10-K 1 cal2016013010-k.htm 10-K 10-K


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
 
 
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended January 30, 2016
 
OR
¨
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 of incorporation or organization)
(IRS Employer Identification Number)
8300 Maryland Avenue
63105
St. Louis, Missouri
(Zip Code)
(Address of principal executive offices)
 

(314) 854-4000
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock — par value $0.01 per share
New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ    No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ¨    No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 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). Yes  þ     No ¨

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   þ

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
 
 
 
 
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨  
Smaller reporting company ¨  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ¨    No þ            

The aggregate market value of the stock held by non-affiliates of the registrant as of July 31, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $1,421.3 million.

As of February 26, 2016, 43,659,252 common shares were outstanding.

Documents Incorporated by Reference

Portions of the Proxy Statement for the 2016 Annual Meeting of Shareholders are incorporated by reference into Part III.




INTRODUCTION
This Annual Report on Form 10-K is a document that U.S. public companies file with the Securities and Exchange Commission ("SEC") on an annual basis. Part II of the Form 10-K contains the business information and financial statements that many companies include in the financial sections of their annual reports. The other sections of this Form 10-K include further information about our business that we believe will be of interest to investors. We hope investors will find it useful to have all of this information in a single document.

The SEC allows us to report information in the Form 10-K by “incorporating by reference” from another part of the Form 10-K or from the proxy statement. You will see that information is “incorporated by reference” in various parts of our Form 10-K. The proxy statement will be available on our website after it is filed with the SEC in April 2016.

Unless the context otherwise requires, “we,” “us,” “our,” “the Company” or “Caleres” refers to Caleres, Inc. and its subsidiaries.

Information in this Form 10-K is current as of March 29, 2016, unless otherwise specified.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS
In this report, and from time to time throughout the year, we share our expectations for the Company’s future performance. These forward-looking statements include statements about our business plans; the potential development, regulatory approval and public acceptance of our products; our expected financial performance, including sales performance, and the anticipated effect of our strategic actions; the anticipated benefits of acquisitions; the outcome of contingencies, such as litigation; domestic or international economic, political and market conditions; and other factors that could affect our future results of operations or financial position, including, without limitation, statements under the captions “Business,” “Legal Proceedings” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Any statements we make that are not matters of current disclosures or historical fact should be considered forward-looking. Such statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “will” and similar expressions. By their nature, these types of statements are uncertain and are not guarantees of our future performance.

Our forward-looking statements represent our estimates and expectations at the time that we make them. However, circumstances change constantly, often unpredictably, and investors should not place undue reliance on these statements. Many events beyond our control will determine whether our expectations will be realized. We disclaim any current intention or obligation to revise or update any forward-looking statements, or the factors that may affect their realization, whether in light of new information, future events or otherwise, and investors should not rely on us to do so. In the interests of our investors, and in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Part I. Item 1A. Risk Factors explains some of the important reasons that actual results may be materially different from those that we anticipate.





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INDEX
 

 
 
 
PART I
 
Page
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
 
 
 
PART II
 
   
Item 5
Item 6
Item 7
Item 7A
Item 8
 
 
 
 
 
 
 
 
 
 
Item 9
Item 9A
 
   Evaluation of Disclosure Controls and Procedures
 
Item 9B
 
 
 
PART III
 
   
Item 10
Item 11
Item 12
Item 13
Item 14
 
 
 
PART IV
 
   
Item 15
 
 
 






3



                                                                    
 

PART I

 
 
ITEM 1
BUSINESS
Caleres, Inc., originally founded as Brown Shoe Company, Inc. in 1878 and incorporated in 1913, is a global footwear retailer and wholesaler with annual net sales of $2.6 billion. In May 2015, the shareholders of Brown Shoe Company, Inc. approved a rebranding initiative that changed the name of the company to Caleres, Inc. (the "Company"). Current activities include the operation of retail shoe stores and e-commerce websites as well as the design, sourcing and marketing of footwear for women and men. Our business is seasonal in nature due to consumer spending patterns, with higher back-to-school and Christmas season sales. Traditionally, the third fiscal quarter accounts for a substantial portion of our earnings for the year.

During 2015, categories of our consolidated net sales were approximately 63% women’s footwear, 23% men’s footwear, 9% children’s footwear and 5% accessories. This composition has remained relatively constant over the past few years. Approximately 66% of footwear sales in 2015 were retail sales, including sales through our e-commerce websites, compared to 67% in 2014 and 70% in 2013, while the remaining 34%, 33% and 30% in the respective years represented wholesale sales.

Employees
We had approximately 11,000 full-time and part-time employees as of January 30, 2016. In the United States, there are no employees subject to union contracts. In Canada, we employ approximately 20 warehouse employees under a union contract, which expires in October 2016.

Competition
With many companies operating retail shoe stores and shoe departments, we compete in a highly fragmented market. Competitors include local, regional and national shoe store chains, department stores, discount stores, mass merchandisers, numerous independent retail operators of various sizes and e-commerce businesses. Quality of products and services, store location, trend-right merchandise selection and availability of brands, pricing, advertising and consumer service are all factors that impact retail competition.

In addition, our wholesale customers also sell shoes purchased from competing footwear suppliers. Those competing footwear suppliers own and license brands, many of which are well-known and marketed aggressively. Many retailers, who are our wholesale customers, source directly from factories or through agents. The wholesale footwear business has low barriers to entry, which further intensifies competition.

 
FAMOUS FOOTWEAR
Our Famous Footwear segment includes our Famous Footwear stores and Famous.com, and included our Shoes.com subsidiary prior to its sale in December 2014, as further discussed in Note 2 to the consolidated financial statements. Famous Footwear is one of America’s leading family-branded footwear retailers with 1,046 stores at the end of 2015 and net sales of $1.6 billion in 2015. Our core consumers are women who seek leading national brands of casual, athletic and fashionable footwear at a value for themselves and their families.

Famous Footwear stores feature a wide selection of brand-name athletic, casual and dress shoes for the entire family. Brands carried include, among others, Nike, Skechers, Converse, Vans, adidas, Sperry, New Balance, Asics, Bearpaw and Sof Sole, as well as company-owned and licensed brands including, among others, LifeStride, Dr. Scholl’s, Naturalizer, Fergalicious and Carlos by Carlos Santana. Our company-owned and licensed products are sold to our Famous Footwear segment by our Brand Portfolio segment at a profit and represent approximately 9% of the Famous Footwear segment's net sales. We work closely with our vendors to provide our consumers with fresh product and, in some cases, product exclusively designed for and available only in our stores. Famous Footwear’s average retail price is approximately $45 for footwear with retail price points typically ranging from $25 for shoes up to $210 for boots.

Famous Footwear stores are located in strip shopping centers as well as outlet and regional malls in all 50 states, Guam and Canada. The breakdown by venue at the end of each of the last three fiscal years is as follows:

4



 
 
2015

2014

2013

Strip centers
 
697

696

711

Outlet malls
 
189

183

172

Regional malls
 
160

159

161

Total
 
1,046

1,038

1,044


Stores open at the end of 2015 and 2014 averaged approximately 6,700 square feet. Total square footage at the end of 2015 decreased 0.1% to 6.9 million square feet compared to 7.0 million at the end of 2014. We expect to open approximately 55 new stores and close approximately 40 stores in 2016. New stores typically experience an initial start-up period characterized by lower sales and operating earnings than what is generally achieved by more mature stores. While the duration of this start-up period may vary by type of store, economic environment and geographic location, new stores typically reach a normal level of profitability within approximately four years.

Sales per square foot were $217 in 2015, up from $215 in 2014. Same-store sales increased 1.9% during 2015. Same-store sales changes are calculated by comparing the sales in stores that have been open at least 13 months. Relocated stores are treated as new stores and closed stores are excluded from the calculation. Sales change from new and closed stores, net, reflects the change in net sales due to stores that have been opened or closed during the period and are thereby excluded from the same-store sales calculation. E-commerce sales for those e-commerce websites that function as an extension of a retail chain are included in the same-store sales calculation. 

Famous Footwear relies on merchandise allocation systems and processes that use allocation criteria, consumer segmentation and inventory data in an effort to ensure stores are adequately stocked with product and to differentiate the needs of each store based on location, consumer segmentation and other factors. Famous Footwear’s distribution systems allow for merchandise to be delivered to each store weekly, or on a more frequent basis, as needed. Famous Footwear also uses regional third-party pooled distribution sites across the country. Famous Footwear’s in-store point-of-sale systems provide detailed sales transaction data to our corporate office for daily update and analysis in the perpetual inventory and merchandise allocation systems. Certain of these systems also are used for training employees and communication between the stores and the corporate office.

Famous Footwear’s marketing programs include digital marketing and social networking, national television, print, e-commerce advertising, cinema and in-store advertisements, all of which are designed to further develop and reinforce the Famous Footwear concept and strengthen our connection with consumers. We believe the success of our campaigns is attributable to highlighting key categories and tailoring the timing of such messaging to adapt to seasonal shopping patterns. In 2015, we spent approximately $52.6 million to advertise and market Famous Footwear to our target consumers, a portion of which was recovered from suppliers. Famous Footwear has a robust loyalty program (“Rewards”), which informs and rewards frequent consumers with product previews, earned incentives based upon purchase continuity and other periodic promotional offers. In 2015, approximately 74% of our Famous Footwear net sales were generated by our Rewards members compared to 73% in 2014. During the year, we expanded our efforts to connect with and engage our consumers to build a strong brand preference for Famous Footwear through both our loyalty program and social media. In 2015, we grew our mobile application and had more than 794,000 members enrolled by the end of the year. In 2016, we will continue to intensify our digital marketing presence to acquire and retain highly valuable consumers.

As part of our omni-channel approach to reach consumers, we also operate Famous.com. Famous.com offers an expanded product assortment beyond what is sold in Famous Footwear stores. Accessible via desktop, tablet and mobile devices, Famous.com helps consumers explore product assortments, including items available in local stores, and make direct-to-consumer purchases. During 2015, we reduced the average delivery time for direct-to-consumer purchases by expanding our in-store fulfillment initiative to approximately 900 stores. Famous.com also allows Rewards members to see their points status and purchase history, manage profile settings and engage further with the brand. Famous Footwear’s mobile app further serves as a hub for Rewards members to shop, find local stores, redeem Rewards certificates, and learn about the newest products, latest trends and hottest deals.

We are investing in our logistics network to meet the omni-channel demands of today, including faster order processing and faster delivery to our customers, as well as to prepare for ongoing growth in our business. The expansion and modernization projects at our distribution centers are intended to provide additional shipping flexibility, operational efficiencies and an expansion of our logistics infrastructure capacity. These projects are anticipated to be complete during the fall of 2016.

Until December 2014, we owned and operated Shoes.com, Inc., a pure-play Internet retailing company. Shoes.com offered a diverse selection of footwear and accessories for women, men and children, including footwear purchased from third-party suppliers and the Company's other brands. As further discussed in Note 2 to the consolidated financial statements, we sold Shoes.com in December 2014 and recognized a gain on sale of $4.7 million.

5




BRAND PORTFOLIO
Our Brand Portfolio segment offers retailers and consumers a portfolio of leading brands from our Healthy Living and Contemporary Fashion platforms by designing, sourcing and marketing branded footwear for women and men at a variety of price points. Certain of our branded footwear products are sold under brand names that are owned by the Company and others are developed pursuant to licensing agreements. Our Brand Portfolio segment sells footwear on a wholesale basis to retailers. The segment also sells footwear through our branded retail stores and e-commerce businesses.

Portfolio of Brands
The following is a listing of our principal brands and licensed products:

Healthy Living
Naturalizer:  Introduced in 1927, Naturalizer has become a global family of comfort lifestyle footwear brands meeting the needs of women across the marketplace with uncompromising comfort, fit and style. Our flagship Naturalizer brand is sold throughout the United States and Canada, primarily at Naturalizer retail stores, national chains, online retailers, department stores, catalog retailers and independent retailers. At the end of 2015, we operated 159 Naturalizer stores in the United States, Guam and Canada. Naturalizer footwear is also distributed through approximately 40 retail and wholesale partners in 57 countries around the world. In addition, Naturalizer footwear is distributed in China through stores operated by our joint venture partner, C. banner International Holdings Limited (“CBI”). CBI operated 94 stores at the end of 2015 and expects net store openings of approximately 10 stores in 2016. Through our majority-owned subsidiary, B&H Footwear Company Limited (“B&H Footwear”), we sell footwear to CBI on a wholesale basis, as further discussed in Note 16 to the consolidated financial statements. Suggested retail price points range from $79 for shoes to $209 for boots.

Dr. Scholl’s:  Dr. Scholl’s is an authentic brand of innovative footwear designed with an uncomplicated, playful style for a healthier life. Dr. Scholl’s delivers proprietary comfort technology across all distribution tiers. Dr. Scholl’s crafts unique styles that offer men and women the freedom to live active lives.  This footwear reaches consumers at a wide range of distribution channels: mass merchandisers, national chains, online and catalogs, specialty and independent retailers, department stores and our Famous Footwear retail stores.  Suggested price points range from $25 for shoes to $200 for boots.  We have a long-term license agreement with Bayer HealthCare, LLC to sell Dr. Scholl’s, which is renewable through December 2026 for the United States and Canada and December 2017 for Latin America.

LifeStride:  For more than 70 years, LifeStride has created quality footwear for women who value style and comfort. Offering work-to-weekend styles, LifeStride is both versatile and comfortable for all-day wear.  LifeStride offers comfortable footwear that dresses up or down at the right value.  The brand is sold in national chains, our Famous Footwear retail stores, online and department stores at suggested retail price points ranging from $45 for shoes to $100 for boots. 

Ryka: For over 25 years, Ryka has been innovating athletic footwear exclusively for women by providing women with more than just a downsized version of a men’s athletic shoe. The brand’s commitment goes beyond footwear design to include fitness and other apparel. The brand is distributed through department stores, national chains, online retailers and our Famous Footwear retail stores at suggested retail price points from $35 to $85.

Bzees: Bzees is the brand of women’s sporty footwear that energizes the mind and body from the feet up. Playful and versatile, Bzees delivers a weightless and energized feeling through its proprietary Cloud Technology system.  The brand is distributed through national chains, our retail stores, online retailers, department stores and Bzees.com at suggested retail price points from $59 to $129.

Contemporary Fashion
Sam Edelman: Since its inception in 2004, designer Sam Edelman’s brand has quickly emerged as a favorite among celebrities and fashionistas around the globe. Sam Edelman captures the imagination of women with on-trend styling and unique materials. Sam Edelman continues to expand its retail presence by opening additional stores. At the end of 2015, we operated six Sam Edelman stores in the United States, and expect to open six stores in 2016.  Sam Edelman footwear is sold primarily through department stores, independent retailers and online at suggested retail price points of $100 for shoes to $200 for boots.

