Stage Stores Inc.
Annual Report 2015

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KSTAGE STORES INC - SSIFiled: March 30, 2016 (period: January 30, 2016)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 30, 2016 or¨¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______Commission File 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.) 2425 WEST LOOP SOUTH, HOUSTON, TEXAS(Address of Principal Executive Offices)77027(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, March 30, 2016Powered 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. 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 þ Accelerated filer o 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 July 31, 2015 (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 $554,753,686 (based upon the closing price of the registrant's commonstock as reported by the New York Stock Exchange on July 31, 2015).As of March 22, 2016, there were 26,876,342 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 2, 2016, which will be filed within120 days of the end of the registrant's fiscal year ended January 30, 2016 ("Proxy Statement"), are incorporated by reference into Part III of this Form 10-K tothe extent described therein.2Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 Comments14Item 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 Securities16Item 6.Selected Financial Data19Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations22Item 7A.Quantitative and Qualitative Disclosures About Market Risk37Item 8.Financial Statements and Supplementary Data37Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure37Item 9A.Controls and Procedures37Item 9B.Other Information38 PART III Item 10.Directors, Executive Officers and Corporate Governance39Item 11.Executive Compensation40Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters40Item 13.Certain Relationships and Related Transactions, and Director Independence40Item 14.Principal Accountant Fees and Services40 PART IV Item 15.Exhibits and Financial Statement Schedules41 Signatures 45 Index to Consolidated Financial Statements of Stage Stores, Inc.F-13Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 "2013" is a reference to the fiscal year ended February 1, 2014, "2014" is a reference to the fiscalyear ended January 31, 2015 and "2015" is a reference to the fiscal year ended January 30, 2016. 2013, 2014 and 2015 each consisted of 52 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 through our direct-to-consumer business. Ourmerchandise assortment is a well-edited selection of moderately priced brand name and private label apparel, accessories, cosmetics, footwear and homegoods. As of January 30, 2016, we operated 834 specialty department stores in 39 states under the BEALLS, GOODY'S, PALAIS ROYAL, PEEBLES andSTAGE 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 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 assortments offer name brand, trend-right apparel, accessories, cosmetics, footwear and home goods.While our broad assortments attract a wide demographic, our primary target customers are style and value savvy women over the age of 35 who are married,employed full time and have an average household income of $55,000. Our customer research reveals our target customer loves shopping and enjoys ashopping experience that brings her style, value and inspiration where she lives.CompetitionThe retail industry is highly competitive, with competition coming from both brick-and-mortar stores as well as e-commerce. As a result of our smalland mid-sized market focus, our stores generally face less competition because we provide a broad selection of brand name merchandise that is generally nototherwise available locally. In small to mid-sized communities where we do compete for brand name merchandise sales, competition generally comes fromlocal retailers, small regional chains and, to a lesser extent, national department stores. In larger markets, where we compete against other national departmentstore chains, we distinguish ourselves by offering a high level of customer service and the advantage of generally being in neighborhood locations withconvenient parking and easy access. We view our ability to provide our customers the options of shopping both in store and online, particularly inunderserved markets, as a competitive advantage. Additional competitive advantages over local retailers and small regional chains in the small to mid-sizedcommunities include (i) economies of scale (ii) strong vendor relationships (iii) a widely used private label credit card and (iv) extensive experience in smalland mid-size markets.4Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 people. We predominantly lease our locations and are generally secondary users of space, allowing us to secureadvantageous occupancy terms. Our average store of 18,000 square feet creates an opportunity to offer a selection that feels comprehensive and curated in aninviting 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, Nine West, Estee Lauder, Clinique, Nautica, Skechers and Adidas. 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, store operations, human resources, information systems and finance. Ourmanagement team has built a solid operating foundation based on sound retail principles and is focused on taking care of our customers and providing greatmerchandise and a great experience.StoresStore Openings and Closures. During 2015, we opened 3 new stores and closed 23 stores. We continually review the profitability of each store andwill consider closing a store if the expected store performance does not meet our financial hurdle rates. As part of a strategic evaluation of our store portfolioin 2015, we announced a multi-year plan to close stores that we believe do not have the potential to meet our sales productivity and profitability standards.We expect to close approximately 100 underperforming stores representing nearly 5% of total sales, including the 23 stores that were closed in 2015 andapproximately 25 to 30 stores expected to close in 2016, with the majority expected to be closed by the end of 2017. The closure of these stores is expectedto improve our ability to effectively allocate capital, deliver higher sales productivity and be accretive to earnings. We do not plan to open new stores in2016.Expansion, Relocation and Remodeling. During 2015, we completed 122 store remodels, relocations and expansions as we embarked on a multi-year initiative to increase investments in our existing stores and direct-to-consumer business. We believe that remodeling improves the store environmentand helps us create an inviting and differentiated shopping experience. Our remodeling projects are designed to create a bright, fun and comfortable storeexperience and may include upgrades ranging from improving lighting, flooring, paint, fixtures, fitting rooms, visual merchandising and signage, to moreextensive expansion projects. Relocations are intended to improve the store's location and help it capture incremental sales.Store count and selling square footage by nameplate are as follows: Number of Stores Selling Square Footage (in thousands) January 31, 2015 2015 Activity NetChanges January 30, 2016 January 31, 2015 2015 Activity NetChanges January 30, 2016Bealls 219 (14) 205 4,403 (284) 4,119Goody's 266 (16) 250 4,225 (276) 3,949Palais Royal 53 (1) 52 1,135 (25) 1,110Peebles 197 (4) 193 3,564 (41) 3,523Stage 119 15 134 2,082 347 2,429 854 (20) 834 15,409 (279) 15,130 5Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 65% of our stores are located in communities with populations below 50,000 people,while an additional 20% of our stores are located in communities with populations between 50,000 and 150,000 people. The remaining 15% of our stores arelocated in higher-density markets with populations greater than 150,000 people, such as Houston, San Antonio and Lubbock, Texas. The store count andselling square footage by market area population are as follows: Number of Stores Selling Square Footage (in thousands)Population January 31, 2015(a) 2015 Activity NetChanges January 30, 2016 January 31, 2015(a) 2015 Activity NetChanges January 30, 2016Less than 50,000 546 (8) 538 8,789 (72) 8,71750,000 to 150,000 175 (8) 167 3,541 (129) 3,412Greater than 150,000 133 (4) 129 3,079 (78) 3,001 854 (20) 834 15,409 (279) 15,130 (a) Store data as of January 31, 2015 is restated to reflect updated population statistics from our new third party data provider. Direct-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-commerce website features a broader assortment of the merchandise categories found inour stores, as well as additional product offerings. Our in-store Send program allows customers to have merchandise shipped directly to their homes if thepreferred size or color is not available in their local store. Our direct-to-consumer business enables us to reach customers with additional convenience, acquirecustomers beyond our local markets, and further build our brand. We believe there is significant potential to expand our direct-to-consumer business overtime.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 2015 2014 2013Women's 38% 38% 38%Men's 17 17 17Children's 11 11 11Footwear 13 13 13Accessories 7 8 8Cosmetics/Fragrances 10 9 9Home/Gifts/Other 4 4 4 100% 100% 100% 6Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 climate characteristics. Our buying and planning team uses technology tools such as size pack optimization and store levelmarkdown optimization to localize assortments. These tools allow us to better fulfill customer needs by tailoring size assortments by store and by being moretargeted in how we markdown merchandise by climate and store.Approximately 84% 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 Adidas, while the remaining 16% of sales are 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 value. We continue to refine the positioning of our private brands and we see them as an avenuefor growth.We are also focused on growing our cosmetics business. During 2015, we installed Clinique and Estee Lauder counters in over 30 stores, bringingour total number of stores with cosmetic counters to more than 330.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 majority of stores receivemerchandise within three days of shipment from the distribution centers. We utilize third party contract carriers to deliver merchandise from the distributioncenters to our stores.Direct-to-consumer orders are predominantly filled from our distribution center in Jacksonville, Texas and occasionally from our Jeffersonville, Ohiodistribution center, as well as from selected stores during peak fulfillment periods.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 compelling offers, dedicated events for cardholders, and updateson the latest deliveries in our stores.Our marketing strategy is designed to establish and reward brand loyalty. The strategy supports each store's position as the destination for desirablestyles and nationally recognized brands at an attractive value in a comfortable and welcoming environment. Our marketing strategy leverages (i) consumerinsight from brand and customer research, (ii) identified customer purchase history and (iii) emerging technology and trends in retail marketing.We maintain a connection to the communities we serve and operate a locally based giving campaign called 30 Days of Giving under ourCommunity Counts program. In 2015, through our Community Counts program and other efforts like our Bears that Care program, we helped raiseapproximately $2.8 million for the communities we serve.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, March 30, 2016Powered 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 44% in 2015, an increase of 400 basis points compared to theprior year. In 2014 and 2013, the penetration rate was 40% and 36%, 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 replenishment/fulfillment system allows us to maintain plannedlevels of in-stock positions in basic items such as jeans and underwear. In addition, a fully integrated warehouse management system is in place in all threedistribution centers.We have a store level markdown optimization tool, which is focused on pricing items on a style-by-style basis at the appropriate price, based oninventory levels and sales history to maximize revenue and profitability. We continue to expand the utilization and effectiveness of our merchandiseplanning system in order to maximize the generation of sales and gross margin. Building on the localization progress we have made in our size packoptimization tool, we implemented a new assortment planning system in 2015 that allows us to create customer-centric assortments aligned to salesstrategies. The system also facilitates cleaner seasonal transitions and fresher merchandise in stores.We utilize a point-of-sale ("POS") platform with bar code scanning, electronic credit authorization, instant credit, a 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 30, 2016, we employed approximately 13,500 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, March 30, 2016Powered 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 2016 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, March 30, 2016Powered 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 our operating performance targets and goals in the future if our strategies and initiatives are unsuccessful. Our ability to develop and executeour strategic plan and to execute the business activities associated with our strategic and operating plans, may impact our ability to meet our operatingperformance targets.