0000014707 CALERES INC false --01-30 Q1 2021 31 628 0.07 96 138 0.07 0 0 4.0 3 3 0 0.1 0.1 0.1 Cost basis for indefinite-lived trademarks has been reduced by $60.0 million in impairment charges recognized in 2018 related to the Allen Edmonds tradename. Includes breakage revenue from unredeemed gift cards Collectively referred to as "e-commerce" below Amounts reclassified are included in other income, net. Refer to Note 13 to the condensed consolidated financial statements for additional information related to pension and other postretirement benefits. Included in net sales in the Brand Portfolio segment and eliminated in the Eliminations and Other category Amounts reclassified are included in net sales, costs of goods sold and selling and administrative expenses. Refer to Note 14 and Note 15 to the condensed consolidated financial statements for additional information related to derivative financial instruments. Excludes unamortized debt issuance costs and debt discount 00000147072020-02-022020-05-02 xbrli:shares 00000147072020-05-29 iso4217:USD 00000147072020-05-02 00000147072019-05-04 00000147072020-02-01 00000147072019-02-032019-05-04 iso4217:USDxbrli:shares 00000147072019-02-02 0000014707us-gaap:CommonStockMember2020-02-01 0000014707us-gaap:AdditionalPaidInCapitalMember2020-02-01 0000014707us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-02-01 0000014707us-gaap:RetainedEarningsMember2020-02-01 0000014707us-gaap:ParentMember2020-02-01 0000014707us-gaap:NoncontrollingInterestMember2020-02-01 0000014707us-gaap:RetainedEarningsMember2020-02-022020-05-02 0000014707us-gaap:ParentMember2020-02-022020-05-02 0000014707us-gaap:NoncontrollingInterestMember2020-02-022020-05-02 0000014707us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-02-022020-05-02 0000014707us-gaap:CommonStockMember2020-02-022020-05-02 0000014707us-gaap:AdditionalPaidInCapitalMember2020-02-022020-05-02 0000014707us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2020-02-01 0000014707us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ParentMember2020-02-01 0000014707us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-02-01 0000014707us-gaap:CommonStockMember2020-05-02 0000014707us-gaap:AdditionalPaidInCapitalMember2020-05-02 0000014707us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-05-02 0000014707us-gaap:RetainedEarningsMember2020-05-02 0000014707us-gaap:ParentMember2020-05-02 0000014707us-gaap:NoncontrollingInterestMember2020-05-02 0000014707us-gaap:CommonStockMember2019-02-02 0000014707us-gaap:AdditionalPaidInCapitalMember2019-02-02 0000014707us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-02-02 0000014707us-gaap:RetainedEarningsMember2019-02-02 0000014707us-gaap:ParentMember2019-02-02 0000014707us-gaap:NoncontrollingInterestMember2019-02-02 0000014707us-gaap:RetainedEarningsMember2019-02-032019-05-04 0000014707us-gaap:ParentMember2019-02-032019-05-04 0000014707us-gaap:NoncontrollingInterestMember2019-02-032019-05-04 0000014707us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-02-032019-05-04 0000014707us-gaap:CommonStockMember2019-02-032019-05-04 0000014707us-gaap:AdditionalPaidInCapitalMember2019-02-032019-05-04 0000014707us-gaap:AccountingStandardsUpdate201602Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2019-02-02 0000014707us-gaap:AccountingStandardsUpdate201602Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ParentMember2019-02-02 0000014707us-gaap:AccountingStandardsUpdate201602Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-02-02 0000014707us-gaap:CommonStockMember2019-05-04 0000014707us-gaap:AdditionalPaidInCapitalMember2019-05-04 0000014707us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-05-04 0000014707us-gaap:RetainedEarningsMember2019-05-04 0000014707us-gaap:ParentMember2019-05-04 0000014707us-gaap:NoncontrollingInterestMember2019-05-04 0000014707us-gaap:RevolvingCreditFacilityMember2020-03-31 0000014707us-gaap:OtherNoncurrentLiabilitiesMember2020-05-02 0000014707us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-02-02 0000014707us-gaap:AccountingStandardsUpdate201613Member2020-02-022020-05-02 0000014707srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-02-01 0000014707us-gaap:RetailMembercal:FamousFootwearMember2020-02-022020-05-02 0000014707us-gaap:RetailMembercal:BrandPortfolioMember2020-02-022020-05-02 0000014707us-gaap:RetailMembercal:EliminationsAndOtherMember2020-02-022020-05-02 0000014707us-gaap:RetailMember2020-02-022020-05-02 0000014707cal:LandedWholesaleEcommerceDropShipMembercal:FamousFootwearMember2020-02-022020-05-02 0000014707cal:LandedWholesaleEcommerceDropShipMembercal:BrandPortfolioMember2020-02-022020-05-02 0000014707cal:LandedWholesaleEcommerceDropShipMembercal:EliminationsAndOtherMember2020-02-022020-05-02 0000014707cal:LandedWholesaleEcommerceDropShipMember2020-02-022020-05-02 0000014707cal:LandedWholesaleOtherMembercal:FamousFootwearMember2020-02-022020-05-02 0000014707cal:LandedWholesaleOtherMembercal:BrandPortfolioMember2020-02-022020-05-02 0000014707cal:LandedWholesaleOtherMembercal:EliminationsAndOtherMember2020-02-022020-05-02 0000014707cal:LandedWholesaleOtherMember2020-02-022020-05-02 0000014707cal:FirstCostWholesaleMembercal:FamousFootwearMember2020-02-022020-05-02 0000014707cal:FirstCostWholesaleMembercal:BrandPortfolioMember2020-02-022020-05-02 0000014707cal:FirstCostWholesaleMembercal:EliminationsAndOtherMember2020-02-022020-05-02 0000014707cal:FirstCostWholesaleMember2020-02-022020-05-02 0000014707cal:FirstcostWholesaleEcommerceMembercal:FamousFootwearMember2020-02-022020-05-02 0000014707cal:FirstcostWholesaleEcommerceMembercal:BrandPortfolioMember2020-02-022020-05-02 0000014707cal:FirstcostWholesaleEcommerceMembercal:EliminationsAndOtherMember2020-02-022020-05-02 0000014707cal:FirstcostWholesaleEcommerceMember2020-02-022020-05-02 0000014707cal:EcommerceMembercal:FamousFootwearMember2020-02-022020-05-02 0000014707cal:EcommerceMembercal:BrandPortfolioMember2020-02-022020-05-02 0000014707cal:EcommerceMembercal:EliminationsAndOtherMember2020-02-022020-05-02 0000014707cal:EcommerceMember2020-02-022020-05-02 0000014707cal:LicenseAndRoyaltyMembercal:FamousFootwearMember2020-02-022020-05-02 0000014707cal:LicenseAndRoyaltyMembercal:BrandPortfolioMember2020-02-022020-05-02 0000014707cal:LicenseAndRoyaltyMembercal:EliminationsAndOtherMember2020-02-022020-05-02 0000014707cal:LicenseAndRoyaltyMember2020-02-022020-05-02 0000014707cal:OtherRevenueMembercal:FamousFootwearMember2020-02-022020-05-02 0000014707cal:OtherRevenueMembercal:BrandPortfolioMember2020-02-022020-05-02 0000014707cal:OtherRevenueMembercal:EliminationsAndOtherMember2020-02-022020-05-02 0000014707cal:OtherRevenueMember2020-02-022020-05-02 0000014707cal:FamousFootwearMember2020-02-022020-05-02 0000014707cal:BrandPortfolioMember2020-02-022020-05-02 0000014707cal:EliminationsAndOtherMember2020-02-022020-05-02 0000014707us-gaap:RetailMembercal:FamousFootwearMember2019-02-032019-05-04 0000014707us-gaap:RetailMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707us-gaap:RetailMembercal:EliminationsAndOtherMember2019-02-032019-05-04 0000014707us-gaap:RetailMember2019-02-032019-05-04 0000014707cal:LandedWholesaleEcommerceDropShipMembercal:FamousFootwearMember2019-02-032019-05-04 0000014707cal:LandedWholesaleEcommerceDropShipMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707cal:LandedWholesaleEcommerceDropShipMembercal:EliminationsAndOtherMember2019-02-032019-05-04 0000014707cal:LandedWholesaleEcommerceDropShipMember2019-02-032019-05-04 0000014707cal:LandedWholesaleOtherMembercal:FamousFootwearMember2019-02-032019-05-04 0000014707cal:LandedWholesaleOtherMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707cal:LandedWholesaleOtherMembercal:EliminationsAndOtherMember2019-02-032019-05-04 0000014707cal:LandedWholesaleOtherMember2019-02-032019-05-04 0000014707cal:FirstCostWholesaleMembercal:FamousFootwearMember2019-02-032019-05-04 0000014707cal:FirstCostWholesaleMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707cal:FirstCostWholesaleMembercal:EliminationsAndOtherMember2019-02-032019-05-04 0000014707cal:FirstCostWholesaleMember2019-02-032019-05-04 0000014707cal:FirstcostWholesaleEcommerceMembercal:FamousFootwearMember2019-02-032019-05-04 0000014707cal:FirstcostWholesaleEcommerceMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707cal:FirstcostWholesaleEcommerceMembercal:EliminationsAndOtherMember2019-02-032019-05-04 0000014707cal:FirstcostWholesaleEcommerceMember2019-02-032019-05-04 0000014707cal:EcommerceMembercal:FamousFootwearMember2019-02-032019-05-04 0000014707cal:EcommerceMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707cal:EcommerceMembercal:EliminationsAndOtherMember2019-02-032019-05-04 0000014707cal:EcommerceMember2019-02-032019-05-04 0000014707cal:LicenseAndRoyaltyMembercal:FamousFootwearMember2019-02-032019-05-04 0000014707cal:LicenseAndRoyaltyMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707cal:LicenseAndRoyaltyMembercal:EliminationsAndOtherMember2019-02-032019-05-04 0000014707cal:LicenseAndRoyaltyMember2019-02-032019-05-04 0000014707cal:OtherRevenueMembercal:FamousFootwearMember2019-02-032019-05-04 0000014707cal:OtherRevenueMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707cal:OtherRevenueMembercal:EliminationsAndOtherMember2019-02-032019-05-04 0000014707cal:OtherRevenueMember2019-02-032019-05-04 0000014707cal:FamousFootwearMember2019-02-032019-05-04 0000014707cal:BrandPortfolioMember2019-02-032019-05-04 0000014707cal:EliminationsAndOtherMember2019-02-032019-05-04 0000014707cal:GiftCardsMember2020-05-02 0000014707cal:GiftCardsMember2019-05-04 0000014707cal:GiftCardsMember2020-02-01 0000014707cal:LoyaltyProgramsLiabilityIncreaseDueToPurchasesMember2020-02-022020-05-02 0000014707cal:LoyaltyProgramsLiabilityDecreaseDueToExpirationsAndRedemptionsMember2020-02-022020-05-02 0000014707cal:LoyaltyProgramsLiabilityIncreaseDueToPurchasesMember2019-02-032019-05-04 0000014707cal:LoyaltyProgramsLiabilityDecreaseDueToExpirationsAndRedemptionsMember2019-02-032019-05-04 0000014707cal:StockRepurchaseProgramMember2020-02-022020-05-02 0000014707cal:StockRepurchaseProgramMember2019-02-032019-05-04 0000014707cal:StockRepurchaseProgram2018Member2020-05-02 0000014707cal:StockRepurchaseProgram2019Member2020-05-02 0000014707cal:InfinitelivedTrademarksMember2020-02-022020-05-02 0000014707cal:EffectOfCOVID19Member2020-02-022020-05-02 0000014707us-gaap:CostOfSalesMembercal:EffectOfCOVID19Member2020-02-022020-05-02 0000014707cal:BrandPortfolioMembercal:EffectOfCOVID19Member2020-02-022020-05-02 0000014707cal:FamousFootwearMembercal:EffectOfCOVID19Member2020-02-022020-05-02 0000014707cal:EliminationsAndOtherMembercal:EffectOfCOVID19Member2020-02-022020-05-02 0000014707us-gaap:CostOfSalesMembercal:BrandPortfolioMembercal:EffectOfCOVID19Member2020-02-022020-05-02 0000014707us-gaap:CostOfSalesMembercal:FamousFootwearMembercal:EffectOfCOVID19Member2020-02-022020-05-02 0000014707cal:OtherAccruedExpensesMembercal:EffectOfCOVID19Member2020-05-02 0000014707cal:BlowfishLLCMember2018-07-06 0000014707cal:BlowfishLLCMember2020-02-022020-05-02 0000014707cal:BlowfishLLCMember2019-02-032019-05-04 0000014707cal:InventoryMarkDownsMembercal:FergieBrandExitMembercal:BrandPortfolioMember2020-02-022020-05-02 0000014707cal:CarlosBrandExitMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707cal:InventoryMarkDownsMembercal:CarlosBrandExitMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707cal:RestructuringAndOtherSpecialChargesMembercal:CarlosBrandExitMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707cal:VionicMembercal:RestructuringAndOtherSpecialChargesMember2019-02-032019-05-04 