Financial Information for the Company and its Subsidiaries | FINANCIAL INFORMATION FOR THE COMPANY AND ITS SUBSIDIARIES The Company's 2023 Senior Notes are fully and unconditionally and jointly and severally guaranteed by all of its existing and future subsidiaries that are guarantors under the Credit Agreement, as further discussed in Note 11 to the consolidated financial statements. The following table presents 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. CONDENSED CONSOLIDATING BALANCE SHEET AS OF FEBRUARY 3, 2018 Non-Guarantors ($ thousands) Parent Guarantors Eliminations Total Assets Current assets: Cash and cash equivalents $ 26,089 $ — $ 37,958 $ — $ 64,047 Receivables, net 124,957 3,663 23,993 — 152,613 Inventories, net 146,068 394,438 28,873 — 569,379 Prepaid expenses and other current assets 26,284 30,456 8,394 (4,384 ) 60,750 Intercompany receivable - current 521 74 9,250 (9,845 ) — Total current assets 323,919 428,631 108,468 (14,229 ) 846,789 Property and equipment, net 35,474 165,227 12,098 — 212,799 Goodwill and intangible assets, net 111,108 40,937 187,123 — 339,168 Other assets 76,317 13,610 732 — 90,659 Investment in subsidiaries 1,329,428 — (23,565 ) (1,305,863 ) — Intercompany receivable - noncurrent 774,588 520,362 704,810 (1,999,760 ) — Total assets $ 2,650,834 $ 1,168,767 $ 989,666 $ (3,319,852 ) $ 1,489,415 Liabilities and Equity Current liabilities: Trade accounts payable $ 136,797 $ 102,420 $ 33,745 $ — $ 272,962 Other accrued expenses 65,817 74,006 21,758 (4,384 ) 157,197 Intercompany payable - current 5,524 — 4,321 (9,845 ) — Total current liabilities 208,138 176,426 59,824 (14,229 ) 430,159 Other liabilities: Long-term debt 197,472 — — — 197,472 Other liabilities 101,784 35,574 5,464 — 142,822 Intercompany payable - noncurrent 1,425,951 98,610 475,199 (1,999,760 ) — Total other liabilities 1,725,207 134,184 480,663 (1,999,760 ) 340,294 Equity: Caleres, Inc. shareholders’ equity 717,489 858,157 447,706 (1,305,863 ) 717,489 Noncontrolling interests — — 1,473 — 1,473 Total equity 717,489 858,157 449,179 (1,305,863 ) 718,962 Total liabilities and equity $ 2,650,834 $ 1,168,767 $ 989,666 $ (3,319,852 ) $ 1,489,415 CONDENSED CONSOLIDATING STATEMENT OF EARNINGS FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2018 ($ thousands) Parent Guarantors Non-Guarantors Eliminations Total Net sales $ 837,849 $ 1,935,265 $ 211,815 $ (199,345 ) $ 2,785,584 Cost of goods sold 580,038 1,090,354 109,104 (162,561 ) 1,616,935 Gross profit 257,811 844,911 102,711 (36,784 ) 1,168,649 Selling and administrative expenses 233,860 771,027 55,600 (36,784 ) 1,023,703 Restructuring and other special charges, net 3,942 756 217 — 4,915 Operating earnings 20,009 73,128 46,894 — 140,031 Interest expense (18,075 ) (14 ) — — (18,089 ) Interest income 332 — 432 — 764 Intercompany interest income (expense) 8,354 (8,813 ) 459 — — Earnings before income taxes 10,620 64,301 47,785 — 122,706 Income tax provision (24,963 ) (175 ) (10,337 ) — (35,475 ) Equity in earnings (loss) of subsidiaries, net of tax 101,543 — (1,619 ) (99,924 ) — Net earnings 87,200 64,126 35,829 (99,924 ) 87,231 Less: Net earnings attributable to noncontrolling interests — — 31 — 31 Net earnings attributable to Caleres, Inc. $ 87,200 $ 64,126 $ 35,798 $ (99,924 ) $ 87,200 CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2018 Non-Guarantors ($ thousands) Parent Guarantors Eliminations Total Net earnings $ 87,200 $ 64,126 $ 35,829 $ (99,924 ) $ 87,231 