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

FORM 10-Q 
 
(Mark One)
[X]
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
 
For the quarterly period ended July 30, 201629, 2017
  
[  ]
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)
  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  
Yes  þ   No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company," and “smaller reporting"emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨(Do not check if a smaller reporting company)
Smaller reporting company ¨
(Do not check if a 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 þ 
 
As of August 26, 2016, 42,920,03825, 2017, 42,965,855 common shares were outstanding.


INDEX

PART IPage
Item 1
Financial Statements
3
Item 2
Management's Discussion and Analysis of Financial Condition and Results of Operations
33
Item 3
Quantitative and Qualitative Disclosures About Market Risk
44
Item 4
Controls and Procedures
44
PART II
Item 1
Legal Proceedings
45
Item 1A
Risk Factors
45
Item 2
Unregistered Sale of Equity Securities and Use of Proceeds
45
Item 3
Defaults Upon Senior Notes
46
Item 4
Mine Safety Disclosures
46
Item 5
Other Information
46
Item 6
Exhibits
47
Signature
48




PART IFINANCIAL INFORMATION
ITEM 1FINANCIAL STATEMENTS
CALERES, INC.          
CONDENSED CONSOLIDATED BALANCE SHEETS          
(Unaudited)  
(Unaudited)  
($ thousands)July 30, 2016
 August 1, 2015
 January 30, 2016
July 29, 2017
 July 30, 2016
 January 28, 2017
Assets     
     
Current assets:          
Cash and cash equivalents$165,729

$129,345

$118,151
$52,942

$165,729

$55,332
Restricted cash—

41,482

—
Receivables, net144,309

144,213

153,664
143,616

144,309

153,121
Inventories, net648,881

641,128

546,745
722,005

648,881

585,764
Prepaid expenses and other current assets30,190

41,002

56,505
36,972

30,190

49,528
Total current assets989,109
 997,170
 875,065
955,535
 989,109
 843,745
          
Other assets115,448

142,646

118,349
69,589

115,448

68,574
Goodwill13,954
 13,954
 13,954
127,081
 13,954
 127,098
Intangible assets, net115,106
 118,783
 116,945
214,114
 115,106
 216,660
Property and equipment489,638
 444,674
 475,750
539,732
 489,638
 531,104
Allowance for depreciation(302,862) (293,835) (296,740)(321,894) (302,862) (311,908)
Net property and equipment186,776

150,839

179,010
Property and equipment, net217,838

186,776

219,196
Total assets$1,420,393
 $1,423,392
 $1,303,323
$1,584,157
 $1,420,393
 $1,475,273
          
Liabilities and Equity 
  
  
 
  
  
Current liabilities: 
  
  
 
  
  
Current portion of long-term debt$—

$39,157

$—
Borrowings under revolving credit agreement$35,000
 $—
 $110,000
Trade accounts payable358,751

382,626

237,802
402,812

358,751

266,370
Other accrued expenses142,085

135,117

152,497
170,499

142,085

151,225
Total current liabilities500,836
 556,900
 390,299
608,311
 500,836
 527,595
          
Other liabilities: 
  
  
 
  
  
Long-term debt196,774

195,919

196,544
197,233

196,774

197,003
Deferred rent47,452

40,981

46,506
52,227

47,452

51,124
Other liabilities60,566

60,364

67,502
85,212

60,566

85,065
Total other liabilities304,792
 297,264
 310,552
334,672
 304,792
 333,192
          
Equity: 
  
  
 
  
  
Common stock429
 437
 437
430
 429
 430
Additional paid-in capital119,241
 136,127
 138,881
124,851
 119,241
 121,537
Accumulated other comprehensive (loss) income(5,375) 3,027
 (5,864)
Accumulated other comprehensive loss(28,051) (5,375) (30,434)
Retained earnings499,492
 428,754
 468,030
542,499
 499,492
 521,584
Total Caleres, Inc. shareholders’ equity613,787

568,345

601,484
639,729

613,787

613,117
Noncontrolling interests978

883

988
1,445

978

1,369
Total equity614,765
 569,228
 602,472
641,174
 614,765
 614,486
Total liabilities and equity$1,420,393
 $1,423,392
 $1,303,323
$1,584,157
 $1,420,393
 $1,475,273
See notes to condensed consolidated financial statements.


CALERES, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGSCONDENSED CONSOLIDATED STATEMENTS OF EARNINGS CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS 
  
(Unaudited)(Unaudited)
Thirteen Weeks EndedTwenty-six Weeks EndedThirteen Weeks EndedTwenty-Six Weeks Ended
($ thousands, except per share amounts)July 30, 2016
August 1, 2015
July 30, 2016
August 1, 2015
July 29, 2017
July 30, 2016
July 29, 2017
July 30, 2016
Net sales$622,937
$637,834
$1,207,670
$1,240,117
$676,954
$622,937
$1,308,463
$1,207,670
Cost of goods sold363,382
375,039
700,322
728,796
389,493
363,382
750,094
700,322
Gross profit259,555
262,795
507,348
511,321
287,461
259,555
558,369
507,348
Selling and administrative expenses227,297
227,061
446,347
445,251
253,500
227,297
497,575
446,347
Restructuring and other special charges, net2,865
—
3,973
—
Operating earnings32,258
35,734
61,001
66,070
31,096
32,258
56,821
61,001
Interest expense(3,479)(4,345)(7,089)(8,808)(4,637)(3,479)(9,681)(7,089)
Loss on early extinguishment of debt—
(8,690)—
(8,690)
Interest income310
238
557
542
262
310
497
557
Earnings before income taxes29,089
22,937
54,469
49,114
26,721
29,089
47,637
54,469
Income tax provision(9,410)(6,074)(16,912)(12,860)(9,047)(9,410)(15,079)(16,912)
Net earnings19,679
16,863
37,557
36,254
17,674
19,679
32,558
37,557
Net (loss) earnings attributable to noncontrolling interests(89)38
6
168
Net earnings (loss) attributable to noncontrolling interests79
(89)61
6
Net earnings attributable to Caleres, Inc.$19,768
$16,825
$37,551
$36,086
$17,595
$19,768
$32,497
$37,551
  
Basic earnings per common share attributable to Caleres, Inc. shareholders$0.46
$0.38
$0.87
$0.82
$0.41
$0.46
$0.76
$0.87
  
Diluted earnings per common share attributable to Caleres, Inc. shareholders$0.46
$0.38
$0.86
$0.82
$0.41
$0.46
$0.75
$0.86
  
Dividends per common share$0.07
$0.07
$0.14
$0.14
$0.07
$0.07
$0.14
$0.14
See notes to condensed consolidated financial statements.



CALERES, INC.    
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    
(Unaudited)(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks EndedThirteen Weeks EndedTwenty-Six Weeks Ended
($ thousands)July 30, 2016
August 1, 2015
 July 30, 2016
August 1, 2015
July 29, 2017
July 30, 2016
July 29, 2017
July 30, 2016
Net earnings$19,679
$16,863
 $37,557
$36,254
$17,674
$19,679
$32,558
$37,557
Other comprehensive (loss) income, net of tax: 
 
  
 
Other comprehensive income (loss), net of tax: 
 
 
 
Foreign currency translation adjustment(804)(949) 1,506
443
1,820
(804)1,280
1,506
Pension and other postretirement benefits adjustments(288)(243) (576)(458)309
(288)727
(576)
Derivative financial instruments(229)547
 (441)330
(402)(229)376
(441)
Other comprehensive (loss) income, net of tax(1,321)(645) 489
315
Other comprehensive income (loss), net of tax1,727
(1,321)2,383
489
Comprehensive income18,358
16,218
 38,046
36,569
19,401
18,358
34,941
38,046
Comprehensive (loss) income attributable to noncontrolling interests(120)37
 (10)171
Comprehensive income (loss) attributable to noncontrolling interests99
(120)76
(10)
Comprehensive income attributable to Caleres, Inc.$18,478
$16,181
 $38,056
$36,398
$19,302
$18,478
$34,865
$38,056
See notes to condensed consolidated financial statements.



CALERES, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)(Unaudited)
Twenty-six Weeks EndedTwenty-six Weeks Ended
($ thousands)July 30, 2016
August 1, 2015
July 29, 2017
July 30, 2016
Operating Activities  
  
Net earnings$37,557
$36,254
$32,558
$37,557
Adjustments to reconcile net earnings to net cash provided by operating activities: 
 
 
 
Depreciation18,325
17,500
22,874
18,325
Amortization of capitalized software6,366
6,140
7,243
6,366
Amortization of intangible assets1,839
1,850
2,046
1,839
Amortization of debt issuance costs and debt discount864
617
864
864
Loss on early extinguishment of debt—
8,690
Share-based compensation expense4,329
3,680
5,804
4,329
Tax benefit related to share-based plans(3,248)(2,838)
Loss (gain) on disposal of property and equipment519
(1,897)
Excess tax benefit related to share-based plans—
(3,248)
Loss on disposal of property and equipment471
519
Impairment charges for property and equipment536
857
2,119
536
Deferred rent946
1,239
1,103
946
Provision for doubtful accounts105
100
294
105
Changes in operating assets and liabilities: 
 
 
 
Receivables9,301
(7,668)9,211
9,301
Inventories(101,032)(98,445)(134,465)(101,032)
Prepaid expenses and other current and noncurrent assets24,799
(11,633)8,158
24,799
Trade accounts payable120,949
166,786
136,108
120,949
Accrued expenses and other liabilities(14,353)(21,952)19,399
(14,353)
Other, net762
1,975
493
762
Net cash provided by operating activities108,564
101,255
114,280
108,564
  
Investing Activities 
 
 
 
Purchases of property and equipment(27,443)(24,872)(24,251)(27,443)
Proceeds from disposal of property and equipment—
7,111
Capitalized software(3,778)(2,698)(3,152)(3,778)
Net cash used for investing activities(31,221)(20,459)(27,403)(31,221)
  
Financing Activities 
 
 
 
Borrowings under revolving credit agreement103,000
86,000
400,000
103,000
Repayments under revolving credit agreement(103,000)(86,000)(475,000)(103,000)
Proceeds from issuance of 2023 senior notes—
200,000
Redemption of 2019 senior notes—
(160,700)
Restricted cash—
(41,482)
Debt issuance costs—
(3,650)
Dividends paid(6,089)(6,135)(6,030)(6,089)
Acquisition of treasury stock(23,139)(4,921)(5,993)(23,139)
Issuance of common stock under share-based plans, net(4,086)(4,428)(2,490)(4,086)
Tax benefit related to share-based plans3,248
2,838
Excess tax benefit related to share-based plans—
3,248
Net cash used for financing activities(30,066)(18,478)(89,513)(30,066)
Effect of exchange rate changes on cash and cash equivalents301
(376)246
301
Increase in cash and cash equivalents47,578
61,942
(Decrease) increase in cash and cash equivalents(2,390)47,578
Cash and cash equivalents at beginning of period118,151
67,403
55,332
118,151
Cash and cash equivalents at end of period$165,729
$129,345
$52,942
$165,729
See notes to condensed consolidated financial statements.


CALERES, INC. 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 1Basis of Presentation
 
The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the United States Securities and Exchange Commission (“SEC”) and reflect all adjustments and accruals of a normal recurring nature, which management believes are necessary to present fairly the financial position, results of operations, comprehensive income and cash flows of Caleres, Inc. (the "Company"). These statements, however, do not include all information and footnotes necessary for a complete presentation of the Company's consolidated financial position, results of operations, comprehensive income and cash flows in conformity with accounting principles generally accepted in the United States. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, after the elimination of intercompany accounts and transactions. 
 
The Company’s business is seasonal in nature due to consumer spending patterns, with higher back-to-school and Christmas holiday season sales. Traditionally, the third fiscal quarter accounts for a substantial portion of the Company’s earnings for the year. Interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole. 

Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications did not affect net earnings attributable to Caleres, Inc. 
 
For further information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended January 30, 2016.28, 2017.

Note 2Impact of New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), and subsequently issued ASU 2015-14 to defer the effective date anddate. Several ASUs 2016-08 and 2016-10 to clarify the implementation guidance in ASU 2014-09 have also been issued. Topic 606 provides a five-step analysis of transactions to determine when and how revenue is recognized, based upon the core principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  ASU 2014-09 also requires additional disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  The ASUs are effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted beginning after December 15, 2016.  The Company has completed an initial assessment of the ASU. Although the ASUASUs will impact revenue recognition for eachboth of the Company's reportable segments, the Company anticipates aimpact will be more significant impact on itsthe Famous Footwear segment, primarily due to the ASU'sASUs' required treatment for loyalty programs (such as Rewards,programs. The new standard will require a deferral of revenue associated with loyalty points issued under the Company's loyalty program). Whileprogram using a relative stand-alone selling price method.

The Company has established an implementation team to develop and execute the Company is currently developing its implementation plan it expects to adopt the ASUASUs. The implementation plan, which continues to be executed and refined, includes changes to the Company's accounting policies and practices, systems and controls to support the new revenue recognition and disclosure requirements. The implementation team is currently assessing the impact of the new standard on each of its revenue streams. The Company plans to adopt the ASUs in the first quarter of 2018 using the fullmodified retrospective method. The Company anticipates thatAlthough the implementation may result in a significant initial adjustment to certain liabilities, including deferred revenue, the adoption may have a materialof the standard is not anticipated to significantly impact on the Company's condensed consolidated financial statements.statements of earnings on an ongoing basis.
 
In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (Topic 330), which requires entities to measure inventory at "the lower of cost and net realizable value", simplifying the current guidance under which entities must measure inventory at the lower of cost or market. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory measured using the last-in, first-out (LIFO) method. The Company adopted the ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted. Because approximately 95%during the first quarter of the Company's inventories are valued using the LIFO method, the Company anticipates that the adoption of this ASU will2017, which did not have a material impact on the condensed consolidated financial statements.



In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize most leases on the balance sheet. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 using a modified retrospective approach, with early adoption permitted. The Company has formed an implementation team and is currentlyin the process of evaluating its leases and upgrading its accounting systems to comply with the impact of the adoption of this ASU on its condensed consolidated financial statements.ASU. Due to the large number of retail operating leases to which the Company is a party, the Company anticipates that the impact to its condensed consolidated financial statements upon adoption in the first quarter of 2019 will be


significant. material. However, the adoption of the ASU is not expected to trigger non-compliance with any covenant or other restrictionrestrictions under the provisions of any of the Company’s debt obligations. 

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), which simplifies accounting for certain aspects of share-based payments to employees, including income taxes, forfeitures and statutory income tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. during the first quarter of 2017, which had the following impact to the condensed consolidated financial statements:

The ASU requires certain incomeCompany recognized excess tax impactsbenefits of $1.1 million related to share-based plans during the twenty-six weeks ended July 29, 2017, which are required to be recognized in the statements of earnings on a prospective basis. Prior to the adoption of the ASU, the excess tax benefit related to share-based plans was recorded withinin additional paid-in-capital.
The Company elected to adopt the incomeprovision of the ASU to account for forfeitures as they occur. This election was applied on a modified retrospective basis, resulting in a net increase to Caleres, Inc. shareholders' equity of $0.4 million.
The ASU requires cash flows from excess tax benefits related to share-based payments to be reported as operating activities in the condensed consolidated statements of cash flows. The Company elected to adopt this provision rather than ason a component of additional paid-in capital, as presented today. While the Company has not yet completed its analysis, the Company anticipates a greater degree of volatility in its income tax provisionprospective basis and effective income tax rate as a result, of the required treatment underexcess tax benefit related to share-based plans for the new standard.twenty-six weeks ended July 30, 2016 is presented as a financing activity, while the benefit for the twenty-six weeks ended July 29, 2017 is presented as an operating activity.

In JuneOctober 2016, the FASB issued ASU 2016-13,2016-16, Financial Instruments - Credit Losses (Topic 326): MeasurementIntra-Entity Transfers of Credit Losses on Financial Instruments, Assets Other Than Inventory,whichsignificantly changes how entities will measure credit losses for most financial requires the recognition of the income tax effects of intercompany sales and intra-entity transfers of assets, and certain other instruments that aren’t measured at fair value through net income.than inventory, when the transfer occurs. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted beginning after December 15, 2018.2017. The ASU’s provisionsASU will be applied asadopted during the first quarter of 2018 using a cumulative-effect adjustment to retained earnings asmodified retrospective approach. While the Company is finalizing its assessment of the beginning of the first reporting period in which it is adopted. The Company is currently evaluating the impact of the adoption of this ASU on its condensed consolidated financial statements.statements, the adoption of the ASU is expected to result in a cumulative adjustment to deferred taxes and retained earnings related to intra-entity transfers of intangible assets that occurred prior to adoption.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The ASU amends ASC 715, Compensation — Retirement Benefits, to require employers that present a measure of operating income in their statements of earnings to include only the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses (together with other employee compensation costs). The other components of net benefit cost, including amortization of prior service cost/credit, and settlement and curtailment effects, are to be included in non-operating expenses. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Upon adoption of the ASU during the first quarter of 2018, the Company will separately present the components of net periodic benefit cost or income, excluding the service cost component, in non-operating expenses on a retrospective basis. Net periodic benefit income, excluding the service cost component, was $2.7 million and $5.1 million for the thirteen and twenty-six weeks ended July 29, 2017, respectively.

In May 2017, the FASB issued ASU 2017-09, Compensation — Stock Compensation (Topic 718), Scope of Modification Accounting. The ASU clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as a modification. Entities will apply modification accounting if the value, vesting conditions or classification of the award changes. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The guidance will be applied prospectively to awards modified after the Company adopts the ASU in the first quarter of 2018.



Note 3Acquisition

On December 13, 2016, the Company entered into a Stock Purchase Agreement (the "Purchase Agreement") with Apollo Investors, LLC (the "Seller") and Apollo Buyer Holding Company, Inc. (the "Holding Company"), pursuant to which the Company acquired all outstanding capital stock of Allen Edmonds ("Allen Edmonds"). The aggregate purchase price for the Allen Edmonds stock was $259.9 million, net of cash received of $0.7 million. The purchase was funded with cash and funds available under the Company's revolving credit agreement. The operating results of Allen Edmonds have been included in the Company’s condensed consolidated financial statements within the Brand Portfolio segment since December 13, 2016. The assets and liabilities of Allen Edmonds were recorded at their estimated fair values and the excess of the purchase price over the fair value of the assets acquired and liabilities assumed, including identified intangible assets, was recorded as goodwill during the fourth quarter of 2016.

The Company’s purchase price allocation contains uncertainties because it required management to make assumptions and to apply judgment to estimate the fair value of the acquired assets and liabilities. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The judgments the Company used in estimating the fair values assigned to each class of the acquired assets and assumed liabilities could materially affect the results of its operations. Management estimated the fair value of the assets and liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows. Unanticipated events or circumstances may occur, which could affect the accuracy of the Company’s fair value estimates, including assumptions regarding industry economic factors and business strategies. As of July 29, 2017, the purchase price allocation is substantially complete.

During the thirteen weeks ended July 29, 2017, the Company recognized $1.9 million in cost of goods sold ($1.2 million on an after-tax basis, or $0.03 per diluted share) related to the amortization of the inventory fair value adjustment required for purchase accounting. The Company recognized $4.9 million in cost of goods sold ($3.0 million on an after-tax basis, or $0.07 per diluted share) during the twenty-six weeks ended July 29, 2017. As further discussed in Note 5 to the condensed consolidated financial statements, the Company also incurred integration costs during the thirteen and twenty-six weeks ended July 29, 2017.

Note 34Earnings 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 July 29, 2017 and July 30, 2016 and August 1, 2015:2016:
 


Thirteen Weeks EndedTwenty-six Weeks EndedThirteen Weeks EndedTwenty-Six Weeks Ended
($ thousands, except per share amounts)July 30, 2016
August 1, 2015
July 30, 2016
August 1, 2015
July 29, 2017
July 30, 2016
July 29, 2017
July 30, 2016
NUMERATOR 
 
 
 
 
 
 
 
Net earnings$19,679
$16,863
$37,557
$36,254
$17,674
$19,679
$32,558
$37,557
Net loss (earnings) attributable to noncontrolling interests89
(38)(6)(168)
Net (earnings) loss attributable to noncontrolling interests(79)89
(61)(6)
Net earnings allocated to participating securities(523)(544)(1,014)(1,195)(490)(523)(895)(1,014)
Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities$19,245
$16,281
$36,537
$34,891
$17,105
$19,245
$31,602
$36,537
  
DENOMINATOR 
 
 
 
 
 
 
 
Denominator for basic earnings per common share attributable to Caleres, Inc. shareholders42,043
42,325
42,238
42,319
41,783
42,043
41,807
42,238
Dilutive effect of share-based awards142
123
151
136
171
142
172
151
Denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders42,185
42,448
42,389
42,455
41,954
42,185
41,979
42,389

  
Basic earnings per common share attributable to Caleres, Inc. shareholders$0.46
$0.38
$0.87
$0.82
$0.41
$0.46
$0.76
$0.87

  
Diluted earnings per common share attributable to Caleres, Inc. shareholders$0.46
$0.38
$0.86
$0.82
$0.41
$0.46
$0.75
$0.86
 
Options to purchase 16,667 shares of common stock for the thirteen and twenty-six weeks ended July 29, 2017 and 66,165 shares of common stock for the thirteen and twenty-six weeks ended July 30, 2016 and 61,497 shares of common stock for the thirteen and twenty-six weeks ended August 1, 2015 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 and twenty-six weeks ended July 29, 2017, the Company repurchased zero and 225,000 shares, respectively, under the publicly announced share repurchase program, which permits repurchases of up to 2.5 million shares. The Company repurchased 450,000 and 900,000 shares during the thirteen and twenty-six weeks ended July 30, 2016, respectively, under the publicly announced share repurchase program, which permits repurchases of up to 2.5 million shares. During the twenty-six weeks ended August 1, 2015, 151,500 shares were repurchased.respectively. As of July 30, 2016, 29, 2017, the Company has repurchased a total of 1.11.3 million shares at a cost of $28.1 million.under this program.