0000014707cal:VionicMembercal:RestructuringAndOtherSpecialChargesMembercal:EliminationsAndOtherMember2019-02-032019-05-04 0000014707cal:VionicMembercal:RestructuringAndOtherSpecialChargesMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707cal:VionicMember2020-02-022020-05-02 0000014707cal:FamousFootwearMember2020-05-02 0000014707cal:BrandPortfolioMember2020-05-02 0000014707cal:EliminationsAndOtherMember2020-05-02 0000014707cal:FamousFootwearMember2019-05-04 0000014707cal:BrandPortfolioMember2019-05-04 0000014707cal:EliminationsAndOtherMember2019-05-04 0000014707cal:FamousFootwearMember2020-02-01 0000014707cal:BrandPortfolioMember2020-02-01 utr:Y 0000014707us-gaap:TrademarksMembersrt:MinimumMember2020-02-022020-05-02 0000014707us-gaap:TrademarksMembersrt:MaximumMember2020-02-022020-05-02 0000014707us-gaap:TrademarksMember2020-05-02 0000014707cal:InfinitelivedTrademarksMember2020-05-02 0000014707us-gaap:CustomerRelationshipsMembersrt:MinimumMember2020-02-022020-05-02 0000014707us-gaap:CustomerRelationshipsMembersrt:MaximumMember2020-02-022020-05-02 0000014707us-gaap:CustomerRelationshipsMember2020-05-02 0000014707us-gaap:TrademarksMembersrt:MinimumMember2019-02-032019-05-04 0000014707us-gaap:TrademarksMembersrt:MaximumMember2019-02-032019-05-04 0000014707us-gaap:TrademarksMember2019-05-04 0000014707cal:InfinitelivedTrademarksMember2019-05-04 0000014707cal:InfinitelivedTrademarksMember2019-02-032019-05-04 0000014707us-gaap:CustomerRelationshipsMembersrt:MinimumMember2019-02-032019-05-04 0000014707us-gaap:CustomerRelationshipsMembersrt:MaximumMember2019-02-032019-05-04 0000014707us-gaap:CustomerRelationshipsMember2019-05-04 0000014707us-gaap:TrademarksMembersrt:MinimumMember2019-02-032020-02-01 0000014707us-gaap:TrademarksMembersrt:MaximumMember2019-02-032020-02-01 0000014707us-gaap:TrademarksMember2020-02-01 0000014707cal:InfinitelivedTrademarksMember2020-02-01 0000014707cal:InfinitelivedTrademarksMember2019-02-032020-02-01 0000014707us-gaap:CustomerRelationshipsMembersrt:MinimumMember2019-02-032020-02-01 0000014707us-gaap:CustomerRelationshipsMembersrt:MaximumMember2019-02-032020-02-01 0000014707us-gaap:CustomerRelationshipsMember2020-02-01 0000014707cal:AllenEdmondsMember2018-02-042019-02-02 0000014707cal:AllenEdmondsMember2020-02-022020-05-02 0000014707cal:ViaSpigaMember2020-02-022020-05-02 0000014707cal:IndefinitelivedViaSpigaTrademarkMember2020-05-02 0000014707cal:RetailStoresMember2020-02-022020-05-02 0000014707cal:RetailStoresMember2019-02-032019-05-04 0000014707srt:ScenarioForecastMember2021-01-31 0000014707us-gaap:RevolvingCreditFacilityMembercal:FourthAmendmentToFourthAmendedAndRestatedCreditAgreementMember2019-01-17 0000014707us-gaap:RevolvingCreditFacilityMembercal:FourthAmendmentToFourthAmendedAndRestatedCreditAgreementMember2019-01-18 0000014707us-gaap:RevolvingCreditFacilityMembercal:FourthAmendmentToFourthAmendedAndRestatedCreditAgreementMember2020-04-142020-04-14 0000014707us-gaap:RevolvingCreditFacilityMembercal:FourthAmendmentToFourthAmendedAndRestatedCreditAgreementMember2020-04-14 xbrli:pure 0000014707us-gaap:RevolvingCreditFacilityMembercal:FourthAmendmentToFourthAmendedAndRestatedCreditAgreementMembersrt:MinimumMember2020-04-14 0000014707us-gaap:RevolvingCreditFacilityMembercal:FourthAmendmentToFourthAmendedAndRestatedCreditAgreementMember2020-05-02 0000014707cal:SeniorNotesDue2023Member2015-07-27 0000014707cal:SeniorNotesDue2023Memberus-gaap:DebtInstrumentRedemptionPeriodOneMember2020-02-022020-05-02 0000014707cal:SeniorNotesDue2023Memberus-gaap:DebtInstrumentRedemptionPeriodTwoMember2020-02-022020-05-02 0000014707cal:SeniorNotesDue2023Member2020-05-02 0000014707us-gaap:AccumulatedTranslationAdjustmentMember2020-02-01 0000014707us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2020-02-01 0000014707us-gaap:AociDerivativeQualifyingAsHedgeExcludedComponentParentMember2020-02-01 0000014707us-gaap:AccumulatedTranslationAdjustmentMember2020-02-022020-05-02 0000014707us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2020-02-022020-05-02 0000014707us-gaap:AociDerivativeQualifyingAsHedgeExcludedComponentParentMember2020-02-022020-05-02 0000014707us-gaap:AccumulatedTranslationAdjustmentMember2020-05-02 0000014707us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2020-05-02 0000014707us-gaap:AociDerivativeQualifyingAsHedgeExcludedComponentParentMember2020-05-02 0000014707us-gaap:AccumulatedTranslationAdjustmentMember2019-02-02 0000014707us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2019-02-02 0000014707us-gaap:AociDerivativeQualifyingAsHedgeExcludedComponentParentMember2019-02-02 0000014707us-gaap:AccumulatedTranslationAdjustmentMember2019-02-032019-05-04 0000014707us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2019-02-032019-05-04 0000014707us-gaap:AociDerivativeQualifyingAsHedgeExcludedComponentParentMember2019-02-032019-05-04 0000014707us-gaap:AccumulatedTranslationAdjustmentMember2019-05-04 0000014707us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2019-05-04 0000014707us-gaap:AociDerivativeQualifyingAsHedgeExcludedComponentParentMember2019-05-04 0000014707us-gaap:RestrictedStockMember2020-02-01 0000014707us-gaap:RestrictedStockMember2019-02-02 0000014707us-gaap:RestrictedStockMember2020-02-022020-05-02 0000014707us-gaap:RestrictedStockMember2019-02-032019-05-04 0000014707us-gaap:RestrictedStockMember2020-05-02 0000014707us-gaap:RestrictedStockMember2019-05-04 0000014707us-gaap:RestrictedStockMembercal:SharebasedCompensationAwardGradedVestingMember2020-02-022020-05-02 0000014707us-gaap:RestrictedStockMembercal:SharebasedCompensationAwardGradedVestingMember2019-02-032019-05-04 0000014707us-gaap:PerformanceSharesMember2020-02-022020-05-02 0000014707us-gaap:PerformanceSharesMember2019-02-032019-05-04 0000014707us-gaap:PerformanceSharesMembersrt:MinimumMember2020-02-022020-05-02 0000014707us-gaap:PerformanceSharesMembersrt:MaximumMember2020-02-022020-05-02 0000014707us-gaap:RestrictedStockUnitsRSUMember2020-02-022020-05-02 0000014707us-gaap:RestrictedStockUnitsRSUMember2019-02-032019-05-04 0000014707us-gaap:PensionPlansDefinedBenefitMember2020-02-022020-05-02 0000014707us-gaap:PensionPlansDefinedBenefitMember2019-02-032019-05-04 0000014707us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-02-022020-05-02 0000014707us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2019-02-032019-05-04 0000014707cal:ForeignExchangeForwardUSDollarsMember2020-05-02 0000014707cal:ForeignExchangeForwardUSDollarsMember2019-05-04 0000014707cal:ForeignExchangeForwardUSDollarsMember2020-02-01 0000014707cal:ForeignExchangeForwardEuroMember2020-05-02 0000014707cal:ForeignExchangeForwardEuroMember2019-05-04 0000014707cal:ForeignExchangeForwardEuroMember2020-02-01 0000014707cal:ForeignExchangeForwardChineseYuanMember2020-05-02 0000014707cal:ForeignExchangeForwardChineseYuanMember2019-05-04 0000014707cal:ForeignExchangeForwardChineseYuanMember2020-02-01 0000014707cal:ForeignExchangeForwardNewTaiwaneseDollarsMember2020-05-02 0000014707cal:ForeignExchangeForwardNewTaiwaneseDollarsMember2019-05-04 0000014707cal:ForeignExchangeForwardNewTaiwaneseDollarsMember2020-02-01 0000014707cal:ForeignExchangeForwardOtherCurrenciesMember2020-05-02 0000014707cal:ForeignExchangeForwardOtherCurrenciesMember2019-05-04 0000014707cal:ForeignExchangeForwardOtherCurrenciesMember2020-02-01 0000014707us-gaap:ForeignExchangeForwardMember2020-05-02 0000014707us-gaap:ForeignExchangeForwardMember2019-05-04 0000014707us-gaap:ForeignExchangeForwardMember2020-02-01 0000014707us-gaap:PrepaidExpensesAndOtherCurrentAssetsMemberus-gaap:ForeignExchangeForwardMember2020-05-02 0000014707us-gaap:PrepaidExpensesAndOtherCurrentAssetsMemberus-gaap:ForeignExchangeForwardMember2019-05-04 0000014707us-gaap:PrepaidExpensesAndOtherCurrentAssetsMemberus-gaap:ForeignExchangeForwardMember2020-02-01 0000014707us-gaap:ForeignExchangeForwardMemberus-gaap:SalesMember2020-02-022020-05-02 0000014707us-gaap:ForeignExchangeForwardMemberus-gaap:SalesMember2019-02-032019-05-04 0000014707us-gaap:ForeignExchangeForwardMemberus-gaap:CostOfSalesMember2020-02-022020-05-02 0000014707us-gaap:ForeignExchangeForwardMemberus-gaap:CostOfSalesMember2019-02-032019-05-04 0000014707us-gaap:ForeignExchangeForwardMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2020-02-022020-05-02 0000014707us-gaap:ForeignExchangeForwardMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-02-032019-05-04 0000014707us-gaap:FairValueMeasurementsRecurringMember2020-05-02 0000014707us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-05-02 0000014707us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-05-02 0000014707us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-05-02 0000014707us-gaap:FairValueMeasurementsRecurringMember2019-05-04 0000014707us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-05-04 0000014707us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-05-04 0000014707us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-05-04 0000014707us-gaap:FairValueMeasurementsRecurringMember2020-02-01 0000014707us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-02-01 0000014707us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-02-01 0000014707us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-02-01 0000014707us-gaap:SellingGeneralAndAdministrativeExpensesMembercal:FamousFootwearMember2020-02-022020-05-02 0000014707us-gaap:SellingGeneralAndAdministrativeExpensesMembercal:FamousFootwearMember2019-02-032019-05-04 0000014707us-gaap:SellingGeneralAndAdministrativeExpensesMembercal:BrandPortfolioMember2020-02-022020-05-02 0000014707us-gaap:SellingGeneralAndAdministrativeExpensesMembercal:BrandPortfolioMember2019-02-032019-05-04 0000014707us-gaap:CarryingReportedAmountFairValueDisclosureMember2020-05-02 0000014707us-gaap:EstimateOfFairValueFairValueDisclosureMember2020-05-02 0000014707us-gaap:CarryingReportedAmountFairValueDisclosureMember2019-05-04 0000014707us-gaap:EstimateOfFairValueFairValueDisclosureMember2019-05-04 0000014707us-gaap:CarryingReportedAmountFairValueDisclosureMember2020-02-01 0000014707us-gaap:EstimateOfFairValueFairValueDisclosureMember2020-02-01 0000014707cal:RedfieldSiteMember2020-02-022020-05-02 0000014707cal:RedfieldSiteMember2020-05-02 0000014707us-gaap:OtherNoncurrentLiabilitiesMembercal:RedfieldSiteMember2020-05-02 0000014707cal:OtherAccruedExpensesMembercal:RedfieldSiteMember2020-05-02 0000014707srt:ParentCompanyMember2020-05-02 0000014707srt:GuarantorSubsidiariesMember2020-05-02 0000014707srt:NonGuarantorSubsidiariesMember2020-05-02 0000014707srt:ConsolidationEliminationsMember2020-05-02 0000014707srt:ParentCompanyMember2020-02-022020-05-02 0000014707srt:GuarantorSubsidiariesMember2020-02-022020-05-02 0000014707srt:NonGuarantorSubsidiariesMember2020-02-022020-05-02 0000014707srt:ConsolidationEliminationsMember2020-02-022020-05-02 0000014707srt:ParentCompanyMember2020-02-01 0000014707srt:GuarantorSubsidiariesMember2020-02-01 0000014707srt:NonGuarantorSubsidiariesMember2020-02-01 0000014707srt:ConsolidationEliminationsMember2020-02-01 0000014707srt:ParentCompanyMember2019-05-04 0000014707srt:GuarantorSubsidiariesMember2019-05-04 0000014707srt:NonGuarantorSubsidiariesMember2019-05-04 0000014707srt:ConsolidationEliminationsMember2019-05-04 0000014707srt:ParentCompanyMember2019-02-032019-05-04 0000014707srt:GuarantorSubsidiariesMember2019-02-032019-05-04 0000014707srt:NonGuarantorSubsidiariesMember2019-02-032019-05-04 0000014707srt:ConsolidationEliminationsMember2019-02-032019-05-04 0000014707srt:ParentCompanyMember2019-02-02 0000014707srt:GuarantorSubsidiariesMember2019-02-02 0000014707srt:NonGuarantorSubsidiariesMember2019-02-02 0000014707srt:ConsolidationEliminationsMember2019-02-02
 
