SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended |
☐ | 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
CALERES, INC. | |
(Exact name of registrant as specified in its charter) | |
New York | 43-0197190 |
(State or other jurisdiction | (IRS Employer Identification Number) |
of incorporation or organization) | |
| |
8300 Maryland Avenue | 63105 |
St. Louis, Missouri | (Zip Code) |
(Address of principal executive offices) | |
| |
(314) 854-4000 | |
( |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock - par value of $0.01 per share | CAL | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | Accelerated filer |
Non-accelerated filer | Smaller reporting company |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
As of
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2
CALERES, INC. | |||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
(Unaudited) | |||||||||||
($ thousands) | October 28, 2017 | October 29, 2016 | January 28, 2017 | ||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 31,379 | $ | 173,435 | $ | 55,332 | |||||
Receivables, net | 132,942 | 139,475 | 153,121 | ||||||||
Inventories, net | 598,365 | 524,823 | 585,764 | ||||||||
Prepaid expenses and other current assets | 40,982 | 31,716 | 49,528 | ||||||||
Total current assets | 803,668 | 869,449 | 843,745 | ||||||||
Other assets | 68,316 | 114,851 | 68,574 | ||||||||
Goodwill | 127,081 | 13,954 | 127,098 | ||||||||
Intangible assets, net | 213,101 | 114,187 | 216,660 | ||||||||
Property and equipment | 535,149 | 497,486 | 531,104 | ||||||||
Allowance for depreciation | (320,167 | ) | (305,732 | ) | (311,908 | ) | |||||
Property and equipment, net | 214,982 | 191,754 | 219,196 | ||||||||
Total assets | $ | 1,427,148 | $ | 1,304,195 | $ | 1,475,273 | |||||
Liabilities and Equity | |||||||||||
Current liabilities: | |||||||||||
Borrowings under revolving credit agreement | $ | 20,000 | $ | — | $ | 110,000 | |||||
Trade accounts payable | 223,832 | 212,088 | 266,370 | ||||||||
Other accrued expenses | 173,487 | 141,886 | 151,225 | ||||||||
Total current liabilities | 417,319 | 353,974 | 527,595 | ||||||||
Other liabilities: | |||||||||||
Long-term debt | 197,348 | 196,888 | 197,003 | ||||||||
Deferred rent | 50,814 | 48,696 | 51,124 | ||||||||
Other liabilities | 86,580 | 57,574 | 85,065 | ||||||||
Total other liabilities | 334,742 | 303,158 | 333,192 | ||||||||
Equity: | |||||||||||
Common stock | 430 | 429 | 430 | ||||||||
Additional paid-in capital | 127,454 | 120,775 | 121,537 | ||||||||
Accumulated other comprehensive loss | (28,122 | ) | (6,310 | ) | (30,434 | ) | |||||
Retained earnings | 573,883 | 531,216 | 521,584 | ||||||||
Total Caleres, Inc. shareholders’ equity | 673,645 | 646,110 | 613,117 | ||||||||
Noncontrolling interests | 1,442 | 953 | 1,369 | ||||||||
Total equity | 675,087 | 647,063 | 614,486 | ||||||||
Total liabilities and equity | $ | 1,427,148 | $ | 1,304,195 | $ | 1,475,273 |
| | | | | | | | | |
| | (Unaudited) | |||||||
($ thousands) |
| April 29, 2023 |
| April 30, 2022 |
| January 28, 2023 | |||
Assets |
| |
|
| |
|
| |
|
Current assets: | | |
|
| |
|
| |
|
Cash and cash equivalents | | $ | 36,151 | | $ | 33,717 | | $ | 33,700 |
Receivables, net | |
| 148,068 | |
| 181,551 | |
| 132,802 |
Inventories, net | |
| 559,467 | |
| 643,527 | |
| 580,215 |
Income taxes | |
| 11,882 | |
| 11,815 | |
| 17,527 |
Property and equipment, held for sale | | | 16,777 | | | 16,777 | | | 16,777 |
Prepaid expenses and other current assets | |
| 48,535 | |
| 46,254 | |
| 50,434 |
Total current assets | |
| 820,880 | |
| 933,641 | |
| 831,455 |
| | | | | | | | | |
Prepaid pension costs | |
| 84,782 | |
| 101,609 | |
| 83,396 |
Lease right-of-use assets | |
| 513,817 | |
| 503,393 | |
| 518,196 |
Property and equipment, net | |
| 157,730 | |
| 137,600 | |
| 160,883 |
Goodwill and intangible assets, net | |
| 212,353 | |
| 224,475 | |
| 215,392 |
Other assets | |
| 28,521 | |
| 27,580 | |
| 27,150 |
Total assets | | $ | 1,818,083 | | $ | 1,928,298 | | $ | 1,836,472 |
| | | | | | | | | |
Liabilities and Equity | |
|
| |
|
| |
|
|
Current liabilities: | |
|
| |
|
| |
|
|
Borrowings under revolving credit agreement | | $ | 291,500 | | $ | 305,000 | | $ | 307,500 |
Trade accounts payable | |
| 261,753 | |
| 386,821 | |
| 229,908 |
Income taxes | |
| 11,953 | |
| 39,418 | |
| 7,650 |
Lease obligations | |
| 136,297 | |
| 118,692 | |
| 136,051 |
Other accrued expenses | |
| 177,774 | |
| 219,956 | |
| 230,087 |
Total current liabilities | |
| 879,277 | |
| 1,069,887 | |
| 911,196 |
| | | | | | | | | |
Other liabilities: | |
|
| |
|
| |
|
|
Noncurrent lease obligations | |
| 437,171 | |
| 452,742 | |
| 444,074 |
Income taxes | |
| 6,940 | |
| 7,786 | |
| 7,786 |
Deferred income taxes | |
| 19,185 | |
| 14,811 | |
| 19,001 |
Other liabilities | |
| 23,629 | |
| 25,044 | |
| 28,302 |
Total other liabilities | |
| 486,925 | |
| 500,383 | |
| 499,163 |
| | | | | | | | | |
Equity: | |
|
| |
|
| |
|
|
Common stock | |
| 363 | |
| 374 | |
| 357 |
Additional paid-in capital | |
| 173,640 | |
| 169,025 | |
| 180,747 |
Accumulated other comprehensive loss | |
| (26,260) | |
| (8,328) | |
| (26,750) |
Retained earnings | |
| 298,574 | |
| 191,165 | |
| 266,329 |
Total Caleres, Inc. shareholders’ equity | |
| 446,317 | |
| 352,236 | |
| 420,683 |
Noncontrolling interests | |
| 5,564 | |
| 5,792 | |
| 5,430 |
Total equity | |
| 451,881 | |
| 358,028 | |
| 426,113 |
Total liabilities and equity | | $ | 1,818,083 | | $ | 1,928,298 | | $ | 1,836,472 |
See notes to
condensedconsolidated financial statements.
3
CALERES, INC. | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||||||
(Unaudited) | ||||||||||||
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||
($ thousands, except per share amounts) | October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||
Net sales | $ | 774,656 | $ | 732,230 | $ | 2,083,119 | $ | 1,939,900 | ||||
Cost of goods sold | 457,771 | 438,459 | 1,207,865 | 1,138,781 | ||||||||
Gross profit | 316,885 | 293,771 | 875,254 | 801,119 | ||||||||
Selling and administrative expenses | 264,015 | 238,319 | 761,590 | 684,666 | ||||||||
Restructuring and other special charges, net | — | — | 3,973 | — | ||||||||
Operating earnings | 52,870 | 55,452 | 109,691 | 116,453 | ||||||||
Interest expense | (4,141 | ) | (3,475 | ) | (13,822 | ) | (10,564 | ) | ||||
Interest income | 95 | 350 | 592 | 907 | ||||||||
Earnings before income taxes | 48,824 | 52,327 | 96,461 | 106,796 | ||||||||
Income tax provision | (14,451 | ) | (17,601 | ) | (29,530 | ) | (34,514 | ) | ||||
Net earnings | 34,373 | 34,726 | 66,931 | 72,282 | ||||||||
Net (loss) earnings attributable to noncontrolling interests | (14 | ) | (4 | ) | 47 | 2 | ||||||
Net earnings attributable to Caleres, Inc. | $ | 34,387 | $ | 34,730 | $ | 66,884 | $ | 72,280 | ||||
Basic earnings per common share attributable to Caleres, Inc. shareholders | $ | 0.80 | $ | 0.81 | $ | 1.56 | $ | 1.67 | ||||
Diluted earnings per common share attributable to Caleres, Inc. shareholders | $ | 0.80 | $ | 0.81 | $ | 1.55 | $ | 1.67 | ||||
Dividends per common share | $ | 0.07 | $ | 0.07 | $ | 0.21 | $ | 0.21 |
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
| | | | | | |
|
| (Unaudited) | ||||
| | Thirteen Weeks Ended | ||||
($ thousands, except per share amounts) |
| April 29, 2023 | | April 30, 2022 | ||
Net sales | | $ | 662,734 | | $ | 735,116 |
Cost of goods sold | |
| 360,052 | |
| 408,122 |
Gross profit | |
| 302,682 | |
| 326,994 |
Selling and administrative expenses | |
| 253,095 | |
| 260,799 |
Operating earnings | |
| 49,587 | |
| 66,195 |
Interest expense, net | |
| (5,623) | |
| (2,299) |
Other income, net | |
| 1,492 | |
| 3,422 |
Earnings before income taxes | |
| 45,456 | |
| 67,318 |
Income tax provision | |
| (10,664) | |
| (17,333) |
Net earnings | |
| 34,792 | |
| 49,985 |
Net earnings (loss) attributable to noncontrolling interests | |
| 65 | |
| (524) |
Net earnings attributable to Caleres, Inc. | | $ | 34,727 | | $ | 50,509 |
| | | | | | |
Basic earnings per common share attributable to Caleres, Inc. shareholders | | $ | 0.97 | | $ | 1.34 |
| | | | | | |
Diluted earnings per common share attributable to Caleres, Inc. shareholders | | $ | 0.97 | | $ | 1.32 |
See notes to
condensedconsolidated financial statements.
4
CALERES, INC. | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||
(Unaudited) | ||||||||||||
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||
($ thousands) | October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||
Net earnings | $ | 34,373 | $ | 34,726 | $ | 66,931 | $ | 72,282 | ||||
Other comprehensive (loss) income, net of tax: | ||||||||||||
Foreign currency translation adjustment | (633 | ) | (545 | ) | 647 | 961 | ||||||
Pension and other postretirement benefits adjustments | 379 | (289 | ) | 1,106 | (865 | ) | ||||||
Derivative financial instruments | 183 | (101 | ) | 559 | (542 | ) | ||||||
Other comprehensive (loss) income, net of tax | (71 | ) | (935 | ) | 2,312 | (446 | ) | |||||
Comprehensive income | 34,302 | 33,791 | 69,243 | 71,836 | ||||||||
Comprehensive (loss) income attributable to noncontrolling interests | (3 | ) | (25 | ) | 73 | (35 | ) | |||||
Comprehensive income attributable to Caleres, Inc. | $ | 34,305 | $ | 33,816 | $ | 69,170 | $ | 71,871 |
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| | | | | |
| (Unaudited) | ||||
| Thirteen Weeks Ended | ||||
($ thousands) | April 29, 2023 |
| April 30, 2022 | ||
Net earnings | $ | 34,792 | | $ | 49,985 |
Other comprehensive income (loss) ("OCI"), net of tax: |
|
| |
|
|
Foreign currency translation adjustment |
| (151) | |
| (163) |
Pension and other postretirement benefits adjustments |
| 710 | |
| 440 |
Other comprehensive income, net of tax |
| 559 | |
| 277 |
Comprehensive income |
| 35,351 | |
| 50,262 |
Comprehensive income (loss) attributable to noncontrolling interests |
| 134 | |
| (525) |
Comprehensive income attributable to Caleres, Inc. | $ | 35,217 | | $ | 50,787 |
See notes to
condensedconsolidated financial statements.
5
CALERES, INC. | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
(Unaudited) | ||||||
Thirty-nine Weeks Ended | ||||||
($ thousands) | October 28, 2017 | October 29, 2016 | ||||
Operating Activities | ||||||
Net earnings | $ | 66,931 | $ | 72,282 | ||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||
Depreciation | 34,354 | 28,131 | ||||
Amortization of capitalized software | 10,786 | 9,589 | ||||
Amortization of intangible assets | 3,059 | 2,758 | ||||
Amortization of debt issuance costs and debt discount | 1,296 | 1,295 | ||||
Share-based compensation expense | 8,394 | 5,966 | ||||
Excess tax benefit related to share-based plans | — | (3,264 | ) | |||
Loss on disposal of property and equipment | 1,004 | 872 | ||||
Impairment charges for property and equipment | 2,995 | 913 | ||||
Deferred rent | (310 | ) | 2,190 | |||
Provision for doubtful accounts | 352 | 564 | ||||
Changes in operating assets and liabilities: | ||||||
Receivables | 19,826 | 13,626 | ||||
Inventories | (11,541 | ) | 22,587 | |||
Prepaid expenses and other current and noncurrent assets | 890 | 22,119 | ||||
Trade accounts payable | (42,702 | ) | (25,870 | ) | ||
Accrued expenses and other liabilities | 26,588 | (17,419 | ) | |||
Other, net | 339 | 664 | ||||
Net cash provided by operating activities | 122,261 | 137,003 | ||||
Investing Activities | ||||||
Purchases of property and equipment | (34,364 | ) | (43,019 | ) | ||
Capitalized software | (4,531 | ) | (5,672 | ) | ||
Net cash used for investing activities | (38,895 | ) | (48,691 | ) | ||
Financing Activities | ||||||
Borrowings under revolving credit agreement | 450,000 | 103,000 | ||||
Repayments under revolving credit agreement | (540,000 | ) | (103,000 | ) | ||
Dividends paid | (9,033 | ) | (9,094 | ) | ||
Acquisition of treasury stock | (5,993 | ) | (23,139 | ) | ||
Issuance of common stock under share-based plans, net | (2,477 | ) | (4,205 | ) | ||
Excess tax benefit related to share-based plans | — | 3,264 | ||||
Net cash used for financing activities | (107,503 | ) | (33,174 | ) | ||
Effect of exchange rate changes on cash and cash equivalents | 184 | 146 | ||||
(Decrease) increase in cash and cash equivalents | (23,953 | ) | 55,284 | |||
Cash and cash equivalents at beginning of period | 55,332 | 118,151 | ||||
Cash and cash equivalents at end of period | $ | 31,379 | $ | 173,435 |
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | |
| (Unaudited) |
| ||||
| Thirteen Weeks Ended | | ||||
($ thousands) | April 29, 2023 |
| April 30, 2022 |
| ||
Operating Activities | |
|
| |
|
|
Net earnings | $ | 34,792 | | $ | 49,985 | |
Adjustments to reconcile net earnings to net cash provided by operating activities: |
| | |
|
| |
Depreciation |
| 8,481 | |
| 8,064 | |
Amortization of capitalized software |
| 1,194 | |
| 1,265 | |
Amortization of intangible assets |
| 3,039 | |
| 3,028 | |
Amortization of debt issuance costs and debt discount |
| 102 | |
| 102 | |
Share-based compensation expense |
| 2,905 | |
| 3,799 | |
Loss on disposal of property and equipment |
| 245 | |
| 933 | |
Impairment charges for property, equipment, and lease right-of-use assets |
| 39 | |
| 1,777 | |
Adjustment to expected credit losses | | (264) | | | (617) | |
Deferred income taxes |
| 184 | |
| 80 | |
Changes in operating assets and liabilities: |
| | |
| | |
Receivables |
| (15,028) | |
| (58,698) | |
Inventories |
| 20,656 | |
| (46,775) | |
Prepaid expenses and other current and noncurrent assets |
| (648) | |
| 1,044 | |
Trade accounts payable |
| 31,885 | |
| 55,372 | |
Accrued expenses and other liabilities |
| (59,624) | |
| (43,126) | |
Income taxes, net |
| 9,102 | |
| 43,376 | |
Other, net |
| 437 | |
| 77 | |
Net cash provided by operating activities |
| 37,497 | |
| 19,686 | |
| | | | | | |
Investing Activities |
|
| |
|
| |
Purchases of property and equipment |
| (5,750) | |
| (9,305) | |
Capitalized software |
| (798) | |
| (2,345) | |
Net cash used for investing activities |
| (6,548) | |
| (11,650) | |
| | | | | | |
Financing Activities |
|
| |
|
| |
Borrowings under revolving credit agreement |
| 126,000 | |
| 205,000 | |
Repayments under revolving credit agreement |
| (142,000) | |
| (190,000) | |
Dividends paid |
| (2,482) | |
| (2,648) | |
Acquisition of treasury stock |
| — | |
| (14,673) | |
Issuance of common stock under share-based plans, net |
| (10,006) | |
| (3,599) | |
Contributions by noncontrolling interests |
| — | |
| 1,500 | |
Net cash used for financing activities |
| (28,488) | |
| (4,420) | |
Effect of exchange rate changes on cash and cash equivalents |
| (10) | |
| (14) | |
Increase in cash and cash equivalents |
| 2,451 | |
| 3,602 | |
Cash and cash equivalents at beginning of period |
| 33,700 | |
| 30,115 | |
Cash and cash equivalents at end of period | $ | 36,151 | | $ | 33,717 | |
See notes to
condensedconsolidated financial statements.
