®
A N N UA L R E P O R T | 2 01 6
We’re focused on ALWAYS
bringing her something NEW,
INSPIRING her to live her life
and EXPRESS herself through
her own STYLE.
M i c h a e l L . G l a z e r | P r e s i d e n t & C E O
While 2016 was a diffi cult year for our industry and our business, we made progress in evolving our business
model to meet the changing habits of our customer. Despite the challenges in the retail industry, as well as the
headwinds facing our oil patch and border stores, we concluded the year in a solid fi nancial position. Importantly,
we believe that the progress we have made will enable us to achieve our fi nancial goals in 2017.
D U R I N G 2 01 6 :
• We grew our omni-channel business as we made a number of enhancements to the user experience. We launched
website navigation and search improvements to make shopping easier and faster. We also introduced buy online,
ship-to-store, giving our customer more convenient shopping options. In addition, we expanded our online
assortment to include seven times more product than our average store, giving our customer additional options when
she shops. Finally, we made investments in digital marketing and our mobile site, as well as to our supply chain, to
support continued online growth.
• We evolved our product assortment to offer more contemporary fashions and brands. We also drove positive
comparable store sales in our home department for the year.
• We launched Style Circle Rewards, our tender-neutral loyalty program, which complements our existing private label
credit card. We ended the year with 4.7 million members, including our private label credit card holders. In addition,
we grew our private label credit card sales penetration by 290 basis points to 47.3% of sales, with credit income
increasing 2%.
• We have enhanced our store environment by remodeling over 200 stores with 86 stores refreshed in 2016.
• We closed 37 stores, and ended the year with 60 locations closed as part of our strategic store closure program.
• Our expense control initiatives enabled us to reduce adjusted SG&A expenses by $27 million.
• Our disciplined inventory management enabled us to reduce inventory by 6% at year end.
• We increased our secured credit facility by $100 million to up to $450 million.
• We paid $16.7 million in cash dividends throughout the year.
• Importantly, we generated positive free cash fl ow1.
1 Free cash fl ow is net cash provided by operating activities less capital expenditures.
continued
Looking ahead, we believe that there are multiple opportunities to drive sales and enhance our fi nancial
performance by continuing to focus on giving our customer the style and value she loves with a great experience.
In 2017, our key strategic initiatives, which we call our Jump Start plan, are to:
• Continue to build our online business, with further enhancements to the site design and functionality, improved
mobile capabilities, additional digital marketing, expanded assortments, and investments in our supply chain. We will
also work to better connect stores and our online platform by leveraging buy online, ship-to-store capabilities, and
make online ordering available in-store from our registers.
• Invigorate our merchandise with more newness, an emphasis on style and value, and an expanded gift selection.
We will be building more liquidity into our merchandise plans, and we plan to add more off-price and close-out buys.
In addition, we will be pulling back on underperforming categories and shifting our emphasis into key categories where
we believe we can win big, including beauty, plus sizes, gifts, and women’s updated and contemporary apparel.
• Build on beauty by adding smaller Clinique and Estēe Lauder counters to approximately 30 stores and expanding
assortments within beauty, bath and body across the store base.
• Recover merchandise margin by reducing promotional discount levels, eliminating overlapping coupons, and
enhancing seasonal transitions.
• Improve our relationship with our customer by connecting with her through the channels she uses most often and
with more relevant messages. This includes shifting to more digital and email marketing, enhancing our loyalty
programs, and emphasizing that she can “Find something new at Stage” in our marketing.
• Enhance the store experience by creating a culture of strong customer service and execution through our “sell one
more” initiative. We plan to create more customer facing time by reducing tasks for our store associates. We will also
reduce capital spend on remodels, and close 15 to 20 strategically identifi ed locations in 2017. In addition, we will
reduce our inventory levels in stores, making it easier for her to shop.
We will remain laser focused on operating our business effi ciently, improving comparable sales and margin
through our Jump Start Plan, reducing capital expenditures, and improving working capital. We believe we
are making the right investments in the right areas of our business to energize our brand, stores, website,
and customers.
In the fi rst quarter of fi scal 2017, we announced the acquisition of a minimum of 50 Gordmans store leases, with
rights to assume leases for an additional seven stores and a distribution center. We believe that Gordmans stores
are a natural complement to Stage, bringing benefi cial diversifi cation and scale to our business, while creating
synergies through the use of our current infrastructure. By acquiring Gordmans stores, we believe that we
have an opportunity to benefi t from its off -price competencies, deep connection with a youthful customer, and
strong home and gifts businesses. The acquisition also enhances our store portfolio with the most profi table of
Gordmans locations, giving us a strong Midwestern presence in markets larger than those we serve today.
We thank our shareholders and suppliers for their continued support, as well as our associates for their ongoing
dedication to Stage Stores.
Sincerely,
Michael L. Glazer
President and Chief Executive Officer
Stage Stores, Inc.
Notice of 2017 Annual Meeting of Shareholders
and
Proxy Statement
Stage Stores, Inc.
2425 West Loop South
Houston, Texas 77027
April 21, 2017
Dear Shareholder:
On behalf of the Board of Directors, it is my pleasure to invite you to attend the 2017 Annual Meeting of Shareholders of Stage
Stores, Inc. The Annual Meeting will be held at our corporate office located at 2425 West Loop South, Houston, Texas, on
June 1, 2017, beginning at 8:15 a.m. CDT.
The following pages contain the Notice of Annual Meeting of Shareholders and the accompanying Proxy Statement. We
encourage you to review these materials for information concerning the business to be conducted at the Annual Meeting.
Your vote is very important. Whether or not you plan to attend the Annual Meeting, we urge you to vote as soon as possible. If
you attend the Annual Meeting, you may revoke your proxy and vote in person, even if you have previously submitted a proxy.
We have elected to take advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to
certain shareholders on the Internet. On or about the date of this letter, we began mailing a Notice of Internet Availability of
Proxy Materials to shareholders of record at the close of business on April 3, 2017. At the same time, we provided those
shareholders with access to our online proxy materials and filed our proxy materials with the Securities and Exchange
Commission. If you received a Notice of Internet Availability of Proxy Materials, you will not receive a printed copy of the
proxy materials unless you request it by following the instructions for those materials contained in the Notice.
Thank you for your continued support of Stage Stores, Inc.
Sincerely,
William J. Montgoris
Chairman of the Board
STAGE STORES, INC.
NOTICE OF 2017 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
TABLE OF CONTENTS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS .................................................................................................... i
IMPORTANT INFORMATION REGARDING VOTING...................................................................................................... ii
IMPORTANT INFORMATION REGARDING AVAILABILITY OF PROXY MATERIALS ......................................... ii
IMPORTANT INFORMATION REGARDING ANNUAL MEETING ATTENDANCE .................................................... ii
PROXY STATEMENT................................................................................................................................................................ 1
ABOUT THE ANNUAL MEETING...................................................................................................................................... 1
ITEM 1: ELECTION OF DIRECTORS .............................................................................................................................. 4
GOVERNANCE ...................................................................................................................................................................... 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .................................... 14
ITEM 2: APPROVAL OF THE STAGE STORES 2017 LONG-TERM INCENTIVE PLAN ..................................... 17
EXECUTIVE COMPENSATION ........................................................................................................................................ 26
DIRECTOR COMPENSATION .......................................................................................................................................... 53
ITEM 3: SAY-ON-PAY VOTE ........................................................................................................................................... 55
ITEM 4: SAY-ON-FREQUENCY VOTE .......................................................................................................................... 57
ITEM 5: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP ........................................ 57
AUDIT COMMITTEE MATTERS ..................................................................................................................................... 58
ADDITIONAL INFORMATION ......................................................................................................................................... 59
OTHER MATTERS .............................................................................................................................................................. 60
2017 LTIP ..................................................................................................................................................................... Annex A
Stage Stores, Inc.
2425 West Loop South
Houston, Texas 77027
To our Shareholders:
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 1, 2017
The 2017 Annual Meeting of Shareholders of Stage Stores, Inc. will be held at our corporate office located at 2425 West Loop
South, Houston, Texas 77027 on June 1, 2017, beginning at 8:15 a.m. CDT, for the following purposes:
1. Elect as directors the eight nominees named in the Proxy Statement for a term of one year;
2. Approve the Stage Stores 2017 Long-Term Incentive Plan;
3. Approve, on an advisory basis, the compensation of our named executive officers;
4. Approve, on an advisory basis, the frequency of future advisory votes on the compensation of our named executive
officers;
5. Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal
year ending February 3, 2018; and
6. Transact such other business as may properly come before the Annual Meeting.
The Board of Directors has fixed the close of business on April 3, 2017, as the record date for the determination of shareholders
entitled to notice of, and to vote at, the Annual Meeting and any postponement or adjournment thereof.
We began mailing a Notice of Internet Availability of Proxy Materials on or about April 21, 2017 to shareholders of record at
the close of business on April 3, 2017. The Notice contains information on how to access on the Internet our 2017 Proxy
Statement, our 2016 Annual Report to Shareholders, our Annual Report on Form 10-K for the fiscal year ended January 28,
2017 and the form of proxy, as well as instructions on how to request a paper copy of the proxy materials.
By Order of the Board of Directors,
Chadwick P. Reynolds
Executive Vice President,
Chief Legal Officer and Secretary
April 21, 2017
Houston, Texas
Your vote is very important. Shareholders are urged to vote online. If you attend the Annual Meeting, you may revoke
your proxy and vote in person if you wish, even if you have previously submitted a proxy.
i
IMPORTANT INFORMATION REGARDING VOTING
If our common shares are registered in your name directly with our transfer agent, you are considered, with respect to those
common shares, a holder of record (which we also refer to as a registered shareholder). If you hold our common shares in a
brokerage account or through a bank or other holder of record, you are considered the beneficial shareholder of the common
shares, which are often referred to as held in “street name.”
If you are a beneficial shareholder, you must instruct your broker how to vote your common shares. If you do not provide
voting instructions, your common shares will not be voted on any proposal on which your broker does not have discretionary
authority to vote. This is called a “broker non-vote”. In such cases, your broker may register your common shares as being
present at the Annual Meeting for purposes of determining the presence of a quorum, but will not be able to vote on those
matters for which specific authorization is required under the rules of the New York Stock Exchange (“NYSE”).
If you are a beneficial shareholder, your broker has discretionary voting authority under NYSE rules to vote your common
shares on Item 5 (Ratification of the Appointment of Deloitte & Touche LLP), even if the broker does not receive voting
instructions from you. However, your broker does not have discretionary authority to vote on Item 1 (Election of Directors),
Item 2 (Approval of 2017 LTIP), Item 3 (Say-on-Pay Vote) or Item 4 (Say-on-Frequency Vote) without instructions from you,
in which case a broker non-vote will occur and your common shares will not be voted on those matters. Accordingly, it is
particularly important that beneficial owners instruct their brokers how they wish to vote their shares.
If you have any questions about the voting process, please contact the broker, bank or other financial institution where you hold
your common shares. The Securities and Exchange Commission (“SEC”) also has a website
(sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a shareholder.
Additionally, you may contact our Investor Relations Department via the information located in the Investor Relations,
Corporate Governance and Financial Reports sections of our website (corporate.stage.com).
IMPORTANT INFORMATION REGARDING AVAILABILITY OF PROXY MATERIALS
Our 2017 Proxy Statement, our 2016 Annual Report to Shareholders and our Annual Report on Form 10-K for the fiscal year
ended January 28, 2017, are available for review by shareholders of record at envisionreports.com/SSI and by beneficial
shareholders at edocumentview.com/SSI.
IMPORTANT INFORMATION REGARDING ANNUAL MEETING ATTENDANCE
In accordance with our security procedures, all persons attending the Annual Meeting must present either their Notice of
Internet Availability or the admission ticket found on their Proxy Card (if they requested and received a Proxy Card), or a
brokerage statement or other proof of ownership of our common shares as of the record date, and picture identification. For
security purposes, briefcases, bags, purses, backpacks and other containers will be subject to search at the door.
Directions to our corporate office, which is the location of the Annual Meeting, are available in the Investor Relations section
of our website (corporate.stage.com/investor-relations).
ii
Stage Stores, Inc.
2425 West Loop South
Houston, Texas 77027
______________________________
PROXY STATEMENT
______________________________
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (“Board”) of Stage
Stores, Inc., a Nevada corporation (“we”, “our”, “us” and “Stage”), for use at the 2017 Annual Meeting of Shareholders to be
held at our corporate office located at 2425 West Loop South, Houston, Texas 77027, on June 1, 2017, beginning at 8:15 a.m.
CDT (“Annual Meeting”). On or about April 21, 2017, we began mailing to our shareholders of record at the close of business
on April 3, 2017, a Notice of Internet Availability containing instructions on how to access the Notice of Annual Meeting of
Shareholders, this Proxy Statement and our Annual Report to Shareholders for 2016.
Unless otherwise noted, references in this Proxy Statement to a particular year correspond to our fiscal year. For example,
“2014” refers to our fiscal year ended January 31, 2015, “2015” refers to our fiscal year ended January 30, 2016, “2016” refers
to our fiscal year ended January 28, 2017, and “2017” refers to our fiscal year ending February 3, 2018.
ABOUT THE ANNUAL MEETING
Purpose of the Annual Meeting
At the Annual Meeting, shareholders will act upon the matters outlined in the Notice of Annual Meeting of Shareholders
included with this Proxy Statement. Specifically, shareholders will be asked to: (1) elect as directors the eight nominees
named in this Proxy Statement; (2) approve the Stage Stores 2017 Long-Term Incentive Plan (“2017 LTIP”); (3) approve, on an
advisory basis, the compensation of our named executive officers, as disclosed in this Proxy Statement pursuant to Item 402 of
Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and the narrative discussion
accompanying the tables (“Say-on-Pay Vote”); (4) approve, on an advisory basis, the frequency of future advisory votes on the
compensation of our named executive officers (“Say-on-Frequency Vote”); (5) ratify the appointment of Deloitte & Touche
LLP as our independent registered accounting firm for 2017; and (6) transact such other business as may properly come before
the Annual Meeting.
Voting Securities and Shareholder Voting Rights
Our voting securities consist of our common stock, par value of $0.01 per share. Only those shareholders of record at the close
of business on April 3, 2017 (“Record Date”) are entitled to receive notice of, and to vote at, the Annual Meeting. On the
Record Date, there were 27,353,023 outstanding shares of our common stock and holders of an additional 1,098,534 shares of
vested and unvested restricted stock with voting rights. Each share of our outstanding common stock and unvested restricted
stock entitles the holder thereof to one vote on each matter to be voted upon at the Annual Meeting or any postponement or
adjournment thereof. Treasury shares are not voted.
Individual votes of shareholders are kept private, except as appropriate to meet legal requirements. Access to proxies and other
individual shareholder voting records is limited to our inspector of election and certain of our employees and agents who must
acknowledge their responsibility to comply with this policy of confidentiality.
A list of the record holders entitled to vote at the Annual Meeting will be available for inspection at the Annual Meeting. All
voting at the Annual Meeting will be governed by our Amended and Restated Articles of Incorporation (“Articles of
Incorporation”), our Amended and Restated Bylaws (“Bylaws”) and the applicable laws of the State of Nevada.
1
Registered Shareholders and Beneficial Shareholders
If our common shares are registered in your name directly with our transfer agent, you are considered, with respect to those
common shares, a holder of record (which we also refer to as a registered shareholder). If you hold our common shares in a
brokerage account or through a bank or other holder of record, you are considered the beneficial shareholder of the common
shares, which are often referred to as held in “street name.”
Internet Availability of Proxy Materials
In accordance with rules adopted by the Securities and Exchange Commission (“SEC”), instead of mailing a printed copy of
our proxy materials to each shareholder of record, we are permitted to furnish our proxy materials, including the Notice of
Annual Meeting of Shareholders, this Proxy Statement, our 2016 Annual Report to Shareholders and our Annual Report on
Form 10-K for 2016, by providing access to those documents on the Internet. Generally, shareholders will not receive printed
copies of the proxy materials unless they request them.
A Notice of Internet Availability that provides instructions for accessing our proxy materials on the Internet was mailed
directly to registered shareholders. The Notice of Internet Availability also provides instructions regarding how registered
shareholders may vote their common shares on the Internet. Registered shareholders who prefer to receive a paper or email
copy of our proxy materials should follow the instructions provided in the Notice of Internet Availability for requesting those
materials.
The broker, bank or other holder of record who is considered the registered shareholder with respect to common shares should
forward to the beneficial shareholder of those common shares a notice that directs the beneficial shareholder to the website
where our proxy materials may be accessed. That broker, bank or other holder of record should also provide to the beneficial
shareholders instructions on how the beneficial shareholders may request a paper or email copy of our proxy materials.
Beneficial shareholders have the right to direct their broker, bank or other holder of record on how to vote their common shares
by following the voting instructions they receive from their broker, bank or other holder of record.
To enroll in the electronic delivery service for future shareholder meetings, use your Notice of Internet Availability (or proxy
card, if you received printed copies of the proxy materials) to register online at envisionreports.com/SSI and, when prompted,
indicate that you agree to receive or access shareholder communications electronically in future years.
How to Vote
As a Registered Shareholder
After receiving the Notice of Internet Availability (or proxy card, if you received printed copies of the proxy materials),
registered shareholders are urged to visit envisionreports.com/SSI to access our proxy materials and vote online. When voting
online, you must follow the instructions posted on the website and you will need the control number included on your Notice of
Internet Availability (or proxy card, if applicable). Registered shareholders may also vote by telephone by calling 1-800-652-
8683, by completing and mailing a proxy card (if you received printed copies of the proxy materials), or by written ballot at the
Annual Meeting. If, after receiving the Notice of Internet Availability, you request (via online, toll-free telephone number or
email) that we send you paper or electronic copies of our proxy materials, you may vote your common shares by completing,
dating and signing the proxy card included with the materials and returning it in accordance with the instructions provided.
If you vote online, by telephone or by mail, your vote must be received by 11:59 p.m. EDT on May 31, 2017, the day before
the Annual Meeting.
If you timely and properly submit your vote, your common shares will be voted as you direct. If you return or otherwise
complete your proxy card, but you do not indicate your voting preferences, the proxies will vote your shares FOR each of Item
1 (Election of Directors), Item 2 (Approval of 2017 LTIP), Item 3 (Say-on-Pay Vote) and Item 5 (Ratification of the
Appointment of Deloitte & Touche LLP), as well as for a one-year frequency for future Say-on-Pay Votes in Item 4 (Say-on-
Frequency Vote), and in their discretion for such other matters as may properly come before the Annual Meeting.
A registered shareholder may revoke a proxy at any time before it is exercised by filing with our Inspector of Election a written
notice of revocation or duly executing and delivering to our corporate secretary a proxy bearing a later date. A registered
shareholder may also revoke a proxy by attending the Annual Meeting and giving written notice of revocation to the secretary
of the meeting. Attendance at the Annual Meeting will not by itself revoke a previously granted proxy.
As a Beneficial Shareholder
Beneficial shareholders should follow the procedures and directions set forth in the materials they receive from the broker,
bank or other holder of record who is the registered holder of their common shares to instruct such registered holder how to
vote those common shares or revoke previously given voting instructions. Please contact your broker, bank or other holder of
2
record to determine the applicable deadlines. Beneficial shareholders who wish to vote at the Annual Meeting will need to
obtain and provide to the secretary of the meeting a completed form of proxy from the broker, bank or other holder of record
who is the registered holder of their common shares.
Brokers, banks and other holders of record who hold common shares for beneficial shareholders in street name may vote such
common shares on “routine” matters (as determined under NYSE rules), such as Item 5 (Ratification of the Appointment of
Deloitte & Touche LLP), without specific voting instructions from the beneficial owner of such common shares. Brokers,
banks and other holders of record may not, however, vote such common shares on “non-routine” matters, such as Item 1
(Election of Directors), Item 2 (Approval of 2017 LTIP), Item 3 (Say-on-Pay Vote) and Item 4 (Say-on-Frequency Vote)
without specific voting instructions from the beneficial owner of such common shares. Proxies submitted by brokers, banks
and other holders of record that have not been voted on “non-routine” matters are referred to as “broker non-votes.” Broker
non-votes will not be counted for purposes of determining the number of common shares necessary for approval of any matter
to which broker non-votes apply (i.e., broker non-votes will have no effect on the outcome of such matter).
Householding
SEC rules allow multiple shareholders residing at the same address the convenience of receiving a single copy of the Notice of
Internet Availability, Annual Report to Shareholders and proxy materials if they consent to do so (“householding”).
Householding is permitted only in certain circumstances, including when you have the same last name and address as another
shareholder. If the required conditions are met, and SEC rules allow, your household may receive a single copy of the Notice
of Internet Availability, Annual Report to Shareholders and proxy materials. Upon request, we will promptly deliver a separate
copy of the Notice of Internet Availability, Annual Report to Shareholders and proxy materials, as applicable, to a shareholder
at a shared address to which a single copy of the document(s) was delivered. Such a request should be made in the same
manner as a revocation of consent for householding.
Board’s Recommendations
Subject to revocation, all proxies that are properly completed and timely received will be voted in accordance with the
instructions contained therein. If no instructions are given (excluding broker non-votes), the persons named as proxy holders
will vote the common shares in accordance with the recommendations of the Board. The Board’s recommendations are set
forth together with the description of each proposal in this Proxy Statement. In summary, the Board recommends a vote:
1. FOR the election of its nominated slate of directors (see Item 1);
2. FOR the approval of the 2017 LTIP (see Item 2);
3. FOR the approval, on an advisory basis, of the Say-on-Pay Vote (see Item 3);
4. For the approval, on an advisory basis, of a ONE YEAR frequency for future Say-on-Pay Votes (see Item 4); and
5. FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for 2017 (see
Item 5).
If any other matter properly comes before the Annual Meeting, or if a director nominee named in this Proxy Statement is
unable to serve or for good cause will not serve, the proxy holders will vote on that matter or for a substitute nominee as
recommended by the Board.
The presence, in person or by proxy, of the holders of a majority of the outstanding common shares entitled to be voted at the
Annual Meeting will constitute a quorum, permitting us to conduct our business at the Annual Meeting. Proxies received but
marked as abstentions and broker non-votes will be included in the calculation of the number of common shares considered to
be represented at the Annual Meeting for purposes of establishing a quorum.
Quorum
Vote Required for Approval
Item 1
Our Corporate Governance Guidelines (“Governance Guidelines”) contain a majority vote policy and our Bylaws impose a
majority vote standard applicable to the uncontested election of directors. Specifically, our Bylaws provide that if a quorum is
present at the Annual Meeting, a director nominee in an uncontested election will be elected to the Board if the number of
votes properly cast for the nominee’s election exceeds the number of votes properly cast against the nominee’s election. In all
director elections other than uncontested elections, the eight director nominees receiving a plurality of the votes properly cast
will be elected as directors. An “uncontested election” means an election of directors at a meeting of shareholders at which the
number of director nominees does not exceed the number of directors to be elected. See the “Governance – Majority Vote
3
Policy and Standard” section of this Proxy Statement for more information about our majority vote policy and standard.
Other Items
For purposes of Item 2 (Approval of 2017 LTIP), Item 3 (Say-on-Pay Vote) and Item 5 (Ratification of the Appointment of
Deloitte & Touche LLP), the affirmative vote of a majority of the votes cast on each such matter will be required for approval.
For purposes of Item 4 (Say-on-Frequency Vote), the frequency alternative that receives the affirmative vote of the holders of a
plurality of the common shares represented in person or by proxy and entitled to vote on the matter will be approved. The
votes received with respect to Item 3, Item 4 and Item 5 are advisory and will not bind the Board or us. A properly executed
proxy marked “abstain” with respect to Item 2, Item 3, Item 4 or Item 5 will not be voted with respect to such matter.
Abstentions and broker non-votes, if any, will not be counted as votes cast, and they will have no effect on the outcome of the
matters to be voted on at the Annual Meeting. If no voting instructions are given (excluding broker non-votes), the persons
named as proxy holders on the proxy card will vote the common shares in accordance with the recommendations of the Board.
ITEM 1: ELECTION OF DIRECTORS
The Board is presently comprised of the following nine directors: Alan J. Barocas, Elaine D. Crowley, Diane M. Ellis, Michael
L. Glazer, Earl J. Hesterberg, Lisa R. Kranc, William J. Montgoris, C. Clayton Reasor, and Ralph P. Scozzafava. Each of the
directors currently serving on the Board are nominees for election at the Annual Meeting, except that Mr. Scozzafava will not
stand for reelection as he has announced his decision to resign his position as a director, effective June 1, 2017, in order to
devote all of his professional time to his employer. Contemporaneous with Mr. Scozzafava’s resignation and immediately prior
to the Annual Meeting, the Board will reduce the number of seats on the Board to eight pursuant to our Bylaws. Accordingly,
at the Annual Meeting, eight directors are to be elected to serve until the next annual meeting of shareholders and until their
respective successors are elected and qualified, or until their earlier death, resignation or removal.
Proxies may not be voted at the Annual Meeting for more than eight persons. Our shareholders do not have cumulative voting
rights in the election of directors. The Board’s Corporate Governance and Nominating Committee recommended the directors
listed below for re-election. The Board knows of no reason why any nominee may be unable to serve as a director. If any
nominee is unable to serve or for good cause will not serve, the shares represented by all valid proxies will be voted for the
election of such other person as the Board may nominate.
Information concerning each nominee is set forth in the following table, including each nominee’s age (as of the Record Date),
current Board committee memberships, business experience and principal occupation for the past five years or more, the
specific experience, qualifications, attributes or skills of each nominee that led to the conclusion that the nominee should serve
as a director (which are in addition to the general qualifications discussed in the “Director Qualifications; Identifying and
Evaluating Nominees” section below), other public company directorships held by each nominee during the past five years,
and tenure as a director on the Board. The Board has affirmatively determined that, with the exception of Mr. Glazer, all of the
nominees are independent of Stage, its subsidiary and its management under the standards set forth in the NYSE rules, and no
nominee has a material relationship with Stage, its subsidiary or its management aside from his or her service as a director. Mr.
Glazer is not an independent director due to his employment as our President and Chief Executive Officer (“CEO”).
Name
Director
Since
Age
Business Experience, Current Positions on the Board’s Committees,
and Specific Qualifications for Service on the Board
Alan J. Barocas
68
2007
Business Experience: Senior Executive Vice President of Leasing at GGP Inc., a
real estate development and management firm, since January 2011. From May
2006 to January 2011, Mr. Barocas was the principal of Alan J. Barocas and
Associates, a real estate consulting firm. From June 1981 to April 2006, he was
employed by GAP, Inc., an apparel retailer, serving last as Senior Vice President
of Real Estate.
Committee Memberships: Corporate Governance and Nominating Committee;
Compensation Committee
Director Qualifications: Mr. Barocas’ lengthy service in senior executive roles
for large public companies in the real estate and retail industries provides the
Board with valuable leadership experience and real estate and retail expertise.
4
Name
Director
Since
Age
Business Experience, Current Positions on the Board’s Committees,
and Specific Qualifications for Service on the Board
Elaine D. Crowley
58
2014
Business Experience: Liquidation Trustee for the Bombay Liquidation Trust,
which oversees the liquidation of The Bombay Company, Inc. (“Bombay”), a
furniture and home goods retailer, since September 2008, where she has served as
Senior Vice President, Chief Financial Officer and Treasurer since February
2000. Bombay filed for bankruptcy protection on September 20, 2007. From
August 2010 to September 2012, Ms. Crowley served as Executive Vice
President and Chief Financial Officer for Mattress Giant Corporation, a mattress
retailer. From August 2008 to August 2010, Ms. Crowley served as Executive
Vice President and Chief Financial Officer and Senior Vice President, Controller
and Chief Accounting Officer/Chief Financial Officer for Michaels Stores, Inc.,
an arts and crafts retailer.
Committee Memberships: Audit Committee; Compensation Committee
Director Qualifications: Ms. Crowley’s tenure in senior executive and financial
roles with other retailers and experience as a Certified Public Accountant in
public accounting provides the Board with valuable leadership experience and
financial and retail expertise.
Diane M. Ellis
59
2012
Business Experience: Brand President – Chico’s of Chico’s FAS, Inc. since
Michael L. Glazer
68
2001
November 2016. From August 2013 to October 2016, Ms. Ellis served as CEO
of Limited Stores, LLC, a fashion retailer. Limited Stores, LLC filed for
bankruptcy protection on January 17, 2017. From September 2004 until August
2013, Ms. Ellis served as President and Chief Operating Officer of Brooks
Brothers Group, Inc., an apparel retailer.
Committee Memberships: Audit Committee; Corporate Governance and
Nominating Committee (Chair)
Director Qualifications: Ms. Ellis’ service in senior executive roles with other
retailers and deep experience in merchandising, marketing and e-commerce, as
well as her experience in strategic consulting to the retail industry while at
Lighthouse Retail Group and PricewaterhouseCoopers LLC, provides the Board
with valuable leadership and industry experience and retail, marketing and
strategic planning expertise.
Business Experience: Our President and CEO since April 2012. From October
2009 to April 2012, Mr. Glazer served as the President and CEO of Mattress
Giant Corporation, a mattress retailer. From August 2005 to October 2009, Mr.
Glazer served as Managing Director of Team Neu, a private equity firm. From
May 1996 to August 2005, Mr. Glazer served as President and CEO of KB Toys,
Inc., a toy retailer. Mr. Glazer served as a director of CPI Corporation, a portrait
studio operator, from December 2008 to July 2012.
Committee Memberships: None
Director Qualifications: Mr. Glazer’s 40 years in the retail industry, tenure as
CEO of several retailers and significant knowledge of our business, provides the
Board with valuable retail expertise, leadership and industry experience.
5
Name
Director
Since
Age
Business Experience, Current Positions on the Board’s Committees,
and Specific Qualifications for Service on the Board
Earl J. Hesterberg
63
2010
Business Experience: President, CEO and a director of Group 1 Automotive,
Inc., an automotive retailer, since April 2005. From October 2004 to April 2005,
Mr. Hesterberg served as Group Vice President, North America Marketing, Sales
and Service for Ford Motor Company. Mr. Hesterberg has also served as
President and CEO of Gulf States Toyota, a distributor of vehicles, parts and
accessories.
Committee Memberships: Compensation Committee (Chair); Corporate
Governance and Nominating Committee
Director Qualifications: Mr. Hesterberg’s extensive experience in senior
executive roles, particularly as CEO, for large public companies in the retail
industry and deep knowledge of marketing, customer service, strategic planning
and consumer research provides the Board with valuable leadership and strategic
planning experience and marketing and retail expertise.
Lisa R. Kranc
63
2012
Business Experience: Senior Vice President, Marketing of AutoZone, Inc., an
William J. Montgoris
70
2004
automotive aftermarket parts retailer and distributor, from August 2001 until her
retirement in December 2012. Since September 2015, Ms. Kranc has served on
the Board of Directors of Truck Hero, Inc., a supplier of truck accessories. From
June 2014 to May 2015, Ms. Kranc served on the Board of Directors of Armored
AutoGroup, Inc., a consumer products manufacturer.
Committee Memberships: Compensation Committee; Corporate Governance and
Nominating Committee
Director Qualifications: Ms. Kranc’s tenure in a senior executive role for a large
public company in the retail industry and extensive experience in marketing,
brand management, consumer research and strategic planning provides the Board
with valuable leadership and strategic planning experience and marketing and
retail expertise.
Business Experience: Chairman of the Board of Stage since June 2010. From
August 1993 until his retirement in June 1999, Mr. Montgoris served as Chief
Operating Officer of The Bear Stearns Companies, Inc. (“Bear Stearns”), an
investment bank and securities trading and brokerage firm. Mr. Montgoris also
served as Chief Financial Officer at Bear Stearns from April 1987 until October
1996. Since August 2008, Mr. Montgoris has served on the Board of Directors of
Carter’s, Inc., a retailer and marketer of children’s apparel, where he is a member
of the audit committee. From July 2008 to November 2013, Mr. Montgoris
served on the Board of Directors of OfficeMax Incorporated, an office products
retailer, where he was a member of the audit and compensation committees.
Committee Memberships: Audit Committee
Director Qualifications: Mr. Montgoris’ extensive experience in senior executive
roles with a leading global investment banking firm and as a director at large
public companies in the retail industry, as well as his experience as a Certified
Public Accountant and deep finance and accounting knowledge, provides the
Board with valuable leadership and financial and retail expertise.
6
Name
Director
Since
Age
Business Experience, Current Positions on the Board’s Committees,
and Specific Qualifications for Service on the Board
C. Clayton Reasor
60
2012
Business Experience: From October 2014 until his retirement in February 2017,
Mr. Reasor served as Executive Vice President, Investor Relations, Strategy,
Corporate and Government Affairs of The Phillips 66 Company, an energy
manufacturing and logistics company. From May 2012 to September 2014, Mr.
Reasor served as Senior Vice President, Investor Relations, Strategic
Development, Public Affairs and Public Policy of The Phillips 66 Company.
From April 2009 to May 2012, Mr. Reasor served as Vice President, Investor
Relations and Public Affairs of ConocoPhillips Co., a crude oil and natural gas
exploration and production company. From March 2013 to February 2017, Mr.
Reasor was a director of Phillips 66 Partners GP LLC, the general partner of
Phillips 66 Partners LP, a publicly-traded owner, developer and acquirer of crude
oil, refined petroleum and natural gas pipelines and terminals.
Committee Memberships: Compensation Committee; Corporate Governance and
Nominating Committee
Director Qualifications: Mr. Reasor’s significant experience in the development,
implementation and communication of corporate strategy, his background
working with investment analysts and investors and his tenure in executive roles
for large public companies provides the Board with valuable strategic planning
and investor relations expertise and leadership experience.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH NOMINEE LISTED ABOVE.
GOVERNANCE
Board Leadership Structure
Our business is managed under the direction of the Board. The Board is currently comprised of the nine directors identified in
Item 1. Members of the Board are kept informed of our business through discussions with our CEO and other members of
management, by reviewing materials provided to them, by visiting our offices, stores and distribution centers, and by
participating in meetings of the Board and its committees.
Our CEO does not serve as the Chairman of the Board. We believe that this leadership structure is appropriate for us because,
while it allows the CEO to speak for and lead us and communicate with other members of senior management, it provides for
effective oversight by the Board, as each of our directors is highly qualified and experienced and exercises a strong oversight
function. The Chairman plans the agendas for meetings of the Board, chairs the Board meetings, and is responsible for briefing
our CEO, as needed, concerning executive sessions of the independent members of the Board. The Chairman also determines
when additional meetings of the Board are needed.
Corporate Governance Guidelines
We have adopted written Governance Guidelines to assist in fulfilling our corporate governance responsibilities. The
Governance Guidelines provide a structure within which our directors and management may monitor the effectiveness of
policy and decision making both at the Board and management level, with a view to enhancing shareholder value over the long
term. The Governance Guidelines are available in the Corporate Governance section of our website
(corporate.stage.com/corporate-governance).
Code of Ethics and Business Conduct and Code of Ethics for Senior Officers
We have adopted a written Code of Ethics and Business Conduct (“Code of Ethics”) to serve as the basic set of policies and
procedures governing the behavior of our directors, executive officers and other employees in conformance with NYSE rules.
It is our policy to adhere to the highest standards of business ethics in all our business activities. When engaging in any
activity concerning us, our customers, competitors, suppliers, other employees, shareholders or the general public, our
directors, executive officers and other employees must maintain standards of uncompromising integrity and conduct
themselves in a professional manner.
We have also adopted a Code of Ethics for Senior Officers (“Code for Senior Officers”) in order to promote ethical conduct in
the practice of financial management. We believe our CEO, Chief Financial Officer and Controller each hold an important role
7
in corporate governance. The Code for Senior Officers is designed to deter wrongdoing and provide principles that our
principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar
functions are expected to adhere to and advocate. These principles embody rules regarding individual and peer responsibilities,
as well as responsibilities to our shareholders and others who have a stake in our continued success.
The Code of Ethics and the Code for Senior Officers are each available in the Corporate Governance section of our website
(corporate.stage.com/corporate-governance). We intend to post amendments to or waivers from any applicable provision
(related to elements listed under Item 406(b) of Regulation S-K) of the Code of Ethics and the Code for Senior Officers (in
each case, to the extent applicable to our principal executive officer, principal financial officer, principal accounting officer,
controller or persons performing similar functions), if any, in the Corporate Governance section of our website
(corporate.stage.com/corporate-governance).
Director Independence
The Board undertook its most recent annual review of director independence in March 2017. During the review, the Board, in
accordance with NYSE rules, broadly considered all relevant facts and circumstances to determine whether any director has a
material relationship with us, either directly or indirectly, other than serving as one of our directors, including all transactions,
relationships and arrangements between each director, his or her affiliates, and any member of his or her immediate family, on
one hand, and Stage, its subsidiary and members of management, on the other hand. The purpose of this review was to
determine whether any such transactions, relationships or arrangements were inconsistent with a determination that the director
is independent in accordance with NYSE rules.
As a result of the review, the Board affirmatively determined that, with the exception of Mr. Glazer, all of the directors
nominated for election at the Annual Meeting are independent of Stage, its subsidiary and management under the standards set
forth in the NYSE rules, and no director nominee, with the exception of Mr. Glazer, has a material relationship with Stage, its
subsidiary or management aside from his or her service as a director. Mr. Glazer was deemed not independent due to his
employment as our President and CEO.
All members of the Board’s Audit Committee, Compensation Committee and Corporate Governance and Nominating
Committee are independent directors. Members of the Audit Committee also satisfy a separate SEC independence
requirement, which provides that they may not accept directly or indirectly any consulting, advisory or other compensatory fee
from us or our subsidiary other than their directors’ compensation. Members of the Compensation Committee also satisfy
separate NYSE independence requirements to ensure independence from management.
In evaluating director independence, the Board considered store leasing transactions between our subsidiary and Mr. Barocas’
employer, General Growth Properties, Inc. (“General Growth”). In the ordinary course of our business, we leased one of our
nearly 800 store locations from General Growth at January 28, 2017. As a result, the Board conducted an independence
analysis to determine whether Mr. Barocas remains an independent director, pursuant to NYSE rules. Quarterly (most recently
in March 2017), the Board reviewed the payments we made to General Growth in each of the last three years ($0.2 million in
2016, $0.3 million in 2015 and $0.3 million in 2014), discussed the matter with Mr. Barocas, and reviewed General Growth’s
reported consolidated gross revenues ($2.3 billion in 2016, $2.4 billion in 2015 and $2.5 billion in 2014). As a result, the
Board determined that the transactions are immaterial and do not impair Mr. Barocas’ independence. The Board also
concluded that Mr. Barocas did not have a direct or indirect material interest in our store leasing transactions with General
Growth during 2016. As Mr. Barocas is employed by, and we lease stores from, General Growth, the Board will continue its
quarterly reviews of these transactions and the independence of Mr. Barocas.
Majority Vote Policy and Standard
Our Bylaws impose a majority vote standard in uncontested elections of directors and our Governance Guidelines contain a
majority vote policy applicable to uncontested elections of directors. Section 2.14 of our Bylaws provides that if a quorum is
present at the Annual Meeting, a director nominee in an uncontested election will be elected to the Board if the number of
votes properly cast for the nominee’s election exceeds the number of votes properly cast against the nominee’s election. The
majority vote policy contained in our Governance Guidelines requires any director nominee who does not receive more votes
cast for the nominee’s election than votes cast against the nominee’s election to deliver his or her resignation from the Board to
the Corporate Governance and Nominating Committee. Upon its receipt of such resignation, the Corporate Governance and
Nominating Committee will promptly consider the resignation and recommend to the Board whether to accept the resignation
or to take other action. The Board will act on the recommendation of the Corporate Governance and Nominating Committee
no later than 100 days following the certification of the shareholder vote. The Corporate Governance and Nominating
Committee, in making its recommendation, and the Board, in making its decision, will evaluate the resignation in light of the
best interests of Stage and our shareholders and may consider any factors and other information they deem relevant. We will
promptly publicly disclose the Board’s decision in a press release or periodic or current report to the SEC.
8
Related Person Transactions
The Board, with the assistance of the Audit Committee and the Corporate Governance and Nominating Committee, monitor
compliance with our corporate governance policies, practices and guidelines applicable to our directors, nominees for director,
officers and employees. Our Governance Guidelines, Code of Ethics and human resources policies address governance matters
and prohibit, without the consent of the Board or its designee, directors, officers and other employees from engaging in
transactions that conflict with our interests or that otherwise usurp corporate opportunities. Our Governance Guidelines also
prohibit our directors, officers and other employees from entering into any agreement or arrangement with any person or entity
or to authorize any transaction which we may be required to disclose to the SEC unless the agreement or arrangement is
approved by the Board.
Pursuant to our written Related Person Transaction Policy, the Audit Committee also evaluates “related person transactions,”
which we define more stringently than is required under SEC rules. Under our policy, we consider a related person transaction
to be any transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships): (1)
involving more than $5,000 in which we and any of our directors, executive officers, other employees, holders of more than
five percent of our common shares, or their respective immediate family members were or are to be a participant; and (2) in
which such related person had, has or will have a direct or indirect material interest. Our policy requires our directors,
executive officers and other employees to report to the attention of the Chair of the Audit Committee all transactions, whether
proposed or existing, of which they have knowledge and which they believe may constitute a related person transaction. If the
Audit Committee Chair, with the assistance of legal counsel, determines that the transaction constitutes a related person
transaction, the Audit Committee Chair or our Chief Legal Officer will notify the other members of the Audit Committee.
Thereafter, the Audit Committee will review the related person transaction, considering all factors and information it deems
relevant, and approve or disapprove the transaction in light of what the Committee believes to be the best interests of Stage and
our shareholders. If advance approval is not practicable or if a related person transaction that has not been approved is
discovered, the Audit Committee will promptly consider whether to ratify the transaction. Where advance approval is not
practicable or we discover a related person transaction that has not been approved and the Audit Committee disapproves the
transaction, the Audit Committee will, taking into account all of the factors and information it deems relevant (including the
rights available to us under the transaction), determine whether we should amend, rescind or terminate the transaction in light
of what it believes to be the best interests of our shareholders and Stage. We do not intend to engage in related person
transactions disapproved by the Audit Committee. Examples of factors and information that the Audit Committee may
consider in its evaluation of a related person transaction include: (1) the reasons for entering into the transaction; (2) the terms
of the transaction; (3) the benefits of the transaction to us; (4) the comparability of the transaction to similar transactions with
unrelated third parties; (5) the materiality of the transaction to each party; (6) the nature of the related person’s interest in the
transaction; (7) the potential impact on the independence of an outside director; and (8) the alternatives to the transaction.
In addition, on an annual basis, each director, director nominee and executive officer must complete a questionnaire that
requires written disclosure of any related person transaction. The responses to these questionnaires are reviewed by our Chief
Legal Officer and Controller, and shared with the Board, to identify any potential conflicts of interest or potential related
person transactions.
If a related person transaction, as defined under SEC rules, existed, we would disclose the transaction as required. Based on
our most recent review conducted in the first quarter of 2017, none of our directors, director nominees, officers or other
employees have engaged in any related person transaction requiring disclosure since the beginning of 2016.
Loans to Directors and Executive Officers Prohibited
Our Governance Guidelines also prohibit us from, directly or indirectly, extending or maintaining credit, or arranging for or
guaranteeing the extension of credit, in the form of a personal loan to or for any of our directors, executive officers or their
immediate family members.
Policy on Poison Pills
The term “poison pill” refers to a type of shareholder rights plan that some companies adopt to provide an opportunity for
negotiation during a hostile takeover attempt. The Board has not adopted a poison pill. However, as we are a Nevada
corporation, our Articles of Incorporation provide that we have expressly elected to be governed by Chapter 78 of the Nevada
Revised Statutes (“NRS”) with respect to the acquisition of a controlling interest in us. NRS 78 provides that a person who
seeks to acquire a “controlling interest” (20% or greater) in a Nevada corporation will only obtain such voting rights in the
shares acquired (“control shares”) as are granted by a vote of the holders of a majority of our remaining voting power at a
special or annual meeting of the shareholders. In addition, NRS 78 provides that we may redeem not less than all of the control
shares at the average price of the control shares if the control shares are not granted full voting rights by the shareholders.
9
Attendance at Board, Committee and Shareholder Meetings
The Board held eight meetings during 2016. During 2016, each director attended at least 75% of the aggregate of the total
number of meetings of the Board and the committees on which he or she served (in each case, held during the periods that he
or she served). The independent directors meet in regularly scheduled executive sessions of the Board and its committees
without employees and non-independent directors present. The Chairman of the Board or committee chair, as applicable,
presides at all executive sessions. In addition to regularly scheduled meetings, a number of directors were involved in
numerous informal meetings with management, offering valuable advice and suggestions on a broad range of corporate
matters. It is the Board’s policy that each director nominee should be present for the annual meeting of shareholders absent
exceptional cause. Each director named in Item 1 attended the 2016 annual meeting of shareholders.
Board’s Role in Risk Oversight
The Board’s role in risk oversight is administered directly and through its standing committees, with each committee’s role
more fully described in the “Role of the Board’s Committees” section below. The Audit Committee assists the Board in
fulfilling its oversight responsibility relating to the performance of our system of internal controls, the integrity of our financial
statements, legal and regulatory compliance, our audit, accounting and financial reporting processes, the qualifications,
independence and work of our independent registered public accounting firm, and the evaluation of enterprise risk issues,
particularly those risk issues not overseen by other committees. The Compensation Committee is responsible for overseeing
the management of risks relating to our compensation programs, policies and practices. The Corporate Governance and
Nominating Committee manages risks associated with corporate governance, related person transactions, succession planning,
business conduct and ethics, and the performance of the Board, its committees and directors.
While each committee is responsible for evaluating certain risks and overseeing the management of those risks, the entire
Board is regularly informed about those risks through committee reports. The reports are regularly presented to the Board and
include discussions of committee agenda topics, including matters involving risk oversight. The Board may also directly
consider specific topics, including risks associated with our strategic plan, capital structure and development activities.
Members of management who supervise the day-to-day risk management responsibilities periodically provide reports to the
Board as a whole and to the committees as requested.
Role of the Board’s Committees
The Board has three standing committees – Audit, Compensation, and Corporate Governance and Nominating – that assist and
report their activities to the Board. In accordance with the applicable rules of the NYSE and SEC, each committee is organized
and operates under a Board-adopted written charter. Each committee and the Corporate Governance and Nominating
Committee annually review and assess the adequacy of the charters and recommend changes to the Board as necessary to
reflect changes in regulatory requirements, authoritative guidance and evolving practices. Pursuant to its respective charter,
each committee has the authority to engage, at our expense, advisors as it deems necessary to carry out its duties. The function
and authority of each committee are further described below and in each committee’s respective charter. The committee
charters are available in the Corporate Governance section of our website (corporate.stage.com/corporate-governance).
The Board and the Corporate Governance and Nominating Committee annually conduct performance evaluations of the Board,
each committee and each director. Under the procedures adopted by the Board, each director evaluates the Chairman of the
Board, the Board, each committee and each other director. In order to continuously improve the Board governance, the results
of the individual director evaluations are communicated to the respective directors and the results of the Chairman, Board and
committees’ evaluations are reported to all directors.
10
Each committee is comprised entirely of independent directors as required by each committee’s charter and applicable SEC and
NYSE rules. The following table reflects the current membership of each committee:
Independent
Directors
Mr. Barocas
Ms. Crowley
Ms. Ellis
Mr. Glazer
Mr. Hesterberg
Ms. Kranc
Mr. Montgoris
Mr. Reasor
Mr. Scozzafava
__________
Audit
Committee
Compensation
Committee
Corporate
Governance and
Nominating Committee
M
M
M
C
M
M
C
M
M
M
M
C
M
M
M
M Denotes a member of the committee.
C Denotes the chair of the committee.
Audit Committee
The primary purposes of the Audit Committee are to (1) assist the Board in its oversight of (a) the integrity of our financial
statements, (b) our compliance with legal and regulatory requirements, (c) the qualifications and independence of our
independent registered public accounting firm, and (d) the performance of our internal audit function and independent
registered public accounting firm; and (2) prepare the Audit Committee Report disclosure required by Item 407(d)(3) of
Regulation S-K. The Audit Committee was established in accordance with Section 3(a)(58)(A) the Securities Exchange Act of
1934, as amended (“Exchange Act”). The Board has determined that each member of the Audit Committee is “financially
literate,” as required by NYSE rules, and an “audit committee financial expert,” as that term is defined by the SEC. The Audit
Committee met 10 times during 2016.
Compensation Committee
The primary purpose of the Compensation Committee is to discharge the responsibilities of the Board relating to the
compensation of our Chief Executive Officer (“CEO”) and other executive officers. In addition, the Compensation
Committee’s key responsibilities include: (1) establishing the goals and objectives for CEO performance, evaluating CEO
performance against those goals and objectives and setting CEO compensation based on the evaluation; (2) reviewing the
performance of, and setting the compensation for, our other executive officers; (3) reviewing and approving the terms of all
compensation plans, policies and programs, including employment and severance agreements, for our CEO and other executive
officers; (4) making recommendations to the Board with respect to our incentive compensation and equity-based plans that are
subject to Board approval; and (5) reviewing and monitoring our compensation policies and practices in order to avoid risks
that are reasonably likely to have a material adverse effect on us. Additional information regarding our executive
compensation program, including our processes and procedures for the consideration and determination of executive officer
compensation, is described in the “Executive Compensation” section of this Proxy Statement. The Compensation Committee
met four times during 2016.
Executive Compensation Consultants
The Compensation Committee may, in its sole discretion, retain or obtain the advice of compensation consultants to review our
executive officer compensation program. The Compensation Committee is directly responsible for the appointment,
compensation and oversight of the work of any compensation consultant retained by the Compensation Committee. We
provide appropriate funding, as determined by the Compensation Committee, for payment of reasonable compensation to any
compensation consultant retained by the Compensation Committee.
11
The Compensation Committee selected and retained Willis Towers Watson as its independent compensation consultant to
advise it on general executive compensation matters in 2016. The Compensation Committee also selected and retained
Exequity as its independent compensation consultant to provide advice on the development of the 2017 LTIP. The
Compensation Committee assessed the independence of Willis Towers Watson and Exequity pursuant to NYSE and SEC rules
and concluded that no conflict of interest exists that would prevent Willis Towers Watson or Exequity from independently
representing the Compensation Committee during 2016.
During 2016, we paid Willis Towers Watson $48,205 in connection with the Compensation Committee’s engagement of Willis
Towers Watson for executive compensation consulting services. In addition, we paid Willis Towers Watson $7,900 for data and
surveys and $135,478 for actuarial retirement services associated with a broad-based defined benefit plan that we sponsor,
which covers substantially all employees who had met eligibility requirements and were enrolled prior to June 30, 1998 (“DB
Plan”). The DB Plan was frozen effective June 30, 1998, and none of our named executive officers (as described in the
“Executive Compensation” section of this Proxy Statement) are participants in the DB Plan. The fees for services related to the
DB Plan were paid to a different line of business within Willis Towers Watson and were not associated with the Willis Towers
Watson executive compensation team that provided advice to the Compensation Committee. During 2016, we paid Exequity
$6,740 in connection with the Compensation Committee’s engagement of Exequity for consulting services related to the
development of the 2017 LTIP.
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee serves, or has served at any time, as one of our officers or employees or has,
during 2016, had a material interest in any related person transaction, as defined in Item 404 of Regulation S-K. None of our
executive officers serve or, during 2016, served as a member of the board of directors or compensation committee of any other
company that has or had an executive officer serving as a member of the Board or the Compensation Committee.
Corporate Governance and Nominating Committee
The primary purposes of the Corporate Governance and Nominating Committee are to: (1) maintain and review the
Governance Guidelines and propose to the Board changes to the Governance Guidelines as corporate governance
developments warrant; (2) identify qualified candidates for nomination as directors to the Board who meet the criteria for
Board membership approved by the Board; (3) oversee the annual evaluation of the performance of the Board, the committees
of the Board, the directors and management; (4) recommend to the Board director nominees for the next annual meeting of
shareholders and for each committee of the Board; (5) review, and report to the Board, annually on the status of the CEO
succession plan; and (6) evaluate director compensation to ensure that our directors are competitively compensated and
recommend any proposed changes in director compensation to the Board for its approval. The Corporate Governance and
Nominating Committee met four times during 2016.
Director Qualifications; Identifying and Evaluating Nominees
The Corporate Governance and Nominating Committee is responsible for recommending to the Board the appropriate skills
and qualifications required of Board members and assessing the appropriate balance of skills and qualifications required of
directors based on our needs from time to time. At a minimum, director nominees should possess the following skills and
qualifications: broad experience, wisdom, integrity, the ability to make independent analytical inquiries, an understanding of
our business environment, and the willingness to devote adequate time to Board duties. The Corporate Governance and
Nominating Committee and the Board shall endeavor to have a Board representing a range of experience in business and in
other areas that are relevant to our activities with a goal of achieving a Board that, as a whole, provides effective oversight of
our management and business through, among other things, diversity (i.e., differences of viewpoint, professional experience,
education, skill and other individual qualities and attributes that contribute to the Board’s heterogeneity). The consideration of
diversity in identifying director nominees is integrated annually as part of the director nomination process by both the Board
and the Corporate Governance and Nominating Committee.
