Stage Stores Inc.
Annual Report 2014

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KSTAGE STORES INC - SSIFiled: April 01, 2015 (period: January 31, 2015)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549_______________ FORM 10-K (Mark One)þþANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 31, 2015 or¨¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______Commission File No. 1-14035Stage Stores, Inc.(Exact Name of Registrant as Specified in Its Charter)NEVADA(State or Other Jurisdiction of Incorporation or Organization)91-1826900(I.R.S. Employer Identification No.) 10201 MAIN STREET, HOUSTON, TEXAS(Address of Principal Executive Offices)77025(Zip Code)Registrant's telephone number, including area code: (800) 579-2302Securities registered pursuant to Section 12(b) of the Act:Title of each classCommon Stock ($0.01 par value)Name of each exchange on which registeredNew York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o No þIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes þ No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes þ No oSource: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 232.405 of this chapter) is not contained herein, and willnot be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. Yes þ No oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.Large accelerated filer o Accelerated filer þ Non-accelerated filer o Smaller reporting company oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þAs of August 1, 2014 (the last business day of the registrant's most recently completed second quarter), the aggregate market value of the voting and non-voting common stock of the registrant held by non-affiliates of the registrant was $505,510,489 (based upon the closing price of the registrant's commonstock as reported by the New York Stock Exchange on August 1, 2014).As of March 24, 2015, there were 31,659,842 shares of the registrant's common stock outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the definitive proxy statement relating to the registrant's Annual Meeting of Shareholders to be held on June 11, 2015, which will be filed within120 days of the end of the registrant's fiscal year ended January 31, 2015 ("Proxy Statement"), are incorporated by reference into Part III of this Form 10-K tothe extent described therein.2Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.TABLE OF CONTENTS PART IPage Item 1.Business4Item 1A.Risk Factors9Item 1B.Unresolved Staff Comments13Item 2.Properties14Item 3.Legal Proceedings15Item 4.Mine Safety Disclosures15 PART II Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities15Item 6.Selected Financial Data18Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations21Item 7A.Quantitative and Qualitative Disclosures About Market Risk33Item 8.Financial Statements and Supplementary Data33Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure33Item 9A.Controls and Procedures34Item 9B.Other Information34 PART III Item 10.Directors, Executive Officers and Corporate Governance35Item 11.Executive Compensation36Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters36Item 13.Certain Relationships and Related Transactions, and Director Independence36Item 14.Principal Accountant Fees and Services36 PART IV Item 15.Exhibits and Financial Statement Schedules37 Signatures 41 Index to Consolidated Financial Statements of Stage Stores, Inc.F-13Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsReferences to a particular year are to Stage Stores, Inc.'s fiscal year, which is the 52- or 53-week period ending on the Saturday closest to January 31st ofthe following calendar year. For example, a reference to "2012" is a reference to the fiscal year ended February 2, 2013, "2013" is a reference to the fiscalyear ended February 1, 2014 and "2014" is a reference to the fiscal year ended January 31, 2015. 2013 and 2014 consisted of 52 weeks, while 2012consisted of 53 weeks. PART I ITEM 1. BUSINESSOur BusinessStage Stores, Inc. and its subsidiary ("we," "us" or "our") operate specialty department stores primarily in small and mid-sized towns andcommunities. We provide customers a welcoming and comfortable shopping experience in our stores and direct-to-consumer business. Our merchandiseassortment is a well-edited selection of moderately priced brand name and private label apparel, accessories, cosmetics, footwear and home goods. As ofJanuary 31, 2015, we operated 854 specialty department stores in 40 states under the BEALLS, GOODY'S, PALAIS ROYAL, PEEBLES and STAGEnameplates and a direct-to-consumer business. On March 7, 2014, we divested Steele's, an off-price concept that we launched in November 2011, in order to focus solely on our core specialtydepartment store business. Accordingly, the results of operations of Steele's and loss on the sale are reflected in discontinued operations for all periodspresented.Our HistoryStage Stores, Inc. was formed in 1988 when the management of Palais Royal, together with several venture capital firms, acquired the family-ownedBealls and Palais Royal chains, both of which were originally founded in the 1920s. At the time of the acquisition, Palais Royal operated primarily largerstores, located in and around the Houston metropolitan area, while Bealls operated primarily smaller stores, principally located in rural Texas towns. Our Market and Target CustomerOur distinct store environment and well-edited offerings of name brand and trend-right assortments attract a wide demographic. Our merchandisecombination of apparel, accessories, cosmetics, footwear and home allows us participate in a number of market segments. While our broad assortment appealsto a wide array of people of varying ages and diverse backgrounds, our primary target customers are style and value savvy women over the age of 35 who aremarried, employed full time and have an average household income of $55,000. Our customer research reveals our target customer loves to shop for fun, andenjoys a shopping experience that brings her style, value and inspiration where she lives.CompetitionThe retail industry is highly competitive and we compete in our stores and in our e-commerce business. However, as a result of our small and mid-sized market focus, our stores generally face less competition for our brand name merchandise since branded merchandise is typically available only inregional malls, which are often located more than 30 miles away from our nearest store. Due to minimal branded merchandise overlap, we generally do notdirectly compete for branded merchandise sales with national discounters such as Wal-Mart. In small and mid-sized markets where we do compete for brandname merchandise sales, competition generally comes from local retailers, small regional chains and, to a lesser extent, national department stores. In themore competitive markets where we compete against other national department store chains, we offer consumers a high level of customer service and theadvantage of generally being in neighborhood locations with convenient parking and easy access. We believe we have a competitive advantage over localretailers and small regional chains due to our (i) broader selection of brand name merchandise, (ii) distinctive retail concept, (iii) economies of scale, (iv)strong vendor relationships and (v) private label credit card program. We also believe we have a competitive advantage in small and mid-sized markets overnational department stores due to our experience with smaller markets. 4Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur Competitive StrengthsWe believe the following strengths differentiate us from our competitors and are key drivers of our success:Unique Real Estate Positioning and Powerful Store Economics. Our stores are predominantly located in small towns and communities withpopulations of less than 150,000. We predominantly lease our locations and are generally secondary users of space, allowing us to secure advantageousoccupancy terms. Our average store is 18,000 square feet, which is a small-format footprint for a specialty department store concept. We believe this createsan opportunity to offer a selection that feels comprehensive and curated in an inviting environment.Trend-Right, Brand Name Merchandise Delivered at a Compelling Value. Our stores and direct-to-consumer business carry a broad selection oftrend-right, brand name apparel, accessories, cosmetics, footwear and home goods for the entire family. Our buyers identify and purchase nationallyrecognized, quality brands and trend-right styles our customers find compelling from respected brands such as Levi Strauss, Nike, Calvin Klein, Chaps, Izod,Dockers, Carters, Jockey, Estee Lauder, Clinique, Nautica, Skechers and DKNY. Our value proposition for moderately priced, brand name merchandiseincludes routine discount and promotional offers. We believe our use of discount and promotional offers generates customer excitement and drives loyaltyand repeat shopping.Experienced Management Team with a Disciplined Operating Philosophy. Our senior management team has extensive experience across a widerange of disciplines in the retail industry, including merchandising, marketing, human resources, information systems and finance. Our management team hasbuilt a solid operating foundation based on sound retail principles and is focused on taking care of our customers to provide great merchandise and a greatexperience.StoresStore Openings and Closures. During 2014, we opened 18 new stores and closed 12 stores. In 2015, we plan to slow our new store growth as weembark on a multi-year initiative to increase investments in our direct-to-consumer business and existing stores. We anticipate opening 2 new stores in2015. We continually review the profitability of each store and look to close a store if the expected store performance does not meet our financial hurdlerates. We expect to close 10-20 stores, where lease terms permit, in 2015.Expansion, Relocation and Remodeling. During 2014, we expanded 13 stores and relocated 7 stores. In 2015, we plan to increase our investment inthe expansion, relocation and remodeling of our existing stores. We believe that remodeling improves the store environment and helps us create an invitingand differentiated shopping experience. Our remodeling projects are designed to create a bright, fun and comfortable store experience and may includeupgrades ranging from improving lighting, flooring, paint, fixtures, fitting rooms, visual merchandising and signage, to more extensive expansion projects. Relocations are intended to improve the store's location and to help it capitalize on incremental sales productivity potential.In 2014, we undertook an initiative to measure selling square footage for each store. Historically, selling square footage for our stores was based on apercentage of gross square footage. The changes as a result of that initiative are included in the beginning balance in the following tables.Store count and selling square footage by nameplate are as follows: Number of Stores Selling Square Footage (in thousands) February 1, 2014 2014 Activity NetChanges January 31, 2015 February 1, 2014 2014 Activity NetChanges January 31, 2015Bealls215 4 219 4,332 71 4,403Goody's268 (2) 266 4,238 (13) 4,225Palais Royal53 — 53 1,135 — 1,135Peebles191 6 197 3,497 67 3,564Stage121 (2) 119 2,111 (29) 2,082 848 6 854 15,313 96 15,4095Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsUtilizing a ten-mile radius from each store, approximately 58% of our stores are located in communities with populations below 50,000 people,while an additional 26% of our stores are located in communities with populations between 50,000 and 150,000 people. The remaining 16% of our stores arelocated in higher-density markets with populations greater than 150,000, such as Houston, San Antonio and Lubbock, Texas. The store count and sellingsquare footage by market area population are as follows: Number of Stores Selling Square Footage (in thousands) February 1, 2014 2014 Activity NetChanges January 31, 2015 February 1, 2014 2014 Activity NetChanges January 31, 2015Less than 50,000491 5 496 7,793 100 7,89350,000 to 150,000217 3 220 4,303 51 4,354Greater than 150,000140 (2) 138 3,217 (55) 3,162 848 6 854 15,313 96 15,409Direct-to-ConsumerOur direct-to-consumer business consists of our e-commerce website and Send program. Since launching our e-commerce website in 2010, we havemade growing our direct-to-consumer business a high priority. Our e-commercewebsite features a broader assortment of the merchandise categories found in our stores, as well as additional product offerings. Entering the 2013 holidayseason, we replatformed our e-commerce website which improved functionality and enhanced the customer experience. Our in-store Send program allowscustomers to have merchandise shipped directly to their homes from another store if the preferred size or color is not available in their local store. Our direct-to-consumer business enables us to reach customers outside of store operating hours, acquire customers in all states and further build our brand. We believethere is significant potential to expand our direct-to-consumer business over time.MerchandisingWe offer a well-edited selection of moderately priced, branded merchandise within distinct merchandise categories, such as women's, men's andchildren's apparel, as well as accessories, cosmetics, footwear and home goods. Our direct-to-consumer business allows us to extend the breadth of ourassortments and offer additional products.The following table sets forth the distribution of net sales among our various merchandise categories: Fiscal YearDepartment 2014 2013 2012Women's (a) 38% 38% 39%Men's (b) 17 17 17Children's 11 11 12Footwear 13 13 13Accessories 8 8 8Cosmetics/Fragrances 9 9 8Home/Gifts/Other 4 4 3 100% 100% 100% (a) Women's includes misses sportswear, junior sportswear, dresses, special sizes, intimates, outerwear and swim.(b) Men's includes men's and young men's. 6Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsMerchandise selections reflect current styles and trends and merchandise mix may also vary from store to store to accommodate differingdemographic, regional and climatic characteristics. Our buying and planning team use technology tools such as size pack optimization and store levelmarkdown optimization to localize assortments.Approximately 87% of sales consist of nationally recognized brands such as Levi Strauss, Nike, Calvin Klein, Chaps, Izod, Dockers, Carters, NineWest, Estee Lauder, Clinique, Nautica, Skechers and DKNY, while the remaining 13% of sales consist of our private label merchandise.Our private label portfolio brands are developed and sourced through agreements with third party vendors. We believe our private label andexclusive brands offer a compelling mix of style, quality and excellent value. We continue to refine the positioning of our private brands and we see them asan avenue for growth.We are also focused on growing our cosmetics business. In 2014, we installed Estee Lauder counters in 75 stores and Clinique counters in 76 stores.Merchandise Distribution We currently distribute all merchandise to our stores through distribution centers located in Jacksonville, Texas, South Hill, Virginia andJeffersonville, Ohio. Incoming merchandise received at the distribution centers is inspected for quality control purposes. Integrated merchandising and warehouse management systems support all corporate and distribution center locations. All of our distribution centersare equipped with modern sortation equipment which enables us to meet specific store merchandise assortment needs. The configurations of the distributioncenters permit scheduled shipments to stores, with the majority of stores receiving merchandise within three days of shipment from the distribution centers. We utilize third party contract carriers to deliver merchandise from the distribution centers to our stores.Direct-to-consumer orders are filled both from our distribution centers and our stores.MarketingWe use a multi-media advertising approach, including broadcast media, digital media, mobile media, local newspaper inserts and direct mail. Inaddition, we leverage our private label credit card to create strong customer loyalty through continuous one-on-one communication.Our marketing strategy is designed to establish and reward brand loyalty and support each store's position as the destination for desirable styles andnationally recognized brands at an attractive value in a comfortable and welcoming environment. Our marketing strategy leverages (i) consumer insight frombrand and customer research, (ii) identified customer purchase history to plan and execute targeted omni-channel marketing to our customers and (iii)emerging technology and trends in retail marketing.Maintaining a connection to the communities we serve is important to us and we have started a locally based giving campaign called 30 Days ofGiving under our Community Counts program. In 2014, through our Community Counts program, we helped raise over $3.0 million for the communities weserve.Brand image is an important part of our marketing program. Our principal trademarks, including the BEALLS, GOODY'S, PALAIS ROYAL,PEEBLES, and STAGE trademarks, have been registered with the U.S. Patent and Trademark Office. We have also registered trademarks used in connectionwith our private label merchandise. We regard our trademarks and their protection as important to our success.7Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPrivate Label Credit Card Program. We consider our private label credit card program to be a vital component of our business because it (i)enhances customer loyalty, (ii) allows us to identify and regularly contact our best customers and (iii) creates a comprehensive database that enables us toimplement targeted and personalized marketing messages. Our Premier Rewards customer loyalty program provides significantly enhanced benefits andincentives for our private label credit card holders. Customers earn reward certificates redeemable for merchandise based on purchases, free shipping ondirect-to-consumer purchases, special promotional discounts and invitations to private sales. The percentage of sales that are paid for using the private labelcredit card is our "penetration rate." The penetration rate for our private label credit card was 40% in 2014, an increase of more than 400 basis pointscompared to the prior year. In 2013 and 2012, the penetration rate was 36% and 33%, respectively.Customer Service We strive to provide exceptional customer service through conveniently located stores staffed with well-trained and motivated sales associates. Inorder to ensure consistency of execution, each sales associate is evaluated based on the attainment of specific customer service standards, such as offering afriendly greeting, providing prompt assistance, helping open private label credit card accounts, thanking customers and inviting return visits. We alsoconduct customer satisfaction surveys to measure and monitor attainment of customer service expectations. The results of customer surveys are used toprovide feedback to reinforce and improve customer service. To further reinforce our focus on customer service, we have various programs in place torecognize our sales associates for providing outstanding customer service.Information SystemsWe support our business by using multiple, highly integrated systems in areas such as merchandising, store operations, distribution, sales promotion,personnel management, store design and accounting. Our core merchandising systems assist in planning, ordering, allocating and replenishing merchandiseassortments for each store, based on specific characteristics and recent sales trends. Our price change management system allows us to identify and markdown slow moving merchandise. Our replenishment/fulfillment system allows us to maintain planned levels of in-stock positions in basic items such as jeansand underwear. In addition, a fully integrated warehouse management system is in place in all three distribution centers.We have a markdown optimization tool, which is focused on pricing items on a style-by-style basis at the appropriate price, based on inventorylevels and sales history, in order to maximize revenue and profitability. We continue to expand the utilization and effectiveness of our merchandise planningsystem in order to maximize the generation of sales and gross margin. In 2014, we implemented markdown optimization at the store level and continued tomake progress on size pack optimization to better tailor assortments at the store level.We utilize a point-of-sale ("POS") platform with bar code scanning, electronic credit authorization, instant credit, returns database and gift cardprocessing in all our stores. The POS platform allows us to capture customer specific sales data for use in our merchandising, marketing and loss preventionsystems, while quickly servicing our customers. The POS platform also manages coupon and deal-based pricing, which streamlines the checkout process andimproves store associate adherence to promotional markdown policies.Our EmployeesAt January 31, 2015, we employed approximately 14,300 hourly and salaried employees. Employee levels will vary during the year as wetraditionally hire additional sales associates and increase the hours of part-time sales associates during peak seasonal selling periods. We consider ourrelationship with our employees to be good, and there are no collective bargaining agreements in effect with respect to any of our employees. Seasonality Our business is seasonal and sales are traditionally lower during the first three quarters of the fiscal year (February through October) and higherduring the last quarter of the fiscal year (November through January). The fourth quarter usually accounts for approximately 30% of our annual sales, witheach of the other quarters accounting for approximately 22% to 24%. Working capital requirements fluctuate during the year as well and generally reach theirhighest levels during the third and fourth quarters.8Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAvailable InformationWe make available, free of charge, through the "Investor Relations" section of our website (www.stagestoresinc.com)under the "SEC Filings" caption, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to thosereports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act") as soon as reasonablypracticable after we file such material with, or furnish it to the Securities and Exchange Commission ("SEC"). In this Form 10-K, we incorporate by referencecertain information from parts of our Proxy Statement for our 2015 Annual Meeting of Shareholders ("Proxy Statement"). Also in the "Investor Relations" section of our website (www.stagestoresinc.com) under the "Corporate Governance" and "SEC Filings" captions, thefollowing information relating to our corporate governance may be found: Corporate Governance Guidelines; charters of our Board of Directors' Audit,Compensation, and Corporate Governance and Nominating Committees; Code of Ethics and Business Conduct; Code of Ethics for Senior Officers; ChiefExecutive Officer and Chief Financial Officer certifications related to our SEC filings; and transactions in our securities by our directors and executiveofficers. The Code of Ethics and Business Conduct applies to all of our directors and employees. The Code of Ethics for Senior Officers applies to our ChiefExecutive Officer, Chief Financial Officer, Controller and other individuals performing similar functions, and contains provisions specifically applicable tothe individuals serving in those positions. We intend to post amendments to and waivers from, if any, our Code of Ethics and Business Conduct (to the extentapplicable to our directors and executive officers) and our Code of Ethics for Senior Officers in the "Investor Relations" section of our website(www.stagestoresinc.com) under the "Corporate Governance" caption. We will provide any of the foregoing information without charge upon written requestto our Secretary. The contents of our websites are not part of this report.ITEM 1A. RISK FACTORSCautionary Statement Concerning Forward-Looking Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation ReformAct of 1995The Private Securities Litigation Reform Act of 1995 ("Act") provides a safe harbor for forward-looking statements to encourage companies toprovide prospective information, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statementsidentifying important factors that may cause actual results to differ materially from those discussed in the statements. We wish to take advantage of the "safeharbor" provisions of the Act.Certain statements in this report are forward-looking statements within the meaning of the Act, and such statements are intended to qualify for theprotection of the safe harbor provided by the Act. The words "anticipate," "estimate," "expect," "objective," "goal," "project," "intend," "plan," "believe,""will," "should," "may," "target," "forecast," "guidance," "outlook," and similar expressions generally identify forward-looking statements. Similarly,descriptions of our objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements relate to the expectations ofmanagement as to future occurrences and trends, including statements expressing optimism or pessimism about future operating results or events andprojected