Note 45
Long-termRestructuring and Short-term Financing ArrangementsOther Initiatives

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

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

Interest on borrowings is at variable rates based on the London Interbank Offered Rate (“LIBOR”) or the prime rate, as defined in the Credit Agreement, plus a spread.  The interest rate and fees for letters of credit vary based upon the level of excess availability under the Credit Agreement.  There is an unused line fee payable on the unused portion under the facility and a letter of credit fee payable on the outstanding face amount under letters of credit.
The Credit Agreement limits the Company’s ability to create, incur, assume or permit to exist additional indebtedness and liens, make investments or specified payments, give guarantees, pay dividends, make capital expenditures and merge or acquire or sell assets.  In addition, certain additional covenants would be triggered if excess availability were to fall below specified levels, including fixed charge coverage ratio requirements.  Furthermore, if excess availability falls below 12.5% of the Loan Cap for three consecutive business days or an event of default occurs, the lenders may assume dominion and control over the Company’s cash (a “cash dominion event”) until such event of default is cured or waived or the excess availability exceeds such amount for 30 consecutive days, provided that a cash dominion event shall be deemed continuing (even if an event of default is no longer continuing and/or excess availability exceeds the required amount for 30 consecutive business days) after a cash dominion event has occurred and been discontinued on two occasions in any twelve-month period.
The Credit Agreement contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, judgment defaults in excess of a certain threshold, the failure of any guaranty or security document supporting the agreement to be in full force and effect, and a change of control event.  In addition, if the excess availability falls below the greater of (i) 10.0% of the lesser of the Loan Cap and (ii) $50.0 million, and the fixed charge coverage ratio is less than 1.0 to 1.0, the Company would be in default under the Credit Agreement. The Credit Agreement also contains certain other covenants and restrictions. The Company was in compliance with all covenants and restrictions under the Credit Agreement as of July 30, 2016. 

At July 30, 2016, the Company had no borrowings outstanding and $6.5 million in letters of credit outstanding under the Credit Agreement. Total borrowing availability was $593.5 million at July 30, 2016.   

$200 Million Senior Notes Due 2019 
During 2011, the Company issued $200.0 million aggregate principal amount of 7.125% Senior Notes due 2019 (the “2019 Senior Notes”).  The 2019 Senior Notes were guaranteed on a senior unsecured basis by each of its subsidiaries that was an obligor under the Credit Agreement. Interest on the 2019 Senior Notes was payable on May 15 and November 15 of each year. The 2019 Senior Notes were scheduled to mature on May 15, 2019 but were callable at specified redemption prices, plus accrued and unpaid interest.
On July 20, 2015, the Company commenced a cash tender offer (the "Tender Offer") to purchase any and all of the outstanding aggregate principal amount of its 2019 Senior Notes. Upon expiration of the Tender Offer on July 24, 2015, $160.7 million aggregate principal amount of the 2019 Senior Notes were validly tendered at the redemption price of 103.950%, representing the specified redemption price and a tender premium. On August 26, 2015, the remaining outstanding $39.3 million aggregate principal amount of outstanding 2019 Senior Notes were redeemed at the redemption price of 103.563%. During the thirteen and twenty-


sixtwenty-six weeks ended August 1, 2015,July 29, 2017, the Company recognized a lossincurred integration and reorganization costs, primarily for professional fees and severance expense, totaling $2.9 million ($1.9 million on an after-tax basis, or $0.04 per diluted share) and $4.0 million ($2.6 million on an after-tax basis, or $0.06 per diluted share), respectively, related to the early extinguishmentmen's business. Of the $2.9 million in costs presented as restructuring and other special charges, net in the condensed consolidated statements of the 2019 Senior Notes of $8.7 million, representing the tender offer and call premiums, the unamortized debt issuance costs and the original issue discount associated with the portion of the 2019 Senior Notes that were redeemed duringearnings for the thirteen weeks ended August 1, 2015.

$200 Million Senior Notes Due 2023
On July 27, 2015,29, 2017, $2.2 million is reflected within the Company issued $200.0Other category and $0.7 million aggregate principal amount of 6.25% Senior Notes due 2023 (the "2023 Senior Notes")is reflected within the Brand Portfolio segment. Of the $4.0 million in a private placement. On October 22, 2015,restructuring and other special charges for the Company commenced an offer to exchange its 2023 Senior Notes outstanding for substantially identical debt securities registered undertwenty-six weeks ended July 29, 2017, $2.5 million is reflected within the Securities Act of 1933. The exchange offer was completed on November 23, 2015Other category and did not affect$1.5 million is reflected within the amount of the Company's indebtedness outstanding. The net proceeds from the issuance of the 2023 Senior NotesBrand Portfolio segment. There were approximately $196.3 million after deducting fees and expenses associated with the offering. The Company used the net proceeds, together with cash on hand, to redeem the outstanding 2019 Senior Notes.

The 2023 Senior Notes are guaranteed on a senior unsecured basis by each of the Company's subsidiaries that is a borrower or guarantor under the Credit Agreement. Interest on the 2023 Senior Notes is payable on February 15 and August 15 of each year, beginning on February 15, 2016. The 2023 Senior Notes will mature on August 15, 2023.  Prior to August 15, 2018, the Company may redeem some or all of the 2023 Senior Notes at a redemption price equal to 100% of the principal amount of the 2023 Senior Notes plus a "make-whole" premium (as defined in the 2023 Senior Notes indenture) and accrued and unpaid interest to the redemption date.  After August 15, 2018, the Company may redeem all or a part of the 2023 Senior Notes at the redemption prices (expressed as a percentage of principal amount) set forth below plus accrued and unpaid interest, and Additional Interest (as defined in the 2023 Senior Notes indenture), if redeemedno restructuring charges incurred during the 12-month period beginning on August 15 of the years indicated below:
YearPercentage
2018104.688%
2019103.125%
2020101.563%
2021 and thereafter100.000%
If the Company experiences specific kinds of changes of control, it would be required to offer to purchase the 2023 Senior Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest and Additional Interest, if any, to, but not including, the date of repurchase.

The 2023 Senior Notes also contain other covenants and restrictions that limit certain activities including, among other things, levels of indebtedness, payments of dividends, the guaranteethirteen or pledge of assets, certain investments, common stock repurchases, mergers and acquisitions and sales of assets. As oftwenty-six weeks ended July 30, 2016, the Company was in compliance with all covenants and restrictions relating to the 2023 Senior Notes.2016.



Note 56Business Segment Information
Following is a summary of certain key financial measures for the Company’s business segments for the periods ended July 29, 2017 and July 30, 2016 and August 1, 2015.2016:  
Famous FootwearBrand Portfolio Famous FootwearBrand Portfolio 
($ thousands)OtherTotalOtherTotal
Thirteen Weeks Ended July 29, 2017Thirteen Weeks Ended July 29, 2017
External sales$404,930
$272,024
$—
$676,954
Intersegment sales—
29,850
—
29,850
Operating earnings (loss)25,112
15,916
(9,932)31,096
Segment assets636,399
839,674
108,084
1,584,157
 
Thirteen Weeks Ended July 30, 2016
External sales$390,123
$232,814
$—
$622,937
$390,123
$232,814
$—
$622,937
Intersegment sales—
30,589
—
30,589
—
30,589
—
30,589
Operating earnings (loss)22,604
17,463
(7,809)32,258
22,604
17,463
(7,809)32,258
Segment assets644,446
518,636
257,311
1,420,393
644,446
518,636
257,311
1,420,393
  
Thirteen Weeks Ended August 1, 2015
External sales$395,873
$241,961
$—
$637,834
Intersegment sales—
32,962
—
32,962
Operating earnings (loss)27,672
16,005
(7,943)35,734
Segment assets608,353
540,582
274,457
1,423,392
 
Twenty-six Weeks Ended July 30, 2016
Twenty-Six Weeks Ended July 29, 2017Twenty-Six Weeks Ended July 29, 2017
External sales$754,719
$452,951
$—
$1,207,670
$771,424
$537,039
$—
$1,308,463
Intersegment sales—
46,152
—
46,152
—
44,550
—
44,550
Operating earnings (loss)48,358
27,085
(14,442)61,001
45,391
29,230
(17,800)56,821
  
Twenty-six Weeks Ended August 1, 2015
Twenty-Six Weeks Ended July 30, 2016Twenty-Six Weeks Ended July 30, 2016
External sales$755,893
$484,224
$—
$1,240,117
$754,719
$452,951
$—
$1,207,670
Intersegment sales—
50,288
—
50,288
—
46,152
—
46,152
Operating earnings (loss)55,632
27,065
(16,627)66,070
48,358
27,085
(14,442)61,001
 
The Other category includes corporate assets, administrative expenses and other costs and recoveries, which are not allocated to the operating segments.  

Following is a reconciliation of operating earnings to earnings before income taxes:   
Thirteen Weeks EndedTwenty-six Weeks EndedThirteen Weeks EndedTwenty-six Weeks Ended
($ thousands)July 30, 2016
August 1, 2015
July 30, 2016
August 1, 2015
July 29, 2017
July 30, 2016
July 29, 2017
July 30, 2016
Operating earnings$32,258
$35,734
$61,001
$66,070
$31,096
$32,258
$56,821
$61,001
Interest expense(3,479)(4,345)(7,089)(8,808)(4,637)(3,479)(9,681)(7,089)
Loss on early extinguishment of debt—
(8,690)—
(8,690)
Interest income310
238
557
542
262
310
497
557
Earnings before income taxes$29,089
$22,937
$54,469
$49,114
$26,721
$29,089
$47,637
$54,469

Note7
Inventories
The Company's net inventory balance was comprised of the following:
($ thousands)July 29, 2017
July 30, 2016
January 28, 2017
Raw materials$18,951
$734
$15,378
Work-in-process840
—
1,093
Finished goods702,214
648,147
569,293
Inventories, net$722,005
$648,881
$585,764



Note 68
Goodwill and Intangible Assets
 
Goodwill and intangible assets were as follows:
($ thousands)July 30, 2016
August 1, 2015
January 30, 2016
July 29, 2017
July 30, 2016
January 28, 2017
Intangible Assets 
 
 
 
 
 
Famous Footwear$2,800
$2,800
$2,800
$2,800
$2,800
$2,800
Brand Portfolio183,068
183,068
183,068
285,988
183,068
286,488
Total intangible assets185,868
185,868
185,868
288,788
185,868
289,288
Accumulated amortization(70,762)(67,085)(68,923)(74,674)(70,762)(72,628)
Total intangible assets, net115,106
118,783
116,945
214,114
115,106
216,660
Goodwill 
 
 
 
 
 
Brand Portfolio13,954
13,954
13,954
127,081
13,954
127,098
Total goodwill13,954
13,954
13,954
127,081
13,954
127,098
Goodwill and intangible assets, net$129,060
$132,737
$130,899
$341,195
$129,060
$343,758

IntangibleAs further described in Note 3 to the condensed consolidated financial statements, the Company acquired Allen Edmonds on December 13, 2016. The allocation of the purchase price resulted in incremental intangible assets consist primarily of owned$102.9 million, consisting of trademarks and licensed trademarks,customer relationships of which $20.8$97.5 million and $5.4 million, respectively, and incremental goodwill of $113.1 million.

The Company's intangible assets as of July 29, 2017, July 30, 2016 August 1, 2015 and January 30, 2016, are not subject to amortization. The remaining intangible assets are subject to amortization and have useful lives ranging from 15 to 40 years28, 2017 were as of July 30, 2016. follows:
($ thousands)   July 29, 2017
  Estimated Useful Lives Original Cost
 Accumulated Amortization
 Net Carrying Value
Trademarks 15-40 years $165,288
 $74,449
 $90,839
Trademarks Indefinite 118,100
(1) 
—
 118,100
Customer relationships 15 years 5,400
(1) 
225
 5,175
    $288,788
 $74,674
 $214,114
    July 30, 2016
  Estimated Useful Lives Original Cost
 Accumulated Amortization
 Net Carrying Value
Trademarks 15-40 years $165,068
 $70,762
 $94,306
Trademarks Indefinite 20,800
 —
 20,800
    $185,868
 $70,762
 $115,106
    January 28, 2017
  Estimated Useful Lives Original Cost
 Accumulated Amortization
 Net Carrying Value
Trademarks 15-40 years $165,288
 $72,604
 $92,684
Trademarks Indefinite 117,900
(1) 
—
 117,900
Customer relationships 15 years 6,100
(1) 
24
 6,076
    $289,288
 $72,628
 $216,660
(1) The Allen Edmonds trademark and customer relationships intangible assets were acquired in the Allen Edmonds acquisition, as further discussed in Note 3 to the condensed consolidated financial statements. Immaterial adjustments attributable to the purchase price allocation were recorded during the thirteen weeks ended April 29, 2017, resulting in an adjustment to the original cost.

Amortization expense related to intangible assets was $1.0 million and $0.9 million for the thirteen weeks ended July 29, 2017 and July 30, 2016, respectively, and August 1, 2015$2.0 million and $1.8 million and $1.9 million for the twenty-six weeks ended July 29, 2017 and July 30, 2016, and August 1, 2015, respectively.


Note 79
Shareholders’ Equity
 
The following tables set forth the changes in Caleres, Inc. shareholders’ equity and noncontrolling interests for the twenty-six weeks ended July 29, 2017 and July 30, 2016 and August 1, 2015:2016:

($ thousands)Caleres, Inc. Shareholders’ Equity
Noncontrolling Interests
Total Equity
Caleres, Inc. Shareholders’ Equity
Noncontrolling Interests
Total Equity
Equity at January 30, 2016$601,484
$988
$602,472
Equity at January 28, 2017$613,117
$1,369
$614,486
Net earnings37,551
6
37,557
32,497
61
32,558
Other comprehensive income (loss)489
(16)473
Other comprehensive income2,383
15
2,398
Dividends paid(6,089)—
(6,089)(6,030)—
(6,030)
Acquisition of treasury stock(23,139)—
(23,139)(5,993)—
(5,993)
Issuance of common stock under share-based plans, net(4,086)—
(4,086)(2,490)—
(2,490)
Tax benefit related to share-based plans3,248
—
3,248
Cumulative-effect adjustment from adoption of ASU 2016-09441
—
441
Share-based compensation expense4,329
—
4,329
5,804
—
5,804
Equity at July 30, 2016$613,787
$978
$614,765
Equity at July 29, 2017$639,729
$1,445
$641,174
 


($ thousands)Caleres, Inc. Shareholders’ Equity
Noncontrolling Interests
Total Equity
Caleres, Inc. Shareholders’ Equity
Noncontrolling Interests
Total Equity
Equity at January 31, 2015$540,910
$712
$541,622
Equity at January 30, 2016$601,484
$988
$602,472
Net earnings36,086
168
36,254
37,551
6
37,557
Other comprehensive income315
3
318
Other comprehensive income (loss)489
(16)473
Dividends paid(6,135)—
(6,135)(6,089)—
(6,089)
Acquisition of treasury stock(4,921)—
(4,921)(23,139)—
(23,139)
Issuance of common stock under share-based plans, net(4,428)—
(4,428)(4,086)—
(4,086)
Tax benefit related to share-based plans2,838
—
2,838
Excess tax benefit related to share-based plans3,248
—
3,248
Share-based compensation expense3,680
—
3,680
4,329
—
4,329
Equity at August 1, 2015$568,345
$883
$569,228
Equity at July 30, 2016$613,787
$978
$614,765



Accumulated Other Comprehensive (Loss) IncomeLoss
The following table sets forth the changes in accumulated other comprehensive (loss) incomeloss (OCL) by component for the thirteen and twenty-six weeksperiods ended July 29, 2017 and July 30, 2016 and August 1, 2015:2016:
($ thousands)Foreign Currency Translation
Pension and Other Postretirement Transactions (1)

Derivative Financial Instrument Transactions (2)

Accumulated Other Comprehensive (Loss) Income
Foreign Currency Translation
Pension and Other Postretirement Transactions (1)

Derivative Financial Instrument Transactions (2)

Accumulated Other Comprehensive (Loss) Income
Balance April 29, 2017$(348)$(29,666)$236
$(29,778)
Other comprehensive income (loss) before reclassifications1,820
—
(295)1,525
Reclassifications: 

Amounts reclassified from accumulated other comprehensive loss—
500
(164)336
Tax (benefit) provision—
(191)57
(134)
Net reclassifications—
309
(107)202
Other comprehensive income (loss)1,820
309
(402)1,727
Balance July 29, 2017$1,472
$(29,357)$(166)$(28,051)
 
Balance April 30, 2016$1,410
$(5,644)$180
$(4,054)$1,410
$(5,644)$180
$(4,054)
Other comprehensive loss before reclassifications(804)—
(351)(1,155)(804)—
(351)(1,155)
Reclassifications:  
Amounts reclassified from accumulated other comprehensive (loss) income—
(477)190
(287)
Amounts reclassified from accumulated other comprehensive loss—
(477)190
(287)
Tax provision (benefit)—
189
(68)121
—
189
(68)121
Net reclassifications���
(288)122
(166)—
(288)122
(166)
Other comprehensive loss(804)(288)(229)(1,321)(804)(288)(229)(1,321)
Balance July 30, 2016$606
$(5,932)$(49)$(5,375)$606
$(5,932)$(49)$(5,375)
   
Balance May 2, 2015$647
$3,018
$7
$3,672
Other comprehensive (loss) income before reclassifications(949)—
625
(324)
Balance January 28, 2017$192
$(30,084)$(542)(30,434)
Other comprehensive income before reclassifications1,280
—
458
1,738
Reclassifications:  

Amounts reclassified from accumulated other comprehensive (loss) income—
(401)(109)(510)
Tax provision—
158
31
189
Net reclassification—
(243)(78)(321)
Other comprehensive (loss) income(949)(243)547
(645)
Balance August 1, 2015$(302)$2,775
$554
$3,027
Amounts reclassified from accumulated other comprehensive loss—
1,179
(117)1,062
Tax (benefit) provision—
(452)35
(417)
Net reclassifications—
727
(82)645
Other comprehensive income1,280
727
376
2,383
Balance July 29, 2017$1,472
$(29,357)$(166)$(28,051)
  

Balance January 30, 2016$(900)$(5,356)$392
$(5,864)$(900)$(5,356)$392
$(5,864)
Other comprehensive income (loss) before reclassifications1,506
—
(639)867
1,506
—
(639)867
Reclassifications:  

Amounts reclassified from accumulated other comprehensive (loss) income—
(954)313
(641)
Amounts reclassified from accumulated other comprehensive loss—
(954)313
(641)
Tax provision (benefit)—
378
(115)263
—
378
(115)263
Net reclassifications—
(576)198
(378)—
(576)198
(378)
Other comprehensive income (loss)1,506
(576)(441)489
1,506
(576)(441)489
Balance July 30, 2016$606
$(5,932)$(49)$(5,375)$606
$(5,932)$(49)$(5,375)
 
Balance January 31, 2015$(745)$3,233
$224
$2,712
Other comprehensive income before reclassifications443
—
365
808
Reclassifications: 
Amounts reclassified from accumulated other comprehensive (loss) income—
(758)(38)(796)
Tax provision—
300
3
303
Net reclassifications—
(458)(35)(493)
Other comprehensive income (loss)443
(458)330
315
Balance August 1, 2015$(302)$2,775
$554
$3,027
(1)Amounts reclassified are included in selling and administrative expenses. See Note 911 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.expenses and interest expense. See Notes 1012 and 1113 to the condensed consolidated financial statements for additional information related to derivative financial instruments.



Note 810Share-Based Compensation
 
The Company recognized share-based compensation expense of $2.3$3.1 million and $2.0$2.3 million during the thirteen weeks and $4.3$5.8 million and $3.7$4.3 million during the twenty-six weeks ended July 29, 2017 and July 30, 2016, and August 1, 2015, respectively. In addition to share-based compensation expense, the Company recognized cash-based expense related to performance share units and cash awards granted under the performance share plans of $0.9 millionzero and $2.5$0.9 million during the thirteen weeks and $1.7$0.1 million and $4.1$1.5 million during the twenty-six weeks ended July 29, 2017 and July 30, 2016, and August 1, 2015, respectively.
 
The Company issued 20,829had net repurchases of 12,472 and 20,1635,947 shares of common stock during the thirteen weeks ended July 29, 2017 and 408,434July 30, 2016, respectively, for restricted stock grants, stock performance awards issued to employees, stock options exercised and 364,842 duringcommon and restricted stock grants issued to directors, net of forfeitures and shares withheld to satisfy the minimum tax withholding requirement. During the twenty-six weeks ended July 29, 2017 and July 30, 2016, the Company issued 241,886 and August 1, 2015,180,825 shares of common stock, respectively, for stock-based awards, stock options exercised and directors' fees.related to these share-based plans.