 

 

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

     

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended May 2, 2020

 

 

 

 

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

(State or other jurisdiction

of incorporation or organization)

43-0197190

(IRS Employer Identification Number)

 

 

8300 Maryland Avenue

St. Louis, Missouri

(Address of principal executive offices)

63105

(Zip Code)

(314) 854-4000

(Registrant's telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock - par value of $0.01 per share

CAL

New York Stock Exchange

 

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes  ☑   No ☐ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer ☑

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   

Yes  ☐     No ☑ 

 

As of May 29, 2020, 38,772,219 common shares were outstanding.

 

 

 

 

INDEX

 

 

PART I

 

Page

Item 1

Financial Statements

3

Item 2

Management's Discussion and Analysis of Financial Condition and Results of Operations

30

Item 3

Quantitative and Qualitative Disclosures About Market Risk

41

Item 4

Controls and Procedures

41

 

 

 

PART II

 

 

Item 1

Legal Proceedings

42

Item 1A

Risk Factors

42

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 3

Defaults Upon Senior Securities

42

Item 4

Mine Safety Disclosures

42

Item 5

Other Information

42

Item 6

Exhibits

43

 

Signature

44

 

 

PART I

FINANCIAL INFORMATION

   

ITEM 1

FINANCIAL STATEMENTS

 

 

CALERES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

   

(Unaudited)

         

($ thousands)

 

May 2, 2020

   

May 4, 2019

   

February 1, 2020

 

Assets

                       

Current assets:

                       
Cash and cash equivalents   $ 187,717     $ 35,778     $ 45,218  
Receivables, net     145,333       148,487       162,181  
Inventories, net     585,307       648,145       618,406  
Income taxes     46,870       3,734       6,189  
Prepaid expenses and other current assets     44,563       51,168       50,305  

Total current assets

    1,009,790       887,312       882,299  
                         
Other assets     81,457       75,614       79,654  
Deferred income taxes     9,456       10,097       9,735  
Goodwill     4,956       244,407       245,275  
Intangible assets, net     268,692       304,101       294,304  
Lease right-of-use assets     648,534       735,282       695,594  
Property and equipment     549,389       592,670       593,979  
Allowance for depreciation     (348,589 )     (356,413 )     (369,133 )

Property and equipment, net

    200,800       236,257       224,846  

Total assets

  $ 2,223,685     $ 2,493,070     $ 2,431,707  
                         

Liabilities and Equity

                       

Current liabilities:

                       
Borrowings under revolving credit agreement   $ 438,500     $ 318,000     $ 275,000  
Trade accounts payable     297,557       289,071       267,018  
Income taxes     7,592       7,124       7,186  
Lease obligations     160,138       136,005       127,869  
Other accrued expenses     173,752       161,100       173,877  

Total current liabilities

    1,077,539       911,300       850,950  
                         

Other liabilities:

                       
Noncurrent lease obligations     601,133       662,750       629,032  
Long-term debt     198,506       198,046       198,391  
Income taxes     7,786       7,786       7,786  
Deferred income taxes     11,780       46,442       55,013  
Other liabilities     41,818       38,114       41,405  

Total other liabilities

    861,023       953,138       931,627  
                         

Equity:

                       
Common stock     393       422       404  
Additional paid-in capital     154,930       146,641       153,489  
Accumulated other comprehensive loss     (33,216 )     (31,873 )     (31,843 )
Retained earnings     160,189       512,046       523,900  

Total Caleres, Inc. shareholders’ equity

    282,296       627,236       645,950  
Noncontrolling interests     2,827       1,396       3,180  

Total equity

    285,123       628,632       649,130  

Total liabilities and equity

  $ 2,223,685     $ 2,493,070     $ 2,431,707  

 

See notes to condensed consolidated financial statements.

 

 

 

CALERES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

 

   

(Unaudited)

 
   

Thirteen Weeks Ended

 

($ thousands, except per share amounts)

 

May 2, 2020

   

May 4, 2019

 

Net sales

  $ 397,184     $ 677,754  

Cost of goods sold

    275,286       397,918  

Gross profit

    121,898       279,836  

Selling and administrative expenses

    225,194       262,111  
Impairment of goodwill and intangible assets     262,719        

Restructuring and other special charges, net

    60,196       856  

Operating (loss) earnings

    (426,211 )     16,869  

Interest expense, net

    (9,478 )     (7,340 )

Other income, net

    3,585       2,619  

(Loss) earnings before income taxes

    (432,104 )     12,148  

Income tax benefit (provision)

    85,932       (3,063 )

Net (loss) earnings

    (346,172 )     9,085  

Net (loss) earnings attributable to noncontrolling interests

    (334 )     2  

Net (loss) earnings attributable to Caleres, Inc.

  $ (345,838 )   $ 9,083  
                 

Basic (loss) earnings per common share attributable to Caleres, Inc. shareholders

  $ (8.95 )   $ 0.22  
                 

Diluted (loss) earnings per common share attributable to Caleres, Inc. shareholders

  $ (8.95 )   $ 0.22  

 

See notes to condensed consolidated financial statements.