6
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | Total | | | | | | | ||
| | | | | | | | | | Other | | | | | Caleres, Inc. | | Non- | | | | |||
(Unaudited) | | Common Stock | | Additional | | Comprehensive | | Retained | | Shareholders’ | | controlling | | | | ||||||||
($ thousands, except number of shares and per share amounts) |
| Shares |
| Dollars |
| Paid-In Capital |
| Loss |
| Earnings |
| Equity |
| Interests |
| Total Equity | |||||||
BALANCE JANUARY 28, 2023 |
| 35,715,752 | | $ | 357 | | $ | 180,747 | | $ | (26,750) | | $ | 266,329 | | $ | 420,683 | | $ | 5,430 | | $ | 426,113 |
Net earnings |
| | |
| | |
| | |
| | |
| 34,727 | |
| 34,727 | |
| 65 | |
| 34,792 |
Foreign currency translation adjustment |
| | |
| | |
| | |
| (220) | |
|
| |
| (220) | |
| 69 | |
| (151) |
Pension and other postretirement benefits adjustments, net of tax of $245 |
| | |
| | |
| | |
| 710 | |
|
| |
| 710 | |
|
| |
| 710 |
Comprehensive income (loss) |
| | |
| | |
| | |
| 490 | |
| 34,727 | |
| 35,217 | |
| 134 | |
| 35,351 |
Dividends ($0.07 per share) |
| | |
| | |
| | |
|
| |
| (2,482) | |
| (2,482) | |
|
| |
| (2,482) |
Issuance of common stock under share-based plans, net |
| 558,847 | |
| 6 | |
| (10,012) | |
| | |
| | |
| (10,006) | |
|
| |
| (10,006) |
Share-based compensation expense |
| | |
| | |
| 2,905 | |
|
| |
|
| |
| 2,905 | |
|
| |
| 2,905 |
BALANCE APRIL 29, 2023 |
| 36,274,599 | | $ | 363 | | $ | 173,640 | | $ | (26,260) | | $ | 298,574 | | $ | 446,317 | | $ | 5,564 | | $ | 451,881 |
| | | | | | | | | | | | | | | | | | | | | | | |
BALANCE JANUARY 29, 2022 |
| 37,635,145 | | $ | 376 | | $ | 168,830 | | $ | (8,606) | | $ | 157,970 | | $ | 318,570 | | $ | 4,817 | | $ | 323,387 |
Net earnings (loss) |
| | |
| | |
| | |
| | |
| 50,509 | |
| 50,509 | |
| (524) | |
| 49,985 |
Foreign currency translation adjustment |
| | |
| | |
| | |
| (162) | |
|
| |
| (162) | |
| (1) | |
| (163) |
Pension and other postretirement benefits adjustments, net of tax of $141 |
| | |
| | |
| | |
| 440 | |
| | |
| 440 | |
| — | |
| 440 |
Comprehensive income |
| | | | | | | | | | 278 | | | 50,509 | | | 50,787 | | | (525) | |
| 50,262 |
Contributions by noncontrolling interests | | | | | | | | | | | | | | | | | | | | 1,500 | | | 1,500 |
Dividends ($0.07 per share) |
| | |
| | |
| | |
| | |
| (2,648) | |
| (2,648) | |
|
| |
| (2,648) |
Acquisition of treasury stock |
| (701,324) | | | (7) | | | | | | | | | (14,666) | | | (14,673) | | |
| |
| (14,673) |
Issuance of common stock under share-based plans, net |
| 512,508 | |
| 5 | |
| (3,604) | |
| | |
| | |
| (3,599) | |
|
| |
| (3,599) |
Share-based compensation expense |
| | |
| | |
| 3,799 | |
|
| |
|
| |
| 3,799 | |
|
| |
| 3,799 |
BALANCE APRIL 30, 2022 |
| 37,446,329 | | $ | 374 | | $ | 169,025 | | $ | (8,328) | | $ | 191,165 | | $ | 352,236 | | $ | 5,792 | | $ | 358,028 |
See notes to condensed consolidated financial statements.
7
CALERES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Basis of Presentation and General
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'sCompany’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,Although the third fiscal quarter accountshas historically accounted for a substantial portion of the Company’s earnings for the year.year, the Company has experienced more equal distribution among the quarters in recent years. 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.
The accompanying 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.
Noncontrolling Interests
During 2019, the Company entered into a joint venture with Brand Investment Holding Limited (“Brand Investment Holding”), a member of the Gemkell Group, to sell Sam Edelman, Naturalizer and other branded footwear in China. The Company and Brand Investment Holding are each 50% owners of the joint venture, which is named CLT Brand Solutions (“CLT”). During the thirteen weeks ended April 30, 2022, capital contributions of $3.0 million were made to CLT, including $1.5 million received from Brand Investment Holding. There were no capital contributions during the thirteen weeks ended April 29, 2023. Net sales and operating earnings were $5.2 million and $0.1 million, respectively, for the thirteen weeks ended April 29, 2023. Net sales and operating losses were $2.9 million and $0.9 million, respectively, for the thirteen weeks ended April 30, 2022.
The Company consolidates CLT into its condensed consolidated financial statements. Net earnings (loss) attributable to noncontrolling interests represents the share of net earnings or losses that is attributable to Brand Investment Holding. Transactions between the Company and the joint venture have been eliminated in the condensed consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Property and Equipment, Held for Sale
During 2021, the Company began actively marketing for sale its nine-acre corporate headquarters campus (the “Campus”) located in Clayton, Missouri. In April 2022, the Company entered into an agreement for the sale of the Campus. Although the Company expected the Campus to qualify as a completed sale within a year, the agreement was terminated in the fourth quarter of 2022. The Company continued to actively market the Campus for sale and in February 2023, the Company entered into an agreement to sell the Campus, subject to certain closing conditions. The Company expects the Campus to qualify as a completed sale within the next year. Accordingly, the Campus, primarily consisting of land and buildings, has been classified as property and equipment, held for sale on the consolidated balance sheets as of April 29, 2023 within the Eliminations and Other category. The Company evaluated the Campus asset group for impairment and determined that no indicators were present as of April 29, 2023.
Note 2 Impact of New Accounting Pronouncements
Impact of Recently Adopted Accounting Pronouncements
In May 2014,September 2022, the Financial Accounting Standards Board ("FASB"(“FASB”) issued Accounting Standards Update ("ASU"(“ASU”) No. 2014-09,
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quantitative disclosures about supplier finance programs in annual financial statements, including key terms of the programs, amounts outstanding, balance sheet presentation and subsequently issueda rollforward of amounts outstanding during the year. For interim periods, the ASU 2015-14 to defer the effective date. Several ASUs to clarify the implementation guidance inrequires disclosure of total obligations outstanding that have been confirmed as valid. The ASU 2014-09 have also been issued. Topic 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. ASU 2014-09 also requires additional disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The ASUs are effective for fiscal years, and interim periods within those years beginning after December 15, 2017. The Company plans to adopt the ASUs in the first quarter of 2018 using the modified retrospective method.
Note 3 Revenues
Disaggregation of Revenues
The following table disaggregates revenue by segment and major source for the periods ended April 29, 2023 and April 30, 2022:
| | | | | | | | | | | | |
| | Thirteen Weeks Ended April 29, 2023 | ||||||||||
| | | | | | | | Eliminations and | | | | |
($ thousands) |
| Famous Footwear |
| Brand Portfolio |
| Other |
| Total | ||||
| | | | | | | | | | | | |
Retail stores | | $ | 308,239 | | $ | 16,438 | | $ | — | | $ | 324,677 |
E-commerce - Company websites (1) | |
| 40,206 | |
| 53,431 | |
| — | |
| 93,637 |
E-commerce - wholesale drop-ship (1) | |
| — | |
| 34,798 | |
| (1,268) | |
| 33,530 |
Total direct-to-consumer sales | | | 348,445 | | | 104,667 | | | (1,268) | | | 451,844 |
Wholesale - e-commerce (1) | |
| — | |
| 54,979 | |
| — | |
| 54,979 |
Wholesale - landed | |
| — | |
| 142,896 | |
| (10,672) | |
| 132,224 |
Wholesale - first cost | |
| — | |
| 19,949 | |
| — | |
| 19,949 |
Licensing and royalty | |
| 585 | |
| 3,015 | |
| — | |
| 3,600 |
Other (2) | |
| 128 | |
| 10 | |
| — | |
| 138 |
Net sales | | $ | 349,158 | | $ | 325,516 | | $ | (11,940) | | $ | 662,734 |
| | | | | | | | | | | | |
|
| Thirteen Weeks Ended April 30, 2022 | ||||||||||
| | | | | | | | Eliminations and | | | | |
($ thousands) |
| Famous Footwear |
| Brand Portfolio |
| Other |
| Total | ||||
| | | | | | | | | | | | |
Retail stores | | $ | 331,988 | | $ | 14,217 | | $ | — | | $ | 346,205 |
E-commerce - Company websites (1) | |
| 51,938 | |
| 50,702 | |
| — | |
| 102,640 |
E-commerce - wholesale drop-ship (1) | | | — | | | 31,773 | | | (998) | | | 30,775 |
Total direct-to-consumer sales | | | 383,926 | | | 96,692 | | | (998) | | | 479,620 |
Wholesale - e-commerce (1) | |
| — | |
| 60,716 | |
| — | |
| 60,716 |
Wholesale - landed | |
| — | |
| 175,327 | |
| (14,128) | |
| 161,199 |
Wholesale - first cost | |
| — | |
| 30,076 | |
| — | |
| 30,076 |
Licensing and royalty | |
| 422 | |
| 2,906 | |
| — | |
| 3,328 |
Other (2) | |
| 154 | |
| 23 | |
| — | |
| 177 |
Net sales | | $ | 384,502 | | $ | 365,740 | | $ | (15,126) | | $ | 735,116 |
(1) | Collectively referred to as "e-commerce" in the narrative below |
(2) | Includes breakage revenue from unredeemed gift cards |
Retail stores
The Company generates revenue from retail sales where control is transferred and revenue is recognized at the point of sale. Retail sales are recorded net of estimated returns and exclude sales tax. The Company records a returns reserve and a corresponding return asset for expected returns of merchandise.
Retail sales to members of the Company’s loyalty programs, including the Famously You Rewards program, include two performance obligations: the sale of merchandise and the delivery of points that may be redeemed for future purchases. The transaction price is allocated to the separate performance obligations based on the relative stand-alone selling price. The stand-alone selling price for the points is estimated
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using the retail value of the merchandise earned, adjusted for estimated breakage based upon historical redemption patterns. The revenue associated with the initial merchandise purchased is recognized immediately and the value assigned to the points is deferred until the points are redeemed, forfeited or expired.
E-commerce
The Company generates revenue from sales on websites maintained by the Company also incurred integration coststhat are shipped from the Company’s distribution centers or retail stores directly to the consumer, or picked up directly by the consumer from the Company’s stores (“e-commerce – Company websites”); sales from the Company’s wholesale customers’ websites that are fulfilled on a drop-ship basis (“e-commerce – wholesale drop ship”); and other e-commerce sales (“wholesale – e-commerce”), collectively referred to as "e-commerce". The Company transfers control and recognizes revenue for merchandise sold that is shipped directly to an individual consumer upon delivery to the consumer.
Landed wholesale
Landed sales are wholesale sales in which the Company obtains title to the footwear from the overseas suppliers and maintains title until the merchandise clears United States customs. The merchandise is shipped directly to the customer from the Company’s warehouses. Many customers purchasing footwear on a landed basis arrange their own transportation of merchandise and, with limited exceptions, control is transferred at the time of shipment. Landed sales generally carry a higher profit rate than first-cost wholesale sales as a result of the brand equity associated with the product along with the additional customs, warehousing and logistics services provided to customers and the risks associated with inventory ownership.
First-cost wholesale
First-cost sales are wholesale sales in which the Company purchases merchandise from an international factory that manufactures the product and subsequently sells to a customer at an overseas port. Many of the customers then import this product into the United States. Revenue is recognized at the time the merchandise is delivered to the customer’s designated freight forwarder and control is transferred to the customer.
Licensing and royalty
The Company has license agreements with third parties allowing them to sell the Company’s branded product, or other merchandise that uses the Company’s owned or licensed brand names. These license agreements provide the licensee access to the Company’s symbolic intellectual property, and revenue is therefore recognized over the license term. For royalty contracts that do not have guaranteed minimums, the Company recognizes revenue as the licensee’s sales occur. For royalty contracts that have guaranteed minimums, revenue for the guaranteed minimum is recognized on a straight-line basis during the thirty-nineterm, until such time that the cumulative royalties exceed the total minimum guarantee. Up-front payments are recognized over the contractual term to which the guaranteed minimum relates.
The Company also licenses its Famous Footwear trade name and logo to a third-party financial institution to offer Famous Footwear-branded credit cards to its consumers. The Company receives royalties based upon cardholder spending, which is recognized as licensing revenue at the time when the credit card is used.
Contract Balances
Revenue is recorded at the transaction price, net of estimates for variable consideration for which reserves are established, including returns, allowances and discounts. Variable consideration is estimated using the expected value method and given the large number of contracts with similar characteristics, the portfolio approach is applied to determine the variable consideration for each revenue stream. Reserves for projected returns are based on historical patterns and current expectations.
Information about significant contract balances from contracts with customers is as follows:
| | | | | | | | | | |
($ thousands) |
| April 29, 2023 |
| April 30, 2022 |
| January 28, 2023 |
| |||
Customer allowances and discounts | | $ | 19,076 | | $ | 22,896 | | $ | 21,917 | |
Loyalty programs liability | |
| 16,993 | |
| 18,152 | |
| 17,732 | |
Returns reserve | |
| 13,915 | |
| 16,376 | |
| 12,038 | |
Gift card liability | |
| 5,920 | |
| 6,130 | |
| 6,659 | |
Changes in contract balances with customers generally reflect differences in relative sales volume for the periods presented. In addition, during the thirteen weeks ended October 28, 2017.April 29, 2023, the loyalty programs liability increased $8.8 million due to points and material rights earned on purchases and decreased $9.5 million due to expirations and redemptions. During the thirteen weeks ended April 30, 2022, the loyalty programs liability increased $7.6 million due to points and material rights earned on purchases and decreased $8.2 million due to expirations and redemptions. The liability for loyalty programs is presented within other accrued expenses when earned and is generally
10
expected to be recognized as revenue within one year. The gift card liability is established upon the sale of a gift card and revenue is recognized either upon redemption of the gift card by the consumer or based upon the gift card breakage rate, which is generally within the 24-month period following the sale of the gift card.
The following table summarizes the activity in the Company’s allowance for expected credit losses during the thirteen weeks ended April 29, 2023 and April 30, 2022:
| | | | | | |
| | Thirteen Weeks Ended | ||||
($ thousands) |
| April 29, 2023 | | April 30, 2022 | ||
Balance, beginning of period | | $ | 8,903 | | $ | 9,601 |
Adjustment to expected credit losses | | | (264) | | | (617) |
Uncollectible accounts written off, net of recoveries | | | (20) | | | (526) |
Balance, end of period | | $ | 8,619 | | $ | 8,458 |
Note 4 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 28, 2017April 29, 2023 and OctoberApril 30, 2022:
| | | | | | |
| | Thirteen Weeks Ended | ||||
($ thousands, except per share amounts) |
| April 29, 2023 |
| April 30, 2022 | ||
| | | | | | |
NUMERATOR | | | | | | |
Net earnings | | $ | 34,792 | | $ | 49,985 |
Net (earnings) loss attributable to noncontrolling interests | |
| (65) | |
| 524 |
Net earnings attributable to Caleres, Inc. | | $ | 34,727 | | $ | 50,509 |
Net earnings allocated to participating securities | |
| (1,478) | |
| (2,017) |
Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities | | $ | 33,249 | | $ | 48,492 |
| |
|
| |
|
|
DENOMINATOR | |
|
| |
|
|
Denominator for basic earnings per common share attributable to Caleres, Inc. shareholders | |
| 34,407 | |
| 36,209 |
Dilutive effect of share-based awards | |
| — | |
| 467 |
Denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders | |
| 34,407 | |
| 36,676 |
| |
|
| |
|
|
Basic earnings per common share attributable to Caleres, Inc. shareholders | | $ | 0.97 | | $ | 1.34 |
| |
|
| |
|
|
Diluted earnings per common share attributable to Caleres, Inc. shareholders | | $ | 0.97 | | $ | 1.32 |
There were no outstanding options to purchase shares of common stock for the thirteen weeks ended April 29, 2016:
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||
($ thousands, except per share amounts) | October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||
NUMERATOR | ||||||||||||
Net earnings | $ | 34,373 | $ | 34,726 | $ | 66,931 | $ | 72,282 | ||||
Net loss (earnings) attributable to noncontrolling interests | 14 | 4 | (47 | ) | (2 | ) | ||||||
Net earnings allocated to participating securities | (949 | ) | (910 | ) | (1,841 | ) | (1,933 | ) | ||||
Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities | $ | 33,438 | $ | 33,820 | $ | 65,043 | $ | 70,347 | ||||
DENOMINATOR | ||||||||||||
Denominator for basic earnings per common share attributable to Caleres, Inc. shareholders | 41,788 | 41,802 | 41,801 | 42,093 | ||||||||
Dilutive effect of share-based awards | 182 | 137 | 173 | 144 | ||||||||
Denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders | 41,970 | 41,939 | 41,974 | 42,237 | ||||||||
Basic earnings per common share attributable to Caleres, Inc. shareholders | $ | 0.80 | $ | 0.81 | $ | 1.56 | $ | 1.67 | ||||
Diluted earnings per common share attributable to Caleres, Inc. shareholders | $ | 0.80 | $ | 0.81 | $ | 1.55 | $ | 1.67 |
The Company did not repurchase any shares under the share repurchase programs during the thirteen weeks ended April 29, 2023. During the thirteen and thirty-nine weeks ended October 28, 2017,April 30, 2022, the Company repurchased zero and 225,000701,324 shares respectively, under the 2019 publicly announced share repurchase program, which permits repurchases of up to 2.55.0 million shares. Refer to further discussion in Item 2, Unregistered Sales of Equity Securities and Use of Proceeds.
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Note 5 Supply Chain Financing
The Company repurchased zero and 900,000 shares during facilitates a voluntary supply chain finance program (“the thirteen and thirty-nine weeks ended October 29, 2016, respectively. AsProgram”) that provides certain of October 28, 2017,the Company’s suppliers the opportunity to sell receivables related to products that the Company has repurchasedpurchased to participating financial institutions at a totalrate that leverages the Company’s credit rating, which may be more beneficial to the suppliers than the rate they can obtain based upon their own credit rating. The Company negotiates payment and other terms directly with the suppliers, regardless of 1.3 million shares under this program.