Restricted Stock 
The following table summarizes restricted stock activity for the periods ended July 29, 2017 and July 30, 2016 and August 1, 2015:2016:
Thirteen Weeks Ended July 30, 2016 Thirteen Weeks Ended August 1, 2015Thirteen Weeks Ended Thirteen Weeks Ended
  Weighted- Average Grant Date Fair Value   Weighted- Average Grant Date Fair ValueJuly 29, 2017 July 30, 2016
Total Number of Restricted Shares Total Number of Restricted Shares   Weighted- Average Grant Date Fair Value   Weighted- Average Grant Date Fair Value
 Weighted- Average Grant Date Fair Value Total Number of Restricted Shares Total Number of Restricted Shares 
April 30, 20161,150,749
 $25.38
1,462,416
 $18.57
Total Number of Restricted Shares Weighted- Average Grant Date Fair ValueTotal Number of Restricted Shares Weighted- Average Grant Date Fair Value
April 29, 2017 $27.96 
Granted13,800
 24.85
 Granted8,000
 31.67
4,492
 27.8313,800
 
Forfeited(19,250) 26.59
 Forfeited(15,000) 16.04
(17,500) 28.56
 Forfeited(19,250) 26.59
Vested(6,000) 11.72
 Vested(59,800) 11.61
(10,000) 18.80
 Vested(6,000) 11.72
July 30, 20161,139,299
 $25.42
 August 1, 20151,395,616
 $18.97
July 29, 20171,194,326
 $28.03
 July 30, 20161,139,299
 $25.42
        
Twenty-Six Weeks Ended Twenty-Six Weeks Ended
July 29, 2017 July 30, 2016
  Weighted- Average Grant Date Fair Value   Weighted- Average Grant Date Fair Value
Total Number of Restricted Shares Total Number of Restricted Shares 
 Weighted- Average Grant Date Fair Value 
January 28, 20171,128,049
 $25.85
1,262,449
 $19.55
Granted356,312
 26.91
350,600
 26.57
Forfeited(30,000) 27.75
 Forfeited(48,500) 22.94
Vested(260,035) 17.07
 Vested(425,250) 9.22
July 29, 20171,194,326
 $28.03
 July 30, 20161,139,299
 $25.42

 Twenty-six Weeks Ended July 30, 2016  Twenty-six Weeks Ended August 1, 2015
   Weighted- Average Grant Date Fair Value    Weighted- Average Grant Date Fair Value
 Total Number of Restricted Shares   Total Number of Restricted Shares 
     
January 30, 20161,262,449
 $19.55
 January 31, 20151,562,470
 $15.61
Granted350,600
 26.57
 Granted293,421
 30.11
Forfeited(48,500) 22.94
 Forfeited(49,850) 19.51
Vested(425,250) 9.22
 Vested(410,425) 14.15
July 30, 20161,139,299
 $25.42
 August 1, 20151,395,616
 $18.97

OfAll of the 13,800 and 8,000 restricted shares granted during the thirteen weeks ended July 30, 2016 and August 1, 2015, respectively, all of the shares29, 2017 have a vestingcliff-vesting term of four years.one year. Of the 350,600356,312 restricted shares granted during the twenty-six weeks ended July 30, 2016, all of the29, 2017, 4,492 shares have a vestingcliff-vesting term of one year, 12,000 shares have a graded-vesting term of four years and 339,820 shares have a cliff-vesting term of four years. OfAll of the 293,421 restricted shares granted during the thirteen and twenty-six weeks ended August 1, 2015, 280,921July 30, 2016 have a vestingcliff-vesting term of four years and 12,500 of the shares have a vesting term of five years. Share-based compensation expense is recognized on a straight-line basis over the respective vesting periods.

Performance Share Awards
During the thirteen weeks ended July 29, 2017 and July 30, 2016, and August 1, 2015, the Company granted no performance share awards. During the twenty-six weeks ended July 29, 2017 and July 30, 2016, and August 1, 2015, the Company granted performance share awards for a targeted 159,000169,500 and 177,921159,000 shares, respectively with a weighted-average grant date fair value of $26.64$26.90 and $30.12,$26.64, respectively. Vesting of performance-based awards is dependent upon the financial performance of the Company and the attainment of certain financial goals during the three-year period following the grant. At the end of the vesting period, the employee will have earned an amount of shares or units between 0% and 200% of the targeted award, depending on the achievement of the specified financial goals for


the service period. Compensation expense is recognized based on the fair value of the award and the anticipated number of shares or units to be awarded for each tranche in accordance with the vesting schedule of the units over the three-year service period. The performance share


units are settled in cash and their fair value is based on the unadjusted quoted market price for the Company’s common stock on each measurement date. During the first quarter of 2017, the Company's remaining performance share awards granted in units vested and were settled in cash at fair value. Refer to Note 13 to the condensed consolidated financial statements for further discussion regarding performance share units.

Stock Options
The following table summarizes stock option activity for the periods ended July 29, 2017 and July 30, 2016 and August 1, 2015:2016:
Thirteen Weeks Ended July 30, 2016 Thirteen Weeks Ended August 1, 2015Thirteen Weeks Ended Thirteen Weeks Ended
  Weighted- Average Grant Date Fair Value   Weighted- Average Grant Date Fair ValueJuly 29, 2017 July 30, 2016
Total Number of Stock Options Total Number of Stock Options   Weighted- Average Grant Date Fair Value   Weighted- Average Grant Date Fair Value
 Weighted- Average Grant Date Fair Value Total Number of Stock Options Total Number of Stock Options 
April 30, 2016229,105
 $8.99
336,886
 $9.01
Total Number of Stock Options Weighted- Average Grant Date Fair ValueTotal Number of Stock Options Weighted- Average Grant Date Fair Value
April 29, 2017 $6.39 
Granted—
 —
 Granted—
 —
—
 ——
 
Exercised(6,315) 9.28
 Exercised(12,000) 7.83
(5,250) 5.93
 Exercised(6,315) 9.28
Forfeited—
 —
 Forfeited(1,500) 15.94
—
 —
 Forfeited—
 —
Expired—
 —
 Expired—
 —
—
 —
 Expired—
 —
July 30, 2016222,790
 $8.98
 August 1, 2015323,386
 $9.02
July 29, 201792,042
 $6.42
 July 30, 2016222,790
 $8.98
       
Twenty-Six Weeks Ended Twenty-Six Weeks Ended
July 29, 2017 July 30, 2016
  Weighted- Average Grant Date Fair Value   Weighted- Average Grant Date Fair Value
Total Number of Stock Options Total Number of Stock Options 
 Weighted- Average Grant Date Fair Value 
January 28, 2017150,540
 $9.36
301,295
 $8.95
Granted—
 —
—
 —
Exercised(11,250) 5.74
 Exercised(56,381) 7.41
Forfeited—
 —
 Forfeited(7,499) 15.94
Expired(47,248) 15.94
 Expired(14,625) 10.75
July 29, 201792,042
 $6.42
 July 30, 2016222,790
 $8.98

Restricted Stock Units for Non-Employee Directors
 Twenty-six Weeks Ended July 30, 2016  Twenty-six Weeks Ended August 1, 2015
   Weighted- Average Grant Date Fair Value    Weighted- Average Grant Date Fair Value
 Total Number of Stock Options   Total Number of Stock Options 
     
January 30, 2016301,295
 $8.95
 January 31, 2015416,803
 $8.42
Granted—
 —
 Granted16,667
 12.81
Exercised(56,381) 7.41
 Exercised(70,633) 7.13
Forfeited(7,499) 15.94
 Forfeited(3,000) 15.94
Expired(14,625) 10.75
 Expired(36,451) 6.95
July 30, 2016222,790
 $8.98
 August 1, 2015323,386
 $9.02

OfEquity-based grants may be made to non-employee directors in the 16,667 stock options granted during the twenty-six weeks ended August 1, 2015, 8,333 have a vesting periodform of four years and 8,334 have a vesting period of five years.

The Company also granted 53,310 and 36,740cash-equivalent restricted stock units ("RSUs"). 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 is recognized at fair value when the dividend equivalents are granted. The Company granted 45,830 and 53,310 RSUs to non-employee directors, including 910 and 1,110 RSUs for dividend equivalents, during the thirteen weeks ended July 29, 2017 and July 30, 2016, and August 1, 2015, respectively, with weighted-average grant date fair values of $21.62$27.84 and $31.68,$21.62, respectively. The Company granted 46,712 and 54,163 RSUs, including 1,792 and 37,444 restricted stock units to non-employee directors1,963 RSUs for dividend equivalents, during the twenty-six weeks ended July 29, 2017 and July 30, 2016, and August 1, 2015, respectively, with weighted-average grant date fair values of $27.81 and $21.72, and $31.69, respectively. All restricted stock units for dividend equivalents vested immediately and compensation expense was fully recognized during the thirteen and twenty-six weeks ended July 30, 2016 and August 1, 2015.



Note 911
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 BenefitsOther Postretirement BenefitsPension BenefitsOther Postretirement Benefits
Thirteen Weeks EndedThirteen Weeks Ended
($ thousands)July 30, 2016
August 1, 2015
July 30, 2016
August 1, 2015
July 29, 2017
July 30, 2016
July 29, 2017
July 30, 2016
Service cost$1,904
$2,993
$—
$—
$2,383
$1,904
$—
$—
Interest cost3,810
3,578
15
14
3,727
3,810
16
15
Expected return on assets(7,252)(8,190)—
—
(6,913)(7,252)—
—
Amortization of: 
 
 
 
 
 
 
 
Actuarial loss (gain)39
143
(55)(63)996
39
(35)(55)
Prior service income(461)(481)—
—
(461)(461)—
—
Settlement cost250
—
—
—
—
250
—
—
Total net periodic benefit income$(1,710)$(1,957)$(40)$(49)$(268)$(1,710)$(19)$(40)
  
Pension BenefitsOther Postretirement BenefitsPension BenefitsOther Postretirement Benefits
Twenty-six Weeks EndedTwenty-six Weeks Ended
($ thousands)July 30, 2016
August 1, 2015
July 30, 2016
August 1, 2015
July 29, 2017
July 30, 2016
July 29, 2017
July 30, 2016
Service cost$4,167
$6,322
$—
$—
$4,850
$4,167
$—
$—
Interest cost7,671
7,164
30
28
7,474
7,671
34
30
Expected return on assets(14,475)(15,845)—
—
(13,793)(14,475)—
—
Amortization of: 
 
 
 
 
Actuarial loss (gain)77
309
(110)(111)2,148
77
(73)(110)
Prior service income(921)(956)—
—
(896)(921)—
—
Settlement cost250
—
—
—
—
250
—
—
Total net periodic benefit income$(3,231)$(3,006)$(80)$(83)$(217)$(3,231)$(39)$(80)



Note 1012Risk 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 and have varying maturities through July 2017.August 2018. Credit risk is managed through the continuous monitoring of exposures to such counterparties. 
 
The Company’s hedging strategy uses foreign currency 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) incomeloss and reclassified to earnings in the period that the hedged transaction is recognized in earnings.

Hedge ineffectiveness is evaluated using the hypothetical derivative method. The amount of hedge ineffectiveness for the thirteen and twenty-six weeks ended July 29, 2017 and July 30, 2016 and August 1, 2015 was not material. 
 


As of July 29, 2017, July 30, 2016 August 1, 2015 and January 30, 2016,28, 2017, the Company had forward contracts maturing at various dates through August 2018, July 2017 July 2016 and January 2017,February 2018, respectively. The contract notional amount representsamounts in the following table represent the net notional amount of all purchase and sale contracts of a foreign currency. 
Contract Notional Amount
(U.S. $ equivalent in thousands)July 30, 2016
August 1, 2015
January 30, 2016
July 29, 2017
July 30, 2016
January 28, 2017
Financial Instruments  
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)$17,404
$19,650
$14,118
$18,110
$17,404
$18,826
Euro13,544
18,035
15,499
14,725
13,544
13,297
Chinese yuan12,477
15,214
14,623
11,887
12,477
7,723
New Taiwanese dollars567
522
526
United Arab Emirates dirham
254
939
823
Japanese yen1,026
1,208
1,159
176
1,026
769
United Arab Emirates dirham
939
861
930
New Taiwanese dollars522
537
570
Other currencies174
235
219
14
174
124
Total financial instruments$46,086
$55,740
$47,118
$45,733
$46,086
$42,088
 
The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of July 29, 2017, July 30, 2016 August 1, 2015 and January 30, 201628, 2017 are as follows:

Asset Derivatives Liability DerivativesAsset Derivatives Liability Derivatives
($ thousands)Balance Sheet LocationFair Value
 Balance Sheet LocationFair Value
Balance Sheet LocationFair Value
 Balance Sheet LocationFair Value
        
Foreign exchange forward contracts:Foreign exchange forward contracts: 
   
Foreign exchange forward contracts: 
   
    
July 29, 2017Prepaid expenses and other current assets$918
 Other accrued expenses$1,083
July 30, 2016Prepaid expenses and other current assets$365
 Other accrued expenses$565
Prepaid expenses and other current assets365
 Other accrued expenses565
August 1, 2015Prepaid expenses and other current assets1,166
 Other accrued expenses453
January 30, 2016Prepaid expenses and other current assets1,000
 Other accrued expenses846
January 28, 2017Prepaid expenses and other current assets234
 Other accrued expenses874
 


For the thirteen and twenty-six weeksperiods ended July 29, 2017 and July 30, 2016, and August 1, 2015, the effect of derivative instruments in cash flow hedging relationships on the condensed consolidated statements of earnings was as follows:

 Thirteen Weeks EndedThirteen Weeks Ended
($ thousands)July 30, 2016August 1, 2015
     
Foreign exchange forward contracts:
Income Statement Classification (Losses) Gains - Realized
(Loss) Gain Recognized in OCI on Derivatives
(Loss) Gain Reclassified from Accumulated OCI into Earnings
Gain Recognized in OCI on Derivatives
Gain Reclassified from Accumulated OCI into Earnings
     
Net sales$(25)$(36)$35
$59
Cost of goods sold(472)33
733
7
Selling and administrative expenses(75)(187)121
43
Interest expense14
—
8
—



 Thirteen Weeks EndedThirteen Weeks Ended
($ thousands)July 29, 2017July 30, 2016
Foreign exchange forward contracts:
Income Statement Classification (Losses) Gains - Realized
Loss Recognized in OCL on Derivatives
Gain Reclassified from Accumulated OCL into Earnings
(Loss) Gain Recognized in OCL on Derivatives
(Loss) Gain Reclassified from Accumulated OCL into Earnings
     
Net sales$(8)$6
$(25)$(36)
Cost of goods sold(55)158
(472)33
Selling and administrative expenses(194)—
(75)(187)
Interest expense(14)—
14
—
Twenty-six Weeks EndedTwenty-Six Weeks Ended
($ thousands)July 30, 2016August 1, 2015July 29, 2017July 30, 2016
 
Foreign exchange forward contracts:
Income Statement Classification (Losses) Gains - Realized
Loss Recognized in OCI on Derivatives
(Loss) Gain Reclassified from Accumulated OCI into Earnings
Gain (Loss) Recognized in OCI on Derivatives
Gain (Loss) Reclassified from Accumulated OCI into Earnings
(Loss) Gain Recognized in OCL on Derivatives
Gain (Loss) Reclassified from Accumulated OCL into Earnings
Loss Recognized in OCL on Derivatives
(Loss) Gain Reclassified from Accumulated OCL into Earnings
  
Net sales$(189)$(72)$60
$113
$(40)$24
$(189)$(72)
Cost of goods sold(585)116
532
(122)737
161
(585)116
Selling and administrative expenses(24)(357)33
47
117
(67)(24)(357)
Interest expense(24)—
(14)—
(10)(1)(24)—

All gains and losses currently included within accumulated other comprehensive (loss) incomeloss associated with the Company’s foreign exchange forward contracts are expected to be reclassified into net earnings within the next 12 months. Additional information related to the Company’s derivative financial instruments are disclosed within Note 1113 to the condensed consolidated financial statements. 
 
Note 1113Fair 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 as well as 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). 
 


Deferred Compensation Plan Assets and Liabilities 
The Company maintains a non-qualified deferred compensation plan (the “Deferred Compensation Plan”) for the benefit of certain management employees. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan, and the account balance fluctuates with the investment returns on those funds. The Deferred Compensation Plan permits the deferral of up to 50% of base salary and 100% of compensation received under the Company’s annual incentive plan. The deferrals are held in a separate trust, which has been established by the Company to administer the Deferred Compensation Plan. The assets of the trust are subject to the claims of the Company’s creditors in the event that the Company becomes insolvent. Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e., a “Rabbi Trust”). The liabilities of the Deferred Compensation Plan are presented in other accrued expenses and the assets held by the trust are classified as trading securities within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets. Changes in deferred compensation plan assets and liabilities are charged to selling and administrative expenses. The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1). 
 
Deferred Compensation Plan for Non-Employee Directors  
Non-employee directors are eligible to participate in a deferred compensation plan with deferred amounts valued as if invested in the Company’s common stock through the use of phantom stock units (“PSUs”). Under the plan, each participating director’s account is credited with the number of PSUs that is equal to the number of shares of the Company’s common stock 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 statementstatements of earnings. The fair value of each PSU is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1). 
 
Restricted Stock Units for Non-Employee Directors
Under the Company’s incentive compensation plans, cash-equivalent restricted stock units (“RSUs”) of the Company may be granted at no cost to non-employee directors. The RSUs are subject to a vesting requirement (usually one year), earn dividend-equivalent units, and are settled in cash on the date the director terminates service or such earlier date as a director may elect, subject to restrictions, based on the then current fair value of the Company’s common stock. The fair value of each RSU is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1).  Additional information related to restricted stock unitsRSUs for non-employee directors is disclosed in Note 810 to the condensed consolidated financial statements.
 


Performance Share Units
Under the Company’s incentive compensation plans, common stock or cash may be awarded at the end of the performance period at no cost to certain officers and key employees if certain financial goals are met. Under the plan, employees are granted performance share awards at a target number of shares or units, which generally vest over a three-year service period. At the end of the vesting period, the employee will have earned an amount of shares or units between 0% and 200% of the targeted award, depending on the achievement of specified financial goals for the service period. The fair value of each performance share unit is based on an unadjusted quoted market price of the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1).  Additional information related toDuring the first quarter of 2017, the Company's remaining performance share awards granted in units is disclosedvested and were settled in Note 8 to the condensed consolidated financial statements.cash at fair value.
 
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 1012 to the condensed consolidated financial statements. 

Secured Convertible Note
The Companyreceived a $7.5 million face value secured convertible note as partial consideration for the December 2014 disposition of Shoes.com. TheShoes.com, and the convertible note requires installments over four years with the first payment of $1.25 million due on July 1, 2017 and quarterly installments of $0.6 million thereafter, plus accrued interest, until it matures on December 12, 2019. Interest accrues at an annual rate of 6% until December 11, 2016, 7% until December 11, 2017, 8% until December 11, 2018, and 9% until the maturity date. The principal and outstanding accrued interest is convertible into common stock of an affiliate of ShoeMe Technologies Limited ("the Purchaser") at a specified conversion price per share, at the Company's option, or automatically upon


a qualified initial public offering ("IPO") by the Purchaser at the IPO price. The convertible note iswas measured at fair value using unobservable inputs (Level 3). The fair valueDuring the fourth quarter of 2016, the convertible note is $7.2 million at July 30, 2016, of which $1.3 million is included in prepaid expenses and other current assets and $5.9 million is included in other assets on the condensed consolidated balance sheets. The fair value of the convertible note of $7.1 million at August 1, 2015 and January 30, 2016 is included in other assets on the condensed consolidated balance sheets. The change in fair value reflects an immaterial amount of interest income for the thirteen and twenty-six weeks ended July 30, 2016 and August 1, 2015.was fully impaired.

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at July 29, 2017, July 30, 2016 August 1, 2015 and January 30, 2016.28, 2017. The Company did not have any transfers between Level 1, and Level 2 or Level 3 during the twenty-six weeks ended July 29, 2017 or July 30, 2016 or August 1, 2015.2016.   
 