The Corporate Governance and Nominating Committee also considers the current composition of the Board and other relevant
factors and attributes that it deems appropriate and important for nominees to make meaningful contributions to the Board and
our business, including:
• Leadership. Directors with experience in significant leadership positions over an extended period, particularly CEO
and Chief Operating Officer positions, provide us with special insights. These individuals generally possess
extraordinary leadership qualities and the ability to identify and develop those qualities in others. They demonstrate a
practical understanding of organizations, processes, strategy, risk management and the methods to drive change and
growth.
• Strategic Planning Experience. Effective strategic planning is critical to our success. Therefore, extensive experience
in strategic planning as a result of various executive leadership roles is very important to us.
12
• Retail Industry Experience. Experience in the retail industry as executives, directors, consultants, professionals or in
other capacities is important to help provide context to our decisions, results and operations, as well as to provide
oversight to our management team.
• Financial Expertise. An understanding of finance and financial reporting processes is important for our directors, as
we measure our operating and strategic performance by reference to financial targets. In addition, accurate financial
reporting and vigorous auditing are critical to our success. We seek to have at least a majority of the members of our
Audit Committee qualify as audit committee financial experts (as defined by NYSE rules) and we expect all of our
directors to be financially knowledgeable.
• Marketing Experience. As a retailer, marketing is critical to our success. Therefore, marketing expertise, both for
brick-and-mortar stores and e-commerce, is very important to us.
•
Investor Relations Experience. As a public company, experience in the development, implementation and articulation
of corporate strategy, experience with commercial, financial and communications and experience working directly
with investment analysts, institutional investors and the broad financial community is valuable to us.
• Real Estate Experience. As of the end of 2016, we operated nearly 800 stores in 38 states. In light of this significant
investment, real estate expertise is important to us.
In identifying and evaluating director nominees, the Corporate Governance and Nominating Committee may implement such
processes as it deems appropriate, including retaining a third party to assist in identifying or evaluating potential nominees.
Prior to his or her nomination to the Board, each director nominee must (1) be determined by the Corporate Governance and
Nominating Committee to meet the minimum qualifications set forth above, (2) have at least one interview with the Corporate
Governance and Nominating Committee and with any other director who requests an interview, and (3) complete and sign a
comprehensive questionnaire in a form deemed appropriate by the Board.
In identifying potential director candidates, the Corporate Governance and Nominating Committee considers recommendations
from our directors, CEO and shareholders. A shareholder wishing to recommend a prospective director nominee to the Board
must send written notice to: Corporate Governance and Nominating Committee Chair, Stage Stores, Inc., Attn: Chief Legal
Officer and Secretary, 2425 West Loop South, Houston, Texas 77027. The written notice must include the prospective
nominee’s name, age, business address, principal occupation, ownership of our common shares, information that would be
required under the rules of the SEC in a proxy statement soliciting proxies for the election of that prospective nominee as a
director, the written consent of all parties to be identified in the proxy materials and any other information that is deemed
relevant by the recommending shareholder. Shareholder recommendations that comply with these procedures and that meet the
factors outlined above will receive the same consideration that the recommendations of the Board receive. For the 2018 annual
meeting of shareholders, recommendations for director nominees must be submitted in writing by December 22, 2017.
In addition to the skills and qualifications described above, the specific factors that the Corporate Governance and Nominating
Committee and the Board considered in each current director nominee’s nomination are included with their individual
biographies appearing in Item 1 (Election of Directors) above.
Communications with the Board
Shareholders and other interested parties may send written communications to the Board and, if applicable, to the Chairman
and other individual directors, by mail or courier to our principal executive office. Under a process approved by the Board for
handling correspondence received by us and addressed to independent directors, our corporate secretary will forward all
correspondence that we receive to the Board or, if applicable, to the Chairman or other individual director. Communications
should be addressed to the Board or applicable director at: Stage Stores, Inc., Attn: Chief Legal Officer and Secretary, 2425
West Loop South, Houston, Texas 77027.
Our Audit Committee has established procedures for the receipt, retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters, and the submission by our employees of concerns regarding questionable
accounting or auditing matters. These procedures are incorporated into our Code of Ethics and (1) set forth a statement about
our commitment to comply with laws, (2) encourage employees to inform us of conduct amounting to a violation of applicable
standards, (3) describe prohibited conduct, (4) set forth compliance procedures that employees may easily use, including
making confidential, anonymous complaints, and (5) provide assurances that there will be no retaliation for reporting suspected
violations.
We have also established procedures to enable anyone who has a concern regarding non-accounting matters and violations of
our Code of Ethics to report that concern through our normal company channels or anonymously. An anonymous ethics hotline
is maintained by an independent third party and is available 24 hours a day, seven days per week.
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table provides information regarding beneficial ownership of our common shares by each person or entity
known by us to be the beneficial owner of more than five percent of our outstanding common shares. The assessment of
holders of more than five percent of our common shares is based on a review of and reliance upon their respective filings with
the SEC, and all information is as of December 31, 2016 as reported in such filings, except as otherwise noted.
Name and Address of Beneficial Owner
Wellington Management Group LLP (1)
280 Congress Street
Boston, MA 02210
Dimensional Fund Advisors LP (2)
Building One
6300 Bee Cave Road
Austin, TX 78746
BlackRock, Inc. (3)
55 East 52nd Street
New York, NY 10055
The Vanguard Group, Inc. (4)
100 Vanguard Boulevard
Malvern, PA 19355
__________
Amount and Nature of
Beneficial Ownership
3,706,968
Percent of Class
13.7%
2,269,640
8.4%
1,681,820
1,368,697
6.2%
5.0%
(1)
(2)
(3)
(4)
The information is based on the Schedule 13G/A (Amendment No. 14) filed with the SEC on February 9, 2017 by
Wellington Management Group LLP reporting on beneficial ownership as of December 30, 2016. According to the
filing, the reporting person has shared voting power with respect to 2,861,528 common shares, shared dispositive power
with respect to 3,706,968 common shares, and no sole voting power or sole dispositive power over any of our common
shares.
The information is based on the Schedule 13G/A (Amendment No. 8) filed with the SEC on February 9, 2017 by
Dimensional Fund Advisors LP reporting on beneficial ownership as of December 31, 2016. According to the filing, the
reporting person has sole voting power with respect to 2,180,851 common shares, sole dispositive power with respect to
2,269,640 common shares, and no shared voting power or shared dispositive power over any of our common shares.
The information is based on the Schedule 13G/A (Amendment No. 9) filed with the SEC on February 8, 2017 by
BlackRock, Inc. reporting on beneficial ownership as of January 31, 2017. According to the filing, the reporting person
has sole voting power with respect to 1,602,121 common shares, sole dispositive power with respect to 1,681,820
common shares, and no shared voting power or shared dispositive power over any of our common shares.
The information is based on the Schedule 13G/A (Amendment No. 6) filed with the SEC on February 10, 2017 by The
Vanguard Group, Inc. reporting on beneficial ownership as of December 31, 2016. According to the filing, the reporting
person has sole voting power with respect to 31,736 common shares, sole dispositive power with respect to 1,338,105
common shares, shared dispositive power with respect to 30,592 shares, and no shared voting power over any of our
common shares.
Security Ownership of Management
The following table provides information regarding the beneficial ownership of our common shares by each of the current and
former officers listed in the Summary Compensation Table, each of our directors, and all of our directors and executive officers
as a group. The table also provides information about stock appreciation rights (“SARs”) exercisable within 60 days of the
Record Date as well as restricted stock. Unless otherwise indicated by footnote, individuals have sole voting and investment
(dispositive) power. All information is as of the Record Date, except that the information is as of January 28, 2017 and
December 10, 2016 for former executives Mr. Lawrence and Mr. Parsons, respectively. Other than in the case of Mr. Glazer, as
footnoted, none of the shares are pledged as security.
14
Name of Beneficial Owner
Common Stock
Restricted Stock
SARs Exercisable
Within 60 Days
Amount and Nature of Beneficial Ownership
Michael L. Glazer (1)
481,307
416,544
53,791
115,187
57,692
38,350
—
—
17,452
17,452
17,452
17,452
17,452
17,452
17,452
17,452
—
15,000
—
8,850
—
—
—
—
—
—
—
—
—
—
—
Total
897,851
115,875
128,933
115,991
57,236
96,211
20,556
78,346
38,251
38,142
70,347
36,039
104,286
38,599
52,439
Percent of
Class
3.2%
*
*
*
*
*
*
*
*
*
*
*
*
*
*
47,084
13,746
49,449
18,886
96,211
20,556
60,894
20,799
20,690
52,895
18,587
86,834
21,147
34,987
Oded Shein
Thorsten I. Weber
Steven L. Hunter
William E. Gentner
Steven P. Lawrence
Stephen B. Parsons
Alan J. Barocas
Elaine D. Crowley
Diane M. Ellis
Earl J. Hesterberg
Lisa R. Kranc
William J. Montgoris
C. Clayton Reasor
Ralph P. Scozzafava
All directors and executive
officers as a group
(19 persons) (2)
__________
1,157,426
918,405
29,750
2,105,581
7.4%
*
Represents less than 1.0% of our outstanding common stock.
(1) Mr. Glazer holds 121,579 shares of common stock pledged as security in a margin account.
(2)
Includes 3,213 beneficially owned shares of common stock held by the spouse of an executive officer who is not a
named executive officer, and for which the executive officer does not have voting rights and disclaims beneficial
ownership.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who beneficially own more than
10% of our outstanding common shares, to file with the SEC and the NYSE initial reports of ownership and reports of changes
in ownership of our common shares. Directors, executive officers and greater than 10% shareholders are required by the SEC
rules to furnish us with copies of all Section 16(a) reports they file. Based solely upon our review of filings with the SEC and
written representations that no other reports were required, we believe that all of our directors and executive officers complied
during 2016 with the reporting requirements of Section 16(a) of the Exchange Act, except Mr. Glazer, Mr. Parsons and Russell
A. Lundy II, each of whom did not timely report the April 19, 2016 acquisition of our common shares pursuant to the
individual’s nonqualified deferred compensation plan account (these transactions were reported on Form 4s dated April 22,
2016).
Stock Ownership by Executive Officers
The Board has adopted stock ownership requirements for all officers at or above the executive vice president level that requires
these executives to hold a significant financial stake in our common shares in order to align the long-term interests of our
executives with those of our shareholders. Under the ownership requirements, on and after the fifth anniversary of his or her
appointment as an executive vice president or higher (“Target Date”), each such officer must have developed and thereafter
maintain an ownership position in our common shares with a minimum value (“Target Ownership Level”) as follows:
• A Target Ownership Level for the CEO having a value equal to three times his or her base salary; and
• A Target Ownership Level for all executive vice presidents or higher having a value equal to his or her base salary.
15
For purposes of assessing compliance with the ownership requirements, the value of stock means the greater of the fair market
value of our common shares held of record on the date of determination by the executive and his or her spouse, or the value of
our common shares at the time of acquisition. In determining whether the executive has achieved his or her Target Ownership
Level, the executive may include the value of our common shares owned outright or beneficially and shares held in benefit
plans, in any event acquired by him or her (1) in open market purchases, (2) from vested restricted stock awards, (3) from net
shares held following the exercise of stock options and SARs, (4) from earned performance shares, and (5) from deferred
compensation plan acquisitions. The executive may also include the share value equivalents of gains on vested but unexercised
stock options and SARs. Individual and joint holdings of stock with an executive’s spouse shall also be included in measuring
achievement of the applicable Target Ownership Level. As of the Record Date, each executive whose tenure dictates that he or
she satisfy the Target Ownership Level has done so. In the event of a financial hardship (e.g., illness, tuition, mortgage), an
executive, with the prior written consent of the Compensation Committee and subject to certain limitations, may sell our
common shares acquired by him or her to satisfy the Target Ownership Level.
Stock Ownership by Directors
The Board also requires non-employee directors to hold a significant financial stake in our common shares in order to align the
long-term interests of the directors with those of our shareholders. Each director must develop and maintain an original
investment of at least four times the annual Board retainer in effect upon the director’s initial election or appointment to the
Board (“Original Investment”). If the annual Board retainer is increased, each director must develop and maintain an
additional investment in our common shares equal to four times the increase in the retainer (“Additional Investment”). In
determining whether a director has achieved the Original Investment and the Additional Investment, the director may include
his or her (1) tax basis in any stock held directly or through a broker (i.e., acquisitions net of dispositions), (2) tax basis in
vested restricted stock, (3) tax basis in vested but unexercised in-the-money stock options and SARs, and (4) director fees
which the director has designated to be used for the acquisition of restricted stock or deferred stock units under our Non-
Employee Director Equity Compensation Plan. Directors have three years from the date of their initial election to the Board to
achieve the Original Investment, and three years from the date of an increase in the annual Board retainer to achieve the
Additional Investment. As of the Record Date, each director who has served on the Board for at least three years satisfied the
stock ownership requirements.
Stock Holding Requirements for Executive Officers and Directors
In order to further align the interests of directors and executives with those of shareholders, the Board also imposes stock
holding requirements for all directors and all officers at or above the executive vice president level. Under our stock holding
requirements, each director and executive must retain 50% of all net shares received (i.e., those shares received from equity
awards at vesting or exercise, after any withholding to satisfy taxes) until his or her applicable stock ownership requirement is
achieved. If a director or executive becomes subject to a greater stock ownership requirement (e.g., due to promotion or an
increase in the ownership requirement), the greater stock ownership requirement will apply as of its effective date and 50% of
all net shares received must be retained until such time that the greater stock ownership requirement is achieved. Once the
applicable stock ownership requirement, as described above, is achieved, sufficient shares must be retained by the director or
executive to continue meeting the stock ownership requirement until separation from service. Exceptions to the holding
requirements may be made at the discretion of the Board or Compensation Committee if compliance would create financial
hardship (e.g., illness, tuition or mortgage) or prevent a director or executive from complying with a court order.
Hedging Prohibited
Hedging or monetization transactions may be accomplished through a number of possible mechanisms, including through the
use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. Those hedging
transactions may permit a person to continue to own our securities without the full risks and rewards of ownership. When that
occurs, the person may no longer have the same objectives as our other shareholders. Therefore, the Board prohibits our
directors, officers and other employees from all hedging or monetization transactions involving our commons shares or other
securities.
Pledging Prohibited
Securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan.
Similarly, securities held in a margin account as collateral for a margin loan may be sold by the broker without the customer’s
consent if the customer fails to meet a margin call. Because a foreclosure sale or margin sale may occur at a time when the
pledgor is aware of material nonpublic information or otherwise is not permitted to trade in our securities, the Board prohibits
our directors, officers and other employees from holding our common shares or other securities in a margin account or
otherwise pledging our common shares or other securities as collateral for a loan. Exceptions to the prohibition on margin
16
accounts and pledged securities may be made only by the Board and only with respect to our securities pledged on or before
April 11, 2014.
As of April 11, 2014, Mr. Glazer, a director since August 2001 and our President and CEO since April 2012, was the beneficial
owner of more than 275,000 shares of our common stock, of which approximately 120,000 shares were pledged as security in a
margin account (“Pledged Stock”). In view of the undue financial hardship that would result if he is required to sell other
longstanding investments as a condition to the immediate release of all of the Pledged Stock from his margin account, the
Board granted Mr. Glazer an exception from our anti-pledging policy, but only with respect to the Pledged Stock. The Board
does not believe that this exception will undermine the goal of aligning Mr. Glazer’s interests with long-term shareholder
interests, or cause a negative impact on our stock price in the event a portion or all of the Pledged Stock is sold to meet a
margin call because our stock is actively traded.
ITEM 2: APPROVAL OF THE STAGE STORES 2017 LONG-TERM INCENTIVE PLAN
Based on the recommendation of the Compensation Committee (referred to as the “Committee” for purposes of this Item 2),
the Board unanimously adopted, subject to shareholder approval at the Annual Meeting, the 2017 LTIP on March 23, 2017. If
our shareholders approve the 2017 LTIP, it will become effective on June 1, 2017, and will replace the Stage Stores, Inc.
Second Amended and Restated 2008 Equity Incentive Plan (“2008 Equity Plan”) which will be frozen and no new awards will
be granted thereunder. The Board recommends that our shareholders approve the 2017 LTIP.
The 2017 LTIP is an omnibus plan that provides for a variety of types of awards to maintain flexibility. The 2017 LTIP will
permit grants of (1) non-qualified stock options (“NQSOs”), (2) incentive stock options (“ISOs”) as defined in Section 422 of
the Internal Revenue Code of 1986, as amended, and including applicable rules, regulations and authoritative interpretations
thereunder (“IRC”), (3) stock appreciation rights (“SARs”), (4) restricted stock, (5) restricted stock units, (6) deferred stock
units, (7) performance shares, (8) performance share units, (9) performance units, (10) cash-based awards, and (11) other stock-
based awards (NQSOs, ISOs, SARs, restricted stock, restricted stock units, deferred stock units, performance shares,
performance share units, performance units, cash-based awards and other stock-based awards are referred to collectively as
“Awards”). All of our and our affiliates’ employees, outside directors and consultants are eligible to receive Awards under the
2017 LTIP.
The 2017 LTIP is designed to promote our long-term financial success and business objectives in a manner consistent with our
compensation philosophy. The Board believes that by offering our employees long-term equity and qualified performance-
based compensation through the 2017 LTIP, we promote the following key objectives of our compensation program:
•
•
aligning the interests of employees, outside directors and consultants with those of our shareholders through increased
participant ownership of our common shares; and
attracting, motivating and retaining experienced and highly qualified employees, outside directors and consultants
who will contribute to our financial success.
The total number of common shares available for Awards under the 2017 LTIP is equal to the sum of: (1) 1,300,000 newly
issued common shares; (2) any of the 65,654 common shares remaining available for issuance under the 2008 Equity Plan as of
April 3, 2017 but not subject to previously exercised, vested or paid awards; and (3) any common shares subject to the
2,625,718 outstanding awards as of April 3, 2017 under the 2008 Equity Plan that on or after such date cease for any reason to
be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or
settled in vested and nonforfeitable common shares), including, but not limited to, common shares withheld to satisfy taxes
related to any such awards that are not stock options or stock appreciation rights (“Share Authorization”). The Board believes
that the Share Authorization represents a reasonable amount of potential equity dilution and provides a powerful incentive for
employees to increase our value for all of our shareholders.
As of April 3, 2017, there were 65,654 common shares available for grant under the 2008 Equity Plan and 2,625,718 common
shares underlying awards outstanding under the 2008 Equity Plan (123,200 of which are underlying SARs, 1,088,723 of which
are underlying performance shares, and 1,413,795 of which are underlying restricted stock). As of April 3, 2017: (1) the
weighted average exercise price of the 123,200 outstanding SARs under our equity compensation plans (all of which were
issued under the 2008 Equity Plan) was $18.53 and the weighted average remaining term was 0.9 years; (2) there were
1,088,723 performance shares outstanding under our equity compensation plans (all of which were issued under the 2008
Equity Plan) and the weighted average remaining term was 1.8 years; and (3) there were 1,495,768 restricted stock awards
outstanding under our equity compensation plans (including those issued under previously expired plans) and the weighted
average remaining term was 2.5 years. Between April 3, 2017 and June 1, 2017, we do not expect to grant any common shares
or other awards that would settle in common shares under the 2008 Equity Plan.
We have made an effort to manage to reasonable levels the annual run rate – that is, the total number of common shares
underlying equity-related awards granted in any given fiscal year divided by the weighted-average number of common shares
17
outstanding during that fiscal year. The annual run rate for 2014, 2015 and 2016 was 1.86%, 1.80% and 5.24%, respectively,
resulting in a three-year average run rate of 2.97%. It is our intention to continue to manage our run rate over time to
reasonable levels while ensuring that our executive compensation program is competitive and motivational.
The 2017 LTIP is designed to meet the requirements for deductibility of executive compensation under Section 162(m) of the
IRC (“Section 162(m)”) with respect to Awards under the 2017 LTIP that are intended to qualify as “qualified performance-
based compensation” under Section 162(m). In order to meet the Section 162(m) deductibility requirements, the 2017 LTIP
imposes limits on the number of common shares underlying Awards that any one participant may receive, as described below in
the “Limits on Awards” section of this Item 2.
The 2017 LTIP does not permit the repricing of Awards without the approval of shareholders or the granting of Awards with a
reload feature.
The following summary describes the material features of the 2017 LTIP and is qualified in its entirety by reference to the
complete text of the 2017 LTIP attached to this Proxy Statement as Annex A.
Administration
Subject to the terms of the 2017 LTIP, the selection of participants in the 2017 LTIP, the level of participation of each
participant and the terms and conditions of all Awards will be determined by the Committee. Each member of the Committee
will be an “independent director” for purposes of our Governance Guidelines, the Committee’s charter and the NYSE listing
requirements; a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act; and an “outside director”
within the meaning of Section 162(m). Currently, the Committee is comprised of six directors, each of whom meets all of
these criteria. Consistent with the purpose of the 2017 LTIP, the Committee will have the discretionary authority to (1)
interpret the 2017 LTIP, (2) prescribe, amend and rescind rules and regulations relating to the 2017 LTIP, and (3) make all other
determinations necessary or advisable for the administration or operation of the 2017 LTIP. The Committee may delegate
authority to administer the 2017 LTIP as it deems appropriate, subject to the express limitations set forth in the 2017 LTIP.
Limits on Awards
The Board will reserve a number of common shares for issuance under the 2017 LTIP equal to the Share Authorization. Of this
number, no more than 1,232,000 common shares may be issued pursuant to grants of ISOs during the term of the 2017 LTIP. A
participant may receive multiple Awards under the 2017 LTIP. Awards shall be limited to the following per participant annual
fiscal year amounts:
Award Type
Stock Options
SARs
Restricted Stock
Restricted Stock Units
Deferred Stock Units
Performance Shares, Performance Share Units and Performance Units
Cash-Based Awards
Other Stock-Based Awards
Dividend and Dividend-Equivalent Rights
All Award types granted to an Outside Director
Annual Limit per Participant
750,000 common shares
750,000 common shares
750,000 common shares
750,000 common shares
750,000 common shares
750,000 common shares or equivalent value
Greater of $5,000,000 or the value of 750,000
common shares
750,000 common shares
$2,000,000
200,000 common shares
The common shares available for issuance under the 2017 LTIP will be our authorized but unissued common shares and
treasury shares. Subject to the terms of the 2017 LTIP, common shares covered by an Award will only be counted as used to
the extent they are actually issued. To the extent that any Award payable in common shares (1) terminates by expiration,
forfeiture, cancellation or otherwise without the issuance of such common shares, (2) is settled in cash in lieu of common
shares, (3) is withheld to satisfy tax withholding obligations with respect to full value Awards, or (4) is exchanged with the
Committee’s permission prior to the issuance of common shares for Awards not involving common shares, the common shares
covered thereby may again be made subject to Awards under the 2017 LTIP. However, common shares which are (a) not
issued or delivered as a result of the net settlement of a stock option or stock-settled SAR, (b) withheld to satisfy tax
withholding obligations on a stock option or SAR, (c) tendered to pay the exercise price of a stock option or the grant price of a
SAR, or (d) repurchased on the open market with the proceeds of a stock option exercise will no longer be eligible to be again
available for grant under the 2017 LTIP. To the extent permitted by applicable law or stock exchange rule, common shares
issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by us
shall not be counted against the common shares available for grant pursuant to the 2017 LTIP.
18
Minimum Vesting Requirements for Awards
Except with respect to a maximum of five percent of the Share Authorization, all Awards granted under the 2017 LTIP shall
vest over a period that is not less than one year. However, the Committee may permit acceleration of vesting of Awards in the
event of a participant’s death or disability or in the event of a change in control.
Eligibility and Participation
All of our and our affiliates’ employees, outside directors and consultants will be eligible to participate in the 2017 LTIP. As of
April 3, 2017, we and our affiliates had approximately 12,000 employees and eight outside directors. We are unable to
reasonably estimate the number of consultants who will be eligible to receive awards under the 2017 LTIP. In 2016,
approximately 285 employees, eight outside directors and no consultants received equity incentive awards, although these
amounts may vary from year to year. From time to time, the Committee will determine who will be granted Awards, the
number of shares subject to such grants, and all other terms of Awards.
Types of Awards
The types of Awards that may be issued under the 2017 LTIP are described below.
Stock Options
Stock options granted under the 2017 LTIP may be either NQSOs or ISOs. The exercise price of any stock option granted may
not be less than the fair market value of our common shares on the date the stock option is granted. The stock option exercise
price is payable (1) in cash, (2) by tendering previously acquired common shares (subject to the satisfaction of the holding
period set forth in the 2017 LTIP) having an aggregate fair value at the time of exercise equal to the exercise price, (3) through
a broker-assisted cashless exercise, (4) by net exercise, which is the surrender to us of common shares for which the stock
option is exercisable in exchange for a distribution of common shares equal to the amount by which the then fair market value
of the common shares subject to the exercised stock option exceeds the applicable exercise price, or (5) by any combination of
the foregoing.
The Committee determines the terms of each stock option grant at the time of the grant. The Committee specifies at the time
each stock option is granted the time or times at which, and in what proportions, the stock option becomes vested and
exercisable. No stock option shall be exercisable later than seven years after the grant date. In general, a stock option expires
upon the earlier of (1) its stated expiration date or (2) one year after the participant terminates service (except in the case of
ISOs which must be exercised within three months after a termination of service, other than due to death or disability).
Stock Appreciation Rights
A SAR entitles the participant, upon settlement, to receive a payment based on the excess of the fair market value of our
common shares on the settlement date over the grant price of the SAR, multiplied by the number of SARs being settled. The
grant price of a SAR may not be less than the fair market value of our common shares on the grant date. SARs may be payable
in cash, our common shares or a combination of both.
The Committee determines the vesting requirements, the form of payment and other terms of a SAR. Vesting may be based on
the continued service of the participant for specified time periods or the attainment of a specified business performance goal
established by the Committee or both. No SAR shall be exercisable later than seven years after the grant date. In general, a
SAR expires upon the earlier of (1) its stated expiration date or (2) one year after the participant terminates service.
Restricted Stock
A restricted stock Award represents our common shares that are issued subject to restrictions on transfer and vesting
requirements as determined by the Committee. Vesting requirements may be based on the continued service of the participant
for specified time periods or the attainment of a specified performance goal established by the Committee.
Subject to the transfer restrictions and vesting requirements of the restricted stock Award, or as otherwise determined by the
Committee, the participant has the same rights as our shareholders during the restriction period, including voting and dividend
rights, although the Committee may provide that dividends and restricted stock certificates will be held in escrow during the
restriction period (and forfeited or distributed depending on whether applicable performance goals or service restrictions have
been met). Any stock dividends will be subject to the same restrictions that apply to the restricted stock upon which the stock
dividends are issued. Unless the Committee specifies otherwise in the Award agreement, the restricted stock is forfeited if the
participant terminates service before the restricted stock vests or if applicable terms and conditions have not been met at the
end of the restriction period.
19
Restricted Stock Units
An Award of restricted stock units provides the participant the right to receive a payment based on the value of our common
shares. Restricted stock units may be subject to such vesting requirements, restrictions and conditions to payment as the
Committee determines are appropriate. Vesting requirements may be based on the continued service of the participant for a
specified time period or on the attainment of a specified performance goal established by the Committee. Restricted stock units
are payable in cash, with our common shares, or a combination of both, as determined by the Committee.
Participants receiving restricted stock units do not have, with respect to such restricted stock units, any of the rights of a
shareholder, including no dividend rights with respect to any restricted stock units granted hereunder unless the Committee
provides the participant with dividend-equivalent rights in connection with an Award of restricted stock units. Unless the
Committee specifies otherwise in the Award agreement, the restricted stock unit Award is forfeited if the participant terminates
service before the restricted stock unit vests or if applicable terms and conditions have not been met at the end of the restriction
period.
Deferred Stock Units
An Award of deferred stock units provides the participant the right to defer receipt of all or some portion of his or her annual
compensation, annual incentive bonus and/or long-term compensation as permitted by the Committee, and for which the
participant will receive a payment based on the value of our common shares. Deferred stock units shall be fully vested and
non-forfeitable at all times. Deferred stock units, together with any dividend-equivalent rights credited with respect thereto,
may be subject to such requirements, restrictions and conditions to payment as the Committee determines are appropriate.
Deferred stock unit Awards are payable in cash, with our common shares, or a combination of both. Participants credited with
deferred stock units shall not have, with respect to such deferred stock units, any of the rights of a shareholder of the Company.
Performance Shares, Performance Share Units and Performance Units
An Award of performance shares, performance share units or performance units provides the participant the right to receive our
common shares if specified terms and conditions are met. Performance shares are restricted shares that are subject to
performance based vesting. Performance share units are restricted stock units that are subject to performance based vesting.
Performance units are cash based awards that are subject to performance based vesting. Performance share, performance share
unit and performance unit Awards are payable in cash, with our common shares, or a combination of both. Unless the
Committee specifies otherwise when the Award is granted, if a participant terminates service for any reason before the
performance shares, performance share units or performance units become vested, such Award will be forfeited.
Cash-Based Awards
An Award of cash-based awards provides the participant an opportunity to receive a cash payment. Cash-based awards may be
subject to such vesting requirements, restrictions and conditions to payment as the Committee determines are appropriate.
Vesting requirements may be based on the continued service of the participant for a specified time period or on the attainment
of a specified performance goal established by the Committee. If a participant terminates service before the cash-based award
vests, the Award will be forfeited.
Other Stock-Based Awards
An Award of other stock-based awards provides the participant an equity-based or equity-related right, which may provide the
participant the right to receive our common shares. Other stock-based awards may be subject to such vesting requirements,
restrictions and conditions to payment as the Committee determines are appropriate. Vesting requirements may be based on the
continued service of the participant for a specified time period or on the attainment of a specified performance goal established
by the Committee. If a participant terminates service for any reason before the other stock-based award vests, the Award will
be forfeited.
Performance-Based Awards
Any Awards granted under the 2017 LTIP may be granted in a form that qualifies for the qualified performance-based
compensation exception under Section 162(m). Under Section 162(m), the terms of the Award must state, through an objective
formula or standard, the method of computing the amount of compensation payable under the Award, and must preclude
discretion to increase the amount of compensation payable under the terms of the Award (but may give the Committee
discretion to decrease the amount of compensation payable). As described above in “Limits on Awards,” the 2017 LTIP
imposes certain limitations on the number and value of performance-based Awards to covered employees. The payment or
vesting of performance-based Awards granted under the 2017 LTIP is based on performance goals established by the
Committee. The 2017 LTIP specifies the following performance measures from which the performance goals must be derived:
20
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
(t)
(u)
(v)
(w)
(x)
(y)
(z)
Earnings (loss) per common share from continuing operations;
Earnings (loss) per common share;
Operating profit (loss), operating income (loss), or income (loss) from operations (as the case may be);
Income (loss) from continuing operations before unusual or infrequent items;
Income (loss) from continuing operations;
Income (loss) before income taxes;
Income (loss) from continuing operations before income taxes;
Income (loss) from continuing operations before extraordinary item and /or cumulative effect of a change in
accounting principle (as the case may be);
Income (loss) before extraordinary item and/or cumulative effect of a change in accounting principle (as the
case may be);
Net income (loss);
Income (loss) before other comprehensive income (loss);
Comprehensive income (loss);
Income (loss) before interest and income taxes (sometimes referred to as “EBIT”);
Income (loss) before interest, income taxes, depreciation and amortization (sometimes referred to as
“EBITDA”);
Any other objective and specific income (loss) category or non-GAAP financial measure that appears as a line
item in our filings with the Securities and Exchange Commission or the annual report to shareholders;
Any of items (c) through (o) on a weighted average common share outstanding basis;
Either of items (a) or (b) on a basic basis and any of items (c) through (o) on a basic earnings per share basis,
as basic earnings per share is defined in FASB ASC 260, Earnings Per Share, including authoritative
interpretations or amendments thereof which may be issued from time to time as long as such interpretations
or amendments are utilized on the consolidated statements of operations or statement of operations, as
applicable, or in the notes to the consolidated financial statements;
Either of items (a) or (b) on a diluted basis and any of items (c) through (o) on a diluted earnings per share
basis, as diluted per share is defined in the FASB ASC 260 – Earnings Per Share including authoritative
interpretations or amendments thereof which may be issued from time to time as long as such interpretations
or amendments are utilized on the consolidated statements of operations or statement of operations, as
applicable, or in the notes to the consolidated financial statements;
Common share price;
Total shareholder return expressed on a dollar or percentage basis as is customarily disclosed in the proxy
statement accompanying the notice of annual meetings of shareholders;
Percentage increase in comparable sales, whether on an absolute basis or relative to those publicly held
companies in the Company’s peer group as established by the Committee prior to the Final Pre-Establishment
Date (as defined in the 2017 LTIP) or such later date as permitted under the IRC;
Gross profit (loss) or gross margin (loss) (as the case may be);
Economic value added;
Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or
revenue):
Expense targets;
Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and
cash flow return on investment):
(aa)
Productivity ratios;
(bb) Market share;
21
(cc)
Customer satisfaction;
(dd) Working capital targets and change in working capital;
(ee)
(ff)
(gg)
(hh)
(ii)
Any of items (a) through (dd) with respect to any subsidiary, affiliate, business unit, business group, business
venture or legal entity, including any combination thereof, or controlled directly or indirectly by us whether or
not such information is included in our annual report to shareholders, proxy statement or notice of annual
meeting of shareholders;
Any of items (a) through (dd) above may be determined before or after a minority interest’s share as designated
by the Committee;
Any of items (a) through (dd) above with respect to the period of service to which the performance goal relates
whether or not such information is included in our SEC filings, annual report to shareholders, proxy statement
or notice of annual meetings of shareholders;
Total shareholder return ranking position meaning the relative placement of our total shareholder return (as
determined in (t) above) compared to those publicly held companies in the Company’s peer group as
established by the Committee prior to the Final Pre-Establishment Date or such later date as permitted under
the IRC; or
With respect to items (a), (b), (p), (q) and (r) above, other terminology may be used for each such
performance criteria (including, but not limited to, “Basic EPS,” “income (loss) per common share,” “diluted
EPS,” or “earnings per common share-assuming dilution”) as contemplated by ASC 260 – Earnings Per
Share, as amended, revised or superseded.
Effect of Change in Control
Awards under the 2017 LTIP may be subject to special provisions upon the occurrence of a change in control (as defined in the
2017 LTIP). The Committee may provide for Awards to vest and, as applicable, be exercisable or payable in the event of a
change in control or in the event of a participant’s termination or separation with, upon or within a specified time period after a
change in control. The Committee may, in the event of a change in control, also take one or more of the following actions with
respect to outstanding Awards: (1) require participants to surrender outstanding stock options and SARs in exchange for cash or
common shares equal to the amount that the fair market value of the common shares subject to those unexercised Awards
exceeds the exercise or grant price; (2) determine that outstanding unexercised stock options and SARs shall be assumed, or
replaced with comparable stock options or rights, by the surviving entity, and other outstanding Awards that remain in effect
after the change in control shall be converted to similar grants of the surviving entity; (3) after giving participants an
opportunity to exercise their outstanding stock options and SARs, whether vested or unvested, terminate any or all unexercised
stock options and SARs at such time as the Committee deems appropriate; (4) provide that any stock options and SARs
outstanding as of the date of the change in control and not then exercisable become fully exercisable to the full extent of the
original grant; (5) provide that all remaining restriction periods be accelerated and any remaining restrictions applicable to
restricted stock or restricted stock units lapse such that the restricted stock or restricted stock units become fully vested; (6)
provide that any performance goal or other condition with respect to any performance units, performance shares and
performance share units be deemed to have been satisfied in full, and the common shares or cash subject to such Award be fully
distributable; (7) provide that any remaining restrictions, performance goals or other conditions with respect to any deferred
stock units lapse and such deferred stock unit be deemed to have been satisfied in full, and the common shares or cash subject
to such Award be fully distributable; and (8) provide that any cash-based awards and other stock-based awards outstanding as
of the date of the change in control shall vest in full.
Limited Transferability
All Awards or common shares subject to an Award under the 2017 LTIP are nontransferable except upon death, either by the
participant’s will or the laws of descent and distribution or through a beneficiary designation, and Awards are exercisable
during the participant’s lifetime only by the participant (or by the participant’s legal representative in the event of the
participant’s incapacity).
Adjustments for Corporate Changes
In the event of a reorganization, recapitalization, merger, spin-off, stock split or other specified changes affecting us or our
capital structure, the Committee is required to make equitable adjustments that reflect the effects of such changes to the
participants. Such adjustments may relate to the number of our common shares available for grant, as well as to other
maximum limitations under the 2017 LTIP (e.g., exercise prices and number of Awards), and the number of our common shares
or other rights and prices under outstanding Awards.
22
Term, Amendment and Termination
The 2017 LTIP will have a term of 10 years expiring on June 1, 2027, unless terminated earlier by the Board. Although the
Board or the Committee may amend or alter the 2017 LTIP, it may not do so without shareholder approval of any amendment
or alteration to the extent shareholder approval is required by law, regulation or stock exchange rule. In addition, any
amendment, alteration or termination of the 2017 LTIP or an Award agreement may not adversely affect any outstanding Award
to a participant without the consent of that participant other than amendments for the purpose of (1) causing the 2017 LTIP to
comply with applicable law, (2) permitting us to receive a tax deduction under applicable law, or (3) avoiding an expense
charge to us or our affiliates.
Repricing
The 2017 LTIP does not permit the repricing of Awards without the approval of shareholders or the granting of Awards with a
reload feature.
Plan Benefits
Future benefits under the 2017 LTIP are not currently determinable. The Committee has discretionary authority to grant
Awards pursuant to the 2017 LTIP which does not contain any provision for automatic grants.
Federal Income Tax Treatment of Awards
The following summary discussion of the United States federal income tax implications of Awards under the 2017 LTIP is
based on the provisions of the IRC as of the date of this Proxy Statement. This summary is not intended to be exhaustive and
does not, among other things, describe state, local or foreign tax consequences and such tax consequences may not correspond
to the federal income tax treatment described herein. The exact federal income tax treatment of transactions could vary
depending upon the specific facts and circumstances involved and participants are advised to consult their personal tax advisors
with regard to all consequences arising from the grant, vesting or exercise of Awards and the disposition of any acquired
common shares.
Incentive Stock Options
ISOs may only be granted to our employees. No taxable ordinary income to the participant or a deduction to us will be realized
at the time the ISO is granted or exercised. If the participant holds the common shares received as a result of an exercise of an
ISO for at least two years from the grant date and one year from the exercise date, then (1) any gain realized on disposition of
the common shares is treated as a long-term capital gain and any loss sustained will be a long-term capital loss and (2) we are
not entitled to a deduction. If the common shares acquired by an exercise of an ISO are disposed of within either of these
periods (i.e., a “disqualifying disposition”), then the participant must include in his or her income, as taxable compensation for
the year of the disposition, an amount equal to the excess, if any, of the fair market value of the common shares upon exercise
of the stock option over the stock option exercise price (or, if less, the excess of the amount realized upon disposition over the
stock option exercise price). In such case, we will generally be entitled to a deduction, generally in the year of such a
disposition, for the amount includible in the participant’s income as taxable compensation. The participant’s basis in the
common shares acquired upon exercise of an ISO is equal to the stock option exercise price paid, plus any amount includible in
his or her income as a result of a disqualifying disposition. The rules that generally apply to ISOs do not apply when
calculating any alternative minimum tax liability. The rules affecting the application of the alternative minimum tax are
complex, and their effect depends on individual circumstances, including whether a participant has items of adjustment other
than those derived from ISOs.
Non-Qualified Stock Options
A NQSO results in no taxable income to the participant or deduction to us at the time it is granted. A participant exercising a
NQSO will, at that time, realize taxable compensation in the amount of the difference between the stock option exercise price
and the then-current fair market value of the common shares. Subject to the applicable provisions of the IRC, a deduction for
federal income tax purposes will be allowable to us in the year of exercise in an amount equal to the taxable compensation
recognized by the participant.
The participant’s basis in such common shares is equal to the sum of the stock option exercise price plus the amount includible
in his or her income as compensation upon exercise. Any gain (or loss) upon subsequent disposition of the common shares will
be a long-term or short-term gain (or loss), depending upon the holding period of the common shares.
If a participant tenders previously owned common shares in payment of the NQSO exercise price, then, instead of the treatment
described above, the following generally will apply: (1) a number of new common shares equal to the number of previously
owned common shares tendered will be considered to have been received in a tax-free exchange; (2) the participant’s basis and
23
holding period for such number of new common shares will be equal to the basis and holding period of the previously owned
common shares exchanged; (3) the participant will have compensation income equal to the fair market value on the exercise
date of the number of new common shares received in excess of such number of exchanged common shares; (4) the
participant’s basis in such excess shares will be equal to the amount of such compensation income; and (5) the holding period
in such common shares will begin on the exercise date.
Stock Appreciation Rights
Generally, a participant that receives a SAR will not recognize taxable income at the time the SAR is granted. If a participant
receives the appreciation inherent in a SAR in cash, the cash will be taxed as ordinary compensation income to the participant
at the time it is received. If a participant receives the appreciation inherent in a SAR in common shares, the spread between the
then-current fair market value of the common shares and the grant price will be taxed as ordinary compensation income to the
participant at the time it is received. In general, there will be no federal income tax deduction allowed to us upon the grant or
termination of a SAR. However, upon the settlement of either form of SAR, we will generally be entitled to a deduction equal
to the amount of ordinary income the participant is required to recognize as a result of the settlement.
If the amount a participant receives upon disposition of the common shares that the participant acquired by exercising a SAR is
greater than the sum of the aggregate exercise price that the participant paid plus the amount of ordinary income recognized by
the participant upon exercise, the excess will be treated as a long-term or short-term capital gain, depending on the holding
period of the common shares. Conversely, if the amount a participant receives upon disposition of the common shares that the
participant acquired by exercising a SAR is less than the sum of the aggregate exercise price that the participant paid plus the
amount of ordinary income recognized by the participant upon exercise, the difference will be treated as a long-term or short-
term capital loss, depending on the holding period of the common shares.
Restricted Stock
Generally, a participant will not recognize income and we will not be entitled to a deduction at the time an award of restricted
stock is made under the 2017 LTIP, unless the participant makes a Section 83(b) election described below. A participant who
has not made such an election will recognize ordinary compensation income at the time the restrictions on the common shares
lapse in an amount equal to the fair market value of the common shares at such time. We will generally be entitled to a
corresponding deduction in the same amount and at the same time as the participant recognizes income. Any otherwise taxable
disposition of the restricted stock after the time the restrictions lapse will result in a capital gain or loss to the extent the amount
realized from the sale differs from the tax basis (i.e., the fair market value of the common shares on the date the restrictions
lapse).
Deferred Stock Units
Generally, a participant who defers compensation into deferred stock units will not recognize income at the time the
compensation would otherwise have been paid to the participant. Upon the settlement of the deferred stock unit, the participant
will be taxed on the then-current fair market value of the shares or cash paid and we will be entitled to a deduction equal to the
amount of ordinary compensation income the participant is required to recognize as a result of the settlement.
Other Awards
The current United States federal income tax consequences of other Awards authorized under the 2017 LTIP are generally in
accordance with the following: (1) the fair market value of other stock-based awards is generally subject to ordinary
compensation income tax at the time the restrictions lapse, unless the participant elects to accelerate recognition as of the date
of grant; and (2) the amount of cash paid (or the fair market value of the common shares issued) to settle restricted stock units,
performance shares, performance share units, performance units and cash-based awards is generally subject to ordinary
compensation income tax. In each of the foregoing cases, we will generally be entitled to a corresponding federal income tax
deduction at the same time the participant recognizes ordinary compensation income.
Dividend-Equivalent Rights
Participants may be granted dividend-equivalent rights in connection with any Award other than a stock option or SAR. A
participant who receives dividend-equivalent rights with respect to an Award between the grant date and the date the Award is
exercised, payable or vests or when the restrictions lapse or expires (as the terms of the Awards dictate) will recognize ordinary
compensation income equal to the value of cash or common shares delivered and we will generally be entitled to a
corresponding deduction for such dividends.
24
Section 162(m)
As described above, Section 162(m) generally provides that a company is prohibited from deducting compensation paid to
certain “covered employees” (i.e., the principal executive officer and three other most highly compensated officers (other than
the principal financial officer)) in excess of $1 million per person in any year. Compensation that qualifies as “qualified
performance-based compensation” is excluded for purposes of calculating the amount of compensation subject to the $1
million limit. To qualify as qualified performance-based compensation, Awards must be granted under the 2017 LTIP by the
Committee and satisfy the 2017 LTIP’s limit on the total number of common shares that may be awarded to any one participant
during a year. In addition, for Awards other than stock options to qualify as qualified performance-based compensation, the
issuance or vesting of the Award, as applicable, must be contingent upon satisfying one or more of the performance measures
listed in the 2017 LTIP, as established and certified by the Committee.
Section 83(b)
A participant may elect pursuant to Section 83(b) of the IRC to have compensation income recognized at the grant date of an
Award of restricted stock, restricted stock units or performance units and to have the applicable capital gain holding period
commence as of that date. If a participant makes this election, we will generally be entitled to a corresponding tax deduction
equal to the value of the Award affected by this election. If the participant who has made an election subsequently forfeits the
Award, then the participant will not be entitled to deduct the amount previously recognized as income.
Section 409A
Section 409A of the IRC imposes certain restrictions on amounts deferred under nonqualified deferred compensation plans and
a 20% excise tax on amounts that are subject to, but do not comply with, Section 409A of the IRC. If the requirements of
Section 409A are not complied with, holders of such Awards may be taxed earlier than would otherwise be the case (e.g., at the
time of vesting instead of the time of payment) and may be subject to an additional 20% penalty tax and, potentially, interest
and penalties. Section 409A of the IRC includes a broad definition of nonqualified deferred compensation plans, which
includes certain types of equity incentive compensation. It is intended that the Awards granted under the 2017 LTIP will
comply with or be exempt from the requirements of Section 409A of the IRC and the treasury regulations promulgated
thereunder (and any subsequent notices or guidance issued by the Internal Revenue Service).
Market Value
On April 3, 2017, the closing price of the Company’s common shares traded on the NYSE was $2.65 per share.
Equity Compensation Plan Information
The following table summarizes information as of January 28, 2017, the end of fiscal 2016, relating to our: (1) Amended and
Restated 2001 Equity Incentive Plan (“2001 Equity Plan”) and our 2008 Equity Plan, under both of which our common shares
are authorized for issuance to directors, officers and other key employees in the form of restricted stock, upon the exercise of
stock options and SARs, and as the result of the vesting of performance shares; and (2) Amended and Restated 2003 Non-
Employee Director Compensation Plan (“2003 Director Plan”), under which our common shares are authorized for issuance to
non-employee directors in lieu of all or a portion of their cash compensation if they so elect. The 2001 Equity Plan expired on
June 3, 2014.
Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights (#) (1)
(a)
Weighted-average exercise
price of outstanding options,
warrants and rights ($) (2)
(b)
Number of securities
remaining available for future
issuance under equity
compensation plans
(excluding securities reflected
in column (a)) (#)
(c)
—
177,900
—
177,900
—
17.69
—
17.69
—
759,234
225,000
984,234
Plan category
Equity compensation plans approved
by security holders:
2001 Equity Plan
2008 Equity Plan
2003 Director Plan (3)
Total
__________
(1) Amounts in this column represent SARs outstanding under the 2008 Equity Plan. As of January 28, 2017, we had 126,159
shares of unvested restricted stock outstanding under the 2001 Equity Plan and 1,470,251 shares of unvested restricted
stock outstanding under the 2008 Equity Plan. We also had 977,446 unvested performance shares outstanding under the
25
2008 Equity Plan, which represents the maximum number of common shares that may be earned under the outstanding
performance share awards.
(2) The weighted average remaining contractual life of these outstanding stock options and SARs is 0.8 years. The weighted
average remaining contractual life in this column does not take into account unvested performance shares outstanding
under the 2008 Equity Plan included in column (a) to the above table.
(3) Shares granted under the 2003 Director Plan are solely for non-employee directors who elect to receive retainers or fees in
restricted stock or deferred stock units in lieu of cash. We do not match or apply a premium to non-employee director
compensation received in the form of equity.
See the “Security Ownership of Certain Beneficial Owners and Management” section of this Proxy Statement for additional
information with respect to security ownership of certain beneficial owners and management.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE THE
2017 LTIP.
EXECUTIVE COMPENSATION
Compensation Committee Report
The Compensation Committee reviewed and discussed the following Compensation Discussion and Analysis (“CD&A”) with
our management. Based on that review and discussion, the Compensation Committee (which we refer to as the “Committee”
in the CD&A) recommended to our Board that the CD&A be included in this Proxy Statement and our Annual Report on Form
10-K for our fiscal year ended January 28, 2017.
Members of the Compensation Committee
Earl J. Hesterberg, Chair
Alan J. Barocas
Elaine D. Crowley
Lisa R. Kranc
C. Clayton Reasor
Ralph P. Scozzafava
Executive Summary
Compensation Discussion and Analysis
In this CD&A, we describe the material objectives and principles underlying our compensation policies and decisions as well
as the material elements of the compensation of our named executive officers for 2016. For 2016, our “named executive
officers” were:
Executive
Michael L. Glazer
Oded Shein
Thorsten I. Weber
Steven L. Hunter
William E. Gentner
Steven P. Lawrence
Stephen B. Parsons
Title
President and Chief Executive Officer (“CEO”)
Executive Vice President, Chief Financial Officer (“CFO”) and Treasurer
Executive Vice President, Chief Merchandising Officer
Executive Vice President, Chief Information Officer
Executive Vice President, Chief Marketing Officer
Former Chief Merchandising Officer
Former Executive Vice President, Chief Human Resources Officer (“CHRO”)
This CD&A should be read in conjunction with the compensation tables following this CD&A.
26
Overview
Although we took significant actions to support the future success of our business, the conditions that we faced in 2016,
including depressed oil prices, a devalued peso and a generally weak environment for the department store retail industry,
impacted our business to the extent that we did not meet our aggressive performance targets. Accordingly, no bonuses were
paid in 2016 for the second straight year, and the performance shares covering the three-year performance cycle ended with
2016 did not vest.
Business Strategy and Results
Our primary objectives for 2016 were to build upon our strategic initiatives and drive sales productivity in stores and online by
delivering an improved customer experience. In particular, our 2016 priorities included:
• 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 existing customer base; and
remodeling nearly 90 stores and closing approximately 30 stores that do not meet our sales productivity and
profitability standards.
While we did accomplish or make significant strides toward these priorities, macroeconomic challenges facing our industry
and business in 2016, including depressed oil prices, a devalued peso and a generally weak environment for the department
store retail industry, prevented our financial performance from meeting our expectations. As a result of our performance in
2016 and the emphasis that our executive compensation program places on performance-based compensation, the actual
compensation realized by our named executive officers in 2016 was significantly lower than our target and total potential
levels. Specifically, we did not achieve our pre-tax earnings thresholds required for our named executive officers to earn an
annual performance incentive bonus for 2016, and our total shareholder return (“TSR”) for the 2014 through 2016 performance
cycle was below the level required for our named executive officers to earn any of the performance shares they had previously
been awarded.
Our financial results and strategic actions for 2016 include the following:
Financial Results
• Net sales decreased $161.7 million, or 10.1%, to $1.4 billion.
• We generated $84.3 million in cash from operating activities, a 109.1% increase over 2015.
• Comparable sales decreased 8.8%.
• Gross profit decreased $98.4 million, or 24.8%.
• Pre-tax loss was $63.1 million, compared to pre-tax earnings of $5.6 million for 2015.
• Diluted loss per common share was $1.40, compared with diluted earnings per common share of $0.12 for 2015.
• We grew sales penetration of our private label credit card by 290 basis points.
• We paid cash dividends of $16.7 million, or $0.60 per share.
• TSR, as calculated under the terms of our performance share awards, was -47.2% for 2016 and -73.2% for the three
year period ended January 28, 2017 (see the “Overview of 2016 Executive Compensation – Long-Term Incentives”
section of this CD&A for additional information regarding how TSR is calculated under the terms of our performance
share awards).
Strategic Actions
• We continued to grow our direct–to-consumer business by enhancing our customer online shopping experience,
expanding our online assortments, improving site navigation, adding buy online ship-to-store capabilities, investing in
digital marketing and our mobile site, and improving operational efficiency.
• We updated our product assortment by offering more contemporary fashions and new brands, adding categories within
existing brands, and extending existing brands to additional stores.
27
• We completed 86 remodels, relocations and expansions in order to continue improving the shopping experience for
our customers.
• We continued our multi-year plan to close underperforming stores, including 37 stores in 2016, following a strategic
evaluation of our store portfolio according to increased profitability and our return on investment standards.