sales, earnings, capital expenditures and business strategy.Forward-looking statements are based upon a number of assumptions and factors concerning future conditions that may ultimately prove to beinaccurate and may cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements that are made hereinand in other reports and releases are not guarantees of future performance and actual results may differ materially from those discussed in such forward-looking statements as a result of various factors. These factors include, but are not limited to, the ability for us to maintain normal trade terms with vendors,the ability for us to comply with the various covenant requirements contained in the Revolving Credit Facility agreement (as defined in "Liquidity andCapital Resources"), the demand for apparel, and other factors. The demand for apparel and sales volume can be affected by significant changes in economicconditions, including an economic downturn, employment levels in our markets, consumer confidence, energy and gasoline prices and other factorsinfluencing discretionary consumer spending. Other factors affecting the demand for apparel and sales volume include unusual weather patterns, an increasein the level of competition in our market areas, competitors' marketing strategies, changes in fashion trends, changes in the average cost of merchandisepurchased for resale, availability of product on normal payment terms and the failure to achieve the expected results of our merchandising and marketingplans as well as our store opening or relocation plans. Additional assumptions, factors and risks concerning future conditions are discussed in the RiskFactors section of this Form 10-K, and may be discussed from time to time in our other filings with the SEC, including Quarterly Reports on Form 10-Q andCurrent Reports on Form 8-K. Most of these factors are difficult to predict accurately and are generally beyond our control.9Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsForward-looking statements are and will be based upon management’s then-current views and assumptions regarding future events and operatingperformance, and are applicable only as of the dates of such statements. Although management believes the expectations expressed in forward-lookingstatements are based on reasonable assumptions within the bounds of our knowledge, forward-looking statements, by their nature, involve risks, uncertaintiesand other factors, any one or a combination of which may materially affect our business, financial condition, results of operations or liquidity.Readers should carefully review this Form 10-K in its entirety, including, but not limited to our financial statements and the accompanying notes,and the risks and uncertainties described in this Item 1A. Readers should consider these risks, uncertainties and other factors carefully in evaluating forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made.Forward-looking statements contained in this Form 10-K are made as of the date of this Form 10-K. We undertake no obligation to publicly update forward-looking statements whether as a result of new information, future events or otherwise. Readers are advised, however, to consult any further disclosures wemake on related subjects in our public announcements and SEC filings.Our ability to achieve the results contemplated by forward-looking statements is subject to a number of factors, any one, or a combination, of whichmay materially affect our business, financial condition, results of operations, or liquidity. Described below are certain risk factors that management believesare applicable to our business and the industry in which we operate. There may also be additional risks that are presently immaterial or unknown.If we are unable to successfully execute our strategies, our operating performance may be significantly impacted. There is a risk that we will beunable to meet or exceed our operating performance targets and goals in the future if our strategies and initiatives are unsuccessful. Our ability to developand execute our strategic plan and to execute the business activities associated with our strategic and operating plans, may impact our ability to meet ouroperating performance targets.Our failure to anticipate and respond to changing customer preferences in a timely manner may adversely affect our operations. Our successdepends, in part, upon our ability to anticipate and respond to changing consumer preferences and fashion trends in a timely manner. We attempt to stayabreast of emerging lifestyles and consumer preferences affecting our merchandise. However, any sustained failure on our part to identify and respond tosuch trends may have a material and adverse effect on our business, financial condition and cash flows.Failure to successfully operate our e-commerce website or fulfill customer expectations may adversely impact our business and sales. Our e-commerce platform provides another channel to generate sales. We believe that the e-commerce website will drive incremental sales by providing existingcustomers another opportunity to shop with us and also allowing us to reach new customers. If we do not successfully meet the challenges of operating an e-commerce website or fulfilling customer expectations, our business and sales may be adversely affected.We face the risk of significant competition in the retail apparel industry which may result in the loss of customers and adversely affectrevenues. The retail apparel business is highly competitive. Although competition varies widely from market to market, we face the risk of increasedcompetition, particularly in our more highly populated markets from national, regional and local department and specialty stores. Some of our competitorsare considerably larger than us and have substantially greater resources. Although we offer a unique product mix and brands that are not available at certainother retailers, including regional and national department stores, there is no assurance that our existing or new competitors will not carry similar brandedmerchandise in the future. This may have a material and adverse effect on our business, financial condition and cash flows. In addition to traditional store-based retailers, we also face e-commerce competition, which may materially affect our revenues and profitability.An economic downturn or decline in consumer confidence may negatively impact our business and financial condition. Our results of operationsare sensitive to changes in general economic conditions that impact consumer discretionary spending, such as employment levels, taxes, energy and gasolineprices and other factors influencing consumer confidence. We have extensive operations in the South Central, Southeastern and Mid-Atlantic states. Inaddition, many stores are located in small towns and rural environments that are substantially dependent upon the local economy. If there is an economicdownturn or decline in consumer confidence, particularly in the South Central, Southeastern and Mid-Atlantic states and any state from which we derive asignificant portion of our net sales (such as Texas or Louisiana), our business, financial condition and cash flows will be negatively impacted and suchimpact may be material.10Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThere can be no assurance that our liquidity will not be affected by changes in economic conditions. Recent economic conditions have not had,nor do we anticipate that current economic conditions will have, a significant impact on our liquidity. Due to our significant operating cash flow andavailability under our Revolving Credit Facility, we continue to believe that we have the ability to meet our financing needs for the foreseeable future. However, there can be no assurance that our liquidity will not be materially and adversely affected by changes in economic conditions.Failure to obtain merchandise product on normal trade terms and/or our inability to pass on any price increases related to our merchandisemay adversely impact our business, financial condition and cash flows. We are highly dependent on obtaining merchandise product on normal trade terms. Failure to meet our performance objectives may cause key vendors and factors to become more restrictive in granting trade credit. The tightening of credit,such as a reduction in our lines of credit or payment terms from the vendor or factor community, may have a material adverse impact on our business,financial condition and cash flows. We are also highly dependent on obtaining merchandise at competitive and predictable prices. In the event weexperience rising prices related to our merchandise, whether due to cost of materials, inflation, transportation costs, or otherwise, and are unable to pass onthose rising prices to our customers, our business, financial condition and cash flows may be adversely and materially affected.Risks associated with our vendors from whom our products are sourced may have a material adverse effect on our business and financialcondition. Our merchandise is sourced from a variety of domestic and international vendors. All of our vendors must comply with applicable laws, includingour required standards of conduct. Political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and otherfactors relating to foreign trade, the ability to access suitable merchandise on acceptable terms and the financial viability of our vendors are beyond ourcontrol and may adversely impact our performance.Risks associated with our carriers, shippers and other providers of merchandise transportation services may have a material adverse effect onour business and financial condition. Our vendors rely on shippers, carriers and other merchandise transportation service providers (collectively"Transportation Providers") to deliver merchandise from their manufacturers, both in the United States and abroad, to the vendors' distribution centers in theUnited States. Transportation Providers are also responsible for transporting merchandise from their vendors' distribution centers to our distribution centers. We also rely on Transportation Providers to transport merchandise from our distribution centers to our stores and to our customers in the case of e-commercesales. However, if work slowdowns, stoppages, weather or other disruptions affect the transportation of merchandise between the vendors and theirmanufacturers, especially those manufacturers outside the United States, between the vendors and us, or between us and our e-commerce customers, ourbusiness, financial condition and cash flows may be adversely affected.Unusual weather patterns or natural disasters, whether due to climate change or otherwise, may negatively impact our financial condition. Our business depends, in part, on normal weather patterns in our markets. We are susceptible to unseasonable and severe weather conditions, includingnatural disasters, such as hurricanes and tornadoes. Any unusual or severe weather, especially in states such as Texas and Louisiana, whether due to climatechange or otherwise, may have a material and adverse impact on our business, financial condition and cash flows. In addition, our business, financialcondition and cash flow may be adversely affected if the businesses of our key vendors and their merchandise manufacturers, shippers, carriers and othermerchandise transportation service providers, including those outside of the United States, are disrupted due to severe weather, such as, but not limited to,hurricanes, typhoons, tornadoes, tsunamis or floods, whether due to climate change or otherwise.A catastrophic event adversely affecting any of our buying, distribution or other corporate facilities may result in reduced revenues and loss ofcustomers. Our buying, distribution and other corporate operations are in highly centralized locations. Our operations may be materially and adverselyaffected if a catastrophic event (such as, but not limited to, fire, hurricanes, tornadoes or floods) impacts the use of these facilities. While we have developedcontingency plans that would be implemented in the event of a catastrophic event, there are no assurances that we would be successful in obtainingalternative servicing facilities in a timely manner in the event of such a catastrophe.War, acts of terrorism, Mexican border violence, public health issues and natural disasters may create uncertainty and may result in reducedrevenues. We cannot predict, with any degree of certainty, what effect, if any, war, acts of terrorism, Mexican border violence, public health issues andnatural disasters, if any, will have on us, our operations, the other risk factors discussed herein and the forward-looking statements we make in this Form 10-K. However, the consequences of these events may have a material adverse effect on our business, financial condition and cash flows.11Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsA disruption of our information technology systems may have a material adverse impact on our business and financial condition. We areheavily dependent on our information technology systems for day to day business operations. In addition, as part of our normal course of business, wecollect, process and retain sensitive and confidential customer information. Today's information technology risks are largely external and their consequencesmay affect us. Potential risks include, but are not limited to, the following: (i) an intrusion by a hacker, (ii) the introduction of malware (virus, Trojan horse,spyware), (iii) hardware failure, (iv) outages due to software defects and (v) human error. Although we run anti-virus and anti-spyware software and take othersteps to ensure that our information technology systems will not be disabled or otherwise disrupted, there are no assurances that disruptions will not occur.The consequences of a disruption, depending on the severity, may have a material adverse effect on our business and financial condition and may expose usto civil, regulatory and industry actions and possible judgments, fees and fines.A security breach that results in unauthorized disclosure of our, employee or customer information may adversely impact our business,reputation and financial condition. The protection of customer, employee, and company data is critical to us. Any security breach involving themisappropriation, loss or other unauthorized disclosure of confidential customer, employee or company information may severely damage our reputation,expose us to the risks of legal proceedings, disrupt our operations, attract a substantial amount of negative media attention, damage our customerrelationships, and otherwise have a material adverse impact on our business and financial condition. While we have taken significant steps to protectconfidential information, there is no assurance that advances in computer capabilities, new discoveries in the field of cryptography, or other developmentswill prevent the compromise of customer transaction processing capabilities and personal data. If any such compromise of our information security were tooccur, it may have a material adverse effect on our reputation, business, operating results, financial condition and cash flows.Our failure to attract, develop and retain qualified employees may deteriorate the results of our operations. We believe that our competitiveadvantage is providing well-trained and motivated sales associates in order to provide customers exceptional customer service. Our success depends in partupon our ability to attract, develop and retain a sufficient number of qualified employees, including store, service and administrative personnel. Competitionfor key personnel in the retail industry is intense and our future success will depend on our ability to recruit, train, and retain our senior executives and otherqualified personnel.Laws and regulations may adversely impact our business, financial condition and cash flows. We, like other businesses, are subject to variousfederal, state and local government laws and regulations including, but not limited to, tax laws. These may change periodically in response to economic orpolitical conditions. We cannot predict whether existing laws or regulations, as currently interpreted or as reinterpreted in the future, or future laws andregulations, may have a material and adverse impact on our operations, financial condition and cash flows.We may be subject to periodic litigation and regulatory proceedings which may adversely affect our business and financial performance. Fromtime to time, we are involved in lawsuits and regulatory proceedings. Due to the inherent uncertainties of such matters, we may not be able to accuratelydetermine the impact on us of any future adverse outcome of such matters. The ultimate resolution of these matters may have a material adverse impact on ourfinancial condition, results of operations and liquidity. In addition, regardless of the outcome, these matters may result in substantial cost to us and mayrequire us to devote substantial attention and resources to defend ourselves.If our trademarks are successfully challenged, the outcome of those disputes may require us to abandon one or more of our trademarks. Weregard our trademarks and their protection as important to our success. However, we cannot be sure that any trademark held by us will provide us acompetitive advantage or will not be challenged by third parties. Although we intend to vigorously protect our trademarks, the cost of litigation to upholdthe validity and prevent infringement of trademarks can be substantial and the outcome of those disputes may require us to abandon one or more of ourtrademarks.Our dependence upon cash flows and net earnings generated during the fourth quarter, including the holiday season, may have adisproportionate impact on our results of operations. The seasonal nature of the retail industry causes a heavy dependence on earnings in the fourthquarter. A large fluctuation in economic or weather conditions occurring during the fourth quarter may adversely impact our earnings. In preparation for ourpeak season, we may carry a significant amount of inventory in advance. If, however, we do not manage inventory appropriately or customer preferenceschange we may need to increase markdowns or promotional sales to dispose of inventory which will negatively impact our financial results.12Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCovenants in our Revolving Credit Facility agreement may impose operating restrictions, impede or adversely affect our ability to paydividends or repurchase common shares and raise capital through the sale of stock and other securities. Our Revolving Credit Facility agreementcontains covenants which, among other things, restrict (i) the amount of additional debt or capital lease obligations we may incur, (ii) our payment ofdividends and repurchase of common stock under certain circumstances and (iii) related party transactions. A violation of any of these covenants may permitthe lenders to restrict our ability to further access loans and letters of credit and may require the immediate repayment of any outstanding loans. Our failure tocomply with these covenants may have a material adverse effect on our capital resources, financial condition, results of operations and liquidity. In addition,any material or adverse developments affecting our business may significantly limit our ability to meet our obligations as they become due or to comply withthe various covenant requirements contained in our Revolving Credit Facility agreement.The inability or unwillingness of one or more lenders to fund their commitment under our Revolving Credit Facility may have a materialadverse impact on our business and financial condition. Our Revolving Credit Facility, which matures on October 6, 2019, is a $350.0 million seniorsecured revolving credit facility. We use the Revolving Credit Facility to provide financing for working capital, capital expenditures and other generalcorporate purposes, as well as to support our outstanding letters of credit requirements. The lenders under the Revolving Credit Facility are: Wells FargoBank, National Association, JPMorgan Chase Bank, N.A, Regions Bank and Bank of America, N.A. Notwithstanding that we may be in full compliance withall covenants contained in the Revolving Credit Facility, the inability or unwillingness of one or more of those lenders to fund their commitment under ourRevolving Credit Facility may have a material adverse impact on our business and financial condition.Unexpected costs may arise from our current insurance program and our financial performance may be affected. Our insurance coverage issubject to deductibles, self-insured retentions, limits of liability and similar provisions that we believe are prudent based on the dispersion of our operations.However, we may incur certain types of losses that we cannot insure or which we believe are not economically reasonable to insure, such as losses due to actsof war, employee and certain other crime and some natural disasters. If we incur these losses and they are material, our business could suffer. Certain materialevents may result in sizable losses for the insurance industry and adversely impact the availability of adequate insurance coverage or result in excessivepremium increases. To offset negative cost trends in the insurance market, we may elect to self-insure, accept higher deductibles or reduce the amount ofcoverage in response to these market changes. In addition, we self-insure a portion of expected losses under our workers' compensation, general liability andgroup health insurance programs. Unanticipated changes in any applicable actuarial assumptions and management estimates underlying our recordedliabilities for these losses, including potential increases in medical and indemnity costs, could result in materially different amounts of expense thanexpected under these programs, which may have a material adverse effect on our financial condition and results of operations. Although we continue tomaintain property insurance for catastrophic events, we are self-insured for losses up to the amount of our deductibles. If we experience a greater number ofself-insured losses than we anticipate, our financial performance may be adversely affected.The price of our common stock as traded on the New York Stock Exchange may be volatile. Our stock price may fluctuate substantially as aresult of factors beyond our control, including but not limited to, general economic and stock market conditions, risks relating to our business and industry asdiscussed above, strategic actions by us or our competitors, variations in our quarterly operating performance, our future sales or purchases of our commonstock and investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives.ITEM 1B. UNRESOLVED STAFF COMMENTSNot applicable.13Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsITEM 2. PROPERTIESOur corporate headquarters occupies approximately 195,000 square feet of leased space in Houston, Texas. We own our distribution centers inJacksonville, Texas and South Hill, Virginia and lease our distribution center in Jeffersonville, Ohio, which have square footages and provide capacity ofservicing stores as follows: LocationSquare Footage(in thousands)Number of Stores Capable ofServicingJacksonville, Texas437600South Hill, Virginia162240Jeffersonville, Ohio202310 8011,150We also lease a 176,000 square foot facility in Jacksonville, Texas to provide capacity expansion for our growing e-commerce business.Our stores are primarily located in strip shopping centers. We own six of our stores and lease the balance. The majority of leases, which are typicallyfor an initial 10-year term and often with two renewals of five years each, provide for a base rent plus payments for expenses incurred by the landlord, such ascommon area maintenance and insurance. Certain leases provide for contingent rents that are not measurable at inception. These contingent rents areprimarily based on a percentage of sales that are in excess of a predetermined level. Stores range in size from approximately 5,000 to 57,000 selling squarefeet, with the average being approximately 18,000 selling square feet. At January 31, 2015, we operated 854 stores, in 40 states located within 7 regions, asfollows: Number of Stores Number of StoresSouth Central Region Midwestern Region Arkansas 23 Illinois 6Louisiana 53 Indiana 24Oklahoma 38 Iowa 2Texas 231 Kansas 9 345 Michigan 15Mid-Atlantic Region Minnesota 1Delaware 3 Missouri 19Maryland 8 Ohio 30New Jersey 5 Wisconsin 4Pennsylvania 35 110Virginia 34 Northeastern Region West Virginia 11 Connecticut 1 96 Massachusetts 2Southeastern Region New Hampshire 2Alabama 35 New York 23Florida 6 Vermont 4Georgia 38 32Kentucky 34 Northwestern Region Mississippi 25 Colorado 6North Carolina 30 Idaho 3South Carolina 21 Oregon 4Tennessee 34 Wyoming 1 223 14Southwestern Region Total Stores 854Arizona 7 Nevada 5 New Mexico 19 Utah 3 34 14Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents ITEM 3. LEGAL PROCEEDINGSNo response is required under Item 103 of Regulation S-K.