Note 6 Business Segment Information
Following is a summary of certain key financial measures for the Company’s business segments for the periods ended October 28, 2017April 29, 2023 and October 29, 2016:
| | | | | | | | | | | | |
| | Famous | | Brand | | Eliminations | | | | |||
($ thousands) |
| Footwear |
| Portfolio |
| and Other |
| Total | ||||
Thirteen Weeks Ended April 29, 2023 | |
| | |
| | |
| | |
| |
Net sales | | $ | 349,158 | | $ | 325,516 | | $ | (11,940) | | $ | 662,734 |
Intersegment sales (1) | |
| — | | | 11,940 | | | — | |
| 11,940 |
Operating earnings (loss) | |
| 17,056 | |
| 42,669 | |
| (10,138) | |
| 49,587 |
Segment assets | |
| 830,994 | |
| 844,263 | |
| 142,826 | |
| 1,818,083 |
| |
|
| |
|
| |
|
| |
|
|
Thirteen Weeks Ended April 30, 2022 | |
|
| |
|
| |
|
| |
|
|
Net sales | | $ | 384,502 | | $ | 365,740 | | $ | (15,126) | | $ | 735,116 |
Intersegment sales (1) | |
| — | | | 15,126 | | | — | |
| 15,126 |
Operating earnings (loss) | |
| 49,688 | |
| 41,349 | |
| (24,842) | |
| 66,195 |
Segment assets | |
| 790,778 | |
| 987,397 | |
| 150,123 | |
| 1,928,298 |
|
|
| |
|
| |
|
| |
|
|
(1) | Included in net sales in the Brand Portfolio segment and eliminated in the Eliminations and Other category. |
Famous Footwear | Brand Portfolio | |||||||||||
($ thousands) | Other | Total | ||||||||||
Thirteen Weeks Ended October 28, 2017 | ||||||||||||
External sales | $ | 473,118 | $ | 301,538 | $ | — | $ | 774,656 | ||||
Intersegment sales | — | 15,218 | — | 15,218 | ||||||||
Operating earnings (loss) | 33,747 | 24,281 | (5,158 | ) | 52,870 | |||||||
Segment assets | 544,280 | 781,421 | 101,447 | 1,427,148 | ||||||||
Thirteen Weeks Ended October 29, 2016 | ||||||||||||
External sales | $ | 467,816 | $ | 264,414 | $ | — | $ | 732,230 | ||||
Intersegment sales | — | 20,234 | — | 20,234 | ||||||||
Operating earnings (loss) | 32,709 | 30,454 | (7,711 | ) | 55,452 | |||||||
Segment assets | 555,934 | 471,329 | 276,932 | 1,304,195 | ||||||||
Thirty-Nine Weeks Ended October 28, 2017 | ||||||||||||
External sales | $ | 1,244,542 | $ | 838,577 | $ | — | $ | 2,083,119 | ||||
Intersegment sales | — | 59,768 | — | 59,768 | ||||||||
Operating earnings (loss) | 79,137 | 53,511 | (22,957 | ) | 109,691 | |||||||
Thirty-Nine Weeks Ended October 29, 2016 | ||||||||||||
External sales | $ | 1,222,535 | $ | 717,365 | $ | — | $ | 1,939,900 | ||||
Intersegment sales | — | 66,386 | — | 66,386 | ||||||||
Operating earnings (loss) | 81,067 | 57,539 | (22,153 | ) | 116,453 |
The Eliminations and 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 | ||||
($ thousands) |
| April 29, 2023 |
| April 30, 2022 | ||
Operating earnings | | $ | 49,587 | | $ | 66,195 |
Interest expense, net | |
| (5,623) | |
| (2,299) |
Other income, net | |
| 1,492 | |
| 3,422 |
Earnings before income taxes | | $ | 45,456 | | $ | 67,318 |
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Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||
($ thousands) | October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||
Operating earnings | $ | 52,870 | $ | 55,452 | $ | 109,691 | $ | 116,453 | ||||
Interest expense | (4,141 | ) | (3,475 | ) | (13,822 | ) | (10,564 | ) | ||||
Interest income | 95 | 350 | 592 | 907 | ||||||||
Earnings before income taxes | $ | 48,824 | $ | 52,327 | $ | 96,461 | $ | 106,796 |
($ thousands) | October 28, 2017 | October 29, 2016 | January 28, 2017 | ||||||
Raw materials | $ | 19,091 | $ | 942 | $ | 15,378 | |||
Work-in-process | 897 | — | 1,093 | ||||||
Finished goods | 578,377 | 523,881 | 569,293 | ||||||
Inventories, net | $ | 598,365 | $ | 524,823 | $ | 585,764 |
| | | | | | | | | |
($ thousands) |
| April 29, 2023 |
| April 30, 2022 |
| January 28, 2023 | |||
Raw materials | | $ | 18,367 | | $ | 16,112 | | $ | 21,172 |
Work-in-process | |
| 563 | |
| 666 | |
| 569 |
Finished goods | |
| 540,537 | |
| 626,749 | |
| 558,474 |
Inventories, net | | $ | 559,467 | | $ | 643,527 | | $ | 580,215 |
| | | | | | | | | |
($ thousands) |
| April 29, 2023 |
| April 30, 2022 |
| January 28, 2023 | |||
Intangible Assets |
| |
|
| |
|
| |
|
Famous Footwear | | $ | 2,800 | | $ | 2,800 | | $ | 2,800 |
Brand Portfolio (1) | |
| 342,083 | |
| 342,083 | |
| 342,083 |
Total intangible assets | |
| 344,883 | |
| 344,883 | |
| 344,883 |
Accumulated amortization | |
| (137,486) | |
| (125,364) | |
| (134,447) |
Total intangible assets, net | |
| 207,397 | |
| 219,519 | |
| 210,436 |
Goodwill | |
|
| |
|
| |
|
|
Brand Portfolio (2) | |
| 4,956 | |
| 4,956 | |
| 4,956 |
Total goodwill | |
| 4,956 | |
| 4,956 | |
| 4,956 |
Goodwill and intangible assets, net | | $ | 212,353 | | $ | 224,475 | | $ | 215,392 |
(1) | The carrying amount of intangible assets as of April 29, 2023, April 30, 2022 and January 28, 2023 is presented net of accumulated impairment charges of $106.2 million. |
(2) | The carrying amount of goodwill as of April 29, 2023, April 30, 2022 and January 28, 2023 is presented net of accumulated impairment charges of $415.7 million. |
($ thousands) | October 28, 2017 | October 29, 2016 | January 28, 2017 | ||||||
Intangible Assets | |||||||||
Famous Footwear | $ | 2,800 | $ | 2,800 | $ | 2,800 | |||
Brand Portfolio | 285,988 | 183,068 | 286,488 | ||||||
Total intangible assets | 288,788 | 185,868 | 289,288 | ||||||
Accumulated amortization | (75,687 | ) | (71,681 | ) | (72,628 | ) | |||
Total intangible assets, net | 213,101 | 114,187 | 216,660 | ||||||
Goodwill | |||||||||
Brand Portfolio | 127,081 | 13,954 | 127,098 | ||||||
Total goodwill | 127,081 | 13,954 | 127,098 | ||||||
Goodwill and intangible assets, net | $ | 340,182 | $ | 128,141 | $ | 343,758 |
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The allocation of the purchase price resulted in incremental intangible assets of $102.9 million, consisting of trademarks and customer relationships of $97.5 million and $5.4 million, respectively, and incremental goodwill of $113.1 million.
($ thousands) | October 28, 2017 | |||||||||||||
Estimated Useful Lives | Original Cost | Accumulated Amortization | Net Carrying Value | |||||||||||
Trademarks | 15-40 years | $ | 165,288 | $ | 75,372 | $ | 89,916 | |||||||
Trademarks | Indefinite | 118,100 | (1) | — | 118,100 | |||||||||
Customer relationships | 15 years | 5,400 | (1) | 315 | 5,085 | |||||||||
$ | 288,788 | $ | 75,687 | $ | 213,101 |
October 29, 2016 | ||||||||||||||
Estimated Useful Lives | Original Cost | Accumulated Amortization | Net Carrying Value | |||||||||||
Trademarks | 15-40 years | $ | 165,068 | $ | 71,681 | $ | 93,387 | |||||||
Trademarks | Indefinite | 20,800 | — | 20,800 | ||||||||||
$ | 185,868 | $ | 71,681 | $ | 114,187 |
January 28, 2017 | ||||||||||||||
Estimated Useful Lives | Original Cost | Accumulated Amortization | Net Carrying Value | |||||||||||
Trademarks | 15-40 years | $ | 165,288 | $ | 72,604 | $ | 92,684 | |||||||
Trademarks | Indefinite | 117,900 | (1) | — | 117,900 | |||||||||
Customer relationships | 15 years | 6,100 | (1) | 24 | 6,076 | |||||||||
$ | 289,288 | $ | 72,628 | $ | 216,660 | |||||||||
(1) The Allen Edmonds trademark and customer relationships intangible assets were acquired in the Allen Edmonds acquisition, as further discussed in Note 3 to the condensed consolidated financial statements. Immaterial adjustments attributable to the purchase price allocation were recorded during the thirty-nine weeks ended October 28, 2017, resulting in an adjustment to the original cost. |
| | | | | | | | | | | | | | |
($ thousands) |
| April 29, 2023 | ||||||||||||
|
| Estimated Useful Lives |
| | |
| Accumulated |
| Accumulated |
| | | ||
| | (In Years) | | Cost Basis | | Amortization | | Impairment | | Net Carrying Value | ||||
Trade names |
| 2 - 40 | | $ | 299,488 | | $ | 123,755 | | $ | 10,200 | | $ | 165,533 |
Trade names |
| Indefinite | |
| 107,400 | |
| — | |
| 92,000 | |
| 15,400 |
Customer relationships |
| 15 - 16 |
|
| 44,200 |
|
| 13,731 |
|
| 4,005 |
|
| 26,464 |
| | | | $ | 451,088 | | $ | 137,486 | | $ | 106,205 | | $ | 207,397 |
| | | | | | | | | | | | | | |
|
| April 30, 2022 | ||||||||||||
|
| Estimated Useful Lives |
| | |
| Accumulated |
| Accumulated |
| | | ||
| | (In Years) | | Cost Basis | | Amortization | | Impairment | | Net Carrying Value | ||||
Trade names |
| 2 - 40 | | $ | 299,488 | | $ | 114,528 | | $ | 10,200 | | $ | 174,760 |
Trade names |
| Indefinite | |
| 107,400 | |
| — | |
| 92,000 | |
| 15,400 |
Customer relationships |
| 15 - 16 |
|
| 44,200 |
|
| 10,836 |
|
| 4,005 |
|
| 29,359 |
| | | | $ | 451,088 | | $ | 125,364 | | $ | 106,205 | | $ | 219,519 |
| | | | | | | | | | | | | | |
|
| January 28, 2023 | ||||||||||||
|
| Estimated Useful Lives |
| | |
| Accumulated |
| Accumulated |
| | | ||
| | (In Years) | | Cost Basis | | Amortization | | Impairment | | Net Carrying Value | ||||
Trade names |
| 2 - 40 | | $ | 299,488 | | $ | 121,928 | | $ | 10,200 | | $ | 167,360 |
Trade names |
| Indefinite | |
| 107,400 | |
| — | |
| 92,000 | |
| 15,400 |
Customer relationships |
| 15 - 16 |
|
| 44,200 |
|
| 12,519 |
|
| 4,005 |
|
| 27,676 |
| | | | $ | 451,088 | | $ | 134,447 | | $ | 106,205 | | $ | 210,436 |
Amortization expense related to intangible assets was $1.0$3.0 million for both the thirteen weeks ended April 29, 2023 and April 30, 2022. The Company estimates that amortization expense related to intangible assets will be approximately $11.9 million in 2023, $11.0 million in 2024, 2025 and 2026, and $10.9 million in 2027.
Goodwill is tested for impairment at least annually, or more frequently if events or circumstances indicate it might be impaired, using either the qualitative assessment or a quantitative fair value-based test. The Company recorded no goodwill impairment charges during the thirteen weeks ended April 29, 2023 or April 30, 2022.
Indefinite-lived intangible assets are tested for impairment as of the first day of the fourth quarter of each fiscal year unless events or circumstances indicate an interim test is required. The Company recorded no impairment charges for indefinite-lived intangible assets during the thirteen weeks ended April 29, 2023 or April 30, 2022.
Note 9 Leases
The Company leases all of its retail locations, a manufacturing facility, and certain office locations, distribution centers and equipment. At contract inception, leases are evaluated and classified as either operating or finance leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
Lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The majority of the Company’s leases do not provide an implicit rate and therefore, the Company uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future payments. For operating leases, lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are expensed as incurred.
14
The Company regularly analyzes the results of all of its stores and assesses the viability of underperforming stores to determine whether events or circumstances exist that indicate the stores should be closed or whether the carrying amount of their long-lived assets may not be recoverable. After allowing for an appropriate start-up period and consideration of any unusual nonrecurring events, property and equipment at stores and the lease right-of-use assets indicated as impaired are written down to fair value as calculated using a discounted cash flow method. The fair value of the lease right-of-use assets is determined utilizing projected cash flows for each store location, discounted using a risk-adjusted discount rate, subject to a market floor based on current market lease rates. The Company recorded an immaterial amount of asset impairment charges in the thirteen weeks ended April 29, 2023. During the thirteen weeks ended April 30, 2022, the Company recorded asset impairment charges of $1.8 million, primarily related to capitalized software. Refer to Note 14 to the condensed consolidated financial statements for further discussion on these impairment charges.
During the thirteen weeks ended April 29, 2023, the Company entered into new or amended leases that resulted in the recognition of right-of-use assets and lease obligations of $29.6 million on the condensed consolidated balance sheets. As of April 29, 2023, the Company has entered into lease commitments for six retail locations for which the leases have not yet commenced. The Company anticipates that two leases will begin in the current fiscal year, three leases will begin in fiscal 2024 and one lease will begin in fiscal 2025. Upon commencement, right-of-use assets and lease liabilities of approximately $1.4 million, $2.2 million and $0.9$0.4 million will be recorded on the condensed consolidated balance sheets in 2023, 2024 and 2025, respectively.
The components of lease expense for the thirteen weeks ended April 29, 2023 and April 30, 2022 were as follows:
| | | | | | |
| | Thirteen Weeks Ended | ||||
($ thousands) | | April 29, 2023 |
| April 30, 2022 | ||
Operating lease expense |
| $ | 39,142 |
| $ | 38,064 |
Variable lease expense | |
| 10,465 | |
| 9,016 |
Short-term lease expense | |
| 687 | |
| 1,195 |
Sublease income | |
| — | |
| (59) |
Total lease expense | | $ | 50,294 | | $ | 48,216 |
Supplemental cash flow information related to leases is as follows: | | | | | | |
| | Thirteen Weeks Ended | ||||
($ thousands) |
| April 29, 2023 |
| April 30, 2022 | ||
Cash paid for lease liabilities | | $ | 41,163 | | $ | 48,793 |
Cash received from sublease income | |
| — | |
| 59 |
| | | | | | |
Note 10 Financing Arrangements
Credit Agreement
The Company maintains a revolving credit facility for working capital needs. The Company is the lead borrower, and Sidney Rich Associates, Inc., BG Retail, LLC, Allen Edmonds LLC, Vionic Group LLC, Vionic International LLC and Blowfish, LLC are each co-borrowers and guarantors.
On October 28, 20175, 2021, the Company entered into a Fifth Amendment to Fourth Amended and October 29, 2016, respectively,Restated Credit Agreement (as so amended, the "Credit Agreement") which, among other modifications, decreased the amount available under the revolving credit facility by $100.0 million to an aggregate amount of up to $500.0 million, subject to borrowing base restrictions, and $3.1 millionmay be increased by up to $250.0 million. The Credit Agreement also decreased the spread applied to the London Interbank Offered Rate (“LIBOR”) or prime rate by a total of 75 basis points. On April 27, 2023, the Company entered into a Sixth Amendment to Fourth Amended and $2.8Restated Credit agreement to transition the borrowings on the revolving credit facility from bearing interest based on LIBOR to a term secured overnight financing rate (“SOFR”).
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.
15
Interest on borrowings is at variable rates based on the SOFR, 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, if excess availability falls below the greater of 10.0% of the Loan Cap and $40.0 million for three consecutive business days, and the thirty-nine weeks ended October 28, 2017fixed charge coverage ratio is less than 1.25 to 1.0, the Company would be in default under the Credit Agreement and Octobercertain additional covenants would be triggered.
The Credit Agreement contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to similar obligations, certain events of bankruptcy and insolvency, judgment defaults and the failure of any guaranty or security document supporting the agreement to be in full force and effect. If an event of default occurs, the collateral agent 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 12-month period. The Credit Agreement also contains certain other covenants and restrictions. The Company was in compliance with all covenants and restrictions under the Credit Agreement as of April 29, 2016, respectively.
At April 29, 2023, the Company had $291.5 million of borrowings outstanding and $10.6 million in letters of credit outstanding under the Credit Agreement. Total additional borrowing availability was $197.9 million at April 29, 2023.
16
($ thousands) | Caleres, Inc. Shareholders’ Equity | Noncontrolling Interests | Total Equity | ||||||
Equity at January 28, 2017 | $ | 613,117 | $ | 1,369 | $ | 614,486 | |||
Net earnings | 66,884 | 47 | 66,931 | ||||||
Other comprehensive income | 2,312 | 26 | 2,338 | ||||||
Dividends paid | (9,033 | ) | — | (9,033 | ) | ||||
Acquisition of treasury stock | (5,993 | ) | — | (5,993 | ) | ||||
Issuance of common stock under share-based plans, net | (2,477 | ) | — | (2,477 | ) | ||||
Cumulative-effect adjustment from adoption of ASU 2016-09 | 441 | — | 441 | ||||||
Share-based compensation expense | 8,394 | — | 8,394 | ||||||
Equity at October 28, 2017 | $ | 673,645 | $ | 1,442 | $ | 675,087 |
($ thousands) | Caleres, Inc. Shareholders’ Equity | Noncontrolling Interests | Total Equity | ||||||
Equity at January 30, 2016 | $ | 601,484 | $ | 988 | $ | 602,472 | |||
Net earnings | 72,280 | 2 | 72,282 | ||||||
Other comprehensive income (loss) | (446 | ) | (37 | ) | (483 | ) | |||
Dividends paid | (9,094 | ) | — | (9,094 | ) | ||||
Acquisition of treasury stock | (23,139 | ) | — | (23,139 | ) | ||||
Issuance of common stock under share-based plans, net | (4,205 | ) | — | (4,205 | ) | ||||
Excess tax benefit related to share-based plans | 3,264 | — | 3,264 | ||||||
Share-based compensation expense | 5,966 | — | 5,966 | ||||||
Equity at October 29, 2016 | $ | 646,110 | $ | 953 | $ | 647,063 |
The following table sets forth the changes in accumulated other comprehensive loss (OCL) by component for the periods ended October 28, 2017April 29, 2023 and October 29, 2016:
| | | | | | | | | |
|
| | |
| |
| | | |
| | | | | Pension and | | Accumulated | ||
| | Foreign | | Other | | Other | |||
| | Currency | | Postretirement | | Comprehensive | |||
($ thousands) | | Translation | | Transactions (1) | | (Loss) Income | |||
Balance at January 28, 2023 | | $ | (1,213) | | $ | (25,537) | | $ | (26,750) |
Other comprehensive loss before reclassifications | | | (220) | | | — | | | (220) |
Reclassifications: | |
| | |
| | |
| |
Amounts reclassified from accumulated other comprehensive loss | | | — | | | 955 | | | 955 |
Tax benefit |
| | — |
| | (245) |
| | (245) |
Net reclassifications |
| | — |
| | 710 |
| | 710 |
Other comprehensive (loss) income |
| | (220) |
| | 710 |
| | 490 |
Balance at April 29, 2023 | | $ | (1,433) | | $ | (24,827) | | $ | (26,260) |
| | | | | | | | | |
Balance at January 29, 2022 | | $ | (788) | | $ | (7,818) | | $ | (8,606) |
Other comprehensive loss before reclassifications | |
| (162) | |
| — | |
| (162) |
Reclassifications: | |
|
| |
|
| |
|
|
Amounts reclassified from accumulated other comprehensive loss | |
| — | |
| 581 | |
| 581 |
Tax benefit | |
| — | |
| (141) | |
| (141) |
Net reclassifications | |
| — | |
| 440 | |
| 440 |
Other comprehensive (loss) income | |
| (162) | |
| 440 | |
| 278 |
Balance at April 30, 2022 | | $ | (950) | | $ | (7,378) | | $ | (8,328) |
($ thousands) | Foreign Currency Translation | Pension and Other Postretirement Transactions (1) | Derivative Financial Instrument Transactions (2) | Accumulated Other Comprehensive (Loss) Income | ||||||||
Balance July 29, 2017 | $ | 1,472 | $ | (29,357 | ) | $ | (166 | ) | $ | (28,051 | ) | |
Other comprehensive (loss) income before reclassifications | (633 | ) | — | 258 | (375 | ) | ||||||
Reclassifications: | ||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | 615 | (118 | ) | 497 | |||||||
Tax (benefit) provision | — | (236 | ) | 43 | (193 | ) | ||||||
Net reclassifications | — | 379 | (75 | ) | 304 | |||||||
Other comprehensive (loss) income | (633 | ) | 379 | 183 | (71 | ) | ||||||
Balance October 28, 2017 | $ | 839 | $ | (28,978 | ) | $ | 17 | $ | (28,122 | ) | ||
Balance July 30, 2016 | $ | 606 | $ | (5,932 | ) | $ | (49 | ) | $ | (5,375 | ) | |
Other comprehensive loss before reclassifications | (545 | ) | — | (150 | ) | (695 | ) | |||||
Reclassifications: | ||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | (478 | ) | 79 | (399 | ) | ||||||
Tax provision (benefit) | — | 189 | (30 | ) | 159 | |||||||
Net reclassifications | — | (289 | ) | 49 | (240 | ) | ||||||
Other comprehensive loss | (545 | ) | (289 | ) | (101 | ) | (935 | ) | ||||
Balance October 29, 2016 | $ | 61 | $ | (6,221 | ) | $ | (150 | ) | $ | (6,310 | ) | |
Balance January 28, 2017 | $ | 192 | $ | (30,084 | ) | $ | (542 | ) | (30,434 | ) | ||
Other comprehensive income before reclassifications | 647 | — | 716 | 1,363 | ||||||||
Reclassifications: | ||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | 1,794 | (235 | ) | 1,559 | |||||||
Tax (benefit) provision | — | (688 | ) | 78 | (610 | ) | ||||||
Net reclassifications | — | 1,106 | (157 | ) | 949 | |||||||
Other comprehensive income | 647 | 1,106 | 559 | 2,312 | ||||||||
Balance October 28, 2017 | $ | 839 | $ | (28,978 | ) | $ | 17 | $ | (28,122 | ) | ||
Balance January 30, 2016 | $ | (900 | ) | $ | (5,356 | ) | $ | 392 | $ | (5,864 | ) | |
Other comprehensive income (loss) before reclassifications | 961 | — | (789 | ) | 172 | |||||||
Reclassifications: | ||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | (1,432 | ) | 392 | (1,040 | ) | ||||||
Tax provision (benefit) | — | 567 | (145 | ) | 422 | |||||||
Net reclassifications | — | (865 | ) | 247 | (618 | ) | ||||||
Other comprehensive income (loss) | 961 | (865 | ) | (542 | ) | (446 | ) | |||||
Balance October 29, 2016 | $ | 61 | $ | (6,221 | ) | $ | (150 | ) | $ | (6,310 | ) |
(1) | Amounts reclassified are included in |
Note 12 Share-Based Compensation
The Company recognized share-based compensation expense of $2.6$2.9 million and $1.6$3.8 million during the thirteen weeks ended April 29, 2023 and $8.4 million and $6.0 million during the thirty-nine weeks ended October 28, 2017 and October 29, 2016,April 30, 2022, 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 zero and $0.4 million during the thirteen weeks and $0.1 million and $1.9 million during the thirty-nine weeks ended October 28, 2017 and October 29, 2016, respectively.