 Fair Value Measurements 
 Fair Value Measurements
($ thousands)Total
 Level 1
Level 2
Level 3
Total
 Level 1
Level 2
Level 3
Asset (Liability) 
  
 
 
 
  
 
 
As of July 30, 2016:   
July 29, 2017:   
Cash equivalents – money market funds$16,163
 $16,163
$—
$—
Non-qualified deferred compensation plan assets5,637
 5,637
—
—
Non-qualified deferred compensation plan liabilities(5,637) (5,637)—
—
Deferred compensation plan liabilities for non-employee directors(2,154) (2,154)—
—
Restricted stock units for non-employee directors(9,088) (9,088)—
—
Derivative financial instruments, net(165) —
(165)—
July 30, 2016:   
Cash equivalents – money market funds$132,320
 $132,320
$—
$—
$132,320
 $132,320
$—
$—
Non-qualified deferred compensation plan assets4,637
 4,637
—
—
4,637
 4,637
—
—
Non-qualified deferred compensation plan liabilities(4,637) (4,637)—
—
(4,637) (4,637)—
—
Deferred compensation plan liabilities for non-employee directors(1,705) (1,705)—
—
(1,705) (1,705)—
—
Restricted stock units for non-employee directors(9,060) (9,060)—
—
(9,060) (9,060)—
—
Performance share units(2,347) (2,347)—
—
(2,347) (2,347)—
—
Derivative financial instruments, net(200) —
(200)—
(200) —
(200)—
Secured convertible note7,190
 —
—
7,190
7,190
 —
—
7,190
As of August 1, 2015:   
January 28, 2017:   
Cash equivalents – money market funds$91,709
 $91,709
$—
$—
$27,530
 $27,530
$—
$—
Non-qualified deferred compensation plan assets3,879
 3,879
—
—
5,051
 5,051
—
—
Non-qualified deferred compensation plan liabilities(3,879) (3,879)—
—
(5,051) (5,051)—
—
Deferred compensation plan liabilities for non-employee directors(2,423) (2,423)—
—
(1,909) (1,909)—
—
Restricted stock units for non-employee directors(10,263) (10,263)—
—
(9,390) (9,390)—
—
Performance share units(3,518) (3,518)—
—
(3,352) (3,352)—
—
Derivative financial instruments, net713
 —
713
—
(640) —
(640)—
Secured convertible note7,118
 —
—
7,118
As of January 30, 2016:   
Cash equivalents – money market funds$100,694
 $100,694
$—
$—
Non-qualified deferred compensation plan assets3,383
 3,383
—
—
Non-qualified deferred compensation plan liabilities(3,383) (3,383)—
—
Deferred compensation plan liabilities for non-employee directors(1,728) (1,728)—
—
Restricted stock units for non-employee directors(8,879) (8,879)—
—
Performance share units(3,780) (3,780)—
—
Derivative financial instruments, net154
 —
154
—
Secured convertible note7,117
 —
—
7,117


 
Impairment Charges 
The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important that could trigger an impairment review include underperformance relative to expected historical or projected future operating results, a significant change in the manner of the use of the asset, or a negative industry or economic trend. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the aforementioned factors, impairment is measured based on a projected discounted cash flow method. Certain factors, such as estimated store sales and expenses, used for this nonrecurring fair value measurement are considered Level 3 inputs as defined by FASB ASC 820, Fair Value Measurement. Long-lived assets held and used with a carrying amount of $114.6 million and $96.6 million were assessed for indicators of impairmentat July 29, 2017 and written down


to their fair value, resulting in impairment charges of $0.2 million for the thirteen weeks ended July 30, 2016. Of the $0.2 million impairment charge included in selling and administrative expenses, an immaterial amount related to the Famous Footwear segment and $0.2 million related to the Brand Portfolio segment.  Impairment charges of $0.5 million were included in selling and administrative expenses for the twenty-six weeks ended July 30, 2016, of which $0.1 million related to the Famous Footwear segment and $0.4 million related to the Brand Portfolio segment. Long-lived assets held and used with a carrying amount of $82.3 millionrespectively, were assessed for indicators of impairment and written down to their fair value, resultingvalue. This assessment resulted in the following impairment charges, of $0.5 millionprimarily for leasehold improvements and furniture and fixtures in the thirteen weeks ended August 1, 2015. Of the $0.5 million impairment charge included in selling and administrative expenses, $0.3 million related to the Famous Footwear segment and $0.2 million related to the Brand Portfolio segment.  Impairment charges of $0.9 millionCompany's retail stores, which were included in selling and administrative expenses for the twenty-six weeks ended August 1, 2015, of which $0.5 million related to the Famous Footwear segment and $0.4 million related to the Brand Portfolio segment.respective periods.

 Thirteen Weeks EndedTwenty-Six Weeks Ended
($ thousands)July 29, 2017
July 30, 2016
July 29, 2017
July 30, 2016
Impairment Charges    
Famous Footwear$150
$—
$300
$134
Brand Portfolio1,020
225
1,819
402
Total impairment charges$1,170
$225
$2,119
$536

Fair Value of the Company’s Other Financial Instruments 
The fair values of cash and cash equivalents (excluding money market funds discussed above), restricted cash, receivables and trade accounts payable approximate their carrying values due to the short-term nature of these instruments.

The carrying amounts and fair values of the Company's other financial instruments subject to fair value disclosures are as follows:
 July 30, 2016August 1, 2015January 30, 2016
 Carrying
  Fair
Carrying
  Fair
Carrying
  Fair
($ thousands)Value
(1) 
 Value
Value
(1) 
 Value
Value
(1) 
 Value
Current portion of long-term debt$—
  $—
$39,157
  $40,823
$—
  $—
Long-term debt196,774
  205,500
195,919
  202,000
196,544
  196,000
Total debt$196,774
  $205,500
$235,076
  $242,823
$196,544
  $196,000
(1)
The carrying value of the long-term debt is net of deferred issuance costs of $3.2 million, $4.1 million and $3.5 million as of July 30, 2016, August 1, 2015 and January 30, 2016, respectively, as a result of the adoption of ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, during the fourth quarter of 2015.
 July 29, 2017 July 30, 2016 January 28, 2017
 Carrying
 Fair
 Carrying
 Fair
 Carrying
 Fair
($ thousands)Value
 Value
 Value
 Value
 Value
 Value
Borrowings under revolving credit agreement$35,000
 $35,000
 $—
 $—
 $110,000
 $110,000
Long-term debt197,233
 209,500
 196,774
 205,500
 197,003
 209,000
Total debt$232,233

$244,500

$196,774

$205,500

$307,003

$319,000
 
The fair value of borrowings under revolving credit agreement approximates its carrying value due to its short-term nature (Level 1). The fair value of the Company’s current portion of long-term debt and long-term debt was based upon quoted prices in an inactive market as of the end of the respective periods (Level 2).

Note 1214Income Taxes
 
The Company’s effective tax rate can vary considerably from period to period, depending on a number of factors.  The Company’s consolidated effective tax rates were 32.3%33.9% and 26.5%32.3%, respectively, for the thirteen weeks and 31.0% and 26.2% for the twenty-six weeks ended July 29, 2017 and July 30, 2016 and August 1, 2015, respectively. 

2016. During the thirteen weeks ended July 30, 2016, the Company recognized a discrete tax benefit of $0.2 million, reflecting the favorable settlement of a federal tax audit issue. DuringIf the thirteen weeks ended August 1, 2015, the Company recognized discrete tax benefits of $1.3 million. If these discrete tax benefitsbenefit had not been recognized during the thirteen weeks ended July 30, 2016, and August 1, 2015, the Company's effective tax ratesrate would have been 33.0% and 32.0%, respectively.. Excluding the discrete tax item, the Company's tax rate is higher for the thirteen weeks ended July 29, 2017, reflecting a lower mix of international earnings in our lowest tax rate jurisdictions.

TheFor the twenty-six weeks ended July 29, 2017 and July 30, 2016, the Company's consolidated effective tax rates were 31.7% and 31.0%, respectively. As a result of the adoption of ASU 2016-09 during the first quarter of 2017, which requires prospective recognition of excess tax benefits and deficiencies in the statement of earnings, the Company recognized a discrete tax benefit of $1.1 million related to share-based compensation. Discrete tax benefits of $0.9 million were recognized during the twenty-six weeks ended July 30, 2016, reflecting the settlement of a federal tax audit issue. During the twenty-six weeks ended August 1, 2015 , the Company recognized discrete tax benefits of $2.9 million.  If these discrete tax benefits had not been recognized during the twenty-six weeks ended July 29, 2017 and July 30, 2016, and August 1, 2015, the Company's effective tax raterates would


have been 32.7%33.9% and 32.1%32.7%, respectively. Excluding the discrete tax items, the Company's tax rate is higher for the twenty-six weeks ended July 29, 2017, reflecting a lower mix of international earnings in our lowest tax rate jurisdictions.

Note 1315Related Party Transactions
 
C. banner International Holdings Limited
The Company has a joint venture agreement with a subsidiary of C. banner International Holdings Limited (“CBI”) to market Naturalizer footwear in China, effective through August 2017.China. The Company is a 51% owner of the joint venture (“B&H Footwear”), with CBI owning the other 49%. The license enabling the joint venture to market the footwear expired in August 2017 and the parties are in the process of dissolving their joint venture arrangements. B&H Footwear sellssold Naturalizer footwear to a retail affiliate of CBI on a wholesale basis, which in turn sellssold the Naturalizer products through department store shops and free-standing stores in China.  The Company, through its consolidated subsidiary, B&H Footwear, sold Naturalizer footwear on a wholesale basis to CBI totaling $1.6 million and $2.1$3.8 million duringfor the thirteen weeks and $3.8 million and $4.7 million during the twenty-six weeks ended July 30, 2016, and August 1, 2015, respectively, of Naturalizer footwear on a


wholesale basis to CBI. During the second quarter of 2016, the Company communicated its intention to dissolve the joint venture with CBI upon the expiration of the license to sell Naturalizer footwear.no corresponding sales during 2017.

Note 1416Commitments and Contingencies
 
Environmental Remediation 
Prior operations included numerous manufacturing and other facilities for which the Company may have responsibility under various environmental laws for the remediation of conditions that may be identified in the future. The Company is involved in environmental remediation and ongoing compliance activities at several sites and has been notified that it is or may be a potentially responsible party at several other sites.
 
Redfield
The Company is remediating, under the oversight of Colorado authorities, the groundwater and indoor air at its owned facility in Colorado (the “Redfield site” or, when referring to remediation activities at or under the facility, the “on-site remediation”) and residential neighborhoods adjacent to and near the property (the “off-site remediation”) that have been affected by solvents previously used at the facility. The current on-site remediation calls for the operation of a pump and treat system (which prevents migration of contaminated groundwater off the property) as the final remedy for the site, subject to monitoring and periodic review of the on-site conditions and other remedial technologies that may be developed in the future. In May 2016, the Company submitted a revised plan to address on-site conditions, including direct treatment of source areas, and received approval from the oversight authorities to begin implementing the revised plan later in 2016. plan.

As the treatment of the on-site source areas progresses, the Company expects to convert the pump and treat system to a passive treatment barrier system. Off-site groundwater concentrations have been reducing over time since installation of the pump and treat system in 2000 and injection of clean water beginning in 2003. However, localized areas of contaminated bedrock just beyond the property line continue to impact off-site groundwater. The modified workplanwork plan for addressing this condition includes converting the off-site bioremediation system into a monitoring well network and employing different remediation methods in these recalcitrant areas. In accordance with the workplan,work plan, a pilot test was conducted of certain groundwater remediation methods and the results of that test were used to develop more detailed plans for remedial activities in the off-site areas, which were approved by the authorities and are being implemented in a phased manner. The results of groundwater monitoring are being used to evaluate the effectiveness of these activities. In 2014, the Company submitted a proposed expanded remedy workplanwork plan that was accepted by the oversight authorities during 2015. The Company continues to implement the expanded remedy workplan.work plan.

The cumulative expenditures for both on-site and off-site remediation through July 30, 201629, 2017 were $28.3$29.5 million. The Company has recovered a portion of these expenditures from insurers and other third parties. The reserve for the anticipated future remediation activities at July 30, 201629, 2017 is $9.8$9.5 million, of which $9.0$8.6 million is recorded within other liabilities and $0.8$0.9 million is recorded within other accrued expenses. Of the total $9.8$9.5 million reserve, $4.9$4.5 million is for on-site remediation and $4.9$5.0 million is for off-site remediation. The liability for the on-site remediation was discounted at 4.8%. On an undiscounted basis, the on-site remediation liability would be $15.2$14.5 million as of July 30, 2016.29, 2017. The Company expects to spend approximately $0.8$0.5 million $0.2 million,in the next fiscal year, $0.1 million $0.1 millionin each of the following four years and $0.1 million during 2016, 2017, 2018, 2019 and 2020, respectively, and $13.9$13.6 million in the aggregate thereafter related to the on-site remediation.
 
Other
The Company has completed its remediation efforts at its closed New York tannery and two associated landfills. In 1995, state environmental authorities reclassified the status of these sites as being properly closed and requiring only continued maintenance and monitoring through 2024. The Company has an accrued liability of $1.2 million at July 30, 2016 to complete the cleanup, maintenance and monitoring at these sites, which has been discounted at 6.4%. Of the $1.2 million reserve, $1.0 million is recorded in other liabilities and $0.2 million is recorded in other accrued expenses. On an undiscounted basis, this liability would be $1.4 million. The Company expects to spend approximately $0.2 million in each of the next five years and $0.4 million in the aggregate thereafter related to these sites. In addition, variousVarious federal and state authorities have identified the Company as a potentially responsible party for remediation at certain other sites. However, the Company does not currently believe that its liability for such sites, if any, would be material.
 


The Company continues to evaluate its estimated costs in conjunction with its environmental consultants and records its best estimate of such liabilities. However, future actions and the associated costs are subject to oversight and approval of various governmental authorities. Accordingly, the ultimate costs may vary, and it is possible costs may exceed the recorded amounts.
 
Litigation
The Company is involved in legal proceedings and litigation arising in the ordinary course of business, including various employee-related claims under state and federal law, such as claims for discrimination, wrongful discharge or retaliation and for wage and


hour violations.business. In the opinion of management, the outcome of such ordinary course of business proceedings and litigation currently pending is not expected to have a material adverse effect on the Company’s results of operations or financial position. Legal costs associated with litigation are generally expensed as incurred.

Note 1517Financial Information for the Company and its Subsidiaries

The Company's 2023 Senior NotesCompany issued senior notes, which are fully and unconditionally and jointly and severally guaranteed by all of its existing and future subsidiaries that are guarantors under the our revolving credit facility ("Credit Agreement, as further discussed in Note 4 to the condensed consolidated financial statements.Agreement"). The following tables present the condensed consolidating financial information for each of Caleres, Inc. (“Parent”), the Guarantors, and subsidiaries of the Parent that are not Guarantors (the “Non-Guarantors”), together with consolidating eliminations, as of and for the periods indicated. Guarantors are 100% owned by the Parent. On December 13, 2016, Allen Edmonds was joined to the Credit Agreement as a guarantor. After giving effect to the joinder, the Company is the lead borrower, and Sidney Rich Associates, Inc., BG Retail, LLC and Allen Edmonds are each co-borrowers and guarantors under the Credit Agreement.

The condensed consolidating financial statements have been prepared using the equity method of accounting in accordance with the requirements for presentation of such information. Management believes that the information, presented in lieu of complete financial statements for each of the Guarantors, provides meaningful information to allow investors to determine the nature of the assets held by, and operations and cash flows of, each of the consolidated groups.


UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JULY 30, 2016
JULY 29, 2017JULY 29, 2017
 Non-
  Non-
 
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Parent
Guarantors
Guarantors
Eliminations
Total
Assets 
 
 
 
 
 
 
 
 
 
Current assets 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents$44,348
$15,673
$105,708
$—
$165,729
$12,712
$20,638
$19,592
$—
$52,942
Receivables, net112,384
1,787
30,138
—
144,309
117,672
5,670
20,274
—
143,616
Inventories, net159,285
467,691
21,905
—
648,881
174,839
516,704
30,462
—
722,005
Prepaid expenses and other current assets13,641
11,479
5,070
—
30,190
23,944
14,463
7,466
(8,901)36,972
Intercompany receivable – current743
213
21,263
(22,219)—
845
134
25,056
(26,035)—
Total current assets330,401
496,843
184,084
(22,219)989,109
330,012
557,609
102,850
(34,936)955,535
Other assets93,839
13,728
7,881
—
115,448
51,273
17,432
884
—
69,589
Goodwill and intangible assets, net114,446
2,800
11,814
—
129,060
112,221
40,937
188,037
—
341,195
Property and equipment, net31,087
146,373
9,316
—
186,776
32,428
172,802
12,608
—
217,838
Investment in subsidiaries1,055,300
—
(20,569)(1,034,731)—
1,263,829
—
(22,724)(1,241,105)—
Intercompany receivable – noncurrent479,611
374,047
559,593
(1,413,251)—
745,812
519,304
669,176
(1,934,292)—
Total assets$2,104,684
$1,033,791
$752,119
$(2,470,201)$1,420,393
$2,535,575
$1,308,084
$950,831
$(3,210,333)$1,584,157
  
Liabilities and EquityLiabilities and Equity 
 
 
 
Liabilities and Equity 
 
 
 
Current liabilities 
 
 
 
 
 
 
 
 
 
Borrowings under revolving credit agreement$35,000
$—
$—
$—
$35,000
Trade accounts payable$111,166
$216,850
$30,735
$—
$358,751
124,675
247,169
30,968
—
402,812
Other accrued expenses52,474
72,987
16,624
—
142,085
72,364
87,425
19,611
(8,901)170,499
Intercompany payable – current11,924
—
10,295
(22,219)—
14,523
—
11,512
(26,035)—
Total current liabilities175,564
289,837
57,654
(22,219)500,836
246,562
334,594
62,091
(34,936)608,311
Other liabilities 
 
 
 
 
 
 
 
 
 
Long-term debt196,774
—
—
—
196,774
197,233
—
—
—
197,233
Other liabilities37,253
67,119
3,646
—
108,018
91,645
40,810
4,984
—
137,439
Intercompany payable – noncurrent1,081,306
41,537
290,408
(1,413,251)—
1,360,406
119,152
454,734
(1,934,292)—
Total other liabilities1,315,333
108,656
294,054
(1,413,251)304,792
1,649,284
159,962
459,718
(1,934,292)334,672
Equity 
 
 
 
 
 
 
 
 
 
Caleres, Inc. shareholders’ equity613,787
635,298
399,433
(1,034,731)613,787
639,729
813,528
427,577
(1,241,105)639,729
Noncontrolling interests—
—
978
—
978
—
—
1,445
—
1,445
Total equity613,787
635,298
400,411
(1,034,731)614,765
639,729
813,528
429,022
(1,241,105)641,174
Total liabilities and equity$2,104,684
$1,033,791
$752,119
$(2,470,201)$1,420,393
$2,535,575
$1,308,084
$950,831
$(3,210,333)$1,584,157



UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
FOR THE THIRTEEN WEEKS ENDED JULY 29, 2017
   Non-
  
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Net sales$194,305
$482,645
$63,175
$(63,171)$676,954
Cost of goods sold137,659
270,548
32,543
(51,257)389,493
Gross profit56,646
212,097
30,632
(11,914)287,461
Selling and administrative expenses60,363
190,444
14,607
(11,914)253,500
Restructuring and other special charges, net2,661
37
167
—
2,865
Operating (loss) earnings(6,378)21,616
15,858
—
31,096
Interest expense(4,634)(3)—
—
(4,637)
Interest income85
—
177
—
262
Intercompany interest income (expense)2,021
(2,189)168
—
—
(Loss) earnings before income taxes(8,906)19,424
16,203
—
26,721
Income tax benefit (provision)2,926
(8,053)(3,920)—
(9,047)
Equity in earnings of subsidiaries, net of tax23,575
—
271
(23,846)—
Net earnings17,595
11,371
12,554
(23,846)17,674
Less: Net earnings attributable to noncontrolling interests—
—
79
—
79
Net earnings attributable to Caleres, Inc.$17,595
$11,371
$12,475
$(23,846)$17,595
      
Comprehensive income$19,302
$11,371
$13,302
$(24,574)$19,401
Less: Comprehensive income attributable to noncontrolling interests—
—
99
—
99
Comprehensive income attributable to Caleres, Inc.$19,302
$11,371
$13,203
$(24,574)$19,302



UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
FOR THE TWENTY-SIX WEEKS ENDED JULY 29, 2017
   Non-
  
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Net sales$388,745
$910,184
$101,220
$(91,686)$1,308,463
Cost of goods sold270,510
502,334
51,073
(73,823)750,094
Gross profit118,235
407,850
50,147
(17,863)558,369
Selling and administrative expenses112,787
372,791
29,860
(17,863)497,575
Restructuring and other special charges, net3,769
37
167
—
3,973
Operating earnings1,679
35,022
20,120
—
56,821
Interest expense(9,669)(12)—
—
(9,681)
Interest income173
—
324
—
497
Intercompany interest income (expense)4,104
(4,513)409
—
—
(Loss) earnings before income taxes(3,713)30,497
20,853
—
47,637
Income tax benefit (provision)1,839
(11,928)(4,990)—
(15,079)
Equity in earnings (loss) of subsidiaries, net of tax34,371
—
(777)(33,594)—
Net earnings32,497
18,569
15,086
(33,594)32,558
Less: Net earnings attributable to noncontrolling interests—
—
61
—
61
Net earnings attributable to Caleres, Inc.$32,497
$18,569
$15,025
$(33,594)$32,497
      
Comprehensive income$34,865
$18,569
$15,755
$(34,248)$34,941
Less: Comprehensive income attributable to noncontrolling interests—
—
76
—
76
Comprehensive income attributable to Caleres, Inc.$34,865
$18,569
$15,679
$(34,248)$34,865


UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JULY 29, 2017
   Non-
  
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Net cash (used for) provided by operating activities$(15,328)$95,828
$33,780
$—
$114,280
      
Investing activities 
 
 
 
 
Purchases of property and equipment(3,722)(17,762)(2,767)—
(24,251)
Capitalized software(2,686)(466)—
—
(3,152)
Intercompany investing(19,894)197,599
(177,705)—
—
Net cash (used for) provided by investing activities(26,302)179,371
(180,472)—
(27,403)
      
Financing activities 
 
 
 