Franco Sarto:  The Franco Sarto brand serves a loyal, career-focused consumer who is passionate about the brand’s modern Italian-inspired style, fit and quality. The brand is sold in major national chains, department stores and independent retailers at suggested retail price points from $79 for shoes to $275 for boots. We previously operated this brand under a license agreement which was to expire in 2019. In February 2014, we purchased the Franco Sarto trademarks for $65.0 million and terminated the license agreement, as further discussed in Note 9 to the consolidated financial statements.


6



Vince: The Vince women's shoe collection launched in the fall of 2012 and was expanded in 2014 to include the Vince men's footwear collection. Vince delivers contemporary casual footwear that sophisticated, modern women and men wear effortlessly, serving as a luxury staple in their shoe closet. The collection is distinguished by clean lines, rich fabrics and intricate details. The brand is primarily sold in premier department stores, online and independent retailers at suggested price points ranging from $225 for shoes to $495 for boots. We have a license agreement with Vince, LLC to sell Vince footwear that expires in December 2018.

Diane von Furstenberg: The Diane von Furstenberg (DVF) brand is a staple of American luxury design. The DVF collection exemplifies feminine, effortless and classic styles that are sold in more than 55 countries worldwide. Suggested price points range from $178 for shoes to $648 for boots. In December 2014, we entered into a license agreement with DVF Studio, LLC to produce and distribute the DVF women's shoe collection, which expires in December 2020, with an extension option through December 2023.

Via Spiga:  Via Spiga is named after the main street in one of the most famed shopping districts in Milan, Italy. For over 25 years, Via Spiga has maintained its rich Italian heritage through its use of luxurious materials and beautiful detailing, providing chic, sophisticated footwear for the cosmopolitan woman who wants to make a fashion statement every day. The brand is primarily sold in premier department stores, national chains and online at suggested retail price points from $150 for shoes to $595 for boots.

Fergie and Fergalicious by Fergie: We have created two namesake footwear lines in collaboration with entertainment superstar Fergie (Fergie Duhamel, formerly Stacy Ferguson) to fully capture the artist’s confident, individual style in a line of sophisticated, sexy footwear with a glam rock influence. The Fergie brand is currently being sold at department stores, boutiques, independent retailers and online at suggested retail price points of $70 for shoes to $225 for boots. Fergalicious by Fergie is available at Famous Footwear and other national chains at suggested retail price points of $45 for shoes to $100 for boots. We have a license agreement with Krystal Ball Productions to sell Fergie/Fergalicious footwear that expires in December 2016.

Carlos by Carlos Santana: The Carlos by Carlos Santana collection of women’s footwear is sold at major department stores, national chains, our Famous Footwear stores and online. Marketed under a license agreement with legendary musician Carlos Santana, this brand targets trend-conscious consumers with hot, fashionable shoes inspired by the passion and energy of Santana’s music. Suggested retail price points range from $80 for shoes to $225 for boots. We have a license agreement with Santana Tesoro, LLC to sell Carlos by Carlos Santana footwear that expires in December 2017 with extension options through December 2020.

George Brown: George Brown, the newest men's footwear brand in our portfolio, will debut in the fall of 2016.  The line takes inspiration from two key moments in George Brown’s legacy - the boots he built for the United States Army during World War I and his farming and hunting boots. The shoes are for the modern man who is now embracing the return of clean dressing. Suggested retail price points will range from $295 for shoes to $595 for boots, and will sell at traditional brick and mortar stores and online retailers as well as its own e-commerce site that is anticipated to launch in the summer of 2016.

Wholesale
Within our Brand Portfolio segment, footwear is distributed on a wholesale basis to over 1,700 retailers, including national chains, department stores, online retailers, mass merchandisers, independent retailers and catalogs throughout the United States and Canada, as well as approximately 65 other countries (including sales to our retail operations). Our most significant wholesale customers include Famous Footwear and many of the nation’s largest retailers including national chains such as DSW, TJX Corporation (including TJ Maxx and Marshalls), Nordstrom Rack and Ross; department stores such as Nordstrom, Macy’s, Bloomingdale's and Dillard's; online retailers such as Nordstrom.com, Zappos.com and Amazon; mass merchandisers such as Walmart and Target; and independent retailers such as QVC and Home Shopping Network. We also sell product to a variety of international retail customers and distributors. The loss of any one or more of our significant customers could have a material negative impact on our Brand Portfolio segment and the Company.

Our Brand Portfolio segment sold approximately 48 million pairs of shoes on a wholesale basis during 2015. We sell footwear to wholesale customers on both a landed and a first-cost basis. Landed sales are those in which we obtain title to the footwear from our overseas suppliers and maintain title until the footwear clears United States customs and is shipped to our wholesale customers. Landed sales generally carry a higher profit rate than first-cost 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. To allow for the prompt shipment on reorders, we carry inventories of certain styles. First-cost sales are those in which we obtain title to footwear from our overseas suppliers and typically relinquish title to customers at a designated overseas port. Many of these customers then import this product into the United States.


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Products sold under license agreements accounted for approximately 27%, 26% and 38% of the sales of the Brand Portfolio segment in 2015, 2014 and 2013, respectively. Caleres also receives royalty revenues for licensing owned brands, including certain brands listed above, to third parties.

Retail
Our Brand Portfolio segment also includes retail stores for certain brands, including Naturalizer and Sam Edelman. The number of our Brand Portfolio retail stores at the end of the last three fiscal years was as follows:
 
 
2015

 
2014

 
2013

Naturalizer
 
159

 
169

 
174

Sam Edelman
 
6

 
2

 
1

Dr. Scholl’s
 

 

 
4

Total
 
165

 
171

 
179


At the end of 2015, we operated 74 Naturalizer stores in the United States (including a store in Guam) and 85 Naturalizer stores in Canada. Of the 159 Naturalizer stores, approximately 50% are concept stores located in regional malls, with a couple stores located in strip centers, and average approximately 1,200 square feet in size. The other 50% of stores are located in outlet malls and average approximately 2,300 square feet in size. Total Naturalizer store square footage at the end of 2015 was 280,000 compared to 297,000 in 2014. During 2016, we expect to open one Naturalizer store and close five stores. At the end of 2015 we operated six Sam Edelman stores. During 2016, we plan to open six Sam Edelman stores, as we expand our retail presence for this brand. Our four Dr. Scholl’s stores were closed in 2014, as we shifted our brand focus toward wholesale distribution and e-commerce sales.

In connection with our omni-channel approach to reach consumers, we also operate Naturalizer.com, Naturalizer.ca, Ryka.com, DrSchollsShoes.com, LifeStride.com, ViaSpiga.com, SamEdelman.com, CarlosShoes.com, Bzees.com and FergieShoes.com, which offer substantially the same product selection to consumers as we sell to our retail partners. Vince.com and DVF.com complement our distribution of those brands, and we have plans to begin selling product on FrancoSarto.com in the second quarter of 2016.

References to our website addresses do not constitute incorporation by reference of the information contained on the websites and the information contained on the websites is not part of this report.

Marketing
We continue to build on the recognition of our portfolio of brands to create differentiation and consumer loyalty. Our marketing teams are responsible for the development and implementation of marketing programs for each brand, both for us and for our retail partners. In 2015, we spent approximately $24.1 million in advertising and marketing support for our Brand Portfolio segment, including print, trade shows, consumer media advertising, production, digital marketing and social media, public relations and in-store displays and fixtures. The marketing teams are also responsible for driving the development of branding and content for our brand websites. We continually focus on enhancing the effectiveness of these marketing efforts through market research, product development and marketing communications that collectively address the ever-changing lives and needs of our consumers. In 2015, the marketing teams were instrumental in the development and execution of new product launches, including branding, positioning and marketing to both the consumer and trade audiences. In 2016, we will continue to leverage relationships by strengthening business with our key customers and increase market share by targeting new growth areas.

Sourcing and Product Development Operations
Our sourcing and product development operations source and develop footwear for our Brand Portfolio segment and also a portion of the footwear sold by our Famous Footwear segment. We have sourcing and product development offices in China, Hong Kong, Vietnam, Italy, Macau, Ethiopia, St. Louis and New York.

Sourcing Operations
In 2015, the sourcing operations sourced approximately 47 million pairs of shoes through a global network of third-party independent footwear manufacturers. The majority of our footwear sourced is provided by approximately 60 manufacturers operating approximately 87 manufacturing facilities. In certain countries, we use agents to facilitate and manage the development, production and shipment of product. We attribute our ability to achieve consistent quality, competitive prices and on-time delivery to the breadth of these established relationships. While we generally do not have significant contractual commitments with our suppliers, we do enter into sourcing agreements with certain independent sourcing agents. Prior to production, we monitor the quality of all of our footwear components and also inspect the prototypes of each footwear style. We have a leading lab testing facility in our Putian, China office, and we also perform quality control checks during production and before any footwear leaves the manufacturing facilities.

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In 2015, approximately 76% of the footwear we sourced was from manufacturing facilities in China. The following table provides an overview of our foreign sourcing in 2015:
Country
Millions of Pairs

China
35.8

Vietnam
9.1

Ethiopia
0.8

Other
1.6

Total
47.3


Product Development Operations
In our Dongguan, China office, we operate a sample-making facility that allows us to have greater control over our product development in terms of accuracy, execution and time to market. We maintain design and product development teams for our brands in St. Louis, New York and China as well as other select fashion locations, including Italy. These teams, which include independent designers, are responsible for the creation and development of new product styles. Our designers monitor trends in fashion footwear and apparel and work closely with retailers to identify consumer footwear preferences. Our design teams create collections of footwear and work closely with our product development and sourcing offices to convert our designs into new footwear styles.

Our long-range plans include further expansion into new markets outside of China, developing more progressive processes to improve factory capacity and material planning, and continuing to understand ways to drive excellence in product value and execution in a continually evolving manufacturing landscape.

Backlog
At January 30, 2016, our Brand Portfolio segment had a backlog of unfilled wholesale orders of approximately $274.4 million compared to $284.6 million on January 31, 2015. Most orders are for delivery within the next 90 to 120 days, and although orders are subject to cancellation, we have not experienced significant cancellations in the past. The backlog at any particular time is affected by a number of factors, including seasonality, the continuing trend among customers to reduce the lead time on their orders, capacity shifts at foreign manufacturers and the volume of e-commerce drop ship orders that are received immediately rather than in advance. Accordingly, a comparison of backlog from period to period is not necessarily meaningful and may not be indicative of eventual actual shipments or the growth rate of sales from one period to the next.

 
AVAILABLE INFORMATION
Our Internet address is www.caleres.com. Our Internet address is included in this annual report on Form 10-K as an inactive textual reference only. The information contained on our website is not incorporated by reference into this annual report on Form 10-K and should not be considered part of this report. We file annual, quarterly and current reports, proxy statements and other information with the SEC. We make available free of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished, as required by Section 13(a) or 15(d) of the Securities Exchange Act of 1934, through our Internet website as soon as reasonably practicable after we electronically file such material with or furnish it to the SEC. You may access these SEC filings via the hyperlink to a third-party SEC filings website that we provide on our website.

 
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the names and ages of the executive officers of the Company and of the offices held by each person. There is no family relationship between any of the named persons. The terms of the following executive officers will expire in May 2016 or upon their respective successors being chosen and qualified.


9



 
 
 
 
 
 
Name
Age
Current Position
Diane M. Sullivan
60
Chief Executive Officer, President and Chairman of the Board of Directors
Richard M. Ausick
62
Division President – Famous Footwear
Daniel R. Friedman
55
Division President – Global Supply Chain
Kenneth H. Hannah
47
Senior Vice President and Chief Financial Officer
Douglas W. Koch
64
Senior Vice President and Chief Human Resources Officer
John W. Schmidt
55
Division President – Brand Portfolio
Mark A. Schmitt
52
Senior Vice President, Chief Information Officer, Logistics and Customer Care

The period of service of each officer in the positions listed and other business experience are set forth below.

Diane M. Sullivan, Chairman of the Board of Directors since February 2014. Chief Executive Officer and President since May 2011. President and Chief Operating Officer from March 2006 to May 2011. President from January 2004 to March 2006.

Richard M. Ausick, Division President – Famous Footwear since January 2010. Division President, Caleres Wholesale from July 2006 to January 2010. Senior Vice President and Chief Merchandising Officer of Famous Footwear from January 2002 to July 2006.

Daniel R. Friedman, Division President – Global Supply Chain since January 2010. Senior Vice President, Product Development and Sourcing from July 2006 to January 2010. Managing Director at Camuto Group, Inc. from 2002 to July 2006.

Kenneth H. Hannah, Senior Vice President and Chief Financial Officer since February 2015. Executive Vice President and Chief Financial Officer of JC Penney Company, Inc. from May 2012 to March 2014.  Executive Vice President and President–Solar Energy of MEMC Electronic Materials, Inc. and had previously served as Executive Vice President and President–Solar Materials from 2009 to 2012. Senior Vice President and Chief Financial Officer of MEMC Electronic Materials, Inc. from 2006 to 2009.

Douglas W. Koch, Senior Vice President and Chief Human Resources Officer since January 2016. Senior Vice President and Chief Talent and Strategy Officer from January 2011 to January 2016. Senior Vice President and Chief Talent Officer from May 2005 to January 2011. Senior Vice President, Human Resources from March 2002 to May 2005.

John W. Schmidt, Division President - Brand Portfolio since October 2015. Division President – Contemporary Fashion Brands from January 2011 to September 2015. Senior Vice President, Better and Image Brands from January 2010 to January 2011. Senior Vice President and General Manager, Better and Image Brands from March 2008 until January 2010. Various positions, including Vice President, President, Group President of Wholesale Footwear for Nine West Group from September 1998 to February 2008.

Mark A. Schmitt, Senior Vice President, Chief Information Officer, Logistics and Customer Care since February 2013. Senior Vice President and Chief Information Officer from January 2012 through February 2013. Senior Director of Management Information Systems for Express Scripts from 2010 through 2011. Various management information systems positions including Group Director with Anheuser-Busch InBev from 1996 to 2009.

 
 
ITEM 1A
RISK FACTORS
Consumer demand for our products may be adversely impacted by economic conditions and other factors.
Worldwide economic conditions continue to be uncertain. Consumer confidence and spending are strongly influenced by general economic conditions and other factors, including fiscal policy, changing tax and regulatory environment, interest rates, minimum wage rates, inflation, consumer debt levels, the availability of consumer credit, the liquidity of consumers’ assets, health care costs, currency exchange rates, taxation, energy costs, real estate values, foreclosure rates, unemployment trends, weather conditions, and the economic consequences of military action or terrorist activities. Negative economic conditions generally decrease disposable income and, consequently, consumer purchases of discretionary items like our products. Negative trends in economic conditions could also drive up the cost of our products, which may require us to increase our product prices. These increases in our product costs, and possibly prices, may not be offset by comparable increases in consumer disposable income. As a result, our customers may choose to purchase fewer of our products or purchase the lower-priced products of our competitors, and our business, results of operations, financial condition and cash flows could be adversely affected.