• We leveraged our technology to create more personalized direct mail and email programs, and shifted our marketing
activity to be more digitally-focused.
• We launched a tender-neutral loyalty program, Style Circle Rewards®, which complements our existing private label
credit card program and will allow us to better understand our customers’ shopping habits, offer more personalized
promotional offers, and provide attractive rewards.
Our 2016 financial performance fell short of our expectations. As a result, our named executive officers did not earn an annual
performance incentive bonus for 2016, and shares were not earned under the three-year performance share awards whose
performance cycle ended with 2016. We have tied these important components of compensation to our pre-tax earnings,
comparable sales and TSR in order to align the interests of our named executive officers with our shareholders and to deliver
meaningful portions of executive compensation only when we perform. The relationship between our 2016 performance and
realized compensation, as well as the design of our executive compensation program to emphasize shareholder alignment,
demonstrates the effectiveness of our program. Accordingly, our Board recommends that shareholders vote FOR the
compensation paid to our named executive officers in 2016 at our Annual Meeting (see Item 3 in this Proxy Statement).
Overview of 2016 Executive Compensation
Our executive compensation program demonstrates strong pay-for-performance alignment. We believe our executive
compensation program effectively aligns pay and performance by tying the value of annual performance incentive bonus
opportunities and long-term incentive equity awards to our financial and sales performance as well as the value of our common
shares.
Approximately 75% of target total compensation awarded to Mr. Glazer in 2016 was variable compensation that was tied to our
performance and/or the value of our common shares, and approximately 62% of target total compensation awarded to our other
named executive officers was variable compensation (see the “Pay-for-Performance” section in this CD&A). We believe that
tying a significant majority of each named executive officer’s target total compensation to our performance and the value of
our common shares aligns the interests of our named executive officers and our shareholders.
We annually review the total direct compensation (base salary and incentive compensation in the form of an annual bonus
opportunity and long-term incentive equity awards) for each named executive officer based on market data, contributions to
corporate performance, internal pay equity, and each executive’s performance, expertise, responsibility and experience.
Base Salaries
Our named executive officers’ base salaries were not adjusted for 2016, except that Mr. Weber’s base salary was increased to
$510,000 in connection with his promotion to Executive Vice President, Chief Merchandising Officer in September 2016. The
Committee reviewed competitive market data, including the base salaries of comparators in our compensation Peer Group (as
described later in this CD&A); however, our CEO and other named executive officers recommended to the Committee that it
not provide base salary increases in 2016 as a result of corporate performance in 2015. Taking into account the
recommendation of our CEO and other named executive officers, the Committee determined that our named executive officers’
base salaries would not be adjusted for 2016 (aside from the mid-year raise in connection with Mr. Weber’s promotion and
assumption of greater responsibility).
Annual Performance Incentive Bonuses
The opportunity to earn a performance incentive bonus under the Stage Stores Executive Performance Incentive Bonus Plan
(“Bonus Plan”) for 2016 was based on two components. First, a pre-tax earnings performance component was weighted to
determine 75% of the amount earned. Second, a relative comparable sales performance component was weighted to determine
25% of the amount earned. The pre-tax earnings component was based on our achievement relative to a target established by
the Committee and the other independent directors, after consultation with management, at the beginning of 2016. The
comparable sales component was based on the year-over-year change in our comparable sales results in 2016 as compared to
the 2016 Performance Group (as described below in “Incentive-Based Compensation Benchmarking; 2016 Performance
Group”). “Comparable sales” means sales in stores open for at least 14 full months prior to the applicable reporting period and
includes direct-to-consumer sales.
• Target. For 2016, our pre-tax earnings target was $34.6 million, an increase of $29.0 million, or 517.9%, compared to
our 2015 actual pre-tax earnings. The comparable sales target was a 50th percentile ranking among the Performance
28
Group for 2016 comparable sales. A threshold level of performance must be achieved to earn a bonus under each
component, and a maximum level of performance limits the bonus that may be earned under each component.
• Results. We did not meet the pre-tax earnings thresholds required for our named executive officers to earn an annual
performance incentive bonus for 2016. Accordingly, our named executive officers were not paid bonuses for 2016.
Long-Term Equity Incentive Awards
For 2016, the long-term equity incentive awards for our named executive officers consisted of performance shares and
restricted stock. Our long-term equity incentive awards are designed to reward sustained, multi-year performance and retain
executives for the duration of each award. Performance shares may be earned based on our TSR over a three-year period
compared to the Performance Group established at the beginning of that three-year period. For purposes of the performance
shares, we measure TSR for our common shares and the publicly-traded shares of the Performance Group companies by
comparing the change in the average closing price of the shares during all trading days in our first fiscal month of the
performance period to the average closing price of the shares during all trading days in our final fiscal month of the
performance period, including the reinvestment of dividends. For the 2014 through 2016 performance cycle, none of the target
number of shares were earned. Restricted stock is generally scheduled to vest ratably over a four year period.
Significant Executive Compensation Policies and Practices
Independent Compensation Committee
The Committee is composed entirely of independent directors who oversee our executive compensation program.
Pay-for-Performance
The majority of each named executive officer’s compensation is based on our financial or stock price performance, putting the
value of that variable compensation at risk if we and our stock do not perform to targeted levels.
Stock Ownership Requirement
Our named executive officers are required to acquire and maintain a minimum ownership stake in our common shares (see the
“Stock Ownership by Executive Officers” section of this Proxy Statement).
Stock Holding Requirement
Our named executive officers are also required to retain 50% of all net shares received until achieving the stock ownership
requirement. Once the stock ownership requirement is achieved, sufficient shares must be retained by the named executive
officers to continue meeting the stock ownership requirement until separation from service (see the “Stock Holding
Requirements for Executive Officers and Directors” section of this Proxy Statement).
Hedging Prohibited
We prohibit hedging or monetization transactions by our directors, named executive officers and other employees with respect
to our securities (see the “Hedging Prohibited” section of this Proxy Statement).
Pledging Prohibited
We prohibit our directors, named executive officers and other employees from pledging our securities as collateral for a loan
(see the “Pledging Prohibited” section of this Proxy Statement).
No Gross-Up Payments
Our named executive officers are not entitled to gross-up payments as part of their annual and long-term compensation
arrangements or with respect to any termination or change in control arrangements. In order to make whole those named
executive officers who we recruit and seek to relocate, we may provide a reimbursement of taxes related to certain relocation
expenses.
No Repricing
It is the policy of our Board that we will not reprice or swap stock options or SARs without shareholder approval.
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Reasonable Perquisites
Our executive compensation program offers perquisites that we believe are reasonable and customary in our industry, and those
perquisites comprise only approximately 5% or less of our named executive officers’ total compensation.
Clawback Policy
Our named executive officers are subject to a compensation recovery or “clawback” policy (see the “Compensation Recovery /
Clawback Policy” section in this CD&A).
Say-on-Pay Votes
At our 2016 annual meeting of shareholders, 89.8% of the votes cast approved the compensation paid to our named executive
officers for 2015. Our pay-for-performance alignment remains strong. Accordingly, our Board recommends that shareholders
vote FOR the compensation paid to our named executive officers in 2016 at our Annual Meeting (see Item 3 in this Proxy
Statement).
Compensation Objectives and Principles
The objectives of our executive compensation program are to:
• Enable us to attract, motivate and retain the executive talent required to successfully manage and grow our business
and to achieve our short-term and long-term business objectives;
• Maximize our executive officers’ long-term commitment to our success by providing compensation elements that
align their interests with the interests of our shareholders by linking compensation elements directly to financial
metrics that the Committee believes influence the creation of long-term shareholder value; and
• Reward our executive officers upon the achievement of short-term and long-term business objectives and the creation
of shareholder value.
The principles of and important processes in our executive compensation program are as follows:
• Emphasize pay-for-performance and encourage retention of executive officers who improve our performance;
• Maintain an appropriate balance between base salary and annual and long-term incentive compensation;
• Link incentive compensation to the achievement of goals set in advance by the Committee;
• Align the interests of our executive officers with those of our shareholders;
• Evaluate CEO performance against annual and long-term performance goals on an absolute basis as well as relative to
the performance of our Peer Group and Performance Group;
• Require the achievement of threshold performance levels to earn payouts under annual and long-term performance-
based incentives;
• Convene an executive session (without management) of the Committee at least once annually;
• Recuse our CEO from deliberations and voting regarding his or her compensation;
• Consult our CEO, on an advisory basis only, on the compensation awarded to our other named executive officers;
• Conduct a thorough annual review and analysis of the recent compensation history of each named executive officer
and all forms of compensation to which the executive may be entitled; and
• Make recommendations on named executive officer compensation to the independent directors after the Committee
completes a thorough review and analysis.
Key Considerations in Setting Compensation
Based on these objectives and principles, the Committee has structured our executive compensation program to motivate our
named executive officers to achieve the business goals set by our Board and to reward them for achieving those goals. The
following is a summary of the key considerations that the Committee takes into account in setting the compensation of our
named executive officers.
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Significance of Overall Corporate Performance
The Committee primarily evaluates our named executive officers’ contributions to our overall performance rather than focusing
only on their individual function. The Committee believes that each named executive officer shares the responsibility to
support our goals and performance as key members of our leadership team. While this approach influences all of the
Committee’s compensation decisions, it has the biggest impact on the long-term incentive awards made annually.
Evaluation of Individual Performance
The Committee does not rely on formulas in determining the amount and mix of each named executive officer’s total direct
compensation. Rather, in establishing compensation, the Committee exercises its judgment to evaluate a broad range of both
quantitative and qualitative factors, including reliability in achieving financial and growth targets, performance in the context
of the economic environment relative to other companies, and possessing the characteristics, such as integrity, good judgment
and vision, needed to create further growth and effectively lead others. For long-term incentive awards, the Committee
primarily considers a named executive officer’s potential for future successful performance and leadership as part of our
executive management team, taking into account past performance as a key indicator. The Committee may also take into
account extraordinary, unusual or non-recurring items anticipated or incurred by us that the Committee deems appropriate in
determining compensation.
Pay-for-Performance and Alignment with Shareholder Interests
Aligning executive compensation with performance is a key principle of our executive compensation philosophy. Incentive
compensation is designed to drive our performance by rewarding executives if we exceed our targeted performance levels.
Similarly, if we fail to meet threshold levels of performance, executives will not earn compensation for the applicable award.
We believe our executive compensation program effectively implements the pay-for-performance principle by tying the value
of bonus opportunities and equity awards to our financial and stock price performance.
The key metrics we currently use to evaluate the performance of our named executive officers are pre-tax earnings, relative
comparable sales and relative TSR (as calculated under the terms of our performance share awards). We believe our pre-tax
earnings is an important financial measure as it reflects the success of our efforts to increase revenue and control our expenses.
Relative comparable sales provides a barometer of our top line performance against our competition. Relative TSR is
important to gauge the return delivered to our shareholders in comparison to our competition. In addition, the value of the
incentive equity compensation that we award is significantly impacted by the price of our stock.
The following charts show the 2016 variable compensation (i.e., compensation that is impacted by our performance and/or the
value of our common shares) for our CEO and other named executive officers as a percentage of their respective target total
compensation (base salary, annual performance incentive bonus opportunity at target, grant date fair value of long-term
incentive equity awards at target, and other compensation and benefits). As the charts illustrate, 75% of Mr. Glazer’s and 62%
of our other current named executive officers’ compensation (applying Mr. Weber’s compensation mix following his promotion
in September 2016) was dependent on our financial or stock price performance.
CEO
3%
22%
53%
22%
All Other NEOs
5%
Base
Target Bonus
Target LTI
Perquisites
41%
33%
21%
Base
Target Bonus
Target LTI
Perquisites
Mix of Compensation Elements
The Committee strives to provide a mix of compensation elements that balances current and long-term compensation as well as
cash and equity incentive compensation. Cash payments primarily reward more recent performance while equity awards
encourage our named executive officers to continue to deliver long-term results while also serving as a retention tool. The
Committee believes that executive compensation should be appropriately weighted on both our long-term and short-term
performance.
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Use of Tally Sheets
The Committee annually reviews tally sheets that present for each named executive officer all elements of compensation, total
annual compensation and total deferred compensation. The Committee also reviews the total benefits to which a named
executive officer would be entitled upon various termination events. The Committee uses the tally sheets to ensure that our
compensation is reasonable and competitive. The Committee also uses the tally sheets to evaluate if our compensation strategy
achieved our goals in the past and to align future executive compensation with our short-term and long-term goals.
Comparative Compensation Data; 2016 Peer Group
In making compensation decisions, the Committee considers executive compensation data from a peer group of publicly-traded
retailers listed below (“Peer Group”). The Peer Group, which was developed in connection with Willis Towers Watson and
approved by the Committee, provides direct information on a job title match basis (e.g., CEO, CFO, etc.) for key competitors.
The companies in the Peer Group generally consist of U.S. based, publicly-traded apparel and accessories retailers with annual
sales between one-half and two times our annual sales with which we compete for business and talent. The members of the
2016 Peer Group were:
Abercrombie & Fitch Co.
American Eagle Outfitters, Inc.
Chico’s FAS, Inc.
DSW Inc.
Express, Inc.
Finish Line Inc.*
Genesco Inc.*
New York & Company Inc.
Shoe Carnival Inc.*
Stein Mart, Inc.
Tailored Brands, Inc.
The Bon-Ton Stores, Inc.
The Buckle, Inc.*
The Cato Corporation*
The Children’s Place, Inc.
Zumiez, Inc.*
The Peer Group is reviewed annually and updated as the Committee deems appropriate taking into consideration changes in
business conditions, changes in revenues, mergers and acquisitions and other circumstances bearing on the availability of
compensation data and/or comparability of other companies. After the annual review, those companies identified above with
an asterisk (*) were added to the Peer Group for 2016, replacing the following companies which were determined to no longer
be appropriate comparisons: Aeropostale, Inc; Ann Inc.; Ascena Retail Group Inc.; Christopher & Banks Corporation; Pacific
Sunwear of California Inc.; and Urban Outfitters Inc. Also note that The Men’s Wearhouse reorganized as a holding company,
Tailored Brands, Inc., on February 1, 2016.
In addition to the Peer Group analysis, the Committee considers data from the Willis Towers Watson Compensation Data Bank
(CDB) Retail/Wholesale Services Executive Database and the Hay Group Retail Executive and Management Total
Remuneration Report. This information from Willis Towers Watson and Hay Group is non-customized compensation data
provided by job within the broader retail industry, including retailers with which we compete for executive talent. The
Committee consults all three sets of information, because the Willis Towers Watson and Hay Group data includes
compensation information on more executives, including executives who are not included in publicly-available documents.
The broader comparator group provides a more extensive basis on which to compare the compensation of our named executive
officers, particularly those whose responsibilities, experience and other factors are not directly comparable to those executives
included in the publicly-available reports of the Peer Group.
Incentive-Based Compensation Benchmarking; 2016 Performance Group
To measure our relative performance with respect to comparable sales for the annual performance incentive bonus
opportunities and our TSR for performance share awards, our Board and the Committee selected a group of 20 department
store and apparel store retailers (“Performance Group”) that generally possess attributes similar to us, including market
capitalization, annual sales, merchandise assortments, target customer, geography of store base and size of markets in which
they operate. The companies comprising the Performance Group were included in the Dow Jones general retailers sector at the
beginning of 2016. However, because the Dow Jones general retailers sector was comprised of more than 70 companies
covering a broad range of subsectors within the retail industry, our Board and the Committee decided to include only
department store and apparel store retailers from the Dow Jones apparel retailers and broadline retailers subsectors. Due to the
fact that the companies within the Dow Jones general retailers sector are changed from time to time by Dow Jones, the
companies included at the beginning of 2016 will be maintained as a fixed listing of companies for the duration of the
applicable performance period (i.e., one year for performance incentive bonuses and three years for performance share awards).
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The Performance Group for 2016 was as follows:
Department Store Group
Apparel Store Group
Dillard’s, Inc.
Abercrombie & Fitch Co.
Guess?, Inc.
J. C. Penney Company, Inc.
American Eagle Outfitters, Inc.
L Brands, Inc.
Kohl’s Corporation
Ascena Retail Group Inc.
Tailored Brands, Inc.
Macy’s, Inc.
Nordstrom, Inc.
Burlington Stores Inc.
Chico’s FAS, Inc.
DSW Inc.
Foot Locker, Inc.
Genesco Inc.
The Gap, Inc.
The TJX Companies, Inc.
Ross Stores, Inc.
Urban Outfitters Inc.
Sears Holdings Corporation and Ann Inc. were included in the 2015 Performance Group and were removed from the 2016
Performance Group. Burlington Stores, Inc. was added to the 2016 Performance Group.
Role of Management
The Committee believes that the input of management is important to the overall effectiveness of our executive compensation
program. At the invitation of the Committee, our CEO and CHRO regularly attend Committee meetings and provide
management’s perspective on compensation issues. Additionally, our CEO and the Committee consult with management from
our human resources, finance and legal departments regarding the design and administration of our compensation program for
executives and directors.
Our CEO annually reviews and evaluates the performance of the other named executive officers and presents recommendations
regarding their compensation to the Committee. The Committee has the discretion to accept, reject or modify these
recommendations. Our CEO and management do not participate in executive sessions of the Committee or when executive
compensation determinations are made by the Committee and the other independent directors. All final decisions regarding the
named executive officers’ compensation are made by the Committee and the other independent directors in their sole
discretion.
Role of Independent Compensation Consultant
The Committee may retain independent compensation consultants as it deems necessary. In establishing executive
compensation for fiscal 2016, the Committee retained independent compensation consultant Willis Towers Watson to provide
Peer Group compensation data, financial information from the public filings of those companies, and compensation design
recommendations. The Committee also reviewed (as discussed above) non-customized compensation survey data provided by
multiple independent compensation consultants.
Compensation Risk Management
Our Board, the Committee and management do not believe that there are any significant risks arising from our compensation
policies and practices for our directors and employees that are reasonably likely to have a material adverse effect on us. We
believe that our compensation programs are balanced and emphasize pay-for-performance. A significant percentage of
compensation is tied to our long-term performance, which we believe provides strong incentives to manage for the long-term,
and avoid excessive risk taking in the short-term. Additionally, goals and objectives reflect a balanced mix of quantitative and
qualitative performance measures to avoid excessive weight on a single performance measure. Also, the elements of
compensation are balanced between cash payments and equity awards. With limited exceptions, the Committee retains
discretion to adjust compensation for quality of performance and adherence to our values. Our Board, the Committee and
management monitor our compensation policies and practices on an ongoing basis to determine whether our risk management
objectives are being met with respect to rewarding our employees for performance.
Say-on-Pay Vote Results and Response
At our 2016 annual meeting of shareholders, 89.8% of the votes cast approved the compensation paid to our named executive
officers for 2015, as disclosed in last year’s Proxy Statement (“Say-on-Pay Vote”). Our Board and the Committee believe that
the Say-on-Pay Vote confirmed shareholder support for our executive compensation policies and decisions. Accordingly, our
Board and the Committee did not make changes to our executive compensation program as a result of the Say-on-Pay Vote.
Although non-binding, our Board and the Committee will continue to consider the results of Say-on-Pay Votes in determining
future executive compensation.
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Say-on-Frequency Vote Results and Response
At least once every six years, we are required to hold an advisory vote on the frequency of Say-on-Pay Votes (“Say-on-
Frequency Votes”). We held our initial Say-on-Frequency Vote at our 2011 annual meeting of shareholders and a majority of
the votes were cast in favor of holding annual Say-on-Pay Votes. In line with the preference of our shareholders, our Board
determined that it will include the Say-on-Pay Vote in our proxy materials annually until the next Say-on-Frequency Vote,
which will occur at our 2017 Annual Meeting (see Item 4 in this Proxy Statement).
Compensation Recovery / Clawback Policy
Our named executive officers are subject to the compensation recovery or “clawback” policy adopted by our Board. Under the
current policy, if our Board determines that a named executive officer (or other officer at or above the executive vice president
level) has engaged in fraudulent or intentional misconduct, our Board may take a range of actions to remedy the misconduct,
prevent its recurrence and impose such discipline on the wrongdoers as would be appropriate. Discipline may vary depending
on the facts and circumstances, and may include (1) termination of employment, (2) initiating an action for breach of fiduciary
duty, and (3) if the misconduct resulted in a material inaccuracy in our financial statements or performance metrics which affect
the executive’s compensation, seeking reimbursement of any portion of any bonus or other incentive-based or equity-based
compensation paid or awarded to the executive that is greater than would have been paid or awarded if calculated based on the
accurate financial statements or performance metrics. These remedies would be in addition to, and not in lieu of, any actions
imposed by law enforcement agencies, regulators or other authorities.
The current clawback policy also provides that if we are required to prepare an accounting restatement due to our material
noncompliance with any financial reporting requirement under the securities laws of the United States, we will recover from
current or former executives who received incentive-based compensation (including any type of equity compensation) during
the three-year period preceding the date on which we are required to prepare an accounting restatement, based on the erroneous
data, the excess of what would have been paid to the executive under the accounting restatement. After the NYSE issues a
listing standard implementing new SEC rules concerning compensation recovery, we expect to modify our clawback policy as
necessary to conform to the listing standard.
No Gross-Up Payments
Our named executive officers are not entitled to gross-up payments as part of their annual and long-term compensation
arrangements or with respect to any termination or change in control arrangements. In order to make whole those named
executive officers who we recruit and seek to relocate, we may provide a reimbursement of taxes related to certain relocation
expenses.
No Repricing
It is the policy of our Board that we will not reprice or swap stock options or SARs without shareholder approval. We have
discontinued the use of stock options and SARs except in extraordinary circumstances.
Compensation Elements
We believe that all of the executive compensation elements described below advance the primary purposes of our executive
compensation program and the achievement of our short-term and long-term business objectives. Specifically, these
compensation elements are designed to promote the following purposes:
• Base salary, perquisites and other benefits are designed to attract and retain executives over time;
• Annual performance incentive bonuses are designed to focus executives on the business objectives established by our
Board for a particular year;
• Long-term incentive compensation, which currently consists of performance shares and restricted stock, is designed to
focus executives on our long-term success, as reflected in increases to our stock price, growth in our earnings and
other elements; and
• Termination and change in control compensation and benefits are designed to attract and retain executives as we
compete for talented employees in a marketplace where such compensation and benefits are customarily provided.
Termination compensation and benefits are designed to ease an executive’s transition due to an unexpected
employment termination, while change in control compensation and benefits are designed to encourage executives to
remain focused on our business in the event of rumored or actual fundamental corporate changes.
The total compensation awarded to each named executive officer, as well as each element of compensation, is intended to
foster our pay-for-performance philosophy and provide a competitive compensation package as compared to executives in
similar positions at our competitors. Although the Committee does not have any specific formula for establishing the amount
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and mix of base salary and variable compensation, it does reference the Peer Group and additional comparative compensation
data discussed above as a market check in making these determinations. The Committee also considers factors relating to each
named executive officer’s individual position, performance versus objectives, professional history and experience, relevant
skill set, scope of duties, and the internal relationship of pay across all executive positions as it establishes compensation.
Base Salary
The Committee believes a competitive base salary serves an important role in attracting and retaining executive talent. Base
salary is not intended to represent the primary method of rewarding performance. After receiving input from our CEO
regarding the performance of the other named executive officers, the Committee uses its judgment regarding individual
performance, market competitiveness, internal pay equity, length of service, job responsibilities and other factors to determine
the appropriate base salary for each named executive officer.
Annual Performance Incentive Bonus
The Committee annually establishes a performance incentive bonus opportunity for our named executive officers. The amount
of the annual performance incentive bonus earned by our named executive officers for 2016 was subject to our achievement of
two performance components: (1) pre-tax earnings from continuing operations (constituting 75% of the opportunity) and (2)
comparable sales relative to the Performance Group (constituting 25% of the opportunity). Annual performance incentive
bonus targets are expressed as a percentage of base salary, with the target percentage increasing with job scope and
responsibility.
At the beginning of each year, the Committee evaluates our annual operating plan to determine if pre-tax earnings and
comparable sales remain appropriate for measuring the achievement of our objectives and to motivate our executives. Based
on discussions with our CEO, CHRO, CFO and independent compensation consultant, the Committee recommends, and our
independent directors approve, a matrix of financial parameters establishing the threshold (minimum), target and maximum
performance levels for pre-tax earnings and comparable sales at a time when achievement of those objectives is substantially
uncertain.
Following the completion of each year and prior to paying any performance incentive bonuses, the Committee and our Audit
Committee review our financial results for the completed performance period (i.e., fiscal year), and the Committee certifies the
calculation of bonus amounts and reports the results and calculations to our Board.
For additional information on the performance incentive bonuses for 2016, see the “Executive Compensation for 2016” section
of this CD&A.
Long-Term Incentive Compensation
The Committee believes that long-term incentive compensation is critical for aligning executive compensation with the
creation of shareholder value. At its spring meeting, the Committee reviews the portfolio of long-term incentive vehicles, the
targeted award size and the performance measures associated with any awards. The Committee also reviews recommendations
provided by management and the Committee’s independent compensation consultant regarding long-term incentive design.
The Committee, with the approval of our other independent directors, has historically made grants of equity awards each year.
For 2016, long-term incentive compensation awards made to our named executive officers were in the form of performance
shares and restricted stock granted under the 2008 Equity Plan. We have discontinued the use of stock options and SARs
except in extraordinary circumstances.
The Committee believes that the use of multiple equity vehicles balances the equity-driven growth and performance aspects of
performance shares with the retention aspects of restricted stock. The grant date for annual equity awards is the date on which
our Board approves the awards. From time to time, our Board will consider making grants under other special circumstances,
such as when recruiting new executive talent, upon the promotion of an executive and to retain key individuals. All grants
other than the annual grants are effective as of the date of the event (e.g., the new hire or promotion date).
Restricted Stock
Restricted stock is common stock that includes vesting restrictions tied to continued employment. Restricted stock provides
our named executive officers with the opportunity to earn full value shares of our common stock. The Committee views
restricted stock as an excellent mechanism to align executive interests with those of shareholders by supporting increased share
ownership for key executives. Restricted stock is also an effective retention tool based on the vesting schedule which occurs
over a period of several years. Restricted stock grants may either vest all at once at the end of a specified period or in
increments over a specified period. Generally, the Committee awards restricted stock with a four year pro rata vesting schedule
(i.e., 25% per year), and the recipient has the rights of a shareholder, including the right to vote and receive dividends, with
respect to restricted stock that has not vested. If the executive’s employment is terminated before vesting for any reason other
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than death, disability or retirement, the unvested portion of the restricted stock award will be forfeited. If the executive dies,
becomes disabled or retires, or a change in control occurs, the restricted stock award will fully vest.
Performance Shares
Performance shares also provide our named executive officers with the opportunity to earn full value shares of our stock. The
Committee views performance shares as a critical link between executive compensation and the creation of shareholder value.
The number of performance shares that vest, if any, is determined by our TSR over a three-year performance cycle relative to
the Performance Group established at the beginning of the year in which the performance shares are awarded (see the
“Overview of 2016 Executive Compensation – Long-Term Incentives” section of this CD&A for additional information
regarding how TSR is calculated under the terms of our performance share awards). If the executive’s employment is
terminated before the end of the performance cycle for any reason other than death, disability or retirement, the performance
share award is forfeited. If the executive dies, becomes disabled or retires during the performance cycle, the executive will
receive the target number of performance shares awarded. In the event of a change in control, the target number of
performance shares awarded will vest.
Stock Appreciation Rights
The use of SARs was discontinued in 2012 except in extraordinary circumstances. Two of our named executive officers hold
SARs granted prior to 2012.
SARs allow the executive to benefit from any appreciation in our stock price from the grant date through the exercise date.
Upon exercise, the executive receives an amount of our common shares equal to the increase in our stock price between the
grant date and the exercise date. SARs may not be settled in cash or granted at less than 100% of the fair market value of our
common stock on the grant date.
All outstanding SARs have vested. SARs have a seven-year term. Any SARs not exercised within the applicable term will be
forfeited. If an executive dies, the executive’s estate will have one year from the date of death to exercise all SARs. If an
executive becomes disabled or retires, the executive will generally have one year from the date of termination to exercise all
SARs. Upon the termination of an executive’s employment for any reason other than death, disability or retirement, the
executive will have 60 days from the date of termination to exercise all SARs.
Benefits and Perquisites
We provide limited benefits and perquisites to our named executive officers because of the value our named executive officers
place on these benefits. The perquisites and other benefits we provide to our named executive officers are summarized below
in the Summary Compensation Table, the Nonqualified Deferred Compensation table and related footnotes. In addition, we
provide our named executive officers with core benefits available to all full-time employees (e.g., coverage for medical, dental,
prescription drugs, basic life insurance and long-term disability coverage) as well as a supplemental executive medical plan.
The supplemental executive medical plan is an insured plan which reimburses officers at the executive vice president level and
above for out-of-pocket medical and dental expenses not covered by the primary medical plan.
For 2016, the Compensation Committee and the other independent directors authorized Mr. Glazer to use corporate aircraft for
up to 40 hours of non-business flights. During 2016, Mr. Glazer used corporate aircraft for one hour of non-business flights.
Given the delays associated with early check-in requirements, security clearances, baggage claim and the need for additional
time to avoid missing a flight due to possible delays at any point in the process, commercial travel has become inefficient.
Accordingly, making the aircraft available to Mr. Glazer allowed him to efficiently and securely conduct business during both
business and non-business flights and to maximize his availability to conduct business before and after his flights. In
approving this benefit, the Compensation Committee and other independent directors considered Mr. Glazer’s travel schedule,
which, whether primarily for business or non-business purposes, frequently included a business element. We also believe that
the value of this benefit to Mr. Glazer, in terms of convenience and time savings, exceeded the aggregate incremental cost that
we incurred to make the aircraft available to him and, therefore, was an efficient form of compensation for him. We reported
imputed income for income tax purposes for the value of Mr. Glazer’s non-business use of corporate aircraft based on the
Standard Industry Fare Level in accordance with the IRC. We did not reimburse or otherwise gross-up Mr. Glazer for any
income tax obligation attributed to his non-business use of corporate aircraft.
Retirement Plans
We do not provide a qualified retirement program for our named executive officers; however, participation in our Nonqualified
Deferred Compensation Plan (Senior Executives) (“DC Plan”) is available to our named executive officers. For additional
information, see the “Nonqualified Deferred Compensation in 2016” and “Retirement Plans” sections following this CD&A.
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Termination and Change in Control Arrangements
Pursuant to their employment agreements, our currently employed named executive officers are entitled to compensation and
other benefits if their employment terminates or if there is a change in control, as described in the “Potential Payments upon
Termination or Change in Control” section following this CD&A. Termination and change in control compensation and other
benefits are established at the time a named executive officer signs an employment agreement. In exchange for the benefits
provided to the named executive officers in their respective employment agreements, we receive a post-termination release of
claims and various restrictive covenants in our favor (e.g., non-competition, non-solicitation and continuing cooperation).
Termination
Our named executive officers are entitled to compensation and other benefits in an amount the Committee believes is
appropriate, taking into account the time it is expected to take a terminated executive to find another job. Compensation and
other benefits upon termination are intended to ease the consequences to an executive of an unexpected termination of
employment. The employment agreements also benefit us by imposing restrictive covenants on the named executive officers
that continue for a period of time following termination.
Change in Control
The Committee and our Board recognize the importance to us and our shareholders of avoiding the distraction and loss of key
management personnel that may occur in connection with any rumored, threatened or actual change in control. To that end, the
Committee and our Board believe that including reasonable change in control provisions in our named executive officers’
employment agreements protect shareholder interests by enhancing executive focus during rumored or actual change in control
activity through (1) incentives to remain with us despite uncertainties while a transaction is under consideration or pending and
(2) assurances of severance and other benefits in the event of termination.
To reduce the potential distraction due to personal uncertainties and risks that inevitably arise when a change in control is
rumored, threatened or pending, the Committee and our Board have provided our named executive officers with what the
Committee and our Board determined to be reasonable competitive change in control compensation and benefit provisions in
their employment agreements. The employment agreements of our named executive officers provide for specific enhanced
payments and benefits in the event of a change in control.
Double Trigger
The enhanced termination benefits payable under the named executive officers’ employment agreements in connection with a
change in control require a “double trigger” which means the named executive officer will only be eligible to receive change in
control compensation and benefits pursuant to the employment agreement (1) if a change in control occurs and (2) during the
period beginning six months before the change in control and ending 24 months after the change in control, (a) the executive’s
employment agreement is terminated by us or our successor without good cause, or (b) the executive’s employment agreement
is terminated by the executive with good reason. A double trigger was selected to enhance the likelihood that the named
executive officers will remain with us after a change in control, since the executives will not receive the change in control
compensation payments and benefits following a voluntary resignation after the change in control. Thus, the executives are
protected from actual or constructive dismissal for 24 months after a change in control, while any new controlling party or
group is better able to retain the services of a key asset.
Employment Agreements
We are a party to three-year, automatically renewable employment agreements with each of our currently employed named
executive officers. The employment agreements provide for a base salary and an annual performance incentive bonus
opportunity. The employment agreements also provide for perquisites such as an automobile allowance, a financial planning
allowance and participation in all other bonus and benefit plans available to our executive officers. Provisions of the
employment agreements related to termination and change in control are discussed in the “Potential Payments Upon
Termination or Change In Control” section following this CD&A.
Executive Compensation for 2016
Considerations
At its March 2016 meeting, the Committee reviewed the market data and analyses provided by its independent compensation
consultant and determined that our overall compensation program was generally competitive and consistent with the
Committee’s compensation objectives. In determining 2016 compensation for our named executive officers, the Committee
considered many factors, including:
• Our performance in 2015, including with respect to revenues, earnings and expense control;
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• Assessments of the executive’s individual performance and leadership in 2015, and the potential for future
contributions to our business and operations;
• Achievement of long-term strategic and short-term business goals;
• The nature and scope of the executive’s responsibilities and his effectiveness in leading our initiatives to successfully
increase customer satisfaction, enhance our growth and ensure compliance with our policies;
• Desired competitive positioning of compensation;
• Retention needs;
• The compensation practices of our Peer Group; and
• The performance of our Performance Group.
The Committee places particular focus on aligning executive compensation with corporate and individual performance.
Despite individual achievements and advances toward our strategic objectives in 2015, our corporate performance did not meet
our expectations. In evaluating 2015 performance, the Committee and the other independent directors recognized our named
executive officers’ achievements as well as the challenging economic and market conditions, but, after taking into account the
recommendation of our CEO and other named executive officers to forgo base salary increases, the Committee determined that
our named executive officers’ base salaries would not be adjusted for 2016. Notwithstanding the challenges of 2015, the
Committee sought to continue advancing our compensation objectives and principles, particularly to motivate our executives
and foster a pay-for-performance culture, and set objectives for the performance incentive bonus opportunity and long-term
equity incentive awards that were deemed aggressive yet achievable.
CEO 2015 Performance
In addition to the considerations discussed above, the following 2015 corporate and individual performance matters were most
significant in determining 2016 compensation for Mr. Glazer. These items were considered important to achieve our objectives
to improve our financial performance, promote corporate efficiencies and grow our business.
• Comparable sales and profitability results were below our objectives;
• Direct-to consumer sales continued to grow;
• We completed approximately 122 store remodels, relocations and expansions, and we closed 23 unproductive stores as
part of a multi-year plan to close stores that we believed do not have the potential to meet our sales productivity and
profitability standards;
• Our 2015 shrinkage results were less favorable than targeted; and
• We achieved meaningful growth in our private label credit card, including increasing sales penetration, and piloted the
launch of a new customer loyalty program.
Other NEOs 2015 Performance
Mr. Shein
As CFO, Mr. Shein’s responsibilities were to oversee our finance functions, which include accounting, tax, treasury, financial
planning and analysis, investor relations and our private label credit card program. He was instrumental in our fiscal
management. His financial expertise and efforts to expand our private label credit card program have added significant value
to our business.
Mr. Weber
Prior to his appointment as our Chief Merchandising Officer in September 2016, Mr. Weber had served as our Senior Vice
President, Planning and Allocation since July 2013. During 2015, Mr. Weber’s responsibilities were to manage our
merchandise planning and allocation functions. He was instrumental in improving localization of our merchandise assortments
and developing a better flow of new merchandise to our stores and website. With his promotion to Chief Merchandising
Officer in September 2016, Mr. Weber assumed responsibility for all of our merchandising strategies.
Mr. Hunter
As Chief Information Officer, Mr. Hunter’s responsibilities were to oversee our information technology, systems, information
security, supply chain, ancillary sales, e-commerce platform and customer service functions. He made significant contributions
to our earnings, and his expertise has been important to us.
38
Mr. Gentner
As Chief Marketing Officer, Mr. Gentner’s responsibilities were to oversee all of our advertising and marketing functions. He
made significant contributions to our brand positioning, customer loyalty, targeted advertising and media mix optimization
efforts. In September 2016, Mr. Gentner assumed responsibility for our omni-channel business.
Mr. Lawrence
Until September 2016, Mr. Lawrence served as our Chief Merchandising Officer, with responsibility for the oversight of our
merchandising strategies, including our omni-channel business. He was instrumental in bringing new brands into our stores
that our customers desired.
Mr. Parsons
Until December 2016, Mr. Parsons served as our CHRO, with responsibility for the oversight of our human resources function.
He played a key role in leading the development of our core values, attracting and retaining key talent and training our
associates.
Base Salaries for 2016
The named executive officers’ base salaries were not adjusted for 2016, except that Mr. Weber’s base salary was increased in
September 2016 to $510,000 in connection with his promotion to Executive Vice President, Chief Merchandising Officer. The
Committee reviewed competitive market data, including the base salaries of comparators in our compensation Peer Group;
however, our CEO and other named executive officers recommended to the Committee that it not provide base salary increases
as a result of corporate performance in 2015. Taking into account the recommendation of our CEO and other named executive
officers, the Committee determined that our named executive officers’ base salaries would not be adjusted for 2016 (aside from
the mid-year raise in connection with Mr. Weber’s promotion and assumption of greater responsibility).
Annual Performance Incentive Bonuses for 2016
At its March 2016 meeting, the Committee recommended, and the independent directors approved, the components for the
2016 performance incentive bonus opportunity for our named executive officers. A bonus could be earned based on our (1)
pre-tax earnings from continuing operations (constituting 75% of the opportunity) and (2) comparable sales relative to the
Performance Group (constituting 25% of the opportunity). The Committee and the other independent directors selected these
financial measures because they believe the measures are strong indicators of our operating results and financial condition.
In light of our 2015 performance and the challenging environment anticipated for department store retailers in 2016, the
Committee set the pre-tax earnings target at $34.6 million for 2016 to align the bonus target with our operating plan and
provide a realistic target. Actual bonus payments, if any, are prorated for results between threshold and maximum levels, and
in order to earn any portion of the comparable sales component, we must achieve 75% of the pre-tax earnings target. The
Committee and other independent directors believe the targeted performance levels provided challenging, but reasonable,
levels of performance that were appropriate in light of our projected corporate operating plan for 2016, and our objective to
promote sustained profitability while providing objectives that motivate our executives.
In order to calculate the results under the annual performance incentive awards, we first calculate each component consistent
with the accounting principles generally accepted in the United States of America. We then make an adjustment to remove the
effect of unusual or non-recurring events, transactions and accruals set forth in the Bonus Plan and approved by the Committee
early in each fiscal year when the performance incentive bonus opportunities are established. The adjustments may have the
net effect of increasing or decreasing the pre-tax earnings and comparable sales results. The Committee may also exercise
negative discretion to cancel or decrease the annual performance incentive awards earned (but not increase an annual
performance incentive award for a covered employee, as that term is used within Section 162(m) of the IRC). Accordingly, the
pre-tax earnings and comparable sales amounts resulting from the adjustments may differ from the amounts reflected in our
reports filed with the SEC and other public disclosures.
39
The following table shows the threshold, target and maximum payout percentages and performance goals established for each
component of the 2016 performance incentive bonus opportunity:
Threshold
Target
Maximum
Pre-Tax Earnings
Comparable Sales
Performance Goal
Payout as (%) of
Target
$28.6 million
$34.6 million
$43.5 million
Up to 10
100
200
Performance Goal
(Relative
Percentile)
Payout as (%) of
Target
25th
50th
75th
25
100
200
The following table shows the: (1) threshold, target and maximum amounts of the 2016 performance incentive bonus that were
attainable, both as a percentage of the named executive officer’s annual base salary and as a dollar amount, based on the extent
to which we achieve the pre-tax earnings and comparable sales components set forth above; and (2) total actual performance
incentive bonus payments earned based on our 2016 performance of (a) $40.1 million of pre-tax loss, calculated as noted above
(i.e., 0% of the total bonus target earned), and (b) comparable sales at the 4.8th percentile of the 2016 Performance Group (i.e.,
0% of the bonus target earned):
Executive
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
Mr. Gentner
Mr. Lawrence
Mr. Parsons
Threshold
% of
Salary
Potential
Payout ($)
Target
% of
Salary
Potential
Payout ($)
Maximum
% of
Salary
Potential
Payout ($)
2016 Bonus Earned
Actual
% of
Payout ($)
Salary
13.75
137,500
100.0
1,000,000
8.25
7.83
8.25
8.25
10.31
8.25
33,990
36,771
38,775
31,020
67,794
36,052
60.0
56.9
60.0
60.0
75.0
60.0
247,200
267,423
282,000
225,600
493,050
262,200
200.0
120.0
113.9
120.0
120.0
150.0
120.0
2,000,000
494,400
534,846
564,000
451,200
986,100
524,400
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Long-Term Equity Incentive Awards for 2016
At its March 2016 meeting, the Committee (1) reviewed the final TSR results for the three-year performance cycle (i.e., 2013
through 2015) for the 2013 performance shares, (2) discussed the attainment level based on our TSR results versus our 2013
Performance Group, (3) reviewed the current standing and attainment levels for 2014 and 2015 performance shares based on
the TSR of the Performance Groups established at the beginning of those years, (4) discussed individual long-term incentive
grants for senior executives recommended by management, (5) reviewed estimated shares needed for 2016 awards, and (6)
reviewed shares available for future grants. To determine the size of each equity award, the Committee reviewed market data,
prior years’ long-term equity incentive decisions, the performance and potential of our named executive officers and
recommendations from the Committee’s independent compensation consultant.
Based upon the recommendation of the Committee and the approval of the other independent directors, the following long-term
equity incentive awards were granted to our named executive officers in 2016 in consideration of their 2015 performance and
in recognition of the critical roles they play in our future success and long-term growth:
Executive
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
Mr. Gentner
Mr. Lawrence (3)
Mr. Parsons (4)
_________
Target Performance Shares
(#)(1)
Restricted Stock
(#)(2)
182,171
38,760
113,488
38,760
31,008
135,659
38,760
121,447
25,840
11,628
25,840
20,672
90,439
25,840
40
(1) The vesting of the performance shares depends on our TSR over the three-year performance cycle compared to the
Performance Group established at the beginning of 2016 (see the “Overview of 2016 Executive Compensation – Long-
Term Incentives” section of this CD&A for additional information regarding how TSR is calculated under the terms of our
performance share awards). The performance cycle began on the first day of 2016 (January 31, 2016) and ends on the last
day of 2018 (February 2, 2019). The number of shares reflected in the table above is the number of shares of our common
stock each named executive officer will earn and receive if our TSR for the performance cycle is at the 50th percentile of
the 2016 Performance Group. On a sliding scale, the performance shares earned can vary as follows:
Percentile Ranking in Performance Group
Performance Shares Earned as (%) of Target
≥90.5%
85.7%
81.0%
76.2%
71.4%
66.7%
61.9%
57.1%
52.4%
47.6%
42.9%
38.1%
33.3%
28.6%
< 28.6%
200.0%
189.3%
177.4%
165.5%
153.6%
141.7%
129.8%
117.9%
106.0%
92.9%
78.6%
64.3%
50.0%
35.7%
—
(2) The restricted stock will vest on a pro rata basis over four years (i.e., 25% per year), and the recipient has the rights of a
shareholder, including the right to vote and receive dividends, with respect to restricted stock that has not vested.
(3) Mr. Lawrence’s awards were forfeited in their entirety upon his separation from service in September 2016.
(4) Mr. Parson’s awards were forfeited in their entirety upon his separation from service in December 2016.
Executive Compensation for 2017
At its March 2017 meeting, the Committee reviewed (1) our performance in 2016, (2) each named executive officer’s
performance in 2016, (3) comparative compensation information regarding our Peer Group and additional survey data provided
by the Committee’s independent compensation consultant, (4) the importance that each named executive officer plays in our
future success and long-term growth, (5) the need to create an incentive for future performance, (6) tally sheets reflecting all
elements of compensation, total annual compensation and total deferred compensation for each named executive officer and (7)
internal pay equity.
As a result of that review and discussion with our other independent directors, the Committee and our other independent
directors approved the following 2017 compensation for our named executive officers:
2017
Base Salary
($) (1)
1,000,000
412,000
510,000
470,000
376,000
2017 Target
Performance Bonus
Opportunity
(as Pct. of Salary)
(%) (2)
Performance Share
Units
(#) (3)
Restricted Stock /
Restricted Stock
Units
(#) (4)
100.0
60.0
70.0
60.0
60.0
240,000
50,000
100,000
50,000
40,000
226,259
75,000
150,000
75,000
60,000
Executive
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
Mr. Gentner
_________
(1) The named executive officers’ base salaries were not adjusted for 2017.
41
(2) The percentage of base salary for a threshold performance incentive bonus opportunity is 13.75% of the target reflected in
the above table for each named executive officer. The percentage of base salary for a maximum performance incentive
bonus opportunity is double the target reflected in the above table for each named executive officer.
(3) The vesting of the performance share units depends on our TSR over the three-year performance cycle compared to the
Performance Group established at the beginning of 2017. The performance cycle began on the first day of 2017 (January
29, 2017) and ends on the last day of 2019 (February 1, 2020). The number of units reflected in the table above equates to
the number of shares of our common stock each named executive officer will earn and receive if our TSR for the
performance cycle is at the 50th percentile of the 2017 Performance Group.
(4) Mr. Glazer received an award of restricted stock, and the other named executive officers received an award of restricted
stock units. In all cases, the award will vest on a pro rata basis over four years (i.e., 25% per year), subject to continuous
employment with us. The restricted stock units may settle only in cash. A recipient of restricted stock has the rights of a
shareholder, including the right to vote and receive dividends, with respect to restricted stock that has not vested. A
recipient of restricted stock units does not have the rights of a shareholder, but is entitled to a dividend equivalent payment
equal to any cash dividends paid by us while the recipient holds unvested restricted stock units.
Executive Compensation Program Administration
The Committee administers the base salary, annual performance incentive bonus, long-term incentive and other compensation
programs for our named executive officers and other executive officers. The Committee ensures that the total compensation
paid to our named executive officers is fair, reasonable and competitive. Although the compensation committees of some
companies make all compensation decisions with respect to their named executive officers, we believe it is consistent with best
practices in corporate governance to reach a consensus among all independent directors when establishing executive
compensation. Accordingly, while the Committee takes the lead in formulating executive compensation, it also seeks the
approval of our other independent directors to provide an additional check on the appropriateness of the compensation
awarded.
Tax and Accounting Considerations
IRC Section 162(m) (“Section 162(m)”) imposes a $1 million limit on the amount that a public company may deduct for
compensation paid to its CEO or any of its three other most highly compensated executive officers (other than the CFO) who
are employed as of the end of the year. This limitation does not apply to compensation that meets the requirements under
Section 162(m) for “qualified performance-based compensation” (i.e., compensation paid only if the individual’s performance
meets pre-established objective goals based on performance criteria approved by the shareholders). The Committee’s policy is
to design compensation programs that further our compensation objectives and the interests of our shareholders and that
generally preserve the tax deductibility of compensation expenses.
Performance incentive bonuses paid to executive officers and awards granted under our equity incentive plans, other than
restricted stock awards, are designed to constitute qualified performance-based compensation for purposes of Section 162(m).
The Committee also believes, however, that it must maintain the flexibility to take actions that it deems to be in our best
interests but which may not qualify for tax deductibility under Section 162(m). In this regard, if the amount of base salary, plus
the value of any restricted stock awards vesting in the same year, for a named executive officer exceeds $1 million, any
amounts over $1 million will not be deductible for federal income tax purposes.
The Committee considered (1) the impact of the $1 million limit on the deductibility of non-qualified performance based
compensation imposed by Section 162(m), (2) the accounting treatment of various types of equity-based compensation under
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, and (3) the non-
deductibility of excess parachute tax payments under IRC Section 280G (and the related excise tax imposed on covered
employees under IRC Section 4999) in its design of executive compensation programs. In addition, the Committee considered
other tax and accounting provisions in developing the compensation programs for our named executive officers. These
included the special rules applicable to nonqualified deferred compensation arrangements under IRC Section 409A, as well as
the overall income tax rules applicable to various forms of compensation. While the Committee strives to compensate our
named executive officers in a manner that produces favorable tax and accounting treatment, its main objective is to develop
fair, equitable and competitive compensation arrangements that appropriately motivate, reward and retain those executives.
42
The following table sets forth the compensation earned by or paid to our named executive officers for each of the last three
fiscal years, except where an officer did not serve as a named executive officer in a reported fiscal year.
Summary Compensation Table for 2016
Fiscal
Year
2016
2015
2014
2016
2015
2014
Salary
($)
1,000,000
Bonus
($)
995,231
966,077
412,000
410,155
395,360
Stock
Awards
($) (1)
Non-Equity
Incentive Plan
Compensation
($) (2)
— 2,465,378
— 2,824,427
—
—
All Other
Compensation
($) (3)
167,912
Total
($)
3,633,290
232,208
4,051,866
— 2,736,628
600,780
159,670
4,463,155
—
524,552
—
908,982
—
—
79,205
1,015,757
75,576
1,394,713
—
497,578
124,003
75,140
1,092,081
2016
466,808
—
746,053
—
63,982
1,276,843
2016
2015
2014
470,000
464,385
432,193
—
524,552
—
639,044
—
—
79,074
1,073,626
83,787
1,187,216
—
671,123
134,385
71,800
1,309,501
2016
376,000
—
419,642
—
83,722
879,364
2016
2015
2014
2016
2015
2014
444,621
653,554
630,493
378,173
435,154
— 1,835,916
— 1,941,816
—
—
88,503
2,369,040
141,359
2,736,729
— 1,865,876
274,462
107,782
2,878,613
—
524,552
—
588,421
—
—
74,761
977,486
84,322
1,107,897
326,923
25,000
398,600
131,750
313,001
1,195,274
Name and Principal Position
Michael L. Glazer
President and Chief Executive Officer
Oded Shein
Executive Vice President,
Chief Financial Officer and Treasurer
Thorsten I. Weber
Executive Vice President,
Chief Merchandising Officer
Steven L. Hunter
Executive Vice President,
Chief Information Officer
William E. Gentner
Executive Vice President,
Chief Marketing Officer
Steven P. Lawrence
Former Chief Merchandising Officer
Stephen B. Parsons
Former Executive Vice President,
Chief Human Resources Officer (4)
_____
(1) The amounts in this column reflect the grant date fair value for performance shares and restricted stock for the named
executive officers with respect to the fiscal year in accordance with FASB ASC Topic 718. These amounts do not
represent the actual amounts that will be realized by the named executive officers with respect to such awards.
Assumptions used in the calculation of these amounts are included in Note 12 to our audited consolidated financial
statements in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017. Further information regarding
the 2016 awards is included in the Grants of Plan-Based Awards table and the Outstanding Awards at Fiscal Year-End table
later in this Proxy Statement. The grant date fair value of the performance shares awarded in 2016 and reflected in this
column is the payout based on the probable outcome of the performance criteria, determined as of the grant date. The
maximum potential achievement for the 2016 performance shares would be 200% of the target number of shares awarded
and the grant date fair value if the highest level of performance is attained would be as follows: Mr. Glazer ($2,110,749),
Mr. Shein ($449,099), Mr. Weber ($202,095), Mr. Hunter ($449,099), Mr. Gentner ($359,279), Mr. Lawrence
($1,571,830), and Mr. Parsons ($449,099). The grant date fair value of the restricted stock was determined by multiplying
43
the closing price of our common shares on the date of grant by the number of shares of restricted stock granted, and factors
in the value of any dividends payable on the restricted stock.
(2) The amounts in this column reflect annual performance incentive bonus awards earned under the applicable incentive
bonus plan for performance during each of the last three fiscal years. Amounts earned for performance are paid during the
subsequent fiscal year. The amounts reflected include any deferrals made pursuant to our DC Plan.
(3) For 2016, the amounts in this column include the following compensation for the executives, as more fully described in the
table included with this footnote:
a. Matching contributions made by us pursuant to our DC Plan, as described in the narrative disclosure accompanying
the Nonqualified Deferred Compensation table below;
b. Reimbursement of out-of-pocket healthcare costs under our supplemental executive medical plan, as described in the
“Compensation Elements – Benefits and Perquisites” section of the CD&A;
c. Healthcare insurance premium payments associated with our supplemental executive medical plan;
d. Life insurance premium payments;
e. Long-term disability insurance premium payments;
f. The cost to us associated with the executive’s use of an automobile or the cash allowance provided in lieu of an
automobile;
g. An allowance for professional fees incurred in connection with estate planning, personal financial advisory services
and individual tax preparation services; and
h. The aggregate incremental cost to Stage associated with limited non-business use of corporate aircraft by Mr. Glazer.