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.PART IIITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESMarket and Dividend InformationOur common stock trades on the New York Stock Exchange under the symbol "SSI". The following table sets forth the high and low market pricesper share of our common stock as reported by the New York Stock Exchange and the amount of cash dividends per common share we paid during eachquarter in 2014 and 2013: Fiscal Year 2014 2013 High Low Dividend High Low Dividend1st Quarter$25.39 $18.39 $0.125 $29.59 $22.65 $0.1002nd Quarter20.46 17.63 0.125 28.50 21.53 0.1253rd Quarter19.33 15.79 0.140 25.31 18.41 0.1254th Quarter22.52 15.71 0.140 22.99 19.35 0.125 On June 11, 2014, we announced that our Board of Directors ("Board") approved a 12% increase in our quarterly cash dividend rate to $0.14 pershare from the previous quarterly rate of $0.125 per share. The new quarterly rate of $0.14 per share is applicable to dividends declared by the Boardbeginning on August 21, 2014.We paid aggregate cash dividends in 2014 and 2013 of $17.0 million and $15.5 million, respectively. While we expect to continue payment ofquarterly cash dividends, the declaration and payment of future dividends are subject to the discretion of our Board. Any future determination to paydividends will depend on our results of operations and financial condition, as well as meeting certain criteria under our Revolving Credit Facility (as definedin "Liquidity and Capital Resources") and other factors deemed relevant by our Board.HoldersAs of the close of trading on the New York Stock Exchange on March 24, 2015 there were approximately 258 holders of record of our commonstock.15Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPerformance GraphThe annual changes for the five-year period shown in the following graph are based on the assumption that $100 had been invested in each of ourcommon stock, the S&P 500 Index and the S&P 500 Retail Index on January 29, 2010 (the last trading date of 2009), and that all quarterly dividends werereinvested at the average of the closing prices at the beginning and end of the quarter. Subsequent measurement points are the last trading days of 2010,2011, 2012, 2013 and 2014. The total cumulative dollar returns shown on the graph represent the value that such investments would have had on January 30,2015 (the last trading date of 2014). The calculations exclude trading commissions and taxes. The stock price performance on the following graph and tableis not necessarily indicative of future stock price performance.DateStage Stores, Inc.S&P 500 IndexS&P 500 Retail Index1/29/2010$100.00$100.00$100.001/28/2011123.96118.85125.461/27/2012127.01122.58140.392/1/2013188.25140.91176.181/31/2014164.01166.00218.281/30/2015172.25185.78259.21 16Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStock Repurchase ProgramOn March 7, 2011, our Board approved a stock repurchase program ("2011 Stock Repurchase Program") which authorized us to repurchase up to$200.0 million of our outstanding common stock. The 2011 Stock Repurchase Program will expire when we have repurchased $200.0 million of ouroutstanding common stock, unless terminated earlier by our Board. Through June 10, 2012, we repurchased approximately $100.1 million of our outstandingcommon stock under the 2011 Stock Repurchase Program. On June 11, 2012, we announced that our Board had chosen not to spend additional capital underthe 2011 Stock Repurchase Program for the time being. In addition, our Board authorized us to repurchase shares of our outstanding common stock equal tothe amount of the proceeds and related tax benefits from the exercise of stock options, stock appreciation rights ("SARs") and other equity grants. Purchasesof shares of our common stock under this authorization may be made from time to time, either on the open market or through privately negotiatedtransactions and are financed by our existing cash, cash flow and other liquidity sources, as appropriate. The table below sets forth information regarding our repurchases of our common stock during the fourth quarter of 2014: ISSUER PURCHASES OF EQUITY SECURITIESPeriod Total Number ofShares Purchased(a) Average Price Paid PerShare (a) Total Number of SharesPurchased as Part ofPublicly AnnouncedPlans or Programs Approximate DollarValue of Shares that MayYet Be Purchased Underthe Plans or Programs (b) November 2, 2014 to November 29, 2014 174,187 $16.04 — $99,938,428 November 30, 2014 to January 3, 2015 1,579 19.82 — 99,938,428 January 4, 2015 to January 31, 2015 1,264 21.67 — 99,938,428 Total 177,030 $16.11 — (a) Although we did not repurchase any of our common stock during the fourth quarter of 2014 under the 2011 Stock Repurchase Program:•We repurchased 171,914 shares of common stock for approximately $2.7 million at a weighted average price of $15.99 associated with the proceeds and related taxbenefits from the exercise of stock options, SARs and other equity grants;•We reacquired 3,333 shares of common stock from certain employees to cover tax withholding obligations from exercises of SARs at a weighted average acquisitionprice of $20.49 per share; and•The trustee of the grantor trust established by us for the purpose of holding assets under our deferred compensation plan purchased an aggregate of 1,783 shares of ourcommon stock in the open market at a weighted average price of $19.51 in connection with the option to invest in our stock under the deferred compensation plan andreinvestment of dividends paid on our common stock held in trust in the deferred compensation plan.(b) Reflects the $200.0 million authorized under the 2011 Stock Purchase Program, less the $100.1 million repurchased using our existing cash, cash flow and other liquiditysources since March 2011.17Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsITEM 6. SELECTED FINANCIAL DATAThe following sets forth selected consolidated financial data for the periods indicated. Financial results for 2014, 2013, 2011, and 2010 are based ona 52-week period. Financial results for 2012 are based on a 53-week period. The selected consolidated financial data should be read in conjunction with ourConsolidated Financial Statements included herein. All amounts are stated in thousands, except for per share data, percentages and number of stores. Fiscal Year 2014 2013 2012 2011 2010Statement of operations data: Net sales$1,638,569 $1,609,481 $1,627,702 $1,511,220 $1,470,590Cost of sales and related buying, occupancy anddistribution expenses1,188,763 1,172,995 1,168,907 1,099,982 1,053,766Gross profit449,806 436,486 458,795 411,238 416,824 Selling, general and administrative expenses383,616 390,224 387,332 353,055 350,865Store opening costs2,488 2,902 2,163 5,305 3,192Interest expense, net3,002 2,744 3,011 3,821 3,875Income from continuing operations before income tax60,700 40,616 66,289 49,057 58,892 Income tax expense22,847 15,400 24,373 16,930 21,252Income from continuing operations37,853 25,216 41,916 32,127 37,640Loss from discontinued operations, net(7,003) (8,574) (3,737) (1,167) —Net income$30,850 $16,642 $38,179 $30,960 $37,640 Adjusted earnings (non-GAAP) (a)$37,853 $39,986 $46,296 $32,127 $37,640 Basic earnings per share data Continuing operations$1.18 $0.78 $1.32 $0.96 $1.00Discontinued operations$(0.22) $(0.27) $(0.12) $(0.04) $—Basic earnings per share (b)$0.96 $0.51 $1.20 $0.93 $1.00Basic weighted average common shares outstanding31,675 32,034 31,278 33,021 37,656 Diluted earnings per share data Continuing operations$1.18 $0.77 $1.31 $0.95 $0.99Discontinued operations$(0.22) $(0.26) $(0.12) $(0.03) $—Diluted earnings per share$0.96 $0.51 $1.19 $0.92 $0.99Adjusted diluted earnings per share (non-GAAP) (a)$1.18 $1.22 $1.44 $0.95 $0.99Diluted weighted average common shares outstanding31,763 32,311 31,600 33,278 38,010 Margin and other data: Gross profit margin27.5% 27.1 % 28.2% 27.2% 28.3%Selling, general and administrative expense rate23.4% 24.2 % 23.8% 23.4% 23.9%Capital expenditures$70,580 $61,263 $49,489 $45,731 $36,990Construction allowances from landlords5,538 4,162 4,193 4,499 5,476Stock repurchases4,599 33,748 387 110,919 31,976Cash dividends per share0.53 0.48 0.38 0.33 0.25 18Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStore data: Comparable sales growth (decline) (c)1.4% (1.5)% 5.7% 0.5% 0.2%Store openings (d)18 28 25 34 33Store closings (d)12 10 5 10 5Number of stores open at end of period (d)854 848 830 810 786Total selling area square footage at end of period (d)15,409 15,313 15,255 15,027 14,681 January 31, February 1, February 2, January 28, January 29, 2015 2014 2013 2012 2011Balance sheet data: Working capital$299,279 $293,995 $259,260 $213,700 $262,100Total assets824,677 810,837 794,871 735,339 796,084Debt obligations47,388 63,225 12,329 49,503 38,492Stockholders' equity475,930 454,444 464,870 412,706 489,509(a) See Non-GAAP Financial Measures following below for additional information and reconciliation to the most directly comparable U.S. GAAP financial measure.(b) Earnings per share may not foot due to rounding.(c) We follow the retail reporting calendar, which included an extra week of sales in the fourth quarter of 2012. However, many retailers report comparable sales on a shiftedcalendar, which excludes the first week of 2012 rather than the fifty-third week. On this shifted basis, comparable sales decreased 1.1% for 2013.(d) Excludes Steele's stores that are now reflected in discontinued operations.19Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNon-GAAP Financial MeasuresThe following supplemental information presents the results of operations for 2014, 2013 and 2012 on a basis in conformity with accountingprinciples generally accepted in the United States of America ("GAAP") and on a non-GAAP basis to show earnings with and without charges associated withthe South Hill Consolidation (see Note 16) and our former Chief Executive Officer's resignation. We believe this supplemental financial informationenhances an investor's understanding of our financial performance as it excludes those items which impact comparability of operating trends. The non-GAAPfinancial information should not be considered in isolation or viewed as a substitute for net income, cash flow from operations, diluted earnings per commonshare or other measures of performance as defined by GAAP. Moreover, the inclusion of non-GAAP financial information as used herein is not necessarilycomparable to other similarly titled measures of other companies due to the potential inconsistencies in the method of presentation and items considered. Thefollowing tables set forth the supplemental financial information and the reconciliation of GAAP disclosures to non-GAAP financial measures (in thousands,except diluted earnings per share): Fiscal Year 2014 2013 2012Net income (GAAP)$30,850 $16,642 $38,179Loss from discontinued operations, net of tax benefit of $4,228, $5,237and $2,172, respectively(7,003) (8,574) (3,737)Income from continuing operations37,853 25,216 41,916South Hill Consolidation related charges, net of tax of $9,019 and$1,330, respectively— 14,770 2,288Former Chief Executive Officer resignation related charges, net of tax of$1,216— — 2,092Adjusted earnings (non-GAAP)(a)$37,853 $39,986 $46,296 Diluted earnings per share (GAAP)$0.96 $0.51 $1.19Loss from discontinued operations(0.22) (0.26) (0.12)Income from continuing operations1.18 0.77 1.31South Hill Consolidation related charges— 0.45 0.07Former Chief Executive Officer resignation related charges— — 0.07Adjusted diluted earnings per share (non-GAAP) (a) (b)$1.18 $1.22 $1.44 (a) 2014 amounts are not adjusted. (b) Earnings per share may not foot due to rounding. 20Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe results of operations for 2014 and 2013 are based on 52-week periods and for 2012 is based on a 53-week period.Our BusinessWe are a retailer operating specialty department stores primarily in small and mid-sized towns and communities. We provide customers a welcomingand comfortable shopping experience in our stores and direct-to-consumer business. Our merchandise assortment is a well-edited selection of moderatelypriced brand name and private label apparel, accessories, cosmetics, footwear and home goods. As of January 31, 2015, we operated 854 specialty departmentstores located in 40 states under the BEALLS, GOODY'S, PALAIS ROYAL, PEEBLES and STAGE nameplates and a direct-to-consumer business.On March 7, 2014, we divested Steele's, an off-price concept that we launched in November 2011, in order to focus solely on our core specialtydepartment store business. Accordingly, the results of operations of Steele's and loss on the sale are reflected in discontinued operations for all periodspresented. Our results of operations for all periods presented within Management's Discussion and Analysis reflect continuing operations. For additionalinformation regarding discontinued operations, see Note 15 to the consolidated financial statements.Results of OperationsOur strategy for 2014 was to build on our prior year achievements and to pursue meaningful sales and earnings growth. Reflecting the successfulimplementation of our business strategy, we achieved the following results in 2014 (comparisons are to 2013):Financial Highlights•Net sales increased $29.1 million, or 1.8%.•Comparable sales increased 1.4%.•Direct-to-consumer sales, included in comparable sales, increased 25.7%.•Gross profit increased $13.3 million, or 3.1%.•Income from continuing operations improved $12.6 million, or 50.1%.•We grew the penetration rate of our private label credit card to 40%.•In August 2014, we increased our quarterly dividend rate by 12.0% to $0.14 per common share•We paid cash dividends of $17.0 million ($0.53 per share).•On October 6, 2014, we entered into a $350.0 million senior secured revolving credit facility that replaced our previous facility and increased ourborrowing capacity by $100.0 million.Strategic Highlights•To enhance our focus on our core specialty department store business, we completed the sale of off-price concept Steele’s in the first quarter of 2014.•We expanded direct-to-consumer assortments and broadened our centralized fulfillment.•We grew our cosmetics business with the installation of new Estee Lauder counters in 75 stores and new Clinique counters in 76 stores.•We refined our assortments with updated styles, new brands, additional categories within existing brands and the expansion of existing brands toadditional stores.•We implemented store-level mark down optimization and continued to make progress on size pack optimization.•We re-launched our home category with a focus on offering a highly curated selection of kitchen, textile and gift assortments.•We continued to install new fixtures in our stores to improve product presentation and the shopping experience. New fixtures are now inapproximately 20% of our stores.•We opened 18 new stores.21Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents2015 Strategy and OutlookOur strategy in 2015 will be focused on driving sales productivity and expanding our direct-to-consumer business. We plan to refine ourassortments, in-store experience and marketing communications. We believe we can grow our revenue and earnings by executing on the following strategies:Drive Sales Productivity. We intend to drive sales productivity in existing stores and our direct-to-consumer business by featuring quality, trend-right merchandise at a compelling value and refining our experience in the store environment, our direct-to-consumer business and our marketing touchpoints. We intend to lead with trend-right and style driven assortments and friendly service to foster a fun, comfortable shopping experience that translates tohigher units sold and higher average unit retails.Expand the Penetration and Presence of our Direct-to-Consumer Business. We expect to improve our brand experience with a growing direct-to-consumer business. Our direct-to-consumer business reinforces and builds further brand awareness and grew by 25.7% in 2014, representing 2.3% of our totalsales. We have expanded assortments, implemented functionality enhancements and broadened centralized fulfillment, and we plan to continue makingsignificant investments in our direct-to-consumer business that will further enhance our customers’ shopping experience from an assortment, technology andfulfillment perspective.In 2015, we plan to slow our new store growth as we embark on a multi-year initiative to increase investments in our direct-to-consumer business andexisting stores. We anticipate opening 2 new stores in 2015. We continually review the profitability of each store and look to close a store if the expectedstore performance does not meet our financial hurdle rates. We expect to close 10-20 stores, where lease terms permit, in 2015.The financial information, discussion and analysis that follow should be read in conjunction with our Consolidated Financial Statements andaccompanying footnotes included in this Form 10-K.2014 Compared to 2013 Fiscal Year Ended January 31, 2015 February 1, 2014 Change Amount % to Sales(a) Amount % to Sales(a) Amount %Net sales$1,638,569 100.0 % $1,609,481 100.0 % $29,088 1.8 %Cost of sales and related buying,occupancy and distributionexpenses1,188,763 72.5 % 1,172,995 72.9 % 15,768 1.3 %Gross profit449,806 27.5 % 436,486 27.1 % 13,320 3.1 %Selling, general and administrativeexpenses383,616 23.4 % 390,224 24.2 % (6,608) (1.7)%Store opening costs2,488 0.2 % 2,902 0.2 % (414) (14.3)%Interest expense3,002 0.2 % 2,744 0.2 % 258 9.4 %Income before income tax60,700 3.7 % 40,616 2.5 % 20,084 49.4 %Income tax expense22,847 1.4 % 15,400 1.0 % 7,447 48.4 %Income from continuing operations37,853 2.3 % 25,216 1.6 % 12,637 50.1 %Loss from discontinued operations,net of tax benefit of $4,228 and$5,237(7,003) (0.4)% (8,574) (0.5)% 1,571 (18.3)%Net income$30,850 1.9 % $16,642 1.0 % $14,208 85.4 % (a) Percentages may not foot due to rounding. 22Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNet SalesSales for 2014 increased 1.8% to $1,638.6 million from $1,609.5 million for 2013. Comparable sales, which are sales in stores that are open for atleast 14 full months prior to the reporting period, including direct-to-consumer sales, increased by 1.4% in 2014 as compared to a 1.5% decrease in 2013.Excluding direct-to-consumer sales, comparable sales increased 0.9% in 2014, as compared to a 2.0% decrease in 2013. The 1.4% increase in comparablesales was driven primarily by a 4.9% gain in average unit retail, which was partially offset by a decline in units per transaction and in the number oftransactions. The higher average selling price was achieved through effectively managing inventory levels, resulting in an improved balance between regularpriced and clearance goods. Comparable sales increase (decrease) by quarter is presented below: Fiscal Year 2014 20131st Quarter(0.2)% 0.7 %2nd Quarter(4.2) 1.73rd Quarter2.3 (4.6)4th Quarter6.4 (3.4)Total Year1.4 %(1.5)% On a merchandise category basis, cosmetics, footwear, children's and home and gifts achieved positive comparable sales. Cosmetics had thestrongest comparable sales increase, driven by the installation of Estee Lauder and Clinique counters in 75 and 76 stores, respectively, during 2014. We alsocontinued to focus on sales growth through the introduction of new product offerings and the expansion of existing sought-after brand names. On a market population basis, utilizing a ten-mile radius from each store, small market stores (populations less than 50,000), mid-sized market stores(populations of 50,000 to 150,000) and higher-density market stores (populations greater than 150,000) had comparable sales increases in 2014 of 0.9%,0.1% and 1.0%, respectively.Cost of SalesThe following is a summary of the changes in the components of cost of sales between 2014 and 2013, expressed as a percent of sales: Increase (Decrease) in theComponents ofCost of SalesMerchandise cost of sales rate(0.6)%Buying, occupancy and distribution expenses rate0.2Cost of sales rate(0.4)%Gross ProfitGross profit in 2014 was $449.8 million, an increase of 3.1% from $436.5 million in 2013. Gross profit, as a percent of sales, increased to 27.5% in2014 from 27.1% in 2013. The 0.4% increase in the gross profit rate reflects a 0.6% decrease in the merchandise cost of sales rate and a 0.2% increase in thebuying, occupancy and distribution expenses rate. Merchandise cost of sales for 2013 includes approximately $12.5 million, or approximately 0.8% of sales,related to the South Hill Consolidation due to inventory liquidation costs associated with discontinued vendors and merchandise and advertising allowancesdeferred in inventory. The increase in buying, occupancy and distribution expenses rate is a result of higher store occupancy costs in 2014 compared to 2013.23Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSelling, General and Administrative ExpensesSelling, general and administrative ("SG&A") expenses in 2014 decreased $6.6 million to $383.6 million from $390.2 million in 2013. As a percentof sales, SG&A expenses decreased to 23.4% in 2014 from 24.2% in 2013. The decrease in SG&A expenses reflects charges of approximately $11.3 millionincurred in 2013 related to the South Hill Consolidation. In addition, the decrease in 2014 also reflects increased credit income from our private label creditcard program. These reductions were partially offset by higher incentive compensation expense in 2014.Store Opening Costs Store opening costs in 2014 were $2.5 million, which included costs related to opening 18 new stores and relocating 7 stores. In 2013, we incurred$2.9 million, which included costs related to opening 28 new stores and relocating 3 stores. Store opening costs are expensed as incurred and include costs ofstores opening in future quarters.Interest ExpenseInterest expense was $3.0 million in 2014 and $2.7 million in 2013. Interest expense is primarily comprised of interest on borrowings under theRevolving Credit Facility, related letters of credit and commitment fees, amortization of debt issuance costs and interest on finance lease obligations. Theincrease in interest expense is primarily due to increased borrowings on the Revolving Credit Facility.Income TaxesOur effective tax rate in 2014 was 37.6%, resulting in tax expense of $22.8 million. This compares to income tax expense of $15.4 million in 2013 atan effective rate of 37.9%.2013 Compared to 2012 Fiscal Year Ended February 1, 2014 February 2, 2013 Change Amount % to Sales(a) Amount % to Sales(a) Amount % Net sales$1,609,481 100.0 % $1,627,702 100.0 % $(18,221) (1.1)%Cost of sales and related buying,occupancy and distribution expenses1,172,995 72.9 % 1,168,907 71.8 % 4,088 0.3 %Gross profit436,486 27.1 % 458,795 28.2 % (22,309) (4.9)%Selling, general and administrativeexpenses390,224 24.2 % 387,332 23.8 % 2,892 0.7 %Store opening costs2,902 0.2 % 2,163 0.1 % 739 34.2 %Interest expense2,744 0.2 % 3,011 0.2 % (267) (8.9)%Income before income tax40,616 2.5 % 66,289 4.1 % (25,673) (38.7)%Income tax expense15,400 1.0 % 24,373 1.5 % (8,973) (36.8)%Income from continuing operations25,216 1.6 % 41,916 2.6 % (16,700) (39.8)%Loss from discontinued operations,net of tax benefit of $5,237 and$2,172(8,574) (0.5)% (3,737) (0.2)% (4,837) 129.4 %Net income$16,642 1.0 % $38,179 2.3 % $(21,537) (56.4)% (a) Percentages may not foot due to rounding. 24Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNet SalesSales for 2013 decreased 1.1% to $1,609.5 million from $1,627.7 million for 2012. Periods of unseasonable and severe weather, an intensepromotional environment and weakness in the overall apparel market negatively impacted sales in 2013 compared to 2012. Comparable sales decreased by1.5% in 2013. The 1.5% decrease in comparable sales for 2013 reflects a combination of a 1.3% increase in the number of transactions, a decrease of 3.3% inaverage unit retail and an increase of 0.3% in units per transaction. This compares to a 5.7% increase in comparable sales in 2012. Excluding direct-to-consumer sales, comparable sales decreased 2.0% in 2013 as compared to a 5.2% increase in 2012. Many retailers report comparable sales on a shiftedcalendar, which excludes the first week of 2012 rather than the fifty-third week. On this shifted basis, comparable sales for 2013 decreased 1.1%.Comparable sales increase (decrease) by quarter is presented below: Fiscal Year 2013 20121st Quarter0.7 % 2.5%2nd Quarter1.7 5.43rd Quarter(4.6) 8.14th Quarter(3.4) 6.6Total Year(1.5)% 5.7% On a merchandise category basis, cosmetics, footwear, home and gifts, men's and children's all outperformed our comparable sales average.Cosmetics had the strongest comparable sales increases driven by the installation of Estee Lauder counters in 35 stores and Clinique counters in 37 storesduring 2013. Footwear was driven by sales of key brands such as Sperry, Nike, and Skechers. Home and gifts benefited from new product launches such asKeurig and Cuisinart.On a market population basis, utilizing a ten-mile radius from each store, the larger market stores outperformed the smaller markets. Our higher-density markets (populations greater than 150,000) had a comparable sales increase of 0.5%, while the mid-sized (populations of 50,000 to 150,000) andsmaller market stores (populations less than 50,000) experienced a comparable sales decrease of 0.9% and 2.7%, respectively.Cost of SalesThe following is a summary of the changes in the components of cost of sales between 2013 and 2012, expressed as a percent of sales: Increase in theComponents ofCost of SalesMerchandise cost of sales rate0.9%Buying, occupancy and distribution expenses rate0.2Cost of sales rate1.1%Gross ProfitGross profit in 2013 was $436.5 million, a decrease of 4.9% from $458.8 million in 2012. Gross profit as a percent of sales decreased to 27.1% in2013 from 28.2% in 2012. The 1.1% decline in the gross profit rate reflects a 0.9% increase in the merchandise cost of sales rate and a 0.2% increase in thebuying, occupancy and distribution expenses rate. Merchandise cost of sales for 2013 includes approximately $12.5 million, or approximately 0.8% of sales,related to the South Hill Consolidation due to inventory liquidation costs associated with discontinued vendors and merchandise and advertising allowancesdeferred in inventory. The increase in buying, occupancy and distribution expenses rate is a result of higher store occupancy costs and deleveraging fromlower sales in 2013 compared to 2012.25Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSelling, General and Administrative ExpensesSG&A expenses in 2013 increased $2.9 million to $390.2 million from $387.3 million in 2012. As a percent of sales, SG&A expenses increased to24.2% in 2013 from 23.8% in 2012. The increase in SG&A expenses reflects charges of approximately $11.3 million incurred in 2013 related to the SouthHill Consolidation, while 2012 included $3.3 million of charges associated with the resignation of our former Chief Executive Officer and $1.1 millionassociated with the South Hill Consolidation. In addition, the increase in 2013 also reflects incremental costs to operate 18 net additional stores and highermedical insurance costs resulting from several large claims as compared to 2012. These higher costs were partially offset by higher credit income associatedwith our private label credit card portfolio and lower incentive compensation costs.Store Opening Costs Store opening costs in 2013 were $2.9 million, which included costs related to opening 28 new stores and relocating 3 stores. In 2012, we incurred$2.2 million, which included costs related to opening 25 new stores and relocating 6 stores. Store opening costs are expensed as incurred and include costs ofstores opening in future quarters.Interest ExpenseInterest expense was $2.7 million in 2013 and $3.0 million in 2012. Interest expense is primarily comprised of interest on borrowings under theRevolving Credit Facility, related letters of credit and commitment fees, amortization of debt issuance costs, interest on finance lease obligations andequipment financing notes. The decrease in interest expense is primarily due to the reduced amount of long-term debt obligations, as we paid off ourequipment financing notes in the second quarter of 2012, which is offset by increased borrowings on the Revolving Credit Facility.Income TaxesOur effective tax rate in 2013 was 37.9%, resulting in tax expense of $15.4 million. This compares to income tax expense of $24.4 million in 2012 atan effective rate of 36.8%. The 2013 rate increased due to the recording of a $0.5 million reserve related to an uncertain tax position.Seasonality and InflationHistorically, our business is seasonal and sales are traditionally lower during the first three quarters of the fiscal year (February through October) andhigher during the last quarter of the fiscal year (November through January). The fourth quarter usually accounts for approximately 30% of our annual sales,with each of the other quarters accounting for approximately 22% to 24%. Working capital requirements fluctuate during the year and generally reach theirhighest levels during the third and fourth quarters. We do not believe that inflation has had a material effect on our results of operations. However, there canbe no assurance that our business will not be affected by inflation in the future.26Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe following table shows quarterly information (unaudited) (in thousands, except per share amounts): Fiscal Year 2014 Q1 Q2 Q3 Q4Net sales$372,040$377,446 $364,197$524,886Gross profit77,941 112,340 88,166171,359 Income (loss) from continuing operations$(12,046) $11,192 $(5,107) $43,814Loss from discontinued operations(6,748) — (161) (94)Net income (loss)$(18,794) $11,192 $(5,268)$43,720 Basic earnings (loss) per share data: Continuing operations$(0.38) $0.35 $(0.16) $1.37Discontinued operations(0.22) — (0.01) —Basic earnings (loss) per common share(0.60) 0.35 (0.17)1.37 Diluted earnings (loss) per share data: Continuing operations$(0.38) $0.35 $(0.16) $1.36Discontinued operations(0.22) — (0.01) —Diluted earnings (loss) per common share(0.60) 0.35 (0.17)1.36 Basic weighted average shares31,492 31,757 31,79431,657Diluted weighted average shares31,492 31,825 31,79431,740 Fiscal Year 2013 Q1 Q2 Q3 Q4Net sales$372,103 $389,991 $354,850 $492,537Gross profit89,629 115,575 83,290 147,992 Income (loss) from continuing operations$(6,188) $10,832 $(9,573) $30,145Loss from discontinued operations(668) (1,225) (1,398) (5,283)Net income (loss)$(6,856) $9,607 $(10,971) $24,862Adjusted earnings (loss) (non-GAAP) (a)$(126) $14,936 $(7,021) $32,197 Basic earnings (loss) per share data: Continuing operations$(0.19) $0.33 $(0.30) $0.95Discontinued operations(0.02) (0.04) (0.04) (0.17)Basic earnings (loss) per common share(0.21) 0.29 (0.34) 0.79 Diluted earnings (loss) per share data: Continuing operations$(0.19) $0.32 $(0.30) $0.95Discontinued operations(0.02) (0.03) (0.04) (0.17)Diluted earnings (loss) per common share(0.21) 0.29 (0.34) 0.78Adjusted diluted earnings (loss) per common share (a)— 0.45 (0.22) 1.01 Basic weighted average shares32,306 32,762 31,854 31,215Diluted weighted average shares32,306 33,073 31,854 31,438(a) See Item 6, Selected Financial Data, for discussion of this non-GAAP financial measure and reconciliation to the most directly comparable U.S. GAAP financial measure.27Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsLiquidity and Capital ResourcesOur liquidity is currently provided by (i) existing cash balances, (ii) operating cash flows, (iii) normal trade credit terms from our vendors and theirfactors and (iv) our Revolving Credit Facility. Our primary cash requirements are for seasonal and new store inventory purchases, as well as capitalinvestments in our stores, direct-to-consumer business and information technology and the payment of our quarterly cash dividends.While there can be no assurances, we believe that our sources of liquidity will be sufficient to cover working capital needs, planned capitalexpenditures and debt service requirements for the remainder of 2015 and the foreseeable future. Key components of our cash flow are summarized below (in thousands): Fiscal Year 2014 2013 2012Net cash provided by (used in): Operating activities$102,214 $46,527 $75,981Investing activities(67,634) (61,236) (49,439)Financing activities(32,177) 11,534 (27,226) Operating ActivitiesDuring 2014, we generated $102.2 million in cash from operating activities. Net income, adjusted for non-cash expenses, provided cash ofapproximately $106.9 million. Changes in operating assets and liabilities used net cash of approximately $10.2 million, which included a $7.0 millionincrease in merchandise inventories, an increase in other assets of $1.7 million and a decrease in accounts payable and other liabilities of $1.5 million.Additionally, cash flows from operating activities included construction allowances from landlords of $5.5 million, which funded a portion of the capitalexpenditures related to store leasehold improvements in new and relocated stores.During 2013, we generated $46.5 million in cash from operating activities. Net income, adjusted for non-cash expenses, provided cash ofapproximately $95.9 million. Changes in operating assets and liabilities used net cash of approximately $53.5 million, which included a $20.5 millionincrease in merchandise inventories, an increase in other assets of $6.4 million and a decrease in accounts payable and other liabilities of $26.7 million. Additionally, cash flows from operating activities included construction allowances from landlords of $4.2 million, which funded a portion of the capitalexpenditures related to store leasehold improvements in new and relocated stores.During 2012, we generated $76.0 million in cash from operating activities. Net income, adjusted for non-cash expenses, provided cash ofapproximately $106.3 million. Changes in operating assets and liabilities used net cash of approximately $34.5 million, which included a $66.0 millionincrease in merchandise inventories primarily to support the higher number of stores open and strategic investments in 2012 to support various salesinitiatives and an increase in other assets of $4.8 million partially offset by an increase in accounts payable and other liabilities of $36.2 million.Additionally, cash flows from operating activities also included construction allowances from landlords amounting to $4.2 million, which funded a portionof the capital expenditures related to store leasehold improvements in new and relocated stores.Investing ActivitiesCapital expenditures for 2014 were $70.6 million compared to $61.3 million in 2013 and $49.5 million in 2012. Capital expenditures during 2014reflect increased investments in our current stores through cosmetic counter installations and store expansions, partially offset by a decrease in store openingscompared to 2013 and 2012. We opened 18 new stores and relocated 7 stores in 2014. In 2013, we opened 29 new stores (including one Steele's store) andrelocated 3 stores. In 2012, we opened 56 new stores (including 31 Steele's stores) and relocated 6 stores. We received construction allowances fromlandlords of $5.5 million in 2014 to fund a portion of the capital expenditures related to store leasehold improvements in new and relocated stores, while$4.2 million and $4.2 million were received from landlords in 2013 and 2012, respectively. These funds have been recorded as deferred rent credits in thebalance sheet and are amortized as an offset to rent expense over the lease term commencing with the date the allowances were contractually earned.We estimate that capital expenditures in 2015, net of construction allowances to be received from landlords, will be approximately $75 million. Theexpenditures are principally for store remodels, expansions, and relocations, new cosmetic counters, investments in technology including our direct-to-consumer business and the opening of new stores.28Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsFinancing ActivitiesOn October 6, 2014, we entered into a Second Amended and Restated Credit Agreement for a $350.0 million senior secured revolving credit facility("Revolving Credit Facility"). The Revolving Credit Facility replaces our former $250.0 million senior secured revolving credit facility, which was set tomature on June 30, 2016. The Revolving Credit Facility (i) increases availability to $300.0 million, with a seasonal increase to $350.0 million, (ii) includes a$50.0 million letter of credit subfacility, (iii) provides better pricing terms, and (iv) extends the maturity date to October 6, 2019.We use the Revolving Credit Facility to provide financing for working capital and general corporate purposes, as well as to finance capitalexpenditures and to support our letter of credit requirements. Borrowings are limited to the availability under a borrowing base that is determined principallyon eligible inventory as defined by the Revolving Credit Facility agreement. Inventory, cash and cash equivalents are pledged as collateral. The dailyinterest rates are determined by a prime rate or LIBOR, plus an applicable margin, as set forth in the Revolving Credit Facility agreement. During 2014, theweighted average interest rate on outstanding borrowings and the average daily borrowings under the Revolving Credit Facility were 1.71% and $81.4million, respectively, as compared to 1.82% and $57.6 million in 2013.Letters of credit issued under the Revolving Credit Facility support certain merchandise purchases and collateralize retained risks and deductiblesunder various insurance programs. At January 31, 2015, we had outstanding letters of credit totaling approximately $6.7 million. These letters of creditexpire within twelve months of issuance. Excess borrowing availability under the Revolving Credit Facility at January 31, 2015 was $251.4 million.The Revolving Credit Facility agreement contains covenants which, among other things, restrict, based on required levels of excess availability, (i)the amount of additional debt or capital lease obligations, (ii) the payment of dividends and repurchase of common stock under certain circumstances and(iii) related party transactions. The agreement also contains a fixed charge coverage ratio covenant in the event excess availability is below a definedthreshold or an event of default has occurred. At January 31, 2015, we were in compliance with all of the financial covenants of the Revolving Credit Facilityagreement and expect to remain in compliance in 2015.On June 11, 2014, we announced that our Board approved a 12% increase in our quarterly cash dividend rate to $0.14 per share from the previousquarterly rate of $0.125 per share. The new quarterly rate of $0.14 per share is applicable to dividends declared by our Board beginning August 21, 2014. OnFebruary 20, 2015, our Board declared a quarterly cash dividend of $0.14 per share on our common stock, payable on March 18, 2015, to shareholders ofrecord at the close of business on March 3, 2015.Contractual ObligationsWe have contractual commitments for purchases of merchandise inventories, services arising in the ordinary course of business, letters of credit,Revolving Credit Facility and other debt service and leases. The following table summarizes payments due under our contractual obligations at January 31,2015 (in thousands). These items are discussed in further detail in Note 6 and Note 11 to the consolidated financial statements. Payment Due by PeriodContractual Obligations(a) Total Less ThanOne Year 1-3Years 4-5Years More than 5YearsRevolving Credit Facility $41,910 $— $— $41,910 $—Documentary letters of credit (b) 1,439 1,439 — — —Capital (finance) lease obligations Finance lease obligations 4,725 962 2,214 1,549 —Interest payments on finance lease obligations 1,049 404 518 127 —Other long-term debt obligations 753 753 — — —Operating lease obligations (c) 454,079 89,763 152,368 99,925 112,023Purchase obligations (d) 196,399 184,911 11,396 92 —Other long-term liabilities (e) 3,000 1,000 2,000 — —Total contractual obligations $703,354 $279,232 $168,496 $143,603 $112,023 29Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents(a) The disclosure of contractual obligations in this table is based on assumptions and estimates that we believe to be reasonable as of the date of this report. Those assumptions andestimates may prove to be inaccurate; consequently, the amounts provided in the table may differ materially from those amounts that we ultimately incur. Variables that may causethe stated amounts to vary from the amounts actually incurred include, but are not limited to: the timing of termination of a contractual obligation; the acquisition of more or lessservices or goods under a contractual obligation than are anticipated by us as of the date of this report; fluctuations in third party fees, governmental charges, or market rates that weare obligated to pay under contracts we have with certain vendors; and the exercise of renewal options under, or the automatic renewal of, contracts that provide for the same.(b) These documentary letters of credit support the importing of private label merchandise. We also had outstanding stand-by letters of credit that totaled approximately $5.3 millionat January 31, 2015 required to collateralize retained risks and deductibles under various insurance programs. The estimated liability that will be paid in cash related to stand-byletters of credit supporting insurance programs is reflected in accrued expenses. If we fail to make payments when due, the beneficiaries of letters of credit could make demand forpayment under the letters of credit.(c) We have operating leases related to office, property and equipment. Certain operating leases have provisions for step rent or escalation payments. We record rent expense on astraight-line basis, evenly dividing rent expense over the lease term, including the build-out period, if any, and where appropriate, applicable available lease renewal optionperiods. However, this accounting treatment does not affect the future annual operating lease cash obligations as shown herein. We record construction allowances from landlordsas a deferred rent credit when earned. Such deferred rent credit is amortized over the related term of the lease, commencing with the date we contractually earned the constructionallowance, as a reduction of rent expense.Certain leases provide for contingent rents that are not measurable at inception. These contingent rents are primarily based on a percentage of sales that are in excess of apredetermined level. These amounts are excluded from minimum rent and are included in the determination of total rent expense when it is probable that the expense has beenincurred and the amount is reasonably estimable.(d) Purchase obligations include legally binding contracts for merchandise, utility purchases, capital expenditures, software acquisition/license commitments and legally bindingservice contracts. For the purposes of this table, contractual obligations for purchases of goods or services are defined as agreements that are enforceable and legally binding andthat specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of thetransaction. Included in purchase obligations are outstanding purchase orders in the ordinary course of business for merchandise of $165.9 million that are typically made up to sixmonths in advance of expected delivery. For non-merchandise purchase obligations, if the obligation to purchase goods or services is non-cancelable, the entire value of thecontract is also included in the above table. If the obligation is cancelable, but we would incur liquidated damages if canceled, the dollar amount of the liquidated damages isincluded as a "purchase obligation." We fully expect to receive the benefits of the goods or services in connection with fulfilling our obligation under these agreements. Theexpected timing for payment of the obligations discussed above is estimated based on current information. Timing of payments and actual amounts paid may be different dependingon the timing of receipt of goods or services or changes to agreed-upon amounts for some obligations.(e) Other long-term liabilities consist of deferred rent, deferred compensation, pension liability, deferred revenue and other (see Note 7 to the consolidated financialstatements). Deferred rent of $45.1 million is included as a component of "operating lease obligations" in the contractual obligations table. Deferred compensation and pensionliability are not included in the contractual obligations table as the timing of future payments is indeterminable.Our funding policy is to make contributions to maintain the minimum funding requirements for our pension obligations in accordance with theEmployee Retirement Income Security Act of 1974, as amended ("ERISA"). We may elect to contribute additional amounts to maintain a level of funding tominimize the Pension Benefit Guaranty Corporation premium costs or to cover short-term liquidity needs of our defined benefit plan in order to maintaincurrent invested positions. We had no minimum contribution requirements for 2013 and 2014 and we do not expect a minimum contribution requirement in2015.We have not included $0.6 million of current liabilities for unrecognized tax benefits and the related interest and penalties in the contractualobligations table because the timing of cash settlements is not reasonably estimable. It is reasonably possible that such tax positions may change within thenext 12 months, primarily as a result of ongoing audits.30Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCritical Accounting Policies and EstimatesThe preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect theamounts reported in the financial statements and accompanying notes. The primary estimates underlying our consolidated financial statements include thevaluation of inventory, the estimated useful life of property, equipment and leasehold improvements, the impairment analysis on long-lived assets, thevaluation of the intangible asset, the reserve for sales returns, breakage income on gift cards and merchandise credits, self-insurance reserves and theestimated liability for pension obligations. We caution that future events rarely develop exactly as forecast, and the best estimates routinely requireadjustment. Therefore, actual results may differ materially from these estimates. We base our estimates on historical experience and on various assumptionswhich are believed to be reasonable under the circumstances. The following critical accounting policies affect our more significant judgments and estimatesused in the preparation of our consolidated financial statements.Inventory Valuation. We value merchandise inventories using the lower of cost or market with cost determined using the weighted average costmethod. We capitalize distribution center costs associated with preparing inventory for sale, such as distribution payroll, benefits, occupancy, depreciationand other direct operating expenses as part of merchandise inventories. We also include in inventory the cost of freight to our distribution centers and tostores as well as duties and fees related to import purchases.Vendor Allowances. We receive consideration from our merchandise vendors in the form of allowances and reimbursements. Given the promotionalnature of our business, the allowances are generally intended to offset our costs of handling, promoting, advertising and selling the vendors' products in ourstores. Vendor allowances related to the purchase of inventory are recorded as a reduction to the cost of inventory until sold. Vendor allowances arerecognized as a reduction of cost of goods sold or the related selling expense when the purpose for which the vendor funds were intended to be used has beenfulfilled and amounts have been authorized by vendors. Property, Equipment and Leasehold Improvements. Additions to property, equipment and leasehold improvements are recorded at cost anddepreciated over their estimated useful lives using the straight-line method. The estimated useful lives of leasehold improvements do not exceed the term ofthe related lease, including applicable available renewal options where appropriate. The estimated useful lives in years are generally as follows:Buildings & improvements20Store and office fixtures and equipment5-10Warehouse equipment5-15Leasehold improvements - stores5-15Leasehold improvements - corporate office10-20Impairment of Long-Lived Assets. Property, plant and equipment and other long-lived assets are reviewed to determine whether any events orchanges in circumstances indicate that the carrying amount of the asset may not be recoverable. For long-lived assets to be held and used, we base ourevaluation on impairment indicators such as the nature of the asset's physical condition, the future economic benefit of the asset, any historical or futureprofitability measurements and other external market conditions or factors that may be present. If such impairment indicators are present or other factors existthat indicate the carrying amount of the asset may not be recoverable, we determine whether impairment has occurred through the use of an undiscountedcash flow analysis of the asset at the lowest level for which identifiable cash flows exist. If impairment has occurred, we recognize a loss for the differencebetween the carrying amount and the estimated fair value of the asset. Management's judgment is necessary to estimate fair value. Intangible Asset and Impairment of Intangible Assets. As a part of the acquisition of Peebles in 2003, we acquired the rights to the PEEBLES tradename and trademark (collectively, the "Trademark"), which was identified as an indefinite life intangible. The value of the Trademark was determined to be$14.9 million at the time of the Peebles acquisition. Indefinite life intangible assets are not amortized but are tested for impairment annually or morefrequently when indicators of impairment exist. We completed our annual impairment test during the fourth quarter of 2014 and determined there was noimpairment.31Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRevenue Recognition. Our retail stores record revenue at the point of sale. Sales from our e-commerce website are recorded at the time of shipment.Shipping and handling fees charged to customers are included in net sales with the corresponding costs recorded as costs of goods sold. Total revenues donot include sales tax because we are a pass-through conduit for collecting and remitting sales taxes. Revenues are recognized net of expected returns, whichwe estimate using historical return patterns as a percentage of sales. We record deferred revenue on our balance sheet for the sale of gift cards and recognize this revenue upon the redemption of gift cards in net sales. We similarly record deferred revenue on our balance sheet for merchandise credits issued related to customer returns and recognize this revenue upon theredemption of the merchandise credits.Gift Card and Merchandise Credits