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment — — 1,116 — 1,116 Pension and other postretirement benefits adjustments 18,855 — (61 ) — 18,794 Derivative financial instruments 1,539 14 (452 ) — 1,101 Other comprehensive income from investment in subsidiaries 544 — — (544 ) — Other comprehensive income, net of tax 20,938 14 603 (544 ) 21,011 Comprehensive income 108,138 64,140 36,432 (100,468 ) 108,242 Comprehensive income attributable to noncontrolling interests — — 104 — 104 Comprehensive income attributable to Caleres, Inc. $ 108,138 $ 64,140 $ 36,328 $ (100,468 ) $ 108,138 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2018 Non-Guarantors ($ thousands) Parent Guarantors Eliminations Total Net cash provided by operating activities $ 40,601 $ 90,745 $ 60,029 $ — $ 191,375 Investing activities Purchases of property and equipment (9,522 ) (31,159 ) (4,039 ) — (44,720 ) Capitalized software (5,950 ) (483 ) (25 ) — (6,458 ) Intercompany investing (20,224 ) 197,929 (177,705 ) — — Net cash (used for) provided by investing activities (35,696 ) 166,287 (181,769 ) — (51,178 ) Financing activities Borrowings under revolving credit agreement 454,000 — — — 454,000 Repayments under revolving credit agreement (564,000 ) — — — (564,000 ) Dividends paid (12,027 ) — — — (12,027 ) Acquisition of treasury stock (5,993 ) — — — (5,993 ) Issuance of common stock under share-based plans, net (3,816 ) — — — (3,816 ) Intercompany financing 129,021 (266,061 ) 137,040 — — Net cash (used for) provided by financing activities (2,815 ) (266,061 ) 137,040 — (131,836 ) Effect of exchange rate changes on cash and cash equivalents — — 354 — 354 Increase (decrease) in cash and cash equivalents 2,090 (9,029 ) 15,654 — 8,715 Cash and cash equivalents at beginning of year 23,999 9,029 22,304 — 55,332 Cash and cash equivalents at end of year $ 26,089 $ — $ 37,958 $ — $ 64,047 CONDENSED CONSOLIDATING BALANCE SHEET AS OF JANUARY 28, 2017 Non- Guarantors ($ thousands) Parent Guarantors Eliminations Total Assets Current assets: Cash and cash equivalents $ 23,999 $ 9,029 $ 22,304 $ — $ 55,332 Receivables, net 118,746 5,414 28,961 — 153,121 Inventories, net 150,098 410,867 24,799 — 585,764 Prepaid expenses and other current assets 24,293 23,040 8,058 (5,863 ) 49,528 Intercompany receivable - current 695 263 22,091 (23,049 ) — Total current assets 317,831 448,613 106,213 (28,912 ) 843,745 Property and equipment, net 31,424 176,358 11,414 — 219,196 Goodwill and intangible assets, net 113,333 219,337 11,088 — 343,758 Other assets 51,181 16,567 826 — 68,574 Investment in subsidiaries 1,343,954 — (21,946 ) (1,322,008 ) — Intercompany receivable - noncurrent 568,541 366,902 581,624 (1,517,067 ) — Total assets $ 2,426,264 $ 1,227,777 $ 689,219 $ (2,867,987 ) $ 1,475,273 Liabilities and Equity Current liabilities: Borrowings under revolving credit agreement $ 110,000 $ — $ — $ — $ 110,000 Trade accounts payable 116,783 112,434 37,153 — 266,370 Other accrued expenses 74,941 65,228 16,919 (5,863 ) 151,225 Intercompany payable - current 12,794 — 10,255 (23,049 ) — Total current liabilities 314,518 177,662 64,327 (28,912 ) 527,595 Other liabilities: Long-term debt 197,003 — — — 197,003 Other liabilities 91,683 40,507 3,999 — 136,189 Intercompany payable - noncurrent 1,209,943 98,982 208,142 (1,517,067 ) — Total other liabilities 1,498,629 139,489 212,141 (1,517,067 ) 333,192 Equity: Caleres, Inc. shareholders’ equity 613,117 910,626 411,382 (1,322,008 ) 613,117 Noncontrolling interests — — 1,369 — 