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 and political conditions that impact consumer discretionary spending, such as employment levels, taxes, energyand gasoline prices and other factors influencing consumer confidence. We have extensive operations in the South Central, Southeastern and Mid-Atlanticstates. Many stores are located in small towns and rural environments that are substantially dependent upon the local economy. We also have concentrationsof stores in areas where the local economy is heavily dependent on the oil and gas industry, particularly in portions of Texas, Louisiana, Oklahoma, and NewMexico. A decline in crude oil prices may negatively impact employment in those communities, resulting in reduced consumer confidence and discretionaryspending. Additionally, approximately 3% of our stores contributing approximately 7% of our 2015 sales are located in cities that either border Mexico orare in close proximity to Mexico. A devaluation of the Mexican peso will reduce the purchasing power of those customers who are citizens of Mexico. Insuch an event, revenues attributable to these stores could be reduced. In 2015, we experienced pressure on our business in areas that are heavily dependent onthe oil industry and near the Mexican border. If those pressures continue or there is an additional economic downturn or decline in consumer confidence,particularly in the South Central, Southeastern and Mid-Atlantic states and any state from which we derive a significant portion of our net sales (such asTexas or Louisiana), our business, financial condition and cash flows will be negatively impacted and such impact may be material.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.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.10Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 ContentsFailure 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 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.There 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 operating cash flow and availability underthe Revolving Credit Facility, we continue to believe that we have the ability to meet our financing needs for the foreseeable future. However, there can beno 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 direct-to-consumer sales. 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.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 havecontingency 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.11Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 ContentsWar, 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.A 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.Changes in the regulatory or administrative landscape could adversely affect our financial condition and results of operations. Laws andregulations at the local, state, federal, and international levels frequently change, and the ultimate cost of compliance cannot be precisely estimated. Inaddition, we cannot predict the impact that may result from changes in the regulatory or administrative landscape. Any changes in regulations, the impositionof additional regulations, or the enactment of any new or more stringent legislation that impacts employment and labor, trade, product safety, transportationand logistics, health care, tax, privacy, operations, or environmental issues, among others, could have an adverse impact on our financial condition andresults of operations.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.12Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 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.Changes in our private label credit card program may adversely affect our sales and/or profitability. Our private label credit card (“PLCC”)program facilitates sales and generates additional revenue under our profit sharing agreement with the unrelated third party which owns the PLCC accountsreceivable. PLCC sales represented 44% of total sales in 2015, and PLCC customers spend more on average than non-PLCC customers. We receive a share ofthe net finance charges, late fees, other cardholder fees, write-offs, and operating expenses generated by the program. Changes in credit granting standardsmaintained by the third party, which may be due to macroeconomic trends, could impact our ability to generate new PLCC accounts. Changes in customerpayment patterns could impact profit sharing by impacting fee income, write-offs, and operating expense. If the sales or profit share which we receive fromthe PLCC decreases due to economic, legal, social, or other factors that we cannot control or predict, our operating results, financial condition and cash flowsmay be adversely affected. Covenants in the 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. The Revolving Credit Facility agreementcontains covenants which, among other things, restrict (i) the amount of additional debt or capital lease obligations we may incur, and (ii) our payment ofdividends and repurchase of common stock under certain circumstances. A violation of any of these covenants may permit the lenders to restrict our ability tofurther access loans and letters of credit and may require the immediate repayment of any outstanding loans. Our failure to comply with these covenants mayhave a material adverse effect on our capital resources, financial condition, results of operations and liquidity. In addition, any material or adversedevelopments affecting our business may significantly limit our ability to meet our obligations as they become due or to comply with the various covenantrequirements contained in the Revolving Credit Facility agreement.The inability or unwillingness of one or more lenders to fund their commitment under the Revolving Credit Facility may have a materialadverse impact on our business and financial condition. The 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 theRevolving 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.13Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 1B. UNRESOLVED STAFF COMMENTSNot applicable.ITEM 2. PROPERTIESOur 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 renewal options of five years each, provide for our payment of base rent plus expenses, such as common areamaintenance, utilities, taxes 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 30, 2016, we operated 834 stores, in 39 states located within 5 regions, asfollows: Number of Stores Number of StoresSouth Central Region Midwestern Region Arkansas 23 Illinois 6Louisiana 52 Indiana 24Oklahoma 36 Iowa 2Texas 231 Kansas 9 342 Michigan 15Mid-Atlantic & Northeastern Region Minnesota 1Delaware 3 Missouri 17Maryland 7 Ohio 30New Jersey 5 Wisconsin 4Pennsylvania 34 108Virginia 35 Northwestern & Southwestern Region West Virginia 11 Colorado 6Massachusetts 2 Idaho 3New Hampshire 2 Oregon 4New York 21 Wyoming 1Vermont 4 Arizona 7 124 Nevada 5Southeastern Region New Mexico 19Alabama 32 Utah 3Florida 6 48Georgia 36 Kentucky 34 Mississippi 23 Total Stores 834North Carolina 29 South Carolina 20 Tennessee 32 212 14Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 ContentsWe own our distribution centers in Jacksonville, Texas and South Hill, Virginia and lease our distribution center in Jeffersonville, Ohio, which havesquare footages and provide capacity of servicing stores as follows: LocationSquare FootageNumber of Stores Capable ofServicingJacksonville, Texas437,000600South Hill, Virginia162,000240Jeffersonville, Ohio202,000310 801,0001,150We also lease a 176,000 square foot facility in Jacksonville, Texas to provide capacity expansion for our growing e-commerce business.In addition to the stores and distribution facilities listed above, we lease our corporate office in Houston, Texas. In 2015, we began the process ofconsolidating our two corporate offices in Houston, Texas into a single corporate headquarters. The office consolidation was completed in February 2016.We consider these principal properties to be suitable and adequate for their intended purpose.ITEM 3. LEGAL PROCEEDINGSNo response is required under Item 103 of Regulation S-K.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.15Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 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 2015 and 2014: Fiscal Year 2015 2014 High Low Dividend High Low Dividend1st Quarter$23.26 $19.09 $0.140 $25.39 $18.39 $0.1252nd Quarter20.27 15.85 0.140 20.46 17.63 0.1253rd Quarter18.05 8.85 0.150 19.33 15.79 0.1404th Quarter10.70 6.00 0.150 22.52 15.71 0.140 On June 16, 2015, we announced that our Board of Directors ("Board") approved a 7% increase in our quarterly cash dividend rate to $0.15 percommon share from the previous quarterly rate of $0.14 per common share. The new quarterly rate of $0.15 per common share is applicable to dividendsdeclared by our Board beginning August 20, 2015.We paid aggregate cash dividends in 2015 and 2014 of $18.7 million and $17.0 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 the 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 22, 2016 there were approximately 248 holders of record of our commonstock.16Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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, the S&P 500 Retail Index and the S&P 1500 Department Stores Index on January 28, 2011 (the last trading date of 2010),and that all quarterly dividends were reinvested at the closing prices of the dividend payment dates. Subsequent measurement points are the last trading daysof 2011, 2012, 2013, 2014 and 2015. The total cumulative dollar returns shown on the graph represent the value that such investments would have had onJanuary 29, 2016 (the last trading date of 2015). The calculations exclude trading commissions and taxes. We have selected the S&P 1500 Department StoresIndex as our peer index, which is comprised of Kohl's, Macy's, Nordstrom and JCPenney, and better represents our peer group than the broader group ofretailers included in our former peer index, the S&P 500 Retail Index, both of which are shown below for comparison. The stock price performance on thefollowing graph and table is not necessarily indicative of future stock price performance.DateStage Stores, Inc.S&P 500 IndexS&P 500 RetailIndex S&P 1500Department StoresIndex1/28/2011$100.00$100.00$100.00 $100.001/27/2012102.79105.33113.42 111.912/1/2013152.42123.87144.15 116.111/31/2014132.99149.02180.63 131.531/30/2015139.53170.22216.93 163.911/29/201660.67169.09253.36 120.35 17Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 upto $200.0 million of our outstanding common stock. After investing $100.1 million to acquire our common stock under the 2011 Stock Repurchase Program,on June 11, 2012, we announced that our Board suspended the program. On November 19, 2015, we announced that our Board approved the resumption ofthe 2011 Stock Repurchase Program. After investing an additional $41.6 million to acquire 5.2 million of our common stock under the 2011 StockRepurchase Program during the fourth quarter 2015, we had $58.4 million available under the program as of January 30, 2016. The 2011 Stock RepurchaseProgram will expire when we have repurchased $200.0 million of our outstanding common stock, unless terminated earlier by our Board. Also in March2011, our Board authorized us to repurchase shares of our outstanding common stock equal to the amount of the proceeds and related tax benefits from theexercise of stock options, stock appreciation rights ("SARs") and other equity grants. Purchases of shares of our common stock may be made from time totime, either on the open market or through privately negotiated transactions and are financed by our existing cash, cash flow and other liquidity sources, asappropriate.The table below sets forth information regarding our repurchases of our common stock during the fourth quarter of 2015: 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 1, 2015 to November 28, 2015 1,105,801 $7.49 1,104,565 $91,663,585 November 29, 2015 to January 2, 2016 4,160,365 8.18 4,070,507 58,351,202 January 3, 2016 to January 30, 2016 5,301 8.04 — 58,351,202 Total 5,271,467 $8.04 5,175,072 (a) In addition to the repurchase of our common stock during the fourth quarter of 2015 under the 2011 Stock Repurchase Program, we reacquired 4,762 shares of common stockfrom certain employees to cover tax withholding obligations from the vesting of performance stock and restricted stock at a weighted average acquisition price of $8.16 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 91,633 shares of ourcommon stock in the open market at a weighted average price of $7.84 in connection with the option to invest in our stock under the deferred compensation plan and reinvestment ofdividends 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 $141.6 million repurchased as of January 30, 2016 using our existing cash, cashflow and other liquidity sources since March 2011.18Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 2015, 2014, 2013, and 2011 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 2015 2014 2013 2012 2011Statement of operations data: Net sales$1,604,433 $1,638,569 $1,609,481 $1,627,702 $1,511,220Cost of sales and related buying, occupancy anddistribution expenses1,208,002 1,188,763 1,172,995 1,168,907 1,099,982Gross profit396,431 449,806 436,486 458,795 411,238 Selling, general and administrative expenses387,859 386,104 393,126 389,495 358,360Interest expense, net2,977 3,002 2,744 3,011 3,821Income from continuing operations before incometax5,595 60,700 40,616 66,289 49,057 Income tax expense1,815 22,847 15,400 24,373 16,930Income from continuing operations3,780 37,853 25,216 41,916 32,127Loss from discontinued operations, net— (7,003) (8,574) (3,737) (1,167)Net income$3,780 $30,850 $16,642 $38,179 $30,960 Adjusted net income (non-GAAP) (a)$16,182 $37,853 $39,986 $46,296 $32,127 Basic earnings (loss) per share data: Continuing operations$0.12 $1.18 $0.78 $1.32 $0.96Discontinued operations— (0.22) (0.27) (0.12) (0.04)Basic earnings per share (b)$0.12 $0.96 $0.51 $1.20 $0.93Basic weighted average shares outstanding31,145 31,675 32,034 31,278 33,021 Diluted earnings (loss) per share data: Continuing operations$0.12 $1.18 $0.77 $1.31 $0.95Discontinued operations— (0.22) (0.26) (0.12) (0.03)Diluted earnings per share$0.12 $0.96 $0.51 $1.19 $0.92Adjusted diluted earnings per share (non-GAAP)(a)$0.51 $1.18 $1.22 $1.44 $0.95Diluted weighted average shares outstanding31,188 31,763 32,311 31,600 33,278 Margin and other data: Gross profit margin24.7 % 27.5% 27.1 % 28.2% 27.2%Selling, general and administrative expense rate24.2 % 23.6% 24.4 % 23.9% 23.7%Capital expenditures$90,695 $70,580 $61,263 $49,489 $45,731Construction allowances