Liability. Unredeemed gift cards and merchandise credits are recorded as a liability. Our gift cards andmerchandise credits do not expire. Based on historical redemption rates, a small and relatively stable percentage of gift cards and merchandise credits willnever be redeemed, which is referred to as "breakage." Estimated breakage income is recognized over time in proportion to actual gift card and merchandisecredit redemptions. We recognized approximately $1.1 million, $1.0 million and $1.0 million of breakage income in 2014, 2013 and 2012, respectively,which is recorded as an offset to SG&A expenses.Customer Loyalty Program. Customers who spend a required amount within a specified time frame using our private label credit card receive rewardcertificates which can be redeemed for merchandise. We estimate the net cost of the rewards and record a liability associated with unredeemed certificatesand customer spend toward unissued certificates. The cost of the loyalty rewards program benefit is recorded in cost of sales.Self-Insurance Reserves. We maintain self-insurance retentions with respect to general liability, workers compensation and health benefits for ouremployees. We estimate the accruals for the liabilities based on industry development factors and historical claim trend experience. Although managementbelieves adequate reserves have been provided for expected liabilities arising from our self-insured obligations, projections of future losses are inherentlyuncertain, and it is reasonably possible that estimates of these liabilities will change over the near term as circumstances develop.Frozen Defined Benefit Plan. We maintain a frozen defined benefit plan. The plan's obligations and related assets are presented in Note 13 to theconsolidated financial statements. The plan's assets are invested in actively managed and indexed mutual funds of domestic and international equities andinvestment-grade corporate bonds and U.S. government securities. The plan's obligations and the annual pension expense are determined by independentactuaries using a number of assumptions. Key assumptions in measuring the plan's obligations include the discount rate applied to future benefit obligationsand the estimated future return on plan assets. At January 31, 2015, assumptions used were a weighted average discount rate of 3.9% and a weighted averagelong-term rate of return on the plan assets of 7.0%.Recent Accounting Standards and DisclosuresIn April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, Presentation ofFinancial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals ofComponents of an Entity, which changes the criteria for reporting discontinued operations and also requires additional disclosures about discontinuedoperations. For public companies, the standard is effective prospectively for disposals that occur beginning on or after December 15, 2014, and interimperiods within those years, with early adoption permitted. We did not early adopt this ASU.In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which provides a five-step analysis oftransactions to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue when ittransfers promised goods or services to customers in an amount that reflects what a company expects to be entitled to in exchange for those goods or services.This update will be effective for us retrospectively in the first quarter of 2017 with early adoption not permitted. We are currently assessing the impact thisASU will have on our financial statements.32Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKBorrowings under our Revolving Credit Facility bear a floating rate of interest. As of January 31, 2015, the outstanding borrowings under ourRevolving Credit Facility were $41.9 million. On future borrowings, an increase in interest rates may have a negative impact on our results of operations andcash flows. During 2014, we had average daily borrowings of $81.4 million bearing a weighted average interest rate of 1.71%. A hypothetical 10% changefrom the weighted average interest rate would have a $0.1 million effect on our 2014 annual results of operations and cash flows.ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATASee "Index to Consolidated Financial Statements of Stage Stores, Inc." included on page F-1 for information required under this Item 8.ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENot applicable.33Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsITEM 9A. CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresManagement, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosurecontrols and procedures, as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), as ofthe end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have each concluded that suchdisclosure controls and procedures were effective as of the end of the period covered by this report.Management's Annual Report on Internal Control Over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and15d-15(f) of the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United Statesof America.Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonabledetail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessaryto permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are beingmade only in accordance with authorizations of management and our directors; and (iii) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements, and provide reasonableassurance as to the detection of fraud.Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not preventor detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time.Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosurecontrols and procedures based on the framework and criteria established in Internal Control-Integrated Framework (2013), issued by the Committee ofSponsoring Organizations of the Treadway Commission and concluded that our internal control over financial reporting was effective as of January 31, 2015.Our independent registered public accounting firm, Deloitte & Touche LLP, with direct access to our Board of Directors through our AuditCommittee, has audited the consolidated financial statements we prepared and issued an attestation report on the effectiveness of our internal control overfinancial reporting. The report appears in the Consolidated Financial Statements section of this Form10-K.Changes in Internal Control over Financial ReportingManagement, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the internal control over financialreporting and concluded that no change in our internal control over financial reporting occurred during the fourth quarter ended January 31, 2015 that hasmaterially affected, or is reasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNot applicable.34Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe following information pertains to our executive officers as of March 24, 2015: Name Age PositionMichael L. Glazer 66 President and Chief Executive Officer, DirectorSteven P. Lawrence 47 Chief Merchandising OfficerWilliam E. Gentner 46 Executive Vice President, Chief Marketing OfficerSteven L. Hunter 44 Executive Vice President, Chief Information OfficerRussell A. Lundy 52 Executive Vice President, Chief Stores OfficerStephen B. Parsons 50 Executive Vice President, Chief Human Resources OfficerOded Shein 53 Executive Vice President, Chief Financial OfficerChadwick P. Reynolds 41 Senior Vice President, Chief Legal Officer and SecretaryRichard E. Stasyszen 54 Senior Vice President, Finance and ControllerMr. Glazer joined us in April 2012 as President and Chief Executive Officer. He has served as a member of our Board since August 2001. Mr. Glazerserved as the President and CEO of Mattress Giant Corporation from October 2009 to April 2012.Mr. Lawrence joined us in April 2012 as Chief Merchandising Officer. Previously, he spent 11 years with J.C. Penney Company, Inc., where he wasmost recently Co-Chief Merchant EVP GMM Men's, Kids & Home. Prior to joining J.C. Penney, Mr. Lawrence spent 11 years at the former Foley'sDepartment Stores, where he held various merchandising positions of increasing responsibility.Mr. Gentner joined us in June 2012 as Senior Vice President, Marketing and was promoted to Executive Vice President, Chief Marketing Officer inJune 2014. From June 2007 to June 2012, he served in various marketing positions at J.C. Penney Company, Inc., including Senior Vice President, StrategicBrands and Senior Vice President, Marketing Planning and Promotions.Mr. Hunter joined us in June 2008 as Senior Vice President, Chief Information Officer and was promoted to Executive Vice President, ChiefInformation Officer in March 2010. From May 2003 to June 2008, he served as Senior Vice President of Information Technology at Belk, Inc.Mr. Lundy joined us in November 2003 as Senior Vice President, Stores, was promoted to Executive Vice President, Stores in January 2013, and toExecutive Vice President, Chief Stores Officer in October 2014. Prior to joining us, he spent 27 years with Peebles, Inc.Mr. Parsons joined us in April 2014 as Executive Vice President, Chief Human Resources Officer. From July 2011 to December 2013, he served asChief Human Resources Officer of OfficeMax Incorporated. Prior to joining OfficeMax, Mr. Parsons served from June 2007 to July 2011 as the Senior VicePresident - Human Resources & Labor Relations of Rite Aid Corporation.Mr. Shein joined us in January 2011 as Executive Vice President, Chief Financial Officer. From July 2004 to January 2011, he served in variousfinancial positions at Belk, Inc., including Vice President, Finance and Vice President and Treasurer. Prior to joining Belk, Inc., Mr. Shein served as the VicePresident, Treasurer of Charming Shoppes, Inc.Mr. Reynolds joined us in August 2014 as Senior Vice President, Chief Legal Officer and Secretary. Previously, he spent 16 years with Big Lots, Inc.,where he most recently served as Vice President, Deputy General Counsel and Assistant Corporate Secretary from March 2009 to August 2014.Mr. Stasyszen joined us in March 1998 as Assistant Controller and was promoted to Vice President and Controller in February 1999. In July 2001,he was promoted to Senior Vice President, Finance and Controller.35Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe remaining information called for by this item, including with respect to our directors, shareholder nomination procedures, code of ethics, AuditCommittee, audit committee financial experts, and Section 16(a) beneficial ownership reporting compliance, is incorporated herein by reference "Item 1:Election of Directors," "Governance," "Security Ownership of Certain Beneficial Owners and Management" and "Section 16(a) Beneficial OwnershipReporting Compliance" in the Proxy Statement.ITEM 11. EXECUTIVE COMPENSATIONInformation regarding executive compensation, Compensation Committee interlocks and insider participation, director compensation, and theCompensation Committee Report called for by this item is incorporated herein by reference to "Governance," "Compensation Committee Interlocks andInsider Participation," "Executive Compensation," "Director Compensation" and "Compensation Committee Report" in the Proxy Statement.ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSInformation regarding the security ownership of certain beneficial owners and management and related stockholder matters called for by this item isincorporated herein by reference to "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement. The remaining informationcalled for by this item is incorporated by reference to "Equity Compensation Plan Information" in the Proxy Statement.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information regarding our review of director independence and transactions with related persons called for by this item is incorporated herein byreference to "Item 1: Election of Directors," "Governance" and "Transactions with Related Persons" in the Proxy Statement.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESInformation regarding fees billed to us by our independent registered public accounting firm, Deloitte & Touche LLP, and our Audit Committee'spre-approval policies and procedures called for by this item is incorporated herein by reference to "Audit Committee Matters" in the Proxy Statement.36Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a)Documents filed as part of this report:1. Financial Statements:See "Index to Consolidated Financial Statements of Stage Stores, Inc." on page F-1, the Report of Independent Registered Public AccountingFirm on page F-2, and the Financial Statements on pages F-3 to F-30, of this Form 10-K, all of which are incorporated herein by reference.2. Financial Statement Schedules:All schedules are omitted because they are not applicable or not required or because the required information is shown in the ConsolidatedFinancial Statements or Notes thereto on pages F-3 to F-30, which are incorporated herein by reference.3. Exhibits Index:The following documents are the exhibits to this Form 10-K. Copies of exhibits will be furnished upon written request and payment of ourreasonable expenses in furnishing the exhibits.ExhibitNumber Description3.1Amended and Restated Articles of Incorporation of Stage Stores, Inc. dated June 7, 2007 are incorporated by reference to Exhibit 3.1 to StageStores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed September 12, 2007.3.2Amended and Restated By-Laws of Stage Stores, Inc. dated March 28, 2007 are incorporated by reference to Exhibit 3.3 to Stage Stores'Annual Report on Form 10-K (Commission File No. 1-14035) filed April 3, 2007.4.1Form of Common Stock Certificate of Stage Stores, Inc. is incorporated by reference to Exhibit 4.1 to Stage Stores' Registration Statement onForm 10 (Commission File No. 000-21011) filed October 29, 2001.10.1Second Amended and Restated Credit Agreement dated October 6, 2014, among Specialty Retailers, Inc., as borrower, Stage Stores, Inc., asguarantor, and the banks named therein is incorporated by reference to Exhibit 10.1 to Stage Stores’ Current Report on Form 8-K(Commission File No. 1-14035) filed October 10, 2014. Some schedules to this Exhibit have been omitted. The registrant agrees to furnishsupplementally a copy of any of the omitted schedules to this Exhibit to the Securities and Exchange Commission upon its request.10.2†Stage Stores, Inc. Amended and Restated 2001 Equity Incentive Plan effective June 3, 2004 is incorporated by reference to Exhibit 10.1 toStage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed September 6, 2012.10.3†Stage Stores, Inc. Second Amended and Restated 2008 Equity Incentive Plan effective June 9, 2011 is incorporated by reference to Exhibit10.2 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed September 6, 2012.10.4†Stage Stores, Inc. Amended and Restated 2003 Non-Employee Director Equity Compensation Plan effective June 10, 2014 is incorporatedby reference to Exhibit 10.2 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed September 11, 2014.10.5†Form of Stock Appreciation Rights Agreement (Employee) under the Stage Stores, Inc. Amended and Restated 2001 Equity Incentive Plan isincorporated by reference to Exhibit 10.4 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed September 6,2012.10.6†Form of Stock Appreciation Rights Agreement (Employee) under the Stage Stores, Inc. Second Amended and Restated 2008 EquityIncentive Plan is incorporated by reference to Exhibit 10.5 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035)filed September 6, 2012.37Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.10.7†Form of Performance Based Share Agreement under the Stage Stores, Inc. Amended and Restated 2001 Equity Incentive Plan is incorporatedby reference to Exhibit 10.6 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed September 6, 2012.10.8†Form of Performance Based Share Agreement under the Stage Stores, Inc. Second Amended and Restated 2008 Equity Incentive Plan isincorporated by reference to Exhibit 10.7 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed September 6,2012.10.9†Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Amended and Restated 2001 Equity Incentive Plan(prior to 2012; cliff vesting; all employees) is incorporated by reference to Exhibit 10.8 to Stage Stores' Quarterly Report on Form 10-Q(Commission File No. 1-14035) filed September 6, 2012.10.10†Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Amended and Restated 2001 Equity Incentive Plan (4year pro rata vesting; SVPs and above) is incorporated by reference to Exhibit 10.9 to Stage Stores' Quarterly Report on Form 10-Q(Commission File No. 1-14035) filed September 6, 2012.10.11†Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Amended and Restated 2001 Equity Incentive Plan (4year pro rata vesting; below SVP level) is incorporated by reference to Exhibit 10.10 to Stage Stores' Quarterly Report on Form 10-Q(Commission File No. 1-14035) filed September 6, 2012.10.12†Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Amended and Restated 2001 Equity Incentive Plan (4year pro rata vesting; EVPs and above; with non-compete) is incorporated by reference to Exhibit 10.11 to Stage Stores' Quarterly Report onForm 10-Q (Commission File No. 1-14035) filed September 6, 2012.10.13†Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Second Amended and Restated 2008 Equity IncentivePlan (cliff vesting; all employees) is incorporated by reference to Exhibit 10.12 to Stage Stores' Quarterly Report on Form 10-Q (CommissionFile No. 1-14035) filed September 6, 2012.10.14†Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Second Amended and Restated 2008 Equity IncentivePlan (4 year pro rata vesting; SVPs and above) is incorporated by reference to Exhibit 10.13 to Stage Stores' Quarterly Report on Form 10-Q(Commission File No. 1-14035) filed September 6, 2012.10.15†Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Second Amended and Restated 2008 Equity IncentivePlan (4 year pro rata vesting; below SVP level) is incorporated by reference to Exhibit 10.14 to Stage Stores' Quarterly Report on Form 10-Q(Commission File No. 1-14035) filed September 6, 2012.10.16†Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Second Amended and Restated 2008 Equity IncentivePlan (4 year pro rata vesting; EVPs and above; with non-compete) is incorporated by reference to Exhibit 10.15 to Stage Stores' QuarterlyReport on Form 10-Q (Commission File No. 1-14035) filed September 6, 2012.10.17†Form of Nonstatutory Stock Option Agreement (Employee) under the Stage Stores, Inc. Amended and Restated 2001 Equity Incentive Plan isincorporated by reference to Exhibit 10.16 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed September6, 2012.10.18†Form of Nonstatutory Stock Option Agreement (Employee) under the Stage Stores, Inc. Second Amended and Restated 2008 EquityIncentive Plan is incorporated by reference to Exhibit 10.17 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035)filed September 6, 2012.10.19†Form of Nonstatutory Stock Option Agreement (Director) under the Stage Stores, Inc. Amended and Restated 2001 Equity Incentive Plan isincorporated by reference to Exhibit 10.18 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed September6, 2012.10.20†Form of Initial Grant Restricted Stock Award Agreement (Director) under the Stage Stores, Inc. Amended and Restated 2001 Equity IncentivePlan is incorporated by reference to Exhibit 10.3 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filedSeptember 11, 2014.10.21†Form of Initial Grant Restricted Stock Award Agreement (Director) under the Stage Stores, Inc. Second Amended and Restated 2008 EquityIncentive Plan is incorporated by reference to Exhibit 10.4 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035)filed September 11, 2014.38Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.10.22†Form of Reelection Grant Restricted Stock Award Agreement (Director) under the Stage Stores, Inc. Amended and Restated 2001 EquityIncentive Plan is incorporated by reference to Exhibit 10.5 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035)filed September 11, 2014.10.23†Form of Reelection Grant Restricted Stock Award Agreement (Director) under the Stage Stores, Inc. Second Amended and Restated 2008Equity Incentive Plan is incorporated by reference to Exhibit 10.6 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed September 11, 2014.10.24†Form of Shareholder Agreement for restricted stock (Director) under the Stage Stores, Inc. Amended and Restated 2003 Non-EmployeeDirector Equity Compensation Plan is incorporated by reference to Exhibit 10.7 to Stage Stores' Quarterly Report on Form 10-Q(Commission File No. 1-14035) filed September 11, 2014.10.25†Stage Stores, Inc. Nonqualified Deferred Compensation Plan, as Amended and Restated effective June 5, 2008 is incorporated by reference toExhibit 4.4 to Stage Stores' Form S-8 (Commission File No. 333-151568) filed June 10, 2008.10.26#Amended and Restated Private Label Credit Card Plan Agreement Between World Financial Network Bank (now Comenity Bank) and StageStores, Inc. and Specialty Retailers, Inc. dated as of August 8, 2012 is incorporated by reference to Exhibit 10.1 to Stage Stores' AmendedQuarterly Report on Form 10-Q/A (Commission File No. 1-14035) filed March 7, 2013.10.27#Amendment No. One to Amended and Restated Private Label Credit Card Plan Agreement dated as of February 1, 2013, Between WorldFinancial Network Bank (now Comenity Bank) and Stage Stores, Inc. and Specialty Retailers, Inc. is incorporated by reference to Exhibit10.26 to Stage Stores' Annual Report on Form 10-K (Commission File No. 1-14035) filed April 3, 2013.10.28#Amendment No. Two to Amended and Restated Private Label Credit Card Plan Agreement dated as of February 13, 2014, Between WorldFinancial Network Bank (now Comenity Bank) and Stage Stores, Inc. and Specialty Retailers, Inc. is incorporated by reference to Exhibit10.1 to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed June 10, 2014.10.29#Amendment No. Three to Amended and Restated Private Label Credit Card Plan Agreement dated as of May 4, 2014, Between ComenityBank and Stage Stores, Inc. and Specialty Retailers, Inc. is incorporated by reference to Exhibit 10.1 to Stage Stores' Quarterly Report onForm 10-Q (Commission File No. 1-14035) filed September 11, 2014.10.30†Employment Agreement between Oded Shein and Stage Stores, Inc. dated January 10, 2011 is incorporated by reference to Exhibit 10.4 ofStage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed June 9, 2011.10.31†Employment Agreement between Steven Hunter and Stage Stores, Inc. dated April 11, 2011 is incorporated by reference to Exhibit 10.5Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed June 9, 2011.10.32†Employment Agreement between Michael L. Glazer and Stage Stores, Inc. dated June 12, 2012 is incorporated by reference to Exhibit 10.25to Stage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed September 6, 2012.10.33†Employment Agreement between Steven Lawrence and Stage Stores, Inc. dated July 23, 2012 is incorporated by reference to Exhibit 10.3 toStage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed June 13, 2013.10.34†Employment Agreement between Russ Lundy and Stage Stores, Inc. dated August 6, 2010 is incorporated by reference to Exhibit 10.2 toStage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed June 13, 2013.10.35†Employment Agreement between Stephen Parsons and Stage Stores, Inc. dated April 28, 2014 is incorporated by reference to Exhibit 10.2 toStage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed June 10, 2014.10.36†Employment Agreement between Bill Gentner and Stage Stores, Inc. dated June 17, 2014 is incorporated by reference to Exhibit 10.8 toStage Stores' Quarterly Report on Form 10-Q (Commission File No. 1-14035) filed September 11, 2014.39Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.14Code of Ethics for Senior Officers dated January 25, 2011 is incorporated by reference to Exhibit 14 to Stage Stores' Annual Report to Form10-K (Commission File No. 1-14035) filed March 30, 2011.21*Subsidiaries of Stage Stores, Inc.23*Consent of Independent Registered Public Accounting Firm.24.1*Power of Attorney: Directors (Form 10-K).24.2*Power of Attorney: Section 16 Filers.31.1*Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32*Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Extension Schema Document101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document101.DEF*XBRL Taxonomy Extension Definition Linkbase Document101.LAB*XBRL Taxonomy Extension Label Linkbase Document101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document_________________________________________*Filed electronically herewith.† Management contract or compensatory plan or arrangement.