 
Borrowings under revolving credit agreement400,000
—
—
—
400,000
Repayments under revolving credit agreement(475,000)—
—
—
(475,000)
Dividends paid(6,030)—
—
—
(6,030)
Acquisition of treasury stock(5,993)—
—
—
(5,993)
Issuance of common stock under share-based plans, net(2,490)—
—
—
(2,490)
Intercompany financing119,856
(263,590)143,734
—
—
Net cash provided by (used for) financing activities30,343
(263,590)143,734
—
(89,513)
Effect of exchange rate changes on cash and cash equivalents—
—
246
—
246
(Decrease) increase in cash and cash equivalents(11,287)11,609
(2,712)—
(2,390)
Cash and cash equivalents at beginning of period23,999
9,029
22,304
—
55,332
Cash and cash equivalents at end of period$12,712
$20,638
$19,592
$—
$52,942



UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
JULY 30, 2016
   Non-
  
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Assets 
 
 
 
 
Current assets 
 
 
 
 
Cash and cash equivalents$44,348
$15,673
$105,708
$—
$165,729
Receivables, net112,384
1,787
30,138
—
144,309
Inventories, net159,285
467,691
21,905
—
648,881
Prepaid expenses and other current assets13,641
11,479
5,070
—
30,190
Intercompany receivable – current743
213
21,263
(22,219)—
Total current assets330,401
496,843
184,084
(22,219)989,109
Other assets93,839
13,728
7,881
—
115,448
Goodwill and intangible assets, net114,446
2,800
11,814
—
129,060
Property and equipment, net31,087
146,373
9,316
—
186,776
Investment in subsidiaries1,055,300
—
(20,569)(1,034,731)—
Intercompany receivable  –  noncurrent479,611
374,047
559,593
(1,413,251)—
Total assets$2,104,684
$1,033,791
$752,119
$(2,470,201)$1,420,393
      
Liabilities and Equity  
 
 
 
Current liabilities 
 
 
 
 
Trade accounts payable$111,166
$216,850
$30,735
$—
$358,751
Other accrued expenses52,474
72,987
16,624
—
142,085
Intercompany payable – current11,924
—
10,295
(22,219)—
Total current liabilities175,564
289,837
57,654
(22,219)500,836
Other liabilities 
 
 
 
 
Long-term debt196,774
—
—
—
196,774
Other liabilities37,253
67,119
3,646
—
108,018
Intercompany payable – noncurrent1,081,306
41,537
290,408
(1,413,251)—
Total other liabilities1,315,333
108,656
294,054
(1,413,251)304,792
Equity 
 
 
 
 
Caleres, Inc. shareholders’ equity613,787
635,298
399,433
(1,034,731)613,787
Noncontrolling interests—
—
978
—
978
Total equity613,787
635,298
400,411
(1,034,731)614,765
Total liabilities and equity$2,104,684
$1,033,791
$752,119
$(2,470,201)$1,420,393



UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
FOR THE THIRTEEN WEEKS ENDED JULY 30, 2016
   Non-
  
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Net sales$194,896
$408,476
$69,798
$(50,233)$622,937
Cost of goods sold142,295
221,031
39,125
(39,069)363,382
Gross profit52,601
187,445
30,673
(11,164)259,555
Selling and administrative expenses52,841
170,463
15,157
(11,164)227,297
Operating (loss) earnings(240)16,982
15,516
—
32,258
Interest expense(3,481)2
—
—
(3,479)
Interest income174
—
136
—
310
Intercompany interest income (expense)2,253
(2,276)23
—
—
(Loss) earnings before income taxes(1,294)14,708
15,675
—
29,089
Income tax provision(309)(6,436)(2,665)—
(9,410)
Equity in earnings (loss) of subsidiaries, net of tax21,371
—
(508)(20,863)—
Net earnings19,768
8,272
12,502
(20,863)19,679
Less: Net loss attributable to noncontrolling interests—
—
(89)—
(89)
Net earnings attributable to Caleres, Inc.$19,768
$8,272
$12,591
$(20,863)$19,768
      
Comprehensive income$18,478
$8,272
$11,802
$(20,194)$18,358
Less: Comprehensive loss attributable to noncontrolling interests—
—
(120)—
(120)
Comprehensive income attributable to Caleres, Inc.$18,478
$8,272
$11,922
$(20,194)$18,478

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
FOR THE TWENTY-SIX WEEKS ENDED JULY 30, 2016
   Non-
  
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Net sales$382,083
$791,522
$108,594
$(74,529)$1,207,670
Cost of goods sold272,204
425,658
62,019
(59,559)700,322
Gross profit109,879
365,864
46,575
(14,970)507,348
Selling and administrative expenses102,383
327,566
31,368
(14,970)446,347
Operating earnings7,496
38,298
15,207
—
61,001
Interest expense(7,089)—
—
—
(7,089)
Interest income331
—
226
—
557
Intercompany interest income (expense)4,507
(4,578)71
—
—
Earnings before income taxes5,245
33,720
15,504
—
54,469
Income tax provision(1,175)(12,740)(2,997)—
(16,912)
Equity in earnings (loss) of subsidiaries, net of tax33,481
—
(1,045)(32,436)—
Net earnings37,551
20,980
11,462
(32,436)37,557
Less: Net earnings attributable to noncontrolling interests—
—
6
—
6
Net earnings attributable to Caleres, Inc.$37,551
$20,980
$11,456
$(32,436)$37,551
      
Comprehensive income$38,056
$20,980
$12,031
$(33,021)$38,046
Less: Comprehensive loss attributable to noncontrolling interests—
—
(10)—
(10)
Comprehensive income attributable to Caleres, Inc.$38,056
$20,980
$12,041
$(33,021)$38,056




UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSFOR THE TWENTY-SIX WEEKS ENDED JULY 30, 2016
 Non-
  Non-
 
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Parent
Guarantors
Guarantors
Eliminations
Total
Net cash provided by operating activities$20,198
$68,129
$20,237
$—
$108,564
$20,198
$68,129
$20,237
$—
$108,564
  
Investing activities 
 
 
 
 
 
 
 
 
 
Purchases of property and equipment(1,525)(25,237)(681)—
(27,443)(1,525)(25,237)(681)—
(27,443)
Capitalized software(2,448)(1,300)(30)—
(3,778)(2,448)(1,300)(30)—
(3,778)
Intercompany investing(2,973)2,973
—
—
—
(2,973)2,973
—
—
—
Net cash used for investing activities(6,946)(23,564)(711)—
(31,221)(6,946)(23,564)(711)—
(31,221)
  
Financing activities 
 
 
 
 
 
 
 
 
 
Borrowings under revolving credit agreement103,000
—
—
—
103,000
103,000
—
—
—
103,000
Repayments under revolving credit agreement(103,000)—
—
—
(103,000)(103,000)—
—
—
(103,000)
Dividends paid(6,089)—
—
—
(6,089)(6,089)—
—
—
(6,089)
Acquisition of treasury stock(23,139)—
—
—
(23,139)(23,139)—
—
—
(23,139)
Issuance of common stock under share-based plans, net(4,086)—
—
—
(4,086)(4,086)—
—
—
(4,086)
Tax benefit related to share-based plans3,248
—
—
—
3,248
Excess tax benefit related to share-based plans3,248
—
—
—
3,248
Intercompany financing30,162
(28,892)(1,270)—
—
30,162
(28,892)(1,270)—
—
Net cash provided by (used for) financing activities96
(28,892)(1,270)—
(30,066)96
(28,892)(1,270)—
(30,066)
Effect of exchange rate changes on cash and cash equivalents—
—
301
—
301
—
—
301
—
301
Increase in cash and cash equivalents13,348
15,673
18,557
—
47,578
13,348
15,673
18,557
—
47,578
Cash and cash equivalents at beginning of period31,000
—
87,151
—
118,151
31,000
—
87,151
—
118,151
Cash and cash equivalents at end of period$44,348
$15,673
$105,708
$—
$165,729
$44,348
$15,673
$105,708
$—
$165,729



CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JANUARY 30, 2016
JANUARY 28, 2017JANUARY 28, 2017
 Non-
  Non-
 
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Parent
Guarantors
Guarantors
Eliminations
Total
Assets 
 
 
 
 
 
 
 
 
 
Current assets 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents$31,000
$—
$87,151
$—
$118,151
$23,999
$9,029
$22,304
$—
$55,332
Receivables, net110,235
2,290
41,139
—
153,664
118,746
5,414
28,961
—
153,121
Inventories, net151,704
371,538
23,503
—
546,745
150,098
410,867
24,799
—
585,764
Prepaid expenses and other current assets29,765
24,597
8,109
(5,966)56,505
24,293
23,040
8,058
(5,863)49,528
Intercompany receivable – current650
176
6,877
(7,703)—
695
263
22,091
(23,049)—
Total current assets323,354
398,601
166,779
(13,669)875,065
317,831
448,613
106,213
(28,912)843,745
Other assets94,767
15,772
7,810
—
118,349
51,181
16,567
826
—
68,574
Goodwill and intangible assets, net115,558
2,800
12,541
—
130,899
113,333
219,337
11,088
—
343,758
Property and equipment, net32,538
136,223
10,249
—
179,010
31,424
176,358
11,414
—
219,196
Investment in subsidiaries1,028,143
—
(19,524)(1,008,619)—
1,343,954
—
(21,946)(1,322,008)—
Intercompany receivable – noncurrent431,523
354,038
556,259
(1,341,820)—
568,541
366,902
581,624
(1,517,067)—
Total assets$2,025,883
$907,434
$734,114
$(2,364,108)$1,303,323
$2,426,264
$1,227,777
$689,219
$(2,867,987)$1,475,273
  
Liabilities and Equity  
 
 
 
  
 
 
 
Current liabilities 
 
 
 
 
 
 
 
 
 
Borrowings under revolving credit agreement$110,000
$—
$—
$—
$110,000
Trade accounts payable$78,332
$123,274
$36,196
$—
$237,802
116,783
112,434
37,153
—
266,370
Other accrued expenses80,053
62,729
15,681
(5,966)152,497
74,941
65,228
16,919
(5,863)151,225
Intercompany payable – current4,394
—
3,309
(7,703)—
12,794
—
10,255
(23,049)—
Total current liabilities162,779
186,003
55,186
(13,669)390,299
314,518
177,662
64,327
(28,912)527,595
Other liabilities 
 
 
 
 
 
 
 
 
 
Long-term debt196,544
—
—
—
196,544
197,003
—
—
—
197,003
Other liabilities44,011
66,302
3,695
—
114,008
91,683
40,507
3,999
—
136,189
Intercompany payable – noncurrent1,021,065
39,175
281,580
(1,341,820)—
1,209,943
98,982
208,142
(1,517,067)—
Total other liabilities1,261,620
105,477
285,275
(1,341,820)310,552
1,498,629
139,489
212,141
(1,517,067)333,192
Equity 
 
 
 
 
 
 
 
 
 
Caleres, Inc. shareholders’ equity601,484
615,954
392,665
(1,008,619)601,484
613,117
910,626
411,382
(1,322,008)613,117
Noncontrolling interests—
—
988
—
988
—
—
1,369
—
1,369
Total equity601,484
615,954
393,653
(1,008,619)602,472
613,117
910,626
412,751
(1,322,008)614,486
Total liabilities and equity$2,025,883
$907,434
$734,114
$(2,364,108)$1,303,323
$2,426,264
$1,227,777
$689,219
$(2,867,987)$1,475,273


UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
AS OF AUGUST 1, 2015
   Non-
  
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Assets 
 
 
 
 
Current assets 
 
 
 
 
Cash and cash equivalents$42,738
$12,742
$73,865
$—
$129,345
Restricted cash41,482
—
—
—
41,482
Receivables, net102,455
2,635
39,123
—
144,213
Inventories, net158,061
458,869
24,198
—
641,128
Prepaid expenses and other current assets12,032
22,554
6,416
—
41,002
Intercompany receivable – current369
120
14,122
(14,611)—
Total current assets357,137
496,920
157,724
(14,611)997,170
Other assets128,975
15,227
(1,556)—
142,646
Goodwill and intangible assets, net116,670
2,800
13,267
—
132,737
Property and equipment, net31,530
109,463
9,846
—
150,839
Investment in subsidiaries1,010,293
—
(18,530)(991,763)—
Intercompany receivable  –  noncurrent425,872
359,067
533,324
(1,318,263)—
Total assets$2,070,477
$983,477
$694,075
$(2,324,637)$1,423,392
      
Liabilities and Equity  
 
 
 
Current liabilities 
 
 
 
 
Current portion of long-term debt$39,157
$—
$—
$—
$39,157
Trade accounts payable121,213
222,148
39,265
—
382,626
Other accrued expenses23,476
96,992
14,649
—
135,117
Intercompany payable – current5,211
297
9,103
(14,611)—
Total current liabilities189,057
319,437
63,017
(14,611)556,900
Other liabilities 
 
 
 
 
Long-term debt195,919
—
—
—
195,919
Other liabilities65,038
33,812
2,495
—
101,345
Intercompany payable – noncurrent1,052,118
37,745
228,400
(1,318,263)—
Total other liabilities1,313,075
71,557
230,895
(1,318,263)297,264
Equity 
 
 
 
 
Caleres, Inc. shareholders’ equity568,345
592,483
399,280
(991,763)568,345
Noncontrolling interests—
—
883
—
883
Total equity568,345
592,483
400,163
(991,763)569,228
Total liabilities and equity$2,070,477
$983,477
$694,075
$(2,324,637)$1,423,392



UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
FOR THE THIRTEEN WEEKS ENDED AUGUST 1, 2015
   Non-
  
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Net sales$196,809
$415,717
$81,169
$(55,861)$637,834
Cost of goods sold144,750
225,771
47,563
(43,045)375,039
Gross profit52,059
189,946
33,606
(12,816)262,795
Selling and administrative expenses60,220
164,064
15,593
(12,816)227,061
Operating (loss) earnings(8,161)25,882
18,013
—
35,734
Interest expense(4,345)—
—
—
(4,345)
Loss on early extinguishment of debt(8,690)—
—
—
(8,690)
Interest income196
—
42
—
238
Intercompany interest income (expense)3,432
(3,471)39
—
—
(Loss) earnings before income taxes(17,568)22,411
18,094
—
22,937
Income tax benefit (provision)3,651
(7,570)(2,155)—
(6,074)
Equity in earnings of subsidiaries, net of tax30,742
—
394
(31,136)—
Net earnings16,825
14,841
16,333
(31,136)16,863
Less: Net earnings attributable to noncontrolling interests—
—
38
—
38
Net earnings attributable to Caleres, Inc.$16,825
$14,841
$16,295
$(31,136)$16,825
      
Comprehensive income$16,181
$14,229
$15,719
$(29,911)$16,218
Less: Comprehensive income attributable to noncontrolling interests—
—
37
—
37
Comprehensive income attributable to Caleres, Inc.$16,181
$14,229
$15,682
$(29,911)$16,181

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
FOR THE TWENTY-SIX WEEKS ENDED AUGUST 1, 2015
   Non-
  
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Net sales$389,160
$795,906
$136,150
$(81,099)$1,240,117
Cost of goods sold282,343
427,354
84,526
(65,427)728,796
Gross profit106,817
368,552
51,624
(15,672)511,321
Selling and administrative expenses113,197
316,310
31,416
(15,672)445,251
Operating (loss) earnings(6,380)52,242
20,208
—
66,070
Interest expense(8,807)(1)—
—
(8,808)
Loss on early extinguishment of debt(8,690)—
—
—
(8,690)
Interest income448
—
94
—
542
Intercompany interest income (expense)7,109
(7,193)84
—
—
(Loss) earnings before income taxes(16,320)45,048
20,386
—
49,114
Income tax benefit (provision)5,335
(15,590)(2,605)—
(12,860)
Equity in earnings of subsidiaries, net of tax47,071
—
378
(47,449)—
Net earnings36,086
29,458
18,159
(47,449)36,254
Less: Net earnings attributable to noncontrolling interests—
—
168
—
168
Net earnings attributable to Caleres, Inc.$36,086
$29,458
$17,991
$(47,449)$36,086
      
Comprehensive income$36,398
$29,570
$18,275
$(47,674)$36,569
Less: Comprehensive income attributable to noncontrolling interests—
—
171
—
171
Comprehensive income attributable to Caleres, Inc.$36,398
$29,570
$18,104
$(47,674)$36,398




UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED AUGUST 1, 2015
   Non-
  
($ thousands)Parent
Guarantors
Guarantors
Eliminations
Total
Net cash (used for) provided by operating activities$(3,561)$71,298
$33,518
$—
$101,255
      
Investing activities 
 
 
 
 
Purchases of property and equipment(9,933)(14,470)(469)—
(24,872)
Disposals of property and equipment7,111
—
—
—
7,111
Capitalized software(1,959)(739)—
—
(2,698)
Intercompany investing(253)253
—
—
—
Net cash used for investing activities(5,034)(14,956)(469)—
(20,459)
      
Financing activities 
 
 
 
 
Borrowings under revolving credit agreement86,000
—
—
—
86,000
Repayments under revolving credit agreement(86,000)—
—
—
(86,000)
Proceeds from issuance of 2023 senior notes200,000
—
—
—
200,000
Redemption of 2019 senior notes(160,700)—
—
—
(160,700)
Restricted cash(41,482)—
—
—
(41,482)
Debt issuance costs(3,650)—
—
—
(3,650)
Dividends paid(6,135)—
—
—
(6,135)
Acquisition of treasury stock(4,921)—
—
—
(4,921)
Issuance of common stock under share-based plans, net(4,428)—
—
—
(4,428)
Tax benefit related to share-based plans2,838
—
—
—
2,838
Intercompany financing55,920
(43,600)(12,320)—
—
Net cash provided by (used for) financing activities37,442
(43,600)(12,320)—
(18,478)
Effect of exchange rate changes on cash and cash equivalents—
—
(376)—
(376)
Increase in cash and cash equivalents28,847
12,742
20,353
—
61,942
Cash and cash equivalents at beginning of period13,891
—
53,512
—
67,403
Cash and cash equivalents at end of period$42,738
$12,742
$73,865
$—
$129,345


ITEM 2MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
OVERVIEW
Financial Highlights
Our financial performance during theWe are pleased with our second quarter of 2016 reflectsfinancial results. Our recently acquired Allen Edmonds business helped us report solid growth in net sales and gross profit. We have experienced a successful start to the benefit of inventory management and cost reductionsback-to-school season at Famous Footwear despite athe challenging retail environment. Although sales at our retail store locations were impacted by lower customer traffic, we experienced solid gainsWe also continue to benefit from improved gross margins in our online traffic and sales. Both our Brand Portfolio and Famous Footwear segments reported increases in gross profit rate and our Brand Portfolio segment reported a 9.1% increase in operating earnings.segment.
 
The following is a summary of the financial highlights for the second quarter of 2016:2017:   
 
Consolidated net sales decreased $14.9increased $54.1 million, or 2.3%8.7%, to $622.9$677.0 million for the second quarter of 2017, with solid contribution from both of our segments. Our Brand Portfolio segment reported a $39.2 million, or 16.8%, increase in net sales. Our Allen Edmonds business, which we acquired on December 13, 2016, comparedcontributed $41.8 million in net sales during the second quarter of 2017. Our Famous Footwear segment reported a $14.8 million, or 3.8%, increase in net sales and a 2.8% increase in same-store sales.

Gross profit increased $27.9 million, or 10.8%, to $637.8$287.5 million for the second quarter of 2015. Our Brand Portfolio segment reported a $9.2 million decrease in net sales,2017, primarily reflecting lower net sales of our Dr. Scholl's, Naturalizer and LifeStride brands, partially offset by higher sales from our Carlos and Via Spiga brands and growth in our Sam Edelman retail operations. Net sales of our Famous Footwear segment decreased $5.8 million, or 1.5%.

Gross profit decreased $3.2 million to $259.6 million for the second quarter of 2016, compared to $262.8 million for the second quarter of 2015, reflecting lower gross profit in our Famous Footwear and Brand Portfolio segments.Allen Edmonds division.  As a percentage of net sales, gross profit increased to 42.5% for the second quarter of 2017, compared to 41.7% for the second quarter of 2016, compared to 41.2% for the second quarter of 2015,primarily reflecting an improved mix of higher margin brands, the exit of some lower margin categories within our Brand Portfolio segment and a higher consolidated mix of retail versus wholesale sales and continued margin expansion in the quarter, partially offset by an increase in freight expense attributable to higher e-commerce sales.our Brand Portfolio segment.
 
Consolidated operating earnings decreased $3.4$1.2 million, or 9.7%3.6%, to $32.3$31.1 million in the second quarter of 2016, compared to $35.7 million2017. Despite higher sales and gross profit rate for the second quarter of 2015, reflecting lower2017, our selling and administrative expenses and restructuring and other special charges were also higher, resulting in a slight decline in operating earnings. As a percentage of net sales, volume as well as additional expenses relatedoperating earnings decreased to growth in our Sam Edelman retail store base and4.6% for the developmentsecond quarter of our George Brown and Diane von Furstenberg ("DVF") brands. 2017, compared to5.2% for the second quarter of 2016.
 
Consolidated net earnings attributable to Caleres, Inc. were $17.6 million, or $0.41 per diluted share, in the second quarter of 2017, compared to $19.8 million, or $0.46 per diluted share, in the second quarter of 2016, compared to net earnings2016.