 

 

 

CALERES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

   

(Unaudited)

 
   

Thirteen Weeks Ended

 

($ thousands)

 

May 2, 2020

   

May 4, 2019

 

Net (loss) earnings

  $ (346,172 )   $ 9,085  

Other comprehensive (loss) income, net of tax:

               

Foreign currency translation adjustment

    (1,550 )     (958 )

Pension and other postretirement benefits adjustments

    66       395  

Derivative financial instruments

    92       303  

Other comprehensive loss, net of tax

    (1,392 )     (260 )

Comprehensive (loss) income

    (347,564 )     8,825  

Comprehensive (loss) income attributable to noncontrolling interests

    (353 )     14  

Comprehensive (loss) income attributable to Caleres, Inc.

  $ (347,211 )   $ 8,811  

 

See notes to condensed consolidated financial statements.

 

 

 

CALERES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   

(Unaudited)

 
   

Thirteen Weeks Ended

 

($ thousands)

 

May 2, 2020

   

May 4, 2019

 

Operating Activities

               

Net (loss) earnings

  $ (346,172 )   $ 9,085  

Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:

               
Depreciation     12,119       11,434  
Amortization of capitalized software     1,493       1,733  
Amortization of intangible assets     3,212       3,265  
Amortization of debt issuance costs and debt discount     3,563       684  
Fair value adjustments to Blowfish mandatory purchase obligation     3,233       107  
Share-based compensation expense     2,351       3,314  
Loss on disposal of property and equipment     113       136  
Impairment charges for property, equipment, and lease right-of-use assets     35,222       1,194  
Impairment of goodwill and intangible assets     262,719        
Provision for expected credit losses     8,704       117  

Changes in operating assets and liabilities, net of acquired amounts:

               
Receivables     5,999       43,117  
Inventories     31,979       38,492  
Prepaid expenses and other current and noncurrent assets     (83,129 )     (6,935 )
Trade accounts payable     30,969       (27,315 )
Accrued expenses and other liabilities     28,605       (27,836 )
Other, net     (252 )     (682 )

Net cash provided by operating activities

    728       49,910  
                 

Investing Activities

               
Purchases of property and equipment     (3,523 )     (18,443 )
Capitalized software     (977 )     (2,917 )

Net cash used for investing activities

    (4,500 )     (21,360 )
                 

Financing Activities

               
Borrowings under revolving credit agreement     168,500       84,000  
Repayments under revolving credit agreement     (5,000 )     (101,000 )
Dividends paid     (2,810 )     (2,947 )
Acquisition of treasury stock     (12,932 )      
Issuance of common stock under share-based plans, net     (906 )     (2,559 )
Other     (323 )     (394 )

Net cash provided by (used for) financing activities

    146,529       (22,900 )
Effect of exchange rate changes on cash and cash equivalents     (258 )     (72 )

Increase in cash and cash equivalents

    142,499       5,578  

Cash and cash equivalents at beginning of period

    45,218       30,200  

Cash and cash equivalents at end of period

  $ 187,717     $ 35,778  
 

 

See notes to condensed consolidated financial statements.

 

 

 

CALERES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
                           

Accumulated

                                 
                           

Other

           

Total Caleres, Inc.

   

Non-

         

(Unaudited)

 

Common Stock

   

Additional

   

Comprehensive

   

Retained

   

Shareholders’

   

controlling

         

($ thousands, except number of shares and per share amounts)

 

Shares

   

Dollars

   

Paid-In Capital

   

(Loss) Income

   

Earnings

   

Equity

   

Interests

   

Total Equity

 

BALANCE FEBRUARY 1, 2020

    40,396,757     $ 404     $ 153,489     $ (31,843 )   $ 523,900     $ 645,950     $ 3,180     $ 649,130  
Net earnings (loss)                                     (345,838 )     (345,838 )     (334 )     (346,172 )
Foreign currency translation adjustment                             (1,531 )             (1,531 )     (19 )     (1,550 )
Unrealized gain on derivative financial instruments, net of tax of $31                             92               92               92  
Pension and other postretirement benefits adjustments, net of tax of $628                             66               66               66  
Comprehensive income (loss)                             (1,373 )     (345,838 )     (347,211 )     (353 )     (347,564 )
Dividends ($0.07 per share)                                     (2,810 )     (2,810 )             (2,810 )
Acquisition of treasury stock     (1,510,888 )     (15 )                     (12,917 )     (12,932 )             (12,932 )
Issuance of common stock under share-based plans, net     414,121       4       (910 )                     (906 )             (906 )
Cumulative-effect adjustment from adoption of ASC 326                                     (2,146 )     (2,146 )             (2,146 )
Share-based compensation expense                     2,351                       2,351               2,351  

BALANCE MAY 2, 2020

    39,299,990     $ 393     $ 154,930     $ (33,216 )   $ 160,189     $ 282,296     $ 2,827     $ 285,123  
                                                                 

BALANCE FEBRUARY 2, 2019

    41,886,562     $ 419     $ 145,889     $ (31,601 )   $ 519,346     $ 634,053     $ 1,382     $ 635,435  
Net earnings                                     9,083       9,083       2       9,085  
Foreign currency translation adjustment                             (970 )             (970 )     12       (958 )
Unrealized gain on derivative financial instruments, net of tax of $96                             303               303               303  
Pension and other postretirement benefits adjustments, net of tax of $138                             395               395               395  
Comprehensive (loss) income                             (272 )     9,083       8,811       14       8,825  
Dividends ($0.07 per share)                                     (2,947 )     (2,947 )             (2,947 )
Issuance of common stock under share-based plans, net     347,283       3       (2,562 )                     (2,559 )             (2,559 )
Cumulative-effect adjustment from adoption of ASC 842                                     (13,436 )     (13,436 )             (13,436 )
Share-based compensation expense                     3,314                       3,314               3,314  

BALANCE MAY 4, 2019

    42,233,845     $ 422     $ 146,641     $ (31,873 )   $ 512,046     $ 627,236     $ 1,396     $ 628,632  

 

 

 

CALERES, INC. 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 1

Basis of Presentation

 

The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the United States Securities and Exchange Commission (“SEC”) and reflect all adjustments and accruals of a normal recurring nature, which management believes are necessary to present fairly the financial position, results of operations, comprehensive income and cash flows of Caleres, Inc. ("the Company").  These statements, however, do not include all information and footnotes necessary for a complete presentation of the Company's consolidated financial position, results of operations, comprehensive income and cash flows in conformity with accounting principles generally accepted in the United States.  The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, after the elimination of intercompany accounts and transactions.

 

The Company’s business is seasonal in nature due to consumer spending patterns, with higher back-to-school and holiday season sales.  Traditionally, the third fiscal quarter accounts for a substantial portion of the Company’s earnings for the year. Interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole, particularly given the impact of the coronavirus pandemic on the results of operations for the thirteen weeks ended May 2, 2020, as further discussed below. 

 

Certain prior period amounts in the condensed consolidated financial statements and footnotes have been reclassified to conform to the current period presentation.  These reclassifications did not affect net (loss) earnings attributable to Caleres, Inc.

 

The accompanying condensed consolidated financial statements and footnotes should be read in conjunction with the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended February 1, 2020.

 

COVID-19 Pandemic

In March 2020, the World Health Organization declared that the outbreak of the coronavirus ("COVID-19") was a global pandemic.  On  March 19, 2020, the Company announced the temporary closure of all retail stores throughout the United States and Canada.  While the Company's e-commerce business continued to serve customers during the retail store closures, the Company experienced a significant loss in sales and earnings.  In addition, many of the Company's wholesale partners also closed their retail stores and canceled orders.  On May 13, 2020, the Company announced it had begun a phased reopening of its Famous Footwear and Brand Portfolio retail stores.  As of the date of this filing, approximately 60% of the Company's retail stores are open and the Company anticipates the vast majority of its stores to begin in-store service by the end of June.  During the store closures, the Company leveraged the strength in its brands and the investments made in its e-commerce platform to quickly shift to a digital-only business.  At the end of April, the Company implemented a contactless curbside pickup option at several retail locations throughout the country and has continued to expand this service during the beginning of the second quarter.

 

The Company took decisive actions to manage its resources conservatively to mitigate the adverse impact of the pandemic.  These actions included reductions in the workforce, associate furloughs for a significant portion of the workforce, salary reductions for most remaining associates, and a reduction in the cash retainers for the Board of Directors; reducing inventory purchases; reducing marketing expenses; and minimizing costs associated with the closed retail facilities.  In addition, as a precautionary measure to increase its cash position and preserve financial flexibility given the uncertainty in the United States and global markets resulting from COVID-19, the Company increased the borrowings on its revolving credit facility in March 2020 to $440.0 million.  In April, the Company entered into an amendment to its Fourth Amended and Restated Credit Agreement to increase its borrowing capacity, as further discussed in Note 10 to the condensed consolidated financial statements.

 

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ("CARES") Act was enacted.  The CARES Act includes a provision that allows the Company to defer the employer portion of social security payroll tax payments that would have been paid between the enactment date and December 31, 2020, with 50% payable by December 31, 2021 and 50% payable by December 31, 2022.  As of May 2, 2020, the Company has deferred $0.2 million of employer social security payroll taxes, which are recorded in other liabilities on the condensed consolidated balance sheets.   

 

 

Note 2

Impact of New Accounting Pronouncements

 

Impact of Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326), which significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.  The ASU replaces the "incurred loss" model with an "expected credit loss" model that requires entities to estimate an expected lifetime credit loss on financial assets, including trade accounts receivable.  The Company adopted the ASU in the first quarter of 2020 on a modified retrospective basis.  Upon adoption, the Company recorded a cumulative-effect adjustment to retained earnings of $2.1 million, net of $0.4 million in deferred taxes.  The Company recorded a provision for expected credit losses of $8.7 million during the first quarter of 2020, primarily as a result of the COVID-19 pandemic and deteriorating financial conditions at several of the Company's wholesale customers.  

 

The following table summarizes the activity in the Company's allowance for expected credit losses during the thirteen weeks ended May 2, 2020:

 

($ thousands)

       
         

Balance at February 1, 2020

  $ 1,813  

Adjustment upon adoption of ASU 2016-13

    2,521  

Provision for expected credit losses

    8,704  

Uncollectible accounts written off, net of recoveries

    356  

Balance at May 2, 2020

  $ 13,394  

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement.  ASU 2018-13 modifies disclosure requirements on fair value measurements, removing and modifying certain disclosures, while adding other disclosures.  The Company adopted the ASU during the first quarter of 2020, which did not have a material impact on the Company's financial statement disclosures.  Refer to Note 15 to the condensed consolidated financial statements for detail regarding the Company's fair value measurements.

 

 

 

 

Impact of Prospective Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-14, Compensation — Retirement Benefits — Defined Benefit Plans — General (Subtopic 715-20), Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans.  The guidance changes the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans, eliminating the requirements for certain disclosures that are no longer considered cost beneficial and requiring new disclosures that the FASB considers pertinent.  The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.  The adoption of ASU 2018-14 is not expected to have a material impact on the Company's financial statement disclosures.  