10



If we are unable to anticipate and respond to consumer preferences and fashion trends and successfully apply new technology, we may not be able to maintain or increase our net sales and earnings.
The footwear industry is subject to rapidly changing consumer demands and fashion trends. Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to rapid change. Accordingly, the success of both our wholesale and retail operations, including the expansion of our e-commerce business, depends largely on our ability to anticipate, understand and react to changing consumer demands and preferences. If we fail to successfully anticipate and respond to changes in consumer demand and fashion trends, develop new products and designs, and implement effective, responsive merchandising and marketing strategies and programs, we could experience lower sales, excess inventories and lower gross margins, any of which could have an adverse effect on our results of operations and financial condition.

We operate in a highly competitive industry.
Competition is intense in the footwear industry. Certain of our competitors are larger and have greater financial, marketing and technological resources than we do; others are able to offer footwear on a lateral basis alongside their apparel products; and others have successfully branded their trademarks as lifestyle brands, resulting in greater competitive advantages. Low barriers to entry into this industry further intensify competition by allowing new companies to easily enter the markets in which we compete. Some of our suppliers further compound these competitive pressures by allowing consumers to purchase their products directly through supplier-maintained Internet sites and retail stores. In addition, retailers aggressively compete on the basis of price, which puts competitive pressure on us to keep our prices low.

We believe that our ability to compete successfully in the footwear industry depends on a number of factors, including style, price, performance, quality, location and service, as well as the strength of our brand names. We remain competitive by increasing awareness of our brands, improving the efficiency of our supply chain and enhancing the style, comfort, fashion and perceived value of our products. However, our competitors may implement more effective marketing campaigns, adopt more aggressive pricing policies, make more attractive offers to potential employees, distribution partners and manufacturers, or respond more quickly to changes in consumer preferences than us. As a result, we may not be able to compete successfully in the future, and increased competition may result in price reductions, reduced gross margins, loss of market share and an inability to generate cash flows that are sufficient to maintain or expand the development and marketing of our products, which could adversely impact our financial results.

We rely on foreign sources of production, which subjects our business to risks associated with international trade.
We rely on foreign sourcing for our footwear products through third-party manufacturing facilities located outside the United States. As is common in the industry, we do not have any long-term contracts with our third-party foreign manufacturers. Foreign sourcing is subject to numerous risks, including trade relations, work stoppages, transportation delays (including delays at foreign and domestic ports) and costs (including customs duties, quotas, tariffs, anti-dumping duties, safeguard measures, cargo restrictions or other trade restrictions), political instability, foreign currency fluctuations, variable economic conditions, expropriation, nationalization, natural disasters, terrorist acts and military conflict and changes in governmental regulations (including the U.S. Foreign Corrupt Practices Act). At the same time, potential changes in manufacturing preferences, including, but not limited to the following, pose additional risk and uncertainty:

Manufacturing capacity may shift from footwear to other industries with manufacturing margins that are perceived to be higher.
Some footwear manufacturers may face labor shortages as workers seek better wages and working conditions in other industries and locations.

As a result of these risks, there can be no assurance that we will not experience reductions in available production capacity, increases in our manufacturing costs, late deliveries or terminations of our supplier relationships. Furthermore, these sourcing risks are compounded by the lack of diversification in the geographic location of our foreign sourcing and manufacturing. With the majority of our supply originating in China, a substantial portion of our supply could be at risk in the event of any significant negative development related to China.
Although we believe we could find alternative manufacturing sources for the products that we currently source from third-party manufacturing facilities in China or other countries, we may not be able to locate alternative manufacturers on terms as favorable as our current terms, including pricing, payment terms, manufacturing capacity, quality standards and lead times for delivery. In addition, there is substantial competition in the footwear industry for quality footwear manufacturers. Accordingly, our future results will partly depend on our ability to maintain positive working relationships with, and offer competitive terms to, our foreign manufacturers. If supply issues cause us to be unable to provide products consistent with our standards or manufacture our footwear in a cost and time efficient manner, our customers may cancel orders, refuse to accept deliveries or demand reductions in purchase prices, any of which could have a material adverse effect on our business and results of operations.
Our operating results depend on preparing accurate sales forecasts and properly managing our inventory levels.
Using sales forecasts, we place orders with manufacturers for some of our products prior to the time we receive all of our customers’ orders to minimize purchasing costs, the time necessary to fill customer orders and the risk of non-delivery. We also maintain an inventory of

11



certain products that we anticipate will be in greater demand. At the retail level, we place orders for product many months in advance of our key selling seasons. Adverse economic conditions and rapidly changing consumer preferences can make it difficult for us and our retail customers to accurately forecast product trends in order to match production with demand. If we fail to accurately assess consumer fashion tastes and the impact of economic factors on consumer spending or to effectively differentiate our retail and wholesale offerings, our inventory levels may exceed customer demand, resulting in inventory write-downs, higher carrying costs, lower gross margins or the sale of excess inventory at discounted prices, which could significantly impact our financial results. Conversely, if we underestimate consumer demand for our products or if our manufacturers fail to supply the quality products that we require in a timely manner, we may experience inventory shortages. Inventory shortages may delay shipments to customers (and possibly require us to offer discounts or costly expedited shipping), negatively impact retailer and distributor relationships, adversely impact our sales results and diminish brand awareness and loyalty.

A cybersecurity breach may adversely affect our sales and reputation.
We routinely possess sensitive consumer and associate information. We also provide certain customer and employee data to third parties for analysis, benefit distribution or compliance purposes. While we believe we have taken reasonable and appropriate steps to protect that information, hackers and data thieves operate sophisticated, large-scale attacks that could breach our information systems, despite ongoing security measures. In addition, we are required to comply with increasingly complex regulations designed to protect our business and personal data. Any breach of our network security, a third-party’s network security or failure to comply with applicable regulations may result in (a) the loss of valuable business data and/or our consumers’ or associates’ personal information, (b) increased costs associated with implementing additional protections and processes, (c) a disruption of our business and a loss of sales, (d) negative media attention, (e) damage to our consumer and associate relationships and reputation, and (f) fines or lawsuits.

We are reliant upon our information technology systems, and any major disruption of these systems could adversely impact our ability to effectively operate our business.
Our computer network and systems are essential to all aspects of our operations, including design, pricing, production, forecasting, ordering, manufacturing, transportation, sales and distribution. Our ability to manage and maintain our inventory and to deliver products in a timely manner depends on these systems. If any of these systems fails to operate as expected, we experience problems with transitioning to upgraded or replacement systems, a breach in security occurs or a natural disaster interrupts system functions, we may experience delays in product fulfillment and reduced efficiency in our operations or be required to expend significant capital to correct the problem, which may have an adverse effect on our results of operations and financial condition.

Customer concentration and other trends in customer behavior may lead to a reduction in or loss of sales.
Our wholesale customers include national chains, department stores, online retailers, mass merchandisers, independent retailers and catalogs. Several of our customers operate multiple department store divisions. Furthermore, we often sell multiple types of branded, licensed and private-label footwear to these same customers. While we believe purchasing decisions in many cases are made independently by the buyers and merchandisers of each of the customers, a decision by a significant customer to decrease the amount of footwear products purchased from us could have a material adverse effect on our business, financial condition or results of operations.

In addition, with the growing trend toward retail trade consolidation, we and our wholesale customers increasingly depend upon a reduced number of key retailers whose bargaining strength is growing. This consolidation may result in the following adverse consequences:

Our wholesale customers may seek more favorable terms for their purchases of our products, which could limit our ability to raise prices, recoup cost increases or achieve our profit goals.
The number of stores that carry our products could decline, thereby exposing us to a greater concentration of accounts receivable risk and negatively impacting our brand visibility.

We also face the following risks with respect to our customers:
Our customers could develop in-house brands or use a higher mix of private-label footwear products, which would negatively impact our sales.
As we sell our products to customers and extend credit based on an evaluation of each customer’s financial condition, the financial difficulties of a customer could cause us to stop doing business with that customer, reduce our business with that customer or be unable to collect from that customer.
Since we transact primarily in United States dollars, our international customers could purchase from competitors who will transact business in their local currency.
If any of our major wholesale customers experiences a significant downturn in its business or fails to remain committed to our products or brands, then these customers may reduce or discontinue purchases from us.

12



Retailers are directly sourcing more of their products directly from foreign manufacturers and reducing their reliance on wholesalers, which could have a material adverse effect on our business and results of operations.

A disruption in the effective functioning of our distribution centers could adversely affect our ability to deliver inventory on a timely basis.
We currently use several distribution centers, which are leased or third-party managed. These distribution centers serve as the source of replenishment of inventory for our footwear stores and e-commerce websites operated by our Famous Footwear and Brand Portfolio segments and serve the wholesale operations of our Brand Portfolio segment. We may be unable to successfully manage, negotiate or renew our third-party distribution center agreements, or we may experience complications with respect to our distribution centers, such as substantial damage to, or destruction of, such facilities due to natural disasters or ineffective information technology systems. In such an event, our other distribution centers may not be able to support the resulting additional distribution demands and we may be unable to locate alternative persons or entities capable of fulfilling our distribution needs, resulting in an adverse effect on our ability to deliver inventory on a timely basis.

Our success depends on our ability to retain senior management and recruit and retain other key associates.
Our success depends on our ability to attract, retain and motivate qualified management, administrative, product development and sales personnel to support existing operations and future growth. In addition, our ability to successfully integrate acquired businesses often depends on our ability to retain incumbent personnel, many of whom possess valuable institutional knowledge and operating experience. Competition for qualified personnel in the footwear industry is intense and we compete for these individuals with other companies that in many cases have superior financial and other resources. The loss of the services of any member of our senior management or key associates, the inability to attract and retain other qualified personnel or the inability to effectively transition positions could adversely affect the sales, design and production of our products as well as the implementation of our strategic initiatives.

Foreign currency fluctuations may result in higher costs and decreased gross profits.
Although we purchase most of our products from foreign manufacturers in United States dollars and otherwise engage in foreign currency hedging transactions, we cannot ensure that we will not experience cost variations with respect to exchange rate changes. Currency exchange rate fluctuations may also adversely impact third parties who manufacture the Company’s products by making their purchases of raw materials or other production costs more expensive and more difficult to finance, resulting in higher prices and lower margins for the Company, its distributors and licensees.

Our business, sales and brand value could be harmed by violations of labor, trade or other laws.
We focus on doing business with those suppliers who share our commitment to responsible business practices and the principles set forth in our Production Code of Conduct (the “PCOC”). By requiring our suppliers to comply with the PCOC, we encourage our suppliers to promote best practices and work toward continual improvement throughout their production operations. The PCOC sets forth standards for working conditions and other matters, including compliance with applicable labor practices, workplace environment and compliance with laws. Although we promote ethical business practices, we do not control our suppliers or their labor practices. A failure by any of our suppliers to adhere to these standards or laws could cause us to incur additional costs for our products, could cause negative publicity and harm our business and reputation. We also require our suppliers to meet our standards for product safety, including compliance with applicable laws and standards with respect to safety issues, including lead content in paint. Failure by any of our suppliers to adhere to product safety standards could lead to a product recall, which may result in critical media coverage, harm our business and reputation, and cause us to incur additional costs.

In addition, if we, or our suppliers or foreign manufacturers, violate United States or foreign trade laws or regulations, we may be subject to additional duties, significant monetary penalties, the seizure and forfeiture of the products we are attempting to import or the loss of our import privileges. Possible violations of United States or foreign laws or regulations could include inadequate record keeping of our imported products, misstatements or errors as to the origin, classification, marketing or valuation of our imported products, fraudulent visas or labor violations. The effects of these factors could render our conduct of business in a particular country undesirable or impractical and have a negative impact on our operating results.

Our retail business depends on our ability to secure affordable and desirable leased locations without creating a competitive concentration of stores.
The success of the retail business within our Famous Footwear and Brand Portfolio segments depends, in part, on our ability to secure affordable, long-term leases in desirable locations for our leased retail footwear stores and to secure renewals of such leases. No assurance can be given that we will be able to successfully negotiate lease renewals for existing stores or obtain acceptable terms for new stores in desirable locations. In addition, opening new Famous Footwear stores in our existing markets may result in reduced net sales in existing

13



stores as our stores become more concentrated in the markets we serve. As a result, the number of consumers and financial performance of individual stores may decline and the average sales per square foot at our stores may be reduced.

If we are unable to maintain working relationships with our major branded suppliers, our business, results of operations, financial condition and cash flows may be adversely impacted.
Our Famous Footwear segment purchases a substantial portion of its footwear products from major branded suppliers. Purchases from two major branded suppliers, Nike, Inc. and Skechers USA, Inc., collectively comprise approximately 23% and 13%, respectively, of sales for the Famous Footwear segment. As is common in the industry, we do not have any long-term contracts with our suppliers. In addition, the success of our financial performance is dependent on the ability of our Famous Footwear segment to obtain products from our suppliers on a timely basis and on acceptable terms. While we believe our relationships with our current suppliers are good, the loss of any of our major suppliers or product developed exclusively for our Famous Footwear stores could have a material adverse effect on our business, financial condition and results of operations. In addition, negative trends in global economic conditions may adversely impact our suppliers. If these third parties do not perform their obligations or are unable to provide us with the materials and services we need at prices and terms that are acceptable to us, our ability to meet our consumers’ demand could be adversely affected.

Our reputation and competitive position are dependent on our ability to license well-recognized brands, license our own brands under successful licensing arrangements and protect our intellectual property rights.
Licenses - Company as Licensee
Although we own most of our wholesale brands, we also rely on our ability to attract, retain and maintain good relationships with licensors that have strong, well-recognized brands and trademarks. Our license agreements are generally for an initial term of two to four years, subject to renewal, and there can be no assurance that we will be able to renew these licenses. Even our longer-term or renewable licenses are typically dependent upon our ability to market and sell the licensed products at specified levels, and the failure to meet such levels may result in the termination or non-renewal of such licenses. Furthermore, many of our license agreements require minimum royalty payments, and if we are unable to generate sufficient sales and profitability to cover these minimum royalty requirements, we may be required to make additional payments to the licensors that could have a material adverse effect on our business and results of operations. In addition, because certain of our license agreements are non-exclusive, new or existing competitors may obtain licenses with overlapping product or geographic terms, resulting in increased competition for a particular market.

Licenses - Company as Licensor
We have entered into numerous license agreements with respect to the brands and trademarks that we own. While we have significant control over our licensees’ products and advertising, we generally cannot control their operational and financial issues. If our licensees are not able to meet annual sales and royalty goals, obtain financing, manage their supply chain, control quality and maintain positive relationships with their customers, our business, results of operations and financial position may be adversely affected. While we would likely have the ability to terminate an underperforming license, it may be difficult and costly to locate an acceptable substitute distributor or licensee, and we may experience a disruption in our sales and brand visibility. In addition, although many of our license agreements prohibit the licensees from entering into licensing arrangements with certain of our competitors, they are generally not prohibited from offering, under other brands, the types of products covered by their license agreements with us.