The following items should be considered in evaluating the comparability of $16.8 million, or $0.38 per diluted share, in theour second quarter results in 2017 and 2016:

Acquisition, integration and reorganization of 2015. The second quartermen's brands – We incurred costs of 2015 included a loss on early extinguishment of debt of $8.7$2.9 million ($5.31.9 million on an after-tax basis, or $0.12$0.04 per diluted share) during the second quarter of 2017 reflecting integration and reorganization charges related to our men's business, with no corresponding costs during the refinancingsecond quarter of our senior notes.2016. Refer to Note 5 to the condensed consolidated financial statements for further discussion.

Acquisition-related cost of goods sold adjustment – We incurred costs of $1.9 million ($1.2 million on an after-tax basis, or $0.03 per diluted share) during the second quarter of 2017 associated with the amortization of the inventory fair value adjustment in connection with the acquisition of Allen Edmonds during the fourth quarter of 2016, with no corresponding costs during the second quarter of 2016. Refer to Note 3 to the condensed consolidated financial statements for additional information related to these costs.

Our debt-to-capital ratio improvedwas 26.6% as of July 29, 2017, compared to 24.2% as of July 30, 2016 compared to 29.2% as of August 1, 2015, and 24.6%33.3% as of January 28, 2017. The increase in our debt-to-capital ratio from July 30, 2016 primarily reflectingreflects higher shareholders' equity dueborrowings under our revolving credit agreement which was utilized to fund the acquisition of Allen Edmonds in December 2016. The decrease in our debt-to-capital ratio from January 28, 2017 primarily reflects lower borrowings under our revolving credit agreement as we continue to reduce our borrowings subsequent to the benefit of our net earnings.Allen Edmonds acquisition. Our current ratio increaseddecreased to 1.971.57 to 1 as of July 30, 2016,29, 2017, compared to 1.791.97 to 1 at August 1, 2015,July 30, 2016 and decreased from 2.241.60 to 1 at January 30, 2016.28, 2017.

Subsequent Event
Subsequent to the second quarter of 2017, Hurricane Harvey made landfall in Houston, Texas and surrounding areas. This is a major market for us with a total of approximately 40 Famous Footwear, Naturalizer, Allen Edmonds and Sam Edelman stores. We are still assessing the extent of the damage to determine the impact on our 2017 financial results.



Outlook for the Remainder of 20162017 
During the second quarter, we saw consistent margin expansion, generated steady cash flow and continued to manage inventorypay down our revolving credit facility following the Allen Edmonds acquisition. We are pleased with the progress we've made in diversifying our business to achieve more balanced earnings from both our Famous Footwear and selling and administrative expenses to deliver shareholder value, despite the continued uncertainty in the retail industry.Brand Portfolio segments. Throughout the remainder of 2016,2017, we will remain focusedcontinue to focus on our long-term strategyspeed-to-market and consumer acquisition initiatives to deliver consistent, profitable and sustainable growth by continuing to invest in company-wide omni-channel and speed to market efforts and our distribution center and consumer fulfillment initiatives.shareholder value.



Following are the consolidated results and the results by segment: 
CONSOLIDATED RESULTSCONSOLIDATED RESULTS        CONSOLIDATED RESULTS        
Thirteen Weeks Ended
Twenty-six Weeks EndedThirteen Weeks Ended
Twenty-six Weeks Ended
July 30, 2016 August 1, 2015
July 30, 2016 August 1, 2015July 29, 2017 July 30, 2016
July 29, 2017 July 30, 2016
  % of 
Net Sales
   % of 
Net Sales
   % of 
Net Sales
   % of 
Net Sales
  % of 
Net Sales
   % of 
Net Sales
   % of 
Net Sales
   % of 
Net Sales
($ millions)                
Net sales$622.9
 100.0 % $637.8
 100.0 % $1,207.7
 100.0 % $1,240.1
 100.0 %$677.0
 100.0 % $622.9
 100.0 % $1,308.5
 100.0 % $1,207.7
 100.0 %
Cost of goods sold363.3
 58.3 % 375.0
 58.8 % 700.4
 58.0 % 728.8
 58.8 %389.5
 57.5 % 363.3
 58.3 % 750.1
 57.3 % 700.4
 58.0 %
Gross profit259.6
 41.7 % 262.8
 41.2 % 507.3
 42.0 % 511.3
 41.2 %287.5
 42.5 % 259.6
 41.7 % 558.4
 42.7 % 507.3
 42.0 %
Selling and administrative expenses227.3
 36.5 % 227.1
 35.6 % 446.3
 36.9 % 445.2
 35.9 %253.5
 37.5 % 227.3
 36.5 % 497.6
 38.0 % 446.3
 36.9 %
Restructuring and other special charges, net2.9
 0.4 % —
 — % 4.0
 0.4 % —
 — %
Operating earnings32.3
 5.2 % 35.7
 5.6 % 61.0
 5.1 % 66.1
 5.3 %31.1
 4.6 % 32.3
 5.2 % 56.8
 4.3 % 61.0
 5.1 %
Interest expense(3.5) (0.5)% (4.3) (0.7)% (7.1) (0.6)% (8.8) (0.7)%(4.7) (0.7)% (3.5) (0.5)% (9.7) (0.7)% (7.1) (0.6)%
Loss on early extinguishment of debt—
 — % (8.7) (1.3)% —
 — % (8.7) (0.6)%
Interest income0.3
 0.0 % 0.2
 0.0 % 0.6
 0.0 % 0.5
 0.0 %0.3
 0.0 % 0.3
 0.0 % 0.5
 0.0 % 0.6
 0.0 %
Earnings before income taxes29.1
 4.7 % 22.9
 3.6 % 54.5
 4.5 % 49.1
 4.0 %26.7
 3.9 % 29.1
 4.7 % 47.6
 3.6 % 54.5
 4.5 %
Income tax provision(9.4) (1.5)% (6.0) (1.0)% (16.9) (1.4)% (12.8) (1.1)%(9.0) (1.3)% (9.4) (1.5)% (15.0) 1.1 % (16.9) (1.4)%
Net earnings19.7
 3.2 % 16.9
 2.6 % 37.6
 3.1 % 36.3
 2.9 %17.7
 2.6 % 19.7
 3.2 % 32.6
 2.5 % 37.6
 3.1 %
Net (loss) earnings attributable to noncontrolling interests(0.1) 0.0 % 0.1
 0.0 % 0.0
 0.0 % 0.2
 0.0 %
Net earnings (loss) attributable to noncontrolling interests0.1
 0.0 % (0.1) (0.0 )% 0.1
 0.0 % 0.0
 0.0 %
Net earnings attributable to Caleres, Inc.$19.8
 3.2 % $16.8
 2.6 % $37.6
 3.1 % $36.1
 2.9 %$17.6
 2.6 % $19.8
 3.2 % $32.5
 2.5 % $37.6
 3.1 %
 
Net Sales 
Net sales decreased $14.9increased $54.1 million, or 2.3%8.7%, to $677.0 million for the second quarter of 2017, compared to $622.9 million for the second quarter of 2016, compared to $637.8 million for the second quarterwith solid contribution from both of 2015.our segments. Our Brand Portfolio segment reported a $9.2$39.2 million, decreaseor 16.8%, increase in net sales, reflecting lower$41.8 million of sales from our recently acquired Allen Edmonds business and higher net sales of our Dr. Scholl's, NaturalizerSam Edelman and LifeStrideVince brands, partially offset by higherlower sales from our Carlos and Via Spiga brands and growthFranco Sarto brands. Our Famous Footwear segment reported a $14.8 million, or 3.8%, increase in our Sam Edelman retail operations.The decline in our Brand Portfolio net sales, was driven by a difficult retail environment and the planned exit of some lower margin categories. Net sales of our Famous Footwear segment decreased $5.8 million, or 1.5%. Lower customer traffic during the second quarter of 2016 drove a decline2.8% increase in same-store sales of 1.1%. In addition, our Famous Footwear customers are purchasing footwear for their back-to-school needs later than in previous periods.and a higher store count.

Net sales decreased $32.4increased $100.8 million, or 2.6%8.3%, to $1,308.5 million for the six months ended July 29, 2017, compared to $1,207.7 million for the six months ended July 30, 2016, compared to $1,240.1 million for the six months ended August 1, 2015.2016. Our Brand Portfolio segment reported a $31.2an $84.0 million, decreaseor 18.6%, increase in net sales, reflecting lower$84.3 million of sales from our recently acquired Allen Edmonds business and higher net sales of our Dr. Scholl's, NaturalizerSam Edelman and LifeStrideVince brands, partially offset by growth in our Sam Edelman retail operations and higherlower sales from our DVF (launched in 2016), Carlos and Via Spiga, brands. The decline in our Brand Portfolio net sales was driven by a difficult retail environmentFranco Sarto and the planned exit of some lower margin categories.Naturalizer brands.  Net sales atof our Famous Footwear segment decreased $1.2increased $16.7 million, reflectingor 2.2%, driven by our expanded store base and a 0.1% decrease1.1% increase in same-store sales due to lower customer traffic at our retail store locations.sales.

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


Gross Profit 
Gross profit decreased $3.2increased $27.9 million, or 1.2%10.8%, to $287.5 million for the second quarter of 2017, compared to $259.6 million for the second quarter of 2016, compared to $262.8 million for the second quarter of 2015, reflecting lowerhigher sales volume.  volume, as described above, and an improved gross profit rate. As a percentage of net sales, gross profit increased to 42.5% for the second quarter of 2017, compared to 41.7% for the second quarter of 2016, compared to 41.2% for the second quarter of 2015,primarily reflecting an improved mix of our higher margin brands and the exit of some lower margin categories. In addition, we experienced a higher consolidated mix of retail versus wholesale sales in the quarter,and an improved mix of higher margin brands, partially offset by an increaseamortization of the inventory fair value adjustment in freight expense attributable to higher e-commerce sales.conjunction with the acquisition of Allen Edmonds of $1.9 million. Retail and wholesale net sales were 68%70% and 32%30%, respectively, in the second quarter of 2016,2017, compared to 67%68% and 33%32% in the second quarter of 2015.2016.


Gross profit decreased $4.0increased $51.1 million, or 0.8%10.1%, to $558.4 million for the six months ended July 29, 2017, compared to $507.3 million for the six months ended July 30, 2016, compared to $511.3 million forreflecting the six months ended August 1, 2015, reflecting lower gross profit in both our Brand Portfolio and Famous Footwear segments.above named factors.  As a percentage of net sales, gross profit increased to 42.7% for the six months ended July 29, 2017, compared to 42.0% for the six months ended July 30, 2016, compared to 41.2% forreflecting the six months ended August 1, 2015. This increase reflects higher rates in our Brand Portfolio segment, reflecting an improved mix of our higher margin brands and the exit of some lower margin categories.factors described above. Retail and wholesale net sales were 68%70% and 32%30%, respectively, in the six months ended July 30, 2016,29, 2017, compared to 66%68% and 34%32% in the six months ended August 1, 2015.six months ended July 30, 2016.

We classify certain warehousing, distribution, sourcing and other inventory procurement costs in selling and administrative expenses. Accordingly, our gross profit and selling and administrative expense rates, as a percentage of net sales, may not be comparable to other companies. 
 
Selling and Administrative Expenses 
Selling and administrative expenses increased $0.2$26.2 million, or 0.1%11.5%, to $253.5 million for the second quarter of 2017, compared to $227.3 million for the second quarter of 2016, compared to $227.1 million in the second quarter of 2015. The increase was primarily driven by the recently acquired Allen Edmonds business and higher store rent and facilities costs, reflecting the opening and operation of several retail stores in prominent locations, and the investment in the development ofanticipated payments under our George Brown and DVF brands. This increase was partially offset by lower cash-based incentive compensation expense.plans. As a percentage of net sales, selling and administrative expenses increased to 37.5% for the second quarter of 2017 from 36.5% for the second quarter of 2016 from 35.6% for the second quarter of 2015.2016.

Selling and administrative expenses increased $1.1$51.3 million, or 0.2%11.5%, to $446.3$497.6 million for the six months ended July 30, 2016,29, 2017, compared to $445.2$446.3 million in the six months ended August 1, 2015. Expenses related to store openingsJuly 30, 2016, primarily driven by the recently acquired Allen Edmonds business and the development of our new brands were partially offset by lowerhigher cash-based incentive compensation expense and our focus on expense management.compensation. As a percentage of net sales, selling and administrative expenses increased to 38.0% for the six months ended July 29, 2017 from 36.9% for the six months ended July 30, 2016 from 35.9%2016.

Restructuring and Other Special Charges, Net
Restructuring and other special charges of $2.9 million ($1.9 million on an after-tax basis, or $0.04 per diluted share) and $4.0 million ($2.6 million on an after-tax basis, or $0.06 per diluted share), primarily for professional fees and severance expense, were incurred in the second quarter and six months ended August 1, 2015.July 29, 2017, respectively, related to the men's business. There were no restructuring charges in the second quarter or six months ended July 30, 2016. Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.

Operating Earnings 
Operating earnings decreased $3.4$1.2 million, or 9.7%3.6%, to $31.1 million for thesecond quarter of 2017, compared to $32.3 million for the second quarter of 2016, compared to $35.7 million for2016. Although sales and gross profit were higher in thesecond quarter, of 2015, primarily reflecting our lower net sales, partially offset by aselling and administrative expenses and restructuring and other special charges were also higher, gross profit rate.resulting in the slight decline in operating earnings. As a percentage of net sales, operating earnings decreased to 5.2%4.6% for the second quarter of 2016,2017, compared to 5.6%5.2% for the second quarter of 2015.2016.

Operating earnings decreased $5.1$4.2 million, or 7.7%6.9% to $56.8 million for the six months ended July 29, 2017, compared to $61.0 million for the six months ended July 30, 2016, compared to $66.1 million forreflecting the six months ended August 1, 2015, reflecting lower net sales and higher selling and administrative expenses, partially offset by a higher gross profit rate.above factors.  As a percentage of net sales, operating earnings decreased to 4.3% for the six months ended July 29, 2017, compared to 5.1% for the six months ended July 30, 2016, compared to5.3% for the six months ended August 1, 2015.2016.

Interest Expense 
Interest expense decreased $0.8increased $1.2 million, or 19.9%33.3%, to $4.7 million for the second quarter of 2017, compared to $3.5 million for the second quarter of 2016, comparedreflecting higher interest expense on our revolving credit agreement, which was used to $4.3 million forfund the secondacquisition of Allen Edmonds in the fourth quarter of 2015, primarily reflecting lower interest on our senior notes, as a result of the refinancing of $200.0 million of senior notes, which reduced the interest rate from 7.125% to 6.25%, as further discussed in Note 4 to the condensed consolidated financial statements.2016. In addition, during the second quarter of 2016, we capitalized interest of $0.4 million associated with the expansion and modernization of our Lebanon, Tennessee distribution center, with no corresponding amount capitalizedwhich was completed in the secondfourth quarter of 2015.2016.

Interest expense decreased $1.7increased $2.6 million, or 19.5%36.6%, to $9.7 million for the six months ended July 29, 2017, compared to $7.1 million for the six months ended July 30, 2016, compared to $8.8 million forreflecting the six months ended August 1, 2015, primarily reflecting a lower interest rate on our senior notes, as described above.above named factor. In addition, during the six months ended July 30, 2016, we capitalized interest of $0.8 million associated with the expansion and modernization of our Lebanon, Tennessee distribution center, with no corresponding amount capitalized in the six months ended August 1, 2015.

Loss on Early Extinguishment of Debt
Loss on early extinguishment of debt was $8.7 million for the three and six months ended August 1, 2015, reflecting the redemption of our senior notes prior to maturity, as further discussed in Note 4 to the condensed consolidated financial statements. We incurred no corresponding charges during the second quarter or six months ended July 30, 2016.center.



Income Tax Provision 
Our effective tax rate can vary considerably from period to period, depending on a number of factors. Our consolidated effective tax rate was 33.9% for the second quarter of 2017, compared to 32.3% for the second quarter of 2016, compared to 26.5% for2016. During the second quarter of 2015. We2016, we recognized a discrete tax benefit of $0.2 million reflecting the favorable settlement of a federal tax audit issue inissue. If the second quarter of 2016. During the second quarter of 2015, the Company recognized discrete tax benefits of $1.3 million, primarily related to the 2014 disposition of Shoes.com. The allocation of consideration received for tax purposes was finalized with the buyer during the second quarter of 2015, resulting in higher anticipated utilization of certain capital loss carryforwards that were previously fully reserved. If these discrete tax benefitsbenefit had not been recognized during the second quarter of 2016, or 2015, our effective tax ratesrate would have been 33.0% and 32.0%, respectively.. Excluding the discrete tax item, our tax rate is higher in the current period, reflecting a lower mix of international earnings in our lowest tax rate jurisdictions.

For the six months ended July 30, 2016,29, 2017, our consolidated effective tax rate was 31.0%31.7% compared to 26.2%31.0% for the six months ended August 1, 2015.July 30, 2016. As a result of the adoption of ASU 2016-09 during the first quarter of 2017, which requires prospective recognition of excess tax benefits and deficiencies in the statement of earnings, we recognized a discrete tax benefit of $1.1 million related to share-based compensation. We recognized a discrete tax benefit of $0.9 million during the six months ended July 30, 2016. In addition to2016, reflecting the discretesettlement of a federal tax benefit recognized in the second quarter of 2015, in the first quarter of 2015, the Company also recognized discrete tax benefits of $1.6 million, following the conversion of one of its primary operating subsidiaries to a limited liability company.audit issue. If these discrete tax benefits had not been recognized during the six months ended July 29, 2017 and July 30, 2016, and six months ended August 1, 2015, our effective tax rates would have been 32.7%33.9% and 32.1%32.7%, respectively.

Net Earnings
Net earnings increased $2.8 million, or 16.7%, to $19.7 million for Excluding the second quarter of 2016, compared to $16.9 million for the second quarter of 2015. Lower operating earnings were offset by the non-recurrence of the loss on the early extinguishment ofdiscrete tax items, our senior notes.

Net earnings increased $1.3 million, or 3.6%, to $37.6 milliontax rate is higher for the six months ended July 30, 2016, compared to $36.3 million for the six months ended August 1, 2015,29, 2017, reflecting the factors described above.a lower mix of international earnings in our lowest tax rate jurisdictions.

Net Earnings Attributable to Caleres, Inc. 
Net earnings attributable to Caleres, Inc. were $17.6 million and $32.5 million for the second quarter and six months ended July 29, 2017, compared to net earnings of $19.8 million and $37.6 million duringfor the second quarter and six months ended July 30, 2016, compared to net earnings of $16.8 million and $36.1 million during the second quarter of 2015 and six months ended August 1, 2015, as a result of the factors described above.



FAMOUS FOOTWEAR                         
Thirteen Weeks Ended Twenty-six Weeks EndedThirteen Weeks Ended Twenty-six Weeks Ended
July 30, 2016 August 1, 2015 July 30, 2016August 1, 2015July 29, 2017 July 30, 2016 July 29, 2017 July 30, 2016
($ millions, except sales per square foot)  % of 
Net Sales
   % of 
Net Sales
   % of 
Net Sales
  % of 
Net Sales
 % of 
Net Sales
  % of 
Net Sales
  % of 
Net Sales
  % of 
Net Sales
($ millions, except sales per square foot)  % of 
Net Sales
   % of 
Net Sales
   % of 
Net Sales
  % of 
Net Sales
       
 
  
  
  
  
 
  
 
  
 
  
 
Net sales$390.1
 100.0% $395.9
 100.0% $754.7
 100.0%$755.9
 100.0%$404.9
100.0% $390.1
100.0% $771.4
100.0% $754.7
100.0%
Cost of goods sold212.7
 54.5% 216.4
 54.7% 408.6
 54.1%408.2
 54.0%221.6
54.7% 212.7
54.5% 420.4
54.5% 408.6
54.1%
Gross profit177.4
 45.5% 179.5
 45.3% 346.1
 45.9%347.7
 46.0%183.3
45.3% 177.4
45.5% 351.0
45.5% 346.1
45.9%
Selling and administrative expenses154.8
 39.7% 151.8
 38.3% 297.7
 39.5%292.1
 38.6%158.2
39.1% 154.8
39.7% 305.6
39.6% 297.7
39.5%
Operating earnings$22.6
 5.8% $27.7
 7.0% $48.4
 6.4%$55.6
 7.4%$25.1
6.2% $22.6
5.8% $45.4
5.9% $48.4
6.4%
                         
Key Metrics 
    
          
   
       
Same-store sales % change(1.1)%  
 0.1%  
 (0.1)%  
0.9%  
2.8% 
 (1.1)% 
 1.1% 
 (0.1)% 
Same-store sales $ change$(4.1)  
 $0.5
  
 $(0.6)  
$6.7
  
$10.4
 
 $(4.1) 
 $8.3
 
 $(0.6) 
Sales change from new and closed stores, net$(1.5)   $2.2
   $(0.3)  $1.6
  $4.5
  $(1.5)  $8.6
  $(0.3) 
Impact of changes in Canadian exchange rate on sales$(0.2)   $(0.5)   $(0.3)  $(0.7)  $(0.1)  $(0.2)  $(0.2)  $(0.3) 
Sales change of Shoes.com (sold in December 2014)N/A   $(10.4)   N/A  $(22.5)  
           
Sales per square foot, excluding e-commerce (thirteen and twenty-six weeks ended)$54
   $55
   $104
  $106
  $55
  $54
  $105
  $104
 
Sales per square foot, excluding e-commerce (trailing twelve months)$216
  
 $216
  
 $216
  
$216
  
$216
 
 $216
 
 $216
 
 $216
 
Square footage (thousand sq. ft.)6,922
  
 6,966
  
 6,922
  
6,966
  
6,967
 
 6,922
 
 6,967
 
 6,922
 
                         
Stores opened11
  
 10
  
 21
  
25
  
12
 
 11
 
 21
 
 21
 
Stores closed10
  
 6
  
 23
  
19
  
9
 
 10
 
 21
 
 23
 
Ending stores1,044
  
 1,044
  
 1,044
  
1,044
  
1,055
 
 1,044
 
 1,055
 
 1,044
 
 
Net Sales 
Net sales decreased $5.8increased $14.8 million, or 1.5%3.8%, to $404.9 million for the second quarter of 2017, compared to $390.1 million for the second quarter of 2016, compared to $395.9 million for the second quarter of 2015.2016. The decreaseincrease was driven by a 1.1% decrease2.8% increase in same-store sales a net decrease in sales from new and closed stores and a lower Canadian dollar exchange rate.higher store count.  Famous Footwear experienced solid growth in e-commerce sales and reported improvement in boththe online customer traffic and conversion rate, due in part to the expansionsuccessful implementation of our in-store fulfillment program. However, the strong e-commerce sales were offset by a declinebuy online, pick up in customer traffic at our retail store locations reflecting a difficult retail climate and our consumers delaying spending for their back-to-school needs.initiative. The segment experienced sales growth in lifestyle athletic and sport-influenced styles, while sales of performance athletic footwear declined.product and sandals. During the second quarter of 2016,2017, we opened 1112 new stores and closed 10nine stores, resulting in 1,055 stores and total square footage of 7.0 million at the end of the second quarter of 2017, compared to 1,044 stores and total square footage of 6.9 million at the end of the second quarter of 2016, compared to 1,044 stores and total square footage of 7.0 million at the end of the second quarter of 2015.2016. On a trailing twelve monthtwelve-month basis, sales per square foot, excluding e-commerce, remained consistent at $216 for the twelve months ended July 29, 2017 and July 30, 2016 and August 1, 2015.2016. Members of Rewards, our customer loyalty program, continue to account for a majority of the segment’s sales, with approximately 75%76% of our net sales made to Rewards program members in the second quarter of 2016,2017, compared to 73%75% in the second quarter of 2015.2016. 