The Company had net issuances (repurchases) of 9,832558,847 and (22,233)512,508 shares of common stock during the thirteen weeks ended October 28, 2017April 29, 2023 and October 29, 2016,April 30, 2022, respectively, for restricted stock grants, stock performance awards issued to employees stock options exercised and common and restricted stock grants issued to non-employee directors, net of forfeitures and shares withheld to satisfy the minimum tax withholding requirement. During the thirty-nine weeks ended October 28, 2017 and October 29, 2016, the Company issued 251,718 and 158,592 shares
17
The following table summarizes restricted stock activity for the periods ended October 28, 2017April 29, 2023 and October 29, 2016:
Thirteen Weeks Ended | Thirteen Weeks Ended | |||||||||||||
October 28, 2017 | October 29, 2016 | |||||||||||||
Weighted- Average Grant Date Fair Value | Weighted- Average Grant Date Fair Value | |||||||||||||
Total Number of Restricted Shares | Total Number of Restricted Shares | |||||||||||||
July 29, 2017 | 1,194,326 | $ | 28.03 | July 30, 2016 | 1,139,299 | $ | 25.42 | |||||||
Granted | 25,000 | 27.13 | Granted | 6,500 | 25.18 | |||||||||
Forfeited | (19,050 | ) | 31.86 | Forfeited | (29,500 | ) | 24.87 | |||||||
Vested | (800 | ) | 22.90 | Vested | — | — | ||||||||
October 28, 2017 | 1,199,476 | $ | 27.95 | October 29, 2016 | 1,116,299 | $ | 25.43 | |||||||
Thirty-Nine Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||
October 28, 2017 | October 29, 2016 | |||||||||||||
Weighted- Average Grant Date Fair Value | Weighted- Average Grant Date Fair Value | |||||||||||||
Total Number of Restricted Shares | Total Number of Restricted Shares | |||||||||||||
January 28, 2017 | 1,128,049 | $ | 25.85 | January 30, 2016 | 1,262,449 | $ | 19.55 | |||||||
Granted | 381,312 | 26.92 | Granted | 357,100 | 26.54 | |||||||||
Forfeited | (49,050 | ) | 29.35 | Forfeited | (78,000 | ) | 23.67 | |||||||
Vested | (260,835 | ) | 17.09 | Vested | (425,250 | ) | 9.22 | |||||||
October 28, 2017 | 1,199,476 | $ | 27.95 | October 29, 2016 | 1,116,299 | $ | 25.43 |
| | | | | | | | | | | | |
| | Thirteen Weeks Ended | | | | Thirteen Weeks Ended | ||||||
| | April 29, 2023 | | | | April 30, 2022 | ||||||
| | | | | Weighted- | | | | | | | Weighted- |
| | Total Number | | | Average | | | | Total Number | | | Average |
| | of Restricted | | | Grant Date | | | | of Restricted | | | Grant Date |
|
| Shares |
| | Fair Value |
| |
| Shares |
| | Fair Value |
January 28, 2023 | | 1,603,960 | | $ | 18.57 | | January 29, 2022 | | 1,390,397 | | $ | 14.24 |
Granted | | 546,384 | | | 23.09 | | Granted | | 671,200 | | | 21.00 |
Forfeited | | (122,245) | | | 17.96 | | Forfeited | | (50,966) | | | 12.63 |
Vested |
| (420,504) |
| | 12.88 |
| Vested |
| (387,854) |
| | 12.48 |
April 29, 2023 |
| 1,607,595 | | $ | 21.64 | | April 30, 2022 |
| 1,622,777 | | $ | 17.51 |
Of the 546,384 restricted shares granted during the thirteen weeks ended October 28, 2017April 29, 2023, 533,584 shares have a cliff-vestinggraded vesting term of four years. Of the 381,312 restrictedthree years, with 50% vesting after two years and 50% after three years, 7,000 shares granted during the thirty-nine weeks ended October 28, 2017, 4,492have a graded vesting term of three years, with 50% vesting after eighteen months and 50% after three years, and 5,800 shares have a cliff-vesting term of one year, 12,000two years. The Company granted 671,200 restricted shares during the thirteen weeks ended April 30, 2022, which have a graded-vesting term of fourthree years, with 50% vesting after two years and 364,820 shares have a cliff-vesting term of four50% after three years. All of the restricted shares granted during the thirteen and thirty-nine weeks ended October 29, 2016 have a cliff-vesting term of four years. Share-based compensation expense for cliff-vesting grants is recognized on a straight-line basis over the respective vesting periods and expense for graded-vesting grants is recognized ratably over the vesting period.
Performance Share Awards
During the thirteen weeks ended October 28, 2017 and OctoberApril 29, 2016, the Company granted no performance share awards. During the thirty-nine weeks ended October 28, 2017 and October 29, 2016,2023, the Company granted performance share awards for a targeted 169,500 and 159,000276,434 shares, respectively, with a weighted-average grant date fair value of $26.90 and $26.64, respectively. Vesting of performance-based awards is dependent upon$23.12 in connection with the financial2023 performance ofaward (2023 – 2025 performance period). During the thirteen weeks ended April 30, 2022, the Company andgranted performance share awards for a targeted 87,750 shares, with a weighted-average grant date fair value of $20.99 in connection with the attainment of certain financial goals during the three-year period following the grant.2020 performance award (2020 – 2022 performance period). At the end of the vesting period, the employee will
During the first quarter of 2017,thirteen weeks ended April 30, 2022, the Company's remaining performance shareCompany granted long-term incentive awards granted in units vested and were settledpayable in cash at fair value. Refer to Note 13 tofor the 2022-2024 performance period, with a target value of $8.3 million and a maximum value of $16.6 million. This award, which vests after a three-year period, is dependent upon the attainment of certain financial goals of the Company for each of the three years and individual achievement of strategic initiatives over the cumulative period of the award. The estimated value of the award, which is reflected within other liabilities on the condensed consolidated financial statements for further discussion regardingbalance sheets, is being expensed ratably over the three-year performance share units.
Thirteen Weeks Ended | Thirteen Weeks Ended | |||||||||||||
October 28, 2017 | October 29, 2016 | |||||||||||||
Weighted- Average Grant Date Fair Value | Weighted- Average Grant Date Fair Value | |||||||||||||
Total Number of Stock Options | Total Number of Stock Options | |||||||||||||
July 29, 2017 | 92,042 | $ | 6.42 | July 30, 2016 | 222,790 | $ | 8.98 | |||||||
Granted | — | — | Granted | — | — | |||||||||
Exercised | (6,000 | ) | 6.41 | Exercised | — | — | ||||||||
Forfeited | — | — | Forfeited | (2,250 | ) | 15.94 | ||||||||
Expired | (1,000 | ) | 8.33 | Expired | (15,000 | ) | 9.82 | |||||||
October 28, 2017 | 85,042 | $ | 6.39 | October 29, 2016 | 205,540 | $ | 8.85 | |||||||
Thirty-Nine Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||
October 28, 2017 | October 29, 2016 | |||||||||||||
Weighted- Average Grant Date Fair Value | Weighted- Average Grant Date Fair Value | |||||||||||||
Total Number of Stock Options | Total Number of Stock Options | |||||||||||||
January 28, 2017 | 150,540 | $ | 9.36 | January 30, 2016 | 301,295 | $ | 8.95 | |||||||
Granted | — | — | Granted | — | — | |||||||||
Exercised | (17,250 | ) | 5.97 | Exercised | (56,381 | ) | 7.41 | |||||||
Forfeited | — | — | Forfeited | (9,749 | ) | 15.94 | ||||||||
Expired | (48,248 | ) | 15.79 | Expired | (29,625 | ) | 10.27 | |||||||
October 28, 2017 | 85,042 | $ | 6.39 | October 29, 2016 | 205,540 | $ | 8.85 |
Restricted Stock Units for Non-Employee Directors
Equity-based grants may be made to non-employee directors in the form of cash-equivalent restricted stock units ("RSUs"). payable in cash or common stock at no cost to the non-employee director. The RSUs are subject to a vesting requirement (usually one year) and earn dividend equivalents at the same rate as dividends on the Company'sCompany’s common stock. The dividend equivalents, which vest immediately, are automatically re-invested in additional RSUs. Expense related to the initial grant of RSUs is recognized ratably over the vesting period based upon the fair value of the RSUs. The RSUs payable in cash are remeasured at the end of each period. Expense for the dividend equivalents is recognized at fair value when the dividend equivalents are granted. Gains and losses resulting from changes in the fair value of the RSUs payable in cash subsequent to the vesting period and through the settlement date are recognized in the Company’s condensed consolidated statements of earnings. The Company granted 8381,423 and 1,0861,907 RSUs to non-employee directors for dividend equivalents, during the thirteen weeks ended October 28, 2017April 29, 2023 and October 29, 2016,April 30, 2022, respectively, with weighted-average grant date fair values of $30.68$21.47 and $24.98,$20.64, respectively. The Company granted 47,550
18
Note 13 Retirement and 55,250 RSUs, including 2,630 and 3,050 RSUs for dividend equivalents, during the thirty-nine weeks ended October 28, 2017 and October 29, 2016, respectively, with weighted-average grant date fair values of $27.86 and $21.78, respectively.
The following table sets forth the components of net periodic benefit income for the Company, including the domestic and Canadian plans:
Pension Benefits | Other Postretirement Benefits | |||||||||||
Thirteen Weeks Ended | Thirteen Weeks Ended | |||||||||||
($ thousands) | October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||
Service cost | $ | 2,426 | $ | 2,084 | $ | — | $ | — | ||||
Interest cost | 3,736 | 3,835 | 17 | 15 | ||||||||
Expected return on assets | (6,896 | ) | (7,237 | ) | — | — | ||||||
Amortization of: | ||||||||||||
Actuarial loss (gain) | 1,090 | 38 | (36 | ) | (55 | ) | ||||||
Prior service income | (439 | ) | (461 | ) | — | — | ||||||
Curtailment cost | 36 | — | — | — | ||||||||
Total net periodic benefit income | $ | (47 | ) | $ | (1,741 | ) | $ | (19 | ) | $ | (40 | ) |
Pension Benefits | Other Postretirement Benefits | |||||||||||
Thirty-nine Weeks Ended | Thirty-nine Weeks Ended | |||||||||||
($ thousands) | October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||
Service cost | $ | 7,276 | $ | 6,251 | $ | — | $ | — | ||||
Interest cost | 11,210 | 11,506 | 51 | 45 | ||||||||
Expected return on assets | (20,689 | ) | (21,712 | ) | — | — | ||||||
Amortization of: | ||||||||||||
Actuarial loss (gain) | 3,238 | 115 | (109 | ) | (165 | ) | ||||||
Prior service income | (1,335 | ) | (1,382 | ) | — | — | ||||||
Settlement cost | — | 250 | — | — | ||||||||
Curtailment cost | 36 | — | — | — | ||||||||
Total net periodic benefit income | $ | (264 | ) | $ | (4,972 | ) | $ | (58 | ) | $ | (120 | ) |
| | | | | | | | | | | | |
| | Pension Benefits |
| Other Postretirement Benefits | ||||||||
|
| Thirteen Weeks Ended | | Thirteen Weeks Ended | ||||||||
($ thousands) | | April 29, 2023 |
| April 30, 2022 |
| April 29, 2023 |
| April 30, 2022 | ||||
Service cost | | $ | 1,258 | | $ | 1,762 | | $ | — | | $ | — |
Interest cost | |
| 3,615 | |
| 2,971 | |
| 13 | |
| 10 |
Expected return on assets | |
| (6,075) | |
| (6,984) | |
| — | |
| — |
Amortization of: | |
| | |
|
| |
| | |
|
|
Actuarial loss (gain) | |
| 1,011 | |
| 681 | |
| (28) | |
| (25) |
Prior service income | |
| (28) | |
| (75) | |
| — | |
| — |
Total net periodic benefit income | | $ | (219) | | $ | (1,645) | | $ | (15) | | $ | (15) |
The non-service cost components of business, the Company’s financial resultsnet periodic benefit income are impacted by currency rate movementsincluded in foreign currency denominated assets, liabilities and cash flows as it makes a portion of its purchases and salesother income, net 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 financial 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.
(U.S. $ equivalent in thousands) | October 28, 2017 | October 29, 2016 | January 28, 2017 | ||||||
Financial Instruments | |||||||||
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars) | $ | 18,242 | $ | 17,229 | $ | 18,826 | |||
Euro | 18,815 | 10,854 | 13,297 | ||||||
Chinese yuan | 12,613 | 13,038 | 7,723 | ||||||
New Taiwanese dollars | 580 | 538 | 526 | ||||||
United Arab Emirates dirham | — | 1,143 | 823 | ||||||
Japanese yen | — | 1,145 | 769 | ||||||
Other currencies | — | 206 | 124 | ||||||
Total financial instruments | $ | 50,250 | $ | 44,153 | $ | 42,088 |
Asset Derivatives | Liability Derivatives | ||||||||
($ thousands) | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||
Foreign Exchange Forward Contracts | |||||||||
October 28, 2017 | Prepaid expenses and other current assets | $ | 760 | Other accrued expenses | $ | 564 | |||
October 29, 2016 | Prepaid expenses and other current assets | 362 | Other accrued expenses | 570 | |||||
January 28, 2017 | Prepaid expenses and other current assets | 234 | Other accrued expenses | 874 |
Thirteen Weeks Ended | Thirteen Weeks Ended | |||||||||||
($ thousands) | October 28, 2017 | October 29, 2016 | ||||||||||
Foreign Exchange Forward Contracts: Income Statement Classification (Losses) Gains - Realized | (Loss) Gain Recognized in OCL on Derivatives | Gain Reclassified from Accumulated OCL into Earnings | Gain (Loss) Recognized in OCL on Derivatives | Loss Reclassified from Accumulated OCL into Earnings | ||||||||
Net sales | $ | (4 | ) | $ | 6 | $ | 16 | $ | (55 | ) | ||
Cost of goods sold | (42 | ) | 3 | (181 | ) | (8 | ) | |||||
Selling and administrative expenses | 364 | 109 | (97 | ) | (15 | ) | ||||||
Interest expense | 6 | — | 5 | (1 | ) |
Thirty-Nine Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||
($ thousands) | October 28, 2017 | October 29, 2016 | ||||||||||
Foreign Exchange Forward Contracts: Income Statement Classification (Losses) Gains - Realized | (Loss) Gain Recognized in OCL on Derivatives | Gain (Loss) Reclassified from Accumulated OCL into Earnings | Loss Recognized in OCL on Derivatives | (Loss) Gain Reclassified from Accumulated OCL into Earnings | ||||||||
Net sales | $ | (44 | ) | $ | 30 | $ | (173 | ) | $ | (127 | ) | |
Cost of goods sold | 695 | 164 | (766 | ) | 109 | |||||||
Selling and administrative expenses | 480 | 42 | (121 | ) | (373 | ) | ||||||
Interest expense | (4 | ) | (1 | ) | (19 | ) | (1 | ) |
Note 13 to the condensed consolidated financial statements.
Fair Value Hierarchy
Fair value measurement 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 aspossible. The Company also considers counterparty credit 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.
Non-Qualified 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
19
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 equal to the number of shares of the Company’s common stock that 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 statements 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 bewere previously granted at no cost to non-employee directors. TheThese cash-equivalent 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 cash-equivalent 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 RSUs for non-employee directors is disclosed in Note 10 to the condensed consolidated financial statements.
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at October 28, 2017, OctoberApril 29, 20162023, April 30, 2022 and January 28, 2017. The Company did not have any transfers between Level 1, Level 2 or Level 3 during2023. During the thirty-ninethirteen weeks ended October 28, 2017April 29, 2023 and April 30, 2022, there were no transfers into or October 29, 2016.