Trademarks
We believe that our trademarks and trade names are important to our success and competitive position because our distinctive marks create a market for our products and distinguish our products from other products. We cannot, however, guarantee that we will be able to secure protection for our intellectual property in the future or that such protection will be adequate for future operations. Furthermore, we face the risk of ineffective protection of intellectual property rights in jurisdictions where we source and distribute our products, some of which do not protect intellectual property rights to the same extent as the United States. If we are unsuccessful in challenging a party’s products on the basis of infringement of our intellectual property rights, continued sales of these products could adversely affect our sales, devalue our brands and result in a shift in consumer preference away from our products. We may face significant expenses and liability in connection with the protection of our intellectual property rights, and if we are unable to successfully protect our rights or resolve intellectual property conflicts with others, our business or financial condition could be adversely affected.

Changes in tax laws, policies and treaties could result in higher taxes, lower profitability, and increased volatility in our financial results.
Our financial results are significantly impacted by our effective tax rates, for both domestic and international operations. Our effective income tax rate could be adversely affected by factors such as changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in permitted deductions, changes in tax laws, interpretations, policies and treaties, the outcome of income tax audits in various jurisdictions and any repatriation of earnings from our international operations. The occurrence of such events may result in higher taxes, lower profitability and increased volatility in our financial results.


14



Our quarterly sales and earnings may fluctuate, which may result in volatility in, or a decline in, our stock price.
Our quarterly sales and earnings can vary due to a number of factors, many of which are beyond our control, including the following:

Our Famous Footwear retail business is seasonally weighted to the back-to-school season, which falls in our third fiscal quarter. As a result, the success of our back-to-school offering, which is affected by our ability to anticipate consumer demand and fashion trends, could have a disproportionate impact on our full year results.
In our wholesale business, sales of footwear are dependent on orders from our major customers, and they may change delivery schedules, change the mix of products they order or cancel orders without penalty.
Our wholesale customers set the delivery schedule for shipments of our products, which could cause shifts of sales between quarters.
Our estimated annual tax rate is based on projections of our domestic and international operating results for the year, which we review and revise as necessary each quarter.
Our earnings are also sensitive to a number of factors that are beyond our control, including manufacturing and transportation costs, changes in product sales mix, geographic sales trends, weather conditions, consumer sentiment and currency exchange rate fluctuations.

As a result of these specific and other general factors, our operating results will vary from quarter to quarter and the results for any particular quarter may not be indicative of results for the full year. Any shortfall in sales or earnings from the levels expected by investors could cause a decrease in the trading price of our common stock.
Transitional challenges with business acquisitions or divestitures could result in the inability to achieve our strategic and operating goals.
Periodically, we pursue acquisitions of other companies or businesses and divestitures of businesses. In either case, we may not achieve our strategic and operating goals through such activity. For example, although we complete due diligence on acquisition candidates, the due diligence may not reveal all existing or potential problems. As a result, we may not accurately assess the value of the business and may, accordingly, ultimately assume unknown adverse operating conditions and/or unanticipated liabilities. In addition, the acquired business may not perform as well as expected. We face the risk that the returns on acquisitions will not support the expenditures or indebtedness incurred to acquire or launch such businesses. We also face the risk that we will not be able to integrate acquisitions into our existing operations effectively. Integration of new businesses may be hindered by, among other things, differing procedures, including internal controls, business practices and technology systems. We may need to allocate more management resources to integration than we planned, which may adversely affect our ability to pursue other profitable activities. In addition, divesting a business may impede progress toward strategic and operating goals. In connection with a divestiture, we may not successfully divest a business without substantial interruption, expense, delay or other operational or financial problems, which may adversely affect our financial condition and results of operations.

We are subject to periodic litigation and other regulatory proceedings, which could result in the unexpected expenditure of time and resources.
We are a defendant from time to time in lawsuits and regulatory actions (including environmental matters) relating to our business and to our past operations. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have a material adverse impact on our business, financial condition and results of operations. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are expensive and will require that we devote substantial resources and executive time to defend, thereby diverting management’s attention and resources that are needed to successfully run our business. See Item 3, Legal Proceedings, for further discussion of pending matters.

A significant portion of our Famous Footwear sales are dependent on our Famous Footwear loyalty program, Rewards, and any decrease in sales from Rewards could have a material adverse impact on our sales.
Rewards is a customer loyalty program that drives sales and traffic for the Famous Footwear segment. Rewards members earn points toward savings certificates for qualifying purchases. Upon reaching specified point values, members are issued a savings certificate, which they may redeem for purchases at Famous Footwear. Approximately 74% of our fiscal 2015 sales within the Famous Footwear segment were generated by our Rewards members. If our Rewards members do not continue to shop at Famous Footwear, our sales may be adversely affected.

Our business, results of operations, financial condition and cash flows could be adversely affected by the failure of financial institutions to fulfill their commitments under our Credit Agreement.
The First Amendment to our Fourth Amended and Restated Credit Agreement (the “Credit Agreement”), which matures on December 18, 2019, is provided by a syndicate of financial institutions, with each institution agreeing severally (and not jointly) to make revolving credit loans to us in an aggregate amount of up to $600.0 million in accordance with the terms of the Credit Agreement. In addition, the Credit Agreement provides for an increase at the Company's option by up to $150.0 million. If one or more of the financial institutions participating

15



in the Credit Agreement were to default on its obligation to fund its commitment, the portion of the facility provided by such defaulting financial institution might not be available to us.

If we are unable to maintain our credit rating, our ability to access capital and interest rates may be negatively impacted.
The credit rating agencies periodically review our capital structure and the quality and stability of our earnings. Any negative ratings actions could constrain the capital available to us or our industry and could limit our access to long-term funding or cause such access to be available at a higher borrowing cost for our operations. We are dependent upon our ability to access capital at rates and on terms we determine to be attractive. If our ability to access capital becomes constrained, our interest expense will likely increase, which could adversely affect our financial condition and results of operations.

 
 
ITEM 1B
UNRESOLVED STAFF COMMENTS
There are no unresolved written comments that were received from the SEC staff 180 days or more before the end of our fiscal year relating to our periodic or current reports under the Securities Exchange Act of 1934, as amended.


 
 
ITEM 2
PROPERTIES
We own our principal executive, sales and administrative offices located in Clayton (“St. Louis”), Missouri.

Our retail operations, included in both our Famous Footwear and Brand Portfolio segments, are conducted throughout the United States, Canada and Guam and involve the operation of 1,211 shoe stores, including 94 in Canada. All store locations are leased, with approximately 51% of them having renewal options. The footwear sold through our domestic wholesale business is processed through third-party facilities in either Chino, California or Clifton, New Jersey.

The following table summarizes the general location and use of the Company's primary properties:
Location
 
Owned/Leased
 
Segment
 
Use
 
 
 
 
 
 
 
Clayton, Missouri
 
Owned
 
Famous Footwear, Brand Portfolio and
Other
 
Principal executive, sales and administrative offices
United States, Canada and Guam
 
Leased
 
Famous Footwear and Brand Portfolio
 
Retail operations
Lebanon, Tennessee (1)
 
Leased
 
Famous Footwear
 
Distribution center
Bakersfield, California (2)
 
Leased
 
Famous Footwear
 
Distribution center
New York, New York
 
Leased
 
Brand Portfolio
 
Office space and showrooms
Bentonville, Arkansas
 
Leased
 
Brand Portfolio
 
Showrooms
Dallas, Texas
 
Leased
 
Brand Portfolio
 
Showrooms
Perth, Ontario
 
Owned
 
Brand Portfolio
 
Primary Canadian operations
Laval, Quebec
 
Leased
 
Brand Portfolio
 
Office space
China, Hong Kong, Vietnam, Ethiopia and Italy
 
Leased
 
Brand Portfolio
 
Office space
Dongguan, China
 
Leased
 
Brand Portfolio
 
Sample-making facility
(1)
This distribution center is approximately 540,000 square feet, up 210,000 square feet from 2014 due to the expansion and modernization of our distribution center.
(2)
This distribution center is approximately 350,000 square feet.

We also own a building in Denver, Colorado, which is leased to a third party; and undeveloped land in Colorado and New York. See Item 3, Legal Proceedings, for further discussion of certain of these properties.

 
 
ITEM 3
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 business proceedings and litigation currently pending will not have a material adverse effect on our results of operations or financial position.

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Our prior operations included numerous manufacturing and other facilities for which we may have responsibility under various environmental laws to address conditions that may be identified in the future. We are involved in environmental remediation and ongoing compliance activities at several sites and have been notified that we are or may be a potentially responsible party at several other sites. We are remediating, under the oversight of Colorado authorities, contamination at and beneath our owned facility in Colorado (also known as the “Redfield” site) and groundwater and indoor air in residential neighborhoods adjacent to and near the property, which have been affected by solvents previously used at the site and surrounding facilities.

During 2014, we signed a settlement agreement to resolve a putative class action lawsuit involving wage and hour claims in California for an amount not to exceed $1.5 million. In 2015, the court granted final approval of the settlement, pursuant to which the Company was required to pay $1.0 million in attorneys' fees, costs of administering the settlement and settlement payments to class members who submitted claims. All payments required under the settlement agreement were made in the fourth quarter of 2015 and this matter is fully resolved.

Refer to Note 17 to the consolidated financial statements for additional information related to the Redfield matter and other legal proceedings.

 
 
ITEM 4
MINE SAFETY DISCLOSURES
Not applicable.

 
PART II

 
 
ITEM 5
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the New York Stock Exchange (“NYSE”) under the trading symbol “CAL.” As of January 30, 2016, we had approximately 3,807 shareholders of record. The following table sets forth the high and low sales prices per share of our common stock as reported on the NYSE and the dividends paid per share for each fiscal quarter during 2015 and 2014.


 
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
2014
 
 
 
 
 
Dividend

 
 
 
 
 
Dividend

 
Low

 
High

 
Paid

 
Low

 
High

 
Paid

1st Quarter
$
27.22

 
$
33.33

 
$
0.07

 
$
22.30

 
$
28.73

 
$
0.07

2nd Quarter
28.91

 
33.83

 
0.07

 
23.14

 
29.65

 
0.07

3rd Quarter
27.90

 
33.73

 
0.07

 
25.30

 
32.31

 
0.07

4th Quarter
23.22

 
31.75

 
0.07

 
26.39

 
33.67

 
0.07


Restrictions on the Payment of Dividends
The First Amendment to our Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) and the indenture governing our 6.25% senior notes due in 2023 (the “2023 Senior Notes”) limit the amount of dividends that can be declared and paid. However, we do not believe this limitation materially restricts the Board of Directors’ ability to declare or our ability to pay regular quarterly dividends to our common stockholders.

In addition to this limitation, the declaration and payment of dividends and the amount of dividends will depend on our results of operations, financial condition, future prospects and other factors deemed relevant by our Board of Directors.

Issuer Purchases of Equity Securities
The following table represents issuer purchases of equity securities.


17



 
 
 
 
 
Total Number of

 
Maximum Number

 
Total Number

 
 
 
Shares Purchased

 
of Shares that May

 
of Shares

 
Average Price

 
as Part of Publicly

 
Yet Be Purchased

Fiscal Period
Purchased

 
Paid per Share

 
Announced Program

 
Under the Program (1)

November 1, 2015 - November 28, 2015
823

(2) 
$
30.50

 

 
2,348,500

November 29, 2015 - January 2, 2016
25,985

(2) 
$
27.44

 

 
2,348,500

January 3, 2016 - January 30, 2016
6,557

(2) 
$
26.43

 

 
2,348,500

Total
33,365

(2) 
$
27.32

 

 
2,348,500


(1)
On August 25, 2011, the Board of Directors approved a stock repurchase program authorizing the repurchase of up to 2.5 million shares of our outstanding common stock. We can use the repurchase program to repurchase shares on the open market or in private transactions from time to time, depending on market conditions. The repurchase program does not have an expiration date. Under this plan, 151,500 shares were repurchased during the first quarter of 2015. Therefore, there were 2.3 million shares authorized to be repurchased under the program as of January 30, 2016. Repurchases of common stock are limited under our debt agreements, as further discussed in Note 10 to the consolidated financial statements.
(2)
Reflects shares that were tendered by employees related to certain share-based awards. These shares were tendered in satisfaction of the exercise price of stock options and/or to satisfy minimum tax withholding amounts for non-qualified stock options, restricted stock and stock performance awards. Accordingly, these share purchases are not considered a part of our publicly announced stock repurchase program.


18



Stock Performance Graph
The following performance graph compares the cumulative total return on our common stock with the cumulative total return of the following indices: (i) the S&P© SmallCap 600 Stock Index and (ii) a peer group of companies believed to be engaged in similar businesses. Our peer group consists of DSW, Inc., Genesco, Inc., Shoe Carnival, Inc., Skechers U.S.A., Inc., Steven Madden, Ltd. and Wolverine World Wide, Inc.

Our fiscal year ends on the Saturday nearest to each January 31. Accordingly, share prices are as of the last business day in each fiscal year. The graph assumes that the value of the investment in our common stock and each index was $100 at January 29, 2011. The graph also assumes that all dividends were reinvested and that investments were held through January 30, 2016. These indices are included for comparative purposes only and do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of the stock involved and are not intended to forecast or be indicative of possible future performance of the common stock.

*$100 invested on January 29, 2011 in stock or index, including reinvestment of dividends. Index calculated on month-end basis.

 
1/29/2011

 
1/28/2012

 
2/2/2013

 
2/1/2014

 
1/31/2015

 
1/30/2016

Caleres, Inc.
$
100.00

 
$
78.63

 
$
142.15

 
$
198.75

 
$
240.64

 
$
229.92

Peer Group
100.00

 
132.67

 
162.79

 
193.35

 
219.86

 
202.01

S&P© SmallCap 600 Stock Index
100.00

 
108.87

 
126.32

 
160.47

 
170.34

 
162.36


 
 
ITEM 6
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction with the consolidated financial statements and notes thereto and the other information contained elsewhere in this report. Our accounting period is based upon a traditional retail calendar, which ends on the Saturday nearest January 31. Periodically, this results in a fiscal year that includes 53 weeks which can affect annual comparisons. Our 2015, 2014, 2013 and 2011 fiscal years each included 52 weeks, while our 2012 fiscal year included 53 weeks.