1,369 Total equity 613,117 910,626 412,751 (1,322,008 ) 614,486 Total liabilities and equity $ 2,426,264 $ 1,227,777 $ 689,219 $ (2,867,987 ) $ 1,475,273 CONDENSED CONSOLIDATING STATEMENT OF EARNINGS FOR THE FISCAL YEAR ENDED JANUARY 28, 2017 Non-Guarantors ($ thousands) Parent Guarantors Eliminations Total Net sales $ 825,654 $ 1,692,093 $ 227,557 $ (165,916 ) $ 2,579,388 Cost of goods sold 583,131 938,169 129,410 (133,313 ) 1,517,397 Gross profit 242,523 753,924 98,147 (32,603 ) 1,061,991 Selling and administrative expenses 212,156 690,292 57,757 (32,603 ) 927,602 Restructuring and other special charges, net 15,333 433 7,638 — 23,404 Operating earnings 15,034 63,199 32,752 — 110,985 Interest expense (15,102 ) (9 ) — — (15,111 ) Interest income 811 — 569 — 1,380 Intercompany interest income (expense) 8,888 (9,033 ) 145 — — Earnings before income taxes 9,631 54,157 33,466 — 97,254 Income tax provision (5,075 ) (20,084 ) (6,009 ) — (31,168 ) Equity in earnings (loss) of subsidiaries, net of tax 61,102 — (2,422 ) (58,680 ) — Net earnings 65,658 34,073 25,035 (58,680 ) 66,086 Less: Net earnings attributable to noncontrolling interests — — 428 — 428 Net earnings attributable to Caleres, Inc. $ 65,658 $ 34,073 $ 24,607 $ (58,680 ) $ 65,658 CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME FOR THE FISCAL YEAR ENDED JANUARY 28, 2017 Non-Guarantors ($ thousands) Parent Guarantors Eliminations Total Net earnings $ 65,658 $ 34,073 $ 25,035 $ (58,680 ) $ 66,086 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment — — 1,045 — 1,045 Pension and other postretirement benefits adjustments (24,790 ) — 62 — (24,728 ) Derivative financial instruments 181 — (1,115 ) — (934 ) Other comprehensive income from investment in subsidiaries 39 — — (39 ) — Other comprehensive loss, net of tax (24,570 ) — (8 ) (39 ) (24,617 ) Comprehensive income 41,088 34,073 25,027 (58,719 ) 41,469 Comprehensive income attributable to noncontrolling interests — — 381 — 381 Comprehensive income attributable to Caleres, Inc. $ 41,088 $ 34,073 $ 24,646 $ (58,719 ) $ 41,088 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JANUARY 28, 2017 Non-Guarantors ($ thousands) Parent Guarantors Eliminations Total Net cash provided by operating activities $ 66,800 $ 71,781 $ 45,041 $ — $ 183,622 Investing activities Purchases of property and equipment (4,769 ) (41,606 ) (4,148 ) — (50,523 ) Capitalized software (5,521 ) (3,481 ) (37 ) — (9,039 ) Acquisition cost, net of cash received (259,932 ) — — — (259,932 ) Intercompany investing (3,257 ) 3,257 — — — Net cash used for investing activities (273,479 ) (41,830 ) (4,185 ) — (319,494 ) Financing activities Borrowings under revolving credit agreement 623,000 — — — 623,000 Repayments under revolving credit agreement (513,000 ) — — — (513,000 ) Dividends paid (12,104 ) — — — (12,104 ) Acquisition of treasury stock (23,139 ) — — — (23,139 ) Issuance of common stock under share-based plans, net (4,188 ) — — — (4,188 ) Excess tax benefit related to share-based plans 2,251 — — — 2,251 Intercompany financing 126,858 (20,922 ) (105,936 ) — — Net cash provided by (used for) financing activities 199,678 (20,922 ) (105,936 ) — 72,820 Effect of exchange rate changes on cash and cash equivalents — — 233 — 233 (Decrease) increase in cash and cash equivalents (7,001 ) 9,029 (64,847 ) — (62,819 ) Cash and cash equivalents at beginning of year 31,000 — 87,151 — 118,151 Cash and cash equivalents at end of year $ 23,999 $ 9,029 $ 22,304 — $ 55,332 CONDENSED