from landlords3,444 5,538 4,162 4,193 4,499Stock repurchases41,587 2,755 31,367 61 109,985Cash dividends per share0.58 0.53 0.48 0.38 0.33 19Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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)(2.0)% 1.4% (1.5)% 5.7% 0.5%Store openings (d)3 18 28 25 34Store closings (d)23 12 10 5 10Number of stores open at end of period (d)834 854 848 830 810Total selling area square footage at end of period (d)15,130 15,409 15,313 15,255 15,027 January 30, January 31, February 1, February 2, January 28, 2016 2015 2014 2013 2012Balance sheet data: Working capital$344,880 $299,279 $293,995 $259,260 $213,700Total assets848,099 824,677 810,837 794,871 735,339Debt obligations165,723 47,388 63,225 12,329 49,503Stockholders' equity429,753 475,930 454,444 464,870 412,706(a) See Non-GAAP Financial Measures on page 21 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 which are reflected in discontinued operations.20Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 2015, 2014 and 2013 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 excluding charges associated with ourcorporate headquarters consolidation, which consists of duplicate rent expense and moving related costs, our strategic store closures and other strategicinitiatives, the majority of which consists of impairment charges, severance charges associated with a workforce reduction initiative and pension settlement,and the consolidation of our former South Hill, Virginia operations into our Houston, Texas corporate headquarters ("South Hill Consolidation"). We believethis supplemental financial information enhances an investor's understanding of our financial performance as it excludes those items which impactcomparability of operating trends. The non-GAAP financial information should not be considered in isolation or viewed as a substitute for net income, cashflow from operations, diluted earnings per common share or other measures of performance as defined by GAAP. Moreover, the inclusion of non-GAAPfinancial information as used herein is not necessarily comparable to other similarly titled measures of other companies due to the potential inconsistenciesin the method of presentation and items considered. The following tables set forth the supplemental financial information and the reconciliation of GAAPdisclosures to non-GAAP financial measures (in thousands, except diluted earnings per share): Fiscal Year 2015 2014 2013Net income (GAAP)$3,780 $30,850 $16,642Loss from discontinued operations, net of tax benefit of $4,228 and $5,237,respectively (GAAP)— 7,003 8,574Income from continuing operations (GAAP)3,780 37,853 25,216Consolidation of company headquarters, net of tax of $1,1482,390 — —Strategic store closures and other initiatives, net of tax of $3,9538,233 — —Severance charges associated with workforce reduction initiativeand pension settlement, net of tax of $8541,779 — —South Hill Consolidation related charges, net of tax of $9,019— — 14,770Adjusted net income (non-GAAP)(a)$16,182 $37,853 $39,986 Diluted earnings per share (GAAP)$0.12 $0.96 $0.51Loss from discontinued operations (GAAP)— (0.22) (0.26)Diluted earnings per share from continuing operations (GAAP)0.12 1.18 0.77Corporate headquarters consolidation0.07 — —Strategic store closures and other initiatives0.26 — —Severance charges associated with workforce reduction initiativeand pension settlement0.06 — —South Hill Consolidation related charges— — 0.45Adjusted diluted earnings per share (non-GAAP) (a) (b)$0.51 $1.18 $1.22 (a) There were no adjustments in 2014. (b) Earnings per share may not foot due to rounding. 21Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 OPERATIONSOur 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 online. Our merchandise assortment is a well-edited selection of moderately priced brand name andprivate label apparel, accessories, cosmetics, footwear and home goods. As of January 30, 2016, we operated 834 specialty department stores located in 39states 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 OperationsSelect financial results for 2015 were as follows (comparisons are to 2014):•Net sales decreased $34.1 million, or 2.1%, to $1.6 billion.•Comparable sales decreased 2.0%.•Direct-to-consumer sales, included in comparable sales, increased 20.2% to $45.4 million.•Gross profit decreased $53.4 million, or 11.9%.•Diluted earnings per common share from continuing operations was $0.12, compared with $1.18.•Adjusted diluted earnings per common share (non-GAAP) was $0.51, compared with $1.18 (see reconciliation of non-GAAP financial measures onpage 21).•Quarterly dividend rate increased by 7% to $0.15 per common share in August 2015.•Cash dividends of $18.7 million, or $0.58 per share, were paid.•We repurchased 5.2 million shares of our common stock for approximately $41.6 million.22Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 ResultsWhile our financial performance in 2015 did not meet our expectations, we had many accomplishments and made progress in our key strategicinitiatives, which were overshadowed by external factors. However, we invested in our strategic plan to set ourselves up for improved productivity andprofitability over time. Our key focus is on our customer and delivering her a great experience in our stores and online.Create a Great Omni-channel Experience. During 2015, we enhanced our customer online shopping experience with a new mobile app and mobile-optimized website, expanded our online assortments, added recommendation and pricing engines, and improved operational efficiency by increasing ourcentralized fulfillment to approximately 70%.Increase Emphasis on Trends and Styles. We updated our product assortment by offering more contemporary fashions and new brands, addingcategories within existing brands, and extending existing brands to additional stores. We continued to grow our cosmetics business with the installation ofClinique and Estee Lauder counters in over 30 stores, bringing our total number of stores with cosmetic counters to more than 330. We expanded our homedepartment in 46 stores and featured a broader assortment of giftable items. We also built out our localization efforts, notably adding size optimization, toenable better alignment with customer preferences.Improve the Store Environment. During 2015, we completed 122 remodels, relocations and expansions of our higher volume stores. We are investingin our stores with improved lighting, upgraded fixtures, more mannequins, comfortable fitting rooms, enhanced navigation and wider aisles. Our storeremodels are designed to achieve better layouts that showcase popular brands and create focus on updated apparel and accessories. We believe thatinvestments to make our stores brighter and more inviting elevate the customer shopping experience and build customer loyalty. As part of a strategicevaluation of our store portfolio in 2015, we increased our profitability benchmarks for our stores, and as a result, we closed 23 stores during the year. We alsoopened 3 stores during 2015.Better Connect with Our Customers. During 2015, we began re-branding our stores and image, adding a fresh new logo and a new look and feel toour marketing. We leveraged our technology to create more personalized direct mail and email programs, and shifted our marketing activity to be moredigitally-focused. We reissued our private label credit card to approximately 2.8 million customers and grew sales penetration by 400 basis points. We arealso piloting a tender neutral loyalty program in select markets.In addition, we consolidated our corporate headquarters into a single location in Houston, Texas. Bringing our corporate associates togetherfacilitates increased collaboration and efficiencies to better execute our strategic plans. The more central location is also expected to help us recruit andretain top talent. The office consolidation was completed in February 2016.23Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 Contents2016 Strategy and OutlookOur strategy in 2016 is focused on building upon our 2015 growth initiatives and progress with the intention of driving sales productivity in storesand online by delivering an improved customer experience. Our priorities for 2016 include:•upgrading our e-commerce website design, further expanding our assortments, and adding more convenient shipping options for our customers;•adding more updated and contemporary styles to our product mix;•using our new assortment planning and size optimization programs to make more localized merchandise offerings;•connecting with our customers with personalized content and digital marketing to attract new customers and to maintain loyalty with our existingcustomer base; and•remodeling approximately 90 stores, which will bring over 210 of our top volume stores, representing approximately 45% of our total sales, to ahigher standard.With our focus on improving sales productivity through investments in our existing stores and direct-to-consumer business, we do not plan to opennew stores in 2016. In addition, we expect to close approximately 25 to 30 stores that do not meet our sales productivity and profitability benchmarks.While we are encouraged by our ongoing strategic initiatives to drive sales, we remain cautious with our outlook for 2016 given our expectation forcontinued headwinds in our stores near the Mexican border and in energy exposed communities. We are intently focused on operating efficiently in achallenging sales climate, while driving sales productivity and carefully managing expenses and inventory. We will continue to invest in building our brand,emphasizing our website, remodeling our stores and building relationships with our loyal customers.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.24Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 Compared to 2014 Fiscal Year Ended January 30, 2016 January 31, 2015 Change Amount % to Sales(a) Amount % to Sales(a) Amount %Net sales$1,604,433 100.0% $1,638,569 100.0 % $(34,136) (2.1)%Cost of sales and related buying,occupancy and distributionexpenses1,208,002 75.3% 1,188,763 72.5 % 19,239 1.6 %Gross profit396,431 24.7% 449,806 27.5 % (53,375) (11.9)%Selling, general and administrativeexpenses387,859 24.2% 386,104 23.6 % 1,755 0.5 %Interest expense2,977 0.2% 3,002 0.2 % (25) (0.8)%Income before income tax5,595 0.3% 60,700 3.7 % (55,105) (90.8)%Income tax expense1,815 0.1% 22,847 1.4 % (21,032) (92.1)%Income from continuing operations3,780 0.2% 37,853 2.3 % (34,073) (90.0)%Loss from discontinued operations,net of tax benefit of $0 and $4,228,respectively— —% (7,003) (0.4)% 7,003 (100.0)%Net income$3,780 0.2% $30,850 1.9 % $(27,070) (87.7)% (a) Percentages may not foot due to rounding. Net SalesSales in 2015 decreased 2.1% to $1,604.4 million from $1,638.6 million in 2014. Comparable sales, which are sales in stores that were open for atleast 14 full months prior to the reporting period, including direct-to-consumer sales, decreased by 2.0% in 2015 as compared to a 1.4% increase in 2014.Direct-to-consumer sales contributed 0.5% to comparable sales in 2015 and 2014. The 2.0% decrease in comparable sales reflects a decline in traffic, partiallyoffset by an increase in average unit retail. Sales in 2015 were negatively impacted by lower consumer demand in our markets near the Mexican border due tothe weaker Mexican peso and in energy exposed communities mostly in Texas, Louisiana, Oklahoma and New Mexico. In addition, sales in the fourth quarter2015 were negatively impacted by unfavorable weather. Comparable sales increase (decrease) by quarter is presented below: Fiscal Year 2015 20141st Quarter(1.1)% (0.2)%2nd Quarter0.8 (4.2)3rd Quarter(3.5) 2.34th Quarter(3.4) 6.4Total Year(2.0)%1.4 % Our cosmetics and home/gifts categories achieved positive comparable sales. Both categories benefited from our strategic investments in 2015, withthe installation of Estee Lauder and Clinique counters in over 30 stores and home department expansions in 46 stores. We experienced strong sales in highprofile brands such as Nautica, Converse, Carter's, Izod, Van Heusen, Calvin Klein, Nike, Estee Lauder and Clinique. Activewear was a strong performeracross merchandise categories.25Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 ContentsGross ProfitGross profit in 2015 was $396.4 million, a decrease of 11.9% from $449.8 million in 2014. Gross profit, as a percent of sales, decreased to 24.7% in2015 from 27.5% in 2014. The 2.8% decrease in the gross profit rate reflects a 1.1% increase in the merchandise cost of sales rate and a 1.7% increase in thebuying, occupancy and distribution expenses rate. The increase in merchandise cost of sales rate is the result of additional promotions and markdowns todrive sales and clear inventory. The increase in the buying, occupancy and distribution expense rate reflects impairment charges of $10.6 million, or 0.7% ofsales, related to our strategic store closure plan, higher store depreciation and rent expense, and increased strategic investments in omni-channel, technologyand stores in 2015 compared to 2014.Selling, General and Administrative ExpensesSelling, general and administrative ("SG&A") expenses in 2015 increased $1.8 million to $387.9 million from $386.1 million in 2014. As a percentof sales, SG&A expenses increased to 24.2% in 2015 from 23.6% in 2014 and primarily reflects deleverage from lower sales in the current year. The increasein SG&A expenses reflects charges incurred in 2015 related to our new corporate headquarters consolidation, severance and other costs associated with areduction in corporate headcount, and a pension settlement charge, partially offset by lower incentive compensation costs. Interest ExpenseInterest expense was $3.0 million in 2015 and 2014, respectively. Interest expense was 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 obligations. Interestexpense in 2015 was flat compared to 2014 primarily due to the timing of borrowings under the Revolving Credit Facility.Income TaxesOur effective tax rate was 32.4% in 2015, resulting in tax expense of $1.8 million. This compares to income tax expense of $22.8 million