The aggregate incremental cost of non-business use of corporate aircraft is calculated based on the costs we incur in
connection with operating a flight, including expenses for fuel, landing fees, flight planning, navigation charges,
ground services, on-board catering, and other miscellaneous costs. Due to the fact that the corporate aircraft are used
primarily for business travel, fixed costs which do not change based on usage, such as pilot salaries, hangar fees,
management fees, purchase costs, depreciation and capitalized improvements to the aircraft, are excluded. We did not
reimburse or otherwise “gross-up” Mr. Glazer for any income tax obligation associated with his non-business use of
corporate aircraft. The benefit of non-business use of corporate aircraft, which was approved by the Compensation
Committee as part of Mr. Glazer’s overall compensation packages, is described in the “Benefits and Perquisites”
section of the CD&A.
DC Plan
Matching
Contributions
($)
Healthcare
Cost
Reimburse-
ment
($)
Healthcare
Insurance
Premiums
($)
Life
Insurance
Premiums
($)
Long-Term
Disability
Insurance
Premiums
($)
Auto
Use /
Allowance
($)
Professional
Fees
Allowance
($)
Non-
Business
Aircraft
Usage
($)
Name
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
Mr. Gentner
102,242
27,983
10,423
43,844
47,302
44,628
7,577
14,444
469
2,292
2,467
14,097
40,185
11,463
13,852
Mr. Lawrence
45,962
14,017
9,066
Mr. Parsons
40,036
6,351
11,805
691
475
507
540
431
461
420
1,071
7,846
840
865
987
790
920
765
12,000
10,000
3,733
12,000
12,000
12,000
—
4,495
4,355
5,000
8,077
10,000
10,385
5,000
—
—
—
—
—
—
(4) On April 28, 2014, Mr. Parsons joined us as Executive Vice President, Chief Human Resources Officer. In consideration
for accepting employment with us, Mr. Parsons received a lump sum payment of $25,000, which is reported in 2014 in the
Bonus column of the Summary Compensation Table.
44
The following table sets forth each award made to our named executive officers in 2016 under any plan. Additional
information regarding the performance shares and restricted stock granted in 2016 is set forth in the “Compensation Elements –
Long-Term Incentive Compensation” section of the CD&A.
Grants of Plan-Based Awards in 2016
Estimated Future Payouts Under Non-
Equity Incentive Plan Awards
(1)
Estimated Future Payouts Under Equity
Incentive Plan Awards
(2)
Grant
Date
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
137,500
1,000,000
2,000,000
—
—
—
Name
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
—
3/24/2016
3/24/2016
—
3/24/2016
3/24/2016
—
3/24/2016
3/24/2016
9/29/2016
—
3/24/2016
3/24/2016
—
—
—
—
—
—
33,990
247,200
494,400
—
—
—
—
—
—
36,771
267,423
534,846
—
—
—
—
—
—
—
—
—
38,775
282,000
564,000
—
—
—
—
—
—
Mr. Gentner
—
31,020
225,600
451,200
3/24/2016
3/24/2016
—
—
—
—
—
—
Mr. Lawrence (5)
—
67,794
493,050
986,100
3/24/2016
3/24/2016
—
3/24/2016
3/24/2016
—
—
—
—
—
—
36,052
262,200
524,000
—
—
—
—
—
—
Mr. Parsons (5)
________
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#) (3)
Grant Date
Fair Value
of Stock
Awards
($) (4)
—
—
—
1,055,374
182,171
1,410,004
—
—
—
224,550
38,760
300,002
—
—
17,442
96,046
—
—
—
101,047
135,001
510,004
—
224,550
38,760
300,002
—
—
—
179,640
31,008
240,002
—
—
—
785,915
135,659
1,050,001
—
—
—
224,550
30,362
121,447
242,894
—
—
—
—
—
—
6,460
25,840
51,680
—
—
—
—
—
—
2,907
11,628
23,256
—
—
—
—
—
—
—
—
—
6,460
25,840
51,680
—
—
—
—
—
—
5,168
20,672
41,344
—
—
—
—
—
—
22,610
90,439
180,878
—
—
—
—
—
—
6,460
25,840
51,680
—
—
—
38,760
300,002
(1) The amounts in these columns represent the threshold, target and maximum payouts for which each executive was eligible
to receive under our 2016 performance incentive bonus awards. These awards were not earned, so no amounts are
included for 2016 in the Summary Compensation Table as non-equity incentive plan compensation. Further detail
regarding the 2016 performance incentive bonus awards may be found in “Executive Compensation for 2016 – Annual
Performance Incentive Bonuses for 2016” section of the CD&A.
(2) The amounts in these columns reflect performance shares that will vest after a three-year performance cycle based on our
TSR relative to the Performance Group, as described in the “Executive Compensation for 2016 – Long-Term Incentive
Compensation Awards for 2016” section of the CD&A (see also the “Overview of 2016 Executive Compensation – Long-
Term Incentives” section of the CD&A for additional information regarding the TSR calculation in connection with our
performance share awards). The threshold number of shares refers to the number of our common shares the named
executive officer may earn and receive at the end of the performance cycle if the results are at the 25th percentile of the
Performance Group. Performance results below the 25th percentile at the end of the performance cycle will result in the
executives earning no common shares under this award. The target number of shares refers to the number of our common
shares the named executive officer may earn and receive at the end of the performance cycle if the results are at the 50th
percentile of the Performance Group. The maximum number of shares refers to the number of our common shares the
named executive officer may earn and receive at the end of the performance cycle if the results are at the top percentile of
the Performance Group.
45
(3) This column reflects restricted stock awards that vest ratably over a four-year period (i.e., 25% per year). The recipient
has the rights of a shareholder, including the right to vote and receive dividends, with respect to restricted stock that has
not vested.
(4) The amounts in this column reflect the grant date fair value for performance shares and restricted stock for the named
executive officers calculated in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these
amounts are included in Note 12 to our audited consolidated financial statements in our Annual Report on Form 10-K for
the fiscal year ended January 28, 2017. The grant date fair value of the performance share awards reflected in this column
is the payout based on the probable outcome of the performance criteria, determined as of the grant date.
(5) Mr. Lawrence and Mr. Parsons each voluntarily terminated employment with us during 2016. Accordingly, all awards in
the above table attributed to Mr. Lawrence and Mr. Parsons were terminated prior to any vesting occurring, so no shares or
payments were delivered to those former executives.
Outstanding Equity Awards at 2016 Fiscal Year-End
The following table sets forth, as of the end of 2016, all equity awards outstanding under our equity compensation plans for
each named executive officer. Market value is computed using the closing market price of our common stock on January 27,
2017, the last trading day prior to the end of our last completed fiscal year ($2.75). Due to their termination of employment
during 2016, neither Mr. Lawrence nor Mr. Parsons had any outstanding equity awards at the end of 2016.
Option / SARs Awards
Stock Awards
Number
of
Securities
Underlying
Unexercised
Options /
SARs
Exercisable
(#)
Number
of
Securities
Underlying
Unexercised
Options /
SARs
Unexercis-
able
(#)
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options /
SARs
(#)
—
15,000
—
—
8,850
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Equity
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#) (2)
182,389
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
($)
501,570
Number
of Shares
or Units
of Stock
That
Have
Not
Vested
(#) (1)
248,292
Market
Value of
Shares
or Units
of Stock
That
Have
Not
Vested
($)
682,803
Option /
SARs
Exercise
Price
($)
—
Option /
SARs
Expiration
Date
—
16.31
1/10/2018
—
—
—
—
—
—
—
—
66,444
182,721
37,901
104,228
120,902
332,481
17,341
47,688
18.84
3/29/2018
—
—
—
—
—
—
—
62,289
171,295
32,188
42,037
115,602
31,464
—
88,517
86,526
Name
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
Mr. Gentner
_________
(1) Common shares reported in this column underlie unvested restricted stock awards as of the end of 2016. The vesting dates
following the end of 2016 for each award of restricted stock are as follows (with a prorated portion of each award
scheduled to vest annually):
Name
Mr. Glazer
Mr. Shein
Number of Shares of Restricted Stock That
Have Not Vested
(#)
182,171
37,396
20,625
8,100
38,760
14,958
7,401
46
Vesting Dates
3/24/2017, 3/24/2018, 3/24/2019, 3/24/2020
3/26/2017, 3/26/2018, 3/26/2019
4/3/2017, 4/3/2018
4/4/2017
3/24/2017, 3/24/2018, 3/24/2019, 3/24/2020
6/16/2017, 6/16/2018, 6/16/2019
3/26/2017, 3/26/2018, 3/26/2019
Name
Mr. Weber
Mr. Hunter
Mr. Gentner
Number of Shares of Restricted Stock That
Have Not Vested
(#)
3,750
1,575
96,046
17,442
3,507
1,407
2,500
38,760
12,120
3,896
1,250
4,688
1,575
31,008
6,623
3,281
1,125
Vesting Dates
4/3/2017, 4/3/2018
4/4/2017
9/29/2017, 9/29/2018, 9/29/2019, 9/29/2020
3/24/2017, 3/24/2018, 3/24/2019, 3/24/2020
3/26/2017, 3/26/2018, 3/26/2019
4/3/2017, 4/3/2018
7/10/2017
3/24/2017, 3/24/2018, 3/24/2019, 3/24/2020
4/1/2017, 4/1/2018, 4/1/2019
3/26/2017, 3/26/2018, 3/26/2019
12/1/2017, 12/1/2018
4/3/2017, 4/3/2018
4/4/2017
3/24/2017, 3/24/2018, 3/24/2019, 3/24/2020
3/26/2017, 3/26/2018, 3/26/2019
4/3/2017, 4/3/2018
4/4/2017
(2) Common shares reported in this column underlie unvested performance shares (at the target number of performance
shares) as of the end of 2016. The performance shares cliff vest after a three-year performance cycle based on our TSR
return relative to the Performance Group, as described in the CD&A. Performance shares awarded in 2014, which had a
three-year performance cycle that was to conclude at the end of 2016, were terminated during 2016 without value or
payout based on our relative TSR for the applicable three-year performance cycle. The final day of each three-year
performance cycle is as follows:
Name
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
Mr. Gentner
Number of Performance Shares That Have
Not Vested
(#)
Final Day of the Three-Year Performance Cycle
2/3/2018
2/2/2019
2/3/2018
2/2/2019
2/3/2018
2/2/2019
2/3/2018
2/2/2019
2/3/2018
2/2/2019
60,942
121,447
12,061
25,840
5,713
11,628
6,348
25,840
10,792
20,672
47
The following table reflects all exercises of SARs and the vesting of restricted stock and performance shares held by each of
our named executive officers during 2016.
Option Exercises and Stock Vested in 2016
Option / SARs Awards
Number of Shares
Acquired on Exercise
(#)
Value Realized
on Exercise
($)
Stock Awards
Number of Shares
Acquired on Vesting
(#) (1)
Value Realized
on Vesting
($) (2)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
54,212
12,952
4,371
11,581
6,848
32,601
7,597
416,022
87,360
27,511
88,072
47,286
246,666
57,987
Name
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
Mr. Gentner
Mr. Lawrence
Mr. Parsons
________
(1) The amounts in this column reflect the number of our common shares vesting under restricted stock awards during 2016.
(2) The value realized is based on the average of the high and low market prices of our common shares on the vesting date.
Pension Benefits in 2016
None of our named executive officers participate in our defined benefit plan, which was closed to new participants and frozen
effective June 30, 1998.
The following table reflects the contributions to, earnings in and balance of each named executive officer’s account held under
our DC Plan.
Nonqualified Deferred Compensation in 2016
Executive
Contributions in Last
Fiscal Year
($) (1)
Registrant
Contributions in Last
Fiscal Year
($) (2)
Aggregate Earnings
in Last Fiscal Year
($) (3)
Aggregate
Withdrawals /
Distributions
($)
Aggregate Balance
at Last Fiscal Year
End
($) (4)
102,242
102,242
(170,211)
43,844
47,302
44,628
40,185
45,962
40,036
43,844
47,302
44,628
40,185
45,962
40,036
51,584
29,418
60,593
43,673
51,775
(26,601)
—
—
—
—
—
—
—
922,683
712,198
363,183
515,943
472,565
837,077
195,950
Name
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
Mr. Gentner
Mr. Lawrence
Mr. Parsons
________
(1) The amounts in this column are included in the Salary column of the Summary Compensation Table for 2016.
(2) The amounts in this column are included in the All Other Compensation column of the Summary Compensation Table for
2016.
(3) The amounts in this column are not included in the Summary Compensation Table as these amounts reflect only the
earnings on the investments designated by the named executive officer in his or her DC Plan account (i.e., appreciation or
decline in account value). The amounts in this column do not include any above-market or preferential earnings, as
defined by Item 402(c)(2)(viii) of Regulation S-K and the instructions thereto.
(4) $888,409, $572,925, $366,095, $693,377 and $142,478 of the amounts in this column were previously reported as
compensation to Mr. Glazer, Mr. Shein, Mr. Hunter, Mr. Lawrence and Mr. Parsons, respectively, in the Summary
Compensation Table for the prior years reported.
48
Retirement Plans
Deferred Compensation Plan
We sponsor the DC Plan which provides our named executive officers and certain other officers with the opportunity to
participate in an unfunded, deferred compensation program that is not qualified under the IRC. Generally, the IRC and the
Employee Retirement Income Security Act of 1974, as amended, restrict contributions to a tax-qualified 401(k) plan by highly
compensated employees, and our named executive officers are unable to participate in our tax-qualified 401(k) plan. The DC
Plan is intended to allow participants to defer income on a pre-tax basis. Under the DC Plan, participants may defer up to 50%
of their base compensation and up to 100% of their bonus and earn a rate of return based on actual investments chosen by each
participant. We have established a grantor trust for the purpose of holding assets to provide benefits to the participants. We
will match 100% of each participant’s contributions, up to 10% of the sum of their base salary and bonus.
The named executive officers have the opportunity to allocate the investment of the funds in their participant employee account
among more than thirty investment options, including an option to invest in our common shares. In the case of the option to
invest in our common shares, the DC Plan provides the opportunity to acquire our common shares on a pre-tax basis.
Frozen Defined Benefit Plan
We sponsor the DB Plan, a defined benefit pension plan for substantially all employees who met eligibility requirements and
were enrolled prior to June 30, 1998. The DB Plan was frozen effective June 30, 1998. None of our named executive officers
are participants in the DB Plan.
Potential Payments Upon Termination or Change In Control
This section addresses the rights of our named executive officers under their employment agreements and other compensation
plans and arrangements upon a change in control (as defined below) or in the event their employment with us is terminated.
The payments that a named executive officer would be entitled to receive upon termination or a change in control are not
considered by the Compensation Committee when making annual compensation decisions for the named executive officers and
do not factor into decisions made by us regarding other compensation elements.
The narrative discussion and tables below set forth the compensation payable to each named executive officer (or his
beneficiaries, as applicable) upon a change in control or as a result of his termination of employment with us under various
scenarios. Having voluntarily terminated employment without good reason prior to the end of 2016, Mr. Lawrence and Mr.
Parsons were not eligible for payments upon termination or in connection with a change in control. For all other named
executive officers, the amounts shown in the tables below are based on the assumption that the termination was effective as of
January 28, 2017, the final day of 2016. The closing market price of our common shares on January 27, 2017, the final trading
day of 2016, was $2.75. The actual amounts that would be payable in connection with a change in control or the termination of
a named executive officer could only be determined at the time of the actual triggering event.
Upon termination, each participating named executive officer would receive his aggregate balance in our DC Plan, as is
reflected in the “Aggregate Balance at Last Fiscal Year End” column of the Nonqualified Deferred Compensation table above.
However, the named executive officers are not entitled to receive compensation for any unused vacation days upon
termination.
Payments Upon Various Triggering Events at 2016 Fiscal Year-End
Termination by Us For Good Cause or Termination by Executive Without Good Reason
If we terminate a named executive officer for Good Cause (as defined below) or a named executive officer terminates his
employment with us without Good Reason (as defined below), the executive will be entitled to receive any earned and unpaid
base salary, and certain accrued and unpaid benefits, through the date of termination and will automatically forfeit any unvested
restricted stock, performance shares, SARs, stock options or similar rights as of the date of termination. As noted above, Mr.
Lawrence and Mr. Parsons voluntarily terminated employment without good reason prior to the end of 2016.
49
Termination by Reason of Death, Disability or Retirement
If a named executive officer’s employment with us terminates as a result of his death, disability or retirement, (1) the executive
will be entitled to receive any base salary earned and unpaid, and certain benefits accrued and unpaid, through the date of
termination, (2) all unvested restricted stock, SARs, stock options or similar rights held by the executive will fully vest as of,
and (in the case of SARs and stock options) be exercisable for one year following, the date of termination and (3) all unvested
performance shares will vest at the target level and be payable to the executive.
Source of Payment
Vesting of Restricted Stock ($)
Vesting of Performance Shares (at target level) ($)
Total ($)
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
Mr. Gentner
1,342,068
640,217
1,982,285
169,010
129,437
298,447
332,481
37,158
369,639
171,295
120,027
291,322
115,602
108,584
224,186
Termination by Us Without Good Cause or Termination by Executive For Good Reason
If we terminate a named executive officer without Good Cause or a named executive officer terminates his employment with us
for Good Reason, the named executive officer will be entitled to receive any base salary earned and unpaid, and certain
benefits accrued and unpaid, through the date of termination, and the following:
•
•
•
•
•
•
severance in an amount equal to two times his base salary in the case of Mr. Glazer;
in the case of the other named executive officers, severance in an amount equal to the aggregate of his (1) base salary
plus (2) performance incentive bonus at the target level as in effect as of the date of termination;
the performance incentive bonus for the fiscal year in which the termination occurs prorated through the date of
termination; provided, however, the named executive officer will not receive any portion of the performance incentive
bonus unless the Board determines that the performance incentive bonus was earned and the executive would have
been entitled to receive it had the termination not occurred;
in the case of Mr. Glazer, all unvested restricted stock held by him will fully vest as of the date of termination and all
unvested performance shares at or above the 50th percentile of achievement as of the termination date will vest on a
prorated basis at the target level and be payable to him;
continuation of healthcare benefits to which the named executive officer is participating as of the date of termination
for a period of 18 months, in the case of Mr. Glazer, and 12 months, in the case of the other named executive officers,
from the date of termination, and
outplacement services for a period of 12 months from the date of termination up to a maximum of $15,000.
In the following table, the benefits continuation amounts shown include the estimated premiums to be paid by us on behalf of
the named executive officer for healthcare insurance.
Source of Payment
Severance ($)
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
Mr. Gentner
2,000,000
659,200
867,000
752,000
601,600
2016 Performance Incentive Bonus ($)
Vesting of Restricted Stock ($)
Vesting of Performance Shares (at target level) ($)
Healthcare Benefits ($)
Outplacement ($)
Total ($)
0
1,342,068
0
57,609
15,000
0
—
—
22,021
15,000
0
—
—
2,761
15,000
0
—
—
16,564
15,000
3,414,677
696,221
884,761
783,564
0
—
—
13,852
15,000
630,452
Change in Control – Termination Without Good Cause or Termination by Executive For Good Reason
If a change in control occurs, and during the period beginning six months before and ending 24 months after the change in
control, we or our successor terminates the named executive officer’s employment without Good Cause or the named executive
officer terminates his employment with Good Reason, the named executive officer will be entitled to receive any base salary
earned and unpaid, and certain benefits accrued and unpaid, through the date of the change in control or termination, and the
following:
50
•
•
•
•
•
•
severance in an amount equal to three times, in the case of Mr. Glazer, and two times, in the case of the other named
executive officers, the aggregate of his (1) base salary plus (2) performance incentive bonus at the target level as in
effect as of the date of the change in control or termination;
the performance incentive bonus for the fiscal year in which the termination occurs prorated through the date of
termination;
all unvested restricted stock, SARs, stock options or similar rights will fully vest and all unvested performance shares
will vest at the target level and be payable to him as of the date of the change in control;
continuation of healthcare benefits to which the named executive officer is participating as of the date of change in
control or termination for a period of 36 months, in the case of Mr. Glazer, and 24 months in the case of the other
named executive officers, from the date of the change in control or termination;
outplacement services for a period of 12 months from the date of the change in control or termination up to a
maximum of $15,000; and
financial planning allowance for a period of 36 months in the case of Mr. Glazer, and 24 months in the case of the
other named executive officers, from the date of the change in control or termination.
If any payment to the named executive officer due to a change in control subjects the executive to any excise tax, we will not
pay to the executive a gross-up payment to compensate him for the amount of the excise tax.
The payments and benefits provided in connection with a change in control are intended to help provide us with continuity of
management and continued focus on the business by senior management in the event of a change in control.
In the following table, the benefits continuation amounts shown include the estimated premiums to be paid by us on behalf of
the named executive officer for healthcare insurance.
Source of Payment
Severance ($)
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
Mr. Gentner
6,000,000
1,318,400
1,734,000
1,504,000
1,203,200
2016 Performance Incentive Bonus ($)
Vesting of Restricted Stock ($)
Vesting of Performance Shares (at target level) ($)
Healthcare Benefits ($)
Outplacement ($)
Financial Planning ($)
Total ($)
Change in Control – Without Termination
0
1,342,068
640,217
115,217
15,000
30,000
0
169,010
129,437
44,042
15,000
10,000
0
332,481
37,158
4,584
15,000
10,000
0
171,298
120,027
33,127
15,000
10,000
0
115,602
108,584
50,629
15,000
10,000
8,142,502
1,685,889
2,133,223
1,853,452
1,503,015
If a change in control occurs, all unvested restricted stock, SARs, stock options or similar rights will fully vest and all unvested
performance shares will vest at the target level and be payable to the named executive officer as of the date of the change in
control.
Source of Payment
Vesting of Restricted Stock ($)
Vesting of Performance Shares (at target level) ($)
Total ($)
Mr. Glazer
Mr. Shein
Mr. Weber
Mr. Hunter
Mr. Gentner
1,342,068
640,217
1,982,285
169,010
129,437
298,447
332,481
37,158
369,639
171,295
120,027
291,322
115,602
108,584
224,186
Change in Control Described
A “change in control” shall be deemed to have occurred:
•
on such date, within the 12-month period following the date that any one person, or more than one person acting as a
group (as defined in §1.409A 3(i)(5)(v)(B) of the Treasury Regulations), acquires ownership of stock that represents
25% or more of the combined voting power of our then outstanding securities (“Trigger Date”), that a majority of the
individuals who, as of the Trigger Date, constitute the Board (“Incumbent Board”) are replaced by new members
whose appointment or election is not endorsed by a majority of the members of the Incumbent Board before the date
of such appointment or election;
51
•
•
as of the date that any one person, or more than one person acting as a group (as defined in §1.409A-3(i)(5)(v)(B) of
the Treasury Regulations), acquires ownership of stock that, together with stock held by such person or group,
constitutes more than 50% of either (a) the then outstanding shares of our common stock or (b) the combined voting
power of our then outstanding voting securities entitled to vote generally in the election of directors; provided,
however, if any one person or more than one person acting as a group, is considered to own more than 50% of the
total fair market value or total voting power of our stock, the acquisition of additional stock by the same person or
persons shall not be considered to cause a change in control; or
on the date any one person, or more than one person acting as a group (as defined in §1.409A-3(i)(5)(v)(B) of the
Treasury Regulations), acquires (or has acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) all, or substantially all, of our assets, except for any sale, lease exchange or
transfer resulting from any action taken by any creditor of ours in enforcing its rights or remedies against any of our
assets in which such creditor holds a security interest. Provided further, a transfer of assets by us shall not be treated
as a change in control if the assets are transferred to: (1) a shareholder of ours (immediately before the asset transfer)
in exchange for or with respect to its stock; (2) an entity, 50% or more of the total value or voting power of which is
owned, directly or indirectly, by us; (3) a person, or more than one person acting as a group, that owns, directly or
indirectly, 50% or more of the total value or voting power of all our outstanding stock; or (4) an entity, at least 50% of
the total value or voting power of which is owned, directly or indirectly, by a person described in this paragraph. For
purposes of this paragraph and except as otherwise provided in clause (1), a person’s status is to be determined
immediately after the transfer of the assets.
Good Cause and Good Reason Defined
As used in this discussion, the definitions for Good Cause and Good Reason are as follows:
•
•
“Good Cause” means: (1) the named executive officer’s criminal conviction of a felony by a federal or state court of
competent jurisdiction including any plea of guilty or no contest; (2) a material and significant act of dishonesty by the
named executive officer relating to us; (3) a failure to comply with our Code of Ethics and Business Conduct; or (4)
the named executive officer’s failure to follow a direct, reasonable and lawful order from the Board within the
reasonable scope of his position, which failure, if remediable, is not remedied within thirty days after written notice to
the named executive officer.
“Good Reason” shall exist if, without the named executive officer’s express written consent, we: (1) materially
reduce or decrease the named executive officer’s base salary or incentive compensation opportunity level from the
level in effect on the effective date of the employment agreement (or some subsequent higher level put into effect by
the Board subsequent to the effective date of the employment agreement), unless such reduction or decrease is in
connection with an across-the-board reduction or decrease in the base salaries or incentive compensation opportunity
levels of all of our other senior level executives; (2) willfully fail to include the named executive officer in any
incentive compensation plans, bonus plans, or other plans and benefits provided by us to other executive level
executives; (3) materially reduces, decreases or diminishes the nature, status or duties and responsibilities of the
named executive officer’s position from those in effect on the effective date of the employment agreement, and such
reduction, decrease or diminution is not reasonably related to or the result of an adverse change in the named
executive officer’s performance of assigned duties and responsibilities; (4) hires an executive senior to the named
executive officer; or (5) require the named executive officer to (a) regularly perform the duties and responsibilities of
his position at, or (b) relocate the named executive officer’s principal place of employment to, a location which is
more than fifty miles from the location of the named executive officer’s principal place of employment. Good Reason
shall not include the death, disability or voluntary retirement of the named executive officer or any other voluntary
action taken by or agreed to by the named executive officer related to his or her position or employment with us.
Timing of Payments
The payments provided in connection with the termination events will be paid as follows:
• Severance payments will be made to the executive in regular payroll payments throughout the severance period;
•
Incentive bonus payments will be made to the executive in a lump sum on or around April 1 following the end of the
fiscal year in which the termination occurred;
• Benefits will be provided in accordance with our standard policies and practices;
• Outplacement payments will be made directly to the entity providing outplacement services following receipt of an
invoice or statement from the entity providing the outplacement services;
52
• Financial planning reimbursements will be made in accordance with our or our successor’s policies and procedures;
and
• Deferred compensation payments will be made in accordance with the provisions of the DC Plan.
DIRECTOR COMPENSATION
The compensation of our non-employee directors is set by the Board at the recommendation of the Corporate Governance and
Nominating Committee (referred to as the “CGNC” in this section). In developing its recommendations, the CGNC is guided
by the following objectives: (1) compensation should fairly pay non-employee directors for work required in a company our
size; and (2) compensation should align the directors’ interests and the long-term interests of our shareholders. As requested by
the CGNC, its director compensation consultant prepares competitive compensation analyses regarding both the Peer Group
and the broader market for similarly situated companies and advises the CGNC on the level and design of compensation
programs for non-employee directors. The Chair of the CGNC works directly with the CGNC’s director compensation
consultant, if any, to determine the scope of the work needed to assist the CGNC in its decision making processes. Directors
are reimbursed for actual expenses they incur while attending, or otherwise participating in, Board meetings, committee
meetings and ad hoc committee assignments.
Directors who are our full-time employees receive no additional compensation for serving on the Board. Non-employee
directors receive the compensation described below.
Retainers and Fees
Board Retainer
Non-employee directors received a $60,000 annual retainer for service on the Board, which was earned and paid pro rata over
their term at the beginning of each month. The annual retainer is intended to compensate the director for attendance at
regularly scheduled quarterly Board meetings (including by teleconference) and up to two special meetings of the Board, as
well as consultation and participation in meetings held for periodic updates.
Chairman Retainer
In addition to the annual board retainer, the Chairman of the Board received a $125,000 retainer, which was earned and paid
pro rata over his term at the beginning of each month. The chairman retainer is intended to compensate the Chairman for the
additional duties set forth in the Governance Guidelines.
Special Board Meeting Fee
Beginning with the seventh meeting of the Board, directors received a special board meeting fee of $1,500 per meeting for their
preparation and attendance at special meetings of the Board (including attendance by teleconference) called for the purpose of
specific actions by the Board and held at times other than in conjunction with regular quarterly meetings of the Board. No
additional meeting fee was paid for attendance at regular quarterly Board meetings and the first two special Board meetings.
Committee Meeting Fees
Non-employee directors received (1) a regular committee meeting fee of $1,500 per meeting for their preparation and
attendance at regular quarterly meetings of the committees on which they serve (including by teleconference), and (2) a special
committee meeting fee of $1,500 per meeting for (a) their preparation and attendance at committee meetings (including by
teleconference) called for the purpose of specific actions by their committees and held at times other than in conjunction with
regular quarterly meetings of their committees and (b) their preparation and attendance at ad hoc committee assignments held
at times other than in conjunction with regular quarterly meetings of their committees or the Board. Non-committee members
who voluntarily attend a committee meeting did not receive a fee.
Committee Chair Fees
The Chair of the Audit Committee received a committee chair fee of $20,000. The Chair of the Compensation Committee
received a committee chair fee of $15,000. The Chair of the Corporate Governance and Nominating Committees received a
committee chair fee of $12,500. The annual committee chair fee was earned and paid pro rata over the Chair’s term at the
beginning of each month.
53
Restricted Stock Awards
Initial Grant
Upon a non-employee director’s initial appointment or election, the director will receive a restricted stock award valued at
$100,000, based on the closing price of our common shares on the date of appointment or election, but prorated for the number
of months the director will serve until the next annual meeting of our shareholders (“Initial Grant”). The Initial Grant will cliff
vest on the earlier of one year from the grant date or the date of the first annual meeting of our shareholders following the grant
date.
Reelection Grant
Upon a non-employee director’s reelection to the Board, the director will be granted a restricted stock award valued at
$100,000, based on the closing price of our common shares on the date of reelection (“Reelection Grant”). The Reelection
Grant will cliff vest on the earlier of one year from the grant date or the date of the first annual meeting of our shareholders
following the grant date.
Forfeiture of Grants
A director will forfeit any unvested Initial Grant and Reelection Grants if he or she ceases to be a director at any time prior to
the vesting date other than due to (1) the fact that the director’s age prohibits him or her from serving as a director per the
Governance Guidelines, (2) death, (3) permanent disability (as determined by the Board) or (4) a change in control (as defined
in the applicable equity incentive plan), at which time the unvested Initial Grant and Reelection Grant will fully vest.
Health Benefits
We have made arrangements with our medical provider to offer medical and dental coverage to the directors and their eligible
family members. The cost to the directors will be the same premiums our active employees pay through payroll deductions.
Election Concerning Receipt of Certain Compensation
Under our Amended and Restated 2003 Non-Employee Director Equity Compensation Plan, a non-employee director may elect
to receive the board retainer, chairman retainer, special board meeting fees, committee meeting fees, committee chair fee, and
such other compensation as the Board may deem appropriate in the form of: (1) restricted stock, deferred stock units, cash, or
a combination of restricted stock, deferred stock units and cash at the time that such compensation is earned; or (2) in cash or
restricted stock at a later date. Any issuance of restricted stock in lieu of cash will be made by us on such terms and conditions
as the Board may establish. In order to receive restricted stock, a director must notify us of his or her election to receive
restricted stock by executing an applicable election form and execute a shareholder agreement by which the director agrees not
to sell any of the restricted stock until the director leaves the Board.
54
The following table provides information concerning the compensation earned by each person who served as a non-employee
director during 2016.
Director Compensation Table for 2016
Fees Earned or
Paid in Cash
($) (1)
Stock
Awards
($) (2)
Non-Equity
Incentive Plan
Compensation
($)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)
83,429
90,929
103,429
96,929
83,429
209,929
83,429
110,929
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
183,429
190,929
203,429
196,929
183,429
309,929
183,429
210,929
Name
Alan J. Barocas
Elaine D. Crowley
Diane M. Ellis
Earl J. Hesterberg
Lisa R. Kranc
William J. Montgoris
C. Clayton Reasor
Ralph P. Scozzafava
_________
(1) The amounts shown in this column reflect the amount of cash compensation earned during 2016 for Board and committee
service. Directors may elect to receive the board retainer, chairman retainer, special board meeting fees, committee
meeting fees, committee chair fees and such other compensation as the Board may deem appropriate, as the case may be,
as described above in the “Election Concerning Receipt of Certain Compensation” section.
(2) The amounts shown in the column reflect the grant date fair value of restricted stock awards granted in 2016 to the named
directors valued in accordance with ASC 718 and is equal to the closing market price of 17,452 common shares on the date
of grant. The recipient has the rights of a shareholder, including the right to vote and receive dividends, with respect to
restricted stock that has not vested.
ITEM 3: SAY-ON-PAY VOTE (ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION)
We are asking our shareholders to approve a non-binding, advisory resolution on the compensation of our named executive
officers as disclosed in this Proxy Statement (commonly referred to as a “Say-on-Pay Vote”). The Board has adopted a policy
providing for an annual Say-on-Pay Vote. In accordance with this policy and Section 14A of the Exchange Act, and as a matter
of good corporate governance, the Board recommends that you vote FOR the following resolution:
RESOLVED, that the compensation paid to the named executive officers of Stage
Stores, Inc., as disclosed in this Proxy Statement pursuant to Item 402 of SEC
Regulation S-K, including the Compensation Discussion and Analysis, compensation
tables and narrative discussion, is hereby APPROVED.
As described above in the “Compensation Discussion and Analysis” section (“CD&A”) of this Proxy Statement, the key
objectives of our executive compensation program are to:
• Enable us to attract, motivate and retain the executive talent required to successfully manage and grow our business
and to achieve our short-term and long-term business objectives;
• Maximize the long-term commitment of our executive officers to our success by providing compensation elements
that align their interests with the interests of our shareholders by linking compensation elements directly to financial
metrics that the Committee believes influence the creation of long-term shareholder value; and
• Reward our executive officers upon the achievement of short-term and long-term business objectives and the creation
of shareholder value.
We urge our shareholders to read the CD&A, which describes in greater detail how our executive compensation policies and
procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and
other related compensation tables and narrative included in the “Executive Compensation” section of this Proxy Statement,
55
which provide detailed information on the compensation of our named executive officers. The Compensation Committee and
the Board believe that the policies and procedures articulated in the CD&A are effective in achieving our goals and that the
compensation of our named executive officers reported in this Proxy Statement has contributed to our recent and long-term
success.
2016 Overview
Although we took significant actions to support the future success of our business, the conditions that we faced in 2016,
including depressed oil prices, a devalued peso and a generally weak environment for the department store retail industry,
impacted our business to the extent that we did not meet our aggressive performance targets. Accordingly, no bonuses were
paid in 2016 for the second straight year, and the performance shares covering the three-year performance cycle ended with
2016 did not vest.
Our financial results and strategic actions for 2016 include the following:
Financial Results
• Net sales decreased $161.7 million, or 10.1%, to $1.4 billion.
• We generated $84.3 million in cash from operating activities, a 109.1% increase over 2015.
• Comparable sales decreased 8.8%.
• Gross profit decreased $98.4 million, or 24.8%.
• Pre-tax loss was $63.1 million, compared to pre-tax earnings of $5.6 million for 2015.
• Diluted loss per common share was $1.40, compared with diluted earnings per common share of $0.12 for 2015.
• We grew sales penetration of our private label credit card by 290 basis points.
• We paid cash dividends of $16.7 million, or $0.60 per share.
• TSR, as calculated under the terms of our performance share awards, was -47.2% for 2016 and -73.2% for the three
year period ended January 28, 2017 (see the “Overview of 2016 Executive Compensation – Long-Term Incentives”
section of this CD&A for additional information regarding how TSR is calculated under the terms of our performance
share awards).
Strategic Actions
• We continued to grow our direct–to-consumer business by enhancing our customer online shopping experience,
expanding our online assortments, improving site navigation, adding buy online ship-to-store capabilities, investing in
digital marketing and our mobile site, and improving operational efficiency.
• We updated our product assortment by offering more contemporary fashions and new brands, adding categories within
existing brands, and extending existing brands to additional stores.
• We completed 86 remodels, relocations and expansions in order to continue improving the shopping experience for
our customers.
• We continued our multi-year plan to close underperforming stores, including 37 stores in 2016, following a strategic
evaluation of our store portfolio according to increased profitability and return on investment standards.
• We leveraged our technology to create more personalized direct mail and email programs, and shifted our marketing
activity to be more digitally-focused.
• We launched a tender-neutral loyalty program, Style Circle Rewards®, which complements our existing private label
credit card program and will allow us to better understand our customers’ shopping habits, offer even more
personalized promotional offers, and provide attractive rewards.
Our 2016 financial performance fell short of our expectations. As a result, our named executive officers did not earn an annual
performance incentive bonus for 2016, and shares were not earned under the three-year performance share awards whose
performance cycle ended with 2016. We have tied these important components of compensation to our pre-tax earnings,
comparable sales and TSR in order to align the interests of our named executive officers with our shareholders and to deliver
meaningful portions of executive compensation only when we perform. The relationship between our 2016 performance and
realized compensation, as well as the design of our executive compensation program to emphasize shareholder alignment,
demonstrates the effectiveness of our program.
56
Say-on-Pay Vote Recommendation
This vote on executive compensation is advisory, which means that the vote is not binding on the Board, the Compensation
Committee or us. Although non-binding, the Board and the Compensation Committee will continue to consider the results of
Say-on-Pay Votes in determining future executive compensation.
The affirmative vote of a majority of the votes cast is required to approve this advisory resolution. Broker discretionary voting
of uninstructed shares is not permitted for a shareholder vote on executive compensation.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ABOVE ADVISORY RESOLUTION ON EXECUTIVE
COMPENSATION.
ITEM 4: SAY-ON-FREQUENCY VOTE (ADVISORY VOTE ON THE FREQUENCY OF THE SAY-ON-PAY VOTE)
As described above, Item 3 is the Say-on-Pay Vote in which we provide our shareholders the opportunity to cast an advisory
vote on the compensation of our named executive officers. This Item 4 is the Say-on-Frequency Vote that affords our
shareholders the opportunity to cast a nonbinding advisory vote on how frequently we should include the Say-on-Pay Vote in
our proxy materials for future annual shareholder meetings. Our shareholders may vote to conduct the Say-on-Pay Vote every
year, every two years or every three years. Our shareholders may also abstain from casting a vote on this Item 4.
The Board acknowledges the prevailing view supporting an annual advisory Say-on-Pay Vote, and it has determined that an
annual Say-on-Pay Vote is the most appropriate alternative for us. Therefore, the Board recommends that our shareholders
vote to hold the Say-on-Pay Vote annually.
In determining its recommendation, the Board concluded that holding an advisory Say-on-Pay Vote annually will provide our
shareholders with frequent opportunities to evaluate the effectiveness of our overall compensation philosophy, policies and
practices in the context of our business results for the corresponding period. However, the Board recognizes that annual Say-
on-Pay Votes may encourage shareholders to over-emphasize short-term variations in compensation and business results. The
Board also recognizes that annual Say-on-Pay Votes will occur after we have already implemented our executive compensation
programs for the current year, thus it expects that it may not be feasible to address and respond to any one year’s Say-on-Pay
Vote before the following year’s annual meeting of shareholders.
We understand that our shareholders may have different views regarding the appropriate frequency for the Say-on-Pay Vote,
and the Board will review the voting results. However, this is an advisory vote, which means that the vote is not binding on the
Board, the Compensation Committee or us. Accordingly, the Board may decide that it is in the best interests of our
shareholders and us to hold the Say-on-Pay Vote more or less frequently than the frequency receiving the most votes cast by
our shareholders.
THE BOARD RECOMMENDS THAT YOU VOTE TO HOLD THE SAY-ON-PAY VOTE EVERY YEAR.
ITEM 5: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2017
The Audit Committee appointed Deloitte & Touche LLP as our independent registered public accounting firm for 2017. This
selection is being presented to the shareholders for their ratification. Proxies solicited by the Board will, unless otherwise
directed, be voted to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for
2017.
Deloitte & Touche LLP has been our independent registered public accounting firm since 2001. The Audit Committee has
been advised by Deloitte & Touche LLP that it is an independent registered public accounting firm with respect to us within the
meaning of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
A representative of Deloitte & Touche LLP will be present at the Annual Meeting to respond to appropriate questions and to
make a statement if so desired.
The affirmative vote of a majority of the shares present or represented and entitled to vote either in person or by proxy is
required to ratify the selection of Deloitte & Touche LLP.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE FOLLOWING RESOLUTION RATIFYING OUR
APPOINTMENT OF AN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM:
RESOLVED, that the appointment of Deloitte & Touche LLP, as the independent
registered public accounting firm for Stage Stores, Inc. for 2017 is hereby
RATIFIED.
57
AUDIT COMMITTEE MATTERS
Pre-Approval Policies
The Audit Committee has the direct responsibility to select, retain, terminate, determine compensation and oversee the work of
our independent registered public accounting firm. Pre-approval by the Audit Committee is required for any engagement of
our independent registered public accounting firm and the Audit Committee has established a pre-approval policy to prevent
the provision of services that would impair the independence of our independent registered public accounting firm. Under the
policy, the Audit Committee annually pre-approves the audit and any non-audit services proposed to be provided by our
independent registered public accounting firm. Requests to provide services that require pre-approval by the Audit Committee
are submitted to the Audit Committee by our Chief Financial Officer, Controller or other officer and our independent registered
public accounting firm. In determining whether to approve the engagement of our independent registered public accounting
firm, the Audit Committee considers whether such services are consistent with the SEC’s and the Public Company Accounting
Oversight Board’s rules on auditor independence. The Audit Committee also considers the amount of audit related fees in
comparison to all other fees paid to the registered public accounting firm and reviews such comparison each year.
The fees billed to us by Deloitte & Touche LLP, our independent registered public accounting firm during the two most
recently completed fiscal years, were as follows:
Principal Accountant Fees and Services
($ in thousands)
Audit Fees (1)
Audit-Related Fees
Tax Fees
All Other Fees (2)
Total Fees
__________
2016
($)
1,148
—
—
47
1,195
2015
($)
1,034
—
—
19
1,053
(1) Audit fees for fiscal 2016 and fiscal 2015 consisted of fees for (a) the audit of our annual financial statements, (b) review
of financial statements in our quarterly reports on Form 10-Q, (c) the audit of the effectiveness of our internal control over
financial reporting, and (d) services that are provided by the independent registered public accounting firm in connection
with statutory and regulatory filings.
(2) All other fees for fiscal 2016 and fiscal 2015 consisted of fees for services related to the audit of the financial statements of
our nonqualified DC Plan, which are included in the DC Plan’s Annual Report on Form 11-K, as well as benchmarking
survey fees in fiscal 2016. All services were approved by the Audit Committee.
Audit Committee Report
The Audit Committee has reviewed and discussed the audited financial statements for fiscal 2016 with management and our
independent registered public accounting firm, Deloitte & Touche LLP. The Audit Committee has discussed with Deloitte &
Touche LLP the matters required to be discussed by Auditing Standard No. 61, as amended, as adopted by the Public Company
Accounting Oversight Board Rule 3200T. The Audit Committee has received the written disclosures and the letter from
Deloitte & Touche LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding
Deloitte & Touche LLP’s communications with the Audit Committee concerning independence, and has discussed with
Deloitte & Touche LLP its independence. Based on these reviews and discussions, the undersigned members of the Audit
Committee recommended to the Board that our audited financial statements for fiscal 2016 be included in our Form 10-K for
filing with the SEC.
Members of the Audit Committee
Ralph P. Scozzafava, Chair
Elaine D. Crowley
Diane M. Ellis
William J. Montgoris
58
ADDITIONAL INFORMATION
Annual Report on Form 10-K
A copy of our 2016 Annual Report on Form 10-K will be furnished without charge to shareholders, upon written request to Stage
Stores, Inc., Attn: Investor Relations, 2425 West Loop South, Houston, Texas 77027. Our 2016 Annual Report on Form 10-K
may also be accessed in the Financial Reports section of our website (corporate.stage.com/financial-reports).
Electronic Access to Proxy Statement and Annual Report
This Proxy Statement, our Annual Report to Shareholders for 2016 and our Annual Report on Form 10-K for 2016 are
available to review at envisionreports.com/SSI for registered shareholders and at edocumentview.com/SSI for beneficial
shareholders. This Proxy Statement and our Annual Report on Form 10-K for 2016 are also available on the SEC’s EDGAR
database located at sec.gov.
Documents Available in Print
In addition to being posted with printer friendly versions in the Corporate Governance section of our website
(corporate.stage.com/corporate-governance), the charters of our Audit Committee, Corporate Governance and Nominating
Committee and Compensation Committee, our Governance Guidelines, our Code of Ethics for Senior Officers, and our Code
of Ethics and Business Conduct are available in print to any shareholder who requests them. Written requests should be made
to Stage Stores, Inc., Attn: Investor Relations, 2425 West Loop South, Houston, Texas 77027.
Solicitation of Proxies
This solicitation of proxies is made by and on behalf of the Board. In addition to mailing the Notice of Internet Availability (or,
if applicable, paper copies of this Proxy Statement, the Notice of Annual Meeting of Shareholders and the proxy card) to
shareholders of record on the record date, the brokers and banks holding our common shares for beneficial holders must, at our
expense, provide our proxy materials to persons for whom they hold our common shares in order that such common shares
may be voted. Solicitation may also be made by our officers and other employees personally or by telephone, mail or
electronic mail. Officers and other employees who assist with solicitation will not receive any additional compensation. The
cost of the solicitation will be borne by us. D.F. King & Co. has been retained to assist in soliciting proxies at an estimated fee
of $7,000, plus reasonable out-of-pocket expenses.
Shareholder Proposals
Shareholder proposals intended to be presented at our 2017 annual meeting of shareholders must be received by our corporate
secretary at our principal executive office on or before December 22, 2017 to be eligible for inclusion in our 2018 proxy
statement and form of proxy. Such proposals must be submitted in accordance with Rule 14a-8 of the Exchange Act. If a
shareholder intends to present a proposal at our 2018 annual meeting of shareholders without inclusion of that proposal in our
2018 proxy materials and written notice of the proposal is not received by our corporate secretary at our principal executive
office on or before March 7, 2018, or if we meet other requirements of the SEC rules, proxies solicited by the Board for our
2018 annual meeting of shareholders will confer discretionary authority on the proxy holders named therein to vote on the
proposal at the meeting. Proposals and notices of intention to present proposals should be addressed to our corporate secretary
as follows: Stage Stores, Inc., Attn: Chief Legal Officer and Secretary, 2425 West Loop South, Houston, Texas 77027.
59
As of the date of this Proxy Statement, the Board knows of no other matters that will be presented for consideration at the
Annual Meeting other than Item 1, Item 2, Item 3, Item 4 and Item 5 described above. If any other matter is properly brought
before the Annual Meeting, including any adjournment or adjournments thereof, common shares represented by proxies
received in response to this solicitation will be voted on such matter in accordance with the recommendation of the Board.
OTHER MATTERS
By Order of the Board of Directors,
Chadwick P. Reynolds
Executive Vice President,
Chief Legal Officer and Secretary
April 21, 2017
Houston, Texas
60
ANNEX A
2017 LTIP
STAGE STORES
2017 LONG-TERM INCENTIVE PLAN
EFFECTIVE MARCH 23, 2017
Contents
Article 1. Establishment, Purpose, and Duration .......................................................................................................... 1
Article 2. Definitions .................................................................................................................................................... 1
Article 3. Administration .............................................................................................................................................. 6
Article 4. Shares Subject to this Plan and Award Limitations ...................................................................................... 6
Article 5. Eligibility and Participation .......................................................................................................................... 8
Article 6. Options ......................................................................................................................................................... 8
Article 7. Stock Appreciation Rights ............................................................................................................................ 9
Article 8. Restricted Stock and Restricted Stock Units .............................................................................................. 10
Article 9. Deferred Stock Units .................................................................................................................................. 11
Article 10. Performance Shares, Performance Share Units, and Performance Units .................................................. 12
Article 11. Cash-Based Awards and Other Stock-Based Awards ............................................................................... 12
Article 12. Nonemployee Director Awards ................................................................................................................ 13
Article 13. Qualified Performance-Based Awards and Performance Measures ......................................................... 13
Article 14. Transferability of Awards ......................................................................................................................... 17
Article 15. Impact of Termination Event on Awards.................................................................................................. 17
Article 16. Substitution Awards ................................................................................................................................. 18
Article 17. Dividend-Equivalent Rights ..................................................................................................................... 18
Article 18. Beneficiary Designation ........................................................................................................................... 18
Article 19. Rights of Participants ................................................................................................................................ 19
Article 20. Change in Control ..................................................................................................................................... 19
Article 21. Amendment, Modification, Suspension, and Termination ....................................................................... 20
Article 22. Withholding .............................................................................................................................................. 20
Article 23. Successors ................................................................................................................................................. 21
Article 24. General Provisions .................................................................................................................................... 21
STAGE STORES
2017 LONG-TERM INCENTIVE PLAN
Article 1. Establishment, Purpose, and Duration
1.1
Establishment. Stage Stores, Inc., a Nevada corporation (hereinafter referred to as the “Company”), establishes an
incentive compensation plan to be known as the Stage Stores 2017 Long-Term Incentive Plan (hereinafter referred to
as the “Plan”), as set forth in this document.
This Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Deferred Stock Units, Performance Shares, Performance Share Units,
Performance Units, Cash-Based Awards, and Other Stock-Based Awards.
This Plan is effective on March 23, 2017 (“Effective Date”) and thereafter remains subject to shareholder approval,
which approval is being sought on June 1, 2017, and shall remain in effect as provided in Section 1.3 (Establishment,
Purposes, and Duration/Duration of this Plan) hereof.
Purpose of this Plan. This Plan is intended to promote the Company’s long-term financial success by motivating
performance through incentive compensation and to encourage Participants to acquire ownership interests in the
Company. This Plan is also intended to provide a means whereby Employees, Directors, and Third Party Service
Providers of the Company develop a sense of proprietorship and personal involvement in the development and financial
success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby
advancing the interests of the Company and its shareholders. A further purpose of this Plan is to provide a means through
which the Company and its Affiliates may attract able individuals to become Employees or serve as Directors or Third
Party Service Providers of the Company and its Affiliates and to provide a means whereby those individuals upon whom
the responsibilities of the successful administration and management of the Company are of importance, can acquire
and maintain stock ownership, thereby strengthening their concern for the welfare of the Company.
Duration of this Plan. Unless sooner terminated as provided herein, this Plan shall terminate ten (10) years from the
Effective Date. After this Plan is terminated, no Awards may be granted but Awards previously granted shall remain
outstanding in accordance with their applicable terms and conditions and this Plan’s terms and conditions.
Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten (10) years after the earlier of
(a) adoption of this Plan by the Board, or (b) the Effective Date.
1.2
1.3
1.4
No New Grants Under Prior Plan. This Plan is the successor plan to the Prior Plan. After the Effective Date, no
additional grants will be made under the Prior Plan.
Article 2. Definitions
Whenever used in this Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the
initial letter of the word shall be capitalized.
2.1
2.2
2.3
2.4
“Affiliate” shall mean (a) in the case of an ISO, a “parent corporation” or a “subsidiary corporation” of the Company,
as those terms are defined in Code Sections 424(e) and (f), respectively; and (b) in all other cases, any other entity
regardless of its form (including, but not limited to, a partnership or a limited liability company) that directly or indirectly
controls, is controlled by or is under common control with, the Company within the meaning of Code Section 414(b),
as modified by Code Section 409A.
“Annual Award Limit” or “Annual Award Limits” have the meaning set forth in Section 4.3 (Shares Subject to this
Plan and Award Limitations/Annual Award Limits).
“Award” means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock
Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Deferred Stock Units, Performance
Shares, Performance Share Units, Performance Units, Cash-Based Awards, or Other Stock-Based Awards, in each case
subject to the terms of this Plan. At the Committee’s discretion, an Award may be granted as a Qualified Performance-
Based Award.
“Award Agreement” means either (a) a written agreement entered into by the Company and a Participant setting forth
the terms and provisions applicable to an Award granted under this Plan, or (b) a written or electronic statement issued
by the Company to a Participant describing the terms and provisions of such Award, including any amendment or
modification thereof. The Committee may provide for the use of electronic, internet or other non-paper Award
Agreements, and the use of electronic, internet or other non-paper means for the acceptance thereof and actions
thereunder by a Participant.
A-1
2.5
2.6
2.7
2.8
2.9
“ASC” means the Accounting Standards Codification.
“Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act.