CONSOLIDATING STATEMENT OF EARNINGS FOR THE FISCAL YEAR ENDED JANUARY 30, 2016 Non-Guarantors ($ thousands) Parent Guarantors Eliminations Total Net sales $ 819,148 $ 1,652,444 $ 268,779 $ (162,941 ) $ 2,577,430 Cost of goods sold 591,539 905,412 162,384 (129,708 ) 1,529,627 Gross profit 227,609 747,032 106,395 (33,233 ) 1,047,803 Selling and administrative expenses 235,210 649,020 61,699 (33,233 ) 912,696 Operating (loss) earnings (7,601 ) 98,012 44,696 — 135,107 Interest expense (16,588 ) (1 ) — — (16,589 ) Loss on early extinguishment of debt (10,651 ) — — — (10,651 ) Interest income 695 — 204 — 899 Intercompany interest income (expense) 14,363 (14,581 ) 218 — — (Loss) earnings before income taxes (19,782 ) 83,430 45,118 — 108,766 Income tax benefit (provision) 8,755 (29,475 ) (6,222 ) — (26,942 ) Equity in earnings (loss) of subsidiaries, net of tax 92,506 — (616 ) (91,890 ) — Net earnings 81,479 53,955 38,280 (91,890 ) 81,824 Less: Net earnings attributable to noncontrolling interests — — 345 — 345 Net earnings attributable to Caleres, Inc. $ 81,479 $ 53,955 $ 37,935 $ (91,890 ) $ 81,479 CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME FOR THE FISCAL YEAR ENDED JANUARY 30, 2016 Non-Guarantors ($ thousands) Parent Guarantors Eliminations Total Net earnings $ 81,479 $ 53,955 $ 38,280 $ (91,890 ) $ 81,824 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment — — (224 ) — (224 ) Pension and other postretirement benefits adjustments (8,838 ) — 249 — (8,589 ) Derivative financial instruments 628 — (460 ) — 168 Other comprehensive loss from investment in subsidiaries (366 ) — — 366 — Other comprehensive loss, net of tax (8,576 ) — (435 ) 366 (8,645 ) Comprehensive income 72,903 53,955 37,845 (91,524 ) 73,179 Comprehensive income attributable to noncontrolling interests — — 276 — 276 Comprehensive income attributable to Caleres, Inc. $ 72,903 $ 53,955 $ 37,569 $ (91,524 ) $ 72,903 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JANUARY 30, 2016 Non-Guarantors ($ thousands) Parent Guarantors Eliminations Total Net cash (used for) provided by operating activities $ (1,259 ) $ 99,222 $ 51,189 $ — $ 149,152 Investing activities Purchases of property and equipment (14,585 ) (56,382 ) (2,512 ) — (73,479 ) Proceeds from disposal of property and equipment 7,111 — 322 — 7,433 Capitalized software (5,197 ) (2,538 ) — — (7,735 ) Intercompany investing (568 ) 568 — — — Net cash used for investing activities (13,239 ) (58,352 ) (2,190 ) — (73,781 ) Financing activities Borrowings under revolving credit agreement 198,000 — — — 198,000 Repayments under revolving credit agreement (198,000 ) — — — (198,000 ) Proceeds from issuance of 2023 senior notes 200,000 — — — 200,000 Redemption of 2019 senior notes (200,000 ) — — — (200,000 ) Dividends paid (12,253 ) — — — (12,253 ) Debt issuance costs (3,650 ) — — — (3,650 ) Acquisition of treasury stock (4,921 ) — — — (4,921 ) Issuance of common stock under share-based plans, net (5,297 ) — — — (5,297 ) Excess tax benefit related to share-based plans 2,651 — — — 2,651 Intercompany financing 55,077 (40,870 ) (14,207 ) — — Net cash provided by (used for) financing activities 31,607 (40,870 ) (14,207 ) — (23,470 ) Effect of exchange rate changes on cash and cash equivalents — — (1,153 ) — (1,153 ) Increase in cash and cash equivalents 17,109 — 33,639 — 50,748 Cash and cash equivalents at beginning of year 13,891 — 53,512 — 67,403 Cash and cash equivalents at end of year $ 31,000 $ — $ 87,151 $ — $ 118,151 |