fromcontinuing operations in 2014 at an effective rate of 37.6%. The current year decrease in the effective tax rate is primarily due to the decrease in net incomewhich increases the net beneficial effect of permanent book-to-tax differences.26Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 Contents2014 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 distribution expenses1,188,763 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 administrativeexpenses386,104 23.6 % 393,126 24.4 % (7,022) (1.8)%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. Net SalesSales in 2014 increased 1.8% to $1,638.6 million from $1,609.5 million in 2013. Comparable sales increased by 1.4% in 2014. Direct-to-consumersales contributed 0.5% to comparable sales in 2014 and 2013. The 1.4% increase in comparable sales in 2014 was driven primarily by an increase in averageunit retail, which was partially offset by a decline in units per transaction and in the number of transactions. The higher average selling price was achievedthrough effectively managing inventory levels, resulting in an improved balance between regular priced 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)% Our cosmetics, footwear, children's and home/gifts categories achieved positive comparable sales. Cosmetics had the strongest comparable salesincrease, driven by the installation of Estee Lauder and Clinique counters in 75 and 76 stores, respectively, during 2014. We also continued to focus on salesgrowth through the introduction of new product offerings and the expansion of existing sought-after brand names.27Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 ContentsGross 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.Selling, General and Administrative ExpensesSG&A expenses in 2014 decreased $7.0 million to $386.1 million from $393.1 million in 2013. As a percent of sales, SG&A expenses decreased to23.6% in 2014 from 24.4% in 2013. The decrease in SG&A expenses reflects charges of approximately $11.3 million incurred in 2013 related to the SouthHill Consolidation. In addition, the decrease in 2014 also reflects increased credit income from our private label credit card program. These reductions werepartially offset by higher incentive compensation expense in 2014.Interest ExpenseInterest expense was $3.0 million in 2014 and $2.7 million in 2013. Interest expense was 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 obligations. The increasein interest expense was primarily due to increased borrowings under 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%.Seasonality and InflationHistorically, our business has been seasonal and sales are traditionally lower during the first three quarters of the fiscal year (February throughOctober) and higher during the last quarter of the fiscal year (November through January). The fourth quarter usually accounts for approximately 30% of ourannual sales, with each of the other quarters accounting for approximately 22% to 24%. Working capital requirements have fluctuated during the year andgenerally reached their highest levels during the third and fourth quarters. We do not believe that inflation has had a material effect on our results ofoperations. However, there can be no assurance that our business will not be affected by inflation in the future.28Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 2015 Q1 Q2 Q3 Q4Net sales$369,313$380,916 $351,575$502,629Gross profit80,929 98,455 76,096140,951Net income (loss)(8,637) 1,615 (10,183)20,985 Basic earnings (loss) per share$(0.27) $0.05 $(0.32)$0.72Diluted earnings (loss) per share$(0.27) $0.05 $(0.32)$0.71 Basic weighted average shares31,750 31,982 32,01728,828Diluted weighted average shares31,750 32,013 32,01728,848 Fiscal Year 2014 Q1 Q2 Q3 Q4Net 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 31,74029Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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) the Revolving Credit Facility. Our primary cash requirements are for operational needs, including rent and salaries, seasonal inventorypurchases, capital investments 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 2016 and the foreseeable future. Key components of our cash flow are summarized below (in thousands): Fiscal Year 2015 2014 2013Net cash provided by (used in): Operating activities$40,300 $102,214 $46,527Investing activities(90,977) (67,634) (61,236)Financing activities49,999 (32,177) 11,534 Operating ActivitiesDuring 2015, we generated $40.3 million in cash from operating activities. Net income, adjusted for non-cash expenses, provided cash ofapproximately $94.3 million. Changes in operating assets and liabilities used net cash of approximately $57.4 million, which included a $5.5 milliondecrease in merchandise inventories, a decrease in other assets of $1.6 million and a decrease in accounts payable and other liabilities of $64.4 million.Additionally, cash flows from operating activities included construction allowances from landlords of $3.4 million, which funded a portion of the capitalexpenditures related to store leasehold improvements in new and relocated stores and our new corporate office building.During 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 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 2015 were $90.7 million compared to $70.6 million in 2014 and $61.3 million in 2013. Capital expenditures during 2015reflect an increase in store remodels, expansions and relocations and expenditures for our new corporate office building, partially offset by a decrease in storeopenings compared to 2014 and 2013. We remodeled, relocated and expanded 122 stores, and opened 3 new stores in 2015. In 2014, we remodeled,relocated and expanded 26 stores, and opened 18 new stores. In 2013, we remodeled, relocated and expanded 17 stores, and opened 29 new stores (includingone Steele's store). We received construction allowances from landlords of $3.4 million in 2015 to fund a portion of the capital expenditures related to storeleasehold improvements in new and relocated stores and our new corporate office building, while $5.5 million and $4.2 million were received from landlordsin 2014 and 2013, respectively. These funds have been recorded as deferred rent credits in the balance sheet and are amortized as an offset to rent expenseover the lease term commencing with the date the allowances were contractually earned.We estimate that capital expenditures in 2016, net of construction allowances from landlords, will be approximately $72 million. The expendituresare principally for store remodels, expansions and relocations, new cosmetic counters, and investments in our technology and direct-to-consumer business.30Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 $300.0 million senior secured revolving credit facility("Revolving Credit Facility") with a seasonal increase to $350.0 million and a $50.0 million letter of credit subfacility. The Revolving Credit Facilitymatures on 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 2015, theweighted average interest rate on outstanding borrowings and the average daily borrowings under the Revolving Credit Facility were 1.53% and $102.5million, respectively, as compared to 1.71% and $81.4 million in 2014. The increase in outstanding borrowings at January 30, 2016 as compared toJanuary 31, 2015, is primarily due to stock repurchases, an increase in capital expenditures and timing of payments made on trade accounts.Letters of credit issued under the Revolving Credit Facility support certain merchandise purchases and collateralize retained risks and deductiblesunder various insurance programs. At January 30, 2016, we had outstanding letters of credit totaling approximately $5.2 million. These letters of credit expirewithin twelve months of issuance. Excess borrowing availability under the Revolving Credit Facility at January 30, 2016 was $137.8 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 to $30 million in a fiscal year, and (iii) the repurchase of commonstock under certain circumstances. 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 30, 2016, we were in compliance with all of the financial covenants of the Revolving Credit Facilityagreement and expect to continue to be in compliance in 2016.During 2015, we financed approximately $5.1 million of capital expenditures, bearing interest of 1.4% of which $1.8 million will paid in 2016 and$3.3 million will be paid in 2017.We paid $18.7 million in cash dividends in 2015. On February 18, 2016, our Board declared a quarterly cash dividend of $0.15 per share on ourcommon stock, payable on March 16, 2016, to shareholders of record at the close of business on March 1, 2016.On November 19, 2015, we announced that our Board approved the resumption of the $200.0 million share repurchase program authorized in March2011. As of January 30, 2016, we had $58.4 million available under the program.31Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 ContentsContractual 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 30,2016 (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 $156,840 $— $— $156,840 $—Documentary letters of credit (b) 984 984 — — —Capital lease obligations — — — — —Finance obligations: Principal payments 3,764 1,056 2,154 554 —Interest payments 643 310 307 26 —Other long-term debt obligations 5,119 1,791 3,328 — —Operating lease obligations (c) 540,623 94,196 165,202 115,510 165,715Purchase obligations (d) 224,328 210,067 12,204 1,798 259Other long-term liabilities (e) 2,000 1,000 1,000 — —Total contractual obligations $934,301 $309,404 $184,195 $274,728 $165,974 (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 $4.2 millionat January 30, 2016 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.32Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 ContentsCertain 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 $187.0 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 $47.5 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 2014 and 2015 and we do not expect a minimum contribution requirement in2016.We have not included $0.7 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.33Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 net realizable value with cost determined using the weightedaverage cost method. We capitalize distribution center costs associated with preparing inventory for sale, such as distribution payroll, benefits, occupancy,depreciation and other direct operating expenses as part of merchandise inventories. We also include in inventory the cost of freight to our distributioncenters and to stores 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. These allowances are recognized in accordance with ASC Subtopic 605-50, Customer Payments and Incentives. Vendor allowances related to thepurchase of inventory are recorded as a reduction to the cost of inventory until sold. Vendor allowances are recognized as a reduction of cost of goods sold orthe related selling expense when the purpose for which the vendor funds were intended to be used has been fulfilled and amounts have been authorized byvendors. 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 & improvements20Information systems3-10Store 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. 34Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 ContentsIntangible Assets and Impairment of Intangible Assets. Indefinite life intangible assets are tested for impairment annually or more frequently whenindicators of impairment exist. As a part of the acquisition of Peebles, Inc. in 2003, we acquired the rights to the PEEBLES trade name 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 thetime of the Peebles, Inc. acquisition. We completed our annual impairment testing during the fourth quarter of 2015 and determined there was no impairment.Revenue Recognition. Our retail stores record revenue at the point of sale. Sales of merchandise shipped to our customers are recorded based onestimated receipt of merchandise by the customer. Shipping and handling fees charged to customers are included in net sales with the corresponding costsrecorded as costs of goods sold. Total revenues do not include sales tax because we are a pass-through conduit for collecting and remitting sales taxes.Revenues are recognized net of expected returns, which we 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 $1.6 million, $1.1 million and $1.0 million of breakage income in 2015, 2014 and 2013, 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-insured 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 30, 2016, assumptions used were a weighted average discount rate of 4.8% and a weighted averagelong-term rate of return on the plan assets of 7.0%.Recent Accounting Standards and DisclosuresIn May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contractswith Customers, which supersedes most existing revenue recognition guidance in GAAP. The core principle of the guidance is that a company shouldrecognize revenue when it transfers promised goods or services to customers in an amount that reflects what a company expects to be entitled to in exchangefor those goods or services. ASU 2014-09 allows for either a retrospective or cumulative effect transition method of adoption and was to be effective forperiods beginning after December 15, 2016. In July 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09 by one year,however, early adoption as of the original effective date is permitted. We are currently evaluating the impact that the adoption of ASU 2014-09 will have onour consolidated financial statements.35Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 ContentsIn April 2015, the FASB issued ASU 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which provides explicitguidance to help companies evaluate the accounting for fees paid by a customer in a cloud computing arrangement. The new guidance clarifies that if a cloudcomputing arrangement includes a software license, the customer should account for the license consistent with its accounting for other software licenses. Ifthe arrangement does not include a software license, the customer should