 

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions related to intraperiod tax allocation, simplifies certain elements of accounting for basis differences and deferred tax liabilities during a business combination, and standardizes the classification of franchise taxes. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of ASU 2019-12 is not expected to have a material impact on the Company's condensed consolidated financial statements.

 

In March 2020, the SEC issued SEC Release No. 33-10762 and Release No. 34-88307, Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities.  The final rule amends the disclosure requirements in SEC Regulation S-X, Rule 3-10, which currently requires entities to separately present financial statements for subsidiary issuers and guarantors of registered debt securities unless certain exceptions are met. The rule permits entities to provide summarized financial information of the parent company and each issuer and guarantor in either a note to the financial statements or in management's discussion and analysis.  The final rule is effective for filings on or after January 4, 2021, with early application permitted.  The Company is currently evaluating the impact of the rule on its condensed consolidated financial statements.

 

In April 2020, the FASB issued interpretive guidance indicating that entities may elect not to evaluate whether a concession provided by lessors is a lease modification.  Under existing lease guidance, an entity would be required to determine if a lease concession was the result of a new arrangement reached with the landlord, which would be accounted for under the lease modification framework, or if the concession was under the enforceable rights and obligations that existed in the original lease, which would be accounted for outside the lease modification framework. The FASB guidance provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease.  During the first quarter of 2020, the Company did not modify any leases as a result of the COVID-19 pandemic and as a result, the Company has not yet made a policy election with respect to lease modifications.  Refer to Note 9 to the condensed consolidated financial statements for further discussion regarding the Company's leases. 

 

 

 

Note 3

Revenues

 

Disaggregation of Revenues

The following table disaggregates revenue by segment and major source for the periods ended May 2, 2020 and May 4, 2019:

 

   

Thirteen Weeks Ended May 2, 2020

   

($ thousands)

 

Famous Footwear

   

Brand Portfolio

   

Eliminations and Other

   

Total

   
                                   

Retail stores

  $ 137,117     $ 11,822     $     $ 148,939    
Landed wholesale-e-commerce/drop ship (1)           45,473             45,473    

Landed wholesale - other

          112,568       (11,306 )     101,262    

First-cost wholesale

          11,921             11,921    
First-cost wholesale - e-commerce (1)           246             246    

E-commerce - Company websites (1)

    54,178       32,989             87,167    

Licensing and royalty

          2,186             2,186    

Other (2)

    (43 )     33             (10)    

Net sales

  $ 191,252     $ 217,238     $ (11,306 )   $ 397,184    

 

   

Thirteen Weeks Ended May 4, 2019

 

($ thousands)

 

Famous Footwear

   

Brand Portfolio

   

Eliminations and Other

   

Total

 
                                 
Retail stores   $ 320,242     $ 36,650     $     $ 356,892  
Landed wholesale-e-commerce/drop ship (1)           63,377             63,377  
Landed wholesale - other           187,214       (15,461 )     171,753  
First-cost wholesale           14,771             14,771  
First-cost wholesale - e-commerce (1)           129             129  
E-commerce - Company websites (1)     31,781       35,696             67,477  
Licensing and royalty           3,132             3,132  

Other (2)

    142       81             223  

Net sales

  $ 352,165     $ 341,050     $ (15,461 )   $ 677,754  

 

(1) Collectively referred to as "e-commerce" below

(2Includes breakage revenue from unredeemed gift cards

 

 

Retail stores

Traditionally, the majority of the Company's revenue is generated from retail sales where control is transferred and revenue is recognized at the point of sale.  Retail sales are recorded net of estimated returns and exclude sales tax.  The Company carries a returns reserve and a corresponding return asset for expected returns of merchandise.

 

Retail sales to members of the Company's loyalty programs, including the Famously You Rewards program, include two performance obligations: the sale of merchandise and the delivery of points that may be redeemed for future purchases.  The transaction price is allocated to the separate performance obligations based on the relative stand-alone selling price.  The stand-alone selling price for the points is estimated using the retail value of the merchandise earned, adjusted for estimated breakage based upon historical redemption patterns.  The revenue associated with the initial merchandise purchased is recognized immediately and the value assigned to the points is deferred until the points are redeemed, forfeited or expired.

 

Landed wholesale

Landed sales are wholesale sales in which the merchandise is shipped directly to the customer from the Company’s warehouses. Many landed customers arrange their own transportation of merchandise and, with limited exceptions, control is transferred at the time of shipment.

 

First-cost wholesale

First-cost sales are wholesale sales in which the Company purchases merchandise from an international factory that manufactures the product and subsequently sells to a customer at an overseas port.  Revenue is recognized at the time the merchandise is delivered to the customer’s designated freight forwarder and control is transferred to the customer.

 

E-commerce

The Company also generates revenue from sales on websites maintained by the Company that are shipped from the Company's distribution centers or retail stores directly to the consumer, picked up directly by the consumer from the Company's stores and e-commerce sales from the Company's wholesale customers' websites that are fulfilled on a drop-ship or first-cost basis (collectively referred to as "e-commerce").  The Company transfers control and recognizes revenue for merchandise sold that is shipped directly to an individual consumer upon delivery to the consumer.

 

Licensing and royalty

The Company has license agreements with third parties allowing them to sell the Company’s branded product, or other merchandise that uses the Company’s owned or licensed brand names.  These license agreements provide the licensee access to the Company's symbolic intellectual property, and revenue is therefore recognized over the license term.  For royalty contracts that do not have guaranteed minimums, the Company recognizes revenue as the licensee's sales occur.  For royalty contracts that have guaranteed minimums, revenue for the guaranteed minimum is recognized on a straight-line basis during the term, until such time that the cumulative royalties exceed the total minimum guarantee.  Up-front payments are recognized over the contractual term to which the guaranteed minimum relates.

 

Contract Balances

Revenue is recorded at the transaction price, net of estimates for variable consideration for which reserves are established, including returns, allowances and discounts.  Variable consideration is estimated using the expected value method and given the large number of contracts with similar characteristics, the portfolio approach is applied to determine the variable consideration for each revenue stream.  Reserves for projected returns are based on historical patterns and current expectations.

 

Information about significant contract balances from contracts with customers is as follows:

 

($ thousands)

 

May 2, 2020

   

May 4, 2019

   

February 1, 2020

 
Customer allowances and discounts   $ 24,768     $ 20,063     $ 26,200  
Loyalty programs liability     17,326       15,700       16,405  
Returns reserve     15,427       16,621       14,033  
Gift card liability     5,528       4,944       5,742  

 

Changes in contract balances with customers generally reflect differences in relative sales volume for the period presented.  In addition, during the thirteen weeks ended May 2, 2020, the loyalty programs liability increased $5.9 million due to points and material rights accrued for purchases and decreased $5.0 million due to expirations and redemptions.  During the thirteen weeks ended May 4, 2019, the loyalty programs liability increased $5.2 million due to purchases and decreased $4.1 million due to expirations and redemptions. 

 

 

 

Note 4

Earnings (Loss) Per Share

 

The Company uses the two-class method to compute basic and diluted earnings per common share attributable to Caleres, Inc. shareholders.  In periods of net loss, no effect is given to the Company’s participating securities since they do not contractually participate in the losses of the Company.  The following table sets forth the computation of basic and diluted earnings per common share attributable to Caleres, Inc. shareholders for the periods ended May 2, 2020 and May 4, 2019:

 

   

Thirteen Weeks Ended

 

($ thousands, except per share amounts)

 

May 2, 2020

   

May 4, 2019

 

NUMERATOR

               

Net (loss) earnings

  $ (346,172 )   $ 9,085  

Net loss (earnings) attributable to noncontrolling interests

    334       (2 )

Net earnings allocated to participating securities

          (283 )

Net (loss) earnings attributable to Caleres, Inc. after allocation of earnings to participating securities

  $ (345,838 )   $ 8,800  
                 

DENOMINATOR

               

Denominator for basic (loss) earnings per common share attributable to Caleres, Inc. shareholders

    38,649       40,741  

Dilutive effect of share-based awards

          60  

Denominator for diluted (loss) earnings per common share attributable to Caleres, Inc. shareholders

    38,649       40,801  
                 

Basic (loss) earnings per common share attributable to Caleres, Inc. shareholders

  $ (8.95 )   $ 0.22  
                 

Diluted (loss) earnings per common share attributable to Caleres, Inc. shareholders

  $ (8.95 )   $ 0.22  

 

Options to purchase 22,667 and 16,667 shares of common stock for the thirteen weeks ended May 2, 2020 and May 4, 2019, respectively, were not included in the denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders because the effect would be anti-dilutive. 

 

During the thirteen weeks ended May 2, 2020 and May 4, 2019, the Company repurchased 1,510,888 and zero shares, respectively, under the 2018 and 2019 publicly announced share repurchase programs, which permits repurchases of up to 2.5 million and 5.0 million shares, respectively, as further discussed in Item 2, Unregistered Sales of Equity Securities and Use of Proceeds

 

 

Note 5

Restructuring and Other Special Charges

 

Impairment of Goodwill and Intangible Assets

During the thirteen weeks ended May 2, 2020, the Company recorded non-cash impairment charges totaling $262.7 million ($218.5 million on an after-tax basis, or $5.66 per diluted share), including $240.3 million of impairment associated with the Company's goodwill and $22.4 million associated with indefinite-lived trademarks.  All of the charges are reflected in the Brand Portfolio segment.  Refer to further discussion in Note 8 to the condensed consolidated financial statements.

 

COVID-19-Related Expenses

During the thirteen weeks ended May 2, 2020, the Company incurred costs associated with the COVID-19 pandemic and related impacts on the Company's business, totaling $93.6 million ($73.3 million on an after-tax basis, or $1.90 per diluted share).  These costs included non-cash impairment of property and equipment and lease right-of-use assets, inventory markdowns, employee severance and other identified expenses that were specific to the impact of COVID-19 on the Company's operations.  Of the $93.6 million in charges, $60.2 million is presented as restructuring and other special charges, net and $33.4 million is reflected as cost of goods sold in the condensed consolidated statements of earnings (loss).   Of the $60.2 million reflected as restructuring and other special charges, $43.8 million is reflected in the Brand Portfolio segment, $16.0 million is reflected in the Famous Footwear segment and $0.4 million is reflected within the Eliminations and Other category.  The $33.4 million reflected as cost of goods sold represents inventory markdowns, of which $27.4 million is reflected in the Brand Portfolio segment and $6.0 million is reflected in the Famous Footwear segment.  As of May 2, 2020, restructuring reserves of $1.3 million were included in other accrued expenses on the condensed consolidated balance sheets.  Refer to Note 9 to the condensed consolidated financial statements for additional information regarding the Company's leases.  