Fair Value Measurements | |||||||||||||
($ thousands) | Total | Level 1 | Level 2 | Level 3 | |||||||||
Asset (Liability) | |||||||||||||
October 28, 2017: | |||||||||||||
Cash equivalents – money market funds | $ | 14,967 | $ | 14,967 | $ | — | $ | — | |||||
Non-qualified deferred compensation plan assets | 6,000 | 6,000 | — | — | |||||||||
Non-qualified deferred compensation plan liabilities | (6,000 | ) | (6,000 | ) | — | — | |||||||
Deferred compensation plan liabilities for non-employee directors | (2,350 | ) | (2,350 | ) | — | — | |||||||
Restricted stock units for non-employee directors | (10,118 | ) | (10,118 | ) | — | — | |||||||
Derivative financial instruments, net | 196 | — | 196 | — | |||||||||
October 29, 2016: | |||||||||||||
Cash equivalents – money market funds | $ | 152,700 | $ | 152,700 | $ | — | $ | — | |||||
Non-qualified deferred compensation plan assets | 4,747 | 4,747 | — | — | |||||||||
Non-qualified deferred compensation plan liabilities | (4,747 | ) | (4,747 | ) | — | — | |||||||
Deferred compensation plan liabilities for non-employee directors | (1,596 | ) | (1,596 | ) | — | — | |||||||
Restricted stock units for non-employee directors | (8,726 | ) | (8,726 | ) | — | — | |||||||
Performance share units | (2,446 | ) | (2,446 | ) | — | — | |||||||
Derivative financial instruments, net | (208 | ) | — | (208 | ) | — | |||||||
Secured convertible note | 7,227 | — | — | 7,227 | |||||||||
January 28, 2017: | |||||||||||||
Cash equivalents – money market funds | $ | 27,530 | $ | 27,530 | $ | — | $ | — | |||||
Non-qualified deferred compensation plan assets | 5,051 | 5,051 | — | — | |||||||||
Non-qualified deferred compensation plan liabilities | (5,051 | ) | (5,051 | ) | — | — | |||||||
Deferred compensation plan liabilities for non-employee directors | (1,909 | ) | (1,909 | ) | — | — | |||||||
Restricted stock units for non-employee directors | (9,390 | ) | (9,390 | ) | — | — | |||||||
Performance share units | (3,352 | ) | (3,352 | ) | — | — | |||||||
Derivative financial instruments, net | (640 | ) | — | (640 | ) | — |
| | | | | | | | | | | | |
|
| Fair Value Measurements | ||||||||||
($ thousands) |
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||
Asset (Liability) | | |
| | |
| | |
| | |
|
April 29, 2023: | | |
| | |
| | |
| | |
|
Non-qualified deferred compensation plan assets | | $ | 8,841 | | $ | 8,841 | | $ | — | | $ | — |
Non-qualified deferred compensation plan liabilities | |
| (8,841) | |
| (8,841) | |
| — | | | — |
Deferred compensation plan liabilities for non-employee directors | |
| (1,527) | |
| (1,527) | |
| — | | | — |
Restricted stock units for non-employee directors | |
| (1,846) | |
| (1,846) | |
| — | | | — |
April 30, 2022: | | |
| | |
| | |
| | |
|
Non-qualified deferred compensation plan assets | | | 7,567 | | | 7,567 | | | — | | | — |
Non-qualified deferred compensation plan liabilities | |
| (7,567) | |
| (7,567) | |
| — | | | — |
Deferred compensation plan liabilities for non-employee directors | |
| (1,765) | |
| (1,765) | |
| — | | | — |
Restricted stock units for non-employee directors | |
| (2,559) | |
| (2,559) | |
| — | | | — |
January 28, 2023: | | |
| | |
| | |
| | |
|
Non-qualified deferred compensation plan assets | |
| 7,890 | |
| 7,890 | |
| — | | | — |
Non-qualified deferred compensation plan liabilities | |
| (7,890) | |
| (7,890) | |
| — | | | — |
Deferred compensation plan liabilities for non-employee directors | |
| (1,662) | |
| (1,662) | |
| — | | | — |
Restricted stock units for non-employee directors | |
| (2,028) | |
| (2,028) | |
| — | | | — |
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,
20
such as estimated store sales and expenses, used for this nonrecurring fair value measurement are considered Level 3 inputs as defined by FASB ASC Topic 820, Fair Value Measurement. Long-lived assets held and used with a carrying amount of $115.8$559.5 million and $100.4$503.6 million at October 28, 2017April 29, 2023 and October 29, 2016,April 30, 2022, respectively, were assessed for indicators of impairment and written down to their fair value.impairment. This assessment resulted in the following impairment charges primarily for operating lease right-of-use assets, leasehold improvements and furniture and fixtures in the Company'sCompany’s retail stores, which were includedand in selling and administrative expenses for the respective periods.
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||
($ thousands) | October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||
Impairment Charges | ||||||||||||
Famous Footwear | $ | 150 | $ | 128 | $ | 450 | $ | 262 | ||||
Brand Portfolio | 726 | 248 | 2,545 | 651 | ||||||||
Total impairment charges | $ | 876 | $ | 376 | $ | 2,995 | $ | 913 |
| | | | | | |
| | Thirteen Weeks Ended | ||||
($ thousands) |
| April 29, 2023 |
| April 30, 2022 | ||
Long-Lived Asset Impairment Charges |
| |
|
| |
|
Famous Footwear | | $ | 39 | | $ | 370 |
Brand Portfolio | |
| — | |
| 1,407 |
Total long-lived asset impairment charges | | $ | 39 | | $ | 1,777 |
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 28, 2017 | October 29, 2016 | January 28, 2017 | |||||||||||||||||||||
Carrying | Fair | Carrying | Fair | Carrying | Fair | ||||||||||||||||||
($ thousands) | Value | Value | Value | Value | Value | Value | |||||||||||||||||
Borrowings under revolving credit agreement | $ | 20,000 | $ | 20,000 | $ | — | $ | — | $ | 110,000 | $ | 110,000 | |||||||||||
Long-term debt | 197,348 | 209,000 | 196,888 | 209,000 | 197,003 | 209,000 | |||||||||||||||||
Total debt | $ | 217,348 | $ | 229,000 | $ | 196,888 | $ | 209,000 | $ | 307,003 | $ | 319,000 |
Note 15 Income Taxes
The Company’s consolidated effective tax rate can vary considerably from period to period, depending on a number of factors. The Company’s consolidated effective tax rates were 29.6%23.5% and 33.6%25.7% for the thirteen weeks ended October 28, 2017April 29, 2023 and October 29, 2016,April 30, 2022, respectively. During the thirteen weeks ended October 28, 2017, the Company recognized discrete tax benefits of $0.9 million, reflecting greater deductibility of certain 2016 expenses than originally estimated. During the thirteen weeks ended October 29, 2016, the Company recognized a discrete tax benefit of $0.3 million, reflecting the settlement of a federal tax audit issue. If these discrete tax benefits had not been recognized during the thirteen weeks ended October 28, 2017 and October 29, 2016, the Company'sThe lower effective tax rates would have been 31.5% and 34.1%, respectively. Excluding the discrete tax items, the Company's tax rate is lower for the thirteen weeks ended October 28, 2017, reflecting a higher mix of international earnings in the Company's lowest tax rate jurisdictions.
As of excess tax benefits and deficiencies in the statement of earnings. Discrete tax benefits of $1.1 million were recognized during the thirty-nine weeks ended OctoberApril 29, 2016, reflecting the settlement of a federal tax audit issue. If these discrete tax benefits had not been recognized during the thirty-nine weeks ended October 28, 2017 and October 29, 2016, the Company's effective tax rates would2023, no deferred taxes have been 32.7% and 33.4%, respectively. Excludingprovided on the discreteaccumulated unremitted earnings of the Company’s foreign subsidiaries that are not subject to United States income tax, items,beyond the Company's tax rate is loweramounts recorded for the thirty-nine weeks ended October 28, 2017, reflecting a higher mixone-time transition tax for the mandatory deemed repatriation of cumulative international earnings, as required by the Tax Cuts and Jobs Act. The Company periodically evaluates its international investment opportunities and plans, as well as its international working capital needs, to determine the level of investment required and, accordingly, determines the level of international earnings in the Company's lowest tax rate jurisdictions.
Note 16 Commitments and free-standing stores in China. The Company, through its consolidated subsidiary, B&H Footwear, sold Naturalizer footwear on a wholesale basis to CBI totaling $1.3 million and $5.1 million for the thirteen and thirty-nine weeks ended October 29, 2016, respectively, with no corresponding sales during 2017.
Environmental Remediation
Prior operations included numerous manufacturing and other facilities for which the Company may have responsibility under various environmental laws for the remediation of conditions that may be identified in the future. The Company is involved in environmental remediation and ongoing compliance activities at several sites and has been notified that it is or may be a potentially responsible party at several other sites.
Redfield
The Company is remediating, under the oversight of Colorado authorities, the groundwater and indoor air at its owned facility in Colorado (the “Redfield site” or, when referring to remediation activities at or under the facility, the “on-site remediation”) and residential neighborhoods adjacent to and near the property (the “off-site remediation”) that have been affected by solvents previously used at the facility. The on-site remediation calls for the operation of a pump and treat system (which prevents migration of contaminated groundwater off the property) as the final remedy for the site, subject to monitoring and periodic review of the on-site conditions and other remedial technologies that may be developed in the future. In May 2016, the Company submitted a revised plan to address on-site conditions, including direct treatment of source areas, and received approval from the oversight authorities to begin implementing the revised plan.
21
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 work plan 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 work plan, 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. In 2014, the Company submitted a proposed expanded remedy work plan that was accepted by the oversight authorities during 2015. The Company continues to implement the expanded remedy work plan that was approved by the oversight authorities in 2015 and to work with the oversight authorities on the off-site work plan.
The cumulative expenditures for both on-site and off-site remediation through October 28, 2017April 29, 2023 were $29.7$33.4 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 28, 2017April 29, 2023 is $9.6 million, of which $8.7 million is recorded within other liabilities and $0.9 million is recorded within other accrued expenses. Of the total $9.6 million reserve, $4.6$4.8 million is for on-siteoff-site remediation and $5.0$4.8 million is for off-siteon-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 $14.1$13.2 million as of October 28, 2017.April 29, 2023. The Company expects to spend approximately $0.6 million in 2023, $0.1 million in each of the following fouryears $0.2 million in the fifth year and $13.5$12.2 million in the aggregate thereafter related to the on-site remediation.
Other
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 costsremediation plans in conjunction with its environmental consultants and records its best estimate of suchremediation 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.
22
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Business Overview
We are fullya global footwear company that operates retail stores and unconditionallye-commerce websites, and jointlydesigns, develops, sources, manufactures and severally guaranteeddistributes footwear for people of all ages. Our mission is to inspire people to feel great...feet first. We offer the consumer a diversified portfolio of leading footwear brands built on deep consumer insights, generating unwavering consumer loyalty and trust. As both a retailer and a wholesaler, we have a perspective on the marketplace that enables us to serve consumers from different vantage points. We believe our diversified business model provides us with synergies by allspanning consumer segments, categories and distribution channels. A combination of its existingthoughtful planning and future subsidiariesrigorous execution is key to our success in optimizing our business and portfolio of brands.
Known Trends Impacting Our Business
Macroeconomic Environment
Macroeconomic factors, including, among others, inflation, the rising interest rate environment, increasing real estate costs and higher consumer debt levels, continued to impact consumer discretionary spending and our financial results during the first quarter of 2023. We experienced a decline in consumer traffic in our retail stores during the first quarter of 2023, contributing to a decrease in our net sales. While we believe that are guarantors under our revolving credit facility ("Credit Agreement"). The following tables present the condensed consolidating financial information for each of Caleres, Inc. (“Parent”),structural changes we’ve implemented in 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. On December 13, 2016, Allen Edmonds was joined to the Credit Agreement as a guarantor. After giving effect to the joinder,last few years enables the Company is the lead borrower, and Sidney Rich Associates, Inc., BG Retail, LLC and Allen Edmonds are each co-borrowers and guarantors under the Credit Agreement.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET | |||||||||||||||
OCTOBER 28, 2017 | |||||||||||||||
Non- | |||||||||||||||
($ thousands) | Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||
Assets | |||||||||||||||
Current assets | |||||||||||||||
Cash and cash equivalents | $ | 8,155 | $ | 7,947 | $ | 15,277 | $ | — | $ | 31,379 | |||||
Receivables, net | 116,974 | 3,987 | 11,981 | — | 132,942 | ||||||||||
Inventories, net | 127,142 | 441,683 | 29,540 | — | 598,365 | ||||||||||
Prepaid expenses and other current assets | 20,642 | 17,872 | 7,263 | (4,795 | ) | 40,982 | |||||||||
Intercompany receivable – current | 1,597 | 123 | 20,677 | (22,397 | ) | — | |||||||||
Total current assets | 274,510 | 471,612 | 84,738 | (27,192 | ) | 803,668 | |||||||||
Other assets | 50,565 | 16,877 | 874 | — | 68,316 | ||||||||||
Goodwill and intangible assets, net | 111,665 | 40,937 | 187,580 | — | 340,182 | ||||||||||
Property and equipment, net | 32,684 | 169,604 | 12,694 | — | 214,982 | ||||||||||
Investment in subsidiaries | 1,288,128 | — | (23,180 | ) | (1,264,948 | ) | — | ||||||||
Intercompany receivable – noncurrent | 744,127 | 527,670 | 677,419 | (1,949,216 | ) | — | |||||||||
Total assets | $ | 2,501,679 | $ | 1,226,700 | $ | 940,125 | $ | (3,241,356 | ) | $ | 1,427,148 | ||||
Liabilities and Equity | |||||||||||||||
Current liabilities | |||||||||||||||
Borrowings under revolving credit agreement | $ | 20,000 | $ | — | $ | — | $ | — | $ | 20,000 | |||||
Trade accounts payable | 65,604 | 139,219 | 19,009 | — | 223,832 | ||||||||||
Other accrued expenses | 64,525 | 95,817 | 17,940 | (4,795 | ) | 173,487 | |||||||||
Intercompany payable – current | 12,833 | — | 9,564 | (22,397 | ) | — | |||||||||
Total current liabilities | 162,962 | 235,036 | 46,513 | (27,192 | ) | 417,319 | |||||||||
Other liabilities | |||||||||||||||
Long-term debt | 197,348 | — | — | — | 197,348 | ||||||||||
Other liabilities | 93,029 | 39,150 | 5,215 | — | 137,394 | ||||||||||
Intercompany payable – noncurrent | 1,374,695 | 121,683 | 452,838 | (1,949,216 | ) | — | |||||||||
Total other liabilities | 1,665,072 | 160,833 | 458,053 | (1,949,216 | ) | 334,742 | |||||||||
Equity | |||||||||||||||
Caleres, Inc. shareholders’ equity | 673,645 | 830,831 | 434,117 | (1,264,948 | ) | 673,645 | |||||||||
Noncontrolling interests | — | — | 1,442 | — | 1,442 | ||||||||||
Total equity | 673,645 | 830,831 | 435,559 | (1,264,948 | ) | 675,087 | |||||||||
Total liabilities and equity | $ | 2,501,679 | $ | 1,226,700 | $ | 940,125 | $ | (3,241,356 | ) | $ | 1,427,148 |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME | |||||||||||||||
FOR THE THIRTEEN WEEKS ENDED OCTOBER 28, 2017 | |||||||||||||||
Non- | |||||||||||||||
($ thousands) | Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||
Net sales | $ | 226,019 | $ | 541,007 | $ | 47,765 | $ | (40,135 | ) | $ | 774,656 | ||||
Cost of goods sold | 152,714 | 313,646 | 23,351 | (31,940 | ) | 457,771 | |||||||||
Gross profit | 73,305 | 227,361 | 24,414 | (8,195 | ) | 316,885 | |||||||||
Selling and administrative expenses | 59,335 | 197,481 | 15,394 | (8,195 | ) | 264,015 | |||||||||
Operating earnings | 13,970 | 29,880 | 9,020 | — | 52,870 | ||||||||||
Interest expense | (4,140 | ) | (1 | ) | — | — | (4,141 | ) | |||||||
Interest income | 47 | — | 48 | — | 95 | ||||||||||
Intercompany interest income (expense) | 1,981 | (2,003 | ) | 22 | — | — | |||||||||
Earnings before income taxes | 11,858 | 27,876 | 9,090 | — | 48,824 | ||||||||||
Income tax provision | (3,963 | ) | (9,479 | ) | (1,009 | ) | — | (14,451 | ) | ||||||
Equity in earnings (loss) of subsidiaries, net of tax | 26,492 | — | (457 | ) | (26,035 | ) | — | ||||||||
Net earnings | 34,387 | 18,397 | 7,624 | (26,035 | ) | 34,373 | |||||||||
Less: Net loss attributable to noncontrolling interests | — | — | (14 | ) | — | (14 | ) | ||||||||
Net earnings attributable to Caleres, Inc. | $ | 34,387 | $ | 18,397 | $ | 7,638 | $ | (26,035 | ) | $ | 34,387 | ||||
Comprehensive income | $ | 34,305 | $ | 18,397 | $ | 7,457 | $ | (25,857 | ) | $ | 34,302 | ||||
Less: Comprehensive loss attributable to noncontrolling interests | — | — | (3 | ) | — | (3 | ) | ||||||||
Comprehensive income attributable to Caleres, Inc. | $ | 34,305 | $ | 18,397 | $ | 7,460 | $ | (25,857 | ) | $ | 34,305 |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME | |||||||||||||||
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 28, 2017 | |||||||||||||||
Non- | |||||||||||||||
($ thousands) | Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||
Net sales | $ | 614,764 | $ | 1,451,191 | $ | 148,985 | $ | (131,821 | ) | $ | 2,083,119 | ||||