account for the arrangement as a service contract. This new standard is effective forfiscal years and interim periods beginning after December 15, 2015, with early adoption permitted. We early adopted ASU 2015-05 for the year endedJanuary 30, 2016. The adoption did not have a material impact on our consolidated financial statements.In August 2015, the FASB issued ASU 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement ofDebt Issuance Costs Associated with Line-of-Credit Arrangements, which allows companies to continue to defer and present debt issuance costs as an assetthat is amortized ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-creditarrangement. The new standard is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, with earlyadoption permitted. We early adopted ASU 2015-05 for the year ended January 30, 2016. The adoption did not impact our consolidated financial statementsand we will continue presenting debt issuance costs for our asset-based revolving credit facility as an asset.In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which changes the measurement principle for inventoryfrom the lower of cost or market to lower of cost and net realizable value. The new principle is part of the FASB’s simplification initiative and applies toentities that measure inventory using a method other than last-in, first-out ("LIFO") or the retail inventory method. The new standard is effective for fiscalyears and interim periods beginning after December 15, 2016, with early adoption permitted, and is to be applied prospectively. We early adopted ASU 2015-11 for the year ended January 30, 2016. The adoption did not have a material impact on our consolidated financial statements.In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferredincome taxes by requiring deferred tax assets and liabilities to be classified on the balance sheets as non-current. The new standard is effective for fiscal yearsand interim periods beginning after December 15, 2016, with early adoption permitted. We early adopted ASU 2015-17 for the year ended January 30, 2016and applied it prospectively. The adoption did not have a material impact on our consolidated financial statements.In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which requires equityinvestments to be measured at fair value with changes in the fair value recognized through net income and requires enhanced disclosures about equityinvestments. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted. We do notexpect the adoption of ASU 2016-01 to have a material impact on our consolidated financial statements.In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize lease assets and liabilities on the balance sheet andclassify all cash payments within operating activities in the statement of cash flows for leases classified as operating leases under previous guidance. The newstandard is effective for fiscal years and interim periods beginning after December 15, 2018, with early adoption permitted. We are currently evaluating theimpact that the adoption of ASU 2016-02 will have on our consolidated financial statements.In March 2016, the FASB issued ASU 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value Products, which requires prepaid stored-value product liabilities to be treated as financial liabilities and breakage of those liabilities be accounted for consistent with the breakage guidance in Topic606. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted, and is to be appliedretrospectively. We are currently evaluating the impact that the adoption of ASU 2016-04 will have on our consolidated financial statements.36Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 the Revolving Credit Facility bear a floating rate of interest. As of January 30, 2016, the outstanding borrowings under theRevolving Credit Facility were $156.8 million. On future borrowings, an increase in interest rates may have a negative impact on our results of operationsand cash flows. During 2015, we had average daily borrowings of $102.5 million bearing a weighted average interest rate of 1.53%. A hypothetical 10%change from the weighted average interest rate would have a $0.2 million effect on our 2015 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.ITEM 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.37Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 ContentsManagement'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 30, 2016.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 30, 2016 that hasmaterially affected, or is reasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNot applicable.38Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 22, 2016: Name Age PositionMichael L. Glazer 67 President and Chief Executive Officer, DirectorSteven P. Lawrence 48 Chief Merchandising OfficerWilliam E. Gentner 47 Executive Vice President, Chief Marketing OfficerSteven L. Hunter 45 Executive Vice President, Chief Information OfficerRussell A. Lundy, II 53 Executive Vice President, Chief Stores OfficerStephen B. Parsons 51 Executive Vice President, Chief Human Resources OfficerOded Shein 54 Executive Vice President, Chief Financial OfficerChadwick P. Reynolds 42 Senior Vice President, Chief Legal Officer and SecretaryRichard E. Stasyszen 55 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 General Merchandise Manager for Men's, Kids & Home. Prior to joining J.C. Penney, Mr. Lawrence spent 11 years atthe former Foley's Department 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.39Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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.40Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 ourQuarterly Report on Form 10-Q filed on September 12, 2007.3.2Amended and Restated Bylaws of Stage Stores, Inc. dated June 5, 2008 are incorporated by reference to Exhibit 3 to our Quarterly Report onForm 10-Q filed on September 9, 2008.4.1Form of Common Stock Certificate of Stage Stores, Inc. is incorporated by reference to Exhibit 4.1 to our Registration Statement on Form 10filed on 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 our Current Report on Form 8-K filed on October 10,2014. Some schedules to this Exhibit have been omitted. The registrant agrees to furnish supplementally a copy of any of the omittedschedules 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 toour Quarterly Report on Form 10-Q filed on 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 our Quarterly Report on Form 10-Q filed on 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 our Quarterly Report on Form 10-Q filed on 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 our Quarterly Report on Form 10-Q filed on September 6, 2012.41Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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.10.6†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 our Quarterly Report on Form 10-Q filed on September 6, 2012.10.7†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 our Quarterly Report on Form 10-Q filed on 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 our Quarterly Report on Form 10-Q filed on 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 our Quarterly Report on Form 10-Q filed onSeptember 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 our Quarterly Report on Form 10-Q filed on September6, 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 our Quarterly Report on Form 10-Q filed onSeptember 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 our Quarterly Report on Form 10-Q filed on 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 our Quarterly Report on Form 10-Q filed on 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 our Quarterly Report on Form 10-Q filed onSeptember 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 our Quarterly Report on Form 10-Q filed onSeptember 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 our Quarterly Report onForm 10-Q filed on 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 our Quarterly Report on Form 10-Q filed on September 6, 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 our Quarterly Report on Form 10-Q filed on 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 our Quarterly Report on Form 10-Q filed on September 6, 2012.42Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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.10.20†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 our Quarterly Report on Form 10-Q filed on September 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 our Quarterly Report on Form 10-Q filed on September 11, 2014.10.22†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 our Quarterly Report on Form 10-Q filed on 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 our Quarterly Report on Form 10-Q filed on 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 our Quarterly Report on Form 10-Q filed on September11, 2014.10.25†Stage Stores Executive Performance Incentive Bonus Plan is incorporated by reference to Exhibit 10 to our Current Report on Form 8K filedon June 16, 2015.10.26†Stage Stores, Inc. Nonqualified Deferred Compensation Plan, as Amended and Restated effective June 5, 2008 is incorporated by reference toExhibit 4.4 to our Registration Statement on Form S-8 filed on June 10, 2008.10.27#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 our Amended QuarterlyReport on Form 10-Q/A filed on March 7, 2013.10.28#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 our Annual Report on Form 10-K filed on April 3, 2013.10.29#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 our Quarterly Report on Form 10-Q filed on June 10, 2014.10.30#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 our Quarterly Report on Form 10-Qfiled on September 11, 2014.10.31†Employment Agreement between Oded Shein and Stage Stores, Inc. dated June 16, 2015 is incorporated by reference to Exhibit 10.14 of ourCurrent Report on Form 8-K filed on June 22, 2015.10.32†Employment Agreement between Steven Hunter and Stage Stores, Inc. dated April 1, 2015 is incorporated by reference to Exhibit 10.1 StageStores' Current Report on Form 8-K filed on April 7, 2015.10.33†Employment Agreement between Michael L. Glazer and Stage Stores, Inc. dated June 12, 2012 is incorporated by reference to Exhibit 10.25to our Quarterly Report on Form 10-Q filed on September 6, 2012.43Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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.10.34†Employment Agreement between Steven Lawrence and Stage Stores, Inc. dated July 23, 2012 is incorporated by reference to Exhibit 10.3 toour Quarterly Report on Form 10-Q filed on June 13, 2013.10.35†Employment Agreement between Russ Lundy and Stage Stores, Inc. dated August 6, 2010 is incorporated by reference to Exhibit 10.2 to ourQuarterly Report on Form 10-Q filed on June 13, 2013.10.36†Employment Agreement between Stephen Parsons and Stage Stores, Inc. dated April 28, 2014 is incorporated by reference to Exhibit 10.2 toour Quarterly Report on Form 10-Q filed on June 10, 2014.10.37†Employment Agreement between Bill Gentner and Stage Stores, Inc. dated June 17, 2014 is incorporated by reference to Exhibit 10.8 to ourQuarterly Report on Form 10-Q filed on September 11, 2014.14Code of Ethics for Senior Officers dated January 25, 2011 is incorporated by reference to Exhibit 14 to our Annual Report to Form 10-K filedon 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.44Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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. GlazerMarch 30, 2016Michael L. Glazer President and Chief Executive Officer (Principal Executive Officer) STAGE STORES, INC. /s/ Oded SheinMarch 30, 2016Oded Shein Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) STAGE STORES, INC. /s/ Richard E. StasyszenMarch 30, 2016Richard 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 March 30, 2016 * Director March 30, 2016Alan J. Barocas Lisa R. Kranc * Director March 30, 2016 * Director March 30, 2016Elaine D. Crowley William J. Montgoris * Director March 30, 2016 * Director March 30, 2016Diane M. Ellis C. Clayton Reasor /s/ Michael L. Glazer Director March 30, 2016 * Director March 30, 2016Michael L. Glazer Ralph P. Scozzafava * Director March 30, 2016 Earl J. Hesterberg (Constituting a majority of the Board of Directors) *By:/s/ Oded Shein Oded Shein Attorney-in-Fact45Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 30, 2016 and January 31, 2015 F-3 Consolidated Statements of Operations and Comprehensive Income for 2015, 2014 and 2013 F-4 Consolidated Statements of Cash Flows for 2015, 2014 and 2013 F-5 Consolidated Statements of Stockholders' Equity for 2015, 2014 and 2013 F-6 Notes to Consolidated Financial Statements F-7F-1Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 30, 2016 andJanuary 31, 2015, and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the threeyears in the period ended January 30, 2016. We also have audited the Company's internal control over financial reporting as of January 30, 2016, based oncriteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for itsassessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over FinancialReporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financialreporting based on our audits.