 

Blowfish Mandatory Purchase Obligation

In 2018, the Company acquired a controlling interest in Blowfish Malibu.  The noncontrolling interest is subject to a mandatory purchase obligation after a three-year period based upon an earnings multiple formula as specified in the purchase agreement.  Approximately $9.0 million was initially assigned to the mandatory purchase obligation, which will be paid upon settlement in July 2021.  Accretion and remeasurement adjustments on the mandatory purchase obligation are being recorded as interest expense.  The fair value adjustments on the mandatory purchase obligation totaled $3.2 million ($2.4 million on an after-tax basis, or $0.06 per diluted share) and zero for the thirteen weeks ended May 2, 2020 and May 4, 2019, respectively.  Refer to further discussion regarding the mandatory purchase obligation in Note 15 to the condensed consolidated financial statements.

 

Brand Exits
The Company incurred costs of $1.6 million ( $1.2 million on an after-tax basis, or $0.03 per diluted share) related to the decision during the thirteen weeks ended May 2, 2020 to exit the Fergie brand.  These charges represent inventory markdowns required to reduce the value of inventory to net realizable value and are presented in cost of goods sold on the condensed consolidated statements of earnings (loss) within the Brand Portfolio segment. 
 
The Company's license agreement to sell Carlos by Carlos Santana footwear expired in December 2018.  In connection with the decision to exit the Carlos brand, the Company incurred restructuring-related costs of $1.9 million ( $1.4 million on an after-tax basis, or $0.03 per diluted share) during the thirteen weeks ended May 4, 2019.  Of these charges included in the Brand Portfolio segment, $1.3 million ( $1.0 million on an after-tax basis or $0.02 per diluted share) primarily represents incremental inventory markdowns required to reduce the value of inventory to net realizable value and is presented in cost of goods sold on the condensed consolidated statements of earnings (loss) and the remaining $0.6 million ( $0.4 million on an after-tax basis, or $0.01 per diluted share) for severance and other related costs is presented in restructuring and other special charges.  There were no corresponding costs in the thirteen weeks ended May 2, 2020.
 

Vionic Integration-Related Costs

During the thirteen weeks ended May 4, 2019, the Company incurred integration-related costs associated with the acquisition of Vionic in October 2018, primarily for severance, totaling $0.3 million ($0.2 million on an after-tax basis, or $0.01 per diluted share).  Of the $0.3 million in costs, which are presented as restructuring and other special charges, net in the condensed consolidated statements of earnings (loss), $0.2 million are reflected within the Eliminations and Other category and $0.1 million are included in the Brand Portfolio segment.  There were no corresponding costs in the thirteen weeks ended May 2, 2020.

 

 

 

 

 

Note 6

Business Segment Information

 

Following is a summary of certain key financial measures for the Company’s business segments for the periods ended May 2, 2020 and May 4, 2019:

 

($ thousands)

 

Famous Footwear

   

Brand Portfolio

   

Eliminations and Other

   

Total

 

Thirteen Weeks Ended May 2, 2020

                               

Net sales

  $ 191,252     $ 217,238     $ (11,306 )   $ 397,184  

Intersegment sales (1)

          11,306             11,306  

Operating loss

    (67,540 )     (345,748 )     (12,923 )     (426,211 )

Segment assets

    897,046       995,760       330,879       2,223,685  
                                 

Thirteen Weeks Ended May 4, 2019

                               

Net sales

  $ 352,165     $ 341,050     $ (15,461 )   $ 677,754  

Intersegment sales (1)

          15,461             15,461  

Operating earnings (loss)

    10,813       12,929       (6,873 )     16,869  

Segment assets

    998,606       1,355,842       138,622       2,493,070  

 

(1) Included in net sales in the Brand Portfolio segment and eliminated in the Eliminations and Other category

 

The Eliminations and Other category includes corporate assets, administrative expenses and other costs and recoveries, which are not allocated to the operating segments, as well as the elimination of intersegment sales and profit.

 

Following is a reconciliation of operating (loss) earnings to (loss) earnings before income taxes:

 

   

Thirteen Weeks Ended

 

($ thousands)

 

May 2, 2020

   

May 4, 2019

 

Operating (loss) earnings

  $ (426,211 )   $ 16,869  

Interest expense, net

    (9,478 )     (7,340 )

Other income, net

    3,585       2,619  

(Loss) earnings before income taxes

  $ (432,104 )   $ 12,148  

 

 

 

Note 7

Inventories

 

The Company's net inventory balance was comprised of the following:

 

($ thousands)

 

May 2, 2020

   

May 4, 2019

   

February 1, 2020

 
Raw materials   $ 16,848     $ 18,618     $ 18,455  
Work-in-process     357       478       454  
Finished goods     568,102       629,049       599,497  

Inventories, net

  $ 585,307     $ 648,145     $ 618,406  

 

 

 

Note 8

Goodwill and Intangible Assets

 

Goodwill and intangible assets were as follows:

 

($ thousands)

 

May 2, 2020

   

May 4, 2019

   

February 1, 2020

 

Intangible Assets

                       

Famous Footwear

  $ 2,800     $ 2,800     $ 2,800  
Brand Portfolio     365,888       388,288       388,288  

Total intangible assets

    368,688       391,088       391,088  
Accumulated amortization     (99,996 )     (86,987 )     (96,784 )

Total intangible assets, net

    268,692       304,101       294,304  

Goodwill

                       
Brand Portfolio     4,956       244,407       245,275  

Total goodwill

    4,956       244,407       245,275  

Goodwill and intangible assets, net

  $ 273,648     $ 548,508     $ 539,579  

 

The Company's intangible assets as of May 2, 2020, May 4, 2019 and February 1, 2020 were as follows:

 

($ thousands)

   

May 2, 2020

 
 

Estimated Useful Lives (In Years)

 

Cost Basis

   

Accumulated Amortization

   

Impairment

   

Net Carrying Value

 

Trademarks

15 - 40

  $ 288,788     $ 94,294     $     $ 194,494  

Trademarks

Indefinite

    58,100 (1 )         22,400       35,700  

Customer relationships

15 - 16

    44,200       5,702             38,498  
      $ 391,088     $ 99,996     $ 22,400     $ 268,692  

 

13

 
     

May 4, 2019

 
 

Estimated Useful Lives (In Years)

 

Cost Basis

   

Accumulated Amortization

   

Impairment

   

Net Carrying Value

 

Trademarks

15 - 40

  $ 288,788     $ 84,427           $ 204,361  

Trademarks

Indefinite

    58,100 (1 )               58,100  

Customer relationships

15 - 16

    44,200       2,560             41,640  
      $ 391,088     $ 86,987           $ 304,101  

 

     

February 1, 2020

 
 

Estimated Useful Lives (In Years)

 

Cost Basis

   

Accumulated Amortization

   

Impairment

   

Net Carrying Value

 

Trademarks

15 - 40

  $ 288,788     $ 91,827           $ 196,961  

Trademarks

Indefinite

    58,100 (1 )               58,100  

Customer relationships

15 - 16

    44,200       4,957             39,243  
      $ 391,088     $ 96,784           $ 294,304  

 

(1) Cost basis for indefinite-lived trademarks has been reduced by $60.0 million in impairment charges recognized in 2018 related to the Allen Edmonds tradename.

 

Amortization expense related to intangible assets was $3.2 million and $3.3 million for the thirteen weeks ended May 2, 2020 and May 4, 2019, respectively.  The Company estimates that amortization expense related to intangible assets will be approximately $13.1 million in 2020, $12.9 million in 2021, $12.5 million in 2022, $12.2 million in 2023 and $11.4 million in 2024. 

 

Goodwill is tested for impairment at least annually, or more frequently if events or circumstances indicate it might be impaired, using either the qualitative assessment or a quantitative fair value-based test.  During the first quarter of 2020, as a result of the significant decline in the Company's share price and market capitalization and the impact of COVID-19 on the Company's business operations, the Company determined that an interim assessment of goodwill was required.  A quantitative assessment was performed for all reporting units as of May 2, 2020.  The assessment indicated that the carrying value of the goodwill associated with the Brand Portfolio and Vionic reporting units was impaired, resulting in total goodwill impairment charges of $240.3 million.  The Company recorded no goodwill impairment charges during the thirteen weeks ended May 4, 2019.

 

Indefinite-lived intangible assets are tested for impairment as of the first day of the fourth quarter of each fiscal year unless events or circumstances indicate an interim test is required.  As a result of the triggering event from the economic impacts of COVID-19, an interim assessment was performed as of May 2, 2020.  The indefinite-lived intangible asset impairment review resulted in total impairment charges of $22.4 million for the thirteen weeks ended May 2, 2020, including $12.2 million associated with the indefinite-lived Allen Edmonds trademark and $10.2 million of impairment associated with the indefinite-lived Via Spiga trademark.  The carrying value of the Via Spiga trademark of $0.5 million will be amortized over approximately two years.  The Company recorded no impairment charges during the thirteen weeks ended May 4, 2019.

 

 

Note 9

Leases

 

The Company leases all of its retail locations and certain manufacturing facilities, office locations, distribution centers and equipment.  At contract inception, leases are evaluated and classified as either operating or finance leases.  Leases with an initial term of 12 months or less are not recorded on the balance sheet. 

 

Lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term.  The majority of the Company’s leases do not provide an implicit rate and therefore, the Company uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future payments.  Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.  Variable lease payments are expensed as incurred.

 

The Company regularly analyzes the results of all of its stores and assesses the viability of underperforming stores to determine whether events or circumstances exist that indicate the stores should be closed or whether the carrying amount of their long-lived assets may not be recoverable.  After allowing for an appropriate start-up period, unusual nonrecurring events or favorable trends, property and equipment at stores and the lease right-of-use assets indicated as impaired are written down to fair value as calculated using a discounted cash flow method.  The Company recorded asset impairment charges, primarily related to underperforming retail stores, of $35.2 million and $1.2 million in thirteen weeks ended May 2, 2020 and May 4, 2019, respectively.  The impairment charges recorded in the thirteen weeks ended May 2, 2020, including $20.4 million associated with operating lease right-of-use assets and $14.8 million associated with property and equipment, reflect the impact of the temporary store closures related to the outbreak of the COVID-19 pandemic and the Company's estimates of remaining cash flows.  Refer to Note 5 and Note 15 to the condensed consolidated financial statements for further discussion on these impairment charges. 

 

As a result of the temporary store closures associated with the COVID-19 pandemic, the Company is negotiating with landlords to modify payment terms for certain leases.  Deferred payments for these leases are reflected in lease obligations on the condensed consolidated balance sheets.  As further discussed in Note 2 to the condensed consolidated financial statements, under relief provided by the FASB, entities may make a policy election to account for the lease concessions as if the enforceable rights existed under the original contract, accounting for them as variable rent rather than lease modifications.  The Company has not yet made a policy election with respect to lease concessions.