Cost of goods sold | 423,224 | 815,980 | 74,424 | (105,763 | ) | 1,207,865 | |||||||||
Gross profit | 191,540 | 635,211 | 74,561 | (26,058 | ) | 875,254 | |||||||||
Selling and administrative expenses | 172,122 | 570,272 | 45,254 | (26,058 | ) | 761,590 | |||||||||
Restructuring and other special charges, net | 3,769 | 37 | 167 | — | 3,973 | ||||||||||
Operating earnings | 15,649 | 64,902 | 29,140 | — | 109,691 | ||||||||||
Interest expense | (13,809 | ) | (13 | ) | — | — | (13,822 | ) | |||||||
Interest income | 220 | — | 372 | — | 592 | ||||||||||
Intercompany interest income (expense) | 6,085 | (6,516 | ) | 431 | — | — | |||||||||
Earnings before income taxes | 8,145 | 58,373 | 29,943 | — | 96,461 | ||||||||||
Income tax provision | (2,124 | ) | (21,407 | ) | (5,999 | ) | — | (29,530 | ) | ||||||
Equity in earnings (loss) of subsidiaries, net of tax | 60,863 | — | (1,234 | ) | (59,629 | ) | — | ||||||||
Net earnings | 66,884 | 36,966 | 22,710 | (59,629 | ) | 66,931 | |||||||||
Less: Net earnings attributable to noncontrolling interests | — | — | 47 | — | 47 | ||||||||||
Net earnings attributable to Caleres, Inc. | $ | 66,884 | $ | 36,966 | $ | 22,663 | $ | (59,629 | ) | $ | 66,884 | ||||
Comprehensive income | $ | 69,170 | $ | 36,966 | $ | 23,212 | $ | (60,105 | ) | $ | 69,243 | ||||
Less: Comprehensive income attributable to noncontrolling interests | — | — | 73 | — | 73 | ||||||||||
Comprehensive income attributable to Caleres, Inc. | $ | 69,170 | $ | 36,966 | $ | 23,139 | $ | (60,105 | ) | $ | 69,170 |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS | |||||||||||||||
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 28, 2017 | |||||||||||||||
Non- | |||||||||||||||
($ thousands) | Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||
Net cash (used for) provided by operating activities | $ | (13,179 | ) | $ | 97,443 | $ | 37,997 | $ | — | $ | 122,261 | ||||
Investing activities | |||||||||||||||
Purchases of property and equipment | (5,340 | ) | (25,377 | ) | (3,647 | ) | — | (34,364 | ) | ||||||
Capitalized software | (4,079 | ) | (452 | ) | — | — | (4,531 | ) | |||||||
Intercompany investing | (20,058 | ) | 197,763 | (177,705 | ) | — | — | ||||||||
Net cash (used for) provided by investing activities | (29,477 | ) | 171,934 | (181,352 | ) | — | (38,895 | ) | |||||||
Financing activities | |||||||||||||||
Borrowings under revolving credit agreement | 450,000 | — | — | — | 450,000 | ||||||||||
Repayments under revolving credit agreement | (540,000 | ) | — | — | — | (540,000 | ) | ||||||||
Dividends paid | (9,033 | ) | — | — | — | (9,033 | ) | ||||||||
Acquisition of treasury stock | (5,993 | ) | — | — | — | (5,993 | ) | ||||||||
Issuance of common stock under share-based plans, net | (2,477 | ) | — | — | — | (2,477 | ) | ||||||||
Intercompany financing | 134,315 | (270,459 | ) | 136,144 | — | — | |||||||||
Net cash provided by (used for) financing activities | 26,812 | (270,459 | ) | 136,144 | — | (107,503 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | 184 | — | 184 | ||||||||||
Decrease in cash and cash equivalents | (15,844 | ) | (1,082 | ) | (7,027 | ) | — | (23,953 | ) | ||||||
Cash and cash equivalents at beginning of period | 23,999 | 9,029 | 22,304 | — | 55,332 | ||||||||||
Cash and cash equivalents at end of period | $ | 8,155 | $ | 7,947 | $ | 15,277 | $ | — | $ | 31,379 |
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET | |||||||||||||||
OCTOBER 29, 2016 | |||||||||||||||
Non- | |||||||||||||||
($ thousands) | Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||
Assets | |||||||||||||||
Current assets | |||||||||||||||
Cash and cash equivalents | $ | 50,463 | $ | 5,897 | $ | 117,075 | $ | — | $ | 173,435 | |||||
Receivables, net | 123,345 | 856 | 15,274 | — | 139,475 | ||||||||||
Inventories, net | 114,180 | 387,688 | 22,955 | — | 524,823 | ||||||||||
Prepaid expenses and other current assets | 12,766 | 13,649 | 5,301 | — | 31,716 | ||||||||||
Intercompany receivable – current | 823 | 327 | 15,766 | (16,916 | ) | — | |||||||||
Total current assets | 301,577 | 408,417 | 176,371 | (16,916 | ) | 869,449 | |||||||||
Other assets | 92,895 | 14,106 | 7,850 | — | 114,851 | ||||||||||
Goodwill and intangible assets, net | 113,889 | 2,800 | 11,452 | — | 128,141 | ||||||||||
Property and equipment, net | 30,902 | 149,680 | 11,172 | — | 191,754 | ||||||||||
Investment in subsidiaries | 1,076,592 | — | (21,068 | ) | (1,055,524 | ) | — | ||||||||
Intercompany receivable – noncurrent | 485,403 | 384,452 | 573,308 | (1,443,163 | ) | — | |||||||||
Total assets | $ | 2,101,258 | $ | 959,455 | $ | 759,085 | $ | (2,515,603 | ) | $ | 1,304,195 | ||||
Liabilities and Equity | |||||||||||||||
Current liabilities | |||||||||||||||
Trade accounts payable | $ | 70,501 | $ | 123,003 | $ | 18,584 | $ | — | $ | 212,088 | |||||
Other accrued expenses | 48,614 | 75,797 | 17,475 | — | 141,886 | ||||||||||
Intercompany payable – current | 5,145 | — | 11,771 | (16,916 | ) | — | |||||||||
Total current liabilities | 124,260 | 198,800 | 47,830 | (16,916 | ) | 353,974 | |||||||||
Other liabilities | |||||||||||||||
Long-term debt | 196,888 | — | — | — | 196,888 | ||||||||||
Other liabilities | 34,463 | 68,146 | 3,661 | — | 106,270 | ||||||||||
Intercompany payable – noncurrent | 1,099,537 | 41,933 | 301,693 | (1,443,163 | ) | — | |||||||||
Total other liabilities | 1,330,888 | 110,079 | 305,354 | (1,443,163 | ) | 303,158 | |||||||||
Equity | |||||||||||||||
Caleres, Inc. shareholders’ equity | 646,110 | 650,576 | 404,948 | (1,055,524 | ) | 646,110 | |||||||||
Noncontrolling interests | — | — | 953 | — | 953 | ||||||||||
Total equity | 646,110 | 650,576 | 405,901 | (1,055,524 | ) | 647,063 | |||||||||
Total liabilities and equity | $ | 2,101,258 | $ | 959,455 | $ | 759,085 | $ | (2,515,603 | ) | $ | 1,304,195 |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME | |||||||||||||||
FOR THE THIRTEEN WEEKS ENDED OCTOBER 29, 2016 | |||||||||||||||
Non- | |||||||||||||||
($ thousands) | Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||
Net sales | $ | 235,094 | $ | 487,558 | $ | 48,055 | $ | (38,477 | ) | $ | 732,230 | ||||
Cost of goods sold | 162,629 | 281,926 | 25,669 | (31,765 | ) | 438,459 | |||||||||
Gross profit | 72,465 | 205,632 | 22,386 | (6,712 | ) | 293,771 | |||||||||
Selling and administrative expenses | 53,225 | 177,466 | 14,340 | (6,712 | ) | 238,319 | |||||||||
Operating earnings | 19,240 | 28,166 | 8,046 | — | 55,452 | ||||||||||
Interest expense | (3,472 | ) | (3 | ) | — | — | (3,475 | ) | |||||||
Interest income | 200 | — | 150 | — | 350 | ||||||||||
Intercompany interest income (expense) | 2,083 | (2,107 | ) | 24 | — | — | |||||||||
Earnings before income taxes | 18,051 | 26,056 | 8,220 | — | 52,327 | ||||||||||
Income tax provision | (6,193 | ) | (9,743 | ) | (1,665 | ) | — | (17,601 | ) | ||||||
Equity in earnings (loss) of subsidiaries, net of tax | 22,872 | — | (499 | ) | (22,373 | ) | — | ||||||||
Net earnings | 34,730 | 16,313 | 6,056 | (22,373 | ) | 34,726 | |||||||||
Less: Net loss attributable to noncontrolling interests | — | — | (4 | ) | — | (4 | ) | ||||||||
Net earnings attributable to Caleres, Inc. | $ | 34,730 | $ | 16,313 | $ | 6,060 | $ | (22,373 | ) | $ | 34,730 | ||||
Comprehensive income | $ | 33,816 | $ | 16,313 | $ | 5,661 | $ | (21,999 | ) | $ | 33,791 | ||||
Less: Comprehensive loss attributable to noncontrolling interests | — | — | (25 | ) | — | (25 | ) | ||||||||
Comprehensive income attributable to Caleres, Inc. | $ | 33,816 | $ | 16,313 | $ | 5,686 | $ | (21,999 | ) | $ | 33,816 |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME | |||||||||||||||
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 29, 2016 | |||||||||||||||
Non- | |||||||||||||||
($ thousands) | Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||
Net sales | $ | 617,177 | $ | 1,279,080 | $ | 156,649 | $ | (113,006 | ) | $ | 1,939,900 | ||||
Cost of goods sold | 434,833 | 707,584 | 87,688 | (91,324 | ) | 1,138,781 | |||||||||
Gross profit | 182,344 | 571,496 | 68,961 | (21,682 | ) | 801,119 | |||||||||
Selling and administrative expenses | 155,608 | 505,032 | 45,708 | (21,682 | ) | 684,666 | |||||||||
Operating earnings | 26,736 | 66,464 | 23,253 | — | 116,453 | ||||||||||
Interest expense | (10,561 | ) | (3 | ) | — | — | (10,564 | ) | |||||||
Interest income | 531 | — | 376 | — | 907 | ||||||||||
Intercompany interest income (expense) | 6,590 | (6,685 | ) | 95 | — | — | |||||||||
Earnings before income taxes | 23,296 | 59,776 | 23,724 | — | 106,796 | ||||||||||
Income tax provision | (7,369 | ) | (22,483 | ) | (4,662 | ) | — | (34,514 | ) | ||||||
Equity in earnings (loss) of subsidiaries, net of tax | 56,353 | — | (1,545 | ) | (54,808 | ) | — | ||||||||
Net earnings | 72,280 | 37,293 | 17,517 | (54,808 | ) | 72,282 | |||||||||
Less: Net earnings attributable to noncontrolling interests | — | — | 2 | — | 2 | ||||||||||
Net earnings attributable to Caleres, Inc. | $ | 72,280 | $ | 37,293 | $ | 17,515 | $ | (54,808 | ) | $ | 72,280 | ||||
Comprehensive income | $ | 71,871 | $ | 37,293 | $ | 17,692 | $ | (55,020 | ) | $ | 71,836 | ||||
Less: Comprehensive loss attributable to noncontrolling interests | — | — | (35 | ) | — | (35 | ) | ||||||||
Comprehensive income attributable to Caleres, Inc. | $ | 71,871 | $ | 37,293 | $ | 17,727 | $ | (55,020 | ) | $ | 71,871 |
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS | |||||||||||||||
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 29, 2016 | |||||||||||||||
Non- | |||||||||||||||
($ thousands) | Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||
Net cash provided by operating activities | $ | 23,770 | $ | 83,584 | $ | 29,649 | $ | — | $ | 137,003 | |||||
Investing activities | |||||||||||||||
Purchases of property and equipment | (2,748 | ) | (37,154 | ) | (3,117 | ) | — | (43,019 | ) | ||||||
Capitalized software | (3,859 | ) | (1,783 | ) | (30 | ) | — | (5,672 | ) | ||||||
Intercompany investing | (3,129 | ) | 3,129 | — | — | — | |||||||||
Net cash used for investing activities | (9,736 | ) | (35,808 | ) | (3,147 | ) | — | (48,691 | ) | ||||||
Financing activities | |||||||||||||||
Borrowings under revolving credit agreement | 103,000 | — | — | — | 103,000 | ||||||||||
Repayments under revolving credit agreement | (103,000 | ) | — | — | — | (103,000 | ) | ||||||||
Dividends paid | (9,094 | ) | — | — | — | (9,094 | ) | ||||||||
Acquisition of treasury stock | (23,139 | ) | — | — | — | (23,139 | ) | ||||||||
Issuance of common stock under share-based plans, net | (4,205 | ) | — | — | — | (4,205 | ) | ||||||||
Excess tax benefit related to share-based plans | 3,264 | — | — | — | 3,264 | ||||||||||
Intercompany financing | 38,603 | (41,879 | ) | 3,276 | — | — | |||||||||
Net cash provided by (used for) financing activities | 5,429 | (41,879 | ) | 3,276 | — | (33,174 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | 146 | — | 146 | ||||||||||
Increase in cash and cash equivalents | 19,463 | 5,897 | 29,924 | — | 55,284 | ||||||||||
Cash and cash equivalents at beginning of period | 31,000 | — | 87,151 | — | 118,151 | ||||||||||
Cash and cash equivalents at end of period | $ | 50,463 | $ | 5,897 | $ | 117,075 | $ | — | $ | 173,435 |
CONDENSED CONSOLIDATING BALANCE SHEET | |||||||||||||||
JANUARY 28, 2017 | |||||||||||||||
Non- | |||||||||||||||
($ thousands) | Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||
Assets | |||||||||||||||
Current assets | |||||||||||||||
Cash and cash equivalents | $ | 23,999 | $ | 9,029 | $ | 22,304 | $ | — | $ | 55,332 | |||||
Receivables, net | 118,746 | 5,414 | 28,961 | — | 153,121 | ||||||||||
Inventories, net | 150,098 | 410,867 | 24,799 | — | 585,764 | ||||||||||
Prepaid expenses and other current assets | 24,293 | 23,040 | 8,058 | (5,863 | ) | 49,528 | |||||||||
Intercompany receivable – current | 695 | 263 | 22,091 | (23,049 | ) | — | |||||||||
Total current assets | 317,831 | 448,613 | 106,213 | (28,912 | ) | 843,745 | |||||||||
Other assets | 51,181 | 16,567 | 826 | — | 68,574 | ||||||||||
Goodwill and intangible assets, net | 113,333 | 219,337 | 11,088 | — | 343,758 | ||||||||||
Property and equipment, net | 31,424 | 176,358 | 11,414 | — | 219,196 | ||||||||||
Investment in subsidiaries | 1,343,954 | — | (21,946 | ) | (1,322,008 | ) | — | ||||||||
Intercompany receivable – noncurrent | 568,541 | 366,902 | 581,624 | (1,517,067 | ) | — | |||||||||
Total assets | $ | 2,426,264 | $ | 1,227,777 | $ | 689,219 | $ | (2,867,987 | ) | $ | 1,475,273 | ||||
Liabilities and Equity | |||||||||||||||
Current liabilities | |||||||||||||||
Borrowings under revolving credit agreement | $ | 110,000 | $ | — | $ | — | $ | — | $ | 110,000 | |||||
Trade accounts payable | 116,783 | 112,434 | 37,153 | — | 266,370 | ||||||||||
Other accrued expenses | 74,941 | 65,228 | 16,919 | (5,863 | ) | 151,225 | |||||||||
Intercompany payable – current | 12,794 | — | 10,255 | (23,049 | ) | — | |||||||||
Total current liabilities | 314,518 | 177,662 | 64,327 | (28,912 | ) | 527,595 | |||||||||
Other liabilities | |||||||||||||||
Long-term debt | 197,003 | — | — | — | 197,003 | ||||||||||
Other liabilities | 91,683 | 40,507 | 3,999 | — | 136,189 | ||||||||||
Intercompany payable – noncurrent | 1,209,943 | 98,982 | 208,142 | (1,517,067 | ) | — | |||||||||
Total other liabilities | 1,498,629 | 139,489 | 212,141 | (1,517,067 | ) | 333,192 | |||||||||
Equity | |||||||||||||||
Caleres, Inc. shareholders’ equity | 613,117 | 910,626 | 411,382 | (1,322,008 | ) | 613,117 | |||||||||
Noncontrolling interests | — | — | 1,369 | — | 1,369 | ||||||||||
Total equity | 613,117 | 910,626 | 412,751 | (1,322,008 | ) | 614,486 | |||||||||
Total liabilities and equity | $ | 2,426,264 | $ | 1,227,777 | $ | 689,219 | $ | (2,867,987 | ) | $ | 1,475,273 |
Financial Highlights
Highlights of our stores were closed for a period of time. We estimate that the hurricanes negatively impacted our net sales for the third quarter of 2017 by approximately $4 million, with approximately a $3 million impact at our Famous Footwearconsolidated and segment and $1 million at our Brand Portfolio segment.results are as follows:
| | | | | | | | | | | |
| | Thirteen Weeks Ended | | | | | | ||||
($ millions, except per share amounts) | | April 29, 2023 |
| April 30, 2022 | | Change (1) | |||||
Consolidated net sales | | $662.7 | | | $735.1 | | | ($72.4) | | (9.8) | % |
Famous Footwear segment net sales | | $349.2 | | | $384.5 | | | ($35.3) | | (9.2) | % |
Famous Footwear comparable sales % change | | (8.5) | % | | (4.0) | % | | n/m | | n/m | |
Brand Portfolio segment net sales | | $325.5 | | | $365.7 | | | ($40.2) | | (11.0) | % |
Gross profit | | $302.7 | | | $327.0 | | | ($24.3) | | (7.4) | % |
Gross margin | | 45.7 | % | | 44.5 | % | | n/m | | 119 bps | |
Operating earnings | | $49.6 | | | $66.2 | | | ($16.6) | | (25.1) | % |
Diluted earnings per share | | $0.97 | | | $1.32 | | | ($0.35) | | (26.5) | % |
(1) | n/m – not meaningful |
Metrics Used in the third quarterEvaluation of 2017 across both segments, primarily reflectingOur Business
The following are a higher consolidated mix of retail versus wholesale sales and an improved mix of higher margin brands. In addition,few key metrics by which we continue to benefit fromevaluate our sourcing initiatives, which have lowered our cost of merchandise.
Comparable sales
The comparable sales metric is a metric commonly used in the retail industry is facing. We remain confident in our ability to drive results and believe we haveevaluate the right strategy, plan and people in place to consistently deliver.
CONSOLIDATED RESULTS | |||||||||||||||||||||||||||
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||||||||||||||
% of Net Sales | % of Net Sales | % of Net Sales | % of Net Sales | ||||||||||||||||||||||||
($ millions) | |||||||||||||||||||||||||||
Net sales | $ | 774.7 | 100.0 | % | $ | 732.2 | 100.0 | % | $ | 2,083.1 | 100.0 | % | $ | 1,939.9 | 100.0 | % | |||||||||||
Cost of goods sold | 457.8 | 59.1 | % | 438.4 | 59.9 | % | 1,207.8 | 58.0 | % | 1,138.8 | 58.7 | % | |||||||||||||||
Gross profit | 316.9 | 40.9 | % | 293.8 | 40.1 | % | 875.3 | 42.0 | % | 801.1 | 41.3 | % | |||||||||||||||
Selling and administrative expenses | 264.0 | 34.1 | % | 238.3 | 32.5 | % | 761.6 | 36.5 | % | 684.6 | 35.3 | % | |||||||||||||||
Restructuring and other special charges, net | — | — | % | — | — | % | 4.0 | 0.2 | % | — | — | % | |||||||||||||||
Operating earnings | 52.9 | 6.8 | % | 55.5 | 7.6 | % | 109.7 | 5.3 | % | 116.5 | 6.0 | % | |||||||||||||||
Interest expense | (4.2 | ) | (0.5 | )% | (3.5 | ) | (0.5 | )% | (13.8 | ) | (0.7 | )% | (10.6 | ) | (0.5 | )% | |||||||||||
Interest income | 0.1 | 0.0 | % | 0.3 | 0.0 | % | 0.6 | 0.0 | % | 0.9 | 0.0 | % | |||||||||||||||
Earnings before income taxes | 48.8 | 6.3 | % | 52.3 | 7.1 | % | 96.5 | 4.6 | % | 106.8 | 5.5 | % | |||||||||||||||
Income tax provision | (14.4 | ) | (1.9 | )% | (17.6 | ) | (2.4 | )% | (29.6 | ) | (1.4 | )% | (34.5 | ) | (1.8 | )% | |||||||||||
Net earnings | 34.4 | 4.4 | % | 34.7 | 4.7 | % | 66.9 | 3.2 | % | 72.3 | 3.7 | % | |||||||||||||||
Net (loss) earnings attributable to noncontrolling interests | (0.0) | (0.0 | %) | (0.0) | (0.0 | %) | 0.0 | 0.0 | % | 0.0 | 0.0 | % | |||||||||||||||
Net earnings attributable to Caleres, Inc. | $ | 34.4 | 4.4 | % | $ | 34.7 | 4.7 | % | $ | 66.9 | 3.2 | % | $ | 72.3 | 3.7 | % |
23
Sales per square foot
The sales per square foot metric is commonly used in the retail industry tocalculate the efficiency of sales based upon the square footage in a store. Management uses the sales per square foot metric as a measure of an individual store’s success to determine whether it is performing in line with expectations. The sales per square foot metric is calculated by dividing total retail store sales, excluding e-commerce sales and the retail operations of our joint venture in China, by the total square footage of the retail store base at the end of each month of the respective period.