19



 
 
2015
 
2014
 
2013
 
2012
 
2011
($ thousands, except per share amounts)
 
(52 Weeks)
 
(52 Weeks)
 
(52 Weeks)
 
(53 Weeks)
 
(52 Weeks)
Operations:
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
2,577,430

 
$
2,571,709

 
$
2,513,113

 
$
2,477,796

 
$
2,434,766

Cost of goods sold
 
1,529,627

 
1,531,609

 
1,498,825

 
1,489,221

 
1,470,270

Gross profit
 
1,047,803

 
1,040,100

 
1,014,288

 
988,575

 
964,496

Selling and administrative expenses
 
912,696

 
910,682

 
909,749

 
891,666

 
910,293

Restructuring and other special charges, net
 

 
3,484

 
1,262

 
22,431

 
23,671

Impairment of assets held for sale
 

 

 
4,660

 

 

Operating earnings
 
135,107

 
125,934

 
98,617

 
74,478

 
30,532

Interest expense
 
(16,589
)
 
(20,445
)
 
(21,254
)
 
(22,973
)
 
(25,428
)
Loss on early extinguishment of debt
 
(10,651
)
 
(420
)
 

 

 
(1,003
)
Interest income
 
899

 
379

 
377

 
322

 
569

Gain on sale of subsidiary
 

 
4,679

 

 

 

Earnings before income taxes from continuing operations
 
108,766

 
110,127

 
77,740

 
51,827

 
4,670

Income tax (provision) benefit
 
(26,942
)
 
(27,184
)
 
(23,758
)
 
(16,656
)
 
1,421

Net earnings from continuing operations
 
81,824

 
82,943

 
53,982

 
35,171

 
6,091

Discontinued operations:
 
 
 
 
 
 
 
 
 
 
(Loss) earnings from discontinued operations, net of tax
 

 

 
(4,574
)
 
(4,437
)
 
4,334

Disposition/impairment of discontinued operations, net of tax
 

 

 
(11,512
)
 
(3,530
)
 
13,965

Net (loss) earnings from discontinued operations
 

 

 
(16,086
)
 
(7,967
)
 
18,299

Net earnings
 
81,824

 
82,943

 
37,896

 
27,204

 
24,390

Net earnings (loss) attributable to noncontrolling interests
 
345

 
93

 
(177
)
 
(287
)
 
(199
)
Net earnings attributable to Caleres, Inc.
 
$
81,479

 
$
82,850

 
$
38,073

 
$
27,491

 
$
24,589

Operations:
 
 
 
 
 
 
 
 
 
 
Return on net sales
 
3.2
%
 
3.2
%
 
1.5
%
 
1.1
%
 
1.0
%
Return on beginning Caleres, Inc. shareholders' equity
 
15.1
%
 
17.4
%
 
9.0
%
 
6.7
%
 
5.9
%
Return on average invested capital (1)
 
12.6
%
 
11.6
%
 
9.1
%
 
6.5
%
 
2.6
%
Dividends paid
 
$
12,253

 
$
12,237

 
$
12,105

 
$
12,011

 
$
12,076

Purchases of property and equipment
 
$
73,479

 
$
44,952

 
$
43,968

 
$
55,801

 
$
27,857

Capitalized software
 
$
7,735

 
$
5,086

 
$
5,235

 
$
7,928

 
$
10,707

Depreciation and amortization (2)
 
$
52,606

 
$
54,015

 
$
57,842

 
$
57,344

 
$
61,449

Per Common Share:
 
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per common share:
 
 
 
 
 
 
 
 
 
 
  From continuing operations
 
$
1.86

 
$
1.90

 
$
1.25

 
$
0.83

 
$
0.15

  From discontinued operations
 

 

 
(0.37
)
 
(0.19
)
 
0.42

Basic earnings per common share attributable to Caleres, Inc. shareholders
 
1.86

 
1.90

 
0.88

 
0.64

 
0.57

Diluted earnings (loss) per common share:
 
 
 
 
 
 
 
 
 
 
  From continuing operations
 
1.85

 
1.89

 
1.25

 
0.83

 
0.14

  From discontinued operations
 

 

 
(0.37
)
 
(0.19
)
 
0.42

Diluted earnings per common share attributable to Caleres, Inc. shareholders
 
1.85

 
1.89

 
0.88

 
0.64

 
0.56

Dividends paid
 
0.28

 
0.28

 
0.28

 
0.28

 
0.28

Ending Caleres, Inc. shareholders’ equity
 
13.78

 
12.36

 
10.99

 
9.91

 
9.83


20



 
 
2015
 
2014
 
2013
 
2012
 
2011
($ thousands, except per share amounts)
 
(52 Weeks)
 
(52 Weeks)
 
(52 Weeks)
 
(53 Weeks)
 
(52 Weeks)
Financial Position:
 
 
 
 
 
 
 
 
 
 
Receivables, net
 
$
153,664

 
$
136,646

 
$
129,217

 
$
111,392

 
$
130,485

Inventories, net
 
546,745

 
543,103

 
547,531

 
503,688

 
518,893

Working capital
 
484,766

 
420,609

 
420,735

 
306,781

 
231,514

Property and equipment, net
 
179,010

 
149,743

 
143,560

 
144,856

 
130,244

Total assets
 
1,303,323

 
1,214,327

 
1,146,340

 
1,170,332

 
1,227,476

Borrowings under our revolving credit agreement
 

 

 
7,000

 
105,000

 
201,000

Long-term debt
 
196,544

 
196,712

 
195,947

 
195,182

 
198,633

Caleres, Inc. shareholders’ equity
 
601,484

 
540,910

 
476,699

 
425,129

 
412,669

Average common shares outstanding – basic
 
42,455

 
42,071

 
41,356

 
40,659

 
41,126

Average common shares outstanding – diluted
 
42,656

 
42,274

 
41,653

 
40,794

 
41,668


All data presented reflects the fiscal year ended on the Saturday nearest to January 31. Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications did not affect net earnings attributable to Caleres, Inc. Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for additional information related to the selected financial data above.

 
 
(1)
Return on average invested capital is calculated by dividing operating earnings for the period, adjusted for income taxes at the applicable effective rate, by the average of each month-end invested capital balance during the year. Invested capital is defined as Caleres, Inc. shareholders’ equity plus long-term debt and borrowings under the Credit Agreement.
(2)
Depreciation and amortization includes depreciation of property and equipment and amortization of capitalized software, intangibles and debt issuance costs and debt discount. The amortization of debt issuance costs and debt discount is reflected within interest expense in our consolidated statement of earnings and totaled $1.2 million in 2015, $2.4 million in 2014, $2.5 million in 2013, $2.6 million in 2012 and $2.3 million in 2011.

 
 
ITEM 7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW
Business Overview
We are a global footwear company, with annual net sales of $2.6 billion whose shoes are worn by people of all ages, from all walks of life. Our mission is to continue to inspire people to feel better feet first. We offer the consumer a powerful portfolio of footwear stores and global footwear brands. 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 spanning consumer segments, categories and distribution channels. A combination of talent acquisition, thoughtful planning and rigorous execution is key to our success in optimizing our business and portfolio of brands. Our business strategy is focused on continuing to evolve our portfolio of brands, driving profit growth to achieve our financial targets, investing in avenues of growth while refocusing our resources, and remaining consumer centric.

Famous Footwear
Our Famous Footwear segment includes our Famous Footwear stores as well as Famous.com. As further discussed in Note 2 to the consolidated financial statements, Shoes.com, which was previously included in our Famous Footwear segment, was sold in December of 2014. Famous Footwear is one of America’s leading familybranded footwear retailers with 1,046 stores at the end of 2015 and net sales of $1.6 billion in 2015. Our focus for the Famous Footwear segment is on meeting the needs of a well-defined consumer by providing an assortment of trend-right, brand-name fashion and athletic footwear at a great price, coupled with exclusive products and engaging marketing programs.

Brand Portfolio
Our Brand Portfolio segment is consumer-focused and we believe our success is dependent upon our ability to strengthen consumers’ preference for our brands by offering compelling style, quality, differentiated brand promises and innovative marketing campaigns. The segment is comprised of the Naturalizer, Sam Edelman, Dr. Scholl's, Franco Sarto, LifeStride, Vince, Via Spiga, Ryka, Fergie, Carlos, Bzees, Diane von Furstenberg and George Brown brands. Through these brands, and brand families, we offer our customers a diversified selection of footwear, each designed and targeted to a specific consumer segment within the marketplace. We are able to showcase many of our brands in our retail stores and online, leveraging our wholesale and retail platforms, sharing consumer insights across our businesses and testing new and innovative products. Our Brand Portfolio segment operates 165 retail stores in the United States, Canada and Guam, primarily for our Naturalizer brand. This segment also includes our e-commerce businesses that sell our branded footwear.
 

21



Financial Highlights
We continued to execute our strategic initiatives and deliver consistent, profitable and sustainable growth in 2015, with operating earnings of $135.1 million. The operating earnings increase of 7.3% was driven by our Famous Footwear segment, which also reported a higher gross profit rate of 44.9%, compared to 44.4% in 2014. Our Brand Portfolio segment reported an increase in net sales of 2.3%, reflecting strong performance from many of our brands.

The following is a summary of the financial highlights for 2015:

Consolidated net sales increased $5.7 million, or 0.2%, to $2,577.4 million in 2015, compared to $2,571.7 million last year. The growth was primarily driven by our Brand Portfolio segment, which reported a net sales increase of $22.3 million, partially offset by a decrease in our Famous Footwear segment, driven by the disposition of Shoes.com in 2014. Excluding Shoes.com, which contributed $45.7 million of net sales in 2014, our net sales were $51.4 million, or 2.0% higher than in 2014.

Consolidated operating earnings were $135.1 million in 2015, compared to $125.9 million last year.

Consolidated net earnings attributable to Caleres, Inc. were $81.5 million, or $1.85 per diluted share, in 2015, compared to $82.8 million, or $1.89 per diluted share, last year.

The following items should be considered in evaluating the comparability of our 2015 and 2014 results:

Loss on early extinguishment of debt – During 2015, we incurred a loss of $10.7 million ($6.5 million on an after-tax basis, or $0.15 per diluted share) related to the redemption of our senior notes due in 2019 prior to maturity, as further discussed in Note 10 to the consolidated financial statements. During 2014, we incurred a loss of $0.4 million reflecting the early extinguishment of our revolving credit agreement prior to maturity.
Sale of Shoes.com and related restructuring – During 2014, we sold our e-commerce subsidiary, Shoes.com, for a pre-tax gain of $4.7 million. In addition, we incurred related severance and other restructuring charges of $1.5 million in 2014. We also recognized tax benefits of $6.6 million associated with the disposition of Shoes.com. These tax benefits were driven in part by the utilization of operating and capital loss carryforwards that previously were not anticipated to be utilized, and therefore, fully reserved on our consolidated balance sheets. In total, the disposition of Shoes.com, inclusive of the related severance and other restructuring charges, improved net earnings by $9.8 million (or $0.23 per diluted share) in 2014. Refer to Note 2 to the consolidated financial statements for further discussion.

Our debt-to-capital ratio, as defined in the Liquidity and Capital Resources – Working Capital and Cash Flow section, improved to 24.6% as of January 30, 2016, compared to 26.6% at January 31, 2015, reflecting higher shareholders' equity due to the impact of our 2015 net earnings. Our current ratio, as defined in the Liquidity and Capital Resources – Working Capital and Cash Flow section, improved to 2.24 to 1 at January 30, 2016, from 2.14 to 1 at January 31, 2015.
 
Outlook for 2016
The challenging retail environment did not derail us from steady improvement towards our long-term financial goals. We are planning additional growth in 2016, as we expand our presence in markets with greater concentrations of highly valuable consumers. We expect same-store sales at Famous Footwear will grow in the low single-digit percentage range in 2016 and our Brand Portfolio net sales are expected to increase in the mid-single-digit percentage range.

Following are the consolidated results and the results by segment for 2015, 2014 and 2013:


22



CONSOLIDATED RESULTS
 
 
2015
 
2014
 
2013
 
 
 
% of

 
 
% of

 
 
% of

($ millions)
 
 
 Net Sales

 
 
Net Sales

 
 
Net Sales

Net sales
 
$
2,577.4

100.0
 %
 
$
2,571.7

100.0
 %
 
$
2,513.1

100.0
 %
Cost of goods sold
 
1,529.6

59.3
 %
 
1,531.6

59.6
 %
 
1,498.8

59.6
 %
Gross profit
 
1,047.8

40.7
 %
 
1,040.1

40.4
 %
 
1,014.3

40.4
 %
Selling and administrative expenses
 
912.7

35.4
 %
 
910.7

35.4
 %
 
909.7

36.2
 %
Restructuring and other special charges, net
 


 
3.5

0.1
 %
 
1.3

0.1
 %
Impairment of assets held for sale
 


 


 
4.7

0.2
 %
Operating earnings
 
135.1

5.2
 %
 
125.9

4.9
 %
 
98.6

3.9
 %
Interest expense
 
(16.5
)
(0.6
)%
 
(20.5
)
(0.8)
 %
 
(21.3
)
(0.8)
 %
Loss on early extinguishment of debt
 
(10.7
)
(0.4
)%
 
(0.4
)
(0.0
 )%
 


Interest income
 
0.9

0.0
 %
 
0.4

0.0
 %
 
0.4

0.0
 %
Gain on sale of subsidiary
 


 
4.7

0.2
 %
 


Earnings before income taxes from continuing operations
 
108.8

4.2
 %
 
110.1

4.3
 %
 
77.7

3.1
 %
Income tax provision
 
(27.0
)
(1.0
)%
 
(27.2
)
(1.1)
 %
 
(23.7
)
(0.9)
 %
Net earnings from continuing operations
 
81.8

3.2
 %
 
82.9

3.2
 %
 
54.0

2.2
 %
Discontinued operations:
 
 
 
 
 
 
 
 
 
Loss from discontinued operations, net of tax
 


 


 
(4.6
)
(0.2)
 %
Disposition/impairment of discontinued operations, net of tax
 


 


 
(11.5
)
(0.5)
 %
Net loss from discontinued operations
 


 


 
(16.1
)
(0.7)
 %
Net earnings
 
81.8

3.2
 %
 
82.9

3.2
 %
 
37.9

1.5
 %
Net earnings (loss) attributable to noncontrolling interests
 
0.3

0.0
 %
 
0.1

0.0
 %
 
(0.2
)
(0.0
 )%
Net earnings attributable to Caleres, Inc.
 
$
81.5

3.2
 %
 
$
82.8

3.2
 %
 
$
38.1

1.5
 %

Net Sales
Net sales increased $5.7 million, or 0.2%, to $2,577.4 million in 2015, compared to $2,571.7 million last year, primarily driven by our Brand Portfolio segment, which reported a $22.3 million, or 2.3%, increase in net sales. The increase in net sales reflects strong performance from many of our brands. Our Brand Portfolio retail net sales were impacted by a lower Canadian dollar exchange rate, a lower store count and a 0.7% decrease in same-store sales. Our Famous Footwear segment reported a $16.6 million decrease in net sales, primarily driven by the disposition of Shoes.com in December of 2014, partially offset by a 1.9% increase in same-store sales at our retail stores. Excluding Shoes.com, which contributed $45.7 million of net sales in 2014, our Famous Footwear segment net sales were $29.1 million, or 1.9% higher than last year. Excluding Shoes.com, our consolidated net sales were $51.4 million, or 2.0% higher than last year.

Net sales increased $58.6 million, or 2.3%, to $2,571.7 million in 2014, compared to $2,513.1 million in 2013, primarily driven by our Brand Portfolio segment, which reported a $57.9 million, or 6.3%, increase in net sales. The increase reflects strong performance from many of our brands, despite a 3.6% decrease in same-store sales at our branded retail stores. Our Brand Portfolio net sales were also impacted by a lower store count and a lower Canadian dollar exchange rate. Our Famous Footwear segment reported a $0.7 million increase in net sales, reflecting a 1.5% increase in same-store sales at our Famous Footwear retail stores, partially offset by the disposition of Shoes.com and a lower store count.