#Certain confidential portions have been omitted pursuant to a confidential treatment request that has been filed separately with the Securities andExchange Commission.40Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized.STAGE STORES, INC. /s/ Michael L. GlazerApril 1, 2015Michael L. Glazer President and Chief Executive Officer (Principal Executive Officer) STAGE STORES, INC. /s/ Oded SheinApril 1, 2015Oded Shein Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) STAGE STORES, INC. /s/ Richard E. StasyszenApril 1, 2015Richard E. Stasyszen Senior Vice President, Finance and Controller (Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. * Director April 1, 2015 * Director April 1, 2015Alan J. Barocas Earl J. Hesterberg * Director April 1, 2015 * Director April 1, 2015Elaine D. Crowley Lisa R. Kranc * Director April 1, 2015 * Director April 1, 2015Diane M. Ellis William J. Montgoris /s/ Michael L. Glazer Director April 1, 2015 * Director April 1, 2015Michael L. Glazer C. Clayton Reasor * Director April 1, 2015 * Director April 1, 2015Gabrielle E. Greene-Sulzberger Ralph P. Scozzafava (Constituting a majority of the Board of Directors) *By:/s/ Oded Shein Oded Shein Attorney-in-Fact41Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsINDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF STAGE STORES, INC. Page Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets at January 31, 2015 and February 1, 2014 F-3 Consolidated Statements of Operations and Comprehensive Income for 2014, 2013 and 2012 F-4 Consolidated Statements of Cash Flows for 2014, 2013 and 2012 F-5 Consolidated Statements of Stockholders' Equity for 2014, 2013 and 2012 F-6 Notes to Consolidated Financial Statements F-7F-1Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders of Stage Stores, Inc.Houston, TexasWe have audited the accompanying consolidated balance sheets of Stage Stores, Inc. and subsidiary (the "Company") as of January 31, 2015 andFebruary 1, 2014, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the three yearsin the period ended January 31, 2015. We also have audited the Company's internal control over financial reporting as of January 31, 2015, based on criteriaestablished in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. TheCompany's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessmentof the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on ouraudits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement andwhether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significantestimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting includedobtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating thedesign and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considerednecessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive andprincipal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition ofthe company's assets that could have a material effect on the financial statements.Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper managementoverride of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation ofthe effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or procedures may deteriorate.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Stage Stores,Inc. and subsidiary as of January 31, 2015 and February 1, 2014, and the results of their operations and their cash flows for each of the three years in theperiod ended January 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, theCompany maintained, in all material respects, effective internal control over financial reporting as of January 31, 2015, based on the criteria established inInternal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission./s/ DELOITTE & TOUCHE LLPHouston, TexasApril 1, 2015F-2Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Consolidated Balance Sheets(in thousands, except par value) January 31, 2015 February 1, 2014ASSETS Cash and cash equivalents$17,165 $14,762Merchandise inventories, net441,452 434,407Prepaid expenses and other current assets45,444 40,082Total current assets504,061 489,251 Property, equipment and leasehold improvements, net285,450 282,534Intangible asset14,910 14,910Other non-current assets, net20,256 24,142Total assets$824,677 $810,837LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable$121,778 $125,707Income taxes payable13,455 5,345Current portion of debt obligations1,715 2,354Accrued expenses and other current liabilities67,834 61,850Total current liabilities204,782 195,256 Long-term debt obligations45,673 60,871Deferred taxes20,474 15,644Other long-term liabilities77,818 84,622Total liabilities348,747 356,393 Commitments and contingencies Common stock, par value $0.01, 100,000 shares authorized, 31,632 and 31,222 shares issued,respectively316 312Additional paid-in capital395,395 384,295Less treasury stock - at cost, 0 and 0 shares, respectively(600) (967)Accumulated other comprehensive loss(6,874) (4,616)Retained earnings87,693 75,420Total stockholders' equity475,930 454,444Total liabilities and stockholders' equity$824,677 $810,837 The accompanying notes are an integral part of these consolidated financial statements.F-3Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Consolidated Statements of Operations and Comprehensive Income(in thousands, except earnings per share) Fiscal Year 2014 2013 2012Net sales$1,638,569 $1,609,481 $1,627,702Cost of sales and related buying, occupancy and distribution expenses1,188,763 1,172,995 1,168,907Gross profit449,806 436,486 458,795 Selling, general and administrative expenses383,616 390,224 387,332Store opening costs2,488 2,902 2,163Interest expense3,002 2,744 3,011Income from continuing operations before income tax60,700 40,616 66,289Income tax expense22,847 15,400 24,373Income from continuing operations37,853 25,216 41,916Loss from discontinued operations, net of tax benefit of $4,228, $5,237 and$2,172, respectively(7,003) (8,574) (3,737)Net income$30,850 $16,642 $38,179 Other comprehensive income (loss): Employee benefit related adjustment, net of tax of ($1,505), $683, ($992),respectively$(2,507) $1,138 $(1,645)Amortization of employee benefit related costs, net of tax of $150, $229, and$156, respectively249 381 258Total other comprehensive income (loss)(2,258) 1,519 (1,387)Comprehensive income$28,592 $18,161 $36,792 Basic earnings per share data: Continuing operations$1.18 $0.78 $1.32Discontinued operations$(0.22) $(0.27) $(0.12)Basic earnings per share$0.96 $0.51 $1.20Basic weighted average shares outstanding31,675 32,034 31,278 Diluted earnings per share data: Continuing operations$1.18 $0.77 $1.31Discontinued operations$(0.22) $(0.26) $(0.12)Diluted earnings per share$0.96 $0.51 $1.19Diluted weighted average shares outstanding31,763 32,311 31,600The accompanying notes are an integral part of these consolidated financial statements.F-4Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Consolidated Statements of Cash Flows(in thousands) Fiscal Year 2014 2013 2012Cash flows from operating activities: Net income$30,850 $16,642 $38,179Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and impairment of long-lived assets63,447 69,925 60,426Loss on retirements of property, equipment and leasehold improvements110 860 454Deferred income taxes3,348 (808) 1,108Tax benefit (deficiency) from stock-based compensation64 1,761 (1,311)Stock-based compensation expense9,664 8,417 7,803Amortization of debt issuance costs275 279 417Excess tax benefits from stock-based compensation(852) (2,076) (1,024)Deferred compensation obligation(367) 266 (134)Amortization of employee benefit related costs399 610 414Construction allowances from landlords5,538 4,162 4,193Other changes in operating assets and liabilities: Increase in merchandise inventories(7,045) (20,479) (65,984)Increase in other assets(1,737) (6,375) (4,802)Increase (decrease) in accounts payable and other liabilities(1,480) (26,657) 36,242Net cash provided by operating activities102,214 46,527 75,981 Cash flows from investing activities: Additions to property, equipment and leasehold improvements(70,580) (61,263) (49,489)Proceeds from insurance and disposal of assets2,946 27 50Net cash used in investing activities(67,634) (61,236) (49,439) Cash flows from financing activities: Proceeds from revolving credit facility borrowings457,742 494,885 357,910Payments of revolving credit facility borrowings(471,227) (445,490) (376,410)Payments of long-term debt obligations(2,352) (744) (18,674)Payments of debt issuance costs(663) (128) —Repurchases of common stock(2,755) (31,367) (61)Payments for stock related compensation(1,844) (2,381) (326)Proceeds from issuance of equity awards5,040 10,149 21,306Excess tax benefits from stock-based compensation852 2,076 1,024Cash dividends paid(16,970) (15,466) (11,995)Net cash provided by (used in) financing activities(32,177) 11,534 (27,226) Net increase (decrease) in cash and cash equivalents2,403 (3,175) (684) Cash and cash equivalents: Beginning of period14,762 17,937 18,621End of period$17,165 $14,762 $17,937 Supplemental disclosures including non-cash investing and financing activities: Interest paid$2,733 $2,392 $2,679Income taxes paid7,084 18,789 13,674Unpaid liabilities for capital expenditures3,168 4,918 5,176The accompanying notes are an integral part of these consolidated financial statements.F-5Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Consolidated Statements of Stockholders' Equity(in thousands, except per share amounts) CommonStock AdditionalPaid-in Capital TreasuryStock AccumulatedOtherComprehensive Loss RetainedEarnings Shares Amount Shares Amount TotalBalance, January 28, 201230,444 $304 $349,366 — $(835) $(4,748) $68,619 $412,706 Net income— — — — — — 38,179 38,179Other comprehensive loss— — — — — (1,387) — (1,387)Dividends on common stock,$0.38 per share— — — — — — (11,995) (11,995)Deferred compensation— — (134) — 134 — — —Repurchases of common stock— — — (4) (61) — — (61)Retirement of treasury stock(4) — (29) 4 61 — (32) —Issuance of equity awards, net1,574 16 21,290 — — — — 21,306Tax withholdings paid for netsettlement of stock awards— — (460) — — — — (460)Stock-based compensationexpense— — 7,803 — — — — 7,803Tax deficiency from stock-basedcompensation— — (1,311) — — — — (1,311)Recognition of pre-reorganizationdeferred tax assets— — 90 — — — — 90Balance, February 2, 201332,014 $320 $376,615 — $(701) $(6,135) $94,771 $464,870 Net income— — — — — — 16,642 16,642Other comprehensive income— — — — — 1,519 — 1,519Dividends on common stock,$0.475 per share— — — — — — (15,466) (15,466)Deferred compensation— — 266 — (266) — — —Repurchases of common stock— — — (1,626) (31,367) — — (31,367)Retirement of treasury stock(1,626) (16) (10,824) 1,626 31,367 — (20,527) —Issuance of equity awards, net834 8 10,141 — — — — 10,149Tax withholdings paid for netsettlement of stock awards— — (2,115) — — — — (2,115)Stock-based compensationexpense— — 8,417 — — — — 8,417Tax benefit from stock-basedcompensation— — 1,761 — — — — 1,761Recognition of pre-reorganizationdeferred tax assets— — 34 — — — — 34Balance, February 1, 201431,222 $312 $384,295 — $(967) $(4,616) $75,420 $454,444 Net income— — — — — — 30,850 30,850Other comprehensive loss— — — — — (2,258) — (2,258)Dividends on common stock,$0.53 per share— — — — — — (16,970) (16,970)Deferred compensation— — (367) — 367 — — —Repurchases of common stock— — — (172) (2,755) — — (2,755)Retirement of treasury stock(172) (2) (1,146) 172 2,755 (1,607) —Issuance of equity awards, net582 6 5,034 — — — — 5,040Tax withholdings paid for netsettlement of stock awards— — (2,211) — — — — (2,211)Stock-based compensationexpense— — 9,664 — — — — 9,664Tax benefit from stock-basedcompensation— — 64 — — — — 64Recognition of pre-reorganizationdeferred tax assets— — 62 — — — — 62Balance, January 31, 201531,632 $316 $395,395 — $(600) $(6,874) $87,693 $475,930 The accompanying notes are an integral part of these consolidated financial statements.F-6Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial StatementsNOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIESDescription of Business. We are a retailer operating specialty department stores primarily in small and mid-sized towns and communities. Ourmerchandise assortment is a well-edited selection of moderately priced brand name and private label apparel, accessories, cosmetics, footwear and homegoods. As of January 31, 2015, we operated 854 specialty department stores located in 40 states under the BEALLS, GOODY’S, PALAIS ROYAL, PEEBLESand STAGE nameplates and a direct-to-consumer business.On March 7, 2014, we divested Steele's, an off-price concept that we launched in November 2011, in order to focus solely on our core specialtydepartment store business. Accordingly, the results of operations of Steele's and loss on the sale are reflected in discontinued operations for all periodspresented.Principles of Consolidation. The consolidated financial statements include the accounts of Stage Stores, Inc. and its subsidiary. All intercompanytransactions have been eliminated in consolidation. We report our specialty department stores and e-commerce website in a single operating segment. Revenues from customers are derived from merchandise sales. We do not rely on any major customer as a source of revenue.Fiscal Year. References to a particular year are to our fiscal year, which is the 52- or 53-week period ending on the Saturday closest to January 31stof the following calendar year. Fiscal YearEndedWeeks2014January 31, 2015522013February 1, 2014522012February 2, 201353Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptionsthat affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those relatedto inventory, deferred tax assets, intangible asset, long-lived assets, sales returns, gift card breakage, pension obligations, self-insurance and contingentliabilities. Actual results may differ materially from these estimates. We base our estimates on historical experience and on various assumptions which arebelieved to be reasonable under the circumstances.Cash and Cash Equivalents. We consider highly liquid investments with initial maturities of less than three months to be cash equivalents.Concentration of Credit Risk. Financial instruments which potentially subject us to concentrations of credit risk are primarily cash. Our cashmanagement and investment policies restrict investments to low-risk, highly-liquid securities and we perform periodic evaluations of the relative creditstanding of the financial institutions with which we deal.Merchandise Inventories. We value merchandise inventories using the lower of cost or market with cost determined using the weighted average costmethod. We capitalize distribution center costs associated with preparing inventory for sale, such as distribution payroll, benefits, occupancy, depreciationand other direct operating expenses as part of merchandise inventories. We also include in inventory the cost of freight to our distribution centers and tostores as well as duties and fees related to import purchases.Vendor Allowances. We receive consideration from our merchandise vendors in the form of allowances and reimbursements. Given the promotionalnature of our business, the allowances are generally intended to offset our costs of handling, promoting, advertising and selling the vendors' products in ourstores. Vendor allowances related to the purchase of inventory are recorded as a reduction to the cost of inventory until sold. Vendor allowances arerecognized as a reduction of cost of goods sold or the related selling expense when the purpose for which the vendor funds were intended to be used has beenfulfilled and amounts have been authorized by vendors. As part our South Hill Consolidation (see Note 16), we changed the method of collecting advertisingallowances from our vendors resulting in a reduction in the amount of these allowances considered as a reimbursement for specific, incremental, identifiablecosts incurred to sell vendors' products. Accordingly, beginning in 2013, the majority of advertising allowances are recorded as a reduction to the cost ofmerchandise purchases.F-7Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)Stock-Based Compensation. We recognize as compensation expense an amount equal to the fair value of share-based payments granted toemployees and independent directors, net of estimated forfeitures. That cost is recognized ratably in SG&A expense over the period during which anemployee or independent director is required to provide service in exchange for the award.Property, Equipment and Leasehold Improvements. Additions to property, equipment and leasehold improvements are recorded at cost anddepreciated over their estimated useful lives using the straight-line method. The estimated useful lives of leasehold improvements do not exceed the term ofthe related lease, including applicable available renewal options where appropriate. The estimated useful lives in years are generally as follows:Buildings & improvements20Store and office fixtures and equipment5-10Warehouse equipment5-15Leasehold improvements - stores5-15Leasehold improvements - corporate office10-20 Impairment of Long-Lived Assets. Property, plant and equipment and other long-lived assets are reviewed to determine whether any events orchanges in circumstances indicate that the carrying amount of the asset may not be recoverable. For long-lived assets to be held and used, we base ourevaluation on impairment indicators such as the nature of the asset's physical condition, the future economic benefit of the asset, any historical or futureprofitability measurements and other external market conditions or factors that may be present. If such impairment indicators are present or other factors existthat indicate the carrying amount of the asset may not be recoverable, we determine whether impairment has occurred through the use of an undiscountedcash flows analysis of the asset at the lowest level for which identifiable cash flows exist. If impairment has occurred, we recognize a loss for the differencebetween the carrying amount and the estimated fair value of the asset. Management's judgment is necessary to estimate fair value. Intangible Asset and Impairment of Intangible Assets. As a part of the acquisition of Peebles in 2003, we acquired the rights to the PEEBLES tradename and trademark (collectively the "Trademark"), which was identified as an indefinite life intangible. The value of the Trademark was determined to be$14.9 million at the time of the Peebles acquisition. Indefinite life intangible assets are not amortized but are tested for impairment annually or morefrequently when indicators of impairment exist. We completed our annual impairment test during the fourth quarter of 2014 and determined there was noimpairment.Insurance Recoveries. We incurred casualty losses during 2014, 2013 and 2012. We received total insurance proceeds of $2.0 million, $0.7 millionand $0.1 million during 2014, 2013 and 2012, respectively, and recognized a net gain of $0.9 million in 2014, a net gain of $0.2 million in 2013 and a netloss of $0.5 million in 2012, which are included in SG&A expenses.Debt Issuance Costs. Debt issuance costs are accounted for as a deferred charge and amortized on a straight-line basis over the term of the relatedfinancing agreement. The balance of debt issuance costs, net of accumulated amortization of $0.1 million and $0.7 million, is $1.0 million and $0.7 millionat January 31, 2015 and February 1, 2014, respectively.Revenue Recognition. Our retail stores record revenue at the point of sale. Sales from our e-commerce website are recorded at the time of shipment.Shipping and handling fees charged to customers are included in net sales with the corresponding costs recorded as costs of goods sold. Total revenues donot include sales tax because we are a pass-through conduit for collecting and remitting sales taxes. Revenues are recognized net of expected returns, whichwe estimate using historical return patterns as a percentage of sales. We record deferred revenue on our balance sheet for the sale of gift cards and recognize this revenue upon the redemption of gift cards in net sales. We similarly record deferred revenue on our balance sheet for merchandise credits issued related to customer returns and recognize this revenue upon theredemption of the merchandise credits. F-8Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)Gift Card and Merchandise Credit Liability. Unredeemed gift cards and merchandise credits are recorded as a liability. Our gift cards andmerchandise credits do not expire. Based on historical redemption rates, a small and relatively stable percentage of gift cards and merchandise credits willnever be redeemed, which is referred to as "breakage." Estimated breakage income is recognized over time in proportion to actual gift card and merchandisecredit redemptions. We recognized approximately $1.1 million, $1.0 million and $1.0 million of breakage income in 2014, 2013 and 2012, respectively,which is recorded as an offset to SG&A expenses.Customer Loyalty Program. Customers who spend a required amount within a specified time frame using our private label credit card receive rewardcertificates which can be redeemed for merchandise. We estimate the net cost of the rewards and record a liability associated with unredeemed certificatesand customer spend toward unissued certificates. The cost of the loyalty rewards program benefit is recorded in cost of sales.Store Opening Expenses. Costs related to the opening of new stores and the relocation or rebranding of current stores to a new nameplate areexpensed as incurred. Store opening expenses include the rent incurred during the rent holiday period on new and relocated stores.Advertising Expenses. Advertising costs are charged to operations when the related advertising first takes place. Advertising costs were $92.1million, $94.2 million and $74.7 million, for 2014, 2013 and 2012, respectively, which are net of advertising allowances received from vendors of $5.0million, $5.2 million and $17.1 million, respectively.Rent Expense. We record rent expense on a straight-line basis over the lease term, including the build out period, and where appropriate, applicableavailable lease renewal option periods. The difference between the payment and expense in any period is recorded as deferred rent in other long-termliabilities in the consolidated financial statements. We record construction allowances from landlords when contractually earned as a deferred rent credit inother long-term liabilities. Such deferred rent credit is amortized over the related term of the lease, commencing on the date we contractually earned theconstruction allowance, as a reduction of rent expense. The deferred rent credit was $45.1 million and $49.4 million as of January 31, 2015 and February 1,2014, respectively.Certain leases provide for contingent rents that are not measurable at inception. These contingent rents are primarily based on a percentage of salesthat are in excess of a predetermined level. These amounts are excluded from minimum rent and are included in the determination of total rent expense whenit is probable that the expense has been incurred and the amount is reasonably estimable.Income Taxes. The provision for income taxes is computed based on the pretax income included in the consolidated financial statements. The assetand liability approach is used to recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between thecarrying amounts for financial reporting purposes and the tax basis of assets and liabilities. A valuation allowance is established if it is more likely than notthat some portion of the deferred tax asset will not be realized. See Note 14 for additional disclosures regarding income taxes and deferred income taxes.Earnings Per Share. Basic earnings per share is computed using the weighted average number of common shares outstanding during themeasurement period. Diluted earnings per share is computed using the weighted average number of common shares as well as all potentially dilutivecommon share equivalents outstanding during the measurement period. Stock options, SARs and non-vested stock grants were the only potentially dilutiveshare equivalents we had outstanding at January 31, 2015.We granted non-vested stock awards that contain non-forfeitable rights to dividends. Under Accounting Standards Codification ("ASC") 260-10,Earnings Per Share, non-vested stock awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securitiesand are included in the calculation of basic and diluted earnings per share pursuant to the two-class method. The two-class method determines earnings pershare for each class of common stock and participating securities according to dividends or dividend equivalents and their respective participation rights inundistributed earnings. See Note 2 for additional disclosures regarding earnings per share.F-9Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued) Recent Accounting Standards. In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property,Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which changes the criteriafor reporting discontinued operations and also requires additional disclosures about discontinued operations. For public companies, the standard is effectiveprospectively for disposals that occur on or after December 15, 2014, and interim periods within those years, with early adoption permitted. We did not earlyadopt this ASU.In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which provides a five-step analysis oftransactions to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue when ittransfers promised goods or services to customers in an amount that reflects what a company expects to be entitled to in exchange for those goods or services.This update will be effective for us retrospectively in the first quarter of 2017 with early adoption not permitted. We are currently assessing the impact thisASU will have on our financial statements.NOTE 2 - EARNINGS PER SHAREBasic earnings per share ("EPS") is computed using the