Direct-to-consumer sales
Direct-to-consumer sales includes sales from our retail stores, our company-owned websites and sales through our customers’ websites that we fulfill on a drop-ship basis. While we take an omni-channel approach to reach consumers, we believe that our direct-to-consumer channels reinforce the image of our brands and strengthens our connection with the end consumer. In addition, direct-to-consumer sales generally result in a higher gross margin for the Company as compared to wholesale sales. As a result, management monitors trends in direct-to-consumer sales as a percentage of our Brand Portfolio segment and total consolidated net sales.
RESULTS OF OPERATIONS
Following are the consolidated results and the results by segment:
CONSOLIDATED RESULTS
| | | | | | | | | | | |
|
| Thirteen Weeks Ended | | ||||||||
|
| April 29, 2023 |
| April 30, 2022 |
| ||||||
| | | | | % of | | | | | % of | |
($ millions) |
|
| |
| Net Sales |
|
| |
| Net Sales |
|
Net sales | | $ | 662.7 |
| 100.0 | % | $ | 735.1 |
| 100.0 | % |
Cost of goods sold | |
| 360.0 |
| 54.3 | % |
| 408.1 |
| 55.5 | % |
Gross profit | |
| 302.7 |
| 45.7 | % |
| 327.0 |
| 44.5 | % |
Selling and administrative expenses | |
| 253.1 |
| 38.2 | % |
| 260.8 |
| 35.5 | % |
Operating earnings | |
| 49.6 |
| 7.5 | % |
| 66.2 |
| 9.0 | % |
Interest expense, net | |
| (5.6) |
| (0.8) | % |
| (2.3) |
| (0.3) | % |
Other income, net | |
| 1.5 |
| 0.2 | % |
| 3.4 |
| 0.5 | % |
Earnings before income taxes | |
| 45.5 |
| 6.9 | % |
| 67.3 |
| 9.2 | % |
Income tax provision | |
| (10.7) |
| (1.7) | % |
| (17.3) |
| (2.4) | % |
Net earnings | |
| 34.8 |
| 5.2 | % |
| 50.0 | | 6.8 | % |
Net earnings (loss) attributable to noncontrolling interests | |
| 0.1 |
| 0.0 | % |
| (0.5) |
| (0.1) | % |
Net earnings attributable to Caleres, Inc. | | $ | 34.7 |
| 5.2 | % | $ | 50.5 |
| 6.9 | % |
Net Sales
Net sales decreased $72.4 million, or 7.9%9.8%, to $316.9$662.7 million for the thirdfirst quarter of 2017,2023, compared to $293.8$735.1 million for the thirdfirst quarter of 2016, reflecting higher2022. Net sales volume,of our Brand Portfolio segment decreased $40.2 million, or 11.0% during the first quarter of 2023, compared to the first quarter of 2022. We experienced strong demand during the first quarter of 2022, as described above,our wholesale customers aggressively replenished their inventory levels following improvements to the supply chain delays that were experienced throughout 2021. For the first quarter of 2023, the challenging macroeconomic environment resulted in many of our wholesale customers more tightly managing inventory levels and an improved grossmoderating purchases, which contributed to the decrease in wholesale net sales compared to the prior year. In addition, while our fashion brands trended better, and casual and dress were our top performing categories, brands with a larger assortment of canvas sneakers experienced larger sales declines. Net sales for Famous Footwear decreased $35.3 million, or 9.2%, in the first quarter of 2023 compared to the first quarter of 2022, with comparable sales down 8.5%. Macroeconomic factors continued to impact consumer sentiment, resulting in declines in customer traffic in our retail stores, contributing to the net sales decrease. Due to the late arrival of warmer spring weather in certain parts of the country, we experienced a slower start to our sandal business this year. On a consolidated basis, our direct-to-consumer sales represented approximately 68% of total net sales for the first quarter of 2023, compared to 65% in the first quarter of 2022. We remain focused on maximizing the vertical opportunity between the Famous Footwear and Brand Portfolio segments, with LifeStride, Dr. Scholl’s and Naturalizer representing three of Famous Footwear’s top 15 best-selling footwear brands during the quarter.
Gross Profit
Gross profit rate.
24
have normalized. This increase was partially offset by amortizationa decline in gross margin in our Famous Footwear segment. Due to supply chain constraints and higher demand in 2021 and the first quarter of 2022, there were fewer product markdowns required and minimal clearance selling. In the inventory fair value adjustmentfirst quarter of 2023, our Famous Footwear segment experienced a higher mix of clearance product sold, in conjunctionline with the acquisition of Allen Edmonds of $4.9 million ($3.0 million on an after-tax basis, or $0.07 per diluted share). Retail and wholesale net sales were 70% and 30%, respectively, in the nine months ended October 28, 2017, compared to 68% and 32% in the nine months ended October 29, 2016.
We classify certain warehousing, distribution, sourcing and other inventory procurement costs in selling and administrative expenses. Accordingly, our gross profit and selling and administrative expense rates, as a percentage of net sales, may not be comparable to other companies.
Selling and Administrative Expenses
Selling and administrative expenses increased $25.7decreased $7.7 million, or 10.8%3.0%, to $264.0$253.1 million for the thirdfirst quarter of 2017,2023, compared to $238.3$260.8 million for the thirdfirst quarter of 2016, primarily2022. The decrease was driven by the recently acquired Allen Edmonds businesslower cash and stock-based incentive costs and lower warehouse costs, partially offset by higher anticipated payments under our cash-based incentive compensation plans.marketing expenses and retail facilities costs. As a percentage of net sales, selling and administrative expenses increased to 34.1%38.2% for the thirdfirst quarter of 20172023, from 32.5%35.5% for the thirdfirst quarter of 2016.
Operating Earnings
Operating earnings decreased $16.6 million or 11.2%, to $761.6$49.6 million for the nine months ended October 28, 2017,first quarter of 2023, compared to $684.6$66.2 million for the nine months ended October 29, 2016, driven byfirst quarter of 2022, reflecting the above named factors.factors described above. As a percentage of net sales, selling and administrative expenses increased to 36.5%operating earnings were 7.5% for the nine months ended October 28, 2017 from 35.3%first quarter of 2023, compared to 9.0% for the nine months ended October 29, 2016.
Interest Expense, Net
Interest expense, net increased $3.3 million, or 145.0%, to $5.6 million for the first quarter of $4.02023, compared to $2.3 million ($2.6 millionfor the first quarter of 2022, reflecting higher interest expense on an after-tax basis, or $0.06 per diluted share), primarily for professional fees and severancethe revolving credit facility attributable to higher interest rates, partially offset by slightly lower average borrowings. The interest on our revolving credit facility is based on a variable interest rate, which has resulted in higher interest expense were incurred in the nine months ended October 28, 2017 relatedcurrent rising interest rate environment. Our interest expense in 2023 will continue to be impacted by higher interest rates.
Other Income, Net
Other income, net decreased $1.9 million, or 56.4%, to $1.5 million for the men's business. No restructuring charges were incurred in the thirdfirst quarter of 2017 or during2023, compared to $3.4 million for the nine months ended October 29, 2016.first quarter of 2022, which reflects a reduction of certain components of net periodic benefit income associated with our pension plans. Refer to Note 513 to the condensed consolidated financial statements for additional information related to these charges.
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 29.6%23.5% for the thirdfirst quarter of 2017,2023, compared to 33.6%25.7% for the thirdfirst quarter of 2016. During2022. The lower effective tax rate for the thirdfirst quarter of 2017, we recognized2023 was driven by discrete tax benefits of $0.9approximately $0.6 million reflecting greater deductibility of certain 2016 expenses than originally estimated. During the third quarter of 2016, we recognized a discrete tax benefit of $0.3 million reflecting the settlement of a federal tax audit issue. If these discrete tax benefits had not been recognized during the third quarter of 2017 and 2016, our effective tax rates would have been 31.5% and 34.1%, respectively. Excluding the discrete tax items, our tax rate is lower in the current period, reflecting a higher mix of international earnings in our lowest tax rate jurisdictions.
Net Earnings Attributable to Caleres, Inc.
Net earnings attributable to Caleres, Inc. were $34.4 million and $66.9$34.7 million for the thirdfirst quarter and nine months ended October 28, 2017,of 2023, compared to net earnings of $34.7 million and $72.3$50.5 million for the thirdfirst quarter and nine months ended October 29, 2016,of 2022, as a result of the factors described above.
25
FAMOUS FOOTWEAR | |||||||||||||||||||||||
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||||||||||
% of Net Sales | % of Net Sales | % of Net Sales | % of Net Sales | ||||||||||||||||||||
($ millions, except sales per square foot) | |||||||||||||||||||||||
Operating Results | |||||||||||||||||||||||
Net sales | $ | 473.1 | 100.0 | % | $ | 467.8 | 100.0 | % | $ | 1,244.5 | 100.0 | % | $ | 1,222.5 | 100.0 | % | |||||||
Cost of goods sold | 275.0 | 58.1 | % | 273.1 | 58.4 | % | 695.4 | 55.9 | % | 681.7 | 55.8 | % | |||||||||||
Gross profit | 198.1 | 41.9 | % | 194.7 | 41.6 | % | 549.1 | 44.1 | % | 540.8 | 44.2 | % | |||||||||||
Selling and administrative expenses | 164.4 | 34.8 | % | 162.0 | 34.6 | % | 470.0 | 37.7 | % | 459.7 | 37.6 | % | |||||||||||
Operating earnings | $ | 33.7 | 7.1 | % | $ | 32.7 | 7.0 | % | $ | 79.1 | 6.4 | % | $ | 81.1 | 6.6 | % | |||||||
Key Metrics | |||||||||||||||||||||||
Same-store sales % change | 0.9 | % | 2.1 | % | 1.0 | % | 0.7 | % | |||||||||||||||
Same-store sales $ change | $ | 3.8 | $ | 9.3 | $ | 12.2 | $ | 8.7 | |||||||||||||||
Sales change from new and closed stores, net | $ | 1.0 | $ | 2.3 | $ | 9.6 | $ | 2.0 | |||||||||||||||
Impact of changes in Canadian exchange rate on sales | $ | 0.5 | $ | 0.0 | $ | 0.2 | $ | (0.3 | ) | ||||||||||||||
Sales per square foot, excluding e-commerce (thirteen and thirty-nine weeks ended) | $ | 64 | $ | 63 | $ | 169 | $ | 167 | |||||||||||||||
Sales per square foot, excluding e-commerce (trailing twelve months) | $ | 217 | $ | 216 | $ | 217 | $ | 216 | |||||||||||||||
Square footage (thousand sq. ft.) | 6,894 | 6,960 | 6,894 | 6,960 | |||||||||||||||||||
Stores opened | 12 | 16 | 33 | 37 | |||||||||||||||||||
Stores closed | (25 | ) | 9 | (46 | ) | 32 | |||||||||||||||||
Ending stores | 1,042 | 1,051 | 1,042 | 1,051 |
FAMOUS FOOTWEAR
| | | | | | | | | | | | |
| | Thirteen Weeks Ended | | |||||||||
| | April 29, 2023 |
| | April 30, 2022 |
| ||||||
($ millions, except sales per square foot) |
| | |
| % of Net Sales |
| | | |
| % of Net Sales |
|
Net sales | | $ | 349.2 | | 100.0 | % | | $ | 384.5 | | 100.0 | % |
Cost of goods sold | | | 190.1 | | 54.4 | % | | | 195.3 | | 50.8 | % |
Gross profit | | | 159.1 | | 45.6 | % | | $ | 189.2 | | 49.2 | % |
Selling and administrative expenses | | | 142.0 | | 40.7 | % | | | 139.5 | | 36.3 | % |
Operating earnings | | $ | 17.1 | | 4.9 | % | | $ | 49.7 | | 12.9 | % |
| | |
| |
| | | |
| |
| |
Key Metrics | | |
| |
| | | |
| |
| |
Comparable sales % change | | | (8.5) | % |
| | | | (4.0) | % |
| |
Comparable sales $ change | | $ | (31.8) | |
| | | $ | (15.6) | |
| |
Sales change from new and closed stores, net (1) | | $ | (3.0) | |
| | | $ | 2.0 | |
| |
Impact of changes in Canadian exchange rate on sales | | $ | (0.5) | |
| | | $ | (0.0) | |
| |
| | | | | | | | | | | | |
Sales per square foot, excluding e-commerce (thirteen weeks ended) | | $ | 54 | |
| | | $ | 57 | |
| |
Sales per square foot, excluding e-commerce (trailing twelve months) | | $ | 250 | |
| | | $ | 251 | |
| |
Square footage (thousand sq. ft.) | |
| 5,702 | |
| | | | 5,870 | |
| |
| |
| | |
| | | |
| |
| |
Stores opened | |
| 2 | |
| | | | — | |
| |
Stores closed | |
| 9 | |
| | | | 7 | |
| |
Ending stores | |
| 866 | |
| | | | 887 | |
| |
Net Sales
Net sales increased $5.3of $349.2 million in the first quarter of 2023 decreased $35.3 million, or 1.1%,9.2% compared to $473.1 million for the thirdfirst quarter of 2017,2022. Comparable sales decreased 8.5% compared to $467.8 million for the thirdfirst quarter of 2016. The increase was primarily driven by2022. A challenging macroeconomic environment led to sales declines in both our retail stores and e-commerce business. In addition, a 0.9% increaselate start to spring weather in same-store sales andmany parts of the country led to a strong back-to-school sellingsoft start to the sandal season. Our kids category, which is a key differentiator for Famous Footwear, experienced growth in e-commerce sales and reported improvement inoutperformed the online conversion rate, due in part to the successful implementationrest of our buy online, pick up in store initiative. The strong e-commerce sales were partially offset by a decline in customer traffic at our retail store locations, due in part tocategories as families prioritized purchases of children’s footwear. During the impact of Hurricanes Harvey and Irma. As discussed in the
Gross Profit
Gross profit decreased $30.1 million, or 1.8%15.9%, to $1,244.5$159.1 million for the nine months ended October 28, 2017,first quarter of 2023, compared to $1,222.5$189.2 million for the nine months ended October 29, 2016. The increase was primarily driven by a 1.0% increase in same-store sales and a net increase in sales from new and closed stores. Famous Footwear experienced solid growth in e-commerce sales, and reported improvement in both conversion rate and online customer traffic. However, the strong e-commerce sales were offset by a decline in customer traffic at our retail store locations.
Selling and Administrative Expenses
Selling and administrative expenses increased $2.4$2.5 million, or 1.5%1.8%, to $164.4$142.0 million for the thirdfirst quarter of 2017,2023, compared to $162.0$139.5 million for the thirdfirst quarter of 2016.2022. The increase was primarily driven by higher expenses related to cash-based incentive compensation and higherretail facilities costs. As a percentage of net sales, selling and administrative expenses increased to 34.8% for the third quarter of 2017, compared to 34.6% for the third quarter of 2016.
Operating Earnings
Operating earnings increased $1.0decreased $32.6 million or
26
BRAND PORTFOLIO
| | | | | | | | | | | |
| Thirteen Weeks Ended | | |||||||||
| April 29, 2023 |
| | April 30, 2022 |
| ||||||
| | | | % of | | | |
| | % of | |
($ millions, except sales per square foot) | | |
| Net Sales |
| | |
|
| Net Sales |
|
Net sales | $ | 325.5 | | 100.0 | % | | $ | 365.7 | | 100.0 | % |
Cost of goods sold | | 181.6 | | 55.8 | % | | | 226.4 | | 61.9 | % |
Gross profit | | 143.9 | | 44.2 | % | | | 139.3 | | 38.1 | % |
Selling and administrative expenses | | 101.2 | | 31.1 | % | | | 98.0 | | 26.8 | % |
Operating earnings | $ | 42.7 | | 13.1 | % | | $ | 41.3 | | 11.3 | % |
| |
| |
| | | |
| |
| |
Key Metrics | |
| |
| | | |
| |
| |
Direct-to-consumer (% of net sales) (1) | | 32 | % |
| | | | 26 | % |
| |
Change in wholesale net sales ($) | $ | (42.2) | |
| | | $ | 104.2 | |
| |
Change in retail net sales ($) | $ | 2.0 | |
| | | $ | 11.2 | |
| |
Unfilled order position at end of period | $ | 272.9 | |
| | | $ | 401.5 | |
| |
| |
| |
| | | |
| |
| |
Sales per square foot, excluding e-commerce (2) | $ | 280 | |
| | | $ | 269 | |
| |
Square footage (thousands sq. ft.) (2) | | 101 | |
| | | | 108 | |
| |
| |
| |
| | | | | |
| |
North America stores: | | | | | | | | | | | |
Stores opened | | 1 | |
| | | | — | |
| |
Stores closed | | 2 | |
| | | | 4 | |
| |
Ending stores - North America | | 62 | | | | | | 66 | | | |
Ending stores - China | | 31 | | | | | | 17 | | | |
Ending stores - Total Brand Portfolio | | 93 | |
| | | | 83 | |
| |
BRAND PORTFOLIO | |||||||||||||||||||||||
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||||||||||
% of Net Sales | % of Net Sales | % of Net Sales | % of Net Sales | ||||||||||||||||||||
($ millions, except sales per square foot) | |||||||||||||||||||||||
Operating Results | |||||||||||||||||||||||
Net sales | $ | 301.5 | 100.0 | % | $ | 264.4 | 100.0 | % | $ | 838.6 | 100.0 | % | $ | 717.4 | 100.0 | % | |||||||
Cost of goods sold | 182.7 | 60.6 | % | 165.3 | 62.5 | % | 512.4 | 61.1 | % | 457.1 | 63.7 | % | |||||||||||
Gross profit | 118.8 | 39.4 | % | 99.1 | 37.5 | % | 326.2 | 38.9 | % | 260.3 | 36.3 | % | |||||||||||
Selling and administrative expenses | 94.5 | 31.3 | % | 68.6 | 26.0 | % | 271.2 | 32.3 | % | 202.8 | 28.3 | % | |||||||||||
Restructuring and other special charges, net | — | — | % | — | — | % | 1.5 | 0.2 | % | — | — | % | |||||||||||
Operating earnings | $ | 24.3 | 8.1 | % | $ | 30.5 | 11.5 | % | $ | 53.5 | 6.4 | % | $ | 57.5 | 8.0 | % | |||||||
Key Metrics | |||||||||||||||||||||||
Wholesale/retail sales mix (%) (1) | 75%/25% | 86%/14% | 75%/25% | 86%/14% | |||||||||||||||||||
Change in wholesale net sales ($) (1) | $ | (0.6 | ) | $ | (8.9 | ) | $ | 7.7 | $ | (39.3 | ) | ||||||||||||
Unfilled order position at end of period (1) | $ | 302.4 | $ | 315.2 | |||||||||||||||||||
Same-store sales % change (2) | 2.4 | % | (5.4 | )% | 6.7 | % | (5.2 | )% | |||||||||||||||
Same-store sales $ change (2) | $ | 0.8 | $ | (1.8 | ) | $ | 5.8 | $ | (4.6 | ) | |||||||||||||
Sales change from new and closed stores, net (3) | $ | 36.3 | $ | 2.6 | $ | 107.4 | $ | 5.6 | |||||||||||||||
Impact of changes in Canadian exchange rate on retail sales | $ | 0.6 | $ | 0.0 | $ | 0.3 | $ | (1.0 | ) | ||||||||||||||
Sales per square foot, excluding e-commerce (thirteen and thirty-nine weeks ended) (2) | $ | 87 | $ | 84 | $ | 245 | $ | 236 | |||||||||||||||
Sales per square foot, excluding e-commerce (trailing twelve months) (2) | $ | 323 | $ | 316 | $ | 323 | $ | 316 | |||||||||||||||
Square footage (thousands sq. ft.) (3) | 403 | 306 | 403 | 306 | |||||||||||||||||||
Stores opened (3) | 3 | 2 | 11 | 7 | |||||||||||||||||||
Stores closed (3) | (6 | ) | 2 | (12 | ) | 5 | |||||||||||||||||
Ending stores (3) | 235 | 167 | 235 | 167 |
(1) | Direct-to-consumer includes sales of our retail stores and e-commerce sites and sales through our customers’ websites that we fulfill on a drop-ship basis. |
(2) | These metrics |
Net Sales
Net sales increased $37.1of $325.5 million or
Our unfilled order position for our wholesale sales decreased $128.6 million, or 32.0%, to $272.9 million at April 29, 2023, compared to 167 stores and total square footage of 0.3$401.5 million at the end of the third quarter of 2016. On a trailing twelve-month basis, sales per square foot, excluding e-commerce and sales fromApril 30, 2022. The decrease in our Allen Edmonds stores, increased 2.1% to $323 for the twelve months ended October 28, 2017,backlog order levels compared to $316 for the twelve months ended October 29, 2016.