Same-store sales changes are calculated by comparing the sales in stores that have been open at least 13 months. Relocated stores are treated as new stores, and closed stores are excluded from the calculation. Sales change from new and closed stores, net, reflects the change in net sales due to stores that have been opened or closed during the period and are thereby excluded from the same-store sales calculation. E-commerce sales for those websites that function as an extension of a retail chain are included in the same-store sales calculation. 

Gross Profit
Gross profit increased $7.7 million, or 0.7%, to $1,047.8 million in 2015, compared to $1,040.1 million last year. As a percentage of net sales, our gross profit rate increased to 40.7% in 2015, compared to 40.4% in 2014, driven by our Famous Footwear segment, which reported a gross profit rate of 44.9% for 2015, compared to 44.4% in 2014 driven in part by the disposition of Shoes.com. Our Shoes.com business achieved lower margins than the rest of the Famous Footwear segment due to the higher expenses for freight and customer returns inherent

23



in the e-commerce business. This impact was partially offset by a higher consolidated mix of wholesale versus retail sales. Gross profit rates on retail sales are higher than wholesale sales. In aggregate, retail and wholesale net sales were 66% and 34%, respectively, in 2015 compared to 67% and 33% in 2014.

Gross profit increased $25.8 million, or 2.5%, to $1,040.1 million in 2014, compared to $1,014.3 million in 2013. As a percentage of net sales, our gross profit rate remained consistent at 40.4%. The gross profit rate reflects improvement in both our Brand Portfolio and Famous Footwear segments, partially offset by a higher consolidated mix of wholesale versus retail sales and a lower volume of branded sales through our branded retail stores. In aggregate, retail and wholesale net sales were 67% and 33%, respectively, in 2014 compared to 70% and 30% in 2013.

We classify warehousing, distribution, sourcing and other inventory procurement costs in selling and administrative expenses. Accordingly, our gross profit and selling and administrative expenses rates, as a percentage of net sales, may not be comparable to other companies.

Selling and Administrative Expenses
Selling and administrative expenses increased $2.0 million, or 0.2%, to $912.7 million in 2015, compared to $910.7 million last year, driven by a $14.2 million increase in our Brand Portfolio segment expenses due to the expansion of several of our brands and a new warehouse service provider in China. This was partially offset by an $11.6 million decrease in unallocated corporate administrative and other costs due to lower pension expense, lower variable compensation expense for directors and certain employees and a gain on the sale of a vacant building at our Corporate headquarters. As a percentage of net sales, selling and administrative expenses were 35.4% in 2015, consistent with 2014.

Selling and administrative expenses increased $1.0 million, or 0.1%, to $910.7 million in 2014, compared to $909.7 million in 2013. As a percentage of net sales, selling and administrative expenses decreased to 35.4% in 2014 from 36.2% in 2013, reflecting better leveraging of our expense base over higher net sales.

Restructuring and Other Special Charges, Net
There were no restructuring and other special charges in 2015. Restructuring and other special charges, net increased $2.2 million to $3.5 million during 2014, compared to $1.3 million in 2013 as a result of costs of $1.9 million related to organizational changes in 2014 and charges of $1.5 million related to the disposition of Shoes.com, as further discussed in Note 4 to the consolidated financial statements. In addition, there were portfolio realignment costs incurred in 2013, with no corresponding costs in 2014. As a percentage of net sales, restructuring and other special charges, were 0.1% in 2014, consistent with 2013.

Impairment of Assets Held for Sale
There were no charges for impairment of assets held for sale in 2015 or 2014. In 2013, we sold certain of our supply chain and sourcing assets as part of our portfolio realignment efforts. In anticipation of the sale, we recognized an impairment charge of $4.7 million in 2013 to adjust the assets to their estimated fair value. Refer to Note 4 to the consolidated financial statements for additional information.

Operating Earnings
Operating earnings increased $9.2 million, or 7.3%, to $135.1 million in 2015, compared to $125.9 million last year, primarily driven by a higher gross profit rate. In addition, operating earnings benefited from the impact of no restructuring and other special charges in 2015, partially offset by higher selling and administrative expenses, as discussed above.

Operating earnings increased $27.3 million, or 27.7%, to $125.9 million in 2014, compared to $98.6 million in 2013, driven by higher sales and resulting gross profit. In addition, operating earnings in 2014 benefited from the impact of no impairment of assets held for sale in 2014, partially offset by higher restructuring and other special charges and higher selling and administrative expenses, as discussed above.

Interest Expense
Interest expense decreased $4.0 million, or 18.9%, to $16.5 million in 2015 compared to $20.5 million last year, and decreased $0.8 million, or 3.8%, in 2014 compared to $21.3 million in 2013. The decrease in 2015 reflects lower average borrowings under our revolving credit agreement and lower interest on our senior notes, as a result of the redemption of our senior notes due in 2019 and the issuance of senior notes due in 2023 reducing our interest rate from 7.125% to 6.25%, as further discussed in Liquidity and Capital Resources. The decrease in interest expense in 2014 was primarily due to lower average borrowings under our revolving credit agreement. In 2015, we capitalized interest of $0.3 million associated with the expansion and modernization of our Lebanon, Tennessee distribution center, with no corresponding amounts capitalized in 2014 or 2013.


24



Loss on Early Extinguishment of Debt
During 2015, we incurred a loss of $10.7 million related to the redemption of our 2019 senior notes prior to maturity, as further discussed in Note 10 to the consolidated financial statements. During 2014, we incurred a loss of $0.4 million reflecting the early extinguishment of the former revolving credit agreement prior to maturity. We did not incur such costs in 2013.

Gain on Sale of Subsidiary
In 2014, we sold our e-commerce subsidiary, Shoes.com. We recognized a pre-tax gain upon on the sale of the subsidiary of $4.7 million, representing the difference in the net proceeds less costs to sell, as compared to the carrying value of the net assets. Refer to Note 2 to the consolidated financial statements for further discussion.

Income Tax Provision
Our consolidated effective tax rate on continuing operations was a provision of 24.8% in 2015 compared to 24.7% in 2014 and 30.6% in 2013. In 2015, 2014 and 2013, we recognized pre-tax earnings in both our domestic operations and foreign jurisdictions. Our consolidated effective tax rate is generally below the federal statutory rate of 35% because our foreign earnings are subject to lower statutory tax rates.  
In 2014, our effective tax rate was impacted by several factors.  In connection with the disposition of Shoes.com, we recognized a pre-tax gain, net of related restructuring costs, of $3.1 million, while recognizing an associated tax benefit of $6.6 million.  This tax benefit was driven in part by the utilization of operating and capital loss carryforwards that were previously not anticipated to be utilized and were therefore fully reserved on our consolidated balance sheets.  In addition, we recognized a tax expense of $1.0 million related to a dividend received from an international subsidiary.  If the impacts of the Shoes.com disposition and the tax on the dividend had been excluded, our full fiscal year 2014 effective tax rate would have been 30.6%, consistent with 2013.

In 2015, our effective tax rate was impacted by several discrete tax benefits which totaled $5.1 million for the year.  These discrete tax benefits primarily reflected the utilization of operating loss, capital loss and other carryforwards that were previously not anticipated to be utilized and were therefore fully reserved on the consolidated balance sheet.  A portion of these carryforwards became utilizable upon conversion of our primary retail entity to an LLC early in 2015.  In addition, certain additional tax carryforwards were able to be utilized upon settlement of the tax attributes associated with the sale of our Shoes.com subsidiary.  If these discrete tax benefits had not been recognized, our full fiscal year 2015 effective tax rate would have been 29.5%, which is 1.1% lower than 2014, driven by a lower state tax rate and a higher mix of earnings in international jurisdictions.

Refer to Note 6 to the consolidated financial statements for additional information regarding our tax rates.

Net Earnings from Continuing Operations
We reported net earnings from continuing operations of $81.8 million in 2015, compared to $82.9 million in 2014 and $54.0 million in 2013, as a result of the factors described above.

Net Loss from Discontinued Operations
Our discontinued operations in 2013 included the operations and sale of our Avia and Nevados brands acquired during the 2011 acquisition of American Sporting Goods Corporation, as well as the operations and impairment of our Vera Wang brand. During 2013, we sold the Avia and Nevados brands and reported a net loss from discontinued operations of $16.1 million. In conjunction with the sale, we recorded a net charge related to the impairment and disposition of those brands of $11.5 million, representing the difference in the fair value, less costs to sell, as compared to the carrying value of the net assets sold. During 2013, we also decided not to renew the Vera Wang license agreement and reflected the operations of this brand as discontinued operations. Refer to Note 2 to the consolidated financial statements for further discussion regarding discontinued operations.

Net Earnings Attributable to Caleres, Inc.
We reported net earnings attributable to Caleres, Inc. of $81.5 million in 2015, compared to $82.8 million last year and $38.1 million in 2013.

Geographic Results
We have both domestic and foreign operations. Domestic operations include the nationwide operation of our Famous Footwear and other branded retail footwear stores, the wholesale distribution of footwear to numerous retail customers and the operation of our e-commerce websites. Foreign operations primarily consist of wholesale operations in the Far East and Canada, retailing operations in Canada and the operation of our international e-commerce websites. In addition, we license certain of our trademarks to third parties who distribute and/or operate retail locations internationally. The Far East operations include first-cost transactions, where footwear is sold at foreign ports to

25



customers who then import the footwear into the United States and other countries. The breakdown of domestic and foreign net sales and earnings before income taxes was as follows:
 
2015
 
2014
 
2013
 
 
Earnings Before
 
 
 
Earnings Before
 
 
 
Earnings Before
 
($ millions)
Net Sales

Income Taxes
 
 
Net Sales

Income Taxes
 
 
Net Sales

Income Taxes
 
Domestic
$
2,342.6

 
$
68.2

 
$
2,318.5

 
$
70.8

 
$
2,258.6

 
$
40.9

Foreign
234.8

 
40.6

 
253.2

 
39.3

 
254.5

 
36.8


$
2,577.4

 
$
108.8

 
$
2,571.7

 
$
110.1

 
$
2,513.1

 
$
77.7


The pre-tax profitability on foreign sales is higher than on domestic sales because of a lower cost structure and the inclusion in domestic earnings of the unallocated corporate administrative and other costs.

FAMOUS FOOTWEAR
 
 
2015
 
2014
 
2013
 
 
 
% of

 
 
% of

 
 
% of

($ millions)
 
 
 Net Sales

 
 
Net Sales

 
 
Net Sales

Net sales
 
$
1,572.7

100.0
%
 
$
1,589.3

100.0
%
 
$
1,588.6

100.0
%
Cost of goods sold
 
866.0

55.1
%
 
883.2

55.6
%
 
887.4

55.9
%
Gross profit
 
706.7

44.9
%
 
706.1

44.4
%
 
701.2

44.1
%
Selling and administrative expenses
 
597.7

38.0
%
 
600.7

37.7
%
 
595.8

37.5
%
Restructuring and other special charges, net
 


 
0.8

0.1
%
 


Operating earnings
 
$
109.0

6.9
%
 
$
104.6

6.6
%
 
$
105.4

6.6
%
 
 
 
 
 
 
 
 
 
 
Key Metrics
 
 
 
 
 
 
 
 
 
Same-store sales % change (on a 52-week basis)
 
1.9
%
 
 
1.5
%
 
 
2.9
%
 
Same-store sales $ change (on a 52-week basis)
 
$
27.9

 
 
$
22.4

 
 
$
41.1

 
Sales change from 53rd week
 
$

 
 
$

 
 
$
(19.1
)
 
Sales change from new and closed stores, net (on a 52-week basis)
 
$
2.9

 
 
$
(6.1
)
 
 
$
(9.8
)
 
Impact of changes in Canadian exchange rate on sales
 
$
(1.7
)
 
 
$
(0.3
)
 
 
$

 
Sales change of Shoes.com (sold in December 2014)
 
$
(45.7
)
 
 
$
(15.3
)
 
 
$
(6.8
)
 
 
 
 
 
 
 
 
 
 
 
Sales per square foot, excluding e-commerce (on a 52-week basis)
 
$
217

 
 
$
215

 
 
$
207

 
Square footage (thousands sq. ft.)
 
6,949

 
 
6,958

 
 
7,059

 
 
 
 
 
 
 
 
 
 
 
Stores opened
 
50

 
 
50

 
 
51

 
Stores closed
 
42

 
 
56

 
 
62

 
Ending stores
 
1,046

 
 
1,038

 
 
1,044

 

Net Sales
Net sales decreased $16.6 million to $1,572.7 million in 2015 compared to $1,589.3 million last year. During 2015, the decrease was primarily due to the disposition of Shoes.com, as further discussed in Note 2 to the consolidated financial statements, which contributed $45.7 million of net sales in 2014, partially offset by a 1.9%, or $27.9 million, increase in same-store sales. The same-store sales increase was driven by continued strength in key selling categories, including athletic shoes and booties, which drove our average retail prices higher. We also saw growth in our e-commerce sales as more customers shifted from visiting our stores to the more convenient online shopping

26



experience. During 2015, we expanded our in-store fulfillment initiative to approximately 900 stores, which has reduced the average number of business days for shoes ordered online or in our Famous Footwear stores to be delivered to our customers. As a result of the same-store sales increase, sales per square foot, excluding e-commerce, increased 1.2% to $217, compared to $215 last year. Net sales were also impacted by a higher store count and a lower Canadian dollar exchange rate. Members of Rewards, our customer loyalty program, continue to account for a majority of the segment's sales, with approximately 74% of our net sales to Rewards members in 2015, compared to 73% in 2014 and 70% in 2013.

Net sales increased $0.7 million to $1,589.3 million in 2014 compared to $1,588.6 million in 2013. During 2014, same-store sales increased 1.5%, or $22.4 million, reflecting an improved conversion rate and higher average retail prices, partially offset by a decrease in customer traffic. In addition, we saw strong growth from canvas and athletic shoes and boots. As a result of the same-store sales increases, sales per square foot, excluding e-commerce, increased 3.5% to $215, compared to $207 in 2013. Net sales of Shoes.com decreased $15.3 million, or 25.2%, to $45.7 million in 2014 compared to $61.0 million in 2013. The decrease was due, in part, to the disposal of this subsidiary in December 2014. Net sales were also impacted by a lower store count and a lower Canadian dollar exchange rate.

Gross Profit
Gross profit increased $0.6 million, or 0.1%, to $706.7 million in 2015 compared to $706.1 million last year due to a higher gross profit rate, partially offset by lower sales. As a percentage of net sales, our gross profit rate increased to 44.9% in 2015 compared to 44.4% last year. The increase in our gross profit rate reflects the disposition of Shoes.com late in 2014, and a continued shift in mix toward higher margin products. Our Shoes.com business achieved lower margins than the rest of the Famous Footwear segment due to the higher expenses for freight and customer returns inherent in the e-commerce business.