 

 

14

 

During the thirteen weeks ended May 2, 2020, the Company entered into new or amended leases that resulted in the recognition of right-of-use assets and lease obligations of $22.4 million on the condensed consolidated balance sheets.  As of May 2, 2020, the Company has entered into lease commitments for three retail locations for which the leases have not yet commenced.  The Company anticipates that the leases for all new retail locations will begin in the current fiscal year.  Upon commencement, right-of-use assets and lease liabilities of approximately $4.0 million will be recorded on the condensed consolidated balance sheets. 

 

The components of lease expense for the thirteen weeks ended May 2, 2020 were as follows:

 

   

Thirteen Weeks Ended

 

($ thousands)

 

May 2, 2020

   

May 4, 2019

 

Operating lease expense

  $ 45,240     $ 46,461  

Variable lease expense

    11,334       12,184  

Short-term lease expense

    712       1,115  

Sublease income

    (19 )     (73 )

Total lease expense

  $ 57,267     $ 59,687  

 

Supplemental cash flow information related to leases is as follows:

 

   

Thirteen Weeks Ended

 

($ thousands)

 

May 2, 2020

   

May 4, 2019

 

Cash paid for lease liabilities

  $ 15,117       46,511  

Cash received from sublease income

    19       73  

 

 

 

Note 10

Long-term and Short-term Financing Arrangements

 

Credit Agreement

The Company maintains a revolving credit facility for working capital needs.  On December 18, 2014, the Company and certain of its subsidiaries (the “Loan Parties”) entered into a Fourth Amended and Restated Credit Agreement ("the Former 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 Former Credit Agreement other than Sidney Rich Associates, Inc. and BG Retail, LLC.  Allen Edmonds and Vionic were joined to the Agreement as guarantors on December 13, 2016 and October 31, 2018, respectively.  After giving effect to the joinders, the Company is the lead borrower, and Sidney Rich Associates, Inc., BG Retail, LLC, Allen Edmonds and Vionic are each co-borrowers and guarantors under the Former Credit Agreement.  On January 18, 2019, the Loan Parties entered into a Third Amendment to Fourth Amended and Restated Credit Agreement to extend the maturity date to January 18, 2024 and change the borrowing capacity under the Former Credit Agreement from an aggregate amount of up to $600.0 million to an aggregate amount of up to $500.0 million, with the option to increase by up to $250.0 million.  On  April 14, 2020, the Company entered into a Fourth Amendment to Fourth Amended and Restated Credit Agreement (as so amended, the "Credit Agreement") which, among other modifications, increased the amount available under the revolving credit facility by $100.0 million to an aggregate amount of up to $600.0 million, subject to borrowing base restrictions, and may be further increased by up to $150.0 million.  The Credit Agreement increased the spread applied to the LIBOR or prime rate by a total of 75 basis points and increased the unused line fee by 5 basis points.  

 

Borrowing availability under the Credit Agreement is limited to the lesser of the total commitments and the borrowing base ("Loan Cap"), which is based on stated percentages of the sum of eligible accounts receivable, eligible inventory and eligible credit card receivables, as defined, less applicable reserves.  Under the Credit Agreement, the Loan Parties’ obligations are secured by a first-priority security interest in all accounts receivable, inventory and certain other collateral.

 

Interest on borrowings is at variable rates based on the London Interbank Offered Rate (“LIBOR”) (with a floor of 1.0% imposed by the Credit Agreement) or the prime rate, as defined in the Credit Agreement, plus a spread.  The interest rate and fees for letters of credit vary based upon the level of excess availability under the Credit Agreement.  There is an unused line fee payable on the unused portion under the facility and a letter of credit fee payable on the outstanding face amount under letters of credit.

 

The Credit Agreement limits the Company’s ability to create, incur, assume or permit to exist additional indebtedness and liens, make investments or specified payments, give guarantees, pay dividends, make capital expenditures and merge or acquire or sell assets.  In addition, if excess availability falls below the greater of 10.0% of the lesser of the Loan Cap and $40.0 million for three consecutive business days, and the fixed charge coverage ratio is less than 1.0 to 1.0, the Company would be in default under the Credit Agreement and certain additional covenants would be triggered.  

 

The Credit Agreement contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to similar obligations, certain events of bankruptcy and insolvency, judgment defaults and the failure of any guaranty or security document supporting the agreement to be in full force and effect.  If an event of default occurs, the collateral agent may assume dominion and control over the Company’s cash (a “cash dominion event”) until such event of default is cured or waived or the excess availability exceeds such amount for 30 consecutive days, provided that a cash dominion event shall be deemed continuing (even if an event of default is no longer continuing and/or excess availability exceeds the required amount for 30 consecutive business days) after a cash dominion event has occurred and been discontinued on two occasions in any 12-month period.  The Credit Agreement also contains certain other covenants and restrictions.  The Company was in compliance with all covenants and restrictions under the Credit Agreement as of May 2, 2020.

 

At May 2, 2020, the Company had $438.5 million borrowings outstanding and $11.1 million in letters of credit outstanding under the Credit Agreement.  Total additional borrowing availability was $104.2 million at May 2, 2020.

 

$200 Million Senior Notes

On July 27, 2015, the Company issued $200.0 million aggregate principal amount of 6.25% Senior Notes due 2023 (the "Senior Notes").  The Senior Notes are guaranteed on a senior unsecured basis by each of the Company's subsidiaries that is a borrower or guarantor under the Credit Agreement.  Interest on the Senior Notes is payable on February 15 and August 15 of each year.  The Senior Notes will mature on August 15, 2023.  The Company may redeem all or a part of the Senior Notes at the redemption prices (expressed as a percentage of principal amount) set forth below plus accrued and unpaid interest, and Additional Interest (as defined in the Senior Notes indenture), if redeemed during the 12-month period beginning on August 15 of the years indicated below:

 

Year

 

Percentage

2020

    101.563 %

2021 and thereafter

    100.000 %

 

If the Company experiences specific kinds of changes of control, it would be required to offer to purchase the Senior Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest and Additional Interest, if any, to, but not including, the date of repurchase.

 

The Senior Notes also contain certain other covenants and restrictions that limit certain activities including, among other things, levels of indebtedness, payments of dividends, the guarantee or pledge of assets, certain investments, common stock repurchases, mergers and acquisitions and sales of assets.  As of May 2, 2020, the Company was in compliance with all covenants and restrictions relating to the Senior Notes.

 

 

 

Note 11

Shareholders’ Equity

 

Accumulated Other Comprehensive Loss

The following table sets forth the changes in accumulated other comprehensive loss (OCL) by component for the periods ended May 2, 2020 and May 4, 2019:

 

($ thousands)

  Foreign Currency Translation     Pension and Other Postretirement Transactions (1)     Derivative Financial Instrument Transactions (2)     Accumulated Other Comprehensive (Loss) Income  

Balance at February 1, 2020

  $ (580 )   $ (31,171 )   $ (92 )   $ (31,843 )

Other comprehensive (loss) income before reclassifications

    (1,531 )           87       (1,444 )

Reclassifications:

                               

Amounts reclassified from accumulated other comprehensive loss

          694       6       700  

Tax benefit

          (628 )     (1 )     (629 )

Net reclassifications

          66       5       71  

Other comprehensive (loss) income

    (1,531 )     66       92       (1,373 )

Balance at May 2, 2020

  $ (2,111 )   $ (31,105 )   $     $ (33,216 )
                                 

Balance at February 2, 2019

  $ 62     $ (31,055 )   $ (608 )   $ (31,601 )

Other comprehensive (loss) income before reclassifications

    (970 )           169       (801 )

Reclassifications:

                               

Amounts reclassified from accumulated other comprehensive loss

          533       171       704  

Tax benefit

          (138 )     (37 )     (175 )

Net reclassifications

          395       134       529  

Other comprehensive (loss) income

    (970 )     395       303       (272 )

Balance at May 4, 2019

  $ (908 )   $ (30,660 )   $ (305 )   $ (31,873 )

 

 

(1)

Amounts reclassified are included in other income, net.  Refer to Note 13 to the condensed consolidated financial statements for additional information related to pension and other postretirement benefits.

 

(2)

Amounts reclassified are included in net sales, costs of goods sold and selling and administrative expenses.  Refer to Note 14 and Note 15 to the condensed consolidated financial statements for additional information related to derivative financial instruments.

 

 

 

Note 12

Share-Based Compensation

 

The Company recognized share-based compensation expense of $2.4 million and $3.3 million during the thirteen weeks ended May 2, 2020 and May 4, 2019, respectively.

 

The Company issued 414,121 and 347,283 shares of common stock during the thirteen weeks ended May 2, 2020 and May 4, 2019, respectively, for restricted stock grants, stock performance awards issued to employees, stock options exercised and common and restricted stock grants issued to non-employee directors, net of forfeitures and shares withheld to satisfy the tax withholding requirement.  

 

Restricted Stock 

The following table summarizes restricted stock activity for the periods ended May 2, 2020 and May 4, 2019:

 

   

Thirteen Weeks Ended

     

Thirteen Weeks Ended

 
   

May 2, 2020

     

May 4, 2019

 
    Total Number of Restricted Shares    

Weighted- Average Grant Date Fair Value

      Total Number of Restricted Shares    

Weighted- Average Grant Date Fair Value

 

February 1, 2020

    1,271,795     $ 26.77  

February 2, 2019

    1,249,223     $ 29.17  
Granted     550,683       5.81   Granted     397,550       23.42  
Forfeited     (32,687 )     25.60   Forfeited     (21,425 )     29.51  
Vested     (368,048 )     28.38   Vested     (204,920 )     30.06  
May 2, 2020     1,421,743     $ 18.20   May 4, 2019     1,420,428     $ 27.43  

 

All of the restricted shares granted during the thirteen weeks ended May 2, 2020 and May 4, 2019 have a graded-vesting term of three years.  Share-based compensation expense for graded-vesting grants is recognized ratably over the respective vesting periods.  

 

Performance Share Awards

During the thirteen weeks ended May 2, 2020, the Company granted no performance share awards.  During the thirteen weeks ended May 4, 2019, the Company granted performance share awards for a targeted 180,000 shares, with a weighted-average grant date fair value of $23.42.  Vesting of performance-based awards is dependent upon the financial performance of the Company and the attainment of certain financial goals during the three-year period following the grant.  At the end of the vesting period, the employee will have earned an amount of shares or units between 0% and 200% of the targeted award, depending on the achievement of the specified financial goals for the service period.  Compensation expense is recognized based on the fair value of the award and the anticipated number of shares or units to be awarded for each tranche in accordance with the vesting schedule of the units over the three-year service period.  