Gross Profit
Gross profit increased $121.2$4.6 million, or 16.9%3.3%, to $838.6$143.9 million for the nine months ended October 28, 2017,first quarter of 2023, compared to $717.4$139.3 million for the nine months ended October 29, 2016, driven by $128.3 million in sales from our Allen Edmonds business and sales growth from our Sam Edelman and Vince brands, partially offset by lower sales from our Franco Sarto, Via Spiga and Dr. Scholl's brands. Our retail sales benefited from a net increase in sales from our acquisition of Allen Edmonds and an increase in same-store sales of 6.7%. During the nine months ended October 28, 2017, we opened 11 stores and closed 12 stores.
27
Selling and Administrative Expenses
Selling and administrative expenses increased $25.9$3.2 million, or 37.7%3.3%, to $94.5$101.2 million for the thirdfirst quarter of 2017,2023, compared to $68.6$98.0 million for the thirdfirst quarter of 2016,2022. The increase was primarily due to higher marketing expenses to drive sales growth and higher warehouse costs, associated with the recently acquired Allen Edmonds businesspartially offset by lower salary and additional costs associated with investments in our fulfillment program and distribution centers.benefits expenses. As a percentage of net sales, selling and administrative expenses increased to 31.3%31.1% for the thirdfirst quarter of 2017,2023, compared to 26.0%26.8% for the thirdfirst quarter of 2016.
Operating Earnings
Operating earnings increased $68.4 million, or 33.7%, to $271.2$42.7 million for the nine months ended October 28, 2017, compared to $202.8first quarter of 2023, from $41.3 million for the nine months ended October 29, 2016, driven by costs associated with the recently acquired Allen Edmonds business, an increase in anticipated payments under our cash-based incentive compensation plans and additional costs associated with investments in our fulfillment program and distribution centers. As a percentage of net sales, selling and administrative expenses increased to 32.3% for the nine months ended October 28, 2017, compared to 28.3% for the nine months ended October 29, 2016.
ELIMINATIONS AND OTHER
| | | | | | | | | | | | |
| Thirteen Weeks Ended | | ||||||||||
| April 29, 2023 |
| | | April 30, 2022 |
| ||||||
| | | | % of | | | | | | | % of | |
($ millions) | | |
| Net Sales |
| | | | |
| Net Sales |
|
Net sales | $ | (11.9) | | 100.0 | % | | | $ | (15.1) | | 100.0 | % |
Cost of goods sold | | (11.6) | | 97.5 | % | | | | (13.6) | | 89.8 | % |
Gross profit | | (0.3) | | 2.5 | % | | | | (1.5) | | 10.2 | % |
Selling and administrative expenses | | 9.8 | | (82.4) | % | | | | 23.3 | | (154.0) | % |
Operating loss | $ | (10.1) | | 84.9 | % | | | $ | (24.8) | | 164.2 | % |
The Eliminations and Other category includes the elimination of intersegment sales and profit, unallocated corporate administrative expenses, and other costs and recoveries. Costs
The net sales elimination of $5.2 million were incurred for the third quarter of 2017, compared to $7.7$11.9 million for the thirdfirst quarter of 2016,2023 is $3.2 million, or 21.1%, lower than the first quarter of 2022, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.
Selling and administrative expenses decreased $13.5 million, to $9.8 million in the first quarter of 2023, compared to $23.3 million for the first quarter of 2022. The decrease primarily reflectingreflects lower expenses related to our cash-basedcash and stock-based incentive compensation plans.
28
LIQUIDITY AND CAPITAL RESOURCES
Borrowings
($ millions) | October 28, 2017 | October 29, 2016 | January 28, 2017 | ||||||
Borrowings under revolving credit agreement | $ | 20.0 | $ | — | $ | 110.0 | |||
Long-term debt | 197.3 | 196.9 | 197.0 | ||||||
Total debt | $ | 217.3 | $ | 196.9 | $ | 307.0 |
Total debt obligations of $217.3$291.5 million at October 28, 2017 increased $20.4April 29, 2023 decreased $13.5 million, compared to $196.9from $305.0 million at October 29, 2016, primarily due to higher borrowings under our revolving credit agreement, which we used to fund the acquisition of Allen Edmonds in the fourth quarter of 2016. Total debt obligationsApril 30, 2022, and decreased $89.7$16.0 million, compared to $307.0from $307.5 million at January 28, 2017, as we paid down an incremental $90.0 million of our borrowings during the nine months ended October 28, 2017. Interest2023. Net interest expense for the thirdfirst quarter of 20172023 increased $0.7$3.3 million to $4.2$5.6 million, compared to $3.5$2.3 million for the thirdfirst quarter of 2016, and increased $3.2 million2022, due to $13.8 million for the nine months ended October 28, 2017, compared to $10.6 million for the nine months ended October 29, 2016. The increases were attributable to higher interest rates. This increase was partially offset by slightly lower average borrowings under our revolving credit agreement dueagreement. The interest on our revolving credit facility is based on a variable rate, which has resulted in higher interest expense in the current rising interest rate environment. Our interest expense in 2023 will continue to be adversely affected by the elevated interest rates.
Credit Agreement
As further discussed in Note 10 to the acquisition of Allen Edmonds incondensed consolidated financial statements, the fourth quarter of 2016. In addition, during the third quarter and nine months ended October 29, 2016, we capitalized interest of $0.4 million and $1.3 million, respectively, associated with the expansion and modernization of our Lebanon, Tennessee distribution center that was completed in the fourth quarter of 2016.
At October 28, 2017,April 29, 2023, we had $20.0$291.5 million in borrowings and $8.9$10.6 million in letters of credit outstanding under the Credit Agreement. Total borrowing availability was $514.0$197.9 million at October 28, 2017.April 29, 2023. We were in compliance with all covenants and restrictions under the Credit Agreement as of October 28, 2017.
Working Capital and Cash Flow
Thirty-nine Weeks Ended | |||||||||
($ millions) | October 28, 2017 | October 29, 2016 | Change | ||||||
Net cash provided by operating activities | $ | 122.2 | $ | 137.0 | $ | (14.8 | ) | ||
Net cash used for investing activities | (38.9 | ) | (48.7 | ) | 9.8 | ||||
Net cash used for financing activities | (107.5 | ) | (33.2 | ) | (74.3 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 0.2 | 0.2 | — | ||||||
(Decrease) increase in cash and cash equivalents | $ | (24.0 | ) | $ | 55.3 | $ | (79.3 | ) |
| | | | | | | | | | |
| | Thirteen Weeks Ended | | | | |||||
($ millions) |
| April 29, 2023 |
| April 30, 2022 |
| Change |
| |||
Net cash provided by operating activities | | $ | 37.5 | | $ | 19.7 | | $ | 17.8 | |
Net cash used for investing activities | | | (6.5) | | | (11.7) | | | 5.2 | |
Net cash used for financing activities | | | (28.5) | | | (4.4) | | | (24.1) | |
Effect of exchange rate changes on cash and cash equivalents | | | (0.0) | | | (0.0) | | | 0.0 | |
Increase in cash and cash equivalents | | $ | 2.5 | | $ | 3.6 | | $ | (1.1) | |
Reasons for the major variances in cash provided (used) in the table above are as follows:
Cash provided by operating activities was $14.8$17.8 million lowerhigher in the nine monthsthirteen weeks ended October 28, 2017April 29, 2023 as compared to the nine monthsthirteen weeks ended October 29, 2016,April 30, 2022, primarily reflecting the following factors:
● | A decrease in inventory during the thirteen weeks ended April 29, 2023, compared to an increase during the thirteen weeks ended April 30, 2022, due in part to lower in-transit inventory levels as the supply chain has normalized; and |
● | A smaller increase in accounts receivable during the thirteen weeks ended April 29, 2023 primarily attributable to lower wholesale sales, compared to the thirteen weeks ended April 30, 2022; partially offset by |
● | A smaller increase in net income taxes payable during the thirteen weeks ended April 29, 2023, compared to the thirteen weeks ended April 20, 2022; |
● | A smaller increase in trade accounts payable during the thirteen weeks ended April 29, 2023, reflecting lower inventory purchases compared to the thirteen weeks ended April 30, 2022, |
● | A larger decrease in accrued expenses and other liabilities during the thirteen weeks ended April 29, 2023, compared to the thirteen weeks ended April 30, 2022; and |
● | Lower net earnings in the thirteen weeks ended April 29, 2023, compared to the thirteen weeks ended April 30, 2022. |
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Cash used for investing activities was $9.8$5.2 million lower infor the nine monthsthirteen weeks ended October 28, 2017April 29, 2023 as compared to the nine monthsthirteen weeks ended October 29, 2016, primarily due toApril 30, 2022, reflecting lower purchases of property and equipment during the nine months ended October 28, 2017. During 2016, our capital expenditures included the expansion and modernization of our Lebanon, Tennessee distribution center, which was completed in the fourth quarter of 2016. For fiscal 2017,expenditures. In 2023, we expect our purchases of property and equipment and capitalized software of approximatelyto be between $55 million.
Cash used for financing activities was $74.3$24.1 million higher for the nine monthsthirteen weeks ended October 28, 2017April 29, 2023 as compared to the nine monthsthirteen weeks ended October 29, 2016, as we continueApril 30, 2022, primarily due to reduce the borrowings undernet repayments on our revolving credit agreement which funded our Allen Edmonds acquisition.of $16.0 million in the thirteen weeks ended April 29, 2023, compared to net borrowings of $15.0 million in the comparable period in 2022. In addition, we repurchased fewer sharesthe issuance of common stock under share-based plans was $6.4 million higher in the thirteen weeks ended April 29, 2023, compared to the thirteen weeks ended April 30, 2022. These increases were partially offset by $14.7 million of repurchases of our common stock under our stockshare repurchase programprograms during the nine monthsthirteen weeks ended October 28, 2017.
A summary of key financial data and ratios at the dates indicated is as follows:
| | | | | | | | | | |
| April 29, 2023 |
| April 30, 2022 | |
| January 28, 2023 |
| |||
Working capital ($ millions) (1) | $ | (58.4) | | $ | (136.2) | | | $ | (79.7) | |
Current ratio (2) | | 0.93:1 | | | 0.87:1 | | | | 0.91:1 | |
Debt-to-capital ratio (3) | | 39.2 | % | | 46.0 | % | | | 41.9 | % |
October 28, 2017 | October 29, 2016 | January 28, 2017 | |||||||
Working capital ($ millions) (1) | $ | 386.3 | $ | 515.5 | $ | 316.2 | |||
Current ratio (2) | 1.93:1 | 2.46:1 | 1.60:1 | ||||||
Debt-to-capital ratio (3) | 24.4 | % | 23.3 | % | 33.3 | % |
(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 |
Working capital at October 28, 2017April 29, 2023 was $386.3($58.4) million, which was $129.2$77.8 million lower and $70.1$21.3 million higher than at October 29, 2016April 30, 2022 and January 28, 2017,2023, respectively. Our current ratio was 1.93 to 1 as of October 28, 2017, compared to 2.46 to 1 at October 29, 2016 and 1.60 to 1 at January 28, 2017. The decrease in working capital and the current ratio from October 29, 2016 primarily reflects the impact of the Allen Edmonds acquisition in the fourth quarter of 2016, which was funded with borrowings under our revolving credit agreement. A significant portion of the Allen Edmonds purchase price was allocated to intangible assets, which are noncurrent, while the entire purchase price was funded using current liabilities. The increase in working capital from April 30, 2022 primarily reflects lower trade accounts payable and the current ratio from January 28, 2017 was primarily due to lower borrowings under our revolving credit agreement and lower payables,accrued expenses, partially offset by lower cashinventory. The increase in working capital from January 28, 2023 primarily reflects lower accrued expenses, partially offset by higher trade accounts payable. Our current ratio was 0.93:1 as of April 29, 2023, compared to 0.87:1 at April 30, 2022 and cash equivalents.0.91:1 at January 28, 2023. Our debt-to-capital ratio was 24.4%39.2% as of October 28, 2017,April 29, 2023, compared to 23.3%46.0% as of October 29, 2016April 30, 2022 and 33.3%41.9% at January 28, 2017. The increase in our debt-to-capital ratio from October 29, 2016 primarily reflects higher borrowings under our revolving credit agreement. The decrease in our debt-to-capital ratio from January 28, 2017 primarily reflects lower borrowings under our revolving credit agreement.
We declared and paid dividends of
We have various contractual or other obligations, primarily consist of purchase obligations, operating lease commitments, long-term debt, interest on long-term debt, minimum license commitments, financial instruments,including borrowings under our revolving credit agreement,facility, operating lease commitments, one-time transition tax for the mandatory deemed repatriation of cumulative foreign earnings and obligations for our supplemental executive retirement plan and other postretirement benefits and obligations.
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 on the Company’s critical accounting policies and estimates, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended January 28, 2017.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Recently issued accounting pronouncements, if any, and their impact on the Company are described in Note 2 to the condensed consolidated financial statements.
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.
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These risks include (i) inflationary pressures; (ii) supply chain disruptions; (iii) changing consumer demands, which may be influenced by consumers' disposable income, which in turn can be influenced by general economic conditions; (ii)conditions and other factors; (iv) rapidly changing fashion trendsconsumer preferences and purchasing patterns; (iii)patterns and fashion trends; (v) customer concentration and increased consolidation in the retail industry; (vi) intense competition within the footwear industry; (iv)(vii) foreign currency fluctuations; (viii) 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)(ix) cybersecurity threats or other major disruption to the Company’s information technology systems; (vii) transitional challenges with acquisitions; (viii) customer concentration(x) the ability to accurately forecast sales and increased consolidation in the retail industry; (ix)manage inventory levels; (xi) a disruption in the Company’s distribution centers; (x)(xii) the ability to recruit and retain senior management and other key associates; (xi) foreign currency fluctuations; (xii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; (xiii) the ability to secure/exit leases on favorable terms; (xiv) the ability to maintain relationships with current suppliers; (xv) transitional challenges with acquisitions and divestitures; (xvi) changes to tax laws, policies and treaties; (xvii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; and (xviii) the ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights; and (xvi) changes to tax laws, policies and treaties.rights. The Company'sCompany’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 28, 2017,2023, 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.
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'sCompany’s Annual Report on Form 10-K for the year ended January 28, 2017.
It is the Chief Executive Officer'sOfficer’s and Chief Financial Officer'sOfficer’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'sCommission’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 reviewsongoing monitoring 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
Based on the evaluation of internal control over financial reporting, the Chief Executive Officer and Chief Financial Officer have concluded that there have been no significant changes toin the Company’s internal controlcontrols over financial reporting during the quarter ended October 28, 2017April 29, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
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 16 to the condensed consolidated financial statements and incorporated by reference herein.
ITEM 1A RISK FACTORS
There have been no material changes that 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 28, 2017.
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 2017:
| | | | | | | | | |
| | | | | | | Total Number | | Maximum Number |
| | | | | | | Purchased as Part | | of Shares that May |
| | Total Number of | | | | | of Publicly | | Yet be Purchased |
| | Shares | | Average Price Paid | | Announced | | Under the | |
Fiscal Period |
| Purchased (1) |
| | per Share (1) |
| Program (2) |
| Program (2) |
January 29, 2023 - February 25, 2023 |
| — | | $ | — |
| — |
| 6,367,379 |
|
| | |
| |
| |
| |
February 26, 2023 - April 1, 2023 |
| 413,128 | |
| 24.22 |
| — |
| 6,367,379 |
|
|
| |
| |
|
|
|
|
April 2, 2023 - April 29, 2023 |
| — | |
| — |
| — |
| 6,367,379 |
Total |
| 413,128 | | $ | 24.22 |
| — |
| 6,367,379 |
Maximum Number of Shares that May Yet be Purchased Under the Program (2) | |||||||||||
Total Number Purchased as Part of Publicly Announced Program (2) | |||||||||||
Total Number of Shares Purchased (1) | Average Price Paid per Share (1) | ||||||||||
Fiscal Period | |||||||||||
July 30, 2017 – August 26, 2017 | — | $ | — | — | 1,223,500 | ||||||
August 27, 2017 – September 30, 2017 | 2,118 | 30.65 | — | 1,223,500 | |||||||
October 1, 2017 – October 28, 2017 | — | — | — | 1,223,500 | |||||||
Total | 2,118 | $ | 30.65 | — | 1,223,500 |
(1) |
(2) | On |
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ITEM 6 EXHIBITS