Gross profit increased $4.9 million, or 0.7%, to $706.1 million in 2014 compared to $701.2 million in 2013 due to higher net sales and gross profit rate. As a percentage of net sales, our gross profit rate increased to 44.4% in 2014 compared to 44.1% in 2013. The increase in our gross profit rate was driven by the above named factors.

Selling and Administrative Expenses
Selling and administrative expenses decreased $3.0 million, or 0.5%, to $597.7 million during 2015 compared to $600.7 million last year. The decrease was primarily attributable to lower expenses due to the disposition of Shoes.com in late 2014, partially offset by higher store rent and facilities costs and an increase in expected payouts under our cash and stock-based incentive plans. As a percentage of net sales, selling and administrative expenses increased to 38.0% in 2015 from 37.7% last year.

Selling and administrative expenses increased $4.9 million, or 0.8%, to $600.7 million during 2014 compared to $595.8 million in 2013. The increase was primarily attributable to higher store rent, depreciation expense and other facilities costs and higher variable store employee and benefit costs, partially offset by lower marketing expenses and a decrease in expected payouts under our cash and stock-based incentive plans. As a percentage of net sales, selling and administrative expenses increased to 37.7% in 2014 from 37.5% in 2013.

Restructuring and Other Special Charges, Net
We incurred restructuring and other special charges of $0.8 million in 2014 related to the disposition of Shoes.com, as further discussed in Note 2 to the consolidated financial statements, with no corresponding costs in 2015 or 2013.

Operating Earnings
Operating earnings increased $4.4 million, or 4.3% to $109.0 million for 2015, compared to $104.6 million last year. As a percentage of net sales, our operating earnings increased to 6.9% for 2015, compared to 6.6% for 2014.

Operating earnings decreased $0.8 million, or 0.8%, to $104.6 million for 2014, compared to $105.4 million in 2013. As a percentage of net sales, our operating earnings of 6.6% were consistent with 2013.


27



BRAND PORTFOLIO
 
 
2015
 
2014
 
2013
 
 
 
% of

 
 
% of

 
 
% of

($ millions)
 
 
Net Sales

 
 
Net Sales

 
 
Net Sales

Net sales
 
$
1,004.8

100.0
%
 
$
982.5

100.0
%
 
$
924.6

100.0
%
Cost of goods sold
 
663.7

66.1
%
 
648.5

66.0
%
 
611.5

66.1
%
Gross profit
 
341.1

33.9
%
 
334.0

34.0
%
 
313.1

33.9
%
Selling and administrative expenses
 
274.5

27.3
%
 
260.3

26.5
%
 
267.3

29.0
%
Restructuring and other special charges, net
 


 
0.3

0.0
%
 
1.2

0.1
%
Impairment of assets held for sale
 


 


 
4.7

0.5
%
Operating earnings
 
$
66.6

6.6
%
 
$
73.4

7.5
%
 
$
39.9

4.3
%

 
 
 
 
 
 
 
 
 
Key Metrics
 
 
 
 
 
 
 
 
 
Wholesale/retail sales mix (%)
 
87%/13%

 
 
86%/14%

 
 
83%/17%

 
Change in wholesale net sales ($)
 
$
32.5

 
 
$
77.8

 
 
$
38.9

 
Unfilled order position at year-end
 
$
274.4

 
 
$
284.6

 
 
$
273.9

 
 
 
 
 
 
 
 
 
 
 
Same-store sales % change (on a 52-week basis)
 
(0.7
)%
 
 
(3.6
)%
 
 
1.6
%
 
Same-store sales $ change (on a 52-week basis)
 
$
(0.8
)
 
 
$
(4.8
)
 
 
$
2.2

 
Sales change from 53rd week
 
$

 
 
$

 
 
$
(2.1
)
 
Sales change from new and closed stores, net (on a 52-week basis)
 
$
(1.8
)
 
 
$
(11.3
)
 
 
$
(6.6
)
 
Impact of changes in Canadian exchange rate on retail sales
 
$
(7.6
)
 
 
$
(3.8
)
 
 
$
(2.4
)
 
 
 
 
 
 
 
 
 
 
 
Sales per square foot, excluding e-commerce (on a 52-week basis)
 
$
343

 
 
$
377

 
 
$
397

 
Square footage (thousands sq. ft.)
 
294

 
 
302

 
 
319

 
 
 
 
 
 
 
 
 
 
 
Stores opened
 
7

 
 
7

 
 
11

 
Stores closed
 
13

 
 
15

 
 
54

 
Ending stores
 
165

 
 
171

 
 
179

 

Net Sales
Net sales increased $22.3 million, or 2.3%, to $1,004.8 million in 2015 compared to $982.5 million last year. The increase reflects strong performance from many of our brands, including Sam Edelman, LifeStride, Vince and Carlos, partially offset by decreases in our Naturalizer and Via Spiga brands. Net sales at our branded retail stores were impacted by a lower Canadian dollar exchange rate, a lower store count and a decline in same-store sales of 0.7%. We opened seven stores and closed 13 stores during 2015, resulting in a total of 165 stores at the end of 2015, compared to 171 stores at the end of last year. Sales per square foot, excluding e-commerce, decreased 8.9% to $343 compared to $377 last year. Our unfilled order position for our wholesale sales decreased $10.2 million, or 3.6%, to $274.4 million at the end of 2015, as compared to $284.6 million at the end of last year primarily due to declines in our Naturalizer, LifeStride and Dr. Scholl's brands, partially offset by an increase in our Franco Sarto brand. Though not significant to net sales for 2015, we recently launched our Diane von Furstenberg brand during the fourth quarter. We also are excited to launch our George Brown line of men's footwear in 2016.
 
Net sales increased $57.9 million, or 6.3%, to $982.5 million in 2014 compared to $924.6 million in 2013. The increase reflects strong performance from many of our brands, including Sam Edelman, Vince, Via Spiga and Franco Sarto, partially offset by a decrease in our Naturalizer brand. Our branded retail stores experienced a decline in same-store sales of 3.6%. In addition, our retail sales were impacted by lower store count and a lower Canadian dollar exchange rate. We opened seven stores and closed 15 stores during 2014, resulting in a total of 171 stores at the end of 2014 compared to 179 stores at the end of 2013. Sales per square foot, excluding e-commerce, decreased

28



5.1% to $377 compared to $397 in 2013. Our unfilled order position for our wholesale sales increased $10.7 million, or 3.9%, to $284.6 million at the end of 2014, as compared to $273.9 million at the end of 2013.

Gross Profit
Gross profit increased $7.1 million, or 2.1%, to $341.1 million in 2015 compared to $334.0 million last year driven by higher net sales, partially offset by a lower gross profit rate. Our gross profit rate decreased slightly to 33.9% in 2015 as compared to 34.0% last year primarily resulting from higher inventory markdowns to clear inventory at our branded retail stores and a lower mix of retail versus wholesale sales. Our retail operations have a higher gross profit rate than our wholesale business.

Gross profit increased $20.9 million, or 6.7%, to $334.0 million in 2014 compared to $313.1 million in 2013 reflecting higher sales and a higher gross profit rate. Our gross profit rate increased slightly to 34.0% in 2014 compared to 33.9% in 2013 primarily resulting from higher wholesale margins for many of our brands, including the impact of lower royalty expense from the acquisition of the Franco Sarto trademarks in the first quarter of 2014, and an improved sales mix of higher margin footwear, partially offset by higher inventory markdowns to clear inventory at our branded retail stores.

Selling and Administrative Expenses
Selling and administrative expenses increased $14.2 million, or 5.5%, to $274.5 million during 2015 compared to $260.3 million last year, primarily driven by additional costs associated with our new or expanded brands, including Sam Edelman, Vince Men's and Diane von Furstenberg, and higher expenses for a new warehouse service provider in China to distribute product to our international customers, partially offset by a decrease in anticipated payments under our cash-based incentive plans. As a percentage of net sales, selling and administrative expenses increased to 27.3% in 2015 from 26.5% last year, reflecting the above named factors.

Selling and administrative expenses decreased $7.0 million, or 2.6%, to $260.3 million during 2014 compared to $267.3 million in 2013, primarily due to lower warehouse expenses, our lower branded retail store count and a lower Canadian dollar exchange rate, partially offset by an increase in anticipated payments under our cash and stock-based incentive plans and higher marketing expenses. As a percentage of net sales, selling and administrative expenses decreased to 26.5% in 2014 from 29.0% in 2013, reflecting the above named factors.

Restructuring and Other Special Charges, Net
There were no restructuring and other special charges during 2015. Restructuring and other special charges decreased $0.9 million, or 77.3%, to $0.3 million in 2014, compared to $1.2 million in 2013 as a result of our portfolio realignment initiatives, which were substantially complete in early 2013. Refer to Notes 2 and 4 to the consolidated financial statements for additional information related to these charges.

Impairment of Assets Held for Sale
There were no charges for impairment of assets held for sale during 2015 or 2014. During 2013, we sold certain of our supply chain and sourcing assets. In conjunction with the sale, we recognized an impairment charge of $4.7 million, representing the difference between the fair value of the assets, less costs to sell, and the carrying value of the assets.

Operating Earnings
Operating earnings decreased $6.8 million, or 9.3%, to $66.6 million in 2015 compared to $73.4 million last year. The decrease was primarily driven by higher selling and administrative expenses and a lower gross profit rate, partially offset by higher net sales. As a percentage of net sales, operating earnings decreased to 6.6% in 2015 compared to 7.5% last year.

Operating earnings increased $33.5 million, or 83.9%, to $73.4 million in 2014, compared to $39.9 million in 2013. The increase was primarily driven by higher net sales and lower selling and administrative expenses. As a percentage of net sales, operating earnings increased to 7.5% in 2014 compared to 4.3% in 2013.

 
OTHER
The Other category includes unallocated corporate administrative and other costs and recoveries. Costs of $40.5 million, $52.1 million, and $46.7 million were incurred in 2015, 2014 and 2013, respectively.

The $11.6 million decrease in costs in 2015 compared to 2014 was primarily a result of the following factors:

Lower pension expense driven by plan provision changes which lowered our projected benefit obligation;

29



Lower expenses related to our variable compensation plans for our directors and certain employees with awards that utilize mark-to-market accounting based on the Company's closing stock price; and
A gain on sale of a vacant building at our corporate headquarters.

The $5.4 million increase in costs in 2014 compared to 2013 was primarily a result of higher anticipated payments under our cash and stock-based incentive plans and higher consulting fees.

 
RESTRUCTURING AND OTHER INITIATIVES
During 2014, we incurred costs associated with the disposal of Shoes.com of $1.5 million and costs of $1.9 million related to management changes at our corporate headquarters, with no corresponding costs in 2015 or 2013. During 2013, we recorded portfolio realignment initiative costs of $30.7 million, with no corresponding costs in 2015 or 2014. See the Financial Highlights section above and Note 2 and Note 4 to the consolidated financial statements for additional information related to these charges.

 
IMPACT OF INFLATION AND CHANGING PRICES
While we have felt the effects of inflation on our business and results of operations, it has not had a significant impact on our business over the last three years. Inflation can have a long-term impact on our business because increasing costs of materials and labor may impact our ability to maintain satisfactory profit rates. For example, our products are manufactured in other countries, and a decline in the value of the U.S. dollar and the impact of labor shortages in China or other countries may result in higher manufacturing costs. Similarly, any potential significant shortage of quantities or increases in the cost of the materials that are used in our manufacturing process, such as leather and other materials or resources, could have a material negative impact on our business and results of operations. In addition, inflation is often accompanied by higher interest rates, which could have a negative impact on consumer spending, in which case our net sales and profit rates could decrease. Moreover, increases in inflation may not be matched by increases in wages, which also could have a negative impact on consumer spending. If we incur increased costs that are unable to be recovered through price increases, or if consumer spending decreases generally, our business, results of operations, financial condition, and cash flows may be adversely affected. In an effort to mitigate the impact of these incremental costs on our operating results, we expect to pass on some portion of cost increases to our consumers and adjust our business model, as appropriate, to minimize the impact of higher costs. Further discussion of the potential impact of inflation and changing prices is included in Item 1A, Risk Factors.

 
LIQUIDITY AND CAPITAL RESOURCES
Borrowings


($ millions)
January 30, 2016

 
January 31, 2015

 
Increase (Decrease)

Long-term debt - 2023 Senior Notes
$
196.5

 
$

 
$
196.5

Long-term debt - 2019 Senior Notes

 
196.7

 
(196.7
)
Total debt
$
196.5

 
$
196.7

 
$
(0.2
)

Total debt obligations decreased $0.2 million, or 0.1%, to $196.5 million at the end of 2015 compared to $196.7 million at the end of last year. Interest expense in 2015 was $16.5 million compared to $20.5 million in 2014 and $21.3 million in 2013. The decrease in interest expense in 2015 reflects lower average borrowings under our revolving credit agreement and lower interest on our senior notes as a result of the redemption of our senior notes due in 2019 ("2019 Senior Notes") and the issuance of senior notes due in 2023 ("2023 Senior Notes") reducing our interest rate from 7.125% to 6.25%, as further described below. In addition, we capitalized $0.3 million of interest costs associated with the expansion and modernization of our Lebanon, Tennessee distribution center.

Credit Agreement
On December 18, 2014, the Company and certain of its subsidiaries (the “Loan Parties”) entered into a Fourth Amended and Restated Credit Agreement, which was further amended on July 20, 2015 to release all of the Company’s subsidiaries that were borrowers under or that guaranteed the credit agreement other than Sidney Rich Associates, Inc. and BG Retail, LLC (as so amended, the “Credit Agreement”). After giving effect to the amendment, the Company is the lead borrower, and Sidney Rich Associates, Inc. and BG Retail, LLC are each co-borrowers and guarantors under the Credit Agreement. The Credit Agreement matures on December 18, 2019 and provides for a revolving credit facility in an aggregate amount of up to $600.0 million, subject to the calculated borrowing base restrictions, and provides for an increase at the Company’s option by up to $150.0 million from time to time during the term of the Credit Agreement, subject to satisfaction

30



of certain conditions and the consent of existing or new lenders to assume the increase. Under the Credit Agreement, the Loan Parties' obligations are secured by a first priority security interest in all accounts receivable, inventory and certain other collateral.

Interest on borrowings is at variable rates based on the London Interbank Offered Rate (“LIBOR”) or the prime rate, as defined in the Credit Agreement, plus a spread. The interest rate and fees for letters of credit vary based upon the level of excess availability under the Credit Agreement. There is an unused line fee payable on the unused portion under the facility and a letter of credit fee payable on the outstanding face amount under letters of credit.
 
We were in compliance with all covenants and restrictions under the Credit Agreement as of January 30, 2016. Refer to further discussion regarding the Credit Agreement in Note 10 to the consolidated financial statements.

At January 30, 2016, we had no borrowings and $6.5 million in letters of credit outstanding under the Credit Agreement. Total borrowing availability was $525.1 million at January 30, 2016.

$200 Million Senior Notes 
On July 20, 2015, we commenced a cash tender offer for our 2019 Senior Notes. The tender offer expired on July 24, 2015 and $160.7 million aggregate principal amount of the 2019 Senior Notes were validly tendered. The remaining $39.3 million aggregate principal amount of 2019 Senior Notes was redeemed on August 26, 2015.