“Board” or “Board of Directors” means the Board of Directors of the Company.
“Cash-Based Award” means an Award, denominated in cash, granted to a Participant as described in Article 11 (Cash-
Based Awards and Other Stock-Based Awards).
“Cause” means the term set forth in a written agreement between a Participant and the Company or any applicable
Award Agreement, but if there is no such agreement or no such definition, Cause means a finding by the Committee
that the Participant (a) has breached his or her employment or service contract with the Company or an Affiliate, (b)
has engaged in disloyalty to the Company or an Affiliate, including, without limitation, fraud, embezzlement, theft,
commission of a felony or proven dishonesty, (c) has disclosed trade secrets or confidential information of the Company
or an Affiliate to persons not entitled to receive such information, (d) has breached any written non-competition, non-
solicitation, invention assignment or confidentiality agreement between the Participant and the Company or an Affiliate,
(e) has failed to comply with the Company’s Code of Ethics and Business Conduct, or (f) has engaged in such other
behavior determined in the reasonable discretion of the Committee to be materially detrimental to the interests of the
Company or an Affiliate.
2.10
“Change in Control” means any one or more of the following events:
(a)
(b)
(c)
Any person or group (as defined for purposes of Section 13(d) of the Exchange Act) becomes the beneficial
owner, directly or indirectly, of 25 percent or more of the outstanding equity securities of the Company entitled
to vote for the election of directors;
A majority of the members of the Board of Directors then in office is replaced within any period of two years
or less by directors not nominated and approved by a majority of the directors in office at the beginning of such
period (or their successors so nominated and approved), or a majority of the Board of Directors at any date
consists of persons not so nominated and approved; or
The consummation of a merger or consolidation with another entity or the sale or other disposition of all or
substantially all of the Company's assets (including, without limitation, a plan of liquidation), which has been
approved by shareholders of the Company.
Provided, however, the other provisions of this Section 2.10 (Definitions/Change in Control) notwithstanding, the term
“Change in Control” shall not mean any merger, consolidation, reorganization, or other transaction in which the
Company exchanges or offers to exchange newly-issued or treasury Shares representing 25 percent or more, but less
than 50 percent, of the outstanding equity securities of the Company entitled to vote for the election of directors, for 51
percent or more of the outstanding equity securities entitled to vote for the election of at least the majority of the directors
of a corporation other than the Company or an Affiliate (the “Acquired Corporation”), or for all or substantially all of
the assets of the Acquired Corporation.
Provided further, if a Change in Control constitutes a payment event with respect to any Award that provides for the
deferral of compensation and is subject to Code Section 409A, payments to be made upon a Change in Control shall
only be made upon a “change in control event” within the meaning of Code Section 409A.
“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan,
references to sections of the Code shall be deemed to include references to any applicable rules, regulations, and
authoritative interpretations thereunder and any successor or similar provision.
“Committee” means the Compensation Committee of the Board or such other committee to which the Board assigns the
responsibility of administering this Plan. The Committee shall consist of at least three members of the Board, each of
whom may serve on the Committee only if the Board determines that he or she (a) is a “Non-employee Director” for
purposes of Rule 16b-3 under the Exchange Act, (b) satisfies the requirements of an “outside director” for purposes of
Code Section 162(m), and (c) qualifies as “independent” in accordance with applicable stock exchange listing standards.
The members of the Committee shall be appointed from time to time by and shall serve at the discretion of the Board.
If the Committee does not exist or cannot function for any reason, the members of the Board that each satisfy the
requirements of an “outside director” for purposes of Code Section 162(m) may take any action under this Plan that
would otherwise be the responsibility of the Committee.
2.11
2.12
2.13
“Company” means Stage Stores, Inc., a Nevada corporation, and any successor thereto as provided in Article 23
(Successors) herein.
A-2
2.14
2.15
2.16
2.17
2.18
2.19
2.20
2.21
2.22
2.23
2.24
2.25
2.26
2.27
“Covered Employee” means any key Employee who is or may become a “Covered Employee,” as defined in Code
Section 162(m), and who is designated, either as an individual Employee or class of Employees, by the Committee as a
“Covered Employee” under this Plan on or before the Final Pre-Establishment Date.
“Deferred Annual Amount” has the meaning set forth in Section 9.1 (Deferred Stock Units/In General).
“Deferred Stock Unit” means a Participant’s contractual right to receive a stated number of Shares or, if provided by
the Committee on the Grant Date, cash equal to the Fair Market Value of such Shares, under this Plan at the end of a
specified period of time or upon the occurrence of a specified event, as further described in Section 9.1 (Deferred Stock
Units/In General).
“Deferral Election Form” has the meaning set forth in Section 9.1 (Deferred Stock Units/In General).
“Director” means any individual who is a member of the Board of Directors of the Company or the board of directors
of any Affiliate of the Company.
“Disability” means the term set forth in a written agreement between a Participant and the Company or any applicable
Award Agreement, but if there is no such agreement or no such definition, Disability means:
(a)
(b)
With respect to ISOs, as that term is defined in Code Section 22(e)(3);
If Disability constitutes a payment event with respect to any Award that is subject to Code Section 409A,
Disability shall mean, unless the Committee determines otherwise in accordance with Code Section 409A, that
the Participant is (i) unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months, (ii) by reason of any readily determinable physical
or mental impairment which can be expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, receiving income replacement benefits for a period of at least three (3)
months under an accident and health plan covering employees of the Participant’s employer, or (iii) determined
to be totally disabled by the Social Security Administration or the Railroad Retirement Board; and
(c)
Unless the Committee determines otherwise, with respect to any other Award, a physical or mental condition
that, for more than six (6) consecutive months, renders the Participant incapable, with reasonable
accommodation, of performing his or her assigned duties on a full-time basis.
“Dividend-Equivalent Right” means the right to receive an amount, calculated with respect to a Full Value Award,
which is determined by multiplying the number of Shares subject to the applicable Award by the per-Share cash
dividend, or the per-Share Fair Market Value (as determined by the Committee) of any dividend in consideration other
than cash, paid by the Company on Shares.
“Effective Date” has the meaning set forth in Section 1.1 (Establishment, Purpose, and Duration/Establishment).
“Elective Deferred Stock Units” has the meaning set forth in Section 9.1 (Deferred Stock Units/In General).
“Eligible Individual” means an individual who is an Employee, Director, and/or Third Party Service Provider.
“Employee” means any employee of the Company or any of its Affiliates.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
“Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.
“Fair Market Value” or “FMV” means a price that is equal to the opening, closing, actual, high, low, or average selling
prices of a Share reported on the New York Stock Exchange (“NYSE”) or other established stock exchange (or
exchanges) on the applicable date, the preceding trading day, the next succeeding trading day, or an average of trading
days, as determined by the Committee and, to the extent applicable, in a manner consistent with Code Section 409A.
Unless the Committee determines otherwise, Fair Market Value shall be deemed to be equal to the closing price of a
Share during regular trading hours on the relevant date or, if there were no trades on that date, the latest preceding date
upon which a sale was reported. In the event Shares are not publicly traded at the time a determination of their value is
required to be made hereunder, the determination of their Fair Market Value shall be made by the Committee in such
manner as it deems appropriate taking into account all information material to the value of the Company within the
meaning of Code Section 409A.
2.28
“FASB” means the Financial Accounting Standards Board.
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2.29
2.30
2.31
2.32
2.33
2.34
2.35
2.36
2.37
2.38
2.39
2.40
2.41
2.42
2.43
2.44
2.45
“Final Pre-Establishment Date” means the last day a performance goal is considered pre-established under Code Section
162(m). As of the Effective Date, a performance goal shall be considered pre-established under Code Section 162(m)
if the Committee establishes the performance goal within ninety (90) days after the commencement of the period of
service to which the performance goal relates, or, in any event, no later than 25 percent of the period of service to which
the performance goal relates has elapsed; provided that the outcome of the performance goal is substantially uncertain
at the time the Committee establishes the performance goal.
“Full Value Award” means an Award other than an ISO, NQSO, or SAR, which is settled by the issuance of Shares.
“Grant Date” means the later of (a) the date the Committee establishes the terms of an Award, or (b) any later date
specified in the Award Agreement. In no event may the Grant Date be earlier than the Effective Date.
“Grant Price” means the price established at the time of grant of an SAR pursuant to Article 7 (Stock Appreciation
Rights), used to determine whether there is any payment due upon exercise of the SAR.
“Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Article 6 (Options) to an
Employee and that is designated as an Incentive Stock Option and that meets the rules and requirements of Code Section
422, or any successor provision.
“Insider” shall mean an individual who is, on the relevant date, an officer, or Director of the Company or an Affiliate,
or a more than 10 percent Beneficial Owner of any class of the Company’s equity securities that is registered pursuant
to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act.
“Nonemployee Director” means a Director who is not an Employee.
“Nonemployee Director Award” means any Award granted to a Nonemployee Director as described in Article 12
(Nonemployee Director Awards).
“Nonqualified Stock Option” or “NQSO” means an Option that is not intended to meet the requirements of Code
Section 422, or that otherwise does not meet such requirements.
“Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6 (Options).
“Other Stock-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of
this Plan, granted pursuant to Article 11 (Cash-Based Awards and Other Stock-Based Awards).
“Participant” means any Eligible Individual as set forth in Article 5 (Eligibility and Participation) to whom an Award
is granted.
“Performance Measures” means business criteria or measures as described in Article 13 (Qualified Performance-Based
Awards and Performance Measures) on which the performance goals are based and which are approved by the
Company’s shareholders pursuant to this Plan in order to qualify Awards for the exception for qualified performance-
based compensation of Code Section 162(m).
“Performance Period” means the period of time during which the performance goals must be met in order to determine
the degree of payout and/or vesting with respect to an Award.
“Performance Share” means a grant of a stated number of Shares to a Participant under this Plan that is forfeitable by
the Participant until the attainment of specified performance goals, or until otherwise determined by the Committee or
in accordance with this Plan, subject to the continuous employment of the Participant through the applicable
Performance Period.
“Performance Share Unit” means a Participant’s contractual right to receive a stated number of Shares or, if provided
by the Committee on or after the Grant Date, cash equal to the Fair Market Value of such Shares, under this Plan at a
specified time that is forfeitable by the Participant until the attainment of specified performance goals, or until otherwise
determined by the Committee or in accordance with this Plan, subject to the continuous employment of the Participant
through the applicable Performance Period.
“Performance Unit” means a Participant’s contractual right to receive a cash-denominated award, payable in cash or
Shares, under this Plan at a specified time that is forfeitable by the Participant until the attainment of specified
performance goals, or until otherwise determined by the Committee or in accordance with this Plan, subject to the
continuous employment of the Participant through the applicable Performance Period.
2.46
“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.
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2.47
2.48
2.49
2.50
2.51
2.52
2.53
2.54
2.55
2.56
2.57
2.58
“Plan” means the Stage Stores 2017 Long-Term Incentive Plan.
“Plan Year” means the Company’s fiscal year.
“Prior Plan” means the Stage Stores, Inc. Second Amended and Restated 2008 Equity Incentive Plan.
“Qualified Performance-Based Awards” means compensation under an Award that is intended to satisfy the
requirements of Code Section 162(m) for certain performance-based compensation paid to Covered Employees.
Notwithstanding the foregoing, nothing in this Plan shall be construed to mean that an Award which does not satisfy
the requirements for performance-based compensation under Code Section 162(m) does not constitute performance-
based compensation for other purposes.
“Restricted Stock” means an Award granted to a Participant pursuant to Article 8 (Restricted Stock and Restricted Stock
Units).
“Restricted Stock Unit” means an Award granted to a Participant pursuant to Article 8 (Restricted Stock and Restricted
Stock Units), except no Shares are actually awarded to the Participant on the Grant Date.
“Restriction Period” means the period when Restricted Stock, Restricted Stock Units, Deferred Stock Units and/or Other
Stock-Based Awards are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of
performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion).
“Retirement” means the term set forth in a written agreement between a Participant and the Company or any applicable
Award Agreement, but if there is no such agreement or no such definition, Retirement means the Termination Event of
a Participant who: (a) has, upon the effective date of his or her termination or separation (“Trigger Date”), attained the
age of sixty (60) years or older; (b) has, upon the Trigger Date, completed a number of years of employment with or
service to the Company or its Affiliates that, when aggregated with the Participant’s age, is equal to or greater than
seventy (70); (c) has, at least sixty (60) days prior to the Trigger Date (subject to waiver by the Company’s senior human
resources officer), submitted to the Company’s senior human resources officer a written request for retirement, in a
form satisfactory to the Company; (d) has had such written request approved in writing by a member of the Committee
or the Company’s Chief Executive Officer, President or senior human resources officer; and (e) executes an irrevocable
general release of claims and severance agreement in favor of the Company and its Affiliates.
“Share” means a common share of the Company, par value $.01 per share (as such par value may be amended from
time to time), whether presently or hereafter issued, and any other stock or security resulting from adjustment thereof
as described hereinafter, or a share of common stock of any successor pursuant to Article 23 (Successors).
“Share Authorization” has the meaning set forth in Section 4.1(a) (Shares Subject to this Plan and Award
Limitations/Share Authorization).
“Stock Appreciation Right” or “SAR” means an Award, designated as an SAR, pursuant to the terms of Article 7 (Stock
Appreciation Rights) herein.
“Termination Event” means the occurrence of any act or event that causes a Participant to cease being an employee of
the Company and any Affiliate, including, without limitation, death, Disability, Retirement, termination with or without
Cause, dismissal, severance at the election of the Participant, or severance as a result of the discontinuance, liquidation,
sale, or transfer by the Company or its Affiliates of a business owned or operated by the Company or any Affiliate. With
respect to any Participant who is not an employee of the Company or any Affiliate, unless the Award Agreement states
otherwise, a Termination Event shall occur when a Participant ceases to provide services as either a Third Party Service
Provider or Nonemployee Director. A Termination Event shall occur with respect to a Participant who is employed by
an Affiliate if the Affiliate shall cease to be an Affiliate and the Participant shall not immediately thereafter become an
employee of the Company or an Affiliate. Notwithstanding the foregoing, as described in Section 15.6 (Impact of
Termination Event on Awards/Change in Participant Status), no Termination Event shall occur if the Participant
continues to be an Employee, Director, or Third Party Service Provider after such termination. Provided, however, if a
Termination Event constitutes a payment event with respect to any Award that provides for the deferral of compensation
and is subject to Code Section 409A, payments to be made upon a Termination Event shall only be made upon a
“separation from service” within the meaning of Code Section 409A.
2.59
“Third Party Service Provider” means any consultant, agent, advisor, or independent contractor who renders services to
the Company or an Affiliate pursuant to a written agreement that (a) are not in connection with the offer and sale of the
Company’s securities in a capital raising transaction, and (b) do not directly or indirectly promote or maintain a market
for the Company’s securities.
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3.1
3.2
3.3
Article 3. Administration
General. The Committee shall be responsible for administering this Plan, subject to this Article 3 (Administration) and
the other provisions of this Plan. The Committee may employ attorneys, consultants, accountants, agents, and other
individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall
be entitled to rely upon the advice, opinions, or valuations of any such individuals. All actions taken and all
interpretations and determinations made by the Committee shall be final and binding upon the Participants, the
Company, and all other interested individuals. Notwithstanding anything herein to the contrary, the administration of
this Plan may, from time to time, be undertaken those members of the Board who satisfy the requirements for Committee
membership set forth in Section 2.12 (Committee). References in this Plan to the Committee shall include the Board or
any subset of the Board that satisfy the requirements for Committee membership set forth in Section 2.12 (Committee).
Authority of the Committee. The Committee shall have full and exclusive discretionary power to interpret the terms
and the intent of this Plan and any Award Agreement or other agreement or document ancillary to or in connection with
this Plan, to determine eligibility for Awards and to adopt such rules, regulations, forms, instruments, and guidelines
for administering this Plan as the Committee may deem necessary or proper. Such authority shall include, but not be
limited to, (a) selecting Participants, (b) establishing all Award terms and conditions, including the terms and conditions
set forth in Award Agreements and any ancillary document or materials, (c) granting Awards as an alternative to or as
the form of payment for grants or rights earned or due under compensation plans or arrangements of the Company, (d)
construing any ambiguous provision of this Plan or any Award Agreement, (e) establishing performance goals, and for
Qualified Performance-Based Awards, establishing and certifying satisfaction of performance goals in accordance with
the requirements of Code Section 162(m), (f) subject to Article 21 (Amendment, Modification, Suspension, and
Termination), adopting modifications and amendments to this Plan or any Award Agreement, including without
limitation, any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company
or its Affiliates operate, and (g) making any other determination and taking any other action that it deems necessary or
desirable for the administration or operation of this Plan and/or any Award Agreement. Determinations made by the
Committee under this Plan need not be uniform and may be made selectively among eligible individuals under this Plan,
whether or not such individuals are similarly situated.
Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company or
its Affiliates or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and
the Committee or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more
individuals to render advice with respect to any responsibility the Committee or such individuals may have under this
Plan. Subject to applicable law, the Committee may authorize one or more officers of the Company to do one or more
of the following on the same basis as can the Committee: (a) designate Employees to be recipients of Awards; (b)
designate Third Party Service Providers to be recipients of Awards; and (c) determine the size of and make any such
Awards; provided, however, (i) the Committee shall not delegate such responsibilities to any such officer for Awards
granted to a Nonemployee Director or an Employee who is considered an Insider; (ii) the Committee shall not delegate
any duties required to be taken by the Committee to comply with Code Section 162(m); and (iii) the officer(s) shall
report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority
delegated.
4.1
Number of Shares Available for Awards.
Article 4. Shares Subject to this Plan and Award Limitations
(a)
Share Authorization. Subject to adjustment as provided in Section 4.4 (Shares Subject to this Plan and Award
Limitations/Adjustments in Authorized Shares) herein, the maximum number of Shares available for grant to
Participants under this Plan (the “Share Authorization”) shall be:
(i)
(ii)
(iii)
1,300,000 Shares, plus
the 65,654 Shares remaining available for issuance under the Prior Plan as of April 3, 2017 but not
subject to previously exercised, vested or paid awards, plus.
any Shares subject to the 2,625,718 outstanding awards as of April 3, 2017 under the Prior Plan that
on or after April 3, 2017 cease for any reason to be subject to such awards (other than by reason of
exercise or settlement of the awards to the extent they are exercised for or settled in vested and
nonforfeitable Shares), including, but not limited to, shares withheld to satisfy taxes related to any
such awards that are not stock options or stock appreciation rights.
(b)
Limits on ISOs. The maximum number of Shares of the Share Authorization that may be issued pursuant to
the exercise of ISOs granted under this Plan shall be 1,300,000 Shares.
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4.2
(c)
Minimum Vesting Requirements for Awards. Except with respect to a maximum of five percent of the Share
Authorization, all Awards granted under this Plan shall vest over a period that is not less than one (1) year.
Notwithstanding the foregoing, the Committee may permit acceleration of vesting of Awards in the event of
the Participant’s death, Disability or a Change in Control.
Share Usage. Subject to the terms of this Plan, Shares covered by an Award shall only be counted as used to the extent
they are actually issued. Any Shares related to Awards which (a) terminate by expiration, forfeiture, cancellation, or
otherwise without the issuance of such Shares, (b) are settled in cash in lieu of Shares, (c) are withheld to satisfy tax
withholding obligations with respect to Full Value Awards, or (d) are exchanged with the Committee’s permission prior
to the issuance of Shares for Awards not involving Shares, shall be available again for grant under this Plan. Shares
which are (i) not issued or delivered as a result of the net settlement of an Option or Share-settled SAR, (ii) withheld to
satisfy tax withholding obligations on an Option or SAR issued under this Plan, (iii) tendered to pay the Exercise Price
of an Option or the Grant Price of a Stock Appreciation Right under this Plan, or (iv) repurchased on the open market
with the proceeds of an Option exercise will no longer be eligible to be again available for grant under this Plan. To the
extent permitted by applicable law or stock exchange rule, Shares issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of combination by the Company or any Affiliate shall not be
counted against Shares available for grant pursuant to this Plan. The Shares available for issuance under this Plan may
be authorized and unissued Shares or treasury Shares. This Plan is not an “evergreen” plan whereby additional Shares
would be added to this Plan on an annual basis without shareholder approval.
4.3
Annual Award Limits. The following limits (each an “Annual Award Limit” and, collectively, “Annual Award
Limits”), as adjusted pursuant to Section 4.4 (Shares Subject to this Plan and Award Limitations/Adjustments in
Authorized Shares) and/or Section 21.2 (Amendment, Modification, Suspension, and Termination/Adjustment of Awards
Upon the Occurrence of Certain Unusual or Nonrecurring Events), shall apply to grants of such Awards under this
Plan:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Options: The maximum aggregate number of Shares subject to Options granted in any one Plan Year to any
one Participant shall be seven hundred fifty thousand (750,000).
SARs: The maximum number of Shares subject to Stock Appreciation Rights granted in any one Plan Year to
any one Participant shall be seven hundred fifty thousand (750,000).
Restricted Stock: The maximum aggregate grant with respect to Awards of Restricted Stock in any one Plan
Year to any one Participant shall be seven hundred fifty thousand (750,000).
Restricted Stock Units: The maximum aggregate grant with respect to Awards of Restricted Stock Units in
any one Plan Year to any one Participant shall be seven hundred fifty thousand (750,000).
Deferred Stock Units: The maximum aggregate grant with respect to Awards of Deferred Stock Units in any
one Plan Year to any one Participant shall be seven hundred fifty thousand (750,000).
Performance Shares, Performance Share Units, or Performance Units: The maximum aggregate Award
of Performance Shares, Performance Share Units or Performance Units that a Participant may receive in any
one Plan Year shall be seven hundred fifty thousand (750,000) Shares, or equal to the value of seven hundred
fifty thousand (750,000) Shares, determined as of the Grant Date.
Cash-Based Awards: The maximum aggregate amount awarded or credited with respect to Cash-Based
Awards to any one Participant in any one Plan Year may not exceed the greater of five million dollars
($5,000,000) or the value of seven hundred fifty thousand (750,000) Shares, determined as of the Grant Date.
Other Stock-Based Awards: The maximum aggregate grant with respect to Other Stock-Based Awards
pursuant to Section 11.2 (Cash-Based Awards and Other Stock-Based Awards/Other Stock-Based Awards) in
any one Plan Year to any one Participant shall be seven hundred fifty thousand (750,000) Shares.
Dividend and Dividend-Equivalent Rights. The maximum aggregate amount of dividends and Dividend
Equivalent-Rights that any one Participant may accrue in any one Plan Year may not exceed two million dollars
($2,000,000).
Nonemployee Director Limits: The maximum aggregate number of Shares with respect to Awards pursuant
to Section 12 (Nonemployee Director Awards) in any one Plan Year to any single Nonemployee Director shall
be two hundred thousand (200,000) Shares.
4.4
Adjustments in Authorized Shares. In the event of any corporate event or transaction (including, but not limited to, a
change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation,
reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, special cash dividend, stock
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split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of
Shares, exchange of Shares, dividend in kind, or other like change in capital structure, number of outstanding Shares or
distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or
transaction, the Committee, in order to prevent dilution or enlargement of Participants’ rights under this Plan, shall
substitute or adjust, as applicable, the number and kind of Shares that may be issued under this Plan or under particular
forms of Awards, the number and kind of Shares subject to outstanding Awards, the Exercise Price or Grant Price
applicable to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding
Awards. Any such adjustment shall be done in a manner consistent with Code Section 409A and, where applicable,
Code Section 424. The Committee may also make appropriate adjustments in the terms of any Awards under this Plan
to reflect such changes or distributions, including modifications of performance goals and changes in the length of
Performance Periods as permitted by Code Section 162(m), or as the Committee otherwise determines. The
determination of the Committee as to the foregoing adjustments, if any, shall be at the discretion of the Committee and
shall be conclusive and binding on Participants under this Plan.
Subject to the provisions of Article 21 (Amendment, Modification, Suspension, and Termination) and
notwithstanding anything else herein to the contrary, without affecting the number of Shares reserved or available
hereunder, the Committee may authorize the issuance or assumption of benefits under this Plan in connection with any
merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem
appropriate (including, but not limited to, a conversion of equity awards into Awards under this Plan), subject to
compliance with the rules under Code Sections 409A, 422 and 424, to the extent applicable.
Article 5. Eligibility and Participation
Eligibility. Individuals eligible to participate in this Plan include all Employees, Directors, and Third Party Service
Providers.
Actual Participation. Subject to the provisions of this Plan, the Committee may, from time to time, select from the
Eligible Individuals, those individuals to whom Awards shall be granted. Awards need not be uniform as among
Participants.
Conditions of Participation. By accepting an Award, each Participant agrees in his or her own behalf and in behalf of
his or her beneficiaries (1) to be bound by the terms of the Award Agreement and this Plan and (2) that the Committee
(or the Board) may amend this Plan and the Award Agreement without any additional consideration to the extent
necessary to avoid penalties arising under Code Section 409A, even if those amendments reduce, restrict or eliminate
rights or Awards granted under this Plan or an Award Agreement (or both) before those amendments; provided,
however, that the Company or the Committee may (but neither is required to) reimburse an affected Participant or his
or her beneficiary for any diminution in the value of an Award associated with any such change.
Article 6. Options
Grant of Options. Subject to the terms and provisions of this Plan, Options may be granted to Eligible Individuals in
such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee;
provided that ISOs may be granted only to Employees of the Company or of any parent or subsidiary corporation (as
permitted under Code Sections 422 and 424). However, unless legitimate business criteria exist (within the meaning of
Treas. Reg. Section 1.409A-1(b)(5)(iii)(E)(1)), an Eligible Individual may only be granted Options to the extent that
such individual provides services to the Company or an Affiliate of the Company that is part of the Company’s
controlled group for purposes of Code Section 409A.
Option Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the
Exercise Price, the term of the Option, the number of Shares to which the Option pertains, the conditions upon which
an Option shall become vested and exercisable, and such other provisions as the Committee shall determine which are
not inconsistent with the terms of this Plan. The Award Agreement also shall specify whether the Option is intended to
be an ISO or a NQSO.
Exercise Price. The Exercise Price for each grant of an Option shall be determined by the Committee and shall be
specified in the Award Agreement; provided, however, the Exercise Price must be at least equal to (a) 100 percent of
the FMV of the Shares as determined on the Grant Date, or (b) 110 percent of the FMV of the Shares as determined on
the Grant Date in the case of an ISO granted to an individual who owns or who is deemed to own shares possessing
more than 10 percent of the total combined voting power of all classes of shares of the Company or any Affiliate, as
determined under Code Section 422.
5.1
5.2
5.3
6.1
6.2
6.3
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6.4
6.5
6.6
6.7
6.8
7.1
7.2
7.3
7.4
7.5
Term of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at
the time of grant; provided, however, no Option shall be exercisable later than the seventh (7th) anniversary date of the
Grant Date.
Exercise of Options. Options granted under this Article 6 (Options) shall be exercisable at such times and be subject
to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need
not be the same for each grant or for each Participant.
Options granted under this Article 6 (Options) shall be exercised by the delivery of a notice of exercise to the Company
or an agent designated by the Company in a form specified or accepted by the Committee (setting forth the number of
Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares), or by complying
with any alternative exercise procedure(s) the Committee may authorize.
Payment. A condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of
the Exercise Price. The Exercise Price of any Option shall be payable to the Company in full either: (a) in cash; (b) by
tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at
the time of exercise equal to the Exercise Price (provided that except as otherwise determined by the Committee, the
Shares that are tendered must have been held by the Participant for at least six (6) months (or such other longer period,
if any, as the Committee may permit) prior to their tender to satisfy the Exercise Price if acquired under this Plan or any
other compensation plan maintained by the Company or have been purchased on the open market); (c) by a cashless
(broker-assisted) exercise; (d) by “net exercise,” which is the surrender of Shares for which the Option is exercisable to
the Company in exchange for a distribution of Shares equal to the amount by which the then Fair Market Value of the
Shares subject to the exercised Option exceeds the applicable Exercise Price; (e) by a combination of (a), (b) (c) and/or
(d); or (e) any other method approved or accepted by the Committee in its sole discretion.
Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and
full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant
evidence of book entry Shares or Share certificates in an appropriate amount based upon the number of Shares purchased
under the Option(s).
Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in
United States dollars.
Other Conditions and Restrictions. The Committee may impose such other conditions and/or restrictions on any
Shares acquired pursuant to the exercise of an Option granted under this Article 6 (Options) as it may deem advisable
or desirable. Such conditions and restrictions may include, but shall not be limited to, minimum holding period
requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or
market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable
to such Shares.
Notification of Disqualifying Disposition. If any Participant shall make any disposition of Shares issued pursuant to
the exercise of an ISO under the circumstances described in Code Section 421(b) (relating to certain disqualifying
dispositions), such Participant shall notify the Company of such disposition within ten (10) days thereof.
Article 7. Stock Appreciation Rights
Grant of SARs. Subject to the terms and conditions of this Plan, SARs may be granted to Eligible Individuals in such
number, and upon such terms, and at any time and from time to time as shall be determined by the Committee. However,
unless legitimate business criteria exist (within the meaning of Treas. Reg. Section 1.409A-1(b)(5)(iii)(E)(1)), an
Eligible Individual may only be granted SARs to the extent that such individual provides services to the Company or
an Affiliate of the Company that is part of the Company’s controlled group for purposes of Code Section 409A.
SAR Award Agreement. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant
Price, the term of the SAR, and such other provisions as the Committee shall determine which are not inconsistent with
the terms of this Plan.
Grant Price. The Grant Price for each grant of an SAR shall be determined by the Committee and shall be specified
in the Award Agreement; provided, however, the Grant Price must be at least equal to 100 percent of the FMV of the
Shares as determined on the Grant Date.
Term of SAR. Each SAR granted to a Participant shall expire at such time as the Committee shall determine at the time
of grant; provided, however, no SAR shall be exercisable later than the seventh (7th) anniversary date of the Grant Date.
Exercise of SARs. SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion,
imposes.
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7.6
Settlement of SARs. Upon the exercise of a SAR, a Participant shall be entitled to receive payment from the Company
in an amount determined by multiplying:
7.7
8.1
8.2
8.3
8.4
(a)
(b)
The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price; by
The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares, or any combination thereof,
or in any other manner approved by the Committee in its sole discretion. The Committee’s determination regarding the
form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR.
Other Conditions and Restrictions. The Committee may impose such other conditions and/or restrictions on any
Shares received upon exercise of an SAR granted pursuant to this Plan as it may deem advisable or desirable. Such
conditions and restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares
received upon exercise of an SAR for a specified period of time.
Article 8. Restricted Stock and Restricted Stock Units
Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of this Plan, the Committee,
at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Eligible
Individuals in such amounts as the Committee shall determine. Restricted Stock Units shall be similar to Restricted
Stock except that no Shares are actually awarded to the Eligible Individual on the Grant Date.
Restricted Stock or Restricted Stock Unit Award Agreement. Each Award of Restricted Stock and/or Restricted
Stock Unit shall be evidenced by an Award Agreement that shall specify the Restriction Period, the number of Shares
of Restricted Stock or the number of Restricted Stock Units granted, and such other provisions as the Committee shall
determine which are not inconsistent with the terms of this Plan.
Other Conditions and Restrictions. The Committee may impose such other conditions and/or restrictions, including
restrictive legends, on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to this Plan as it may
deem advisable or desirable. Such conditions and restrictions may include, but shall not be limited to, without limitation,
a requirement that the Participant pay a stipulated purchase price for each Share of Restricted Stock or each Restricted
Stock Unit, restrictions based upon the achievement of specific performance goals, acceleration of a Restriction Period
based on the achievement of performance goals, time-based restrictions on vesting following the attainment of the
performance goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of any
stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed
on the Shares by the Company upon vesting of such Restricted Stock or Restricted Stock Units.
To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of
Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions applicable to such
Shares have been satisfied or lapse. Except as otherwise provided in this Article 8 (Restricted Stock and Restricted
Stock Units), Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by
the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including
satisfaction of any applicable tax withholding obligations), and Restricted Stock Units shall be settled in cash, Shares,
or a combination of cash and Shares as the Committee, in its sole discretion shall determine.
Rights. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extent
permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock granted
hereunder shall have the right to exercise full voting rights with respect to those Shares during the Period of Restriction.
Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, a Participant receiving
a Restricted Stock Award will have, with respect to the Restricted Stock, all of the rights of a shareholder of the
Company holding the class of Shares that is the subject of the Restricted Stock, including, if applicable, the right to vote
the shares and the right to receive any dividends or Dividend-Equivalent Rights pursuant to Article 17 (Dividend-
Equivalent Rights) of this Plan. Dividends paid out of escrow will be treated as remuneration for employment unless an
election has been made under Section 8.5 (Restricted Stock and Restricted Stock Units/Section 83(b) Election). A
Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. A Participant shall
have no dividend rights with respect to any Restricted Stock Units granted hereunder unless the Participant is also
granted Dividend-Equivalent Rights.
8.5
Section 83(b) Election. The Committee may provide in an Award Agreement that the Award of Restricted Stock is
conditioned upon the Participant making or refraining from making an election with respect to the Award under Code
Section 83(b). If a Participant makes an election pursuant to Code Section 83(b) concerning a Restricted Stock Award,
the Participant shall be required to file promptly a copy of such election with the Company.
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9.1
9.2
9.3
9.4
9.5
Article 9. Deferred Stock Units
In General. The Committee may, in accordance with the requirements of Code Section 409A, permit an Employee or
Director to elect to defer receipt of all or a portion of his annual compensation, annual incentive bonus and/or long-term
compensation (other than Options or SARs) (“Deferred Annual Amount”) payable by the Company or an Affiliate and
receive in lieu thereof an Award of elective Deferred Stock Units equal to the number which may be obtained by dividing
(a) the amount of the Deferred Annual Amount, by (b) the Fair Market Value of a Share on the date such compensation
and/or annual bonus would otherwise have been paid (“Deferred Stock Units”). Deferred Stock Units shall be evidenced
by a deferral election form (“Deferral Election Form”) containing such terms and conditions not inconsistent with this
Plan or Code Section 409A as the Committee shall determine, including customary representations, warranties and
covenants with respect to securities law matters. The Deferral Election Form shall serve as the Award Agreement for
the Deferred Stock Units. Upon receipt of a Deferral Election Form, the Company shall establish a notional account
for the Participant and will record in such account the number of Shares underlying the Deferred Stock Units awarded
to the Participant. No Shares will be issued to the Participant at the time Deferred Stock Units are credited in connection
with a Deferral Election Form.
Rights as a Stockholder. The Committee may, in its discretion, provide in the Deferral Election Form related to a
Deferred Stock Unit, that Dividend Equivalent Rights shall be granted with respect to such Deferred Stock Unit, and if
Dividend Equivalent Rights are granted, whether such Dividend Equivalent Rights shall be currently paid to, or credited
to the account of, a Participant credited with Deferred Stock Units. Unless otherwise provided by the Committee in the
Deferral Election Form, (a) any cash dividends or distributions credited to the Participant’s account shall be deemed to
have been invested in additional Deferred Stock Units on the record date established for the related dividend or
distribution in an amount equal to the number which may be obtained by dividing (i) the value of such dividend or
distribution on the record date by (ii) the Fair Market Value of a Share on such date, and such additional Deferred Stock
Units shall be subject to the same terms and conditions as are applicable in respect of the Deferred Stock Units with
respect to which such dividends or distributions were payable, and (b) if any such dividends or distributions are paid in
Shares or other securities, such shares and other securities shall be subject to the same Restriction Period and other
restrictions, if any, as apply to the Deferred Stock Units with respect to which they were paid. A Participant shall not
have any rights as a shareholder in respect of Deferred Stock Units awarded pursuant to this Plan (including, without
limitation, the right to vote on any matter submitted to the Company’s shareholders) until such time as the Shares
attributable to such Deferred Stock Units have been issued to such Participant or his beneficiary.
Vesting. Unless otherwise provided in the Deferral Election Form related to a Deferred Stock Unit, each Deferred Stock
Unit, together with any Dividend–Equivalent Rights credited with respect thereto, shall not be subject to any Restriction
Period and shall be non-forfeitable at all times.
Settlement. Subject to Article 24 (General Provisions), and the last sentence of Section 9.1 (Deferred Stock Units/In
General), unless otherwise provided in the Deferral Election Form related to a Deferred Stock Unit, the Company shall
issue the Shares underlying any of a Participant’s Deferred Stock Units (and any related Dividend-Equivalent Rights)
credited to such Participant’s account under this Plan within ninety (90) days following the date of such Participant’s
Termination Event (or such other Code Section 409A-compliant distribution event as may be elected by the Participant
in the initial Deferral Election Form in accordance with the rules and procedures of the Committee and Code Section
409A). The Committee may provide, or the Participant may elect, in the Deferral Election Form applicable to any
Deferred Stock Unit that, in lieu of issuing Shares in settlement of that Deferred Stock Units, the Fair Market Value of
the Shares corresponding to such Deferred Stock Units shall be paid in cash. For each Share received in settlement of
Deferred Stock Units, the Company shall deliver to the Participant a certificate representing such Share, bearing
appropriate legends, if applicable. Notwithstanding any other provision of this Plan to the contrary, any distribution that
complies with Code Section 409A shall be deemed for all purposes to comply with this Plan requirements regarding the
time and form of distributions.
Further Deferral Elections. If permitted by the Committee in the Deferral Election Form, a Participant may, elect to
further defer receipt of Shares issuable in respect of Deferred Stock Units in accordance with the requirements of Code
Section 409A. Any such redeferral election shall be valid only if: (a) such election does not take effect until at least
twelve (12) months after the date on which it is made; (b) in the case of an election not related to a payment on account
of Disability, death, or an unforeseeable emergency (within the meaning of Code Section 409A), the distribution is
deferred for at least five (5) years from the date such distribution would otherwise have been paid; and (c) any election
related to a distribution at a specified time or pursuant to a fixed schedule (within the meaning of Code Section 409A)
is made at least twelve (12) months prior to the date on which distributions are otherwise scheduled to be paid. Any
redeferral election in accordance with this paragraph shall be irrevocable on the date it is filed with the Committee
unless subsequently changed pursuant to this paragraph.
A-11
10.1
10.2
10.3
10.4
11.1
11.2
11.3
11.4
Article 10. Performance Shares, Performance Share Units, and Performance Units
Grant of Performance Shares, Performance Share Units, and Performance Units. Subject to the terms and
provisions of this Plan, the Committee, at any time and from time to time, may grant Performance Shares, Performance
Share Units, and/or Performance Units to Eligible Individuals in such amounts and upon such terms as the Committee
shall determine.
Value of Performance Shares, Performance Share Units, and Performance Units. Each Performance Share and
each Performance Share Unit shall have an initial value equal to the Fair Market Value of a Share on the Grant Date.
Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. The
Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will
determine the value and/or number of Performance Shares, Performance Share Units, and/or Performance Units that
will be paid out to the Participant.
Earning of Performance Shares, Performance Share Units, and Performance Units. Subject to the terms of
this Plan, after the applicable Performance Period has ended, the holder of Performance Shares, Performance Share
Units, and/or Performance Units shall be entitled to receive payout on the value and number of Performance Shares,
Performance Share Units, and/or Performance Units earned by the Participant over the Performance Period, to be
determined as a function of the extent to which the corresponding performance goals have been achieved. Performance
goals may include minimum, maximum and target levels of performance, with the size of the Award or payout of
Performance Shares, Performance Share Units or Performance Units or the vesting or lapse of restrictions with respect
thereto, based on the level attained. The Committee may also provide in any such Award that any evaluation of
performance against a performance goal may include or exclude events that occur during a Performance Period
(including the income tax effects attributable thereto), singularly or in combination.
Form and Timing of Payment of Performance Shares, Performance Share Units, and Performance Units.
Payment of earned Performance Shares, Performance Share Units, and/or Performance Units shall be as determined by
the Committee and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in its sole
discretion, may pay earned Performance Shares, Performance Share Units, and/or Performance Units in the form of
cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Shares, Performance Share
Units, and/or Performance Units at the close of the applicable Performance Period, but no later than the fifteenth (15th)
day of the third month after the year in which the Performance Period ended. Any Shares may be granted subject to any
restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of
payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
Article 11. Cash-Based Awards and Other Stock-Based Awards
Grant of Cash-Based Awards. Subject to the terms and provisions of this Plan, the Committee, at any time and from
time to time, may grant Cash-Based Awards to Eligible Individuals in such amounts and upon such terms as the
Committee may determine.
Other Stock-Based Awards. The Committee, at any time and from time to time, may grant to Eligible Individuals
other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the
grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee
shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise
of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take
advantage of the applicable local laws of jurisdictions other than the United States.
Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a payment amount or
payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of Shares
or units based on Shares, as determined by the Committee. The Committee may establish performance goals in its
discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Cash-
Based Awards or Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which
the performance goals are met.
Payment of Cash-Based Awards and Other Stock-Based Awards. Payment, if any, with respect to a Cash-Based
Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as
the Committee determines. The Company may pay earned Cash-Based Awards and Other Stock-Based Awards in the
form of cash or in Shares (or in a combination thereof) equal to the value of the earned Award at the close of the
applicable Performance Period, if any, but no later than the fifteenth (15th) day of the third month after the year in which
the Performance Period ended, the award vests (unless a valid deferral election has been made), or the date the payment
was otherwise scheduled to be made.
A-12
Article 12. Nonemployee Director Awards
The Board or a committee of the Board shall determine all Awards to Nonemployee Directors. The terms and conditions of any
grant to any such Nonemployee Director shall be set forth in an Award Agreement. Nonemployee Directors, pursuant to this
Article 12 (Nonemployee Director Awards), may be awarded, or may be permitted to elect to receive, pursuant to the procedures
established by the Board or a committee of the Board, all or any portion of their annual retainer, meeting fees or other fees in
Shares, Restricted Stock, Restricted Stock Units, Deferred Stock Units or other Awards as contemplated by this Plan in lieu of
cash.
13.1
13.2
13.3
13.4
13.5
13.6
13.7
Article 13. Qualified Performance-Based Awards and Performance Measures
In General. The Committee shall have the discretionary authority, consistent with Code Section 162(m), to structure
any Awards granted to Covered Employees under this Plan to qualify as Qualified Performance-Based Awards. Only
the Committee may grant Awards intended to be Qualified Performance-Based Awards. With respect to any Award
intended to be a Qualified Performance-Based Award, this Plan and the applicable Award Agreement shall be
interpreted and operated consistent with that intention.
Options and SARs. Compensation attributable to an Option or SAR is deemed to be a Qualified Performance-Based
Award as long as (a) the Committee grants the Option and the SAR, (b) the Exercise Price and Grant Price, respectively,
are not less than the Fair Market Value, and (c) such Option or SAR complies with the limitations imposed by Section
4.3 (Shares Subject to this Plan and Award Limitations/Annual Award Limits).
Qualified Performance-Based Awards Other Than Options or SARS. With respect to Qualified Performance-Based
Awards that are not intended to be Options or SARs within the scope of Section 13.2 (Qualified Performance-Based
Awards and Performance Measures/Options and SARs), the vesting, exercisability, lapse of restrictions, payment or
grant, as applicable, must be contingent upon the (a) attainment of a pre-established performance goal or measure (or
combination thereof) as specified in this Article 13 (Qualified Performance-Based Awards and Performance Measures),
and (b) certification described
in Section 13.9 (Qualified Performance-Based Awards and Performance
Measures/Certification of Performance).
Pre-Establishment Prerequisite for Qualified Performance-Based Awards Other Than Options or SARs. With
respect to Qualified Performance-Based Awards that are not intended to be Options or SARs within the scope of Section
13.2 (Qualified Performance-Based Awards and Performance Measures/Options and SARs), the Committee shall
establish in writing on or before the Final Pre-Establishment Date (a) the Covered Employees to which objective
performance goals or measures applicable to a given Performance Period will apply, (b) the objective performance goals
or measures (as described in Article 13 (Qualified Performance-Based Awards and Performance Measures)) applicable
to a given Performance Period, and (c) such performance goals shall state, in terms of an objective formula or standard,
the method for computing the amount of compensation payable to the Covered Employee Participant if such
performance goals are obtained. A formula or standard is objective if a third party having knowledge of the relevant
performance results could calculate the amount to be paid to the Covered Employee.
Qualified Performance-Based Awards that have Base Pay or Salary-Based Formula Terms. With respect to any
Qualified Performance-Based Award compensation formula that is based, in whole or in part, on a percentage of salary
or base pay, such salary or base pay must be fixed on or before the Final Pre-Establishment Date for the service period
to which the Qualified Performance-Based Award relates.
Prohibited Discretion. The terms of the objective formula or standard of a Qualified Performance-Based Award must
preclude discretion to increase the amount of compensation payable that would otherwise be due upon attainment of the
goal. However, the Committee shall retain the discretion to reduce or eliminate the amount of any Award payable to
any Participant either on a formula or discretionary basis or any combination, as the Committee determines in its sole
discretion.
Performance Goals for Qualified Performance-Based Awards. The performance goals upon which the payment or
vesting of an Award to a Covered Employee that is intended to qualify as Qualified Performance-Based Awards shall
be limited to the following Performance Measures, which will be derived using the accounting principles generally
accepted in the United States of America (“GAAP”), to the extent applicable, and will be reported or appear in the
Company’s filings with the Securities and Exchange Commission (including, but not limited to, Forms 8-K, 10-Q and
10-K) or the Company’s proxy statement or annual report to shareholders and will be derived from one or more (or any
combination of one or more) of the following:
(a)
(b)
Earnings (loss) per common share from continuing operations;
Earnings (loss) per common share;
A-13
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
(t)
(u)
(v)
(w)
(x)
(y)
(z)
Operating profit (loss), operating income (loss), or income (loss) from operations (as the case may be);
Income (loss) from continuing operations before unusual or infrequent items;
Income (loss) from continuing operations;
Income (loss) before income taxes;
Income (loss) from continuing operations before income taxes;
Income (loss) from continuing operations before extraordinary item and /or cumulative effect of a change in
accounting principle (as the case may be);
Income (loss) before extraordinary item and/or cumulative effect of a change in accounting principle (as the
case may be);
Net income (loss);
Income (loss) before other comprehensive income (loss);
Comprehensive income (loss);
Income (loss) before interest and income taxes (sometimes referred to as “EBIT”);
Income (loss) before interest, income taxes, depreciation and amortization (sometimes referred to as
“EBITDA”);
Any other objective and specific income (loss) category or non-GAAP financial measure that appears as a line
item in the Company’s filings with the Securities and Exchange Commission or the annual report to
shareholders;
Any of items (c) through (o) on a weighted average Share outstanding basis;
Either of items (a) or (b) on a basic basis and any of items (c) through (o) on a basic earnings per share basis,
as basic earnings per share is defined in FASB ASC 260, Earnings Per Share, including authoritative
interpretations or amendments thereof which may be issued from time to time as long as such interpretations
or amendments are utilized on the consolidated statements of operations or statement of operations, as
applicable, or in the notes to the consolidated financial statements;
Either of items (a) or (b) on a diluted basis and any of items (c) through (o) on a diluted earnings per share
basis, as diluted per share is defined in the FASB ASC 260 – Earnings Per Share including authoritative
interpretations or amendments thereof which may be issued from time to time as long as such interpretations
or amendments are utilized on the consolidated statements of operations or statement of operations, as
applicable, or in the notes to the consolidated financial statements;
Common share price;
Total shareholder return expressed on a dollar or percentage basis as is customarily disclosed in the proxy
statement accompanying the notice of annual meetings of shareholders;
Percentage increase in comparable sales, whether on an absolute basis or relative to those publicly held
companies in the Company’s peer group as established by the Committee prior to the Final Pre-Establishment
Date or such later date as permitted under the Code;
Gross profit (loss) or gross margin (loss) (as the case may be);
Economic value added;
Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or
revenue):
Expense targets;
Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and
cash flow return on investment):
(aa)
Productivity ratios;
(bb) Market share;
A-14
(cc)
Customer satisfaction;
(dd) Working capital targets and change in working capital;
(ee)
(ff)
(gg)
(hh)
(ii)
Any of items (a) through (dd) with respect to any subsidiary, Affiliate, business unit, business group, business
venture or legal entity, including any combination thereof, or controlled directly or indirectly by the Company
whether or not such information is included in the Company’s annual report to shareholders, proxy statement
or notice of annual meeting of shareholders;
Any of items (a) through (dd) above may be determined before or after a minority interest’s share as designated
by the Committee;
Any of items (a) through (dd) above with respect to the period of service to which the performance goal relates
whether or not such information is included in the Company’s SEC filings, annual report to shareholders, proxy
statement or notice of annual meetings of shareholders;
Total shareholder return ranking position meaning the relative placement of the Company’s total shareholder
return (as determined in (t) above) compared to those publicly held companies in the Company’s peer group
as established by the Committee prior to the Final Pre-Establishment Date or such later date as permitted under
the Code; or
With respect to items (a), (b), (p), (q) and (r) above, other terminology may be used for each such performance
criteria (including, but not limited to, “Basic EPS,” “income (loss) per common share,” “diluted EPS,” or
“earnings per common share-assuming dilution”) as contemplated by ASC 260 – Earnings Per Share, as
amended, revised or superseded.
To avoid a circular reference, the Committee may establish any of the performance measures above computed without
taking into account an amount reflected therein related to Awards granted under this Plan. The Committee shall
explicitly state such exclusion of Awards when establishing the material terms of the performance measure. If the
performance measure (considered without this exclusion of Awards) reflects an income tax effect of Awards, this
exclusion should reflect the corresponding income tax effects attributable thereto.
13.8
Evaluation of Performance. The Committee, in its sole discretion, in setting the performance goals, may provide in
any Award that any evaluation of performance may include or exclude any of the following events that occur during a
Performance Period (including the income tax effects attributable thereto), singularly or in combination, to the
goals/targets (in Section 13.7 (Qualified Performance-Based Awards and Performance Measures/Performance Goals
for Qualified Performance-Based Awards)) in recognition of the following categories (or any particular item(s) within
the following categories or portion(s) thereof):
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Asset impairments as described in ASC 360 – Property, Plant, & Equipment, as amended, revised or
superseded;
Costs associated with exit or disposal activities as described by ASC 420 – Exit or Disposal Cost Obligations,
as amended, revised or superseded;
Impairment charges (excluding the amortization thereof) related to goodwill or other intangible assets, as
described by ASC 350 – Intangibles – Goodwill and Other, as amended, revised or superseded;
Integration costs related to all merger and acquisition activity of the Company and/or its Affiliates, including,
without limitation, any merger, acquisition, reverse merger, triangular merger, tender offer, consolidation,
amalgamation, arrangement, security exchange, business combination or any other purchase or sale involving
the Company and/or its Affiliates (or foreign equivalent of any of the foregoing);
Transaction costs related to all merger and acquisition activity of the Company and/or its Affiliates, including,
without limitation, any merger, acquisition, reverse merger, triangular merger, tender offer, consolidation,
amalgamation, arrangement, security exchange, business combination or any other purchase or sale involving
the Company and/or its Affiliates (or foreign equivalent of any of the foregoing);
Any profit or loss attributable to the business operations of a specified segment as described in ASC 280 –
Segment Reporting, as amended, revised or superseded;
Any profit or loss attributable to a specified segment as described in ASC 280 – Segment Reporting, as
amended, revised or superseded, acquired during the Performance Period or an entity or entities acquired during
the Performance Period to which the performance goal relates;
A-15
(h)
(i)
(j)
(k)
(l)
Any Tax settlement(s) with a Tax authority;
The relevant Tax effect(s) of Tax laws or regulations, or amendments thereto, that become effective after the
beginning of the Performance Period;
Any unusual in nature, or infrequent in occurrence items, events or transactions described in ASC 225-20 –
Income Statement –Unusual or Infrequently Occurring Items, as amended, revised or superseded;
Any other non-recurring items, any events or transactions that do not constitute ongoing operations, or other
non-GAAP financial measures (not otherwise listed);
Any change in accounting principle as described in ASC 250-10 Accounting Changes and Error Corrections,
as amended, revised or superseded;
(m)
Unrealized gains or losses on investments in debt and equity securities as described in ASC 320 – Investments
– Debt and Equity Securities, as amended, revised or superseded;
(n)
(o)
(p)
(q)
(r)
(s)
(t)
(u)
Any gain or loss recognized as a result of derivative instrument transactions or other hedging activities as
described in ASC 815 – Derivatives and Hedging, as amended, revised or superseded;
Shares-based compensation charges as described in ASC 718 – Compensation – Stock Compensation and ASC
505-50 Equity-Based Payments to Non-Employees, as amended, revised or superseded;
Any gain or loss as reported as a component of other comprehensive income as described in ASC 220 –
Comprehensive Income, as amended, revised or superseded;
Any expense (or reversal thereof) as a result of incurring an obligation for a direct or indirect guarantee, as
described in ASC 460 – Guarantees, as amended, revised or superseded;
Any gain or loss as the result of the consolidation of a variable interest entity as described in ASC 810 -
Consolidation, as amended, revised or superseded;
Any expense, gain or loss (including, but not limited to, judgments, interest on judgments, settlement amounts,
attorneys’ fees and costs, filing fees, experts’ fees, and damages sustained as a result of the imposition of
injunctive relief) as a result of claims, litigation, judgments or lawsuit settlement (including collective actions
or class action lawsuits);
Any charges associated with the early retirement of debt obligations; or
The relevant tax effect(s) of tax laws or regulations, or amendments thereto, that become effective after the
beginning of the applicable Performance Period.