Net sales decreased $1.2increased $16.7 million, or 0.2%2.2%, to $771.4 million for the six months ended July 29, 2017, compared to $754.7 million for the six months ended July 30, 2016, compared to $755.9 million for the six months ended August 1, 2015.2016. The decreaseincrease was primarily driven by our expanded store base and a 0.1% decrease1.1% increase in same-store sales, a lower Canadian dollar exchange rate and a net decrease in sales from new and closed stores.sales. Famous Footwear experienced growth in e-commerce sales, and reported improvement in both conversion rate and online customer traffic and conversion rate, due in part to the expansion of our in-store fulfillment


program.traffic. However, the strong e-commerce sales were offset by a decline in customer traffic at our retail store locations. Famous Footwear experienced sales growth in the athletics category, driven by an increase in lifestyle athletic and sport-influenced styles. 



Gross Profit 
Gross profit decreased $2.1increased $5.9 million, or 1.2%3.3%, to $183.3 million for the second quarter of 2017, compared to $177.4 million for the second quarter of 2016 compared to $179.5 million for the second quarter of 2015, driven primarily by lowerreflecting higher net sales, partially offset by a higherslight drop in gross profit rate. As a percentage of net sales, our gross profit was 45.3% for the second quarter of 2017, compared to 45.5% for the second quarter of 2016, compared to 45.3% for the second quarter of 2015. The increase in our gross profit rate reflects improvement in margins of seasonal styles, partially offset by an increase in freight expense due to growth in our Famous.com business.2016.

Gross profit decreased $1.6increased $4.9 million, or 0.5%1.4%, to $351.0 million for the six months ended July 29, 2017, compared to $346.1 million for the six months ended July 30, 2016, compared to $347.7 million forreflecting the six months ended August 1, 2015, driven primarily by a lower gross profit rate and net sales.above named factors. As a percentage of net sales, our gross profit was 45.5% for the six months ended July 29, 2017, compared to 45.9% for the six months ended July 30, 2016, compared to 46.0% for the six months ended August 1, 2015. The decrease in our gross profit rate primarily reflects an increase in freight expense due to growth in our Famous.com business.2016.

Selling and Administrative Expenses 
Selling and administrative expenses increased $3.0$3.4 million, or 2.0%2.2%, to $158.2 million for the second quarter of 2017, compared to $154.8 million for the second quarter of 2016, compared2016.  The increase was primarily driven by higher store rent and facilities costs attributable to $151.8 millionour expanded store base and higher expenses related to cash-based incentive compensation, partially offset by lower marketing costs. As a percentage of net sales, selling and administrative expenses decreased to 39.1% for the second quarter of 2015.2017, compared to 39.7% for the second quarter of 2016, reflecting better leveraging of our expense base over higher net sales.

Selling and administrative expenses increased $7.9 million, or 2.6%, to $305.6 million for the six months ended July 29, 2017, compared to $297.7 million for the six months ended July 30, 2016. The increase was primarily attributable to higher store rent and warehousefacilities cost attributable to our expanded store base and distribution costs during the second quarter of 2016, partially offset by lowerhigher expenses related to cash-based incentive compensation.compensation during the six months ended July 29, 2017. As a percentage of net sales, selling and administrative expenses increased to 39.7% for the second quarter of 2016, compared to 38.3% for the second quarter of 2015. 

Selling and administrative expenses increased $5.6 million, or 1.9%, to $297.7 million39.6% for the six months ended July 30, 2016,29, 2017, compared to $292.1 million for the six months ended August 1, 2015. The increase was primarily attributable to higher store rent and depreciation and higher warehouse and distribution costs during the six months ended July 30, 2016, partially offset by lower expenses related to cash-based incentive compensation. As a percentage of net sales, selling and administrative expenses increased to 39.5% for the six months ended July 30, 2016, compared to 38.6% for the six months ended August 1, 2015. 2016.

Operating Earnings  
Operating earnings decreased $5.1increased $2.5 million, or 18.3%11.1%, to $25.1 million for thesecond quarter of 2017, compared to $22.6 million for the second quarter of 2016, compared to $27.7 million for thesecond quarter of 2015.2016. The decreaseincrease reflects lowerour net sales andgrowth, partially offset by higher selling and administrative expenses partially offset byand a higherslight decline in our gross profit rate. As a percentage of net sales, operating earnings decreasedincreased to 6.2% for thesecond quarter of 2017, comparedto 5.8% for the second quarter of 2016, comparedto 7.0% for thesecond quarter of 2015.2016.

Operating earnings decreased $7.2$3.0 million, or13.1% 6.1%, to $45.4 million for the six months ended July 29, 2017, compared to $48.4 million for thesix months ended July 30, 2016, compared to $55.6 million for thesix months ended August 1, 2015.2016. The decrease reflects higher selling and administrative expenses lower net sales and a decreasedlower gross profit rate.rate, partially offset by higher net sales. As a percentage of net sales, operating earnings decreasedto 5.9% for the six months ended July 29, 2017, compared to 6.4% for thesix months ended July 30, 2016, comparedto 7.4% for thesix months ended August 1, 2015.2016.



BRAND PORTFOLIO        
 Thirteen Weeks Ended Twenty-six Weeks Ended
 July 30, 2016 August 1, 2015 July 30, 2016 August 1, 2015
($ millions, except sales per square foot)  % of Net Sales
   % of Net Sales
   % of Net Sales
  
 % of Net Sales
           
Operating Results 
 ��
  
  
  
  
  
  
Net sales$232.8
 100.0% $242.0
 100.0% $453.0
 100.0% $484.2
 100.0%
Cost of goods sold150.7
 64.7% 158.7
 65.6% 291.8
 64.4% 320.6
 66.2%
Gross profit82.1
 35.3% 83.3
 34.4% 161.2
 35.6% 163.6
 33.8%
Selling and administrative expenses64.6
 27.8% 67.3
 27.8% 134.1
 29.6% 136.5
 28.2%
Operating earnings$17.5
 7.5% $16.0
 6.6% $27.1
 6.0% $27.1
 5.6%
                
Key Metrics 
  
  
  
  
  
  
  
Wholesale/retail sales mix (%)86%/14%
  
 86%/14%
  
 86%/14%
  
 87%/13%
  
Change in wholesale net sales ($)$(8.2)   $14.5
   $(30.4)   $35.0
  
Unfilled order position at end of period$260.2
   $307.3
          
                
Same-store sales % change(8.2)%   (5.2)%   (5.1)%   (3.9)%  
Same-store sales $ change$(2.4)   $(1.7)   $(2.9)   $(2.4)  
Sales change from new and closed stores, net$1.9
   $(0.7)   $3.1
   $(1.4)  
Impact of changes in Canadian exchange rate on retail sales$(0.5)   $(1.9)   $(1.0)   $(3.2)  
                
Sales per square foot, excluding e-commerce (thirteen and twenty-six weeks ended)$82
   $94
   $152
   $171
  
Sales per square foot, excluding e-commerce (trailing twelve months)$323
   $359
   $323
   $359
  
Square footage (thousands sq. ft.)305
   289
   305
   289
  
                
Stores opened1
   1
   5
   1
  
Stores closed2
   3
   3
   9
  
Ending stores167
   163
   167
   163
  
BRAND PORTFOLIO      
 Thirteen Weeks Ended Twenty-six Weeks Ended
 July 29, 2017 July 30, 2016 July 29, 2017 July 30, 2016
  
% of 
Net Sales

  
% of 
Net Sales

  
% of 
Net Sales

  
% of 
Net Sales

($ millions, except sales per square foot)       
Operating Results 
 
  
 
  
 
  
 
Net sales$272.0
100.0% $232.8
100.0% $537.0
100.0% $453.0
100.0%
Cost of goods sold167.8
61.7% 150.7
64.7% 329.6
61.4% 291.8
64.4%
Gross profit104.2
38.3% 82.1
35.3% 207.4
38.6% 161.2
35.6%
Selling and administrative expenses87.6
32.2% 64.6
27.8% 176.7
32.9% 134.1
29.6%
Restructuring and other special charges, net0.7
0.2% —
—
 1.5
0.3% —
—
Operating earnings$15.9
5.9% $17.5
7.5% $29.2
5.4% $27.1
6.0%
            
Key Metrics 
 
  
 
  
 
  
 
Wholesale/retail sales mix (%) (1)
75%/25%
 
 86%/14%
 
 74%/26%
 
 86%/14%
 
Change in wholesale net sales ($) (1)
$2.7
  $(8.2)  $8.2
  $(30.4) 
Unfilled order position at end of period (1)
$275.0
  $260.2
       
            
Same-store sales % change (2)
15.8%  (8.2)%  9.2%  (5.1)% 
Same-store sales $ change (2)
$4.4
  $(2.4)  $5.0
  $(2.9) 
Sales change from new and closed stores, net (3)
$32.3
  $1.9
  $71.1
  $3.1
 
Impact of changes in Canadian exchange rate on retail sales$(0.2)  $(0.5)  $(0.3)  $(1.0) 
            
Sales per square foot, excluding e-commerce (thirteen and twenty-six weeks ended) (2)
$88
  $82
  $158
  $152
 
Sales per square foot, excluding e-commerce (trailing twelve months) (2)
$320
  $323
  $320
  $323
 
Square footage (thousands sq. ft.) (3)
409
  305
  409
  305
 
            
Stores opened (3)
5
  1
  8
  5
 
Stores closed (3)
—
  2
  4
  3
 
Ending stores (3)
238
  167
  238
  167
 

(1)The wholesale/retail sales mix and change in wholesale net sales in the second quarter and six months ended July 29, 2017 and unfilled order position as of July 29, 2017 include our recently acquired Allen Edmonds business. Refer to Note 3 to the condensed consolidated financial statements for additional information.
(2)These metrics exclude our recently acquired Allen Edmonds business since the business was not included in our operations in the prior year comparative period.
(3)These metrics for the second quarter and six months ended July 29, 2017 include our recently acquired Allen Edmonds retail stores, which total approximately 116,000 square feet.



Net Sales 
Net sales decreased $9.2increased $39.2 million, or 3.8%16.8%, to $232.8$272.0 million for the second quarter of 2016,2017, compared to $242.0$232.8 million for the second quarter of 2015. The decrease reflects lower2016, driven by $41.8 million in sales from our recently acquired Allen Edmonds business. In addition, we experienced higher net sales of our Dr. Scholl's, Naturalizer,Sam Edelman and LifeStrideVince brands, partially offset by higherlower sales from our Carlos and Via Spiga brands and growth in our Sam Edelman retail operations.Franco Sarto brands. Our wholesale business hassame-store sales, which exclude the impact of Allen Edmonds stores because they have not been impacted bypart of the overall slower retail environment, as cautious retailers were focused on inventory productivity. In general, our strongest categoryCompany for 13 months, increased 15.8% during the quarter was lifestyle athletic and sport-influenced styles, while sales of traditional dress footwear were more sluggish.quarter. The decline in net sales also reflects the planned exit of some lower margin categories. Our retail sales were impacted by a decreaseincrease in same-store sales of 8.2%was primarily driven by growth in Sam Edelman e-commerce and a lower Canadian dollar exchange rate, partially offset by a higherretail store count.sales. During the second quarter of 2016,2017, we opened one store and closed twofive stores, resulting in a total of 238 stores (of which 76 are Allen Edmonds) and total square footage of 0.4 million at the end of the second quarter of 2017, compared to 167 stores and total square footage of 0.3 million at the end of the second quarter of 2016, compared to 163 stores and total square footage of 0.3 million at the end of the second quarter of 2015. Sales2016. On a trailing twelve-month basis, sales per square foot, excluding e-commerce and sales from our Allen Edmonds stores, decreased 13.0%0.9% to $82$320 for the second quarter of 2016,twelve months ended July 29, 2017, compared to $94$323 for the second quarter of 2015.twelve months ended July 30, 2016. Our unfilled order position decreased $47.1increased $14.8 million, or 15.3%5.7%, to $275.0 million as of July 29, 2017, from $260.2 million as of July 30, 2016, from $307.3 million as of August 1, 2015 primarily due to declines in our Naturalizer, Dr. Scholl's and LifeStride brands, partially offset by increases in our Franco Sarto and Carlos brands.2016.



Net sales decreased $31.2increased $84.0 million, or 6.5%18.6%, to $537.0 million for the six months ended July 29, 2017, compared to $453.0 million for the six months ended July 30, 2016, compared to $484.2driven by $84.3 million for the six months ended August 1, 2015. The decrease reflects lower netin sales offrom our Dr. Scholl's, Naturalizerrecently acquired Allen Edmonds business and LifeStridesales growth from our Sam Edelman and Vince brands, partially offset by growth in our Sam Edelman retail operations and higherlower sales from our DVF (launched in 2016), Carlos and Via Spiga, Franco Sarto and Naturalizer brands.Our retail sales were impactedbenefited from a net increase in sales from new and closed stores driven by a decreaseour acquisition of Allen Edmonds and an increase in same-store sales of 5.1% and a lower Canadian dollar exchange rate, partially offset by a higher store count.9.2%. During the six months ended July 30, 2016,29, 2017, we opened fiveeight stores and closed threefour stores. Sales per square foot, excluding e-commerce, decreased 11.6% to $152 for the six months ended July 30, 2016, compared to $171 for the six months ended August 1, 2015. On a trailing twelve month basis, sales per square foot, excluding e-commerce, decreased 10.0% to $323 for the twelve months ended July 30, 2016, compared to $359 for the twelve months ended August 1, 2015.

Gross Profit 
Gross profit decreased $1.2increased $22.1 million, or 1.4%26.8%, to $104.2 million for the second quarter of 2017, compared to $82.1 million for the second quarter of 2016, compared to $83.3primarily as a result of the recently acquired Allen Edmonds business. The Brand Portfolio segment recognized $1.9 million for($1.2 million on an after-tax basis, or $0.03 per diluted share) in incremental cost of goods sold in the second quarter of 2015, driven by2017 related to the decrease in net sales, partially offset by a higher gross profit rate.amortization of the Allen Edmonds inventory fair value adjustment required for purchase accounting. As a percentage of net sales, our gross profit increased to 38.3% for the second quarter of 2017, compared to 35.3% for the second quarter of 2016, compared to 34.4%2016.  Our gross profit rate for the second quarter of 2015.  Our gross profit rate2017 benefited from an improvedthe higher mix of retail versus wholesale sales and growth in our higher margin brands and the exit of some lower margin categories.brands.

Gross profit decreased $2.4increased $46.2 million, or 1.4%28.6%, to $207.4 million for the six months ended July 29, 2017, compared to $161.2 million for the six months ended July 30, 2016, compared to $163.6primarily as a result of the recently acquired Allen Edmonds business. The Brand Portfolio segment recognized $4.9 million ($3.0 million on an after-tax basis, or $0.07 per diluted share) in cost of goods sold for the six months ended August 1, 2015, driven byJuly 29, 2017 related to the decrease in net sales, partially offset by a higher gross profit rate, reflecting loweramortization of the Allen Edmonds inventory markdowns and customer allowances.fair value adjustment required for purchase accounting. As a percentage of net sales, our gross profit wasincreased to 38.6% for the six months ended July 29, 2017, compared to 35.6% for the six months ended July 30, 2016, compared to 33.8% for the six months ended August 1, 2015, reflecting the above named factors.higher mix of retail versus wholesale sales.

Selling and Administrative Expenses 
Selling and administrative expenses decreased $2.7increased $23.0 million, or 3.9%35.5%, to $87.6 million for the second quarter of 2017, compared to $64.6 million for the second quarter of 2016, comparedprimarily due to $67.3 million forcosts associated with the second quarter of 2015, driven by lower expenses related torecently acquired Allen Edmonds business and an increase in anticipated payments under our cash-based incentive plans, partially offset by the opening and operation of several retail stores in prominent locations and our investment in the development of our George Brown and DVF brands. As a percentage of net sales, selling and administrative expenses remained consistent at 27.8% for the second quarter of 2016 and 2015. 

Selling and administrative expenses decreased $2.4 million, or 1.7%, to $134.1 million for the six months ended July 30, 2016, compared to $136.5 million for the six months ended August 1, 2015, driven by lower expenses related to our cash-based incentive plans, partially offset by store openings and the development of our new brands.compensation plans. As a percentage of net sales, selling and administrative expenses increased to 32.2% for the second quarter of 2017, compared to 27.8% for the second quarter of 2016. 

Selling and administrative expenses increased $42.6 million, or 31.7%, to $176.7 million for the six months ended July 29, 2017, compared to $134.1 million for the six months ended July 30, 2016, driven by the above named factors. As a percentage of net sales, selling and administrative expenses increased to 32.9% for the six months ended July 29, 2017, compared to 29.6% for the six months ended July 30, 2016, compared to 28.2% for2016.

Restructuring and Other Special Charges, Net
Restructuring and other special charges were $0.7 million and $1.5 million in the second quarter and six months ended August 1, 2015.July 29, 2017, respectively, related to the integration and reorganization of our men's business. There were no restructuring charges incurred in the second quarter or six months ended July 30, 2016. Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.

Operating Earnings 
Operating earnings increased $1.5decreased $1.6 million, or 9.1%8.9%, to $15.9 million for thesecond quarter of 2017, compared to $17.5 million for the second quarter of 2016, compared to $16.0 million for thesecond quarter of 2015. The increase reflects a higher2016. Despite net sales growth and expansion in our gross profit rate, and lowerhigher selling and administrative expenses partially offset by lower net sales.and restructuring charges led to a slight decline in operating earnings. As a percentage of net sales, operating earnings increaseddecreased to 7.5%5.9% for the second quarter of 2016,2017, compared to 6.6%7.5% in the second quarter of 2015.2016. 



Operating earnings remained consistent at $27.1increased $2.1 million, or 7.9%, to $29.2 million for the six months ended July 29, 2017, compared to $27.1 million for six months ended July 30, 20162016. The increase reflects higher net sales and August 1, 2015. A higheran improved gross profit rate, and lowerpartially offset by higher selling and administrative expenses were offset by lower net sales.expenses. As a percentage of net sales, operating earnings increaseddecreased to 5.4% for the six months ended July 29, 2017, compared to 6.0% fromfor the six months ended July 30, 2016, compared to 5.6% for the six months ended August 1, 2015.2016.
    
OTHER
 
The Other category includes unallocated corporate administrative expenses and other costs and recoveries. Costs of $7.8$9.9 million were incurred for the second quarter of 2016,2017, compared to $7.9$7.8 million for the second quarter of 2015. During2016. The increase primarily reflects $2.2 million of restructuring costs for the secondintegration and reorganization of quarter of 2015, we benefited from a gain on sale of a vacant building at our Corporate headquarters. We benefited from lowermen's brands, as further discussed in Note 5 to the condensed consolidated financial statements, and an increase in anticipated payments under our cash-based incentive compensationplans during the second quarter of 2016.2017.

Unallocated corporate administrative expenses and other costs and recoveries were $17.8 million for the six months ended July 29, 2017, compared to $14.4 million for the six months ended July 30, 2016, compared to $16.62016. The $3.4 million forincrease reflects the six months ended August 1, 2015. The $2.2 million decrease in costs was primarily attributable to lower cash-based incentive compensation for the six months ended July 30, 2016.above named factors.