On July 27, 2015, we issued $200.0 million aggregate principal amount of our 2023 Senior Notes in a private placement.  On October 22, 2015, we commenced an offer to exchange our 2023 Senior Notes outstanding for substantially identical debt securities registered under the Securities Act of 1933. The exchange offer was completed on November 23, 2015 and did not affect the amount of our indebtedness outstanding. The net proceeds from the offering were approximately $196.3 million after deducting fees and expenses associated with the offering. We used the net proceeds, together with cash on hand, to redeem the outstanding 2019 Senior Notes.

The 2023 Senior Notes are guaranteed on a senior unsecured basis by each of the subsidiaries of Caleres, Inc. that is an obligor under the Credit Agreement. The 2023 Senior Notes bear interest at 6.25%, which is payable on February 15 and August 15 of each year beginning on February 15, 2016. The 2023 Senior Notes mature on August 15, 2023. Prior to August 15, 2018, we may redeem some or all of the 2023 Senior Notes at various redemption prices.


The 2023 Senior Notes also contain certain covenants and restrictions that limit certain activities including, among other things, levels of indebtedness, payments of dividends, the guarantee or pledge of assets, certain investments, common stock repurchases, mergers and acquisitions and sales of assets. As of January 30, 2016, we were in compliance with all covenants and restrictions relating to the 2023 Senior Notes.

Loss on Early Extinguishment of Debt
During 2015 and 2014, we incurred losses on early extinguishment of debt of $10.7 million and $0.4 million, respectively, with no corresponding loss in 2013. The loss in 2015 represents the tender offer and call premiums, unamortized debt issuance costs, and original issue discount related to the 2019 Senior Notes. Of the $10.7 million loss on early extinguishment of debt in 2015, approximately $3.0 million was non-cash. The loss in 2014 represents the early extinguishment of the revolving credit agreement prior to maturity.

Working Capital and Cash Flow
 
 
January 30, 2016

 
January 31, 2015

 
Increase (Decrease)

Working capital ($ millions) (1)
 
$484.8
 
$420.6
 
$64.2
Debt-to-capital ratio (2)
 
24.6
%
 
26.6
%
 
(2.0
)%
Current ratio (3)
 
2.24:1

 
2.14:1

 
 
(1)
Working capital has been computed as total current assets less total current liabilities.
(2)
Debt-to-capital has been computed by dividing total debt by total capitalization. Total debt is defined as long-term debt and borrowings under the Credit Agreement. Total capitalization is defined as total debt and total equity.
(3)
The current ratio has been computed by dividing total current assets by total current liabilities.


31



 
2015

 
2014

 
Increase (Decrease)
in Cash and Cash Equivalents

Net cash provided by operating activities
$
149.2

 
$
118.8

 
$
30.4

Net cash used for investing activities
(73.8
)
 
(112.0
)
 
38.2

Net cash used for financing activities
(23.5
)
 
(20.5
)
 
(3.0
)
Effect of exchange rate changes on cash and cash equivalents
(1.2
)
 
(1.4
)
 
0.2

Increase (decrease) in cash and cash equivalents
$
50.7

 
$
(15.1
)
 
$
65.8


Working capital at January 30, 2016, was $484.8 million, which was $64.2 million higher than at January 31, 2015. The increase in working capital reflects our strong 2015 financial performance, including net cash provided by operating activities, partially offset by cash used for both investing and financing activities. Working capital also reflects higher cash and cash equivalents, higher receivables, and an increase in the current income tax asset, partially offset by an increase in trade accounts payable. Our debt-to-capital ratio improved to 24.6% as of January 30, 2016, compared to 26.6% at January 31, 2015, primarily reflecting higher shareholders' equity due to the impact of our 2015 net earnings. Our current ratio improved to 2.24 to 1 at January 30, 2016, from 2.14 to 1 at January 31, 2015.

At January 30, 2016, we had $118.2 million of cash and cash equivalents. The majority of this balance represents the accumulated unremitted earnings of our foreign subsidiaries, which are considered indefinitely reinvested.  Refer to Note 6 to the consolidated financial statements for more information regarding our unremitted foreign earnings. 

Reasons for the major variances in cash provided (used) in the table above are as follows:

Cash provided by operating activities was $30.4 million higher in 2015 than last year, reflecting the following factors:

An increase in trade accounts payable in 2015 as compared to a decrease in 2014 due to the timing of inventory purchases and payments to vendors;
Higher net earnings (after consideration of non-cash items); and
A smaller increase in prepaid expenses and other current and noncurrent assets in 2015 as compared to 2014, reflecting a smaller increase in prepaid rent in 2015 than 2014 as a result of the timing of payments; partially offset by
A decrease in accrued expenses and other liabilities in 2015 as compared to an increase in 2014 driven by higher payments under our cash-based incentive plans in 2015.

Cash used for investing activities was $38.2 million lower in 2015 than last year, primarily due to the $65.1 million acquisition of the Franco Sarto trademarks in 2014 and the $7.4 million in proceeds from disposal of property and equipment related to the sale of a vacant building at our Corporate headquarters in 2015. These variances were partially offset by higher purchases of property and equipment in 2015, driven by the expansion and modernization of our distribution centers and leasehold improvements associated with the relocation of one of our leased office spaces in New York City. In 2016, we expect purchases of property and equipment and capitalized software of approximately $70 million, with an estimated $16 million allocated for continued expansion and modernization of our distribution centers.

Cash used for financing activities was $3.0 million higher in 2015 than last year, primarily due to an increase in common stock issued under share-based plans in 2015 and the acquisition of treasury stock in 2015, partially offset by a decrease in net repayments under the revolving credit agreement.

We paid dividends of $0.28 per share in each of 2015, 2014 and 2013. The 2015 dividends marked the 93rd year of consecutive quarterly dividends. On March 3, 2016, the Board of Directors declared a quarterly dividend of $0.07 per share, payable April 1, 2016, to shareholders of record on March 21, 2016, marking the 373rd consecutive quarterly dividend to be paid by the Company. The declaration and payment of any future dividend is at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors. However, we presently expect that dividends will continue to be paid.

 
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Certain accounting issues require management estimates and judgments for the preparation of financial statements. Our most significant policies requiring the use of estimates and judgments are listed below.


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Revenue Recognition
Retail sales, recognized at the point of sale, are recorded net of returns and exclude sales tax. Wholesale sales are recorded, net of returns, allowances and discounts, generally when the merchandise has been shipped and title and risk of loss have passed to the customer. Revenue for products sold that are shipped directly to an individual consumer is recognized upon delivery to the consumer. Reserves for projected merchandise returns, discounts and allowances are determined based on historical experience and current expectations. Revenue is recognized on license fees related to Company-owned brand-names, where the Company is the licensor, when the related sales of the licensee are made.

Inventories
Inventories are our most significant asset, representing approximately 42% of total assets at the end of 2015. We value inventories at the lower of cost or market with 95% of consolidated inventories using the last-in, first-out (“LIFO”) method. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory valuation.

We apply judgment in valuing our inventories by assessing the net realizable value of our inventories based on current selling prices. At our Famous Footwear segment, we recognize markdowns when it becomes evident that inventory items will be sold at retail prices less than cost, plus the cost to sell the product. This policy causes the gross profit rate at our Famous Footwear segment to be lower than the initial markup during periods when permanent price reductions are taken to clear product. At our Brand Portfolio segment, we generally provide markdown reserves to reduce the carrying values of inventories to a level where, upon sale of the product, we will realize our normal gross profit rate. We believe these policies reflect the difference in operating models between our Famous Footwear segment and our Brand Portfolio segment. Famous Footwear periodically runs promotional events to drive sales to clear seasonal inventories. The Brand Portfolio segment generally relies on permanent price reductions to clear slower-moving inventory.

We perform physical inventory counts or cycle counts on all merchandise inventory on hand throughout the year and adjust the recorded balance to reflect the results. We record estimated shrinkage between physical inventory counts based on historical results. Inventory shrinkage is included as a component of cost of goods sold.

Income Taxes
We record deferred taxes for the effects of timing differences between financial and tax reporting. These differences relate principally to employee benefit plans, accrued expenses, bad debt reserves, depreciation and amortization and inventory.

We evaluate our foreign investment opportunities and plans, as well as our foreign working capital needs, to determine the level of investment required and, accordingly, determine the level of foreign earnings that we consider indefinitely reinvested. Based upon that evaluation, earnings of our foreign subsidiaries that are not otherwise subject to United States taxation, except for our Canadian subsidiary, are considered to be indefinitely reinvested, and accordingly, deferred taxes have not been provided. If changes occur in future investment opportunities and plans, those changes will be reflected when known and may result in providing residual United States deferred taxes on unremitted foreign earnings.

At January 30, 2016, we have net operating loss and other carryforwards at certain of our subsidiaries. We evaluate these carryforwards for realization based upon their expiration dates and our expectations of future taxable income. As deemed appropriate, valuation reserves are recorded to adjust the recorded value of these carryforwards to the expected realizable value.

We are audited periodically by domestic and foreign tax authorities and tax assessments may arise several years after tax returns have been filed. Tax liabilities are recorded when, in management’s judgment, a tax position does not meet the more-likely-than-not threshold for recognition. For tax positions that meet the more-likely-than-not threshold, a tax liability may be recorded depending on management’s assessment of how the tax position will ultimately be settled. In evaluating issues raised in such audits and other uncertain tax positions, we provide reserves for exposures as appropriate.

Goodwill and Intangible Assets
Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. We adopted the provisions of Accounting Standards Codification (“ASC”), Intangibles-Goodwill and Other (ASC Topic 350) Testing Goodwill for Impairment, which permits, but does not require, a company to qualitatively assess indicators of a reporting unit’s fair value when it is unlikely that a reporting unit is impaired. If, after completing the qualitative assessment, a company believes it is likely that a reporting unit is impaired, a discounted cash flow analysis is prepared to estimate fair value. If the recorded values of these assets are not recoverable, based on either the assessment screen or discounted cash flow analysis, management performs the next step, which compares the fair value of the reporting unit to the recorded value of the tangible and intangible assets of the reporting units. Goodwill is considered impaired if the fair value of the tangible and intangible assets exceeds the fair value of the reporting unit. An adjustment to goodwill is recorded for

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any goodwill determined to be impaired. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized assets and liabilities of the reporting unit. For 2015, we elected to perform the optional qualitative assessment for the goodwill impairment test.

We perform impairment tests during the fourth quarter of each fiscal year unless events indicate an interim test is required. The goodwill impairment testing and other indefinite-lived intangible asset impairment reviews were performed as of the first day of our fourth fiscal quarter and resulted in no impairment charges. Other intangible assets are amortized over their useful lives and are reviewed for impairment if and when impairment indicators are present. Refer to Note 9 to the consolidated financial statements for additional information related to the impairment of goodwill and intangible assets.

Store Closing and Impairment Charges
We regularly analyze the results of all of our stores and assess 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, unusual nonrecurring events or favorable trends, we write down to fair value the fixed assets of stores indicated as impaired.

Litigation Contingencies
We are the defendant in several claims and lawsuits arising in the ordinary course of business. We do not believe any of these ordinary- course-of-business proceedings will have a material adverse effect on our consolidated financial position or results of operations. We accrue our best estimate of the cost of resolution of these claims. Legal defense costs of such claims are recognized in the period in which we incur the costs. See Note 17 to the consolidated financial statements for a further description of commitments and contingencies.

Environmental Matters
We are involved in environmental remediation and ongoing compliance activities at several sites. We are remediating, under the oversight of Colorado authorities, the groundwater and indoor air at our Redfield site and residential neighborhoods adjacent to and near the property, which have been affected by solvents previously used at the facility. In addition, various federal and state authorities have identified us as a potentially responsible party for remediation at certain landfills. While we currently do not operate manufacturing facilities in the United States, prior operations included numerous manufacturing and other facilities for which we may have responsibility under various environmental laws to address conditions that may be identified in the future. See Note 17 to the consolidated financial statements for a further description of specific properties.

Environmental expenditures relating to an existing condition caused by past operations and that do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated and are evaluated independently of any future claims recovery. Generally, the timing of these accruals coincides with completion of a feasibility study or our commitment to a formal plan of action, and our estimates of cost are subject to change as new information becomes available. Costs of future expenditures for environmental remediation obligations are discounted to their present value in those situations requiring only continuing maintenance and monitoring based upon a schedule of fixed payments.

Retirement and Other Benefit Plans
We sponsor pension plans in both the United States and Canada. Our domestic pension plans cover substantially all United States employees, and our Canadian pension plans cover certain employees based on plan specifications. In addition, we maintain an unfunded Supplemental Executive Retirement Plan (“SERP”) and sponsor unfunded defined benefit postretirement life insurance plans that cover both salaried and hourly employees who had become eligible for benefits by January 1, 1995.

We determine our expense and obligations for retirement and other benefit plans based on assumptions related to discount rates, expected long-term rates of return on invested plan assets, expected salary increases and certain employee-related factors, such as turnover, retirement age and mortality, among others. Our assumptions reflect our historical experience and our best judgment regarding future expectations. Additional information related to our assumptions is as follows:

Expected long-term rate of return – The expected long-term rate of return on plan assets is based on historical and projected rates of return for current and planned asset classes in the plan’s investment portfolio. Assumed projected rates of return for each asset class were selected after analyzing experience and future expectations of the returns. The overall expected rate of return for the portfolio was developed based on the target allocation for each asset class. The weighted-average expected rate of return on plan assets used to determine our pension expense for 2015 was 8.25%. A decrease of 50 basis points in the weighted-average expected rate of return on plan assets would increase pension expense by approximately $1.9 million. The actual return on plan assets in a

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given year may differ from the expected long-term rate of return, and the resulting gain or loss is deferred and recognized into the plans’ expense over time.

Discount rate – Discount rates used to measure the present value of our benefit obligations for our pension and other postretirement benefit plans are based on a hypothetical bond portfolio constructed from a subset of high-quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plans. The weighted-average discount rate selected to measure the present value of our benefit obligations under our pension and other postretirement benefit plans was 4.7% for each. A decrease of 50 basis points in the weighted-average discount rate would have increased the projected benefit obligation of the pension and other postretirement benefit plans by approximately $27.3 million and $0.1 million, respectively.

Mortality table – As of January 30, 2016, we are using the RP-2014 Bottom Quartile tables, projected using generational scale MP-2015, an updated projection scale issued by the Society of Actuaries in 2015, to estimate the actuarial gain or loss. Actuarial gains, related to the change in mortality tables, reduced the projected benefit obligation by approximately $7.9 million as of January 30, 2016.

Refer to Note 5 to the consolidated financial statements for additional information related to our retirement and other benefit plans.

Impact of Prospective Accounting Pronouncements
Recent accounting pronouncements and their impact on the Company are described in Note 1 to the consolidated financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements as of January 30, 2016.

 
CONTRACTUAL OBLIGATIONS
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