To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that
meets the requirements of Code Section 162(m) for deductibility.
13.9
Certification of Performance. No Qualified Performance-Based Award shall vest, have restrictions lapse, be payable
or granted, as the case may be, any earlier than the Committee certifies in writing (in any manner allowable under Code
Section 162(m)) the extent or level of achievement (if at all) to which the objective performance goals (and other
material terms) applicable to the Performance Period were satisfied. As provided in Section 13.6 (Qualified
Performance-Based Awards and Performance Measures/Prohibited Discretion), the Committee may reduce or
eliminate (but not increase) the amount of any Award otherwise payable to a Participant.
13.10 Death, Disability or Other Circumstances. The Committee may provide in the Award Agreement that an Award
intended to qualify as a Qualified Performance-Based Award under this Article 13 (Qualified Performance-Based
Awards and Performance Measures) shall be payable, in whole or in part, in the event of the Participant’s death or
Disability, a Change in Control, or under other circumstances consistent with the requirements of Code Section 162(m).
13.11 Committee Discretion. In the event that applicable tax and/or securities laws change to permit Committee discretion
to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee
shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that
the Committee determines that it is advisable to grant Awards that shall not qualify as Qualified Performance-Based
Awards, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and base
vesting on Performance Measures other than those set forth in Section 13.1 (Qualified Performance-Based Awards and
Performance Measures/In General).
13.12 Shareholder Approval for Qualified Performance-Based Awards. The material terms of the performance goals with
respect to Qualified Performance-Based Awards must be reapproved by the Company’s shareholders no later than the
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first shareholders meeting that occurs in the fifth (5th) year following the year in which the shareholders previously
approved the provisions of this Article 13 (Qualified Performance-Based Awards and Performance Measures), if
Qualified Performance-Based Awards are to be made under Article 13 (Qualified Performance-Based Awards and
Performance Measures) after the date of such shareholders meeting and if required by Code Section 162(m). The
material terms include the employees eligible to receive Qualified Performance-Based Awards, a description of the
business criteria on which the performance goal is based, and either the maximum amount of compensation that could
be paid to any employee or the formula used to calculate the amount of compensation to be paid to the employee if the
performance goal is attained.
Article 14. Transferability of Awards
During a Participant’s lifetime, his or her Awards shall be exercisable only by the Participant (or by the Participant’s legal
representative in the event of the Participant’s incapacity). Unless otherwise determined by the Committee, Awards shall not be
transferable other than by will or the laws of descent and distribution; no Awards shall be subject, in whole or in part, to
attachment, execution, or levy of any kind; and any purported transfer in violation hereof shall be null and void.
Article 15. Impact of Termination Event on Awards
15.1
In General. Except as otherwise set forth in this Plan or determined by the Committee and set forth in the Award
Agreement, upon a Participant’s Termination Event with or to the Company or an Affiliate, for any reason whatsoever,
except as otherwise set forth in this Article 15 (Impact of Termination Event on Awards), in an Award Agreement or,
with the consent of such individual, as determined by the Committee at any time prior to or after such termination,
Awards granted to such Participant will be treated as follows:
(a)
(b)
(c)
(d)
Any Options and SARs will (i) to the extent not vested and exercisable as of the date of such Termination
Event with or to the Company or an Affiliate, terminate on the date of such termination, and (ii) to the extent
vested and exercisable as of the date of such Termination Event with or to the Company or an Affiliate, remain
exercisable for a period of ninety (90) days following the date of such termination (but in no event beyond the
maximum term of such Award); provided, however, that a Participant may not exercise an ISO more than three
(3) months following the date of such termination for any reason other than death or Disability (but in no event
beyond the maximum term of such Award). Notwithstanding the foregoing, in the event that on the last
business day of the term of an Option (other than an ISO) or SAR (i) the exercise of the Option or SAR is
prohibited by applicable law or (ii) Shares may not be purchased or sold by certain Employees or Nonemployee
Directors due to the “black-out period” of a Company policy or a “lock-up” agreement undertaken in
connection with an issuance of securities by the Company, the term of the Option or SAR shall be automatically
extended for a period of thirty (30) days following the end of the legal prohibition, black-out period or lock-up
agreement.
Any unvested portion of any Restricted Stock, Restricted Stock Units, or Deferred Stock Units will be
immediately forfeited.
Any Performance Shares, Performance Share Units, or Performance Units will be immediately forfeited and
terminate.
Any other Awards, including, but not limited to, Cash-Based Awards and Other Stock-Based Awards, to the
extent not vested will be immediately forfeited and terminate.
15.2
Upon Termination Event in Connection with Death or Disability. Except as otherwise provided in an Award
Agreement, upon a Termination Event in connection with a Participant’s death or Disability, Awards granted to a
Participant will be treated as follows:
(a)
(b)
(c)
(d)
Any Options and SARs will (i) to the extent not vested and exercisable as of the date of such Termination
Event with or to the Company or an Affiliate, immediately vest on the date of such termination, and remain
exercisable for a period of one (1) year following the date of such termination (but in no event beyond the
maximum term of such Award).
Any unvested portion of any Restricted Stock, Restricted Stock Units, or Deferred Stock Units will
immediately vest on the date of such termination.
Any unvested portion of any Performance Shares, Performance Share Units, or Performance Units will
immediately vest on the date of such termination at the target number of Shares or units.
Any other Awards, including, but not limited to, Cash-Based Awards and Other Stock-Based Awards, to the
extent not vested will be immediately forfeited and terminate.
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15.3
Upon Termination Event in Connection with Retirement. Except as otherwise provided in an Award Agreement,
upon a Termination Event in connection a Participant’s Retirement, other than with respect to Qualified Performance-
Based Awards, Awards granted to a Participant will be treated as follows:
(a)
(b)
(c)
(d)
Any Options and SARs will, to the extent not vested and exercisable as of the date of such Termination Event
with or to the Company or an Affiliate, immediately vest on the date of such termination, and remain
exercisable for a period of one (1) year following the date of such termination (but in no event beyond the
maximum term of such Award); provided, however, that a Participant may not exercise an ISO more than three
(3) months following the date of such termination (but in no event beyond the maximum term of such Award).
Any unvested portion of any Restricted Stock, Restricted Stock Units, or Deferred Stock Units will
immediately vest on the date of such termination.
Any Performance Shares, Performance Share Units, or Performance Units will be immediately forfeited and
terminate.
Any other Awards, including, but not limited to, Cash-Based Awards and Other Stock-Based Awards, to the
extent not vested will be immediately forfeited and terminate.
Upon Termination Event in Connection with a Change in Control. Except as otherwise provided in an Award
Agreement, upon a Termination Event in connection with a change in control, Awards granted to a Participant will be
treated as set forth in Article 20 (Change in Control).
Bona Fide Leave. Notwithstanding the fact that a Participant’s employment ostensibly terminates and except as
otherwise provided in an Award Agreement, if the Participant is on a bona fide leave of absence, as defined in Treas.
Reg. Section 1.409A-1(h)(1), then the Participant will be treated as having a continuing employment relationship (and
not as having terminated employment for purposes of this Plan) so long as the period of the leave does not exceed six
(6) months, or if longer, so long as the Participant retains a right to reemployment with the Company or an Affiliate
under an applicable statute or by contract.
Change in Participant Status. If a Participant changes status from an Employee, Director, or Third Party Service
Provider to an Employee, Director, and/or Third Party Service Provider, without interruption, the Committee, in its sole
discretion, may permit any Award held by such Participant at the time of such change in status to be unaffected by such
status change; provided, however, that an ISO held by an Employee shall be treated as a NQSO on the first (1st) day that
is three (3) months after the date that the Participant ceases to be an Employee.
15.4
15.5
15.6
Article 16. Substitution Awards
Awards may be granted under this Plan from time to time in substitution for stock options and other awards held by employees
or directors of other entities who are about to become Employees, whose employer is about to become an Affiliate as the result
of a merger or consolidation of the Company or its Affiliate with another corporation, or the acquisition by the Company or its
Affiliate of substantially all the assets of another corporation, or the acquisition by the Company or its Affiliate of at least 50
percent of the issued and outstanding stock of another corporation as the result of which such other corporation will become a
subsidiary. The terms and conditions of the substitute Awards so granted may vary from the terms and conditions set forth in this
Plan to such extent as the Board at the time of grant may deem appropriate to conform, in whole or in part, to the provisions of
the award in substitution for which they are granted to ensure that the requirements imposed under Code Section 409A and 424,
to the extent applicable, are satisfied.
Article 17. Dividend-Equivalent Rights
Any Participant selected by the Committee may be granted Dividend-Equivalent Rights (in connection with any Award other
than an Option or SAR) based on the dividends declared on Shares that are subject to the Award to which they relate, to be
credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is
exercised, vests or expires, as determined by the Committee. Such Dividend-Equivalent Rights shall be converted to cash or
additional Shares by such formula and at such time and subject to such limitations as may be determined by the Committee.
Notwithstanding the foregoing, if any Award for which Dividend-Equivalent Rights have been granted has its vesting or grant
dependent upon the achievement of one or more performance goals, then the Dividend-Equivalent Rights shall accrue and only
be paid to the extent the Award becomes vested. Under no circumstances may Dividend-Equivalent Rights be granted for any
Option or SAR.
Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently
or successively) to whom any benefit under this Plan is to be paid in case of his death before he receives any or all of such benefit.
Article 18. Beneficiary Designation
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Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee,
and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the
absence of any such beneficiary designation, benefits remaining unpaid or rights remaining unexercised at the Participant’s death
shall be paid to or exercised by the Participant’s executor, administrator, or legal representative.
19.1
19.2
19.3
20.1
Article 19. Rights of Participants
Employment/Service. Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of
the Company or its Affiliates to terminate any Participant’s employment or service on the Board or to the Company or
its Affiliates at any time or for any reason, nor confer upon any Participant any right to continue his employment or
service as a Director or Third Party Service Provider for any specified period of time. Neither an Award nor any benefits
arising under this Plan shall constitute an employment contract with the Company or any of its Affiliates and,
accordingly, subject to Article 3 (Administration) and Article 21 (Amendment, Modification, Suspension, and
Termination), this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of
the Committee without giving rise to any liability on the part of the Company or its Affiliates. Nothing contained herein
shall be deemed to alter the relationship between the Company or an Affiliate and a Participant, or the contractual
relationship between a Participant and the Company or an Affiliate if there is a written contract regarding such
relationship.
Participation. No individual shall have the right to be selected to receive an Award under this Plan, or, having been so
selected, to be selected to receive a future Award.
Rights as a Shareholder. Except as otherwise provided herein or in an Award Agreement, a Participant shall have none
of the rights of a shareholder with respect to Shares covered by any Award until the Participant becomes the record
holder of such Shares.
Article 20. Change in Control
Impact of Event. The Committee may provide in an Award Agreement terms under which Awards may vest and, as
applicable, be exercisable or payable in the event of a Change in Control or in the event of a Participant’s Termination
Event with, upon or within a specified time period after a Change in Control. In addition, in the event of a Change in
Control, the Committee may take one or more of the following actions with respect to any or all outstanding Awards:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Require that Participants surrender their outstanding Options and SARs in exchange for one or more payments
by the Company, in cash or Shares as determined by the Committee, in an amount equal to the amount by
which the then Fair Market Value of the Shares subject to the Participant’s unexercised Options and SARs
exceeds the Exercise Price of the Options or the Grant Price of the SARs, as applicable, including for no
consideration if the then Fair Market Value does not exceed the Exercise Price or Grant Price;
Determine that outstanding Options and SARs that are not exercised shall be assumed by, or replaced with
comparable options or rights by, the surviving entity (or a parent or subsidiary of the surviving entity), and
other outstanding Awards that remain in effect after the Change in Control shall be converted to similar grants
of the surviving entity (or a parent or subsidiary of the surviving entity);
After giving Participants an opportunity to exercise their outstanding Options and SARs, whether vested or
unvested, terminate any or all unexercised Options and SARs at such time as the Committee deems appropriate.
Provide that any Options and SARs outstanding as of the date of such Change in Control and not then
exercisable become fully exercisable to the full extent of the original grant;
Provide that all remaining Restriction Periods be accelerated and any remaining restrictions applicable to any
Restricted Stock Awards lapse and such Restricted Stock become free of all restrictions and become fully
vested and transferable to the full extent of the original grant;
Provide that all remaining Restriction Periods be accelerated and any remaining restrictions applicable to any
Restricted Stock Units lapse and such Restricted Stock Units become free of all restrictions and become fully
vested and redeemed to the full extent of the original grant (i.e., the Restriction Period lapse);
Provide that any performance goal or other condition with respect to any Performance Units, Performance
Shares, and Performance Share Units be deemed to have been satisfied in full, and the Shares or cash subject
to such Award be fully distributable;
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(h)
(i)
Provide that any remaining restrictions, performance goals or other conditions with respect to any Deferred
Stock Units lapse and such Deferred Stock Unit be deemed to have been satisfied in full, and the Shares or
cash subject to such Award be fully distributable; and
Provide that any Cash-Based Awards and Other Stock-Based Awards outstanding as of the date of such Change
in Control and not then vested shall vest to the full extent of the original grant.
Notwithstanding the foregoing, with respect to any Award that provides for the deferral of compensation and is subject
to Code Section 409A, unless the Committee determines otherwise in the Award Agreement, such Award shall be paid,
distributed or settled, as applicable: (i) on the occurrence of a Change in Control if that Change in Control constitutes a
“change in control event” within the meaning of Code Section 409A; or (ii) in accordance with the terms provided in
the Award Agreement if that Change in Control does not constitute a “change in control event” within the meaning of
Code Section 409A.
Article 21. Amendment, Modification, Suspension, and Termination
Amendment, Modification, Suspension, and Termination. Subject to Section 21.3 (Amendment, Modification,
Suspension, and Termination/Awards Previously Granted) and Section 21.5 (Amendment, Modification, Suspension,
and Termination/Repricing Prohibition), the Committee may, at any time and from time to time, alter, amend, modify,
suspend, or terminate this Plan and/or any Award Agreement in whole or in part; provided, however, that no material
amendment of this Plan shall be made without shareholder approval if shareholder approval is required by law,
regulation, or stock exchange rule.
Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. Except to the extent
prohibited under Code Sections 409A and 424, to the extent applicable, the Committee may make adjustments in the
terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (other
than those described in Section 4.4 (Shares Subject to this Plan and Award Limitations/Adjustments in Authorized
Shares) hereof), affecting the Company or the financial statements of the Company or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order
to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under
this Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding
on Participants under this Plan.
Awards Previously Granted. Notwithstanding any other provision of this Plan to the contrary (other than Section 21.4
(Amendment, Modification, Suspension, and Termination/Amendment to Conform to Law)), no termination, amendment,
suspension, or modification of this Plan or an Award Agreement shall adversely affect in any material way any Award
previously granted under this Plan, without the written consent of the Participant holding such Award.
Amendment to Conform to Law. Notwithstanding any other provision of this Plan to the contrary, the Board of
Directors may amend this Plan or an Award Agreement, to take effect retroactively or otherwise, as deemed necessary
or advisable for the purpose of (a) conforming this Plan or an Award Agreement to any present or future law relating to
plans of this or similar nature (including, but not limited to, Code Section 409A to the extent applicable), and to the
administrative regulations and rulings promulgated thereunder; (b) permitting the Company or its Affiliates to receive
a tax deduction under applicable law; or (c) avoiding an expense charge to the Company or its Affiliates. By accepting
an Award under this Plan, a Participant consents to any amendment made pursuant to this Section 21.4 (Amendment,
Modification, Suspension, and Termination/Amendment to Conform to Law) to any Award granted under this Plan
without further consideration or action.
21.1
21.2
21.3
21.4
21.5
Repricing Prohibition. Except to the extent (a) approved by the Company’s shareholders, or (b) provided in Section
4.4 (Shares Subject to this Plan and Award Limitations/Adjustments in Authorized Shares), the Committee shall not
have the power or authority to reduce, whether through amendment or otherwise, the Exercise Price or the Grant Price
of any outstanding Option or SAR or to grant any new Award, or make any cash payment, in substitution for or upon
the cancellation of Options or SARs previously granted.
21.6
Reload Prohibition. Regardless of any other provision of this Plan, no Participant will be entitled to (and no Committee
discretion may be exercised to extend to any Participant) an automatic grant of additional Awards in connection with
the exercise of an Option or otherwise.
22.1
Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to
remit to the Company, up to the maximum statutory amount to satisfy federal, state, provincial, and local taxes, domestic
or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
Article 22. Withholding
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22.2
As soon as practicable after the date as of which the amount first becomes includible in the gross income of the
Participant (but no later than the last business day of the calendar quarter during which the amount first becomes
includible in gross income), the Participant shall pay to the Company or an Affiliate (or other entity identified by the
Committee), or make arrangements satisfactory to the Company or other entity identified by the Committee regarding
the payment of any federal, state, provincial, or local taxes of any kind (including any employment taxes) required by
law to be withheld with respect to such income. The obligations of the Company under this Plan shall be conditional on
such payment or arrangements, and the Company and its Affiliates shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment otherwise due to the Participant.
Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of
restrictions on Restricted Stock and Restricted Stock Units, or upon the achievement of performance goals related to
Performance Shares, or any other taxable event arising as a result of an Award granted hereunder, unless the Participant
has elected, with the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by paying
the taxes in cash or transferring to the Company Shares owned by the Participant that would satisfy the statutory total
tax (but no more than such maximum) with respect to the Company’s withholding obligation, the Participant shall be
deemed to have elected to have the Company withhold a number of Shares that would satisfy the statutory total tax (but
no more than such maximum) that could be imposed on the transaction. All such elections shall be irrevocable, made
by the Participant in a manner approved by the Committee, and shall be subject to any restrictions or limitations that the
Committee, in its sole discretion, deems appropriate.
Article 23. Successors
All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to
the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business and/or assets of the Company. All obligations imposed upon a Participant,
and all rights granted to the Company hereunder, shall be binding upon each Participant’s heirs, legal representatives, and
successors.
24.1
24.2
24.3
24.4
24.5
Article 24. General Provisions
Recovery of Compensation. Any Award issued under this Plan will be subject to any clawback policy developed by
the Board or the Committee that is consistent with applicable law, whether such Award was granted before or after the
effective date of any such clawback policy.
Legend. The certificates for Shares may include any legend which the Committee deems appropriate to reflect any
restrictions on transfer of such Shares.
Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall
include the feminine, the singular shall include the plural, and the plural shall include the singular.
Severability. In the event that any one or more of the provisions of this Plan shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
Compliance with Legal and Exchange Requirements. This Plan, the granting and exercising of Awards thereunder,
and any obligations of the Company under this Plan, shall be subject to all applicable federal and state laws, rules, and
regulations, and to such approvals by any regulatory or governmental agency as may be required, and to any rules or
regulations of any stock exchange on which the Shares are listed. The Company, in its discretion, may postpone the
granting and exercising of Awards, the issuance or delivery of Shares under any Award or any other action permitted
under this Plan to permit the Company, with reasonable diligence, to complete such stock exchange listing or registration
or qualification of such Shares or other required action under any federal or state law, rule, or regulation and may require
any Participant to make such representations and furnish such information as it may consider appropriate in connection
with the issuance or delivery of Shares in compliance with applicable laws, rules, and regulations. The Company shall
not be obligated by virtue of any provision of this Plan to recognize the exercise of any Award or to otherwise sell or
issue Shares in violation of any such laws, rules, or regulations, and any postponement of the exercise or settlement of
any Award under this provision shall not extend the term of such Awards. Neither the Company nor its Affiliates, or
the directors or officers of any such entities, shall have any obligation or liability to a Participant with respect to any
Award (or Shares issuable thereunder) that shall lapse because of such postponement.
24.6
No Limitation on Compensation. Nothing in this Plan shall be construed to limit the right of the Company to establish
other plans or to pay compensation to its employees, in cash or property, in a manner which is not expressly authorized
under this Plan.
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24.7
24.8
Investment Representations. The Committee may require any individual receiving Shares pursuant to an Award under
this Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any
present intention to sell or distribute such Shares.
Employees Based Outside of the United States. Notwithstanding any provision of this Plan to the contrary, in order
to comply with the laws in other countries in which the Company or its Affiliates operate or have Employees, Directors
or Third Party Service Providers, the Committee, in its sole discretion, shall have the power and authority to:
(a)
(b)
(c)
(d)
(e)
Determine which Affiliates shall be covered by this Plan;
Determine which Employees, Directors and/or Third Party Service Providers outside the United States are
eligible to participate in this Plan;
Modify the terms and conditions of any Award granted to Employees, Directors and/or Third Party Service
Providers outside the United States to comply with applicable foreign laws;
Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions
may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under
this Section 24.8 (General Provisions/Employees Based Outside of the United States) by the Committee shall
be attached to this Plan document as appendices; and
Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with
any necessary local government regulatory exemptions or approvals.
Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that
would violate applicable law.
24.9
Uncertificated Shares. To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares,
the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or
the rules of any stock exchange.
24.10 Unfunded Plan. It is intended that this Plan be an “unfunded” plan for incentive compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations created under this Plan to deliver Shares
or make payments; provided, however, that, unless the Committee otherwise determines, the existence of such trusts or
other arrangements is consistent with the “unfunded” status of this Plan and Participants shall have no right, title, or
interest whatsoever in or to any investments that the Company or its Affiliates may make to aid it in meeting its
obligations under this Plan.
24.11 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to this Plan or any Award. The
Committee shall determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares
or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated (i.e., rounded down to
the nearest whole Share).
24.12 No Impact on Benefits. Except as may otherwise be specifically stated under any employee benefit plan, policy or
program, no amount payable in respect of any Award shall be treated as compensation for purposes of calculating a
Participant’s right under any such plan, policy or program.
24.13 Compliance with Code Section 409A.
(a)
In General. This Plan is intended to be administered in a manner consistent with the requirements, where
applicable, of Code Section 409A. All Award Agreements shall be construed and administered such that the
Award either (i) qualifies for an exemption from the requirements of Code Section 409A or (ii) satisfies the
requirements of Code Section 409A. To the extent that any provision of this Plan or an Award Agreement
would cause a conflict with the requirements of Code Section 409A, or would cause the administration of this
Plan or an Award to fail to satisfy the requirements of Code Section 409A, such provision shall be deemed
amended to the extent practicable to avoid adverse tax consequences under Code Section 409A for the
Participant (including his or her beneficiaries). In no event shall a Participant, directly or indirectly, designate
the calendar year in which payment, distribution or settlement, as applicable, of an Award subject to Code
Section 409A is made, except in accordance with Code Section 409A. Notwithstanding any provision in this
Plan to the contrary, neither the Company nor the Committee shall have any liability to any person in the event
such Code Section 409A applies to any Award in a manner that results in adverse tax consequences for the
Participant or any of his or her beneficiaries.
(b)
Six-Month Delay for Specified Employees. Notwithstanding anything in this Plan or an Award Agreement
to the contrary, if a Participant is a “specified employee,” within the meaning of Code Section 409A and as
determined under the Company’s policy for determining specified employees, on the date of his “separation
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from service”, within the meaning of Code Section 409A, the distribution, payment or settlement, as applicable,
of all of Participant’s Awards that are both (i) subject to Code Section 409A and (ii) distributable, payable or
settleable, as appropriate, on account of a separation from service, shall be postponed for six (6) months
following the date of the Participant’s separation from service. If a distribution, payment or settlement, as
applicable, is delayed pursuant to this paragraph, the distribution, payment or settlement, as applicable, shall
be made within the thirty (30)-day period following the first (1st) business day of the seventh (7th) month
following the Participant’s separation from service; provided that if the Participant dies during such six (6)-
month period, any postponed amounts shall be paid within ninety (90) days of the Participant’s death. This
distribution, payment or settlement, as applicable, shall include the cumulative amount of any amount that
could not be paid or provided during such period.
(c)
(d)
Elective Deferrals. No Participant elective deferrals or re-deferrals of compensation (as defined under Code
Section 409A and/or guidance thereto) other than in regard to Deferred Stock Units are permitted under this
Plan. Instead, any such elective deferrals of compensation shall only be permitted pursuant to the Company’s
nonqualified deferred compensation plan. To the extent elective deferrals or re-deferrals are permitted under
this Plan, such elections shall be made in accordance with the requirements of Code Section 409A and the
rules, procedures and forms specified from time to time by the Committee.
Mandatory Deferrals. If, at the grant of an Award under this Plan, the Committee decides that the payment
of compensation with respect to such Award shall be deferred compensation within the meaning of Code
Section 409A, then, the Committee shall set forth the time and form of payment in the Award Agreement in a
manner consistent with Code Section 409A.
(e)
Timing of Payments. Payment(s) of compensation that is subject to Code Section 409A shall only be made in
the form and upon an event or at a time permitted under Code Section 409A.
24.14 Nonexclusivity of this Plan. The adoption of this Plan shall not be construed as creating any limitations on the power
of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.
24.15 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect
the Company’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its
capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its
business or assets; or (b) limit the right or power of the Company or an Affiliate to take any action which such entity
deems to be necessary or appropriate.
24.16 Headings and Captions. The headings and captions herein are provided for reference and convenience only, shall not
be considered part of this Plan, and shall not be employed in the construction of this Plan.
24.17 Offset. Subject to the requirements of Code Section 409A, if applicable, (a) any amounts owed to the Company or an
Affiliate by a Participant of whatever nature up to the fullest extent permitted by applicable law may be offset by the
Company from the value of any Award to be transferred to the Participant, and (b) no Shares, cash or other thing of
value under this Plan or an Award Agreement shall be transferred unless and until all disputes between the Company
and the Participant have been fully and finally resolved and the Participant has waived all claims to such against the
Company and its Affiliates. However, no waiver of any liability (or the right to apply the offset described in this Section
24.17 (General Provisions/Offset) may be inferred because the Company pays an Award to a Participant with an
outstanding liability owed to the Company or an Affiliate.
24.18 Governing Law. This Plan and each Award Agreement shall be governed by the laws of the State of Texas, excluding
any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to
the substantive law of another jurisdiction. This Plan shall be construed to comply with all applicable law and to avoid
liability (other than a liability expressly assumed under this Plan or an Award Agreement) to the Company, an Affiliate
or a Participant. Recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction and venue
of the federal or state courts located in Harris County, Texas, to resolve any and all issues that may arise out of or relate
to this Plan or any related Award Agreement.
24.19 Delivery and Execution of Electronic Documents. To the extent permitted by applicable law, the Company may (a)
deliver by email or other electronic means (including posting on a web site maintained by the Company or an Affiliate
or by a third party under contract with the Company or an Affiliate) all documents relating to this Plan or any Award
thereunder (including without limitation, prospectuses required by the Securities and Exchange Commission) and all
other documents that the Company is required to deliver to its security holders (including without limitation, annual
reports and proxy statements), and (b) permit Participants to electronically execute applicable Plan documents
(including, but not limited to, Award Agreements) in a manner prescribed by the Committee.
A-23
24.20 No Representations or Warranties Regarding Tax Affect. Notwithstanding any provision of this Plan to the contrary,
the Company, its Affiliates, the Board, and the Committee neither represent nor warrant the tax treatment under any
federal, state, local or foreign laws and regulations thereunder (individually and collectively referred to as the “Tax
Laws”) of any Award granted or any amounts paid to any Participant under this Plan including, but not limited to, when
and to what extent such Awards or amounts may be subject to tax, penalties and interest under the Tax Laws.
24.21
Indemnification. To the maximum extent permitted under applicable law and the Company’s articles of incorporation
and bylaws, each person who is or shall have been a member of the Board, a committee appointed by the Board, or an
officer of the Company to whom authority was delegated in accordance with Article 3 (Administration), shall be
indemnified and held harmless by the Company against and from any (a) loss, cost, liability, or expense (including
attorneys’ fees) that may be imposed upon or reasonably incurred by him or her in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason
of any action taken or failure to act under this Plan or any Award Agreement, and (b) from any and all amounts paid by
him or her in settlement thereof, with the Company’s prior written approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her; provided, however, that he or she shall give the
Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company’s articles of incorporation or bylaws, by
contract, as a matter of law, or otherwise, or under any power that the Company may have to indemnify them or hold
them harmless.
24.22 No Obligation to Disclose Material Information. Except to the extent required by applicable securities laws, none of
the Company, an Affiliate, the Committee, or the Board shall have any duty or obligation to affirmatively disclose
material information to a record or beneficial holder of Shares or an Award, and such holder shall have no right to be
advised of any material information regarding the Company or any Affiliate at any time prior to, upon or in connection
with receipt or the exercise or distribution of an Award. The Company makes no representation or warranty as to the
future value of the Shares that may be issued or acquired under this Plan.
24.23 Entire Agreement. Except as expressly provided otherwise, this Plan and any Award Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that in the event of any inconsistency between
this Plan and any Award Agreement, the terms and conditions of this Plan shall control.
*****
A-24
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
(Mark One)
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 28, 2017
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. 1-14035
Stage 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) 579-2302
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock ($0.01 par value)
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
No
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 will not 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 or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
As of July 29, 2016 (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 $154,962,842
(based upon the closing price of the registrant’s common stock as reported by the New York Stock Exchange on July 29, 2016).
As of March 21, 2017, there were 27,168,594 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement relating to the registrant’s Annual Meeting of Shareholders to be held on June 1, 2017,
which will be filed within 120 days of the end of the registrant’s fiscal year ended January 28, 2017 (“Proxy Statement”), are
incorporated by reference into Part III of this Form 10-K to the extent described therein.
2
TABLE OF CONTENTS
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
PART III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
PART IV
Item 16.
Form 10-K Summary
Signatures
Index to Consolidated Financial Statements of Stage Stores, Inc.
Page
4
11
16
17
18
18
19
22
26
39
39
39
39
40
41
42
42
42
42
43
46
47
F-1
3
References 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 of the following calendar year. For example, a reference to “2014” is a reference to the fiscal year ended
January 31, 2015, “2015” is a reference to the fiscal year ended January 30, 2016 and “2016” is a reference to the fiscal year
ended January 28, 2017. 2014, 2015 and 2016 each consisted of 52 weeks. Similarly, references to a particular quarter are to
Stage Stores, Inc.’s fiscal quarters.
ITEM 1. BUSINESS
Our Business
PART I
Stage Stores, Inc. and its subsidiary (“we,” “us” or “our”) operate specialty department stores primarily in small and
mid-sized towns and communities. We provide customers a welcoming and comfortable shopping experience in our stores and
through our direct-to-consumer business. Our merchandise assortment is a well-edited selection of moderately priced brand
name and private label apparel, accessories, cosmetics, footwear and home goods. As of January 28, 2017, we operated 798
specialty department stores in 38 states under the BEALLS, GOODY’S, PALAIS ROYAL, PEEBLES and STAGE nameplates
and a direct-to-consumer business.
Our History
Stage Stores, Inc. was formed in 1988 when the management of Palais Royal, together with several venture capital
firms, acquired the family-owned Bealls and Palais Royal chains, both of which were originally founded in the 1920s. At the
time of the acquisition, Palais Royal operated primarily larger stores, located in and around the Houston metropolitan area,
while Bealls operated primarily smaller stores, principally located in rural Texas towns.
Our Market and Target Customer
Our 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 a shopping experience that
brings her style, value and inspiration where she
Competition
The retail industry is highly competitive, with competition coming from both brick-and-mortar stores as well as e-
commerce. We view our ability to provide our customers the options of shopping both in store and online, particularly in
underserved markets, as a competitive advantage. Additional competitive advantages over local retailers and small regional
chains in the small to mid-sized communities include (i) economies of scale (ii) strong vendor relationships (iii) a widely used
private label credit card and (iv) extensive experience in small and mid-size markets. In larger markets where we compete
against other national department store chains, we distinguish ourselves by striving to offer a high level of customer service and
the advantage of generally being in neighborhood locations with convenient parking and easy access.
Our Competitive Strengths
We believe the following strengths differentiate us from our competitors and are key drivers of our success:
Unique Real Estate Positioning and Strong Store Economics. Our stores are predominantly located in small towns and
communities with populations of less than 150,000 people. We predominantly lease our locations and are generally secondary
users of space, allowing us to secure advantageous occupancy terms. Our average store of 18,000 square feet creates an
opportunity to offer a selection that feels comprehensive and curated in an inviting environment.
4
Trend-Right, Brand Name Merchandise Delivered at a Compelling Value. Our stores and direct-to-consumer business
carry a broad selection of trend-right, brand name apparel, accessories, cosmetics, footwear and home goods for the entire
family. Our buyers identify and purchase nationally recognized, quality brands and trend-right styles our customers find
compelling from respected brands such as Adidas, Calvin Klein, Carters, Chaps, Clinique, Dockers, Estee Lauder, Izod, Levi’s,
Nautica, Nike, Nine West and Skechers. Our value proposition for moderately priced, brand name merchandise includes
discount and promotional offers. We believe our use of discount and promotional offers generates customer excitement and
drives loyalty and repeat shopping.
Experienced Management Team with a Disciplined Operating Philosophy. Our senior management team has
extensive experience across a wide range of disciplines in the retail industry, including merchandising, marketing, store
operations, human resources, information systems and finance. Our management team has built a solid operating foundation
based on sound retail principles and is focused on taking care of our customers and providing great merchandise and a great
experience.
Stores
Store Openings and Closures. We did not open any new stores during 2016 and do not plan to open new stores in
2017. 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 the potential to meet our sales productivity and profitability standards. Since then, we have closed 60
stores, including 37 stores during 2016. We expect to close approximately 100 stores in total through 2019, with 15 to 20 store
closures anticipated for 2017. We continually review the profitability of each store and will consider closing a store if the
expected store performance does not meet our financial hurdle rates. The closure of these stores is expected to improve our
ability to effectively allocate capital, deliver higher sales productivity and be accretive to earnings.
Expansion, Relocation and Remodeling. During 2016, we completed 86 store remodels, relocations and expansions.
Since we began our store remodel initiative in 2015, we have updated over 200 stores representing approximately 45% of our
sales base. We believe that our investment in these stores improves the store environment and helps us create an inviting and
differentiated shopping experience. Our store remodels are designed to create a bright, fun and comfortable environment and
include upgrades ranging from improved lighting, flooring, paint, fixtures, fitting rooms, visual merchandising and signage, to
more extensive expansion projects.
Store count and selling square footage by nameplate are as follows:
January 30,
2016
205
250
52
193
134
834
Number of Stores
2016 Activity
Net Changes(a)
(1)
(26)
(3)
(6)
—
(36)
January 28,
2017
204
224
49
187
134
798
Bealls
Goody's
Palais Royal
Peebles
Stage
Total
January 30,
2016
January 28,
2017
4,119
3,949
Selling Square Footage (in thousands)
2016 Activity
Net Changes
43
(480)
(47)
(94)
36
(542)
15,130
1,110
2,429
3,523
4,162
3,469
1,063
3,429
2,465
14,588
(a) One store, which had been temporarily closed and was not included in the store count as of January 30, 2016, was relocated
and reopened in 2016.
5
Utilizing 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 19% of our stores are located in communities with populations between
50,000 and 150,000 people. The remaining 16% of our stores are located in higher-density markets with populations greater
than 150,000 people, such as Houston, San Antonio and Lubbock, Texas. The store count and selling square footage by market
area population are as follows:
Population
Less than 50,000
50,000 to 150,000
Greater than 150,000
Total
January 30,
2016
538
167
129
834
Number of Stores
2016 Activity
Net Changes(a)
(15)
(18)
(3)
(36)
January 28,
2017
Selling Square Footage (in thousands)
2016 Activity
Net Changes
January 30,
2016
January 28,
2017
523
149
126
798
8,717
3,412
3,001
15,130
(165)
(310)
(67)
(542)
8,552
3,102
2,934
14,588
(a) One store, which had been temporarily closed and was not included in the store count as of January 30, 2016, was relocated
and reopened in 2016.
Direct-to-Consumer
In our ongoing effort to enhance the customer experience, we are focused on providing customers with a seamless
experience across our channels. Our direct-to-consumer business, which consists of our e-commerce website and Send
program, enables us to reach customers with additional convenience and assortment of merchandise, acquire customers beyond
our local markets, and further build our brand. Our e-commerce website, which we launched in 2010, features a broader
assortment of the merchandise categories found in our stores, as well as additional product offerings. Our in-store Send
program allows customers to have merchandise shipped directly to their homes if the preferred size or color is not available in
their local store.
As our omni-channel strategy continues to mature, it is increasingly difficult to distinguish between store sales and direct-
to-consumer sales. Below are few examples of how our stores and direct-to-consumer business intersect:
•
Stores increase online sales by providing customers opportunities to view, touch and/or try on physical merchandise
before ordering online.
• Many customers preview our merchandise online before making a purchase in our stores.
• Most online purchases can easily be returned in our stores.
•
In 2016, we introduced buy online, ship to store, which gives our customers the option to have online purchases
shipped for free to a local store.
Style Circle Rewards® can be redeemed online or in stores regardless of where they are earned.
•
• Customers may apply coupons from our website or mobile app to their purchase when they check out in the store.
• Online orders may be shipped from one of our distribution centers, a store, a direct ship vendor or any combination of
the above.
Providing our customers the opportunity to engage with us through multiple channels is part of a cohesive business
strategy that helps us build our brand loyalty. Customers that shop with us both online and in stores spend, on average, 3 times
more than customers that shop only in our stores.
6
Merchandising
We offer a well-edited selection of moderately priced, branded merchandise within distinct merchandise categories of
women’s, men’s and children’s apparel, accessories, cosmetics, footwear and home goods. Our direct-to-consumer business
allows us to extend the breadth of our assortments and offer additional products.
The following table sets forth the distribution of net sales among our various merchandise categories:
Merchandise Category
2016
Fiscal Year
2015
2014
Women’s
Men’s
Children's
Footwear
Accessories
Cosmetics/Fragrances
Home/Gifts/Other
37%
17
12
13
7
10
4
100%
38%
17
11
13
7
10
4
100%
38%
17
11
13
8
9
4
100%
Merchandise selections reflect current styles and trends and merchandise mix may also vary from store to store to
accommodate differing demographic, regional and climate characteristics. Our buying and planning team uses technology tools
such as size pack optimization and store level markdown optimization. These tools allow us to better fulfill customer needs by
tailoring size assortments by store and by being more targeted in how we markdown merchandise by climate and store.
Approximately 82% of sales consist of nationally recognized brands such as Adidas, Calvin Klein, Carters, Chaps,
Clinique, Dockers, Estee Lauder, G by Guess, Izod, Jessica Simpson, Levi’s, Nike, Nine West and Skechers, while the
remaining 18% 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 and exclusive 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 avenue for growth.
Merchandise Distribution
We currently distribute all merchandise to our stores through distribution centers located in Jacksonville, Texas, South
Hill, Virginia and Jeffersonville, 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 centers are equipped with modern sortation equipment which enables us to meet specific store
merchandise assortment needs. The majority of stores receive merchandise within three days of shipment from the distribution
centers. We utilize third party contract carriers to deliver merchandise from the distribution centers to our stores.
Direct-to-consumer orders are predominantly filled from our distribution center in Jacksonville, Texas and to a lesser
extent from our Jeffersonville, Ohio distribution center, select stores and directly from our vendors.
7
Marketing
Our marketing strategy is designed to establish and reward brand loyalty. The strategy supports each store’s position as
the destination for desirable styles and nationally recognized brands at an attractive value in a comfortable and welcoming
environment. Our marketing strategy leverages (i) consumer insight from brand and customer research, (ii) identified customer
purchase history and (iii) emerging technology and trends in retail marketing.
We use a multi-media advertising approach, including broadcast media, digital media, mobile media, local newspaper
inserts and direct mail. In addition, we leverage our private label credit card to create strong customer loyalty through
compelling offers, dedicated events for cardholders, and updates on the latest deliveries in our stores.
We consider our private label credit card program and Style Circle Rewards®, our tender-neutral loyalty program, to
be vital components of our business because these loyalty programs (i) enhance customer loyalty, (ii) allow us to identify and
regularly contact our best customers and (iii) create a comprehensive database that enables us to implement targeted and
personalized marketing messages. Private label credit card purchases represented 47%, 44% and 40% of our sales in 2016,
2015 and 2014, respectively. In the third quarter of 2016, we launched Style Circle Rewards® to encourage and reward
customer loyalty for both private label credit cardholders and non-cardholders. These loyalty programs allow us to better
understand and respond to our customers’ shopping habits and are powerful tools to drive higher transaction value and
frequency of visits.
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 connection with our private label merchandise. We regard our trademarks
and their protection as important to our success.
We maintain a connection to the communities we serve and operate a locally based giving campaign called 30 Days of
Giving under our Community Counts program. In 2016, through our Community Counts program and other efforts like our
Bears that Care program, we helped raise approximately $2.1 million for the communities we serve.
Customer Service
We strive to provide exceptional customer service through conveniently located stores staffed with well-trained and
motivated sales associates. In order to ensure consistency of execution, each sales associate is evaluated based on the
attainment of specific customer service standards, such as offering a friendly greeting, providing prompt assistance, helping
open private label credit card accounts, thanking customers and inviting return visits. We also conduct customer satisfaction
surveys to measure and monitor attainment of customer service expectations. The results of customer surveys are used to
provide feedback to reinforce and improve customer service. To further reinforce our focus on customer service, we have
various programs in place to recognize our sales associates for providing outstanding customer service.
8
Information Systems
We 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 merchandise assortments for each store, based on specific characteristics and
recent sales trends. Our replenishment/fulfillment system allows us to maintain planned levels 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 three
distribution 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 on inventory levels and sales history to maximize revenue and profitability. Our assortment planning
system allows us to create customer-centric assortments aligned to sales strategies. The system also facilitates cleaner seasonal
transitions and fresher merchandise in stores. We continue to expand the utilization and effectiveness of our merchandise
planning system in order to maximize the generation of sales and gross margin. In 2016, we implemented new systems to
support our Style Circle Rewards® loyalty program and omni-channel order management, and we introduced buy online, ship
to store.
We utilize a point-of-sale (“POS”) platform with bar code scanning, electronic credit authorization, instant credit, a
returns database and gift card processing in all our stores. The POS platform allows us to capture customer specific sales data
for use in our merchandising, marketing and loss prevention systems, while servicing our customers. The POS platform also
manages coupon and deal-based pricing, which streamlines the checkout process and improves store associate adherence to
promotional markdown policies.
Our Employees
At January 28, 2017, we employed approximately 12,400 hourly and salaried employees. Employee levels vary
during the year as we traditionally hire additional sales associates and increase the hours of part-time sales associates during
peak seasonal selling periods. We consider our relationship 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 higher during the last quarter of the fiscal year (November through January). The fourth quarter usually
accounts for approximately 32% of our annual sales, with each of the other quarters accounting for approximately 22% to 24%.
Working capital requirements fluctuate during the year as well and generally reach their highest levels during the third and
fourth quarters.
9
Available Information
We make available, free of charge, through the “Investor Relations” section of our website (www.stagestoresinc.com)
under the “Financial Reports” caption, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended (“Exchange Act”) as soon as reasonably practicable after we file such material with, or furnish it to, the
Securities and Exchange Commission (“SEC”). In this Form 10-K, we incorporate by reference certain information from parts
of our Proxy Statement for our 2017 Annual Meeting of Shareholders (“Proxy Statement”).
Also in the “Investor Relations” section of our website (www.stagestoresinc.com) under the “Corporate Governance”
and “Financial Reports” captions, the following 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; Chief Executive Officer and Chief
Financial Officer certifications related to our SEC filings; and transactions in our securities by our directors and executive
officers. 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 Chief Executive Officer, Chief Financial Officer, Controller and other individuals performing
similar functions, and contains provisions specifically applicable to the 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 extent applicable 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 request to our Secretary. The contents of our websites are not part of this report.
10
ITEM 1A. RISK FACTORS
Cautionary Statement Concerning Forward-Looking Statements for Purposes of the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995
The Private Securities Litigation Reform Act of 1995 (“Act”) provides a safe harbor for forward-looking statements to
encourage companies to provide prospective information, so long as those statements are identified as forward-looking and are
accompanied by meaningful cautionary statements identifying important factors that may cause actual results to differ
materially from those discussed in the statements. We wish to take advantage of the “safe harbor” 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 the protection 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 of
management as to future occurrences and trends, including statements expressing optimism or pessimism about future
operating results or events and projected 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 be inaccurate and could cause actual results to differ materially from those in the forward-looking
statements. Forward-looking statements that are made herein and 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 and Capital Resources”), the demand for apparel, and other factors. The demand for apparel and sales
volume can be affected by significant changes in economic conditions, including an economic downturn, employment levels in
our markets, consumer confidence, energy and gasoline prices, the value of the Mexican peso, and other factors influencing
discretionary consumer spending. Other factors affecting the demand for apparel and sales volume include unusual weather
patterns, an increase in the level of competition, competitors’ marketing strategies, changes in fashion trends, changes in the
average cost of merchandise purchased for resale, availability of product on normal payment terms and the failure to achieve
the expected results of our merchandising and marketing plans as well as our store opening or relocation plans. Additional
assumptions, factors and risks concerning future conditions are discussed in the Risk Factors 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 and Current
Reports on Form 8-K. Most of these factors are difficult to predict accurately and are generally beyond our control.
Forward-looking statements are and will be based upon management’s then-current views and assumptions regarding
future events and operating performance, and are applicable only as of the dates of such statements. Although management
believes the expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of
our knowledge, forward-looking statements, by their nature, involve risks, uncertainties and other factors, any one or a
combination of which could 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 we make 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 which could materially affect our business, financial condition, results of operations, or liquidity.
Described below are certain risk factors that management believes are applicable to our business and the industry in which we
operate. There may also be additional risks that are presently immaterial or unknown.
11
If we are unable to successfully execute our strategies, our operating performance may be significantly
impacted. There is a risk that we will be unable to meet our operating performance targets and goals in the future if our
strategies and initiatives are unsuccessful. Our ability to develop and execute our strategic plan and to execute the business
activities associated with our strategic and operating plans, may impact our ability to meet our operating performance targets.
An economic downturn or decline in consumer confidence may negatively impact our business and financial
condition. Our results of operations are sensitive to changes in general economic and political conditions that impact consumer
discretionary spending, such as employment levels, taxes, energy and gasoline prices and other factors influencing consumer
confidence. We have extensive operations in the South Central, Southeastern and Mid-Atlantic states. Many stores are located
in small towns and rural environments that are substantially dependent upon the local economy. We also have concentrations of
stores in areas where the local economy is heavily dependent on the oil and gas industry, particularly in portions of Texas,
Louisiana, Oklahoma, and New Mexico. A decline in crude oil prices may negatively impact employment in those
communities, resulting in reduced consumer confidence and discretionary spending. Additionally, approximately 3% of our
stores contributing approximately 6% of our 2016 sales are located in cities that either border Mexico or are in close proximity
to Mexico. A devaluation of the Mexican peso will reduce the purchasing power of those customers who are citizens of
Mexico. In such an event, revenues attributable to these stores could be reduced. In 2015 and 2016, we experienced pressure on
our business in areas that are heavily dependent on the 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 as Texas 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 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,
including natural disasters, such as hurricanes and tornadoes. Any unusual or severe weather, especially in states such as Texas
and Louisiana, may have a material and adverse impact on our business, financial condition and cash flows. In addition, our
business, financial condition and cash flow may be adversely affected if the businesses of our key vendors or their merchandise
manufacturers, shippers, carriers and other merchandise 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.
Our failure to anticipate and respond to changing customer preferences in a timely manner may adversely
affect our operations. Our success depends, in part, upon our ability to anticipate and respond to changing consumer
preferences and fashion trends in a timely manner. We attempt to stay abreast of emerging lifestyles and consumer preferences
affecting our merchandise. However, any sustained failure on our part to identify and respond to such trends may have a
material and adverse effect on our business, financial condition and cash flows.
Failure to successfully operate our e-commerce website or fulfill customer expectations may adversely impact
our business and sales. Our e-commerce platform provides another channel to generate sales. We believe that our e-
commerce website will drive incremental sales by providing existing customers 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 significant competition in the retail apparel industry, which may adversely affect our sales and
profitability. The retail apparel business is highly competitive. We compete with local, regional, national and online retailers,
including department, specialty and discount stores, direct-to-consumer businesses and other forms of retail commerce. The
Internet and evolving technologies in retail have led to increased competition as there are fewer barriers to entry and consumers
are able to quickly and conveniently comparison shop. We compete on many factors, such as, merchandise assortment,
advertising, price, quality, convenience, customers’ shopping experience, store environment, service, loyalty programs and
credit availability. Unanticipated changes in the pricing and other practices of our competitors may create downward pressure
on prices and lower demand for our products, which may adversely impact our sales and profitability.
There can be no assurance that our liquidity will not be affected by changes in economic conditions. Due to our
operating cash flow and availability under the Revolving Credit Facility, we continue to believe that we have the ability to meet
our financing needs for the foreseeable future. However, there can be no assurance that our liquidity will not be materially and
adversely affected by changes in economic conditions.
12
Failure to obtain merchandise product on normal trade terms and/or our inability to pass on any price
increases related to our merchandise may 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 we experience rising prices related to our merchandise, whether due to cost of materials,
inflation, transportation costs, or otherwise, and are unable to pass on those 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 financial condition. Our merchandise is sourced from a variety of domestic and international vendors. All
of our vendors must comply with applicable laws, including our required standards of conduct. Political or financial instability,
trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to foreign trade, the
ability to access suitable merchandise on acceptable terms and the financial viability of our vendors are beyond our control 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 on our 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 the United 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 their manufacturers, especially those manufacturers outside the
United States, between the vendors and us, or between us and our e-commerce customers, our business, 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 of customers. Our buying, distribution and other corporate operations are in highly centralized
locations. Our operations may be materially and adversely affected if a catastrophic event (such as, but not limited to, fire,
hurricanes, tornadoes or floods) impacts the use of these facilities. While we have contingency plans that would be
implemented in the event of a catastrophic event, there are no assurances that we would be successful in obtaining alternative
servicing facilities in a timely manner in the event of such a catastrophe.
War, acts of terrorism, Mexican border violence, public health issues and natural disasters may create
uncertainty and may result in reduced revenues. We cannot predict, with any degree of certainty, what effect, if any, war,
acts of terrorism, Mexican border violence, public health issues and natural 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 are heavily dependent on our information technology systems for day-to-day business operations,
including sales, warehousing, distribution, purchasing, inventory control, merchandise planning and replenishment, and
financial systems. Certain of our information technology support functions are performed by third-parties in overseas
locations. While we believe that we are diligent in selecting the vendors that assist us in maintaining the reliability and
integrity of our information technology systems, failure by any of these third-parties to implement and/or manage our
information systems and infrastructure effectively and securely could result in future disruptions, service outages, service
failures or unauthorized intrusions. Despite our precautionary efforts, our information technology systems are vulnerable to
damage or interruption from, among other things, natural or man-made disasters, technical malfunctions, inadequate systems
capacity, power outages, computer viruses and security breaches, which may require significant investment to fix or replace,
and we may suffer loss of critical data and interruptions or delays to our operations in the interim. In addition, as part of our
normal course of business, we collect, process and retain sensitive and confidential customer information. 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 other steps 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 us to civil, regulatory and industry
actions and possible judgments, fees and fines.
13
A security breach that results in unauthorized disclosure of customer, employee, vendor or our company
information may adversely impact our business, reputation and financial condition. In the standard course of business, we
receive, process and store information about our customers, employees, vendors and our business, some of which is entrusted
to third-party service providers and vendors. We also work with third-party service providers and vendors that provide
technology, systems and services that we use in connection with the receipt, storage and transmission of this information.
Hardware, software or applications obtained from third parties may contain defects in design or manufacture or other problems
that could unexpectedly compromise our information security. We rely on commercially available systems, software, tools
(including encryption technology) and monitoring to provide security and oversight for processing, transmission, storage and
the protection of confidential information. Despite the security measures we have in place, our facilities and systems (and
those of our vendors and third party service providers) may be vulnerable to security breaches, acts of vandalism and theft,
computer viruses, misplaced or lost data, programming and/or human errors, or other similar events. Our employees,
contractors, vendors or third party service providers may attempt to circumvent our security measures in order to
misappropriate such information, and may purposefully or inadvertently cause a breach involving such information.
Additionally, unauthorized parties may attempt to gain access to our systems or facilities through fraud, trickery, or other means
of deceit. We have programs in place to detect, contain and respond to data security incidents. However, because the
techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, we may be
unable to anticipate these techniques or implement adequate preventive measures to safeguard against all data security breaches
or misuses of data. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential
customer, employee or company information may severely damage our reputation, cause us to incur significant remediation
costs, expose us to the risks of legal proceedings (including fines or other regulatory sanctions), disrupt our operations, attract a
substantial amount of negative media attention, damage our customer relationships, and otherwise have a material adverse
impact on our reputation, business, operating results, financial condition and cash flows.