weighted average number of common shares outstanding during the measurementperiod. Diluted EPS is computed using the weighted average number of common shares as well as all potentially dilutive common share equivalentsoutstanding during the measurement period.The following tables show the computation of basic and diluted EPS for each period (in thousands, except per share amounts): Fiscal Year 2014 2013 2012Basic EPS from continuing operations: Income from continuing operations$37,853 $25,216 $41,916Less: Allocation of earnings to participating securities(503) (352) (594)Net income from continuing operations allocated to common shares37,350 24,864 41,322 Basic weighted average shares outstanding31,675 32,034 31,278Basic EPS from continuing operations$1.18 $0.78 $1.32 Fiscal Year 2014 2013 2012Diluted EPS from continuing operations: Income from continuing operations$37,853 $25,216 $41,916Less: Allocation of earnings to participating securities(502) (351) (590)Net income from continuing operations allocated to common shares37,351 24,865 41,326 Basic weighted average shares outstanding31,675 32,034 31,278Add: Dilutive effect of stock awards88 277 322Diluted weighted average shares outstanding31,763 32,311 31,600Diluted EPS per continuing operations$1.18 $0.77 $1.31 F-10Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)The number of shares attributable to stock options, SARs and non-vested stock grants that would have been considered dilutive securities, but wereexcluded from the calculation of diluted EPS because the effect was anti-dilutive were as follows (in thousands): Fiscal Year 2014 2013 2012Number of anti-dilutive stock options and SARs due to exercise price greaterthan average market price of our common stock234 414 329NOTE 3 – FAIR VALUE MEASUREMENTSWe recognize or disclose the fair value of our financial and non-financial assets and liabilities on a recurring and non-recurring basis. Fair value isdefined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, we assume thehighest and best use of the asset by market participants in which we would transact and the market-based risk measurements or assumptions that marketparticipants would use in pricing the asset or liability.We applied the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels, and bases the categorizationwithin the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:Level 1 -Quoted prices in active markets for identical assets or liabilities.Level 2 -Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similarassets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data forsubstantially the full term of the assets or liabilities.Level 3 -Inputs that are both unobservable and significant to the overall fair value measurement reflect our estimates of assumptions thatmarket participants would use in pricing the asset or liability. F-11Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)Financial assets and liabilities measured at fair value on a recurring basis (in thousands): January 31, 2015 Balance Quoted Prices inActive Markets for IdenticalInstruments(Level 1) Significant Other Observable Inputs(Level 2) SignificantUnobservable Inputs(Level 3)Other assets: Securities held in grantor trust for deferredcompensation plans (a)(b)$16,654 $16,654 $— $— February 1, 2014 Balance Quoted Prices inActive Markets for IdenticalInstruments(Level 1) Significant Other Observable Inputs(Level 2) SignificantUnobservable Inputs(Level 3)Other assets: Securities held in grantor trust for deferredcompensation plans (a)(b)$21,023 $21,023 $— $—Accrued expenses and other current liabilities: Deferred non-employee director equitycompensation plan liability (b)$226 $226 $— $— (a) The liability for the amount due to participants corresponding in value to the securities held in the grantor trust is recorded in other long-term liabilities.(b) Using the market approach, the fair values of these items represent quoted market prices multiplied by the quantities held. Net gains and losses related to the changes in fair valuein the assets and liabilities under the various deferred compensation plans are recorded in SG&A expenses and were nil during 2014 and 2013. F-12Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)Non-financial assets measured at fair value on a nonrecurring basis (in thousands): January 31, 2015 Balance Quoted Prices inActive Markets for Identical Instruments(Level 1) Significant Other Observable Inputs(Level 2) SignificantUnobservable Inputs(Level 3)Assets: Store property, equipment and leaseholdimprovements (a)$3,343 $— $— $3,343 February 1, 2014 Balance Quoted Prices inActive Markets for Identical Instruments(Level 1) Significant Other Observable Inputs(Level 2) SignificantUnobservable Inputs(Level 3)Assets: Store property, equipment and leasehold improvements (a)$4,562 $— $— $4,562 (a) In accordance with ASC No. 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets, using an undiscounted cash flow model, we identified certain storeswhose cash flow trends indicated that the carrying value of store property, equipment and leasehold improvements may not be fully recoverable and determined that impairmentcharges were necessary for 2014. We use a discounted cash flow model to determine the fair value of our impaired assets. Key assumptions in determining future cash flowsinclude, among other things, expected future operating performance and changes in economic conditions. Long-lived assets with a carrying amount of $3.9 million in 2014 and$12.6 million in 2013 were written down to their estimated fair value of $3.3 million in 2014 and $4.6 million in 2013, resulting in impairment charges of approximately $0.6million during 2014 and $8.0 million during 2013. The $8.0 million in 2013 includes approximately $7.3 million of impairment charges for Steele's, which was disposed ofsubsequent to February 1, 2014. See Note 15 for additional disclosures on the Steele's divestiture. The fair values of cash and cash equivalents, payables and short-term debt obligations approximate their carrying values due to the short-term natureof these instruments. In addition, we believe that the Revolving Credit Facility approximates fair value since interest rates are adjusted to reflect current rates. F-13Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)NOTE 4 - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTSThe components of property, equipment and leasehold improvements were as follows (in thousands): January 31, 2015 February 1, 2014Land$1,842 $1,842Buildings and improvements15,633 15,511Fixtures and equipment489,243 457,335Leasehold improvements360,594 345,598Property, equipment and leasehold improvements867,312 820,286Accumulated depreciation581,862 537,752Property, equipment and leasehold improvements, net$285,450 $282,534 Depreciation expense was $62.7 million, $61.9 million and $59.3 million for 2014, 2013 and 2012, respectively. As a result of our ongoing reviewof the performance of our stores, we identified certain stores whose cash flow trends indicated that the carrying value of property, equipment and leaseholdimprovements may not be fully recoverable and recognized impairment charges of $0.6 million, $0.7 million and $0.8 million in 2014, 2013 and 2012,respectively. The charges reflect the difference between the carrying value and fair value of the stores. In addition, we recognized property and equipmentimpairment charges of approximately $7.3 million in 2013 for Steele's, which was disposed of subsequent to February 1, 2014, and $0.2 million in 2012related to the South Hill Consolidation. Cost of sales includes $50.9 million, $49.2 million and $48.6 million in 2014, 2013 and 2012, respectively, relatedto depreciation expense and impairment charges. See Note 15 for additional disclosures on the Steele's divestiture.NOTE 5 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIESThe components of accrued expenses and other current liabilities were as follows (in thousands): January 31, 2015 February 1, 2014Accrued compensation and benefits$19,299 $13,730Gift card and merchandise credit liability10,690 9,952Self-insurance liability10,395 8,603Accrued occupancy5,625 5,720Accrued advertising3,599 4,389Current deferred income tax1,822 4,721Accrued capital expenditures1,313 2,756Other15,091 11,979Accrued expenses and other current liabilities$67,834 $61,850 F-14Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)NOTE 6 - DEBT OBLIGATIONS Debt obligations consist of the following (in thousands): January 31, 2015 February 1, 2014Revolving Credit Facility$41,910 $55,395Finance lease obligations4,725 5,584Other financing753 2,246Total debt obligations47,388 63,225Less: Current portion of debt obligations1,715 2,354Long-term debt obligations$45,673 $60,871 On October 6, 2014, we entered into the $350.0 million Revolving Credit Facility, which replaced our former $250.0 million senior securedrevolving credit facility that was set to mature on June 30, 2016. The Revolving Credit Facility (i) increases availability to $300.0 million, with a seasonalincrease to $350.0 million, (ii) includes a $50.0 million letter of credit subfacility, (iii) provides better pricing terms and (iv) extends the maturity date toOctober 6, 2019.We use the Revolving Credit Facility to provide financing for working capital and general corporate purposes, as well as to finance capitalexpenditures and to support our letter of credit requirements. Borrowings are limited to the availability under a borrowing base that is determined principallyon eligible inventory as defined by the Revolving Credit Facility agreement. Inventory, cash and cash equivalents are pledged as collateral. The dailyinterest rates are determined by a prime rate or LIBOR, plus an applicable margin, as set forth in the Revolving Credit Facility agreement. During 2014, theweighted average interest rate on outstanding borrowings and the average daily borrowings under the Revolving Credit Facility were 1.71% and $81.4million, respectively, as compared to 1.82% and $57.6 million in 2013.Letters of credit issued under the Revolving Credit Facility support certain merchandise purchases and collateralize retained risks and deductiblesunder various insurance programs. At January 31, 2015, we had outstanding letters of credit totaling approximately $6.7 million. These letters of credit expirewithin twelve months of issuance. Excess borrowing availability under the Revolving Credit Facility at January 31, 2015 was $251.4 million.The Revolving Credit Facility agreement contains covenants which, among other things, restrict, based on required levels of excess availability, (i)the amount of additional debt or capital lease obligations, (ii) the payment of dividends and repurchase of common stock under certain circumstances and(iii) related party transactions. The agreement also contains a fixed charge coverage ratio covenant in the event excess availability is below a definedthreshold or an event of default has occurred. At January 31, 2015, we were in compliance with all of the financial covenants of the Revolving Credit Facilityagreement and expect to continue to be in compliance in 2015.F-15Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)While infrequent in occurrence, occasionally we are responsible for the construction of leased stores and for paying project costs. ASC No. 840-40-55, The Effect of Lessee Involvement in Asset Construction, requires us to be considered the owner (for accounting purposes) of this type of project during theconstruction period. Such leases are accounted for as finance lease obligations with the amounts received from the landlord being recorded in debtobligations. Interest expense is recognized at a rate that will amortize the finance lease obligation over the initial term of the lease. Where ASC No. 840-40-55 was applicable, we have recorded finance lease obligations with interest rates ranging from 6.1% to 16.9% on our consolidated financial statementsrelated to five store leases as of January 31, 2015. Minimum annual payments required under existing finance lease obligations as of January 31, 2015 are asfollows (in thousands):Fiscal YearMinimum LeasePayments Less: Interest Principal Payments2015$1,366 $404 $96220161,366 311 1,05520171,366 207 1,15920181,096 101 9952019580 26 554Total$5,774 $1,049 $4,725 During 2013, we financed approximately $2.2 million of capital expenditures, bearing interest of 2.1% of which $1.5 million was paid in 2014 and$0.7 million will be paid in 2015.NOTE 7 – OTHER LONG-TERM LIABILITIESThe components of other long-term liabilities were as follows (in thousands): January 31, 2015 February 1, 2014Deferred rent$45,053 $49,376Deferred compensation16,762 21,023Pension liability8,503 4,723Deferred revenue under ADS agreement5,500 6,500Other2,000 3,000Other long-term liabilities$77,818 $84,622 NOTE 8 - COMMITMENTS AND CONTINGENCIESWe have numerous contractual commitments for purchases of merchandise inventories, services arising in the ordinary course of business, letters ofcredit, Revolving Credit Facility and other debt service and leases. Contractual obligations for purchase of goods or services are defined as agreements thatare enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities. In the ordinary course of business, we enterinto arrangements with vendors to purchase merchandise typically up to six months in advance of expected delivery.From time to time, we are involved in various legal proceedings arising in the ordinary course of our business. We do not believe that any pendinglegal proceedings, either individually or in the aggregate, are material to our financial condition, results of operations or cash flows.F-16Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)NOTE 9 - STOCKHOLDERS' EQUITYOur deferred compensation plan covering executives and certain officers provides an investment option that allows participants to elect to purchaseshares of our common stock ("Company Stock Investment Option"). We established a grantor trust to facilitate the collection of funds and purchase our shareson the open market at prevailing market prices. All shares purchased through the grantor trust are held in the trust until the participants are eligible to receivethe benefits under the terms of the plan. At the time of the participant's eligibility, the deferred compensation obligation related to the Company StockInvestment Option is settled by the delivery of the fixed number of shares held by the grantor trust on the participant's behalf. In 2014, 2013 and 2012,participants in our deferred compensation plan elected to invest approximately $0.4 million, $0.3 million and $0.1 million, respectively, of the total amountof deferred compensation withheld, in the Company Stock Investment Option. The purchase of shares made by the grantor trust on behalf of the participantsis included in treasury stock and the corresponding deferred compensation obligation is included in additional paid-in capital.On June 11, 2014, we announced that our Board approved a 12% increase in our quarterly cash dividend rate to $0.14 per share from the previousquarterly rate of $0.125 per share. The new quarterly rate of $0.14 per share is applicable to dividends declared by our Board beginning August 21, 2014. OnFebruary 20, 2015, our Board declared a quarterly cash dividend of $0.14 per share on our common stock, payable on March 18, 2015, to shareholders ofrecord at the close of business on March 3, 2015. On March 7, 2011, our Board approved the 2011 Stock Repurchase Program which authorized us to repurchase up to $200.0 million of ouroutstanding common stock. The 2011 Stock Repurchase Program will expire when we have repurchased $200.0 million of our outstanding common stock,unless terminated earlier by our Board. Through June 10, 2012, we repurchased approximately $100.1 million of our outstanding common stock under the2011 Stock Repurchase Program. On June 11, 2012, we announced that our Board had chosen not to spend additional capital under the 2011 StockRepurchase Program for the time being. In addition, our Board authorized us to repurchase shares of our outstanding common stock equal to the amount ofthe proceeds and related tax benefits from the exercise of stock options, SARs and other equity grants. Under such authorization, we repurchased 172,214 and1,626,037 shares of our common stock for approximately $2.8 million and $31.4 million during 2014 and 2013, respectively. Purchases of shares of ourcommon stock may be made from time to time, either on the open market or through privately negotiated transactions and are financed by our existing cash,cash flow and other liquidity sources, as appropriate.F-17Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)NOTE 10 - PRIVATE LABEL CREDIT CARD PROGRAM On August 8, 2012, we entered into an Amended and Restated Private Label Credit Card Plan Agreement ("Agreement") with World FinancialNetwork Bank (now Comenity Bank) ("Bank"), an affiliate of Alliance Data Systems Corporation ("ADS"). The Agreement supersedes, restates and amends inits entirety an Amended and Restated Private Label Credit Card Program Agreement dated March 5, 2004, and various subsequent amendments thereto,between us and the Bank. Under the terms of the Agreement, which will remain in effect until July 31, 2021, the Bank provides private label credit card services for our creditcard program, including account acquisition and activation, receivables funding, card authorization, private label credit card issuance, statement generation,remittance processing, customer service functions and marketing services. We are required to perform certain duties, including electronic processing andtransmitting of transaction records and marketing and promoting the private label credit card program. As consideration, among other payments set forth inthe Agreement, the Bank pays us a monthly net portfolio yield payment and an annual portfolio performance bonus, if earned. Under the previous agreement,we received a premium or paid a discount on certain private label credit card sales, a share of certain fees generated by the portfolio and marketing support.We received certain upfront payments upon execution of the Agreement that are being recognized over the life of the Agreement. We realized $54.1million, $46.3 million and $31.0 million related to our private label credit card program during 2014, 2013 and 2012, respectively, which have beenrecorded as a reduction to SG&A expenses.NOTE 11 - OPERATING LEASESWe lease stores, our corporate headquarters, one distribution center and equipment under operating leases. Such leases generally contain renewaloptions and require that we pay utilities, taxes and maintenance expenses. A number of store leases provide for escalating minimum rent. Rent expense foroperating leases for 2014, 2013 and 2012 was $80.8 million, $80.7 million and $75.9 million, respectively, and includes minimum rentals of $77.1 million,$76.8 million and $71.5 million in 2014, 2013 and 2012, respectively. Rent expense also includes contingent rentals of $3.7 million, $3.9 million and $4.4million in 2014, 2013 and 2012, respectively, and sublease rental income of $0.01 million, $0.01 million and $0.01 million in 2014, 2013 and 2012,respectively.Minimum rental commitments on long-term, non-cancelable operating leases at January 31, 2015, net of sub-lease rental income, are as follows (inthousands):Fiscal Year Commitments2015 $89,7632016 81,0822017 71,2862018 58,6152019 41,310Thereafter 112,023Total $454,079 F-18Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)NOTE 12 – STOCK-BASED COMPENSATIONAs approved by our shareholders, we established the Amended and Restated 2001 Equity Incentive Plan ("2001 Equity Incentive Plan") and theAmended and Restated 2008 Equity Incentive Plan ("2008 Equity Incentive Plan" and collectively with the 2001 Equity Incentive Plan, "Equity IncentivePlans") to reward, retain and attract key personnel. The Equity Incentive Plans provide for grants of non-qualified or incentive stock options, SARs,performance shares or units, stock units and stock grants. To fund the 2001 and 2008 Equity Incentive Plans, 12,375,000 and 4,550,000 shares of ourcommon stock were reserved for issuance upon exercise of awards, respectively. The 2001 Equity Incentive Plan expired in the second quarter of 2014.The following table summarizes stock-based compensation expense by type of grant for each period presented (in thousands, except per shareamounts): Fiscal Year 2014 2013 2012Stock options and SARs$703 $1,521 $3,034Non-vested stock5,034 4,204 3,198Performance shares3,927 2,692 1,571Total stock-based compensation expense9,664 8,417 7,803Related tax benefit(3,634) (3,165) (2,869)Stock-based compensation expense, net of tax$6,030 $5,252 $4,934 As of January 31, 2015, we had unrecognized compensation cost of $16.0 million related to stock-based compensation awards granted. That cost isexpected to be recognized over a weighted average period of 2.3 years.Stock Options and SARsWe historically granted stock options and SARs to our employees. The right to exercise stock options and SARs generally vests over four years fromthe date of grant, with 25% vesting at the end of each of the first four years following the date of grant. Stock options and SARs are settled by issuance ofcommon stock. Options issued prior to January 29, 2005, will generally expire, if not exercised, within ten years from the date of the grant, while options andSARs granted after that date generally expire, if not exercised, within seven years from the date of grant. No stock options or SARs were granted during 2014,2013 or 2012.The following table summarizes stock options and SARs activity during 2014: Number ofOutstandingShares WeightedAverageExercise Price WeightedAverageRemainingContractualTerm(years) AggregateIntrinsicValue (inthousands)Outstanding at February 1, 20141,062,851 $16.52 Exercised(578,943) 16.41 Forfeited(65,383) 17.68 Outstanding at January 31, 2015418,525 $16.49 2.2 $1,468 Vested or expected to vest at January 31, 2015404,572 $16.41 2.2 $1,452 Exercisable at January 31, 2015348,762 $16.02 2.0 $1,387F-19Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)The following table summarizes non-vested stock options and SARs activity during 2014:Stock Options/ SARs Number ofShares WeightedAverageGrant DateFair ValueNon-vested at February 1, 2014 292,075 $7.97Vested (204,687) 7.67Forfeited (17,625) 8.60Outstanding at January 31, 2015 69,763 8.69 The aggregate intrinsic value of stock options and SARs, defined as the amount by which the market price of the underlying stock on the date ofexercise exceeds the exercise price of the award, exercised during 2014, 2013 and 2012 was $3.7 million, $6.0 million and $6.9 million, respectively. Non-vested StockWe grant shares of non-vested stock to our employees and non-employee directors. The non-vested stock converts one for one to common stock atthe end of the vesting period at no cost to the recipient to whom it is awarded. The vesting period of the non-vested stock ranges from one to four years fromthe date of grant.The following table summarizes non-vested stock activity during 2014:Non-vested Stock Number ofShares WeightedAverageGrant DateFair ValueOutstanding at February 1, 2014 652,459 $20.40Granted 356,854 22.81Vested (254,220) 19.89Forfeited (76,489) 21.24Outstanding at January 31, 2015 678,604 21.76 The aggregate intrinsic value of non-vested stock that vested during 2014, 2013 and 2012 was $5.7 million, $4.8 million and $2.3 million,respectively. The weighted-average grant date fair value for non-vested stock granted in 2014, 2013 and 2012 was $22.81, $24.97 and $16.10, respectively.The payment of the employees' tax liability for a portion of the non-vested stock that vested during 2014 was satisfied by withholding shares with a fair valueequal to the tax liability. As a result, the actual number of shares issued was 188,920.Performance SharesWe grant performance shares as a means of rewarding management for our long-term performance based on shareholder return performancemeasures. The actual number of shares that may be issued ranges from zero to a maximum of twice the number of granted shares outstanding, as reflected inthe table below and is based on our shareholder return performance relative to a specific group of companies over a 3-year performance cycle. If earned, theperformance shares vest following the 3-year cycle. Compensation expense, which is recorded ratably over the vesting period, is based on the fair value atgrant date and the anticipated number of shares of our common stock, which is determined using a Monte Carlo probability model. Grant recipients do nothave any shareholder rights until the granted shares have been issued.F-20Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)The following table summarizes information about the performance shares that were outstanding at January 31, 2015: PeriodGranted Target SharesOutstanding atBeginningof Year TargetSharesGranted Target SharesVested TargetSharesForfeited Target SharesOutstandingat Endof Year WeightedAverageGrant DateFair Value perShare2012 198,200 — (8,300) (20,800) 169,100 $18.042013 151,250 — (9,941) (23,059) 118,250 33.812014 — 168,445 — (2,292) 166,153 33.84Total 349,450 168,445 (18,241) (46,151) 453,503 During 2014, 16,620 shares vested related to the 2011 performance share grant. The aggregate intrinsic value of shares that vested during 2014 was$0.8 