 

18

 

Restricted Stock Units for Non-Employee Directors

Equity-based grants may be made to non-employee directors in the form of restricted stock units ("RSUs") payable in cash or common stock at no cost to the non-employee director.  The RSUs earn dividend equivalents at the same rate as dividends on the Company's common stock.  The dividend equivalents, which vest immediately, are automatically re-invested in additional RSUs.  Expense related to the initial grant of RSUs is recognized ratably over the vesting period based upon the fair value of the RSUs.  The RSUs payable in cash are remeasured at the end of each period.  Expense for the dividend equivalents is recognized at fair value when the dividend equivalents are granted.  The Company granted 8,309 and 1,114 RSUs to non-employee directors for dividend equivalents, during the thirteen weeks ended May 2, 2020 and May 4, 2019, respectively, with weighted-average grant date fair values of $3.86 and $25.08, respectively.  

 

 

Note 13

Retirement and Other Benefit Plans

 

The following table sets forth the components of net periodic benefit income for the Company, including domestic and Canadian plans:

 

   

Pension Benefits

   

Other Postretirement Benefits

 
   

Thirteen Weeks Ended

   

Thirteen Weeks Ended

 

($ thousands)

 

May 2, 2020

   

May 4, 2019

   

May 2, 2020

   

May 4, 2019

 
Service cost   $ 2,160     $ 1,854     $     $  
Interest cost     3,154       3,725       10       15  
Expected return on assets     (7,443 )     (6,892 )            

Amortization of:

                               
Actuarial loss (gain)     1,083       928       (39 )     (30 )
Prior service income     (350 )     (365 )            

Total net periodic benefit income

  $ (1,396 )   $ (750 )   $ (29 )   $ (15 )

 

The non-service cost components of net periodic benefit income are included in other income, net in the condensed consolidated statements of earnings (loss). Service cost is included in selling and administrative expenses.

 

 

 

Note 14

Risk Management and Derivatives

 

In the normal course of business, the Company’s financial results are impacted by currency rate movements in foreign currency denominated assets, liabilities and cash flows as it makes a portion of its purchases and sales in local currencies.  The Company has established policies and business practices that are intended to mitigate a portion of the effect of these exposures.  The Company uses derivative financial instruments, primarily forward contracts, to manage its currency exposures.  These derivative financial instruments are viewed as risk management tools and are not used for trading or speculative purposes.  Derivatives entered into by the Company are designated as cash flow hedges of forecasted foreign currency transactions. 

 

Derivative financial instruments expose the Company to credit and market risk.  The market risk associated with these instruments resulting from currency exchange movements is expected to offset the market risk of the underlying transactions being hedged.  The Company does not believe there is a significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with major international financial institutions.  Credit risk is managed through the continuous monitoring of exposures to such counterparties. 

 

The Company’s hedging strategy uses forward contracts as cash flow hedging instruments, which are recorded in the Company's condensed consolidated balance sheets at fair value. The effective portion of gains and losses resulting from changes in the fair value of these hedge instruments are deferred in accumulated other comprehensive loss and reclassified to earnings in the period that the hedged transaction is recognized in earnings.

 

As of  May 4, 2019 and  February 1, 2020, the Company had forward contracts maturing through May 2020.  The Company had no forward contracts as of May 2, 2020.  The contract amounts in the following table represent the net notional amount of all purchase and sale contracts of a foreign currency. 

 

(U.S. $ equivalent in thousands)

 

May 2, 2020

   

May 4, 2019

   

February 1, 2020

 

Financial Instruments

                       

U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)

  $     $ 13,230     $ 3,963  

Euro

          12,134       1,251  

Chinese yuan

          2,858       2,355  

New Taiwanese dollars

          469        

Other currencies

          376       69  

Total financial instruments

  $     $ 29,067     $ 7,638  

 

The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of May 2, 2020, May 4, 2019 and February 1, 2020 are as follows:

 

 

Asset Derivatives

 

Liability Derivatives

 

($ thousands)

Balance Sheet Location

 

Fair Value

 

Balance Sheet Location

 

Fair Value

 

Foreign Exchange Forward Contracts

                   
May 2, 2020 Prepaid expenses and other current assets       Other accrued expenses      
May 4, 2019 Prepaid expenses and other current assets     183   Other accrued expenses     459  

February 1, 2020

Prepaid expenses and other current assets

     

Other accrued expenses

    103  

 

20

 

For the thirteen weeks ended May 2, 2020 and May 4, 2019, the effect of derivative instruments in cash flow hedging relationships on the condensed consolidated statements of earnings was as follows:

 

   

Thirteen Weeks Ended

 

($ thousands)

 

May 2, 2020

   

May 4, 2019

 

Foreign Exchange Forward Contracts: Income Statement Classification Gains (Losses) - Realized

 

Gain Recognized in OCL on Derivatives

   

Loss Reclassified from Accumulated OCL into Earnings

   

(Loss) Gain Recognized in OCL on Derivatives

   

Loss Reclassified from Accumulated OCL into Earnings

 
                                 

Net sales

  $ 23     $     $ (99 )   $  

Cost of goods sold

    60             289       (22 )

Selling and administrative expenses

    33       (6 )     35       (149 )
 

Additional information related to the Company’s derivative financial instruments are disclosed within Note 15 to the condensed consolidated financial statements.

 

 

Note 15

Fair Value Measurements

 

Fair Value Hierarchy

Fair value measurement disclosure requirements specify a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (“observable inputs”) or reflect the Company’s own assumptions of market participant valuation (“unobservable inputs”).  In accordance with the fair value guidance, the inputs to valuation techniques used to measure fair value are categorized into three levels based on the reliability of the inputs as follows: 

 

Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

 

Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and

 

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

 

In determining fair value, the Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.  The Company also considers counterparty credit risk in its assessment of fair value.  Classification of the financial or non-financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. 

 

Measurement of Fair Value 

The Company measures fair value as an exit price, the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date, using the procedures described below for all financial and non-financial assets and liabilities measured at fair value. 

 

Money Market Funds 

The Company has cash equivalents consisting of short-term money market funds backed by U.S. Treasury securities.  The primary objective of these investing activities is to preserve the Company’s capital for the purpose of funding operations and it does not enter into money market funds for trading or speculative purposes.  The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1). 

 

21

 

Non-Qualified Deferred Compensation Plan Assets and Liabilities 

The Company maintains a non-qualified deferred compensation plan (the “Deferred Compensation Plan”) for the benefit of certain management employees.  The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan, and the account balance fluctuates with the investment returns on those funds.  The Deferred Compensation Plan permits the deferral of up to 50% of base salary and 100% of compensation received under the Company’s annual incentive plan.  The deferrals are held in a separate trust, which has been established by the Company to administer the Deferred Compensation Plan.  The assets of the trust are subject to the claims of the Company’s creditors in the event that the Company becomes insolvent.  Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e., a “Rabbi Trust”).  The liabilities of the Deferred Compensation Plan are presented in other accrued expenses and the assets held by the trust are classified within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets.  Changes in deferred compensation plan assets and liabilities are charged to selling and administrative expenses.  The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1). 

 

Deferred Compensation Plan for Non-Employee Directors  

Non-employee directors are eligible to participate in a deferred compensation plan with deferred amounts valued as if invested in the Company’s common stock through the use of phantom stock units (“PSUs”).  Under the plan, each participating director’s account is credited with the number of PSUs equal to the number of shares of the Company’s common stock that the participant could purchase or receive with the amount of the deferred compensation, based upon the average of the high and low prices of the Company’s common stock on the last trading day of the fiscal quarter when the cash compensation was earned.  Dividend equivalents are paid on PSUs at the same rate as dividends on the Company’s common stock and are re-invested in additional PSUs at the next fiscal quarter-end.  The liabilities of the plan are based on the fair value of the outstanding PSUs and are presented in other accrued expenses (current portion) or other liabilities in the accompanying condensed consolidated balance sheets.  Gains and losses resulting from changes in the fair value of the PSUs are presented in selling and administrative expenses in the Company’s condensed consolidated statements of earnings (loss).  The fair value of each PSU is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1). 

 

Restricted Stock Units for Non-Employee Directors

Under the Company’s incentive compensation plans, cash-equivalent restricted stock units (“RSUs”) of the Company were previously granted at no cost to non-employee directors.  These cash-equivalent RSUs are subject to a vesting requirement (usually one year), earn dividend-equivalent units, and are settled in cash on the date the director terminates service or such earlier date as a director may elect, subject to restrictions, based on the then current fair value of the Company’s common stock.  The fair value of each cash-equivalent RSU is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1).  Additional information related to RSUs for non-employee directors is disclosed in Note 12 to the condensed consolidated financial statements.

 

Derivative Financial Instruments 

The Company uses derivative financial instruments, primarily foreign exchange contracts, to reduce its exposure to market risks from changes in foreign exchange rates.  These foreign exchange contracts are measured at fair value using quoted forward foreign exchange prices from counterparties corroborated by market-based pricing (Level 2).  Additional information related to the Company’s derivative financial instruments is disclosed in Note 14 to the condensed consolidated financial statements. 

 

Mandatory Purchase Obligation

The Company recorded a mandatory purchase obligation of the noncontrolling interest in conjunction with the acquisition of Blowfish Malibu in July of 2018.  The fair value of the mandatory purchase obligation is based on the earnings formula specified in the purchase agreement (Level 3).  Accretion of the mandatory purchase obligation and fair value adjustments are recorded as interest expense.  During the thirteen weeks ended May 2, 2020, the Company recorded remeasurement adjustments of $3.2 million.  Accretion of $0.1 million was recorded during the thirteen weeks ended May 4, 2019.  The earnings projections and discount rate utilized in the estimate of the fair value of the mandatory purchase obligation require management judgment and are the assumptions to which the fair value calculation is the most sensitive.  Refer to further discussion of the mandatory purchase obligation in Note 5 to the condensed consolidated financial statements.

 

22

 

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at May 2, 2020, May 4, 2019 and February 1, 2020

 

           

Fair Value Measurements

 

($ thousands)

 

Total

   

Level 1

   

Level 2

   

Level 3

 

Asset (Liability)

                               

May 2, 2020:

                               
Cash equivalents – money market funds   $ 146,009     $ 146,009     $     $  

Non-qualified deferred compensation plan assets

    7,435       7,435              

Non-qualified deferred compensation plan liabilities

    (7,435 )     (7,435 )            

Deferred compensation plan liabilities for non-employee directors

    (818 )     (818 )            

Restricted stock units for non-employee directors

    (1,093 )     (1,093 )            
Mandatory purchase obligation - Blowfish Malibu     (18,433 )                 (18,433 )

May 4, 2019:

                               

Cash equivalents – money market funds

  $ 4,500     $ 4,500     $     $  

Non-qualified deferred compensation plan assets

    7,865       7,865              

Non-qualified deferred compensation plan liabilities

    (7,865 )     (7,865 )            

Deferred compensation plan liabilities for non-employee directors

    (2,173 )     (2,173 )            

Restricted stock units for non-employee directors