We are subject to payment-related risks that may increase our operating costs, expose us to fraud or theft,
subject us to potential liability and potentially disrupt our business. We accept payments using a variety of methods,
including cash, checks, credit and debit cards, and gift cards, and we may offer new payment options over time. Acceptance of
these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including
payment network rules and operating guidelines, data security standards and certification requirements, and rules governing
electronic funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or
costly. We rely on third parties to provide payment processing services and pay interchange and other fees, which may increase
over time and raise our operating costs. On October 1, 2015, the payment cards industry began shifting liability for certain debit
and credit card transactions to retailers who do not accept Europay, MasterCard and Visa (“EMV”) chip technology
transactions. We have not yet implemented EMV chip technology. Implementation of the EMV chip technology and receipt of
final certification is subject to the time availability of third-party service providers and may require upgrades to our systems
and hardware. Further, we may experience a decrease in transaction volume if we cannot process transactions for cardholders
whose card issuer has migrated entirely from magnetic strip to EMV chip enabled cards. Until we are able to fully implement
and certify the EMV chip technology in our stores, we may be liable for chargebacks related to counterfeit transactions
generated through EMV chip enabled cards, which could negatively impact our operational results, financial position and cash
flows.
Our failure to attract, develop and retain qualified employees may negatively impact the results of our
operations. We strive to have well-trained and motivated sales associates provide customers with exceptional service. Our
success depends in part upon our ability to attract, develop and retain a sufficient number of qualified employees, including
store, service and administrative personnel. Competition for 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 other qualified personnel.
Changes in the regulatory or administrative landscape could adversely affect our financial condition and results
of operations. Laws and regulations at the local, state, federal, and international levels frequently change, and the ultimate cost
of compliance cannot be precisely estimated. In addition, we cannot predict the impact that may result from changes in the
regulatory or administrative landscape. Any changes in regulations, the imposition of additional regulations, or the enactment
of any new or more stringent legislation that impacts employment and labor, trade, product safety, transportation and logistics,
health care, tax, privacy, operations, or environmental issues, among others, could have an adverse impact on our financial
condition and results of operations.
14
Our business may be materially and adversely affected by changes to fiscal and tax policies. The new U.S.
presidential administration has called for substantial change to fiscal tax policies, which may include comprehensive tax
reform. We cannot predict the impact, if any, of these changes to our business. It is likely that some policies adopted by the new
administration will benefit us and others will negatively affect us. Until we know what changes are enacted, we will not know
whether in total we will benefit from, or be negatively affected by, the changes.
We may be subject to periodic litigation and regulatory proceedings which may adversely affect our business
and financial performance. From time to time, we are involved in lawsuits and regulatory proceedings. Due to the inherent
uncertainties of such matters, we may not be able to accurately determine 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 our financial condition, results of
operations and liquidity. In addition, regardless of the outcome, these matters may result in substantial cost to us and may
require 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. We regard our trademarks and their protection as important to our success. However, we cannot be
sure that any trademark held by us will provide us a competitive advantage or will not be challenged by third parties. Although
we intend to vigorously protect our trademarks, the cost of litigation to uphold the validity and prevent infringement of
trademarks can be substantial and the outcome of those disputes may require us to abandon one or more of our trademarks.
Our dependence upon cash flows and net earnings generated during the fourth quarter, including the holiday
season, may have a disproportionate impact on our results of operations. The seasonal nature of the retail industry causes a
heavy dependence on earnings in the fourth quarter. A large fluctuation in economic or weather conditions occurring during the
fourth quarter may adversely impact our earnings. In preparation for our peak season, we may carry a significant amount of
inventory in advance. If, however, we do not manage inventory appropriately or customer preferences change 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 accounts receivable. PLCC sales represented 47% of total sales in 2016, and
PLCC customers spend more on average than non-PLCC customers. We receive a share of the net finance charges, late fees,
other cardholder fees, write-offs, and operating expenses generated by the program. Changes in credit granting standards
maintained by the third party, which may be due to macroeconomic trends, could impact our ability to generate new PLCC
accounts. Changes in customer payment patterns could impact profit sharing by impacting fee income, write-offs, and
operating expense. If the sales or profit share which we receive from the PLCC decreases due to economic, legal, social, or
other factors that we cannot control or predict, our operating results, financial condition and cash flows may be adversely
affected.
The Revolving Credit Facility contains covenants that may impose operating restrictions and limits our
borrowing capacity to the value of certain of our assets. The Revolving Credit Facility agreement contains covenants which,
among other things, restrict (i) the amount of additional debt or capital lease obligations we may incur, and (ii) our payment of
dividends and repurchase of common stock under certain circumstances. A violation of any of these covenants may permit the
lenders to restrict our ability to further access loans and letters of credit and may require the immediate repayment of any
outstanding loans. Our failure to comply with these covenants may have a material adverse effect on our capital resources,
financial condition, results of operations and liquidity. In addition, any material or adverse developments affecting our business
may significantly limit our ability to meet our obligations as they become due or to comply with the various covenant
requirements contained in the Revolving Credit Facility agreement. In addition, borrowings under the Revolving Credit Facility
are limited to the availability under a borrowing base that is determined principally on eligible inventory, and our inventory,
cash and cash equivalents are pledged as collateral under the Revolving Credit Facility. In the event of any material decrease in
the amount of or appraised value of our inventory, our borrowing capacity would decrease, which may adversely impact our
business and liquidity. In the event of a default that is not cured or waived, the lenders’ commitment to extend further credit
under the Revolving Credit Facility may be terminated, our outstanding obligations may become immediately due and payable,
outstanding letters of credit may be required to be cash collateralized, and remedies may be exercised against the collateral. If
we are unable to borrow under the Revolving Credit Facility, we may not have the necessary cash resources for our operations
and, if any event of default occurs, there is no assurance that we would have the cash resources available to repay such
accelerated obligations, refinance such indebtedness on commercially reasonable terms, or at all, or cash collateralize our
letters of credit, which would have a material adverse effect on our business, financial condition, results of operations and
liquidity.
15
The inability or unwillingness of one or more lenders to fund their commitment under the Revolving Credit
Facility may have a material adverse impact on our business and financial condition. We use the Revolving Credit Facility
to provide financing for working capital, capital expenditures and other general corporate purposes, as well as to support our
outstanding letters of credit requirements. The lenders under the Revolving Credit Facility are: Wells Fargo Bank, National
Association, JPMorgan Chase Bank, N.A., Regions Bank, Bank of America, N.A. and SunTrust Bank. Notwithstanding that we
may be in full compliance with all covenants contained in the Revolving Credit Facility, the inability or unwillingness of one or
more of those lenders to fund their commitment under the Revolving 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 is subject 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 acts of war, employee and
certain other crime and some natural disasters. If we incur these losses and they are material, our business could suffer.
Certain material events, including property losses caused by various natural disasters and other types of casualties, may result
in sizable losses for the insurance industry and adversely impact the availability of adequate insurance coverage or result in
excessive premium increases. To offset negative cost trends in the insurance market, we may elect to self-insure, accept higher
deductibles or reduce the amount of coverage in response to these market changes. In addition, we self-insure a portion of
expected losses under our workers’ compensation, general liability and group health insurance programs. Unanticipated
changes in any applicable actuarial assumptions and management estimates underlying our recorded liabilities for these losses,
including potential increases in medical and indemnity costs, could result in materially different amounts of expense than
expected under these programs, which may have a material adverse effect on our financial condition and results of operations.
Although we continue to maintain property insurance for catastrophic events, we are self-insured for losses up to the amount of
our deductibles. If we experience a greater number of self-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 a result of factors beyond our control, including but not limited to, general economic and stock market
conditions, risks relating to our business and industry as discussed above, strategic actions by us or our competitors, variations
in our quarterly operating performance, our future sales or purchases of our common stock and investor perceptions of the
investment opportunity associated with our common stock relative to other investment alternatives.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
16
ITEM 2. PROPERTIES
Our stores are primarily located in strip shopping centers. We own six of our stores and lease the balance. The majority
of leases, which are typically 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 as common area maintenance, utilities, taxes and insurance. Certain leases provide for
contingent rents that are not measurable at inception. These contingent rents are primarily based on a percentage of sales that
are in excess of a predetermined level. Stores range in size from approximately 5,000 to 67,000 selling square feet, with the
average being approximately 18,000 selling square feet. At January 28, 2017, we operated 798 stores, in 38 states located
within 5 regions, as follows:
South Central Region
Midwestern Region
Number of Stores
Number of Stores
Arkansas
Louisiana
Oklahoma
Texas
Mid-Atlantic & Northeastern Region
Delaware
Maryland
New Jersey
Pennsylvania
Virginia
West Virginia
Massachusetts
New Hampshire
New York
Vermont
Southeastern Region
Alabama
Florida
Georgia
Kentucky
Mississippi
North Carolina
South Carolina
Tennessee
22
52
35
227
336
3
6
5
32
35
10
2
2
20
4
119
28
6
33
34
21
24
19
26
191
Illinois
Indiana
Iowa
Kansas
Michigan
Missouri
Ohio
Wisconsin
Northwestern & Southwestern Region
Arizona
Colorado
Idaho
Nevada
New Mexico
Oregon
Utah
Wyoming
Total Stores
6
24
2
9
15
14
30
4
104
7
6
3
5
19
4
3
1
48
798
17
We own our distribution centers in Jacksonville, Texas and South Hill, Virginia and lease our distribution center in
Jeffersonville, Ohio, which have square footages and provide capacity of servicing stores as follows:
Location
Square Footage
Jacksonville, Texas
South Hill, Virginia
Jeffersonville, Ohio
437,000
162,000
202,000
801,000
Number of Stores
Capable of Servicing
600
240
310
1,150
We 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.
We consider these principal properties to be suitable and adequate for their intended purpose.
ITEM 3. LEGAL PROCEEDINGS
No response is required under Item 103 of Regulation S-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
18
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market and Dividend Information
Our common stock trades on the New York Stock Exchange under the symbol “SSI”. The following table sets forth
the high and low market prices per 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 each quarter in 2016 and 2015:
Fiscal Year
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
High
$
$
9.00
7.57
6.56
5.88
2016
Low
Dividend
High
$
6.60
4.44
4.97
2.72
$
0.150
0.150
0.150
0.150
$
23.26
20.27
18.05
10.70
2015
Low
Dividend
$
19.09
15.85
8.85
6.00
0.140
0.140
0.150
0.150
We paid aggregate cash dividends in 2016 and 2015 of $16.7 million and $18.7 million, respectively. The declaration
and payment of future quarterly cash dividends remain subject to the review and discretion of our Board. Future determinations
to pay dividends will continue to be evaluated in light of our results of operations, cash flow and financial condition, as well as
meeting certain criteria under the Revolving Credit Facility (as defined in “Liquidity and Capital Resources”) and other factors
deemed relevant by our Board.
Holders
As of the close of trading on the New York Stock Exchange on March 21, 2017 there were approximately 242 holders
of record of our common stock.
19
Performance Graph
The 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 our common stock, the S&P 500 Index and the S&P 1500 Department Stores Index on January 27,
2012 (the last trading date of 2011), and that all quarterly dividends were reinvested at the closing prices of the dividend
payment dates. Subsequent measurement points are the last trading days of 2012, 2013, 2014, 2015 and 2016. The total
cumulative dollar returns shown on the graph represent the value that such investments would have had on January 27, 2017
(the last trading date of 2016). The calculations exclude trading commissions and taxes. The stock price performance on the
following graph and table is not necessarily indicative of future stock price performance.
Date
1/27/2012
2/1/2013
1/31/2014
1/30/2015
1/29/2016
1/27/2017
Stage Stores, Inc.
$100.00
148.29
129.39
135.75
59.02
21.76
S&P 500 Index
$100.00
117.61
141.49
161.61
160.54
194.04
S&P 1500
Department
Stores Index
$100.00
103.75
117.53
146.46
107.54
87.15
20
Stock Repurchase Program
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. The 2011 Stock Repurchase Program will
expire when we have exhausted the authorization, unless terminated earlier by our Board. Through January 28, 2017, we
repurchased approximately $141.6 million of our outstanding common stock under the 2011 Stock Repurchase Program. Also
in March 2011, our Board authorized us to repurchase shares of our outstanding common stock equal to the amount of the
proceeds and related tax benefits from the exercise of stock options, stock appreciation rights (“SARs”) and other equity grants.
Purchases of shares of our common stock may be made from time to time, either on the open market or through privately
negotiated transactions, and are financed by our existing cash, cash flow and other liquidity sources, as appropriate.
The table below sets forth information regarding our repurchases of our common stock during the fourth quarter of
2016:
ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total Number
of Shares
Purchased (a)
Average Price
Paid Per Share (a)
October 30, 2016 to November 26, 2016
5,481
$
November 27, 2016 to December 31, 2016
January 1, 2017 to January 28, 2017
Total
9,194
2,710
17,385
$
4.78
4.71
3.59
4.56
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans or
Programs (b)
— $
58,351,202
58,351,202
58,351,202
—
—
—
(a) Although we did not repurchase any of our common stock during the fourth quarter of 2016 under the 2011 Stock Repurchase Program:
• We reacquired 3,718 shares of our common stock from certain employees to cover tax withholding obligations from the vesting of
restricted stock at a weighted average acquisition price of $4.46 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 13,667 shares of our common stock in the open market at a weighted average price of $4.58 in connection with the
option to invest in our stock under the deferred compensation plan and reinvestment of dividends paid on our common stock held in
trust in the deferred compensation plan.
(b) Reflects the $200.0 million authorized under the 2011 Stock Purchase Program, less the $141.6 million repurchased as of January 28, 2017
using our existing cash, cash flow and other liquidity sources since March 2011.
21
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth selected consolidated financial data for the periods indicated. Financial results for 2016, 2015,
2014, and 2013 are based on a 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 our Consolidated Financial Statements included herein. All
amounts are stated in thousands, except for per share data, percentages and number of stores.
Statement of operations data:
Net sales
Cost of sales and related buying, occupancy
and distribution expenses
Gross profit
Selling, general and administrative expenses
Interest expense
Income from continuing operations before
income tax
2016
2015
Fiscal Year
2014
2013
2012
$1,442,718
$1,604,433
$ 1,638,569
$1,609,481
$ 1,627,702
1,144,666
298,052
1,208,002
396,431
1,188,763
449,806
1,172,995
436,486
1,168,907
458,795
356,064
5,051
387,859
2,977
386,104
3,002
393,126
2,744
389,495
3,011
(63,063)
5,595
60,700
40,616
66,289
(25,166)
Income tax expense (benefit)
(37,897)
Income (loss) from continuing operations
Loss from discontinued operations, net (a)
—
$ (37,897)
Net income (loss)
Adjusted net income (loss) (non-GAAP) (b) $ (24,078)
Basic earnings (loss) per share data:
Continuing operations
Discontinued operations
Basic earnings (loss) per share
Basic weighted average shares outstanding
Diluted earnings (loss) per share data:
Continuing operations
Discontinued operations (a)
Diluted earnings (loss) per share
Adjusted diluted earnings (loss) per share
(non-GAAP) (b)
Diluted weighted average shares outstanding
Margin and other data:
Gross profit margin
Selling, general and administrative expense
rate
Capital expenditures
Construction allowances from landlords
Stock repurchases
Cash dividends per share
$
$
$
$
$
$
(1.40)
—
(1.40)
27,090
(1.40)
—
(1.40)
(0.89)
27,090
20.7 %
24.7 %
74,257
7,079
—
0.60
$
$
$
$
$
$
$
$
1,815
3,780
—
3,780
16,182
0.12
—
0.12
31,145
0.12
—
0.12
0.51
31,188
24.7 %
24.2 %
90,695
3,444
41,587
0.58
$
$
$
$
$
$
$
$
22,847
37,853
(7,003)
30,850
37,853
1.18
(0.22)
0.96
31,675
1.18
(0.22)
0.96
1.18
31,763
27.5%
23.6%
70,580
5,538
2,755
0.53
$
$
$
$
$
$
$
$
15,400
25,216
(8,574)
16,642
39,986
0.78
(0.27)
0.51
32,034
0.77
(0.26)
0.51
1.22
32,311
27.1 %
24.4 %
61,263
4,162
31,367
0.48
$
$
$
$
$
$
$
$
24,373
41,916
(3,737)
38,179
46,296
1.32
(0.12)
1.20
31,278
1.31
(0.12)
1.19
1.44
31,600
28.2%
23.9%
49,489
4,193
61
0.38
22
Store data:
Comparable sales growth (decline) (c)
Store openings (d)
Store closings (d)
Number of stores open at end of period (d)
Total selling area square footage at end of
period (d)
Balance sheet data:
Working capital
Total assets
Debt obligations
Stockholders' equity
2016
2015
Fiscal Year
2014
2013
2012
(8.8)%
—
37
798
(2.0)%
3
23
834
1.4%
18
12
854
(1.5)%
28
10
848
5.7%
25
5
830
14,588
15,130
15,409
15,313
15,255
January 28,
2017
January 30,
2016
January 31,
2015
February 1,
2014
February 2,
2013
$ 296,091
786,989
170,163
380,160
$ 344,880
848,099
165,723
429,753
$ 299,279
824,677
47,388
475,930
$ 293,995
810,837
63,225
454,444
$ 259,260
794,871
12,329
464,870
(a) Discontinued operations reflect the results of Steele’s, which was divested in 2014.
(b) See Reconciliation of Non-GAAP Financial Measures on page 24 for additional information and reconciliation to the most
directly comparable U.S. GAAP financial measure.
(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 shifted calendar, 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.
23
Reconciliation of Non-GAAP Financial Measures
To provide additional transparency, we have disclosed the results of operations for the years presented on a basis in
conformity with accounting principles generally accepted in the United States of America (“GAAP”) and on a non-GAAP basis
to show earnings excluding certain items presented below. We believe this supplemental financial information enhances an
investor’s understanding of our financial performance as it excludes those items which impact comparability of operating
trends. The non-GAAP financial information should not be considered in isolation or viewed as a substitute for net income,
cash flow from operations, diluted earnings per common share or other measures of performance as defined by
GAAP. Moreover, the inclusion of non-GAAP financial information as used herein is not necessarily comparable to other
similarly titled measures of other companies due to the potential inconsistencies in the method of presentation and items
considered. The following tables set forth the supplemental financial information and the reconciliation of GAAP disclosures to
non-GAAP financial measures (in thousands, except diluted earnings per share):
Net income (loss) (GAAP)
Loss from discontinued operations, net of tax benefit of
$4,228, $5,237 and $2,172, respectively (GAAP)(a)
Income (loss) from continuing operations (GAAP)
Consolidation of corporate headquarters (pretax)(b)
Severance charges associated with workforce reductions and
pension settlement (pretax)(c)
Store closures, impairments and other strategic initiatives
(pretax)(d)
South Hill Consolidation related charges (pretax)(e)
Former Chief Executive Officer resignation related charges
(pretax)(f)
Income tax impact(g)
Adjusted net income (loss) (non-GAAP)
Diluted earnings (loss) per share (GAAP)
Loss from discontinued operations (GAAP)(a)
Diluted earnings (loss) per share from continuing operations
(GAAP)
Consolidation of corporate headquarters (pretax)(b)
Severance charges associated with workforce reduction and
pension settlement (pretax)(c)
Store closures, impairments and other strategic initiatives
(pretax)(d)
South Hill Consolidation related charges (pretax)(e)
Former Chief Executive Officer resignation related charges
(pretax)(f)
Income tax impact(g)
Adjusted diluted earnings (loss) per share (non-GAAP)
Fiscal Year
2016
2015
2014
2013
2012
$ (37,897) $
3,780
$ 30,850
$ 16,642
$ 38,179
—
(37,897)
110
—
3,780
3,538
1,632
2,633
21,256
12,186
—
—
—
(9,179)
—
(5,955)
$ (24,078) $ 16,182
7,003
37,853
8,574
25,216
3,737
41,916
—
—
—
—
—
—
$ 37,853
—
—
—
—
—
—
23,789
3,618
—
(9,019)
$ 39,986
3,308
(2,546)
$ 46,296
$
(1.40) $
—
(1.40)
—
0.06
0.78
—
0.12
$
—
0.12
0.11
0.08
0.39
—
$
0.96
(0.22)
$
0.51
(0.26)
1.19
(0.12)
1.18
0.77
1.31
—
—
—
—
—
—
—
—
—
—
—
—
0.73
0.11
—
(0.28)
1.22
$
0.10
(0.08)
1.44
—
(0.33)
(0.89) $
—
(0.19)
0.51
$
$
1.18
$
24
(a) Discontinued operations reflect the results of Steele’s, which was divested in 2014.
(b) Reflects duplicate rent expense and moving related costs associated with the consolidation of our corporate headquarters
into a single location, which was completed in February 2016.
(c) Includes severance charges associated with workforce reductions and pension settlement of $0.7 million in 2015 as a
result of lump sum payments exceeding interest cost for 2015.
(d) Charges in 2016 reflect impairment charges recognized as a result of deteriorating operating performance of our stores
(see Notes 3 and 4 to the financial statements) and costs related to our strategic store closure plan and other initiatives
announced in 2015. Charges reflected for 2015 are related to our strategic store closure plan and primarily consist of
impairment charges as well as fixture moving costs and lease termination charges, and other strategic initiatives.
(e) Reflects charges associated with the consolidation of our operations in South Hill, Virginia, into our corporate
headquarters. The charges were primarily for transitional payroll and benefits, recruiting and relocation costs, severance,
property and equipment impairment and inventory markdowns.
(f) Reflects charges incurred associated with the resignation of our former Chief Executive Officer.
(g) Taxes were allocated based on the annual effective tax rate.
25
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Our Business
We are a retailer operating specialty department stores primarily in small and mid-sized towns and communities. We
provide customers a welcoming and comfortable shopping experience in our stores and online. Our merchandise assortment is
a well-edited selection of moderately priced brand name and private label apparel, accessories, cosmetics, footwear and home
goods. As of January 28, 2017, we operated 798 specialty department stores located in 38 states under the BEALLS,
GOODY’S, PALAIS ROYAL, PEEBLES and STAGE nameplates and a direct-to-consumer business.
On March 7, 2014, we divested Steele’s, an off-price concept that we launched in November 2011, in order to focus
solely on our core specialty department store business. Accordingly, the results of operations of Steele’s and loss on the sale are
reflected in discontinued operations for all periods presented. Our results of operations for all periods presented within this
Management’s Discussion and Analysis reflect continuing operations. For additional information regarding discontinued
operations, see Note 15 to the consolidated financial statements.
Results of Operations
Select financial results for 2016 were as follows (comparisons are to 2015):
• Net sales decreased $161.7 million, or 10.1%, to $1.4 billion.
• Comparable sales decreased 8.8%.
• Gross profit decreased $98.4 million, or 24.8%.
• Diluted earnings (loss) per common share was $(1.40), compared with $0.12.
• Adjusted diluted earnings (loss) per common share (non-GAAP) was $(0.89), compared with $0.51 (see reconciliation
of non-GAAP financial measures on page 24).
• Cash dividends of $16.7 million, or $0.60 per share, were paid.
2016 Strategy and Results
While 2016 was a difficult year for our business, our sector, and certain of our geographies, we made progress in
evolving our business model to meet the changing habits of our customer. Despite our depressed results of operations caused
by challenges in the retail industry, as well as headwinds in our stores near the Mexican border and in energy exposed
communities, we did accomplish or make significant strides on strategic initiatives that we expect to position us for improved
productivity and profitability over time.
• We continued to grow our direct-to-consumer business by enhancing our customer online shopping experience. We
launched website navigation and search improvements to make shopping easier and faster. We also introduced buy
online, ship to store, giving our customer more convenient shopping options. In addition, we expanded our online
assortment to include seven times more product than an average store, giving her additional options when she shops.
Finally, we made investments in digital marketing and our mobile site, as well as to our supply chain, to support
continued online growth.
• We evolved our product assortment to offer more contemporary fashions and brands, adding categories within existing
brands, and extending existing brands to additional stores.
• We launched Style Circle Rewards®, our tender-neutral loyalty program, which complements our existing private label
credit card and will allow us to better understand our customers’ shopping habits, offer more personalized promotional
offers, and provide attractive rewards. We ended the year with 4.7 million members, including our private label credit
card holders. In addition, we grew our private label credit card penetration by 290 basis points to 47.3% of sales, with
credit income increasing 2%.
• We enhanced our store environment with 86 stores refreshed, bringing us to over 200 updated stores to date as a part
of our remodel program.
• We closed 37 stores, and ended the year with 60 locations closed out of the approximately 100 locations we have
planned as part of our strategic store closure program.
26
2017 Strategy and Outlook
Our key strategic initiatives for 2017, which we call our JumpStart Plan, are to:
• Continue to build our online business, with further enhancements to the site design and functionality, improved mobile
capabilities, additional digital marketing, expanded assortments, and investments in our supply chain. We will also
work to better connect stores and our online platform by leveraging buy online, ship to store capabilities, and make
online ordering available in-store from our registers.
•
Invigorate merchandise with more newness, an emphasis on style and value, and an expanded gift selection. We will
be building more liquidity into our merchandise plans, as well as adding off-price and close-out buys. In addition, we
will be reducing underperforming categories and shifting our emphasis into key categories where we believe we can
achieve substantial gains, including beauty, plus sizes, gifts, and women’s updated and contemporary apparel.
• Build on beauty by adding smaller Clinique and Estee Lauder counters to approximately 30 stores and expanding
assortments within beauty, bath and body across the store base.
• Recover merchandise margin by reducing promotional discount levels, eliminating overlapping coupons, and
enhancing seasonal transitions.
•
Improve our relationship with our customers by connecting with her through the channels she uses most often and
with more relevant messages. This includes shifting to more digital and email marketing, enhancing our loyalty
programs, and emphasizing that she can “Find something new at Stage” in our marketing.
• Enhance the store experience for our customers by emphasizing service and execution through our sell one more
initiative. We are simplifying tasks to enable our store associates to direct their attention on providing exceptional
service to our customers.
While we expect to continue facing external headwinds and reduced traffic in our stores, we believe that there are
multiple opportunities to drive sales and enhance our financial performance by continuing to focus on giving our customers
style and value with a great experience. From a profitability perspective, we believe we can begin to rebuild margins and will
continue our disciplined expense controls. A primary objective of our 2017 financial plan is to generate positive free cash flow
(defined as net cash provided by operating activities less capital expenditures net of proceeds related to retirements). We will do
this by operating efficiently, improving comparable sales and margin through our JumpStart Plan, reducing capital
expenditures, and improving working capital so it is a source of cash. Overall, we believe we are making the right investments
in the right areas of our business to energize our brand, stores, website, and customers, and ultimately drive long-term
shareholder value.
The financial information, discussion and analysis that follow should be read in conjunction with our Consolidated
Financial Statements and accompanying footnotes included in this Form 10-K.
27
2016 Compared to 2015
Net sales
Cost of sales and related buying,
occupancy and distribution expenses
Gross profit
Selling, general and administrative
expenses
Interest expense
Income (loss) before income tax
Income tax expense (benefit)
Net income (loss)
$
(a) Percentages may not foot due to rounding.
Net Sales
Fiscal Year Ended
January 28, 2017
January 30, 2016
Change
Amount
$
1,442,718
% to
Sales (a)
100.0 % $ 1,604,433
Amount
% to
Sales (a)
Amount
%
100.0% $
(161,715)
(10.1)%
1,144,666
298,052
356,064
5,051
(63,063)
(25,166)
(37,897)
79.3 %
20.7 %
24.7 %
0.4 %
(4.4)%
(1.7)%
(2.6)% $
1,208,002
396,431
75.3%
24.7%
(63,336)
(98,379)
(5.2)%
(24.8)%
(8.2)%
387,859
24.2%
2,977
5,595
1,815
3,780
0.2%
0.3%
0.1%
0.2% $
(31,795)
2,074
(68,658)
(26,981)
(41,677)
Sales decreased 10.1% to $1,442.7 million in 2016 from $1,604.4 million in 2015, reflecting a decline in comparable
sales and closed stores. Comparable sales includes sales for stores that were open for at least 14 full months prior to the
reporting period and direct-to-consumer sales. Comparable sales decreased 8.8% in 2016 as compared to 2015, attributable to a
decrease of 13.2% in the number of transactions, partially offset by an increase of 5.1% in average transaction value. The
increase in average transaction value was comprised of a 1.6% decline in average unit retail and an increase of 6.8% in units
per transaction. During 2016 and 2015, we experienced a decline in traffic in our stores and lower consumer demand,
especially in our stores in Texas, Louisiana, Oklahoma and New Mexico, which were impacted by depressed oil prices, and in
our markets near the Mexican border due to the devaluation of the Mexican peso. Comparable sales in these four states were
down 11.1%, while comparable sales in the balance of our chain were down 6.0%.
Comparable sales increase (decrease) by quarter is presented below:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total Year
Fiscal Year
2016
2015
(8.5)%
(1.1)%
(9.8)
(8.2)
(8.5)
0.8
(3.5)
(3.4)
(8.8)%
(2.0)%
Our home/gifts, cosmetics and men’s categories outperformed our comparable sales average. Home, gifts, cosmetics
and dresses were strong performers across merchandise categories.
28
Gross Profit
Gross profit in 2016 was $298.1 million, a decrease of 24.8% from $396.4 million in 2015. Gross profit, as a percent
of sales, decreased 400 basis points to 20.7% in 2016 from 24.7% in 2015. The decrease in the gross profit rate reflects a
decrease in merchandise margin of 140 basis points, as a result of additional promotions and markdowns to drive sales and
clear inventory, and an increase in the buying, occupancy and distribution expenses rate of 260 basis points due to deleverage
from lower sales in 2016 compared to 2015, increased rent and depreciation associated with remodeled stores and store
impairment charges. In 2016, we recorded store impairment charges of $19.9 million compared to $10.6 million in 2015.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses in 2016 decreased $31.8 million to $356.1 million from
$387.9 million in 2015. As a percent of sales, SG&A expenses increased to 24.7% in 2016 from 24.2% in 2015 as a result of
deleverage from lower sales in the current year. The decrease in SG&A expenses is primarily due to lower payroll, advertising,
incentive compensation and lower charges incurred in 2016 related to our corporate headquarters consolidation and severance
costs associated with our workforce reduction compared to 2015.
Interest Expense
Interest expense was $5.1 million in 2016 and $3.0 million in 2015. Interest expense was primarily comprised of
interest on borrowings under the Revolving Credit Facility, related letters of credit and commitment fees, amortization of debt
issuance costs and interest on finance obligations. The increase in interest expense is primarily due to an increase in average
borrowings and interest rate under the Revolving Credit Facility for 2016 as compared with 2015.
Income Taxes
Our effective tax rate was 39.9% in 2016, resulting in tax benefit of $25.2 million. This compares to income tax
expense of $1.8 million in 2015 at an effective rate of 32.4%. The prior year effective tax rate was lower than usual due to the
low net income which increased the net beneficial effect of permanent book-tax differences. The current year increase in the
effective tax rate is primarily due to net loss, which causes permanent tax benefits, which included a $0.7 million benefit
associated with the favorable resolution of an uncertain tax position under audit, that would normally reduce the effective tax
rate to be reflected as an increased percentage of the net loss.
29
2015 Compared to 2014
Net sales
Cost of sales and related buying,
occupancy and distribution expenses
Gross profit
Selling, general and administrative
expenses
Interest expense
Income before income tax
Income tax expense
Income from continuing operations
Loss from discontinued operations, net
of tax benefit of $0 and $4,228,
respectively
Net income
$
(a) Percentages may not foot due to rounding.
Net Sales
Fiscal Year Ended
January 30, 2016
January 31, 2015
Change
Amount
% to
Sales (a)
Amount
% to
Sales (a)
Amount
%
$ 1,604,433
100.0% $ 1,638,569
100.0 % $
(34,136)
(2.1)%
1,208,002
396,431
75.3%
24.7%
1,188,763
449,806
72.5 %
27.5 %
19,239
(53,375)
1.6 %
(11.9)%
387,859
24.2%
386,104
23.6 %
0.2%
0.3%
0.1%
0.2%
3,002
60,700
22,847
37,853
0.2 %
3.7 %
1.4 %
2.3 %
0.5 %
1,755
(25)
(55,105)
(21,032)
(34,073)
—%
0.2% $
(7,003)
30,850
(0.4)%
1.9 % $
7,003
(27,070)
2,977
5,595
1,815
3,780
—
3,780
Sales decreased 2.1% to $1,604.4 million in 2015 from $1,638.6 million in 2014. Comparable sales decreased by
2.0% in 2015 as compared to 2014, attributable to a decline in traffic, partially offset 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 to the devaluation of
the Mexican peso and in energy exposed communities mostly in Texas, Louisiana, Oklahoma and New Mexico. In addition,
sales in the fourth quarter 2015 were negatively impacted by unfavorable weather.
Comparable sales increase (decrease) by quarter is presented below:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total Year
Fiscal Year
2015
2014
(1.1)%
0.8
(3.5)
(3.4)
(2.0)%
(0.2)%
(4.2)
2.3
6.4
1.4 %
Our cosmetics and home/gifts categories achieved positive comparable sales. Both categories benefited from our
strategic investments in 2015, with the installation of Estee Lauder and Clinique counters in over 30 stores and home
department expansions in 46 stores. Activewear was a strong performer across merchandise categories.
30
Gross Profit
Gross 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 280 basis points to 24.7% in 2015 from 27.5% in 2014. The decrease in the gross profit rate reflects a
decrease in merchandise margin of 110 basis points, as a result of additional promotions and markdowns to drive sales and
clear inventory, and an increase in the buying, occupancy and distribution expenses rate of 170 basis points due to impairment
charges of $10.6 million, or 0.7% of sales, related to our store closures, higher store depreciation and rent expense, and
increased strategic investments in omni-channel, technology and stores in 2015 compared to 2014.
Selling, General and Administrative Expenses
SG&A expenses in 2015 increased $1.8 million to $387.9 million from $386.1 million in 2014. As a percent of sales,
SG&A expenses increased to 24.2% in 2015 from 23.6% in 2014 and primarily reflects deleverage from lower sales in 2015.
The increase in SG&A expenses reflects charges incurred in 2015 related to our corporate headquarters consolidation,
severance and other costs associated with a reduction in corporate headcount, and a pension settlement charge, partially offset
by lower incentive compensation costs.
Interest Expense
Interest expense was $3.0 million in 2015 and 2014, respectively. Interest expense was primarily comprised of interest
on borrowings under the Revolving Credit Facility, related letters of credit and commitment fees, amortization of debt issuance
costs, and interest on finance obligations. Interest expense in 2015 was flat compared to 2014 due to primarily due to the timing
of borrowings under the Revolving Credit Facility.
Income Taxes
Our effective tax rate in 2015 was 32.4%, resulting in tax expense of $1.8 million. This compares to income tax
expense of $22.8 million from continuing operations in 2014 at an effective rate of 37.6%. The 2015 effective tax rate was
lower than usual due to low net income which increased the net beneficial effect of permanent book-tax differences.
Seasonality and Inflation
Historically, our business has been seasonal and sales are traditionally lower during the first three quarters of the fiscal
year (February through October) and higher during the last quarter of the fiscal year (November through January). The fourth
quarter usually accounts for approximately 32% of our annual sales, with each of the other quarters accounting for
approximately 22% to 24%. Working capital requirements have fluctuated during the year and generally reached their highest
levels during the third and fourth quarters. We do not believe that inflation has had a material effect on our results of
operations. However, there can be no assurance that our business will not be affected by inflation in the future.
31
The following table shows quarterly information (unaudited) (in thousands, except per share amounts):
Fiscal Year 2016
Net sales
Gross profit
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Basic weighted average shares
Diluted weighted average shares
Net sales
Gross profit
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Basic weighted average shares
Diluted weighted average shares
Liquidity and Capital Resources
Q1
332,750
$
66,987
(15,460)
Q2
338,385
85,570
41
Q3
317,140
$
Q4
454,443
$
56,590
(15,634)
$
$
(0.57) $
(0.57)
— $
—
(0.58) $
(0.58)
26,932
26,932
27,111
27,175
27,155
27,155
Fiscal Year 2015
Q1
Q2
Q3
$
369,313
$
380,916
$
351,575
$
80,929
(8,637)
98,455
1,615
76,096
(10,183)
$
(0.27) $
(0.27)
$
0.05
0.05
(0.32) $
(0.32)
31,750
31,750
31,982
32,013
32,017
32,017
88,905
(6,844)
(0.25)
(0.25)
27,163
27,163
Q4
502,629
140,951
20,985
0.72
0.71
28,828
28,848
Our liquidity is currently provided by (i) existing cash balances, (ii) operating cash flows, (iii) normal trade credit
terms from our vendors and their factors and (iv) the Revolving Credit Facility. Our primary cash requirements are for
operational needs, including rent and salaries, seasonal inventory purchases, capital investments in our stores, direct-to-
consumer business and information technology. We also have used our cash flows and other liquidity sources to pay 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 capital expenditures and debt service requirements for the remainder of 2017 and the foreseeable future.
Key components of our cash flow are summarized below (in thousands):
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
2016
Fiscal Year
2015
2014
$
$
84,284
(73,078)
(13,890)
$
40,300
(90,977)
49,999
102,214
(67,634)
(32,177)
32
Operating Activities
During 2016, we generated $84.3 million in cash from operating activities. Net loss, adjusted for non-cash expenses,
provided cash of approximately $40.1 million. Changes in operating assets and liabilities generated net cash of approximately
$37.1 million, which included a $26.6 million decrease in merchandise inventories, a decrease in other assets of $0.8 million
and an increase in accounts payable and other liabilities of $9.8 million. Additionally, cash flows from operating activities
included construction allowances from landlords of $7.1 million, which funded a portion of the capital expenditures related to
store leasehold improvements in new and relocated stores and our new corporate office building.
During 2015, we generated $40.3 million in cash from operating activities. Net income, adjusted for non-cash
expenses, provided cash of approximately $94.3 million. Changes in operating assets and liabilities used net cash of
approximately $57.4 million, which included a $5.5 million decrease 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 capital expenditures
related to store leasehold improvements in new and relocated stores.
During 2014, we generated $102.2 million in cash from operating activities. Net income, adjusted for non-cash
expenses, provided cash of approximately $106.9 million. Changes in operating assets and liabilities used net cash of
approximately $10.2 million, which included a $7.0 million increase 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 also included construction allowances from landlords amounting to $5.5 million, which funded a portion of the capital
expenditures related to store leasehold improvements in new and relocated stores.
Investing Activities
The following table summarizes key information about our investing activities for each period presented (in
thousands, except number of stores):
Capital expenditures
Construction allowances received from landlords
Capital expenditures, net of construction allowances
2016
74,257
7,079
67,178
$
$
$
$
Fiscal Year
2015
90,695
3,444
87,251
$
$
Number of stores remodeled, relocated and expanded
Number of new stores (a)
86
—
122
3
(a) 2014 includes one Steele's store.
2014
70,580
5,538
65,042
26
18
Capital expenditures in 2016 were primarily for store remodels, expansions and relocations and investments in our
technology and omni-channel. Construction allowances received from landlords were used to fund a portion of the capital
expenditures related to store leasehold improvements in remodeled and relocated stores and our new corporate office building.
These funds have been recorded as deferred rent credits in the balance sheet and are amortized as an offset to rent expense over
the lease term commencing with the date the allowances were contractually earned.
We estimate that capital expenditures in 2017, net of construction allowances from landlords, will be approximately
$35 to $40 million. The expenditures are principally for store remodels, expansions and relocations, new cosmetic counters,
and investments in our technology, omni-channel and supply chain.
Financing Activities
On December 16, 2016, we entered into an amendment to our senior secured revolving credit facility (“Revolving
Credit Facility”). The amendment increased total capacity under the facility from $350.0 million to $450.0 million, including a
$50.0 million seasonal increase and $25.0 million letter of credit sublimit, and extended the term from October 6, 2019 until
December 16, 2021.
33
We use the Revolving Credit Facility to provide financing for working capital and general corporate purposes, as well
as to finance capital expenditures and to support our letter of credit requirements. Borrowings are limited to the availability
under a borrowing base that is determined principally on eligible inventory as defined by the Revolving Credit Facility
agreement. Inventory, cash and cash equivalents are pledged as collateral. The daily interest rates are determined by a prime
rate or LIBOR, plus an applicable margin, as set forth in the Revolving Credit Facility agreement. During 2016, the weighted
average interest rate on outstanding borrowings and the average daily borrowings under the Revolving Credit Facility were
1.9% and $192.4 million, respectively, as compared to 1.53% and $102.5 million in 2015. The increase in average daily
borrowings for 2016 compared to the 2015 is primarily due to stock repurchases made in the fourth quarter 2015 and capital
Letters of credit issued under the Revolving Credit Facility support certain merchandise purchases and collateralize
retained risks and deductibles under various insurance programs. At January 28, 2017, we had outstanding letters of credit
totaling approximately $6.4 million. These letters of credit expire within twelve months of issuance. Excess availability under
the Revolving Credit Facility at January 28, 2017 was $122.3 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 common stock under certain circumstances. The agreement also contains a
fixed charge coverage ratio covenant in the event excess availability is below a defined threshold or an event of default has
occurred. At January 28, 2017, we were in compliance with all of the financial covenants of the Revolving Credit Facility
agreement and expect to continue to be in compliance in 2017.
During 2016, we borrowed approximately $5.8 million under an equipment financing note bearing an effective interest
rate of 3.2%. The equipment financing note is payable in monthly installments over a three-year term and is secured by certain
equipment.
We paid $16.7 million in cash dividends in 2016. On February 16, 2017, our Board declared a quarterly cash dividend
of $0.15 per share on our common stock, payable on March 15, 2017, to shareholders of record at the close of business on
February 28, 2017.
As of January 28, 2017, we had $58.4 million available under the 2011 Stock Repurchase Program authorized on
March 7, 2011, which authorized us to repurchase up to $200.0 million of our outstanding common stock.
34
Contractual Obligations
We 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 28, 2017 (in thousands). These items are discussed in further detail
in Note 6 and Note 11 to the consolidated financial statements.
Payment Due by Period
Contractual Obligations(a)
Revolving Credit Facility(b)
Documentary letters of credit (c)
Finance obligations:
Principal payments
Interest payments
Other long-term debt obligations:
Principal payments
Interest payments
Operating lease obligations (d)
Purchase obligations (e)
Other long-term liabilities (f)
Total contractual obligations
$
Total
159,702
1,317
Less Than
One Year
1-3
Years
$
— $
4-5
Years
159,702
—
— $
—
1,317
1,159
207
5,255
160
93,607
160,690
1,000
263,395
2,708
334
7,753
214
493,758
174,314
1,000
841,100
$
$
1,549
127
2,498
54
152,948
11,154
—
168,330
$
—
—
—
—
110,571
2,460
—
272,733
$
More than 5
Years
$
$
—
—
—
—
—
—
136,632
10
—
136,642
(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 and estimates 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 cause the 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 less services 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 we are 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) Includes principal and interest accrued as of January 28, 2017.
(c) These documentary letters of credit support the importing of private label merchandise. We also had outstanding stand-by letters of credit
that totaled approximately $5.1 million at January 28, 2017 required to collateralize retained risks and deductibles under various insurance
programs. The estimated liability that will be paid in cash related to stand-by letters 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 for payment under the
letters of credit.
(d) 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 a straight-line basis, evenly dividing rent expense over the lease term, including the build-out period, if
any, and where appropriate, applicable available lease renewal option periods. However, this accounting treatment does not affect the future
annual operating lease cash obligations as shown herein. We record construction allowances from landlords as 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
construction allowance, as a reduction of rent expense.
Certain leases provide for contingent rents that are not measurable at inception. These contingent rents are primarily based on a percentage of
sales that are in excess of a predetermined 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 been incurred and the amount is reasonably estimable.
35
(e) Purchase obligations include legally binding contracts for merchandise, utility purchases, capital expenditures, software acquisition/license
commitments and legally binding service 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 and that specify all significant terms, including: fixed or minimum
quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Included in purchase
obligations are outstanding purchase orders in the ordinary course of business for merchandise of $140.4 million that are typically made up to
six months 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 the contract is also included in the above table. If the obligation is cancelable, and we would incur liquidated
damages if canceled, the dollar amount of the liquidated damages is included 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. The expected timing for payment of the
obligations discussed above is estimated based on current information. Timing of payments and actual amounts paid may be different
depending on the timing of receipt of goods or services or changes to agreed-upon amounts for some obligations.
(f) Other long-term liabilities consist of deferred rent, deferred compensation, pension liability, deferred revenue and other (see Note 7 to the
consolidated financial statements). Deferred rent of $43.4 million is included as a component of “operating lease obligations” in the
contractual obligations table. Deferred compensation and pension liability 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 the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). We may elect
to contribute additional amounts to maintain a level of funding to minimize the Pension Benefit Guaranty Corporation premium
costs or to cover short-term liquidity needs of our defined benefit plan in order to maintain current invested positions. We had
no minimum contribution requirements for 2015 and 2016. We expect to contribute approximately $0.9 million during 2017.
We had no unrecognized tax benefits at January 28, 2017.
36
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes. The primary estimates
underlying our consolidated financial statements include the valuation of inventory, the impairment analysis on long-lived
assets, the valuation of intangible assets, self-insurance reserves and the estimated liability for pension obligations. We caution
that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment. Therefore, actual
results may differ materially from these estimates. We base our estimates on historical experience and on various assumptions
which are believed to be reasonable under the circumstances. The following critical accounting policies affect our more
significant judgments and estimates used 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 weighted average 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 distribution centers 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 promotional nature of our business, the allowances are generally intended to offset our costs of
handling, promoting, advertising and selling the vendors’ products in our stores. These allowances are recognized in accordance
with ASC Subtopic 605-50, Customer Payments and Incentives. Vendor allowances related to the purchase 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 or the related selling expense when the purpose for which the vendor funds were intended to be used has been fulfilled and
amounts have been authorized by vendors.
Impairment of Long-Lived Assets. Property, plant and equipment and other long-lived assets are reviewed to
determine whether any events or changes 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 our evaluation on impairment indicators such as the nature of
the asset’s physical condition, the future economic benefit of the asset, any historical or future profitability measurements and
other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist
that indicate the carrying amount of the asset may not be recoverable, we determine whether impairment has occurred through
the use of an undiscounted cash 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 difference between 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 when indicators 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 the time of the Peebles, Inc.
acquisition. We completed our annual impairment testing during the fourth quarter of 2016 and determined that the fair value
exceeded the carrying value by less than 10%.
Self-Insurance Reserves. We maintain self-insured retentions with respect to general liability, workers compensation
and health benefits for our employees. We estimate the accruals for the liabilities based on industry development factors and
historical claim trend experience. Although management believes adequate reserves have been provided for expected liabilities
arising from our self-insured obligations, projections of future losses are inherently uncertain, and it is reasonably possible that
estimates of these liabilities will change over the near term as circumstances develop.
37
Frozen Defined Benefit Plan. We maintain a frozen defined benefit plan. The plan’s obligations and related assets are
presented in Note 13 to the consolidated financial statements. The plan’s assets are invested in actively managed and indexed
mutual funds of domestic and international equities and investment-grade corporate bonds and U.S. government securities. The
plan’s obligations and the annual pension expense are determined by independent actuaries using a number of assumptions.
Key assumptions in measuring the plan’s obligations include the discount rate applied to future benefit obligations and the
estimated future return on plan assets. At January 28, 2017, assumptions used were a weighted average discount rate of 4.3%
and a weighted average long-term rate of return on the plan assets of 7.0%.
Recent Accounting Standards and Disclosures
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 the guidance is that a company should recognize revenue when it transfers promised goods or
services to customers in an amount that reflects what a company expects to be entitled to in exchange for those goods or
services. ASU 2014-09 allows for either a retrospective or cumulative effect transition method of adoption. In August 2015, the
FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 by one year. The new revenue standard will be
effective for us in the first quarter of fiscal year ending February 2, 2019. We do not expect the adoption of ASU 2014-09 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 the assets and liabilities
that arise from finance and operating leases on the balance sheet. In addition, this guidance requires disclosures about the
amount, timing and uncertainty of cash flows arising from leases. The new standard will be effective for us in the first quarter
of fiscal year ending February 1, 2020. We are currently evaluating the impact that the adoption of this ASU will have on our
consolidated financial statements and we expect that our reported assets and liabilities will significantly increase under the new
standard.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting, which modifies several aspects of the accounting for share-based payment
transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on
the statement of cash flows. Under the new standard, excess income tax benefits and tax deficiencies related to equity awards
that vest or settle will be recognized as income tax expense, rather than within additional paid-in capital on the balance
sheet. The recognition of excess tax benefits and losses may create significant volatility in earnings. We do not expect the
adoption of the other requirements of this ASU to have a material impact on our consolidated financial statements. The new
standard will be effective for us in the first quarter of fiscal year ending February 3,
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments, which provides guidance on certain specific cash flow issues including proceeds received from
the settlement of insurance claims. This guidance requires cash proceeds received from the settlement of insurance claims to be
classified on the statement of cash flows on the basis of the related insurance coverage (that is, the nature of the loss). The new
standard is effective for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted. We
do not expect the adoption of this ASU to have a material impact on our consolidated statements of cash
In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost, which requires employers that offer or maintain defined benefit plans to disaggregate the
service component from the other components of net benefit cost and provides guidance on presentation of the service
component and the other components of net benefit cost in the statement of operations. The new standard is effective for fiscal
years and interim periods beginning after December 15, 2017. We are currently evaluating the impact that the adoption of ASU
2017-07 will have on our consolidated financial statements.
38
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Borrowings under the Revolving Credit Facility bear a floating rate of interest. As of January 28, 2017, the
outstanding borrowings under the Revolving Credit Facility were $159.7 million. On future borrowings, an increase in interest
rates may have a negative impact on our results of operations and cash flows. During 2016, we had average daily borrowings
of $192.4 million bearing a weighted average interest rate of 1.9%. A hypothetical 10% change from the weighted average
interest rate would have a $0.4 million effect on our 2016 annual results of operations and cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See “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 DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls 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 of the end of the period covered by this report. Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer have each concluded that such disclosure controls and
procedures were effective as of the end of the period covered by this report.
39
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with
authorizations of management and our directors; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial
statements, and provide reasonable assurance 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 prevent or 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 disclosure controls and procedures based on the framework and criteria established in Internal Control-
Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission and
concluded that our internal control over financial reporting was effective as of January 28, 2017.
Our independent registered public accounting firm, Deloitte & Touche LLP, with direct access to our Board of
Directors through our Audit Committee, has audited the consolidated financial statements we prepared and issued an attestation
report on the effectiveness of our internal control over financial reporting. The report appears in the Consolidated Financial
Statements section of this Form10-K.
Changes in Internal Control over Financial Reporting
Management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the internal
control over financial reporting and concluded that no change in our internal control over financial reporting occurred during
the fourth quarter ended January 28, 2017 that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
40
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following information pertains to our executive officers as of March 21, 2017:
PART III
Name
Michael L. Glazer
Thorsten I. Weber
William E. Gentner
Steven L. Hunter
Russell A. Lundy, II
Oded Shein
Chadwick P. Reynolds
Richard E. Stasyszen
Age
68
46
48
46
54
55
43
56
Position
President and Chief Executive Officer, Director
Executive Vice President, Chief Merchandising Officer
Executive Vice President, Chief Marketing Officer
Executive Vice President, Chief Information Officer
Executive Vice President, Chief Stores Officer
Executive Vice President, Chief Financial Officer and Treasurer
Senior Vice President, Chief Legal Officer and Secretary
Senior Vice President, Finance and Controller
Mr. 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. Glazer served as the President and CEO of Mattress Giant Corporation from October 2009 to April
2012.
Mr. Weber joined us in July 2013 as Senior Vice President, Planning and Allocation and was promoted to Executive
Vice President, Chief Merchandise Officer in September 2016. Most recently, he served as Senior Vice President, Planning and
Allocation with Kohl’s Corporation. Previously, he spent 10 years with J.C. Penney Company, Inc., where he ultimately held
the position of Senior Vice President, Planning and Allocation. Prior to joining J.C. Penney Company, Inc., he spent 9 years at
the Kaufmann’s Division of May Department Stores Company where he began his career and held buying 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 in June 2014. From June 2007 to June 2012, he served in various marketing positions at
J.C. Penney Company, Inc., including Senior Vice President, Strategic Brands 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, Chief Information 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 to Executive Vice President, Chief Stores Officer in October 2014. Prior to joining us, he spent 27
years with Peebles, Inc.
Mr. Shein joined us in January 2011 as Executive Vice President, Chief Financial Officer. From July 2004 to January
2011, he served in various financial positions at Belk, Inc., including Vice President, Finance and Vice President and Treasurer.
Prior to joining Belk, Inc., Mr. Shein served as the Vice President, 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.