million. The payment of the recipients' tax liability for shares vesting during 2014 of approximately $0.2 million was satisfied by withholding shareswith a fair value equal to the tax liability. As a result, the actual number of shares issued was 24,508.F-21Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)NOTE 13 - BENEFIT PLANS401(k) Plan. We have a contributory 401(k) savings plan ("401(k) Plan") generally available to full and part-time employees with 60 days of service,who are age 21 or older. Under the 401(k) Plan, participants may contribute up to 50% of their qualifying earnings on a pre-tax basis, and up to 10% of theirqualifying earnings on a post-tax basis, subject to certain restrictions. We currently match 50% of each participant's pre-tax contributions, limited up to 6% ofeach participant's compensation under the Plan. We may make discretionary matching contributions during the year. Our matching contributions expense forthe 401(k) Plan were approximately $1.4 million, $1.5 million and $1.5 million in 2014, 2013 and 2012, respectively.Deferred Compensation Plans. We have two nonqualified deferred compensation plans ("DC Plans") which provide executives and other keyemployees with the opportunity to participate in unfunded, deferred compensation programs that are not qualified under the Internal Revenue Code of 1986,as amended, ("Code"). Generally, the Code and ERISA restrict contributions to a 401(k) plan by highly compensated employees. The DC Plans are intendedto allow participants to defer income on a pre-tax basis. Under the DC Plans, participants may defer up to 50% of their base salary and up to 100% of theirbonus and earn a rate of return based on actual investments chosen by each participant. We have established grantor trusts for the purposes of holding assetsto provide benefits to the participants. For the plan covering executives, we will match 100% of each participant's contributions, up to 10% of the sum oftheir base salary and bonus. For the plan covering other key employees, we may make a bi-weekly discretionary matching contribution. We currently match50% of each participant's contributions, up to 6% of the participant's compensation offset by the contribution we make to the participant's 401(k) account, ifany. For both DC Plans, our contributions are vested 100%. In addition, we may, with approval by our Board, make an additional employer contribution inany amount with respect to any participant as is determined in our sole discretion. Our matching contribution expense for the DC Plans was approximately$1.3 million, $0.9 million and $1.7 million for 2014, 2013 and 2012, respectively.Non-Employee Director Equity Compensation Plan. In 2003, we adopted, and our shareholders approved, the 2003 Non-Employee Director EquityCompensation Plan. The plan was amended and restated effective June 10, 2014. We reserved 225,000 shares of our common stock to fund this plan. Underthis plan, non-employee directors have the option to defer all or a portion of their annual compensation fees and to receive such deferred fees in the form ofrestricted stock or deferred stock units as defined in this plan. At February 1, 2014, $0.2 million was deferred under this plan and as of January 31, 2015, therewere no participants in or amounts deferred under this plan.Frozen Defined Benefit Plan. We sponsor a defined benefit plan ("DB Plan"), which covers substantially all employees who had met eligibilityrequirements and were enrolled prior to June 30, 1998. The DB Plan was frozen effective June 30, 1998.Benefits for the DB Plan are administered through a trust arrangement, which provides monthly payments or lump sum distributions. Benefits underthe DB Plan were based upon a percentage of the participant's earnings during each year of credited service. Any service after the date the DB Plan was frozenwill continue to count toward vesting and eligibility for normal and early retirement for existing participants. The measurement dates used to determinepension benefit obligations were January 31, 2015 and February 1, 2014. F-22Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)Information regarding the DB Plan is as follows (in thousands): Fiscal Year 2014 2013Change in benefit obligation: Benefit obligation at beginning of year$36,579 $40,037Employer service cost210 360Interest cost1,692 1,723Actuarial (gain) loss6,165 (1,609)Plan disbursements(3,351) (3,932)Projected benefit obligation at end of year41,295 36,579 Change in plan assets: Fair value of plan assets at beginning of year31,856 33,339Actual return on plan assets4,287 2,449Employer contributions— —Plan disbursements(3,351) (3,932)Fair value of plan assets at end of year32,792 31,856 Underfunded status$(8,503) $(4,723) Amounts recognized in the consolidated balance sheet consist of: Accrued benefit liability - included in other long-term liabilities$(8,503) $(4,723)Amount recognized in accumulated other comprehensive loss, pre-tax (a)11,055 7,442 (a) Consists solely of net actuarial losses as there are no prior service costs. Fiscal Year 2014 2013 Weighted-average assumptions: For determining benefit obligations at year-end: Discount rate3.90% 4.81% Fiscal Year 2014 2013 2012For determining net periodic pension cost for year: Discount rate4.81% 4.43% 5.10%Expected return on assets7.00% 7.00% 7.00%The discount rate was determined using yields on a hypothetical bond portfolio that matches the approximated cash flows of the DB Plan. Wedevelop our long-term rate of return assumptions using long-term historical actual return data considering the mix of investments that comprise plan assetsand input from professional advisors. The DB Plan's trustees have engaged investment advisors to manage and monitor performance of the investments of theDB Plan's assets and consult with the DB Plan's trustees.F-23Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)The allocations of DB Plan assets by category are as follows: Fiscal Year 2015 TargetAllocation 2014 2013Equity securities50% 49% 56%Fixed income securities50 50 42Other - primarily cash— 1 2Total100% 100% 100% We employ a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return onDB Plan assets for a prudent level of risk. The investment portfolio consists of actively managed and indexed mutual funds of domestic and internationalequities and investment-grade corporate bonds and U.S. government securities. Investment risk is measured and monitored on an ongoing basis throughquarterly investment portfolio reviews and annual liability measurements. The following tables present the DB Plan assets measured at fair value on a recurring basis in the consolidated financial statements (in thousands): January 31, 2015 Balance Quoted Pricesin ActiveMarkets forIdenticalInstruments(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3)Mutual funds: Equity securities$15,943 $15,943 $— $—Fixed income securities16,437 16,437 — —Other - primarily cash412 412 — —Total$32,792 $32,792 $— $— February 1, 2014 Balance Quoted Pricesin ActiveMarkets forIdenticalInstruments(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3)Mutual funds: Equity securities$17,773 $17,773 $— $—Fixed income securities13,512 13,512 — —Other - primarily cash571 571 — —Total$31,856 $31,856 $— $— F-24Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)The components of net periodic benefit cost for the DB Plan were as follows (in thousands): Fiscal Year 2014 2013 2012Net periodic pension cost for the fiscal year: Employer service cost$210 $360 $—Interest cost1,692 1,723 1,889Expected return on plan assets(2,134) (2,237) (2,253)Net loss amortization399 610 414Net pension cost$167 $456 $50 Other changes in DB Plan assets and benefit obligations recognized in other comprehensive loss are as follows (in thousands): Fiscal Year 2014 2013Amortization of net loss$(399) $(610)Net loss (gain)4,012 (1,821)Net change recognized in other comprehensive loss, pre-tax$3,613 $(2,431) The estimated net loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next year is $0.7million. The amortization of net loss is recorded in SG&A expenses.Our funding policy is to make contributions to maintain the minimum funding requirements for our pension obligation in accordance with ERISA.We may elect to contribute additional amounts to maintain a level of funding to minimize the Pension Benefit Guaranty Corporation premium costs or tocover short-term liquidity needs of the DB Plan in order to maintain current invested positions. We do not have a minimum contribution requirement for2015.The following benefit payments are expected to be paid (in thousands):Fiscal YearPayments2015$3,00520163,52920173,40120183,13320193,408Fiscal years 2020 - 202415,641 F-25Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)NOTE 14 - INCOME TAXES All of our operations are domestic. Income tax expense consisted of the following (in thousands): Fiscal Year 2014 2013 2012Federal income tax expense: Current$12,948 $9,462 $17,467Deferred3,048 (761) 1,170 15,996 8,701 18,637State income tax expense: Current2,323 1,509 3,626Deferred300 (47) (62) 2,623 1,462 3,564Total income tax expense$18,619 $10,163 $22,201 Income tax is included in the consolidated financial statements as follows (in thousands): Fiscal Year 2014 2013 2012Continuing operations22,847 15,400 24,373Discontinued operations(4,228) (5,237) (2,172)Total income tax expense$18,619 $10,163 $22,201Reconciliation between the federal income tax expense charged to income before income tax computed at statutory tax rates and the actual incometax expense recorded follows (in thousands): Fiscal Year 2014 2013 2012Federal income tax expense at the statutory rate$17,314 $9,382 $21,133State income taxes, net1,811 974 2,199Uncertain tax position92 531 —Other590 399 (99)Job credits(1,188) (1,123) (1,032)Total income tax expense$18,619 $10,163 $22,201F-26Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)Deferred tax assets (liabilities) consist of the following (in thousands): January 31, 2015 February 1, 2014Gross deferred tax assets: Net operating loss carryforwards$521 $599Accrued expenses2,392 3,031Lease obligations18,690 20,658Deferred compensation9,967 13,371Deferred income4,707 5,319Other2,905 1,366 39,182 44,344Gross deferred tax liabilities: Inventory(5,756) (9,675)Depreciation and amortization(55,320) (54,570) (61,076) (64,245) Valuation allowance(402) (464)Net deferred tax liabilities$(22,296) $(20,365)ASC No. 740, Income Taxes, requires recognition of future tax benefits of deferred tax assets to the extent such realization is more likely than not. Net non-current deferred tax liabilities were $20.5 million and $15.6 million and net current deferred tax liabilities were $1.8 million and $4.7 million atJanuary 31, 2015 and February 1, 2014, respectively. Consistent with the requirements of ASC No. 740, the tax benefits recognized related to pre-reorganization deferred tax assets have been recorded as a direct addition to additional paid-in capital. The remaining valuation allowance of $0.4 millionand $0.5 million at January 31, 2015 and February 1, 2014, respectively, was established for pre-reorganization state net operating losses, which may expireprior to utilization. Adjustments are made to reduce the recorded valuation allowance when positive evidence exists that is sufficient to overcome thenegative evidence associated with those losses.We have net operating loss carryforwards for state income tax purposes of approximately $12.5 million which, if not utilized, will expire in varyingamounts between 2015 and 2021. We do not have any net operating loss carryforwards for federal income tax purposes.As of January 31, 2015, the total unrecognized tax benefit was $0.6 million, which if recognized, would favorably affect the effective income taxrate in a future period. A reconciliation of the beginning and ending amount of total unrecognized tax benefits, including associated interest, is as follows (inthousands): 2014Balance, beginning of period$531Additions based on tax positions related to 201479Additions for tax positions for prior years13Balance, end of period$623 F-27Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)We file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. The Internal Revenue Service ("IRS") hasinitiated an examination of the federal tax return for 2012 and has completed its field examination of the federal income tax returns for 2009, 2010 and 2011.We have received a Revenue Agent Report from the IRS that seeks adjustments to income before taxes of approximately $2.3 million in connection with anunresolved issue related to Section 199, Domestic Production Deduction. In July 2014, we filed a protest with the IRS Appeals Office regarding the proposedadjustment. Meetings with the Appeals Office have not been set. We believe that adequate provision has been made for any adjustments that may result fromtax audits. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner notconsistent with our expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs.We recognize penalty and interest accrued related to unrecognized tax benefits as an income tax expense. During the years ended January 31, 2015,February 1, 2014, and February 2, 2013, the amount of penalties and interest accrued was almost nil. We are subject to U.S. federal income tax examinationsby tax authorities for 2013 forward. We are also subject to audit by the taxing authorities of 38 states for years generally after 2009.F-28Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)NOTE 15 - DISCONTINUED OPERATIONSOn March 7, 2014, we divested Steele's, an off-price concept that we launched in November 2011, in order to focus solely on our core specialtydepartment store business. Accordingly, the results of operations of Steele's are reflected in discontinued operations for all periods presented.Revenues and pre-tax loss of Steele's, which includes the 2014 loss on the sale of Steele's of $9.7 million, for each period presented were as follows(in thousands): Fiscal Year 2014 2013 2012Net Sales$2,414 $24,075 $18,098 Pre-tax loss from discontinued operations11,231 13,811 5,909 There were no assets or liabilities related to Steele’s included in the condensed consolidated financial statements as of January 31, 2015. Thecarrying values of the major assets and liabilities related to Steele’s included in the consolidated financial statements as of February 1, 2014 were as follows(in thousands): February 1, 2014Merchandise inventories, net$10,498Property, equipment and leasehold improvements, net732Other assets442Liabilities809NOTE 16 - SOUTH HILL CONSOLIDATIONOn February 11, 2013, we announced plans to consolidate our South Hill, Virginia operations into our Houston, Texas corporate headquarters("South Hill Consolidation"). This action was the culmination of an initiative that we began in 2012. The reasons for the South Hill Consolidation were: (i) tohave department store functions and processes entirely together in one location, (ii) to strengthen collaboration, teamwork and communications, whilestreamlining operations, enhancing overall operational efficiency and reducing costs, and (iii) to create consistency in merchandising, marketing and e-commerce.The South Hill Consolidation was completed during 2013, and all liabilities related to the consolidation have been paid. Total expenses in 2013associated with the South Hill Consolidation, were $11.3 million. The costs, which were primarily for severance and transitional payroll and related benefits,recruiting and relocation costs, and visual presentation supplies and other, were recorded in SG&A expenses in the consolidated financial statements. Weincurred and paid $2.7 million in 2012 primarily for transitional payroll and related benefits, recruiting and relocation costs, and property and equipmentimpairment. Merchandise cost of sales for 2013 also includes approximately $12.5 million related to the South Hill Consolidation due to inventoryliquidation costs associated with discontinued vendors and merchandise and advertising allowances deferred in inventory. During 2014, we completed the sale of the building which housed our former South Hill operations. The building was sold for a gain of $0.8 millionand is recorded as an offset to SG&A expenses.F-29Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStage Stores, Inc.Notes to Consolidated Financial Statements – (continued)NOTE 17 - QUARTERLY FINANCIAL INFORMATION (unaudited)The following table shows quarterly information (in thousands, except per share amounts): Fiscal Year 2014 Q1Q2Q3Q4Net sales$372,040 $377,446 $364,197 $524,886Gross profit77,941 112,340 88,166 171,359 Income (loss) from continuing operations$(12,046) $11,192 $(5,107) $43,814Loss from discontinued operations(6,748) — (161) (94)Net income (loss)$(18,794) $11,192 $(5,268) $43,720 Basic earnings (loss) per share data: Continuing operations$(0.38) $0.35 $(0.16) $1.37Discontinued operations(0.22) — (0.01) —Basic earnings (loss) per share(0.60) 0.35 (0.17) 1.37 Diluted earnings (loss) per share data: Continuing operations$(0.38) $0.35 $(0.16) $1.36Discontinued operations(0.22) — (0.01) —Diluted earnings (loss) per share(0.60) 0.35 (0.17) 1.36 Basic weighted average shares31,492 31,757 31,794 31,657Diluted weighted average shares31,492 31,825 31,794 31,740 Fiscal Year 2013 Q1 Q2 Q3 Q4Net sales$372,103 $389,991 $354,850 $492,537Gross profit89,629 115,575 83,290 147,992 Income (loss) from continuing operations$(6,188) $10,832 $(9,573) $30,145Loss from discontinued operations(668) (1,225) (1,398) (5,283)Net income (loss)$(6,856) $9,607 $(10,971) $24,862 Basic earnings (loss) per share data: Continuing operations$(0.19) $0.33 $(0.30) $0.95Discontinued operations(0.02) (0.04) (0.04) (0.17)Basic earnings (loss) per share(0.21) 0.29 (0.34) 0.79 Diluted earnings (loss) per share data: Continuing operations$(0.19) $0.32 $(0.30) $0.95Discontinued operations(0.02) (0.03) (0.04) (0.17)Diluted earnings (loss) per common share(0.21) 0.29 (0.34) 0.78 Basic weighted average shares32,306 32,762 31,854 31,215Diluted weighted average shares32,306 33,073 31,854 31,438F-30Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 21SUBSIDIARIES OF STAGE STORES, INC.NameJurisdiction of IncorporationSpecialty Retailers, Inc.TexasSource: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 23 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement Nos. 333-84072, 333-120960, 333-151566, 333-151568, 333-160758, 333-162300 and 333-176094 on Form S-8 of our report dated April 1, 2015, relating to the consolidated financial statementsof Stage Stores, Inc. and subsidiary and the effectiveness of Stage Stores, Inc.'s internal control over financial reporting, appearing inthis Annual Report on Form 10-K of Stage Stores, Inc. and subsidiary for the year ended January 31, 2015./s/ Deloitte & Touche LLP Houston, TexasApril 1, 2015Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 24.1POWER OF ATTORNEYKNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a Director of Stage Stores, Inc., a Nevadacorporation (the "Company"), hereby constitutes and appoints Michael L. Glazer and Oded Shein, and each of them (with full powerto each of them to act alone), the undersigned’s true and lawful attorneys-in-fact and agents, with full power of substitution, for theundersigned and in the undersigned’s name, place and stead in any and all capacities, to sign and date, one or more Annual Reports forthe Company's 2014 fiscal year ended January 31, 2015 on Form 10-K under the Securities Exchange Act of 1934, as amended, orsuch other form as any such attorney-in-fact may deem necessary or desirable, and any amendments thereto, each in such form as theyor any one of them may approve, and to file the same with all exhibits thereto and other documents in connection therewith with theSecurities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to doand perform each and every act and thing requisite and necessary to be done so that such Annual Report shall comply with theSecurities Exchange Act of 1934, as to all intents and purposes as he or she might or could do in person, hereby ratifying andconfirming all that said attorneys-in-fact and agents, or either of them or their substitute or resubstitute, may lawfully do or cause to bedone by virtue hereof.IN WITNESS WHEREOF, each of the undersigned has signed this Power of Attorney as of the 16th day of February, 2015./s/ Alan J. Barocas /s/ Earl J. HesterbergAlan J. Barocas Earl J. Hesterberg /s/ Elaine D. Crowley /s/ Lisa R. KrancElaine D. Crowley Lisa R. Kranc /s/ Diane M. Ellis /s/ William J. MontgorisDiane M. Ellis William J. Montgoris /s/ Michael L. Glazer /s/ C. Clayton Reasor Michael L. Glazer C. Clayton Reasor /s/ Gabrielle E. Greene /s/ Ralph P. ScozzafavaGabrielle E. Greene-Sulzberger Ralph P. ScozzafavaSource: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 24.2POWER OF ATTORNEYKNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Executive Officer of Stage Stores, Inc., a Nevadacorporation (the “Company”), in connection with the preparation and filing of reports on Form 3, 4 and 5 (as well as applications forEDGAR filer identification numbers and any other reports required under Section 16(a) of the Securities Exchange Act of 1934) andForm 144, if required under the Securities Act of 1933, on my behalf including, but not limited to, those cases where time is short or Iam unavailable to review the form, hereby constitute and appoint Oded Shein, Richard E. Stasyszen and Chadwick P. Reynolds, andeach of them (with full power to each of them to act alone), the undersigned’s true and lawful attorneys-in-fact and agents, for theundersigned and on the undersigned’s behalf and in the undersigned’s name, place and stead, in any and all capacities, to prepare, sign,and file with the Securities and Exchange Commission reports on Form 3, 4 and 5 (as well as applications for EDGAR fileridentification numbers and any other reports required under Section 16(a) of the Securities Exchange Act of 1934) and Form 144, ifrequired under the Securities Act of 1933, together with all amendments thereto, with all exhibits and any and all documents requiredto be filed with respect thereto with the Securities and Exchange Commission and any other regulatory authority granting unto suchattorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary tobe done in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do in person, herebyratifying and confirming all that said attorneys-in-fact and agents, or any of them, might lawfully do or cause to be done by virtuehereof.IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of the 16th day of February, 2015.DIRECTORS/s/ Alan J. Barocas /s/ Earl J. HesterbergAlan J. Barocas Earl J. Hesterberg /s/ Elaine D. Crowley /s/ Lisa R. KrancElaine D. Crowley Lisa R. Kranc /s/ Diane M. Ellis /s/ William J. MontgorisDiane M. Ellis William J. Montgoris /s/ Michael L. Glazer /s/ C. Clayton Reasor Michael L. Glazer C. Clayton Reasor /s/ Gabrielle E. Greene /s/ Ralph P. Scozzafava Gabrielle E. Greene-Sulzberger Ralph P. ScozzafavaSource: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXECUTIVE OFFICERS/s/ William E. Gentner /s/ Stephen B. ParsonsWilliam E. Gentner Stephen B. Parsons /s/ Steven L. Hunter /s/ Chadwick P. ReynoldsSteven L. Hunter Chadwick P. Reynolds /s/ Steven P. Lawrence /s/ Oded SheinSteven P. Lawrence Oded Shein /s/ Russell A. Lundy /s/ Richard E. StasyszenRussell A. Lundy Richard E. Stasyszen Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TORULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDAS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael L. Glazer, certify that: 1.I have reviewed this Annual Report on Form 10-K of Stage Stores, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant, and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financialreporting.5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Date: April 1, 2015/s/ Michael L. Glazer Michael L. Glazer President and Chief Executive OfficerSource: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TORULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDAS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Oded Shein, certify that: 1.I have reviewed this Annual Report on Form 10-K of Stage Stores, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant, and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financialreporting.5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Date: April 1, 2015/s/ Oded Shein Oded Shein Executive Vice President, Chief Financial Officer and TreasurerSource: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 32 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Stage Stores, Inc. (the "Company") on Form 10-K for the year ended January 31, 2015 as filed with the Securities andExchange Commission on the date hereof (the "Report"), we, Michael L. Glazer and Oded Shein, Chief Executive Officer and Chief Financial Officer,respectively, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to ourknowledge: 1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date: April 1, 2015/s/ Michael L. Glazer Michael L. Glazer President and Chief Executive Officer /s/ Oded Shein Oded Shein Executive Vice President, Chief Financial Officer and TreasurerSource: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: STAGE STORES INC, 10-K, April 01, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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