LIQUIDITY AND CAPITAL RESOURCES
Borrowings 
($ millions)July 30, 2016
August 1, 2015
January 30, 2016
July 29, 2017
July 30, 2016
January 28, 2017
Current portion of long-term debt$—
$39.2
$—
Borrowings under revolving credit agreement$35.0
$—
$110.0
Long-term debt196.8
195.9
196.5
197.2
196.8
197.0
Total debt$196.8
$235.1
$196.5
$232.2
$196.8
$307.0
 
Total debt obligations of $232.2 million at July 29, 2017 increased $35.4 million, compared to $196.8 million at July 30, 2016, primarily due to higher borrowings under our revolving credit agreement, which we used to fund the acquisition of Allen Edmonds in the fourth quarter of 2016. Total debt obligations decreased $38.3$74.8 million, compared to $235.1 million at August 1, 2015, of which $39.2 million represented the remaining senior notes due in 2019 ("2019 Senior Notes") not tendered in the tender offer during the second quarter of 2015, but subsequently redeemed in August 2015. Total debt obligations of $196.8 million at July 30, 2016 increased $0.3 million compared to $196.5$307.0 million at January 30, 2016.28, 2017, as we paid down $75.0 million of our borrowings during the six months ended July 29, 2017. Interest expense for the second quarter of 2016 decreased $0.82017 increased $1.2 million to $3.5$4.7 million, compared to $4.3$3.5 million for the second quarter of 20152016, and decreased $1.7increased $2.6 million to $9.7 million for the six months ended July 29, 2017, compared to $7.1 million for the six months ended July 30, 2016, compared2016. The increases were attributable to $8.8 million forhigher average borrowings under our revolving credit agreement. In addition, during the second quarter and six months ended August 1, 2015. The decreases were primarily a result of lower interest on our senior notes reflecting the redemption of our 2019 Senior Notes and the issuance of senior notes due in 2023 ("2023 Senior Notes") reducing our interest rate from 7.125% to 6.25%, as further described below. In addition,July 30, 2016, we capitalized interest of $0.4 million and $0.8 million, of interest costsrespectively, associated with the expansion and modernization of our Lebanon, Tennessee distribution center duringthat was completed in the secondfourth quarter of 2016.

Credit Agreement 
The Company maintains a revolving credit facility for working capital needs in an aggregate amount of up to $600.0 million, with the option to increase by up to $150.0 million. On December 18, 2014, the Company and six months endedcertain of its subsidiaries (the “Loan Parties”) entered into a Fourth Amended and Restated Credit Agreement, which was further amended on July 30,20, 2015 to release all of the Company’s subsidiaries that were borrowers under or that guaranteed the Credit Agreement other than Sidney Rich Associates, Inc. and BG Retail, LLC (as so amended, the “Credit Agreement”). On December 13, 2016, respectively.Allen Edmonds was joined to the Credit Agreement as a guarantor. After giving effect to the joinder, the Company is the lead borrower, and Sidney Rich Associates, Inc., BG Retail, LLC and Allen Edmonds are each co-borrowers and guarantors under the Credit Agreement. The Credit Agreement matures on December 18, 2019.

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

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



At July 30, 2016,29, 2017, we had no$35.0 million in borrowings outstanding and $6.5$7.3 million in letters of credit outstanding under the Credit Agreement. Total borrowing availability was $593.5$557.7 million at July 30, 2016.29, 2017. We were in compliance with all covenants and restrictions under the Credit Agreement as of July 30, 2016.29, 2017. 

$200 Million Senior Notes 
As further discussed in Note 4 to the condensed consolidated financial statements, on July 20, 2015, we commenced a cash tender offer for our 2019 Senior Notes. The tender offer expired on July 24, 2015 and $160.7 million aggregate principal amount of the 2019 Senior Notes were tendered. The remaining $39.3 million aggregate principal amount of 2019 Senior Notes was redeemed on August 26, 2015. During the second quarter of 2015, we recognized a loss on early extinguishment of debt of $8.7 million, representing the tender offer and call premiums, the unamortized debt issuance costs and original issue discount related to the portion of the 2019 Senior Notes that was redeemed prior to quarter-end. Of the $8.7 million loss on early extinguishment of debt, approximately $2.4 million was non-cash.

On July 27, 2015, we issued $200.0 million aggregate principal amount of theSenior Notes due in 2023 (the "2023 Senior NotesNotes") in a private placement.  On October 22, 2015, we commenced an offer to exchange our 2023 Senior Notes outstanding for substantially identical debt securities registered under the Securities Act of 1933. The exchange offer was completed on November 23, 2015 and did not affect the amount of our indebtedness outstanding.

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

The 2023 Senior Notes also contain 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 July 30, 2016,29, 2017, we were in compliance with all covenants and restrictions relating to the 2023 Senior Notes.

Working Capital and Cash Flow
Twenty-six Weeks Ended 
Twenty-six Weeks Ended 
($ millions)July 30, 2016
August 1, 2015
Change
July 29, 2017
July 30, 2016
Change
Net cash provided by operating activities$108.6
$101.3
$7.3
$114.3
$108.6
$5.7
Net cash used for investing activities(31.2)(20.5)(10.7)(27.4)(31.2)3.8
Net cash used for financing activities(30.1)(18.5)(11.6)(89.5)(30.1)(59.4)
Effect of exchange rate changes on cash and cash equivalents0.3
(0.4)0.7
0.2
0.3
(0.1)
Increase in cash and cash equivalents$47.6
$61.9
$(14.3)
(Decrease) increase in cash and cash equivalents$(2.4)$47.6
$(50.0)
 
Reasons for the major variances in cash provided (used) in the table above are as follows: 
 
Cash provided by operating activities was $7.3$5.7 million higher in the six months ended July 30, 201629, 2017 as compared to the six months ended August 1, 2015,July 30, 2016, reflecting the following factors:  
A decrease in prepaid expenses and other current and noncurrent assets in the six months ended July 30, 2016, compared to anAn increase in the comparable period in 2015 due to lower prepaid rent as of July 30, 2016 compared to August 1, 2015, reflecting rent payments made closer to due dates in the current period;
A decrease in receivables in the six months ended July 30, 2016, compared to an increase in the comparable period in 2015 due primarily to lower wholesale sales volume; and
A smaller decrease in accrued expenses and other liabilities in the six months ended July 30, 201629, 2017 compared to a decrease in the comparable period in 2015,2016, reflecting lowerhigher anticipated payments underof our cash-based incentive compensation plans and a decrease in interest payable on our 2023 Senior Notes due to a lower interest rate and timing of payments; partially offset byfor 2017;
A smallerlarger increase in accounts payable in the six months ended July 30, 201629, 2017, compared to the comparable period in 2015,2016 driven by lowerhigher purchases of inventory; and
Higher earnings (after consideration of depreciation, amortization and other non-cash items); partially offset by
A larger increase in inventory resulting fromin the softer retail environment.six months ended July 29, 2017, compared to the comparable period in 2016, and
A smaller decrease in prepaid expenses and other current assets in the six months ended July 29, 2017, compared to the comparable period in 2016, reflecting lower prepaid rent as of July 30, 2016 due to the timing of payments.

Cash used for investing activities was $10.7$3.8 million higherlower in the six months ended July 29, 2017 as compared to the six months ended July 30, 2016, as comparedprimarily due to 2015 primarily reflecting the non-recurrence of $7.1 million of proceeds upon the sale of a vacant building at our corporate headquarters during the second quarter of 2015. In addition,lower purchases of property and equipment were higher induring the six months ended July 30,29, 2017. During 2016, driven byour capital expenditures included the expansion and modernization of our Lebanon, Tennessee distribution center, as well aswhich was completed in the openingfourth quarter of retail stores.2016. For fiscal 2016,2017, we expect purchases of property and equipment and capitalized software of approximately $70$55 million. 

Cash used for financing activities was $11.6$59.4 million higher for the six months ended July 29, 2017 as compared to the six months ended July 30, 2016, as comparedwe continue to 2015 primarily reflecting higher share repurchasesreduce the borrowings under our revolving credit agreement, which funded our Allen Edmonds acquisition. In addition, we repurchased fewer shares under our stock repurchase program as further discussed in Note 3 toduring the condensed consolidated financial statements.six months ended July 29, 2017.



A summary of key financial data and ratios at the dates indicated is as follows: 
 July 30, 2016
August 1, 2015
January 30, 2016
Working capital ($ millions) (1)
$488.3
$440.3
$484.8
Debt-to-capital ratio (2)
24.2%29.2%24.6%
Current ratio (3)
1.97:1
1.79:1
2.24:1
 July 29, 2017
July 30, 2016
January 28, 2017
Working capital ($ millions) (1)
$347.2
$488.3
$316.2
Current ratio (2)
1.57:1
1.97:1
1.60:1
Debt-to-capital ratio (3)
26.6%24.2%33.3%
(1)Working capital has been computed as total current assets less total current liabilities.
(2)The current ratio has been computed by dividing total current assets by total current liabilities.
(3)The debt-to-capital ratio has been computed by dividing total debt by total capitalization. Total debt is defined as long-term debt (including current portion) and borrowings under the revolving credit agreement.Credit Agreement. Total capitalization is defined as total debt and total shareholders’ equity.
(3)The current ratio has been computed by dividing total current assets by total current liabilities.
  
Working capital at July 30, 201629, 2017 was $488.3$347.2 million, which was $48.0$141.1 million lower and $3.5$31.0 million higher than at August 1, 2015July 30, 2016 and January 30, 2016,28, 2017, respectively. Our current ratio increaseddecreased to 1.971.57 to 1 as of July 30, 2016,29, 2017, compared to 1.791.97 to 1 at August 1, 2015,July 30, 2016 and decreased from 2.241.60 to 1 at January 28, 2017. The decrease in working capital and the current ratio from July 30, 2016.2016 primarily reflects the impact of the Allen Edmonds acquisition in the fourth quarter of 2016, which was funded with borrowings under our revolving credit agreement. A significant portion of the Allen Edmonds purchase price was allocated to intangible assets, which are noncurrent, while the entire purchase price was funded using current liabilities. The increase in working capital and the current ratio from August 1, 2015January 28, 2017 was primarily due to July 30, 2016 reflects a decreasean increase in the current portion of long-term debtinventory levels and trade accounts payable,lower borrowings under our revolving credit agreement, partially offset by a decrease in prepaid and other current assets. The increase in working capital from January 30, 2016 to July 30, 2016 reflects higher inventory levels due to the seasonality of our business and an increase in cash and cash equivalents, partially offset by an increase in trade accounts payable.payables. The decrease in the current ratio from January 30, 2016 to July 30, 201628, 2017 primarily reflects an increase in trade accounts payable and a decrease in prepaid and other currentaccrued expenses, partially offset by an increase in inventory levels and cash and cash equivalents. The increase in cash and cash equivalents from January 30, 2016 to July 30, 2016 reflects our net earnings and related operating cash flows during that period.levels. Our debt-to-capital ratio improvedwas 26.6% as of July 29, 2017, compared to 24.2% as of July 30, 2016 compared to 29.2% as of August 1, 2015, and 24.6% as of33.3% at January 28, 2017. The increase in our debt-to-capital ratio from July 30, 2016 primarily reflectingreflects higher shareholders' equity due to the impact ofborrowings under our net earnings.revolving credit agreement. The decrease in our debt-to-capital ratio from January 28, 2017 primarily reflects lower borrowings under our revolving credit agreement.
 
At July 30, 2016,29, 2017, we had $165.7$52.9 million of cash and cash equivalents. The majorityApproximately 40% of this balance represents the accumulated unremitted earnings of our foreign subsidiaries, which are considered indefinitely reinvested. 

We declared and paid dividends of $0.07 per share in both the second quarter of 20162017 and the second quarter of 2015.2016. The declaration and payment of any future dividend is at the discretion of the Board of Directors and will depend on our results of


operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors. However, we presently expect that dividends will continue to be paid. 

CONTRACTUAL OBLIGATIONS
 
Our contractual obligations primarily consist of purchase obligations, operating lease commitments, long-term debt, interest on long-term debt, minimum license commitments, financial instruments, borrowings under our revolving credit agreement, obligations for our supplemental executive retirement plan and other postretirement benefits and obligations.

Except for changes within the normal course of business (primarily changes in purchase obligations, which fluctuate throughout the year as a result of the seasonal nature of our operations, borrowings under and repayments of our revolving credit agreement and changes in operating lease commitments as a result of new stores, store closures and lease renewals), there have been no other significant changes to our contractual obligations identified in our Annual Report on Form 10-K for the year ended January 30, 2016.28, 2017.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 
No material changes have occurred related to critical accounting policies and estimates since the end of the most recent fiscal year. For further information, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended January 30, 2016.28, 2017. 

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
Recently issued accounting pronouncements and their impact on the Company are described in Note 2 to the condensed consolidated financial statements. 



FORWARD-LOOKING STATEMENTS
 
This Form 10-Q contains certain forward-looking statements and expectations regarding the Company’s future performance and the performance of its brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially.  These risks include (i) changing consumer demands, which may be influenced by consumers' disposable income, which in turn can be influenced by general economic conditions; (ii) rapidly changing fashion trends and purchasing patterns; (iii) intense competition within the footwear industry; (iv) political and economic conditions or other threats to the continued and uninterrupted flow of inventory from China and other countries, where the Company relies heavily on third-party manufacturing facilities for a significant amount of its inventory; (v) the ability to accurately forecast sales and manage inventory levels; (vi) cybersecurity threats or other major disruption to the Company’s information technology systems; (vii) transitional challenges with acquisitions; (viii) customer concentration and increased consolidation in the retail industry; (viii)(ix) a disruption in the Company’s distribution centers; (ix)(x) the ability to recruit and retain senior management and other key associates; (x)(xi) foreign currency fluctuations; (xi)(xii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; (xii)(xiii) the ability to secure/exit leases on favorable terms; (xiii)(xiv) the ability to maintain relationships with current suppliers; (xiv)(xv) the ability to attract, retain and maintain good relationships with licensors and protect intellectual property rights; and (xv)(xvi) changes to federal overtime regulations could increase the Company's payroll costs.tax laws, policies and treaties.  The Company's reports to the Securities and Exchange Commission contain detailed information relating to such factors, including, without limitation, the information under the caption “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended January 30, 2016,28, 2017, which information is incorporated by reference herein and updated by the Company’s Quarterly Reports on Form 10-Q. The Company does not undertake any obligation or plan to update these forward-looking statements, even though its situation may change.

ITEM 3QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
No material changes have taken place in the quantitative and qualitative information about market risk since the end of the most recent fiscal year. For further information, see Part II, Item 7A of the Company's Annual Report on Form 10-K for the year ended January 30, 2016.28, 2017.  



ITEM 4CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures 
It is the Chief Executive Officer's and Chief Financial Officer's ultimate responsibility to ensure we maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures include mandatory communication of material events, automated accounting processing and reporting, management review of monthly, quarterly and annual results, an established system of internal controls and internal control reviews by our internal auditors. 
 
A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to errors or fraud may occur and not be detected.  Our disclosure controls and procedures are designed to provide a reasonable level of assurance that their objectives are achieved.  As of July 30, 2016,29, 2017, management of the Company, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures were effective at the reasonable assurance level. 
There were no significant changes to internal control over financial


reporting during the quarter ended July 30, 2016,29, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.   
On December 13, 2016, we acquired Allen Edmonds. As a result of the acquisition, we are in the process of reviewing the internal control structure of Allen Edmonds and, if necessary, will make appropriate changes as we incorporate our internal controls into the acquired business.

PART IIOTHER INFORMATION
ITEM 1LEGAL PROCEEDINGS
 
We are involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such ordinary course of business proceedings and litigation currently pending will not have a material adverse effect on our results of operations or financial position. All legal costs associated with litigation are expensed as incurred. 
 
Information regarding Legal Proceedings is set forth within Note 1416 to the condensed consolidated financial statements and incorporated by reference herein. 

ITEM 1ARISK FACTORS
Changes to Federal overtime regulations could increase our payroll costs.
In May 2016, the U.S. Department of Labor ("DOL") released updated overtime and exemption rules under the Fair Labor Standards Act which increase the minimum salary needed to qualify for the standard white collar employee exemption and the threshold to qualify for a highly compensated employee ("HCE"). Additionally, the updated rules establish a mechanism for automatically increasing the minimum salary and compensation levels every three years. The initial increases to the standard salary level and HCE total annual compensation requirement will be effective on December 1, 2016. Future automatic increases to those thresholds will occur every three years, beginning on January 1, 2020. Changes to the overtime exemption also increase the risk of litigation. We are in the process of determining the impact the new regulation will have on our payroll costs and results of operations, and we expect to incur additional costs to comply with the revised rules. However, we do not currently expect the impact to be material to our results of operations.



Other than the aforementioned risk associated with the new DOL wage regulation, thereThere have been no material changes that have occurred related to our risk factors since the end of the most recent fiscal year. For further information, see Part I, Item 1A of our Annual Report on Form 10-K for the year ended January 30, 2016.28, 2017.  

ITEM 2UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
The following table provides information relating to our repurchases of common stock during the second quarter of 2016:2017:
      
Maximum Number of Shares that May Yet be Purchased Under the Program (1)
     
Total Number Purchased as Part of Publicly Announced Program (1)
 
Total Number of Shares Purchased (2)
 
Average Price Paid per Share (2)
 
   
Fiscal Period  
       
May 1, 2016 – May 28, 2016667
 $22.08
 —
1,898,500
       
May 29, 2016 – July 2, 2016376,466
 24.55
 375,000
1,523,500
       
July 3, 2016 – July 30, 201680,393
 24.06
 75,000
1,448,500
       
Total457,526
 $24.46
 450,000
1,448,500
      
Maximum Number of Shares that May Yet be Purchased Under the Program (2)
     
Total Number Purchased as Part of Publicly Announced Program (2)
 
Total Number of Shares Purchased (1)
 
Average Price Paid per Share (1)
 
   
Fiscal Period  
       
April 30, 2017 – May 27, 20172,213
 $27.63
 —
1,223,500
       
May 28, 2017 – July 1, 20172,501
 26.39
 —
1,223,500
       
July 2, 2017 – July 29, 2017—
 —
 —
1,223,500
       
Total4,714
 $26.97
 —
1,223,500
 
(1)Reflects shares that were tendered by employees related to certain share-based awards. These shares were tendered in satisfaction of the exercise price of stock options and/or to satisfy minimum tax withholding amounts for non-qualified stock options, restricted stock and stock performance awards. Accordingly, these share purchases are not considered a part of our publicly announced stock repurchase program.

(2)On August 25, 2011, the Board of Directors approved a stock repurchase program authorizing the repurchase of up to 2.5 million2,500,000 shares of our outstanding common stock. We can use the repurchase program to repurchase shares on the open market or in private transactions from time to time, depending on market conditions. The repurchase program does not have an expiration date. Under this plan, 450,000 shareszero and 900,000225,000 shares were repurchased during the second quarterthirteen and first half oftwenty-six weeks ended July 29, 2017, respectively. The Company repurchased 450,000 and 900,000 shares during the thirteen and twenty-six weeks ended July 30, 2016, respectively, and 151,500 sharesrespectively. There were repurchased during fiscal year 2015. Therefore, there were 1.4 million1,223,500 shares authorized to be repurchased under the program as of July 30, 2016.29, 2017. Our repurchases of common stock are limited under our debt agreements. 
 
(2)Includes shares that were tendered by employees related to certain share-based awards and shares purchased as part of our publicly announced program. The shares related to employee share-based awards were tendered in satisfaction of the exercise price of stock options and/or to satisfy minimum tax withholding amounts for non-qualified stock options, restricted stock and stock performance awards.


ITEM 3DEFAULTS UPON SENIOR SECURITIES
 
None. 

ITEM 4MINE SAFETY DISCLOSURES
 
Not applicable. 

ITEM 5OTHER INFORMATION
 
None. 



ITEM 6EXHIBITS
Exhibit  
No.
  
3.1 
Restated Certificate of Incorporation of Caleres, Inc. (the “Company”) incorporated herein by reference to Exhibit 3.1 to the Company's Form 8-K filed June 1, 2015.
3.2 
Bylaws of the Company as amended through May 28, 2015,April 6, 2017, incorporated herein by reference to Exhibit 3.23.1 to the Company’s Form 8-K filed June 1, 2015.
10.1†Second Amendment to Fourth Amended and Restated Credit Agreement, dated August 17, 2016, among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and the financial institutions party thereto, filed herewith.April 11, 2017.
31.1†
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2†
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1†
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS†XBRL Instance Document
101.SCH 
101.CAL 
101.LAB 
101.PRE 
101.DEF
† 
† 
† 
† 
†
XBRL Taxonomy Extension Schema Document  
XBRL Taxonomy Extension Calculation Linkbase Document  
XBRL Taxonomy Extension Label Linkbase Document  
XBRL Taxonomy Presentation Linkbase Document  
XBRL Taxonomy Definition Linkbase Document

† Denotes exhibit is filed with this Form 10-Q. 


SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
 
  CALERES, INC.
   
Date: September 7, 20166, 2017 /s/ Kenneth H. Hannah
  
Kenneth H. Hannah
Senior Vice President and Chief Financial Officer  
on behalf of the Registrant and as the
Principal Financial Officer and Principal Accounting Officer


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