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 30, 2016 and January 31, 2015, and the results of their operations and their cash flows for each of the three years in theperiod ended January 30, 2016, 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 30, 2016, 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, TexasMarch 30, 2016F-2Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 30, 2016 January 31, 2015ASSETS Cash and cash equivalents$16,487 $17,165Merchandise inventories, net435,996 441,452Prepaid expenses and other current assets48,279 45,444Total current assets500,762 504,061 Property, equipment and leasehold improvements, net311,717 285,450Intangible assets15,235 14,910Other non-current assets, net20,385 20,256Total assets$848,099 $824,677LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable$84,019 $121,778Income taxes payable1,850 13,455Current portion of debt obligations2,847 1,715Accrued expenses and other current liabilities67,166 67,834Total current liabilities155,882 204,782 Long-term debt obligations162,876 45,673Deferred taxes20,277 20,474Other long-term liabilities79,311 77,818Total liabilities418,346 348,747 Commitments and contingencies (Note 8) Common stock, par value $0.01, 100,000 shares authorized, 32,030 and 31,632 shares issued,respectively320 316Additional paid-in capital406,034 395,395Less treasury stock - at cost, 5,175 and 0 shares, respectively(43,068) (600)Accumulated other comprehensive loss(6,353) (6,874)Retained earnings72,820 87,693Total stockholders' equity429,753 475,930Total liabilities and stockholders' equity$848,099 $824,677 The accompanying notes are an integral part of these consolidated financial statements.F-3Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 2015 2014 2013Net sales$1,604,433 $1,638,569 $1,609,481Cost of sales and related buying, occupancy and distribution expenses1,208,002 1,188,763 1,172,995Gross profit396,431 449,806 436,486 Selling, general and administrative expenses387,859 386,104 393,126Interest expense2,977 3,002 2,744Income from continuing operations before income tax5,595 60,700 40,616Income tax expense1,815 22,847 15,400Income from continuing operations3,780 37,853 25,216Loss from discontinued operations, net of tax benefit of $0, $4,228 and$5,237, respectively— (7,003) (8,574)Net income$3,780 $30,850 $16,642 Other comprehensive income (loss): Employee benefit related adjustment, net of tax of ($258), ($1,505) and$683, respectively$(431) $(2,507) $1,138Amortization of employee benefit related costs, net of tax of $290, $150, and$229, respectively484 249 381Loss on pension settlement, net of tax of $280, $0 and $0, respectively468 — —Total other comprehensive income (loss)521 (2,258) 1,519Comprehensive income$4,301 $28,592 $18,161 Basic earnings per share data: Continuing operations$0.12 $1.18 $0.78Discontinued operations— (0.22) (0.27)Basic earnings per share$0.12 $0.96 $0.51Basic weighted average shares outstanding31,145 31,675 32,034 Diluted earnings per share data: Continuing operations$0.12 $1.18 $0.77Discontinued operations— (0.22) (0.26)Diluted earnings per share$0.12 $0.96 $0.51Diluted weighted average shares outstanding31,188 31,763 32,311The accompanying notes are an integral part of these consolidated financial statements.F-4Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 2015 2014 2013Cash flows from operating activities: Net income$3,780 $30,850 $16,642Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and impairment of long-lived assets77,599 63,447 69,925Loss on retirements of property, equipment and leasehold improvements719 110 860Deferred income taxes(2,330) 3,348 (808)Tax benefit from stock-based compensation409 64 1,761Stock-based compensation expense12,394 9,664 8,417Amortization of debt issuance costs218 275 279Excess tax benefits from stock-based compensation(945) (852) (2,076)Deferred compensation obligation881 (367) 266Amortization of employee benefit related costs and loss on pension settlement1,522 399 610Construction allowances from landlords3,444 5,538 4,162Other changes in operating assets and liabilities: Decrease (increase) in merchandise inventories5,456 (7,045) (20,479)Decrease (increase) in other assets1,551 (1,737) (6,375)Decrease in accounts payable and other liabilities(64,398) (1,480) (26,657)Net cash provided by operating activities40,300 102,214 46,527 Cash flows from investing activities: Additions to property, equipment and leasehold improvements(90,695) (70,580) (61,263)Proceeds from insurance and disposal of assets43 2,946 27Addition to intangible assets(325) — —Net cash used in investing activities(90,977) (67,634) (61,236) Cash flows from financing activities: Proceeds from revolving credit facility borrowings575,570 457,742 494,885Payments of revolving credit facility borrowings(460,640) (471,227) (445,490)Payments of long-term debt obligations(1,714) (2,352) (744)Payments of debt issuance costs— (663) (128)Repurchases of common stock(41,587) (2,755) (31,367)Payments for stock related compensation(4,465) (1,844) (2,381)Proceeds from issuance of equity awards543 5,040 10,149Excess tax benefits from stock-based compensation945 852 2,076Cash dividends paid(18,653) (16,970) (15,466)Net cash provided by (used in) financing activities49,999 (32,177) 11,534 Net (decrease) increase in cash and cash equivalents(678) 2,403 (3,175) Cash and cash equivalents: Beginning of period17,165 14,762 17,937End of period$16,487 $17,165 $14,762 Supplemental disclosures including non-cash investing and financing activities: Interest paid$2,705 $2,733 $2,392Income taxes paid15,237 7,084 18,789Unpaid liabilities for capital expenditures11,951 3,168 4,918The accompanying notes are an integral part of these consolidated financial statements.F-5Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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, 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 Net income— — — — — — 3,780 3,780Other comprehensive income— — — — — 521 — 521Dividends on common stock,$0.58 per share— — — — — — (18,653) (18,653)Deferred compensation— — 881 — (881) — — —Repurchases of common stock— — — (5,175) (41,587) — — (41,587)Issuance of equity awards, net398 4 539 — — — — 543Tax withholdings paid for netsettlement of stock awards— — (3,584) — — — — (3,584)Stock-based compensationexpense— — 12,394 — — — — 12,394Tax benefit from stock-basedcompensation— — 409 — — — — 409Balance, January 30, 201632,030 $320 $406,034 (5,175) $(43,068) $(6,353) $72,820 $429,753 The accompanying notes are an integral part of these consolidated financial statements.F-6Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 30, 2016, we operated 834 specialty department stores located in 39 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 YearEndedWeeks2015January 30, 2016522014January 31, 2015522013February 1, 201452Use 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 assets, 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. Cashand cash equivalents also includes amounts due from credit card sales transactions.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 net realizable value with cost determined using the weightedaverage cost method. We capitalize distribution center costs associated with preparing inventory for sale, such as distribution payroll, benefits, occupancy,depreciation and other direct operating expenses as part of merchandise inventories. We also include in inventory the cost of freight to our distributioncenters and to stores as well as duties and fees related to import purchases.F-7Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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)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. These allowances are recognized in accordance with ASC Subtopic 605-50, Customer Payments and Incentives. Vendor allowances related to thepurchase of inventory are recorded as a reduction to the cost of inventory until sold. Vendor allowances are recognized as a reduction of cost of goods sold orthe related selling expense when the purpose for which the vendor funds were intended to be used has been fulfilled and amounts have been authorized byvendors. 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 & improvements20Information systems3-10Store 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 Assets and Impairment of Intangible Assets. Indefinite life intangible assets are tested for impairment annually or more frequently whenindicators of impairment exist. As a part of the acquisition of Peebles, Inc. in 2003, we acquired the rights to the PEEBLES trade name 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 thetime of the Peebles, Inc. acquisition. We completed our annual impairment testing during the fourth quarter of 2015 and determined there was noimpairment.F-8Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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)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 $0.3 million and $0.1 million, is $0.8 million and $1.0 millionat January 30, 2016 and January 31, 2015, respectively.Revenue Recognition. Our retail stores record revenue at the point of sale. Sales of merchandise shipped to our customers are recorded based onestimated receipt of merchandise by the customer. Shipping and handling fees charged to customers are included in net sales with the corresponding costsrecorded as costs of goods sold. Total revenues do not include sales tax because we are a pass-through conduit for collecting and remitting sales taxes.Revenues are recognized net of expected returns, which we 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 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 $1.6 million, $1.1 million and $1.0 million of breakage income in 2015, 2014 and 2013, 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-insured 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.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 and reflected in SG&A expense. Store opening expenses, including rent incurred during the rent holiday period on new and relocatedstores, were $0.5 million, $2.5 million and $2.9 million in 2015, 2014 and 2013, respectively.Advertising Expenses. Advertising costs are charged to operations when the related advertising first takes place. Advertising costs were $91.0million, $92.1 million and $94.2 million, in 2015, 2014 and 2013, respectively, which are net of advertising allowances received from vendors of $4.9million, $5.0 million and $5.2 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 lease term, commencing on the date we contractually earned theconstruction allowance, as a reduction of rent expense. The deferred rent credit was $47.5 million and $45.1 million as of January 30, 2016 and January 31,2015, 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.F-9Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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)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. We granted non-vested stock awards that contain non-forfeitable dividend rights. Under Accounting Standards Codification ("ASC") 260-10,Earnings Per Share, non-vested stock awards that contain non-forfeitable dividend or dividend equivalent rights are considered participating securities andare included in the calculation of basic and diluted earnings per share pursuant to the two-class method. The two-class method determines earnings per sharefor 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. Recent Accounting Standards. In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update("ASU") 2014-09, Revenue from Contracts with Customers, which supersedes most existing revenue recognition guidance in GAAP. The core principle of theguidance is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects what a companyexpects to be entitled to in exchange for those goods or services. ASU 2014-09 allows for either a retrospective or cumulative effect transition method ofadoption and was to be effective for periods beginning after December 15, 2016. In July 2015, the FASB issued ASU 2015-14, which defers the effective dateof ASU 2014-09 by one year, however, early adoption as of the original effective date is permitted. We are currently evaluating the impact that the adoptionof ASU 2014-09 will have on our consolidated financial statements.In April 2015, the FASB issued ASU 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which provides explicitguidance to help companies evaluate the accounting for fees paid by a customer in a cloud computing arrangement. The new guidance clarifies that if a cloudcomputing arrangement includes a software license, the customer should account for the license consistent with its accounting for other software licenses. Ifthe arrangement does not include a software license, the customer should account for the arrangement as a service contract. This new standard is effective forfiscal years and interim periods beginning after December 15, 2015, with early adoption permitted. We early adopted ASU 2015-05 for the year endedJanuary 30, 2016. The adoption did not have a material impact on our consolidated financial statements.In August 2015, the FASB issued ASU 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement ofDebt Issuance Costs Associated with Line-of-Credit Arrangements, which allows companies to continue to defer and present debt issuance costs as an assetthat is amortized ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-creditarrangement. The new standard is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, with earlyadoption permitted. We early adopted ASU 2015-05 for the year ended January 30, 2016. The adoption did not impact our consolidated financial statementsand we will continue presenting debt issuance costs for our asset-based revolving credit facility as an asset.F-10Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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)In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which changes the measurement principle for inventoryfrom the lower of cost or market to lower of cost and net realizable value. The new principle is part of the FASB’s simplification initiative and applies toentities that measure inventory using a method other than last-in, first-out ("LIFO") or the retail inventory method. The new standard is effective for fiscalyears and interim periods beginning after December 15, 2016, with early adoption permitted, and is to be applied prospectively. We early adopted ASU 2015-11 for the year ended January 30, 2016. The adoption did not have a material impact on our consolidated financial statements.In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferredincome taxes by requiring deferred tax assets and liabilities to be classified on the balance sheets as non-current. The new standard is effective for fiscal yearsand interim periods beginning after December 15, 2016, with early adoption permitted. We early adopted ASU 2015-17 for the year ended January 30, 2016and applied it prospectively. The adoption did not have a material impact on our consolidated financial statements.In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which requires equityinvestments to be measured at fair value with changes in the fair value recognized through net income and requires enhanced disclosures about equityinvestments. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted. We do notexpect the adoption of ASU 2016-01 to have a material impact on our consolidated financial statements.In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize lease assets and lease liabilities on the balance sheetand classify all cash payments within operating activities in the statement of cash flows for leases classified as operating leases under previous guidance. Thenew standard is effective for fiscal years and interim periods beginning after December 15, 2018, with early adoption permitted. We are currently evaluatingthe impact that the adoption of ASU 2016-02 will have on our consolidated financial statements.In March 2016, the FASB issued ASU 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value Products, which requires prepaid stored-value product liabilities to be treated as financial liabilities and breakage of those liabilities be accounted for consistent with the breakage guidance in Topic606. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted, and is to be appliedretrospectively. We are currently evaluating the impact that the adoption of ASU 2016-04 will have on our consolidated financial statements.F-11Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 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 2015 2014 2013Basic EPS from continuing operations: Income from continuing operations$3,780 $37,853 $25,216Less: Allocation of earnings to participating securities(48) (503) (352)Net income from continuing operations allocated to common shares3,732 37,350 24,864 Basic weighted average shares outstanding31,145 31,675 32,034Basic EPS from continuing operations$0.12 $1.18 $0.78 Fiscal Year 2015 2014 2013Diluted EPS from continuing operations: Income from continuing operations$3,780 $37,853 $25,216Less: Allocation of earnings to participating securities(48) (502) (351)Net income from continuing operations allocated to common shares3,732 37,351 24,865 Basic weighted average shares outstanding31,145 31,675 32,034Add: Dilutive effect of stock awards43 88 277Diluted weighted average shares outstanding31,188 31,763 32,311Diluted EPS per continuing operations$0.12 $1.18 $0.77 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 2015 2014 2013Number of anti-dilutive stock options and SARs due to exercise price greaterthan average market price of our common stock251 234 414F-12Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 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-13Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 were as follows (in thousands): January 30, 2016 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)$17,286 $17,286 $— $— 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 $— $— (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 2015 and 2014. F-14Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 were as follows (in thousands): January 30, 2016 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)$3,895 $— $— $3,895 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 leasehold improvements (a)$3,343 $— $— $3,343 (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 recognized impairment chargesto reflect the assets at fair value. We use a discounted cash flow model, with a 10% discount rate, to determine the fair value of our impaired assets. Key assumptions in determiningfuture cash flows include, among other things, expected future operating performance, including expected closure date or lease term, and changes in economic conditions. See Note4 for additional disclosures on impairment charges. 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-15Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 30, 2016 January 31, 2015Land$1,842 $1,842Buildings and improvements15,633 15,633Fixtures and equipment517,485 489,243Leasehold improvements398,406 360,594Property, equipment and leasehold improvements933,366 867,312Less: Accumulated depreciation621,649 581,862Property, equipment and leasehold improvements, net$311,717 $285,450 Depreciation expense and impairment charges were as follows for each period presented (in thousands): Fiscal Year 2015 2014 2013Depreciation expense$66,998 $62,791 $61,885Impairment charges(a)10,580 636 8,017Total depreciation and impairment (b)$77,578 $63,427 $69,902(a) We review the performance of our stores on an ongoing basis and recognize impairment charges for the difference between the carrying value and fair value of the storewhen store cash flow trends indicate that the carrying value of property, equipment and leasehold improvements may not be fully recoverable. Store impairment chargesare recorded in cost of sales and related buying, occupancy and distribution expenses. Impairment charges recognized in 2015 are related to our strategic store closureplan. Impairment charges recognized in 2013 include $7.3 million associated with Steele's, which was disposed of on March 7, 2014. See Note 15 for additionaldisclosures on the Steele's divestiture.(b) Depreciation expense and impairment charges included in cost of sales for 2015, 2014 and 2013 were $67.9 million, $50.9 million and $49.2 million, respectively.As part of a strategic evaluation of our store portfolio in 2015, we announced a multi-year plan to close stores that we believe do not have thepotential to meet our sales productivity and profitability standards. We expect to close approximately 100 underperforming stores representing nearly 5% oftotal sales, including the 23 stores that were closed in 2015 and approximately 25 to 30 stores expected to close in 2016, with the majority expected to beclosed by the end of 2017.F-16Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 5 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIESThe components of accrued expenses and other current liabilities were as follows (in thousands): January 30, 2016 January 31, 2015Accrued compensation and benefits$12,345 $19,299Gift card and merchandise credit liability10,477 10,690Self-insurance liability10,029 10,395Accrued occupancy6,185 5,625Accrued advertising3,092 3,599Current deferred income tax— 1,822Accrued capital expenditures11,084 1,313Other13,954 15,091Accrued expenses and other current liabilities$67,166 $67,834NOTE 6 - DEBT OBLIGATIONS Debt obligations consisted of the following (in thousands): January 30, 2016 January 31, 2015Revolving Credit Facility$156,840 $41,910Finance obligations3,764 4,725Other financing5,119 753Total debt obligations165,723 47,388Less: Current portion of debt obligations2,847 1,715Long-term debt obligations$162,876 $45,673 On October 6, 2014, we entered into a Second Amended and Restated Credit Agreement for a $300.0 million senior secured revolving credit facility("Revolving Credit Facility") with a seasonal increase to $350.0 million and a $50.0 million letter of credit subfacility. The Revolving Credit Facilitymatures on 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 2015, theweighted average interest rate on outstanding borrowings and the average daily borrowings under the Revolving Credit Facility were 1.53% and $102.5million, respectively, as compared to 1.71% and $81.4 million in 2014.Letters of credit issued under the Revolving Credit Facility support certain merchandise purchases and collateralize retained risks and deductiblesunder various insurance programs. At January 30, 2016, we had outstanding letters of credit totaling approximately $5.2 million. These letters of credit expirewithin twelve months of issuance. Excess borrowing availability under the Revolving Credit Facility at January 30, 2016 was $137.8 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 to $30.0 million in a fiscal year, and (iii) the repurchase of commonstock under certain circumstances. 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 30, 2016, we were in compliance with all of the financial covenants of the Revolving Credit Facilityagreement and expect to continue to be in compliance in 2016.F-17Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 obligations with the amounts received from the landlord being recorded in debt obligations.Interest expense is recognized at a rate that will amortize the finance obligation over the initial term of the lease. Where ASC No. 840-40-55 was applicable,we have recorded finance obligations with interest rates ranging from 6.1% to 16.9% on our consolidated financial statements related to five store leases as ofJanuary 30, 2016. Minimum annual payments required under existing finance obligations as of January 30, 2016 are as follows (in thousands):Fiscal YearMinimumPayments Less: Interest Principal Payments2016$1,366 $310 $1,05620171,366 207 1,15920181,096 101 9952019580 26 554Total$4,408 $644 $3,764 During 2015, we financed approximately $5.1 million of capital expenditures, bearing interest of 1.4% of which $1.8 million will paid in 2016 and$3.3 million will be paid in 2017.NOTE 7 – OTHER LONG-TERM LIABILITIESThe components of other long-term liabilities were as follows (in thousands): January 30, 2016 January 31, 2015Deferred rent$47,506 $45,053Deferred compensation17,392 16,762Pension liability8,913 8,503Deferred revenue under ADS agreement (see Note 10)4,500 5,500Other1,000 2,000Other long-term liabilities$79,311 $77,818 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-18Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 2015, 2014 and 2013,participants in our deferred compensation plan elected to invest approximately $0.9 million, $0.4 million and $0.3 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 16, 2015, we announced that our Board approved a 7% increase in our quarterly cash dividend rate to $0.15 per common share from theprevious quarterly rate of $0.14 per common share. The quarterly rate of $0.15 per common share was first paid on September 16, 2015 to shareholders ofrecord on September 1, 2015. On February 18, 2016, our Board declared a quarterly cash dividend of $0.15 per share on our common stock, payable onMarch 16, 2016, to shareholders of record at the close of business on March 1, 2016. On 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. After investing $100.1 million to acquire our common stock under the 2011 Stock Repurchase Program, onJune 11, 2012, we announced that our Board suspended the program. On November 19, 2015, we announced that our Board approved the resumption of the2011 Stock Repurchase Program. After investing an additional $41.6 million to acquire our common stock under the 2011 Stock Repurchase Program duringthe fourth quarter 2015, we had $58.4 million available under the program as of January 30, 2016. The 2011 Stock Repurchase Program will expire when wehave repurchased $200.0 million of our outstanding common stock, unless terminated earlier by our Board. Also in March 2011, our Board authorized us torepurchase shares of our outstanding common stock equal to the amount of the proceeds and related tax benefits from the exercise of stock options, SARs andother equity grants. During 2015 and 2014, we repurchased 5,175,072 and 172,214 shares of our common stock for approximately $41.6 million and $2.8million, respectively. Purchases of shares of our common stock 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. F-19Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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"). Under the terms of the Agreement, which expires July 31, 2021, the Bank provides credit card services for our private label credit card program,including account 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 and transmitting of transactionrecords and marketing and promoting the private label credit card program. As consideration, among other payments set forth in the Agreement, the Bankpays us a monthly net portfolio yield payment and an annual portfolio performance bonus, if earned.We received certain upfront payments upon execution of the Agreement that are being recognized over the life of the Agreement. We realized $54.1million, $54.1 million and $46.3 million related to our private label credit card program during 2015, 2014 and 2013, 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. The majority of store leases, which aretypically for an initial 10-year term and often with two renewal options of five years each, provide for our payment of base rent plus expenses, such ascommon area maintenance, utilities, taxes and insurance. Certain store leases provide for contingent rents that are not measurable at inception. Thesecontingent rents are primarily based on a percentage of sales that are in excess of a predetermined level. A number of store leases provide for escalatingminimum rent. As part of the consolidation of our corporate headquarters, we entered into an agreement to sublease our former corporate office buildingbeginning in February 2016 through our remaining lease term.Minimum rental commitments on long-term, non-cancelable operating leases at January 30, 2016, are as follows (in thousands):Fiscal Year Commitments Sublease Income Net Minimum LeaseCommitments2016 $94,196 $(1,325) $92,8712017 87,610 (1,365) 86,2452018 77,592 (1,447) 76,1452019 61,992 (1,447) 60,5452020 53,518 (1,492) 52,026Thereafter 165,715 (4,218) 161,497Total $540,623 $(11,294) $529,329Rental expense for operating leases, net of sublease income, consisted of the following for each period presented (in thousands): Fiscal Year 2015 2014 2013Minimum rentals $84,170 $77,141 $76,813Contingent rentals 3,067 3,642 3,904Sublease income (5) (6) (6) $87,232 $80,777 $80,711F-20Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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.Stock-based compensation expense by type of grant for each period presented was as follows (in thousands, except per share amounts): Fiscal Year 2015 2014 2013Stock options and SARs$30 $703 $1,521Non-vested stock7,171 5,034 4,204Performance shares5,193 3,927 2,692Total stock-based compensation expense12,394 9,664 8,417Related tax benefit(4,660) (3,634) (3,165)Stock-based compensation expense, net of tax$7,734 $6,030 $5,252 As of January 30, 2016, we had unrecognized compensation cost of $19.1 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. Outstanding options and SARs will expire, if not exercised, within seven years from the date of grant. No stock options or SARs were grantedduring 2015, 2014 or 2013.The following table summarizes stock options and SARs activity during 2015: Number ofOutstandingShares WeightedAverageExercise Price WeightedAverageRemainingContractualTerm(years) AggregateIntrinsicValue (inthousands)Outstanding at January 31, 2015418,525 $16.49 Exercised(160,650) 15.32 Forfeited(33,475) 17.61 Outstanding, vested and exercisable at January30, 2016224,400 $17.16 1.7 $—F-21Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 2015:Stock Options/ SARs Number ofShares WeightedAverageGrant DateFair ValueOutstanding at January 31, 2015 69,763 $8.69Vested (69,763) 8.69Outstanding at January 30, 2016 — — 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 2015, 2014 and 2013 was $0.9 million, $3.7 million and $6.0 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 2015:Non-vested Stock Number ofShares WeightedAverageGrant DateFair ValueOutstanding at January 31, 2015 678,604 $21.76Granted 548,759 18.70Vested (272,872) 20.77Forfeited (59,965) 21.56Outstanding at January 30, 2016 894,526 20.20 The aggregate intrinsic value of non-vested stock that vested during 2015, 2014 and 2013 was $5.4 million, $5.7 million and $4.8 million,respectively. The weighted-average grant date fair value for non-vested stock granted in 2015, 2014 and 2013 was $18.70, $22.81 and $24.97, respectively.The payment of the employees' tax liability for a portion of the non-vested stock that vested during 2015 was satisfied by withholding shares with a fair valueequal to the tax liability. As a result, the actual number of shares issued was 196,949.F-22Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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)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.The following table summarizes information about the performance shares that were outstanding at January 30, 2016: PeriodGranted Target SharesOutstanding atBeginningof Year TargetSharesGranted Target SharesVested TargetSharesForfeited Target SharesOutstandingat Endof Year WeightedAverageGrant DateFair Value perShare2013 118,250 — (3,300) (2,200) 112,750 $33.812014 166,153 — (3,438) (2,292) 160,423 33.842015 — 227,685 — (3,809) 223,876 28.33Total 284,403 227,685 (6,738) (8,301) 497,049 During 2015, 221,182 shares vested related to the 2012 performance share grant. The aggregate intrinsic value of shares that vested during 2015,2014 and 2013 was $4.9 million, $0.8 million and $2.7 million, respectively. The payment of the recipients' tax liability for shares vesting during 2015 ofapproximately $1.8 million was satisfied by withholding shares with a fair value equal to the tax liability. As a result, the actual number of shares issued was144,189.F-23Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 $1.5 million, $1.4 million and $1.5 million in 2015, 2014 and 2013, 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$1.1 million, $1.3 million and $0.9 million for 2015, 2014 and 2013, 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 January 31, 2015 and January 30, 2016 there were no participants in or amounts deferredunder 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 30, 2016 and January 31, 2015. F-24Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 2015 2014Change in benefit obligation: Benefit obligation at beginning of year$41,295 $36,579Employer service cost350 210Interest cost1,566 1,692Actuarial (gain) loss(3,406) 6,165Settlement (a)(2,579) —Plan disbursements(2,003) (3,351)Projected benefit obligation at end of year35,223 41,295 Change in plan assets: Fair value of plan assets at beginning of year32,792 31,856Actual return (loss) on plan assets(1,900) 4,287Employer contributions— —Settlement paid (a)(2,579) —Plan disbursements(2,003) (3,351)Fair value of plan assets at end of year26,310 32,792 Underfunded status$(8,913) $(8,503) Amounts recognized in the consolidated balance sheet consist of: Accrued benefit liability - included in other long-term liabilities$(8,913) $(8,503)Amount recognized in accumulated other comprehensive loss, pre-tax (b)10,222 11,055 (a) The settlement was a result of lump sum payments exceeding the interest cost for 2015. Settlements of this nature may occur in future years.(b) Consists solely of net actuarial losses as there are no prior service costs. Fiscal Year 2015 2014 Weighted-average assumptions: For determining benefit obligations at year-end: Discount rate4.79% 3.90% Fiscal Year 2015 2014 2013For determining net periodic pension cost for year: Discount rate3.90% 4.81% 4.43%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-25Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 2016 TargetAllocation 2015 2014Equity securities50% 48% 49%Fixed income securities50 51 50Other - primarily cash— 1 1Total100% 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 30, 2016 Balance Quoted Pricesin ActiveMarkets forIdenticalInstruments(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3)Mutual funds: Equity securities$12,607 $12,607 $— $—Fixed income securities13,341 13,341 — —Other - primarily cash362 362 — —Total$26,310 $26,310 $— $— 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 $— $— F-26Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 2015 2014 2013Net periodic pension cost for the fiscal year: Employer service cost$350 $210 $360Interest cost1,566 1,692 1,723Expected return on plan assets(2,195) (2,134) (2,237)Net loss amortization774 399 610Loss on pension settlement748 — —Net pension cost1,243 167 456 Other changes in DB Plan assets and benefit obligations recognized in other comprehensive loss are as follows (in thousands): Fiscal Year 2015 2014Amortization of net loss$(774) $(399)Loss on pension settlement(748) —Net loss689 4,012Net change recognized in other comprehensive loss, pre-tax$(833) $3,613 The estimated net loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next year is $0.9million. 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 for2016.The following benefit payments are expected to be paid (in thousands):Fiscal YearPayments2016$2,30020172,89520182,68420192,94920202,815Fiscal years 2021 - 202513,990 F-27Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 2015 2014 2013Federal income tax expense: Current$3,380 $12,948 $9,462Deferred(2,156) 3,048 (761) 1,224 15,996 8,701State income tax expense: Current765 2,323 1,509Deferred(174) 300 (47) 591 2,623 1,462Total income tax expense$1,815 $18,619 $10,163 Income tax is included in the consolidated financial statements as follows (in thousands): Fiscal Year 2015 2014 2013Continuing operations$1,815 $22,847 $15,400Discontinued operations— (4,228) (5,237)Total income tax expense$1,815 $18,619 $10,163Reconciliation 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 2015 2014 2013Federal income tax expense at the statutory rate$1,958 $17,314 $9,382State income taxes, net332 1,811 974Uncertain tax position128 92 531Other474 590 399Job credits(1,077) (1,188) (1,123)Total income tax expense$1,815 $18,619 $10,163F-28Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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) consisted of the following (in thousands): January 30, 2016 January 31, 2015Gross deferred tax assets: Net operating loss carryforwards$469 $521Accrued expenses2,719 2,392Lease obligations19,186 18,690Deferred compensation11,223 9,967Deferred income4,592 4,707Other2,879 2,905 41,068 39,182Gross deferred tax liabilities: Inventory(6,725) (5,756)Depreciation and amortization(54,218) (55,320) (60,943) (61,076) Valuation allowance(402) (402)Net deferred tax liabilities$(20,277) $(22,296)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.Consistent with the requirements of ASC No. 740, the tax benefits recognized related to pre-reorganization deferred tax assets are recorded as a directaddition to additional paid-in capital. The remaining valuation allowance of $0.4 million at January 30, 2016 and January 31, 2015, respectively, wasestablished for pre-reorganization state net operating losses, which may expire prior to utilization. Adjustments are made to reduce the recorded valuationallowance when positive evidence exists that is sufficient to overcome the negative evidence associated with those losses.We have net operating loss carryforwards for state income tax purposes of approximately $11.7 million which, if not utilized, will expire in varyingamounts between 2016 and 2021. We do not have any net operating loss carryforwards for federal income tax purposes.As of January 30, 2016, the total unrecognized tax benefit was $0.7 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): 2015Balance, beginning of period$623Additions based on tax positions related to 2015100Additions for tax positions for prior years20Balance, end of period$743F-29Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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") hascompleted its field examination of the federal income tax returns for 2009, 2010, 2011 and 2012. We have received Revenue Agent Reports from the IRS thatseek adjustments to income before taxes of approximately $3.2 million in connection with an unresolved issue related to Section 199, Domestic ProductionDeduction. We filed a protest with the IRS Appeals Office regarding the proposed adjustment. Meetings with the Appeals Office have been set for April 2016.We believe that adequate provision has been made for any adjustments that may result from tax audits. However, the outcome of tax audits cannot bepredicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with our expectations, we could be required to adjustour 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 30, 2016,January 31, 2015, and February 1, 2014, the amount of penalties and interest accrued was approximately nil. We are subject to U.S. federal income taxexaminations by tax authorities for 2013 forward. We are also subject to audit by the taxing authorities of 38 states for years generally after 2011.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 $9.7 million, for each period presented were as follows(in thousands): Fiscal Year 2015 2014 2013Net Sales$— $2,414 $24,075 Pre-tax loss from discontinued operations— 11,231 13,811 There were no assets or liabilities related to Steele’s included in the condensed consolidated financial statements as of January 30, 2016 orJanuary 31, 2015.F-30Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 16 - QUARTERLY FINANCIAL INFORMATION (unaudited)The following table shows quarterly information (in thousands, except per share amounts): Fiscal Year 2015 Q1Q2Q3Q4Net sales$369,313 $380,916 $351,575 $502,629Gross profit80,929 98,455 76,096 140,951Net income (loss)(8,637) 1,615 (10,183) 20,985 Basic earnings (loss) per share$(0.27) $0.05 $(0.32) $0.72Diluted earnings (loss) per share(0.27) 0.05 (0.32) 0.71 Basic weighted average shares31,750 31,982 32,017 28,828Diluted weighted average shares31,750 32,013 32,017 28,848 Fiscal Year 2014 Q1 Q2 Q3 Q4Net 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 31,740F-31Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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, March 30, 2016Powered 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 March 30, 2016, relating to the consolidated financialstatements of Stage Stores, Inc. and subsidiary and the effectiveness of Stage Stores, Inc.'s internal control over financial reporting,appearing in this Annual Report on Form 10-K of Stage Stores, Inc. and subsidiary for the year ended January 30, 2016./s/ Deloitte & Touche LLP Houston, TexasMarch 30, 2016Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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 (“Company”), hereby constitutes and appoints Michael L. Glazer and Oded Shein, and each of them (with full power toeach 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 2015 fiscal year ended January 30, 2016 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, 2016./s/ Alan J. Barocas /s/ Lisa R. KrancAlan J. Barocas Lisa R. Kranc /s/ Elaine D. Crowley /s/ William J. MontgorisElaine D. Crowley William J. Montgoris /s/ Diane M. Ellis /s/ C. Clayton Reasor Diane M. Ellis C. Clayton Reasor /s/ Michael L. Glazer /s/ Ralph P. ScozzafavaMichael L. Glazer Ralph P. Scozzafava /s/ Earl J. Hesterberg Earl J. Hesterberg Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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, 2016.DIRECTORS/s/ Alan J. Barocas /s/ Lisa R. KrancAlan J. Barocas Lisa R. Kranc /s/ Elaine D. Crowley /s/ William J. MontgorisElaine D. Crowley William J. Montgoris /s/ Diane M. Ellis /s/ C. Clayton Reasor Diane M. Ellis C. Clayton Reasor /s/ Michael L. Glazer /s/ Ralph P. Scozzafava Michael L. Glazer Ralph P. Scozzafava /s/ Earl J. Hesterberg Earl J. Hesterberg Source: STAGE STORES INC, 10-K, March 30, 2016Powered 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, March 30, 2016Powered 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: March 30, 2016/s/ Michael L. Glazer Michael L. Glazer President and Chief Executive OfficerSource: STAGE STORES INC, 10-K, March 30, 2016Powered 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: March 30, 2016/s/ Oded Shein Oded Shein Executive Vice President, Chief Financial Officer and TreasurerSource: STAGE STORES INC, 10-K, March 30, 2016Powered 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 30, 2016 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: March 30, 2016/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, March 30, 2016Powered 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, March 30, 2016Powered 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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