussed in Note 54 to the condensed consolidated financial statements, on July 20, 2015, we commenced a cash tender offer for our 2019 Senior Notes. The tender offer expired on July 24, 2015 and $160.7 million aggregate principal amount of the 2019 Senior Notes were tendered. The remaining $39.3 million aggregate principal amount of 2019 Senior Notes was redeemed on August 26, 2015. During the third quarter and the nine months ended October 31, 2015, we recognized a loss on early extinguishment of debt of $2.0 million and $10.7 million, respectively, representing the tender offer and call premiums, the unamortized debt issuance costs and original issue discount associated with the 2019 Senior Notes. Of the $2.0 million loss on early extinguishment of debt, approximately $0.6 million was non-cash for the third quarter of 2015. Of the $10.7 million loss on early extinguishment of debt, approximately $3.0 million was non-cash for the nine months ended October 31, 2015.
On July 27, 2015, we closed on the offering of $200.0 million aggregate principal amount of the 2023 Senior Notes in a private placement. On October 22, 2015, we commenced an offer to exchange our 2023 Senior Notes outstanding for substantially identical debt securities registered under the Securities Act of 1933. The exchange offer was completed on November 23, 2015 and did not affect the amount of our indebtedness outstanding.
The 2023 Senior Notes are guaranteed on a senior unsecured basis by each of the subsidiaries of Caleres, Inc. that is an obligor under the Credit Agreement. The 2023 Senior Notes bear interest at 6.25%, which is payable on February 15 and August 15 of each year beginning on February 15, 2016. The 2023 Senior Notes mature on August 15, 2023. Prior to August 15, 2018, we may redeem some or all of the 2023 Senior Notes at various redemption prices.
The net proceeds from the offering were approximately $196.3 million after deducting fees and expenses associated with the offering. We used the net proceeds, together with cash on hand, to redeem the outstanding 2019 Senior Notes.
The 2023 Senior Notes also contain certain covenants and restrictions that limit certain activities including, among other things, levels of indebtedness, payments of dividends, the guarantee or pledge of assets, certain investments, common stock repurchases, mergers and acquisitions and sales of assets. As of October 31, 2015,April 30, 2016, we were in compliance with all covenants and restrictions relating to the 2023 Senior Notes.
Working Capital and Cash Flow
| | | Thirty-nine Weeks Ended | |
| Thirteen Weeks Ended | |
|
($ millions) | October 31, 2015 |
| November 1, 2014 |
| Change |
| April 30, 2016 |
| May 2, 2015 |
| Change |
|
Net cash provided by operating activities | $ | 84.0 |
| $ | 68.5 |
| $ | 15.5 |
| $ | 65.2 |
| $ | 21.9 |
| $ | 43.3 |
|
Net cash used for investing activities | (45.3 | ) | (112.4 | ) | 67.1 |
| (18.2 | ) | (13.9 | ) | (4.3 | ) |
Net cash (used for) provided by financing activities | (19.3 | ) | 0.5 |
| (19.8 | ) | |
Net cash used for financing activities | | (16.2 | ) | (9.3 | ) | (6.9 | ) |
Effect of exchange rate changes on cash and cash equivalents | (0.5 | ) | (0.1 | ) | (0.4 | ) | 0.6 |
| 0.2 |
| 0.4 |
|
Increase (decrease) in cash and cash equivalents | $ | 18.9 |
| $ | (43.5 | ) | $ | 62.4 |
| $ | 31.4 |
| $ | (1.1 | ) | $ | 32.5 |
|
Reasons for the major variances in cash provided (used) in the table above are as follows:
Cash provided by operating activities was $15.5$43.3 million higher in the nine months ended October 31, 2015first quarter of 2016 as compared to the nine months ended November 1, 2014,first quarter of 2015, reflecting the following factors:
A smaller increaselarger decrease in inventoriesreceivables in the nine months ended October 31, 2015first quarter of 2016 compared to the comparable period in 2014, reflecting our continued focus on inventory management;
Higher net earnings (adjusted for non-cash items); and
A smaller2015, due primarily to a decrease in trade accounts payable in the nine months ended October 31, 2015 compared to the comparable period in 2014 due to the timing of payments; partially offset bywholesale sales volume;
A decrease in accrued expenses and other liabilities in the nine months ended October 31, 2015 compared to an increase in the comparable period in 2014, driven by higher payments under our cash-based incentive plans in 2015; and
A larger increase in prepaid expenses and other current and noncurrent assets in the nine months ended October 31, 2015, driven byfirst quarter of 2016, compared to an increase in the pension asset.comparable period in 2015 driven by a decrease in deferred tax assets; and
A larger decrease in inventories in the first quarter of 2016 compared to the comparable period in 2015, reflecting our continued focus on inventory management; partially offset by
A larger decrease in accrued expenses and other liabilities in the first quarter of 2016 compared to the comparable period in 2015, driven by a decrease in interest payable as a result of a lower interest rate and timing of payments on our 2023 Senior Notes.
Cash used for investing activities was $67.1$4.3 million lowerhigher in the nine months ended October 31, 2015,first quarter of 2016, as compared to the comparable period in 20142015 due primarily to the $65.1 million acquisition of the Franco Sarto trademarks in the first quarter of 2014 and the $7.4 million in proceeds from disposal of property and equipment related to the sale of a vacant building at our Corporate headquarters in the second quarter of 2015. These variances were partially offset by higherincreased purchases of property and equipment in the nine months ended October 31, 2015,first quarter of 2016, driven by the expansion and modernization of one of our distribution centers and leasehold improvements associated withas well as the relocationopening of one of our leased office facilities in New York City.retail store locations. For fiscal 2015,2016, we expect purchases of property and equipment and capitalized software of approximately $75$70 million.
Cash used for financing activities was $19.8$6.9 million higher for the nine months ended October 31, 2015first quarter of 2016 as compared to the comparable period in 20142015 primarily due to a decreasereflecting an increase in net borrowings under the revolving credit agreement, the acquisition of treasury stock in the first quarter of 2015, an increase in common stock issued under share-based plans, and debt issuance costs associated with the offering of the 2023 Senior Notes in the second quarter of 2015.stock.
A summary of key financial data and ratios at the dates indicated is as follows:
| | | October 31, 2015 |
| November 1, 2014 |
| January 31, 2015 |
| April 30, 2016 |
| May 2, 2015 |
| January 30, 2016 |
|
Working capital ($ millions) (1) | $ | 443.7 |
| $ | 393.8 |
| $ | 393.8 |
| $ | 479.6 |
| $ | 422.5 |
| $ | 484.8 |
|
|
|
|
|
|
|
| |
Debt-to-capital ratio (2) | | 24.4 | % | 26.2 | % | 24.6 | % |
Current ratio (2)(3) | 2.18:1 |
| 2.01:1 |
| 1.99:1 |
| 2.52:1 |
| 2.36:1 |
| 2.24:1 |
|
|
|
|
|
|
|
| |
Debt-to-capital ratio (3) | 24.9 | % | 28.3 | % | 26.9 | % | |
| |
(1) | Working capital has been computed as total current assets less total current liabilities. |
| |
(2) | The current ratio has been computed by dividing total current assets by total current liabilities. |
| |
(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. |
| |
(3) | The current ratio has been computed by dividing total current assets by total current liabilities. |
Working capital at October 31, 2015April 30, 2016 was $443.7$479.6 million, which was $49.9$57.1 million higher than at November 1, 2014May 2, 2015 and $5.2 million lower than at January 31, 2015.30, 2016. Our current ratio increased to 2.182.52 to 1 as of October 31, 2015,April 30, 2016, compared to 2.012.36 to 1 at November 1, 2014,May 2, 2015, and 1.992.24 to 1 at January 31, 2015.30, 2016. The increase in working capital and the current ratio from January 31,May 2, 2015 to October 31, 2015April 30, 2016 reflects higher cash and cash equivalents and a decrease in tradeother accrued expenses, partially offset by an increase in accounts payable and higher receivables in the nine months ended October 31, 2015.first quarter of 2016. The increase in cash and cash equivalents from May 2, 2015 to April 30, 2016 reflects our strong financial performance and related operating cash flows. The decrease in working capital from November 1, 2014January 30, 2016 to October 31, 2015April 30, 2016 reflects lower inventory levels and a decrease in receivables, partially offset by a decrease in accounts payable. The increase in the current ratio from January 30, 2016 to April 30, 2016 reflects a decrease in accounts payable and higher cash and cash equivalents, partially offset by a decrease in borrowings under the revolving credit agreement,inventories and higher receivables, partially offset by lower inventory levels.receivables. Our debt-to-capital ratio was 24.9%improved to 24.4% as of October 31, 2015,April 30, 2016, compared to 28.3%26.2% as of November 1, 2014May 2, 2015, and 26.9%24.6% as of January 31, 2015. The decrease in our debt-to-capital ratio from November 1, 2014 reflects30, 2016, primarily reflecting higher shareholders' equity due to the impact of our net earnings and a $13.2 million decrease in total debt obligations. The decrease in our debt-to-capital ratio from January 31, 2015 reflects higher shareholders' equity due to net earnings for 2015.earnings.
At October 31, 2015,April 30, 2016, we had $86.3$149.5 million of cash and cash equivalents, nearly halfequivalents. The majority of whichthis balance represents cash and cash equivalentsthe accumulated unremitted earnings 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, the Company 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.which are considered indefinitely reinvested.
We declared and paid dividends of $0.07 per share in both the thirdfirst quarter of 20152016 and the thirdfirst quarter of 2014.2015. 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.
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 January 31, 2015.30, 2016.
|
|
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. For further information, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended January 31, 2015.30, 2016.
|
|
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) 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; (xi) compliance with applicable laws and standards with respect to labor, trade and product safety issues; (xii) the ability to secure/exit leases on favorable terms; (xiii) the ability to maintain relationships with current suppliers and (xiv) the ability to attract, retain and maintain good relationships with licensors and protect intellectual property rights; and (xiv) the ability to maintain relationships with current suppliers.rights. 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 January 31, 2015,30, 2016, 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 January 31, 2015.30, 2016.
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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. 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 October 31, 2015,April 30, 2016, 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 October 31, 2015,April 30, 2016, 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 1514 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 January 31, 2015.30, 2016.
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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 2015:2016:
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| | | | | | 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) | |
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Fiscal Period | | |
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August 2, 2015 – August 29, 2015 | — |
| | $ | — |
| | — |
| 2,348,500 |
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August 30, 2015 – October 3, 2015 | 3,105 |
| | 32.20 |
| | — |
| 2,348,500 |
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October 4, 2015 – October 31, 2015 | 5,912 |
| | 31.58 |
| | — |
| 2,348,500 |
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Total | 9,017 |
| | $ | 31.79 |
| | — |
| 2,348,500 |
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| | | | | | | | | | | |
| | | | | | 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) | |
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Fiscal Period | | |
| | | | | | |
January 31, 2016 – February 27, 2016 | 6,152 |
| | $ | 27.14 |
| | — |
| 2,348,500 |
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February 28, 2016 – April 2, 2016 | 365,431 |
| | 27.93 |
| | 200,000 |
| 2,148,500 |
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April 3, 2016 – April 30, 2016 | 250,000 |
| | 26.72 |
| | 250,000 |
| 1,898,500 |
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Total | 621,583 |
| | $ | 27.43 |
| | 450,000 |
| 1,898,500 |
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(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 use 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, 151,500450,000 shares were repurchased during the first quarter of 2016 and 151,500 shares were repurchased during fiscal year 2015. Therefore, there were 2.31.9 million shares authorized to be purchased under the program as of October 31, 2015.April 30, 2016. Our repurchases of common stock are limited under our debt agreements. |
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(2) | Includes shares that were tendered by employees related to certain share-based awards. 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 Caleres, Inc. (the “Company”) incorporated herein by reference to Exhibit 3.1 to the Company's Form 8-K filed June 1, 2015. |
3.2 | | Bylaws of the Company as amended through May 28, 2015, incorporated herein by reference to Exhibit 3.2 to the Company’s Form 8-K filed June 1, 2015. |
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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| | CALERES, INC. |
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Date: December 9, 2015June 8, 2016 | | /s/ Kenneth H. Hannah |
| | Kenneth H. Hannah Senior Vice President and Chief Financial Officer on behalf of the Registrant and as the Principal Financial Officer and Principal Accounting Officer |