41
The remaining information called for by this item, including with respect to our directors, shareholder nomination
procedures, code of ethics, Audit Committee, 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 Ownership Reporting Compliance” in the Proxy
Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation, Compensation Committee interlocks and insider participation, director
compensation, and the Compensation Committee Report called for by this item is incorporated herein by reference to
“Governance,” “Compensation Committee Interlocks and Insider 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 STOCKHOLDER MATTERS
Information regarding the security ownership of certain beneficial owners and management and related stockholder
matters called for by this item is incorporated herein by reference to “Security Ownership of Certain Beneficial Owners and
Management” in the Proxy Statement. The remaining information called 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 by reference to “Item 1: Election of Directors,” “Governance” and “Transactions with Related
Persons” in the Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information regarding fees billed to us by our independent registered public accounting firm, Deloitte & Touche LLP,
and our Audit Committee’s pre-approval policies and procedures called for by this item is incorporated herein by reference to
“Audit Committee Matters” in the Proxy Statement.
42
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(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 Accounting Firm on page F-2, and the Financial Statements on pages F-3 to F-29, 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 Consolidated Financial Statements or Notes thereto on pages F-3 to F-29, 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 our reasonable expenses in furnishing the exhibits.
Exhibit
Number Description
3.1
3.2
4.1
10.1
10.2
10.3†
10.4†
10.5†
Amended and Restated Articles of Incorporation of Stage Stores, Inc. dated June 7, 2007 are incorporated by
reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q filed on September 12, 2007.
Amended and Restated Bylaws of Stage Stores, Inc. dated September 15, 2016 are incorporated by reference to
Exhibit 3 to our Quarterly Report on Form 10-Q filed on December 8, 2016.
Form of Common Stock Certificate of Stage Stores, Inc. is incorporated by reference to Exhibit 4.1 to our
Registration Statement on Form 10 filed on October 29, 2001.
Second Amended and Restated Credit Agreement dated October 6, 2014, among Specialty Retailers, Inc., as
borrower, Stage Stores, Inc., as guarantor, 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 omitted schedules to this Exhibit to
the Securities and Exchange Commission upon its request.
First Amendment to Second Amended and Restated Credit Agreement dated December 16, 2016, among
Specialty Retailers, Inc., as borrower, Stage Stores, Inc., as guarantor, and the banks named therein is
incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on December 19, 2016. Some
schedules to this Exhibit have been omitted. The registrant agrees to furnish supplementally a copy of any of the
omitted schedules to this Exhibit to the Securities and Exchange Commission upon its request.
Stage Stores, Inc. Amended and Restated 2001 Equity Incentive Plan effective June 3, 2004 is incorporated by
reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on September 6, 2012.
Stage Stores, Inc. Second Amended and Restated 2008 Equity Incentive Plan effective June 9, 2011 is
incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on September 6, 2012.
Stage Stores, Inc. Amended and Restated 2003 Non-Employee Director Equity Compensation Plan effective June
10, 2014 is incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on September
11, 2014.
43
10.6†
10.7†
10.8†
10.9†
10.10†
10.11†
10.12†
10.13†
10.14†
10.15†
10.16†
10.17†
10.18†
10.19†
10.20#
Form of Stock Appreciation Rights Agreement (Employee) under the Stage Stores, Inc. Second Amended and
Restated 2008 Equity Incentive Plan is incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form
10-Q filed on September 6, 2012.
Form of Performance Based Share Agreement under the Stage Stores, Inc. Second Amended and Restated 2008
Equity Incentive Plan is incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q filed on
September 6, 2012.
Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Amended and Restated 2001
Equity Incentive Plan (4 year pro rata vesting; SVPs and above) is incorporated by reference to Exhibit 10.9 to
our Quarterly Report on Form 10-Q filed on September 6, 2012.
Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Amended and Restated 2001
Equity Incentive Plan (4 year pro rata vesting; below SVP level) is incorporated by reference to Exhibit 10.10 to
our Quarterly Report on Form 10-Q filed on September 6, 2012.
Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Amended and Restated 2001
Equity Incentive Plan (4 year 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.
Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Second Amended and
Restated 2008 Equity Incentive Plan (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.
Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Second Amended and
Restated 2008 Equity Incentive Plan (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 on September 6, 2012.
Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Second Amended and
Restated 2008 Equity Incentive Plan (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 on September 6, 2012.
Form of Restricted Stock Award Agreement (Employee) under the Stage Stores, Inc. Second Amended and
Restated 2008 Equity Incentive Plan (4 year pro rata vesting; EVPs and above; with non-compete) is incorporated
by reference to Exhibit 10.15 to our Quarterly Report on Form 10-Q filed on September 6, 2012.
Form of Initial Grant Restricted Stock Award Agreement (Director) under the Stage Stores, Inc. Second Amended
and Restated 2008 Equity Incentive Plan is incorporated by reference to Exhibit 10.4 to our Quarterly Report on
Form 10-Q filed on September 11, 2014.
Form of Reelection Grant Restricted Stock Award Agreement (Director) under the Stage Stores, Inc. Second
Amended and Restated 2008 Equity Incentive Plan is incorporated by reference to Exhibit 10.6 to our Quarterly
Report on Form 10-Q filed on September 11, 2014.
Form of Shareholder Agreement for restricted stock (Director) under the Stage Stores, Inc. Amended and
Restated 2003 Non-Employee Director Equity Compensation Plan is incorporated by reference to Exhibit 10.7 to
our Quarterly Report on Form 10-Q filed on September 11, 2014.
Stage Stores Executive Performance Incentive Bonus Plan is incorporated by reference to Exhibit 10 to our
Current Report on Form 8-K filed on June 16, 2015.
Stage Stores, Inc. Nonqualified Deferred Compensation Plan, as Amended and Restated effective June 5, 2008 is
incorporated by reference to Exhibit 4.4 to our Registration Statement on Form S-8 filed on June 10, 2008.
Amended and Restated Private Label Credit Card Plan Agreement Between World Financial Network Bank (now
Comenity Bank) and Stage Stores, Inc. and Specialty Retailers, Inc. dated as of August 8, 2012 is incorporated by
reference to Exhibit 10.1 to our Amended Quarterly Report on Form 10-Q/A filed on March 7, 2013.
44
10.21#
10.22#
10.23#
10.24#
10.25†
10.26†
10.27†
10.28†
10.29†
10.30†
10.31†
14
21*
23*
Amendment No. One to Amended and Restated Private Label Credit Card Plan Agreement dated as of February
1, 2013, Between World Financial Network Bank (now Comenity Bank) and Stage Stores, Inc. and Specialty
Retailers, Inc. is incorporated by reference to Exhibit 10.26 to our Annual Report on Form 10-K filed on April 3,
2013.
Amendment No. Two to Amended and Restated Private Label Credit Card Plan Agreement dated as of February
13, 2014, Between Comenity Bank and Stage Stores, Inc. and Specialty Retailers, Inc. is incorporated by
reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on June 10, 2014.
Amendment No. Three to Amended and Restated Private Label Credit Card Plan Agreement dated as of May 4,
2014, Between Comenity Bank and Stage Stores, Inc. and Specialty Retailers, Inc. is incorporated by reference to
Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on September 11, 2014.
Amendment No. Four to Amended and Restated Private Label Credit Card Plan Agreement dated as of March 28,
2016, Between Comenity Bank and Stage Stores, Inc. and Specialty Retailers, Inc. is incorporated by reference to
Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on June 3, 2016.
Employment Agreement between Oded Shein and Stage Stores, Inc. dated June 16, 2015 is incorporated by
reference to Exhibit 10.1 of our Current Report on Form 8-K filed on June 22, 2015.
Employment Agreement between Steven L. Hunter and Stage Stores, Inc. dated April 1, 2015 is incorporated by
reference to Exhibit 10.1 Stage Stores’ Current Report on Form 8-K filed on April 7, 2015.
Employment Agreement between Michael Glazer and Stage Stores, Inc. dated June 12, 2012 is incorporated by
reference to Exhibit 10.25 to our Quarterly Report on Form 10-Q filed on September 6, 2012.
Employment Agreement between Thorsten I. Weber and Stage Stores, Inc. dated September 29, 2016 is
incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on December 8, 2016.
Employment Agreement between Russ Lundy and Stage Stores, Inc. dated August 6, 2010 is incorporated by
reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on June 13, 2013.
Employment Agreement between Bill Gentner and Stage Stores, Inc. dated June 17, 2014 is incorporated by
reference to Exhibit 10.8 to our Quarterly Report on Form 10-Q filed on September 11, 2014.
Form of Indemnity Agreement is incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q
filed on December 8, 2016.
Code of Ethics for Senior Officers dated January 25, 2011 is incorporated by reference to Exhibit 14 to our
Annual Report to Form 10-K filed on March 30, 2011.
Subsidiaries of Stage Stores, Inc.
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.
45
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.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 and Exchange Commission.
ITEM 16. FORM 10-K SUMMARY
An optional summary of the information required by this Form 10-K is not included in this Form 10-K.
46
Pursuant 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 on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
STAGE STORES, INC.
/s/ Michael L. Glazer
Michael L. Glazer
President and Chief Executive Officer
(Principal Executive Officer)
STAGE STORES, INC.
/s/ Oded Shein
Oded Shein
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
STAGE STORES, INC.
/s/ Richard E. Stasyszen
Richard E. Stasyszen
Senior Vice President, Finance and Controller
(Principal Accounting Officer)
April 3, 2017
April 3, 2017
April 3, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
*
Alan J. Barocas
*
Elaine D. Crowley
*
Diane M. Ellis
/s/ Michael L. Glazer
Michael L. Glazer
*
Earl J. Hesterberg
Director
April 3, 2017
Director
April 3, 2017
Director
April 3, 2017
Director
April 3, 2017
Director
April 3, 2017
*
Lisa R. Kranc
*
William J. Montgoris
*
C. Clayton Reasor
*
Ralph P. Scozzafava
Director
April 3, 2017
Director
April 3, 2017
Director
April 3, 2017
Director
April 3, 2017
(Constituting a majority of the Board of Directors)
*By:
/s/ Oded Shein
Oded Shein
Attorney-in-Fact
47
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF STAGE STORES, INC.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at January 28, 2017 and January 30, 2016
Consolidated Statements of Operations and Comprehensive Income (Loss) for 2016, 2015 and 2014
Consolidated Statements of Cash Flows for 2016, 2015 and 2014
Consolidated Statements of Stockholders’ Equity for 2016, 2015 and 2014
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Stage Stores, Inc.
Houston, Texas
We have audited the accompanying consolidated balance sheets of Stage Stores, Inc. and subsidiary (the “Company”)
as of January 28, 2017 and January 30, 2016, and the related consolidated statements of operations, comprehensive income
(loss), stockholders’ equity, and cash flows for each of the three years in the period ended January 28, 2017. We also have
audited the Company’s internal control over financial reporting as of January 28, 2017, based on criteria 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 its assessment of the effectiveness of internal control over financial reporting, included in
Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether 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 significant
estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we considered necessary 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 and principal financial officers, or persons performing similar functions, and effected by the
company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to 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 accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the 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 management override of controls, material misstatements due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because of changes 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 28, 2017 and January 30, 2016, and the results of their
operations and their cash flows for each of the three years in the period ended January 28, 2017, in conformity with accounting
principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of January 28, 2017, based on the criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
April 3, 2017
F-2
Stage Stores, Inc.
Consolidated Balance Sheets
(in thousands, except par value)
January 28, 2017
January 30, 2016
ASSETS
Cash and cash equivalents
Merchandise inventories, net
Prepaid expenses and other current assets
Total current assets
Property, equipment and leasehold improvements, net
Intangible assets
Other non-current assets, net
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable
Income taxes payable
Current portion of debt obligations
Accrued expenses and other current liabilities
Total current liabilities
Long-term debt obligations
Deferred taxes
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 8)
Common stock, par value $0.01, 100,000 shares authorized, 32,340 and 32,030
shares issued, respectively
Additional paid-in capital
Less treasury stock at cost, 5,175 shares, respectively
Accumulated other comprehensive loss
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
13,803
$
409,384
41,574
464,761
284,110
15,235
22,883
786,989
101,985
326
6,414
59,945
168,670
163,749
547
73,863
406,829
323
410,504
(43,286)
(5,648)
18,267
380,160
786,989
$
$
$
$
$
$
16,487
435,996
48,279
500,762
311,717
15,235
20,385
848,099
84,019
1,850
2,847
67,166
155,882
162,876
20,277
79,311
418,346
320
406,034
(43,068)
(6,353)
72,820
429,753
848,099
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Stage Stores, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except earnings per share)
Net sales
Cost of sales and related buying, occupancy and distribution
expenses
Gross profit
Selling, general and administrative expenses
Interest expense
Income (loss) from continuing operations before income tax
Income tax expense (benefit)
Income (loss) from continuing operations
Loss from discontinued operations, net of tax benefit of
$4,228
Net income (loss)
Other comprehensive income (loss):
Employee benefit related adjustment, net of tax of $112,
($258) and ($1,505), respectively
Amortization of employee benefit related costs, net of tax of
$381, $290, and $150, respectively
Loss on pension settlement, net of tax of $280
Total other comprehensive income (loss)
Comprehensive income (loss)
Basic earnings (loss) per share data:
Continuing operations
Discontinued operations
Basic earnings (loss) per share
Basic weighted average shares outstanding
Diluted earnings (loss) per share data:
Continuing operations
Discontinued operations
Diluted earnings (loss) per share
Diluted weighted average shares outstanding
2016
1,442,718
$
Fiscal Year
2015
1,604,433
$
2014
1,638,569
$
1,144,666
298,052
1,208,002
396,431
1,188,763
449,806
356,064
5,051
(63,063)
(25,166)
(37,897)
387,859
2,977
5,595
1,815
3,780
386,104
3,002
60,700
22,847
37,853
—
(37,897)
$
—
3,780
$
(7,003)
30,850
189
$
(431)
$
(2,507)
516
—
705
(37,192)
(1.40)
—
(1.40)
27,090
(1.40)
—
(1.40)
27,090
$
$
$
$
$
484
468
521
4,301
0.12
—
0.12
31,145
0.12
—
0.12
31,188
$
$
$
$
$
249
—
(2,258)
28,592
1.18
(0.22)
0.96
31,675
1.18
(0.22)
0.96
31,763
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Stage Stores, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation, amortization and impairment of long-lived assets
Loss on retirements of property, equipment and leasehold
improvements
Deferred income taxes
Tax (deficiency) benefit from stock-based compensation
Stock-based compensation expense
Amortization of debt issuance costs
Excess tax benefits from stock-based compensation
Deferred compensation obligation
Amortization of employee benefit related costs and loss on
pension settlement
Construction allowances from landlords
Other changes in operating assets and liabilities:
Decrease (increase) in merchandise inventories
Decrease (increase) in other assets
Increase (decrease) in accounts payable and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Additions to property, equipment and leasehold improvements
Proceeds from insurance and disposal of assets
Addition to intangible assets
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from revolving credit facility borrowings
Payments of revolving credit facility borrowings
Proceeds from long-term debt obligation
Payments of long-term debt obligations
Payments of debt issuance costs
Repurchases of common stock
Payments for stock related compensation
Proceeds from issuance of equity awards
Excess tax benefits from stock-based compensation
Cash dividends paid
Net cash provided by (used in) financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents:
Beginning of period
End of period
Supplemental disclosures including non-cash investing and financing
activities:
Interest paid
Income taxes paid
Unpaid liabilities for capital expenditures
2016
Fiscal Year
2015
2014
$
(37,897)
$
3,780
$
30,850
91,656
296
(20,224)
(4,565)
9,461
229
—
218
897
7,079
26,612
754
9,768
84,284
(74,257)
1,179
—
(73,078)
512,873
(510,011)
5,830
(4,252)
(815)
—
(859)
—
—
(16,656)
(13,890)
(2,684)
77,599
719
(2,330)
409
12,394
218
(945)
881
1,522
3,444
5,456
1,551
(64,398)
40,300
(90,695)
43
(325)
(90,977)
575,570
(460,640)
—
(1,714)
—
(41,587)
(4,465)
543
945
(18,653)
49,999
63,447
110
3,348
64
9,664
275
(852)
(367)
399
5,538
(7,045)
(1,737)
(1,480)
102,214
(70,580)
2,946
—
(67,634)
457,742
(471,227)
—
(2,352)
(663)
(2,755)
(1,844)
5,040
852
(16,970)
(32,177)
(678)
2,403
$
$
16,487
13,803
4,816
1,601
3,943
$
$
17,165
16,487
2,705
15,237
11,951
$
$
14,762
17,165
2,733
7,084
3,168
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Stage Stores, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except per share amounts)
Common
Stock
Shares
Amount
Additional
Paid-in
Capital
Treasury
Stock
Shares
Amount
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Balance, February 1, 2014
31,222
$
312
$
384,295
— $
(967) $
(4,616) $
75,420
$
454,444
Net income
Other comprehensive loss
Dividends on common stock,
$0.53 per share
Deferred compensation
Repurchases of common stock
Retirement of treasury stock
Issuance of equity awards, net
Tax withholdings paid for net
settlement of stock awards
Stock-based compensation
expense
Tax benefit from stock-based
compensation
Recognition of pre-reorganization
deferred tax assets
Balance, January 31, 2015
Net income
Other comprehensive income
Dividends on common stock,
$0.58 per share
Deferred compensation
Repurchases of common stock
Issuance of equity awards, net
Tax withholdings paid for net
settlement of stock awards
Stock-based compensation
expense
Tax benefit from stock-based
compensation
—
—
—
—
—
(172)
582
—
—
—
—
—
—
—
—
—
(2)
6
—
—
—
—
—
—
—
(367)
—
(1,146)
5,034
(2,211)
9,664
64
62
—
—
—
—
(172)
172
—
—
—
—
—
—
—
—
367
(2,755)
2,755
—
—
—
—
—
—
(2,258)
30,850
—
30,850
(2,258)
—
—
—
—
—
—
—
—
(16,970)
(16,970)
—
—
(1,607)
—
—
—
—
—
—
(2,755)
—
5,040
(2,211)
9,664
64
62
31,632
$
316
$
395,395
— $
(600) $
(6,874) $
87,693
$
475,930
—
—
—
—
—
398
—
—
—
—
—
—
—
—
4
—
—
—
—
—
—
881
—
539
(3,584)
12,394
409
—
—
—
—
—
—
—
(881)
(5,175)
(41,587)
—
—
—
—
—
—
—
—
—
521
—
—
—
—
—
—
—
3,780
—
3,780
521
(18,653)
(18,653)
—
—
—
—
—
—
—
(41,587)
543
(3,584)
12,394
409
Balance, January 30, 2016
32,030
$
320
$
406,034
(5,175) $
(43,068) $
(6,353) $
72,820
$
429,753
Net loss
Other comprehensive income
Dividends on common stock,
$0.60 per share
Deferred compensation
Issuance of equity awards, net
Tax withholdings paid for net
settlement of stock awards
Stock-based compensation
expense
Tax deficiency from stock-based
compensation
—
—
—
—
310
—
—
—
—
—
—
—
3
—
—
—
—
—
—
218
(3)
(641)
9,461
(4,565)
—
—
—
—
—
—
—
—
—
—
—
(218)
—
—
—
—
—
705
(37,897)
(37,897)
—
705
—
—
—
—
—
—
(16,656)
(16,656)
—
—
—
—
—
—
—
(641)
9,461
(4,565)
Balance, January 28, 2017
32,340
$
323
$
410,504
(5,175) $
(43,286) $
(5,648) $
18,267
$
380,160
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Stage Stores, Inc.
Notes to Consolidated Financial Statements
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business. We are a retailer operating specialty department stores primarily in small and mid-sized
towns and communities. Our merchandise assortment is a well-edited selection of moderately priced brand name and private
label apparel, accessories, cosmetics, footwear and home goods. As of January 28, 2017, we operated 798 specialty department
stores located in 38 states under the BEALLS, GOODY’S, PALAIS ROYAL, PEEBLES and STAGE nameplates and a direct-
to-consumer business.
On March 7, 2014, we divested Steele's, an off-price concept that we launched in November 2011, in order to focus
solely on our core specialty department store business. Accordingly, the results of operations of Steele's and loss on the sale are
reflected in discontinued operations for all periods presented.
Principles of Consolidation. The consolidated financial statements include the accounts of Stage Stores, Inc. and its
subsidiary. All intercompany transactions 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 31st of the following calendar year.
Fiscal Year
Ended
Weeks
2016
2015
2014
January 28, 2017
January 30, 2016
January 31, 2015
52
52
52
Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make
certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an
ongoing basis, we evaluate our estimates, including those related to inventory, deferred tax assets, intangible assets, long-lived
assets, sales returns, gift card breakage, pension obligations, self-insurance and contingent liabilities. Actual results may differ
materially from these estimates. We base our estimates on historical experience and on various assumptions which are believed
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. Cash and 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 cash management and investment policies restrict investments to low-risk, highly-liquid securities and we
perform periodic evaluations of the relative credit standing 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 weighted average 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 distribution centers and to stores as well as
duties and fees related to import purchases.
F-7
Stage 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 promotional nature of our business, the allowances are generally intended to offset our costs of
handling, promoting, advertising and selling the vendors’ products in our stores. These allowances are recognized in
accordance with ASC Subtopic 605-50, Customer Payments and Incentives. Vendor allowances related to the purchase 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 or the related selling expense when the purpose for which the vendor funds were intended to be used has
been fulfilled and amounts have been authorized by vendors.
Stock-Based Compensation. We recognize as compensation expense an amount equal to the fair value of share-based
payments granted to employees and independent directors, net of estimated forfeitures. That cost is recognized ratably in
SG&A expense over the period during which an employee 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 and depreciated over their estimated useful lives using the straight-line method. The estimated useful lives of
leasehold improvements do not exceed the term of the related lease, including applicable available renewal options where
appropriate. The estimated useful lives in years are generally as follows:
Buildings & improvements
Information systems
Store and office fixtures and equipment
Warehouse equipment
Leasehold improvements - stores
Leasehold improvements - corporate office
20
3 - 10
5 - 10
5 - 15
5 - 15
10 - 12
Impairment of Long-Lived Assets. Property, plant and equipment and other long-lived assets are reviewed to determine
whether any events or changes 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 our evaluation on impairment indicators such as the nature of the asset’s physical
condition, the future economic benefit of the asset, any historical or future profitability measurements and other external market
conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate the
carrying amount of the asset may not be recoverable, we determine whether impairment has occurred through the use of an
undiscounted cash 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 difference between the carrying amount and the estimated fair value of the asset.
Management’s judgment is necessary to estimate fair value.
Insurance Recoveries. We incurred casualty losses during 2016, 2015 and 2014. We received total insurance proceeds
of $3.3 million, $2.5 million and $2.0 million during 2016, 2015 and 2014, respectively, and recognized net gains of $0.7
million, $0.8 million and $0.9 million in 2016, 2015 and 2014, respectively, which are included in SG&A expenses.
Intangible Assets and Impairment of Intangible Assets. Indefinite life intangible assets are tested for impairment
annually or more frequently when indicators 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 the time of the Peebles, Inc.
acquisition. We completed our annual impairment testing during the fourth quarter of 2016 and determined that the fair value
exceeded the carrying value by less than 10%.
F-8
Stage 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 related financing agreement. The balance of debt issuance costs, net of accumulated amortization of $0.1
million and $0.3 million, is $1.4 million and $0.8 million at January 28, 2017 and January 30, 2016, respectively.
Revenue Recognition. Our retail stores record revenue at the point of sale. Sales of merchandise shipped to our
customers are recorded based on estimated receipt of merchandise by the customer. Shipping and handling fees charged to
customers are included in net sales with the corresponding costs recorded 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 merchandise credits issued related to
customer returns. Upon redemption, we recognize this revenue in net sales.
Gift Card and Merchandise Credit Liability. Unredeemed gift cards and merchandise credits are recorded as a liability.
Our gift cards and merchandise credits do not expire. Based on historical redemption rates, a small and relatively stable
percentage of gift cards and merchandise credits will never be redeemed, which is referred to as “breakage.” Estimated
breakage income is recognized over time in proportion to actual gift card and merchandise credit redemptions. We recognized
breakage income of approximately $3.0 million in net sales in 2016, and approximately $1.6 million and $1.1 million as an
offset to SG&A expenses in 2015 and 2014, respectively.
Customer Loyalty Program. Prior to the third quarter of 2016, customers who spent a required amount within a
specified time frame using our private label credit card received reward certificates which could be redeemed for merchandise.
We estimated the net cost of the rewards and recorded a liability associated with unredeemed certificates and customer spend
toward unissued certificates. The cost of the loyalty rewards program was recorded in cost of sales. In the third quarter of 2016,
we expanded our loyalty program to enable all customers to earn benefits regardless of how they choose to pay. We record
deferred revenue, net of estimated breakage, for the retail value of certificates earned and as customers make purchases towards
earning reward certificates.
Self-Insurance Reserves. We maintain self-insured retentions with respect to general liability, workers compensation
and health benefits for our employees. We estimate the accruals for the liabilities based on industry development factors and
historical claim trend experience. Although management believes adequate reserves have been provided for expected liabilities
arising from our self-insured obligations, projections of future losses are inherently uncertain, and it is reasonably possible that
estimates of these liabilities will change over the near term as circumstances develop.
Advertising Expenses. Advertising costs are charged to operations when the related advertising first takes place.
Advertising costs were $88.7 million, $91.0 million and $92.1 million, in 2016, 2015 and 2014, respectively, which are net of
advertising allowances received from vendors of $4.3 million, $4.9 million and $5.0 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, applicable available lease renewal option periods. The difference between the payment and expense in any
period is recorded as deferred rent in other long-term liabilities in the consolidated financial statements. We record construction
allowances from landlords when contractually earned as a deferred rent credit in other long-term liabilities. Such deferred rent
credit is amortized over the related lease term, commencing on the date we contractually earned the construction allowance, as
a reduction of rent expense. The deferred rent credit was $43.4 million and $47.5 million as of January 28, 2017 and
January 30, 2016, respectively.
Certain leases provide for contingent rents that are not measurable at inception. These contingent rents are primarily
based on a percentage of sales that are in excess of a predetermined 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 been incurred and the amount is
reasonably estimable.
F-9
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
Income Taxes. The provision for income taxes is computed based on the pretax income (loss) included in the
consolidated financial statements. The asset and liability approach is used to recognize deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the carrying amounts for financial reporting purposes and
the tax basis of assets and liabilities. A valuation allowance is established if it is more likely than not that 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 the measurement period. Diluted earnings per share is computed using the weighted average number of
common shares as well as all potentially dilutive common 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 and are included in the calculation of basic and diluted earnings per
share pursuant to the two-class method. The two-class method determines earnings per share for each class of common stock
and participating securities according to dividends or dividend equivalents and their respective participation rights in
undistributed earnings. See Note 2 for additional disclosures regarding earnings per share.
Recent Accounting Standards. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with
Customers, which supersedes most existing revenue recognition guidance in GAAP. The core principle of the guidance is that a
company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects what a
company expects to be entitled to in exchange for those goods or services. ASU 2014-09 allows for either a retrospective or
cumulative effect transition method of adoption. In August 2015, the FASB issued ASU 2015-14, which deferred the effective
date of ASU 2014-09 by one year. The new revenue standard will be effective for us in the first quarter of fiscal year ending
February 2, 2019. We do not expect the adoption of ASU 2014-09 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 the assets and liabilities
that arise from finance and operating leases on the balance sheet. In addition, this guidance requires disclosures about the
amount, timing and uncertainty of cash flows arising from leases. The new standard will be effective for us in the first quarter
of fiscal year ending February 1, 2020. We are currently evaluating the impact that the adoption of this ASU will have on our
consolidated financial statements and we expect that our reported assets and liabilities will significantly increase under the new
standard.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting, which modifies several aspects of the accounting for share-based payment
transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on
the statement of cash flows. Under the new standard, excess income tax benefits and tax deficiencies related to equity awards
that vest or settle will be recognized as income tax expense, rather than within additional paid-in capital on the balance
sheet. The recognition of excess tax benefits and losses may create significant volatility in earnings. We do not expect the
adoption of the other requirements of this ASU to have a material impact on our consolidated financial statements. The new
standard will be effective for us in the first quarter of fiscal year ending February 3,
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments, which provides guidance on certain specific cash flow issues including proceeds received from
the settlement of insurance claims. This guidance requires cash proceeds received from the settlement of insurance claims to be
classified on the statement of cash flows on the basis of the related insurance coverage (that is, the nature of the loss). The new
standard is effective for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted. We
do not expect the adoption of this ASU to have a material impact on our consolidated statements of cash
In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost, which requires employers that offer or maintain defined benefit plans to disaggregate the
service component from the other components of net benefit cost and provides guidance on presentation of the service
component and the other components of net benefit cost in the statement of operations. The new standard is effective for fiscal
years and interim periods beginning after December 15, 2017. We are currently evaluating the impact that the adoption of ASU
2017-07 will have on our consolidated financial statements.
F-10
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
NOTE 2 - EARNINGS PER SHARE
Basic earnings (loss) per share is computed using the weighted average number of common shares outstanding during
the measurement period. Diluted earnings (loss) per share is computed using the weighted average number of common shares
as well as all potentially dilutive common share equivalents outstanding during the measurement period.
The following tables show the computation of basic and diluted earnings (loss) per share for each period (in thousands,
except per share amounts):
2016
Fiscal Year
2015
2014
Basic:
Net income (loss) from continuing operations
Less: Allocation of earnings to participating securities
Net income (loss) from continuing operations allocated to
common shares
$
(37,897)
—
$
$
3,780
(48)
(37,897)
3,732
Basic weighted average shares outstanding
Basic earnings (loss) per share from continuing operations
$
27,090
(1.40)
$
31,145
0.12
$
37,853
(503)
37,350
31,675
1.18
2016
Fiscal Year
2015
2014
Diluted:
Net income (loss) from continuing operations
Less: Allocation of earnings to participating securities
Net income (loss) from continuing operations allocated to
common shares
Basic weighted average shares outstanding
Add: Dilutive effect of stock awards
Diluted weighted average shares outstanding
Diluted earnings (loss) per share from continuing operations
$
$
(37,897)
—
$
$
3,780
(48)
(37,897)
27,090
—
27,090
(1.40)
$
3,732
31,145
43
31,188
0.12
$
37,853
(502)
37,351
31,675
88
31,763
1.18
The number of shares attributable to stock options, SARs and non-vested stock grants that would have been considered
dilutive securities, but were excluded from the calculation of diluted earnings (loss) per share because the effect was anti-
dilutive were as follows (in thousands):
Number of anti-dilutive shares due to net loss for the period
Number of anti-dilutive stock options and SARs due to exercise
price greater than average market price of our common stock
2016
Fiscal Year
2015
2014
34
192
—
251
—
234
F-11
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
NOTE 3 - FAIR VALUE MEASUREMENTS
We recognize or disclose the fair value of our financial and non-financial assets and liabilities on a recurring and non-
recurring basis. Fair value is defined 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 the measurement date. When determining the fair value measurements for
assets and liabilities which are required to be recorded at fair value, we assume the highest and best use of the asset by market
participants in which we would transact and the market-based risk measurements or assumptions that market participants 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 categorization within 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 similar assets or liabilities in inactive markets, or other inputs that are observable
or can be corroborated by observable market data for substantially 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 that market participants would use in pricing the asset or liability.
F-12
Stage 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 28, 2017
Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance
Other assets:
Securities held in grantor trust for deferred
compensation plans (a)(b)
$
18,094
$
18,094
$
— $
—
January 30, 2016
Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance
Other assets:
Securities held in grantor trust for deferred
compensation plans (a)(b)
$
17,286
$
17,286
$
— $
—
(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 securities represent quoted market prices multiplied by the quantities
held. Net gains and losses related to the changes in fair value in the assets and liabilities under the various deferred
compensation plans are recorded in SG&A expenses and were nil during 2016 and 2015.
F-13
Stage 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 28, 2017
Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance
Assets:
Store property, equipment and leasehold
improvements (a)
$
8,795
$
— $
— $
8,795
January 30, 2016
Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance
Assets:
Store property, equipment and leasehold
improvements (a)
$
3,895
$
— $
— $
3,895
(a) Using an undiscounted cash flow model, we evaluate the cash flow trends of our stores at least annually and when events or
changes in circumstances, such as a store closure, indicate that property, equipment and leasehold improvements may not be
fully recoverable. When a store’s projected undiscounted cash flows indicate its carrying value may not be recoverable, we use
a discounted cash flow model, with a 10% discount rate, to estimate the fair value of the underlying long-lived assets. An
impairment write-down is recorded if the carrying value of a long-lived asset exceeds its fair value. Key assumptions in
estimating future cash flows include, among other things, expected future operating performance, including expected closure
date and lease term, and changes in economic conditions. We believe estimated future cash flows are sufficient to support the
carrying value of our long-lived assets. Significant changes in the key assumptions used in our cash flow projections may result
in additional asset impairments. See Note 4 for additional disclosures on impairments charges.
Due to the short-term nature of cash and cash equivalents, payables and short-term debt obligations, the carrying value
approximates the fair value of these instruments. In addition, we believe that the Revolving Credit Facility obligation
approximates its fair value because interest rates are adjusted daily based on current market
F-14
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
NOTE 4 - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
The components of property, equipment and leasehold improvements were as follows (in thousands):
January 28, 2017
January 30, 2016
Land
Buildings and improvements
Fixtures and equipment
Leasehold improvements
Property, equipment and leasehold improvements
Less: Accumulated depreciation
Property, equipment and leasehold improvements, net
$
$
1,842
$
15,633
548,145
415,577
981,197
697,087
284,110
$
1,842
15,633
517,485
398,406
933,366
621,649
311,717
Depreciation expense and impairment charges were as follows for each period presented (in thousands):
Depreciation expense
Store impairment charges(a)
Total depreciation and impairment
$
$
2016
71,779
19,856
91,635
$
$
Fiscal Year
2015
66,998
10,580
77,578
$
$
2014
62,791
636
63,427
(a) Impairment charges recognized in 2016 reflect deteriorating operating performance during the year, especially in
the fourth quarter, which negatively impacted projected future cash flows. Impairment charges recognized in 2015 are
related to our strategic store closure plan. Store impairment charges are recorded in cost of sales and related buying,
occupancy and distribution expense.
Depreciation expense and store impairment charges included in cost of sales and related buying, occupancy and
distribution expense for 2016, 2015 and 2014 were $77.9 million, $67.9 million and $50.9 million, respectively.
F-15
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
NOTE 5 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
The components of accrued expenses and other current liabilities were as follows (in thousands):
Accrued compensation and benefits
Gift card and merchandise credit liability
Self-insurance liability
Accrued occupancy
Accrued advertising
Accrued capital expenditures
Other
Accrued expenses and other current liabilities
January 28, 2017
12,165
10,864
9,437
10,259
2,001
2,887
12,332
59,945
$
$
January 30, 2016
12,345
10,477
10,029
6,185
3,092
11,084
13,954
67,166
$
$
NOTE 6 - DEBT OBLIGATIONS
Debt obligations consisted of the following (in thousands):
Revolving Credit Facility
Finance obligations
Other financing
Total debt obligations
Less: Current portion of debt obligations
Long-term debt obligations
January 28, 2017
159,702
2,708
7,753
170,163
6,414
163,749
$
$
January 30, 2016
156,840
3,764
5,119
165,723
2,847
162,876
$
$
On December 16, 2016, we entered into an amendment to our senior secured revolving credit facility. The amendment
increased total capacity under the facility from $350.0 million to $450.0 million, including a $50.0 million seasonal increase
and $25.0 million letter of credit sublimit, and extended the term from October 6, 2019 until December 16, 2021.
We use the Revolving Credit Facility to provide financing for working capital and general corporate purposes, as well
as to finance capital expenditures and to support our letter of credit requirements. Borrowings are limited to the availability
under a borrowing base that is determined principally on eligible inventory as defined by the Revolving Credit Facility
agreement. Inventory, cash and cash equivalents are pledged as collateral. The daily interest rates are determined by a prime
rate or LIBOR, plus an applicable margin, as set forth in the Revolving Credit Facility agreement. During 2016, the weighted
average interest rate on outstanding borrowings and the average daily borrowings under the Revolving Credit Facility were
1.9% and $192.4 million, respectively, as compared to 1.53% and $102.5 million in 2015.
Letters of credit issued under the Revolving Credit Facility support certain merchandise purchases and collateralize
retained risks and deductibles under various insurance programs. At January 28, 2017, we had outstanding letters of credit
totaling approximately $6.4 million. These letters of credit expire within twelve months of issuance. Excess availability under
the Revolving Credit Facility at January 28, 2017 was $122.3 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 common stock under certain circumstances. The agreement also contains a
fixed charge coverage ratio covenant in the event excess availability is below a defined threshold or an event of default has
occurred. At January 28, 2017, we were in compliance with all of the financial covenants of the Revolving Credit Facility
agreement and expect to continue to be in compliance in 2017.
F-16
Stage 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 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 the construction 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 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 of January 28, 2017. Minimum annual payments required under existing finance obligations as of
January 28, 2017 are as follows (in thousands):
Fiscal Year
2017
2018
2019
Total
$
$
Minimum
Payments
Less: Interest
1,366
1,096
580
3,042
$
$
207
101
26
334
Principal Payments
1,159
$
995
554
2,708
$
During 2016, we borrowed approximately $5.8 million under a secured equipment financing note bearing an effective
interest rate of 3.2%, of which $1.4 million was paid in 2016 and $1.9 million, $2.0 million and $0.5 million will be paid in
2017, 2018 and 2019, respectively. At January 28, 2017, we had $3.3 million outstanding on our capital expenditures financed
in 2015, bearing interest of 1.4%, which will be paid in 2017.
NOTE 7 - OTHER LONG-TERM LIABILITIES
The components of other long-term liabilities were as follows (in thousands):
Deferred rent
Deferred compensation
Pension liability
Deferred revenue under ADS agreement (see Note 10)
Other
Other long-term liabilities
January 28, 2017
43,382
18,180
8,801
3,500
—
73,863
$
$
January 30, 2016
47,506
17,392
8,913
4,500
1,000
79,311
$
$
NOTE 8 - COMMITMENTS AND CONTINGENCIES
We have numerous 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. Contractual obligations for
purchase of goods or services are defined as agreements that are enforceable and legally binding and that specify all significant
terms, including: fixed or minimum quantities. In the ordinary course of business, we enter into 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 pending legal proceedings, either individually or in the aggregate, are material to our financial condition,
results of operations or cash flows.
F-17
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
NOTE 9 - STOCKHOLDERS’ EQUITY
Our deferred compensation plan covering executives and certain officers provides an investment option that allows
participants to elect to purchase shares of our common stock (“Company Stock Investment Option”). We established a grantor
trust to facilitate the collection of funds and purchase our shares on 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 receive the benefits under the terms
of the plan. At the time of the participant’s eligibility, the deferred compensation obligation related to the Company Stock
Investment Option is settled by the delivery of the fixed number of shares held by the grantor trust on the participant’s behalf.
In 2016, 2015 and 2014, participants in our deferred compensation plan elected to invest approximately $0.3 million, $0.9
million and $0.4 million, respectively, of the total amount of deferred compensation withheld, in the Company Stock
Investment Option. The purchase of shares made by the grantor trust on behalf of the participants is included in treasury stock
and the corresponding deferred compensation obligation is included in additional paid-in capital.
On February 16, 2017, our Board declared a quarterly cash dividend of $0.15 per share on our common stock, payable
on March 15, 2017, to shareholders of record at the close of business on February 28, 2017.
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. The 2011 Stock Repurchase Program will
expire when we have repurchased $200.0 million of our outstanding common stock, unless terminated earlier by our Board. As
of January 28, 2017, we had $58.4 million available under the program. Also in March 2011, our Board authorized us to
repurchase shares of our outstanding common stock equal to the amount of the proceeds and related tax benefits from the
exercise of stock options, stock appreciation rights (“SARs”) and other equity grants. Purchases of shares of our common stock
may be made from time to time, either on the open market or through privately negotiated transactions and are financed by our
existing cash, cash flow and other liquidity sources, as
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 Financial Network 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 and customer service functions. We are required to perform
certain duties, including electronic processing and transmitting of transaction records and marketing and promoting the private
label credit card program. As consideration, among other payments set forth in the Agreement, the Bank pays 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, and as of January 28, 2017, the remaining amount to be amortized is $4.5 million. We realized $55.3 million, $54.1
million and $54.1 million in income related to our private label credit card program during 2016, 2015 and 2014, respectively,
which have been recorded as a reduction to SG&A expenses.
F-18
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
NOTE 11 - OPERATING LEASES
We lease stores, our corporate headquarters, one distribution center and equipment under operating leases. The
majority of store leases, which are typically 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 as common area maintenance, utilities, taxes and insurance. Certain
store 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 a predetermined level. A number of store leases provide for escalating minimum rent.
As part of the consolidation of our corporate headquarters, we entered into an agreement to sublease our former corporate office
building beginning in February 2016 through our remaining lease term.
Minimum rental commitments on long-term, non-cancelable operating leases at January 28, 2017, are as follows (in
thousands):
Fiscal Year
2017
2018
2019
2020
2021
Thereafter
Total
Commitments
93,607
$
83,883
69,065
60,474
50,097
136,632
493,758
$
$
$
Sublease
Income
(1,365)
(1,447)
(1,447)
(1,492)
(1,582)
(2,636)
(9,969)
Net Minimum
Lease
Commitments
92,242
$
82,436
67,618
58,982
48,515
133,996
483,789
$
Rental expense for operating leases, net of sublease income, consisted of the following for each period presented (in
thousands):
2016
Fiscal Year
2015
Minimum rentals
Contingent rentals
Sublease income
Total
$
$
85,538
$
84,170
$
2,365
(1,436)
3,067
(5)
86,467
$
87,232
$
2014
77,141
3,642
(6)
80,777
F-19
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
NOTE 12 - STOCK-BASED COMPENSATION
As approved by our shareholders, we established the Amended and Restated 2001 Equity Incentive Plan (“2001 Equity
Incentive Plan”) and the Amended and Restated 2008 Equity Incentive Plan (“2008 Equity Incentive Plan” and collectively
with the 2001 Equity Incentive Plan, “Equity Incentive Plans”) 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 our common 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):
2016
Fiscal Year
2015
2014
Stock options and SARs
Non-vested stock
Performance shares
Total stock-based compensation expense
Related tax benefit
Stock-based compensation expense, net of tax
$
$
— $
6,676
2,785
9,461
(3,557)
5,904
$
30
7,171
5,193
12,394
(4,660)
7,734
$
$
703
5,034
3,927
9,664
(3,634)
6,030
As of January 28, 2017, we had unrecognized compensation cost of $14.9 million related to stock-based compensation
awards granted. That cost is expected to be recognized over a weighted average period of 2.3 years.
SARs
Prior to 2012, we granted stock options and SARs to our employees, which generally vested over four years from the
date of grant. There were no stock options outstanding as of January 28, 2017 and January 30, 2016. Outstanding SARs will
expire, if not exercised or forfeited, within seven years from the date of grant. Exercised SARs are settled by the issuance of
common stock in an amount equal to the increase in our stock price between the grant date and the exercise
The following table summarizes SARs activity during 2016:
Number of
Outstanding
Shares
Weighted
Average
Exercise Price
224,400
(46,500)
177,900
$
$
17.16
15.14
17.69
Weighted
Average
Remaining
Contractual
Term
(years)
Aggregate
Intrinsic
Value (in
thousands)
0.8
$
—
Outstanding, vested and exercisable at
January 30, 2016
Forfeited
Outstanding, vested and exercisable at
January 28, 2017
No SARs were exercised during 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 of exercise exceeds the exercise price of the award, exercised
during 2015 and 2014 was $0.9 million and $3.7 million, respectively.
F-20
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
Non-vested Stock
We grant shares of non-vested stock to our employees and non-employee directors. The non-vested stock converts one
for one to common stock at the end of the vesting period at no cost to the recipient to whom it is awarded. Compensation
expense is recorded ratably over the vesting period, which ranges from one to four years from the date of grant. Certain non-
vested stock awards have shareholder rights, including the right to vote and to receive dividends. The fair value of non-vested
stock awards is based on the closing share price of our common stock on the date of grant. The fair value of non-vested stock
awards that do not have dividend rights is discounted for the present value of expected dividends during the vesting period.
The following table summarizes non-vested stock activity during 2016:
Non-vested Stock
Outstanding at January 30, 2016
Granted
Vested
Forfeited
Outstanding at January 28, 2017
Number of
Shares
$
894,526
1,411,947
(384,756)
(325,307)
1,596,410
Weighted
Average
Grant Date
Fair Value
20.20
6.75
19.04
12.18
10.22
The aggregate intrinsic value of non-vested stock that vested during 2016, 2015 and 2014 was $2.7 million, $5.4
million and $5.7 million, respectively. The weighted-average grant date fair value for non-vested stock granted in 2016, 2015
and 2014 was $6.75, $18.70 and $22.81, respectively. The payment of the employees’ tax liability for a portion of the non-
vested stock that vested during 2016 was satisfied by withholding shares with a fair value equal to the tax liability. As a result,
the actual number of shares issued was 299,139.
Performance Shares
We grant performance shares as a means of rewarding management for our long-term performance based on
shareholder return performance measures. 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 in the table below and is based on our shareholder return
performance relative to a specific group of companies over a 3-year performance cycle. Compensation expense is recorded
ratably over the corresponding 3-year vesting period. The fair value of performance shares is determined using a Monte Carlo
probability model. Grant recipients do not have any shareholder rights until the granted shares have been issued.
The following table summarizes information about the performance shares that were outstanding at January 28, 2017:
Target
Shares
Outstanding
at
Beginning
of Year
223,876
—
223,876
Period
Granted
2015
2016
Total
Target
Shares
Granted
—
451,680
451,680
Target
Shares
Vested
(6,983)
(5,168)
(12,151)
Target
Shares
Forfeited
(58,403)
(116,279)
(174,682)
Target
Shares
Outstanding
at End
of Year
158,490
330,233
488,723
Weighted
Average
Grant Date
Fair Value
per
Share
$
28.33
8.69
For the 2014 performance grant, none of the 120,318 target shares that vested on January 28, 2017 were earned. The
aggregate intrinsic value of shares that vested and were earned during 2016, 2015 and 2014 was $0.1 million, $4.9 million and
$0.8 million, respectively. The payment of the recipients’ tax liability for shares that were earned during 2016 was satisfied by
withholding shares with a fair value equal to the tax liability. As a result, the actual number of shares issued was 11,323.
F-21
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
NOTE 13 - BENEFIT PLANS
401(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 their qualifying 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% of each participant’s
compensation under the Plan. We may make discretionary matching contributions during the year. Our matching contributions
expense for the 401(k) Plan were approximately $1.4 million, $1.5 million and $1.4 million in 2016, 2015 and 2014,
respectively.
Deferred Compensation Plans. We have two nonqualified deferred compensation plans (“DC Plans”) which provide
executives and other key employees 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 intended to 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 their
bonus and earn a rate of return based on actual investments chosen by each participant. We have established grantor trusts for
the purposes of holding assets to 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 of their base salary and bonus. For the plan covering other key
employees, we may make a bi-weekly discretionary matching contribution. We currently match 50% 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, if any. For both DC Plans, our contributions are vested 100%. In addition, we may, with approval by our Board, make
an additional employer contribution in any amount with respect to any participant as is determined in our sole discretion. Our
matching contribution expense for the DC Plans was approximately $1.0 million, $1.1 million and $1.3 million for 2016, 2015
and 2014, respectively.
Non-Employee Director Equity Compensation Plan. In 2003, we adopted, and our shareholders approved, the 2003
Non-Employee Director Equity Compensation Plan. The plan was amended and restated effective June 10, 2014. We reserved
225,000 shares of our common stock to fund this plan. Under this 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 of restricted stock or deferred stock
units as defined in this plan. At January 30, 2016 and January 28, 2017 there were no participants in or amounts deferred under
this plan.
Frozen Defined Benefit Plan. We sponsor a defined benefit plan (“DB Plan”), which covers substantially all employees
who had met eligibility requirements 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 under the 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 frozen will continue to count toward vesting and eligibility for
normal and early retirement for existing participants. The measurement dates used to determine pension benefit obligations
were January 28, 2017 and January 30, 2016.
F-22
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
Information regarding the DB Plan is as follows (in thousands):
Change in benefit obligation:
Benefit obligation at beginning of year
Employer service cost
Interest cost
Actuarial (gain) loss
Settlement (a)
Plan disbursements
Projected benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return (loss) on plan assets
Employer contributions
Settlement paid (a)
Plan disbursements
Fair value of plan assets at end of year
Underfunded status
Amounts recognized in the consolidated balance sheet consist of:
Accrued benefit liability - included in other long-term liabilities
Amount recognized in accumulated other comprehensive loss, pre-tax (b)
Fiscal Year
2016
2015
$
35,223
340
1,598
1,067
—
(3,266)
34,962
26,310
3,117
—
—
(3,266)
26,161
41,295
350
1,566
(3,406)
(2,579)
(2,003)
35,223
32,792
(1,900)
—
(2,579)
(2,003)
26,310
(8,801)
$
(8,913)
(8,801)
9,023
$
(8,913)
10,222
$
$
$
(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.
Weighted-average assumptions:
For determining benefit obligations at year-end:
Discount rate
Fiscal Year
2016
2015
4.33%
4.79%
2016
Fiscal Year
2015
2014
For determining net periodic pension cost for year:
Discount rate
Expected return on assets
4.79%
7.00%
3.90%
7.00%
4.81%
7.00%
The discount rate was determined using yields on a hypothetical bond portfolio that matches the approximated cash
flows of the DB Plan. We develop our long-term rate of return assumptions using long-term historical actual return data
considering the mix of investments that comprise plan assets and input from professional advisors. The DB Plan’s trustees have
engaged investment advisors to manage and monitor performance of the investments of the DB Plan’s assets and consult with
the DB Plan’s trustees.
F-23
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
The allocations of DB Plan assets by category are as follows:
Equity securities
Fixed income securities
Other - primarily cash
Total
2017 Target
Allocation
50%
50
—
100%
2016
51%
48
1
100%
Fiscal Year
2015
48%
51
1
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 on DB Plan assets for a prudent level of risk. The investment portfolio consists of actively
managed and indexed mutual funds of domestic and international equities and investment-grade corporate bonds and U.S.
government securities. Investment risk is measured and monitored on an ongoing basis through quarterly 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 28, 2017
Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance
$
13,309
12,540
312
13,309
12,540
312
$
— $
—
—
26,161
$
26,161
$
— $
—
—
—
—
January 30, 2016
Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance
$
12,607
13,341
362
12,607
13,341
362
$
— $
—
—
26,310
$
26,310
$
— $
—
—
—
—
$
$
$
$
Mutual funds:
Equity securities
Fixed income securities
Other - primarily cash
Total
Mutual funds:
Equity securities
Fixed income securities
Other - primarily cash
Total
F-24
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
The components of net periodic benefit cost for the DB Plan were as follows (in thousands):
2016
Fiscal Year
2015
2014
Net periodic pension cost for the fiscal year:
Employer service cost
Interest cost
Expected return on plan assets
Net loss amortization
Loss on pension settlement
Net pension cost
$
$
340
1,598
(1,749)
897
—
1,086
$
$
350
1,566
(2,195)
774
748
1,243
$
$
210
1,692
(2,134)
399
—
167
Other changes in DB Plan assets and benefit obligations recognized in other comprehensive loss are as follows (in
thousands):
Amortization of net loss
Loss on pension settlement
Net (gain) loss
Net change recognized in other comprehensive loss, pre-tax
Fiscal Year
2016
2015
$
$
$
(897)
—
(301)
(1,198)
$
(774)
(748)
689
(833)
The estimated net loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost
over the next year is $0.8 million. 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 to cover short-term liquidity needs of the DB Plan in order to
maintain current invested positions. We expect to contribute approximately $0.9 million during 2017.
The following benefit payments are expected to be paid (in thousands):
$
Fiscal Year
2017
2018
2019
2020
2021
Fiscal Years 2022 - 2026
Payments
2,865
2,642
3,086
2,841
2,998
13,902
F-25
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
NOTE 14 - INCOME TAXES
All of our operations are domestic. Income tax expense (benefit) consisted of the following (in thousands):
Federal income tax expense (benefit):
Current
Deferred
State income tax expense (benefit):
Current
Deferred
Total income tax expense (benefit)
2016
Fiscal Year
2015
2014
$
$
(5,234)
(19,052)
(24,286)
292
(1,172)
(880)
(25,166)
$
$
3,380
(2,156)
1,224
765
(174)
591
1,815
$
$
12,948
3,048
15,996
2,323
300
2,623
18,619
Income tax is included in the consolidated financial statements as follows (in thousands):
Continuing operations
Discontinued operations
Total income tax expense (benefit)
2016
(25,166)
—
(25,166)
$
$
$
$
Fiscal Year
2015
1,815
—
1,815
$
$
2014
22,847
(4,228)
18,619
A reconciliation between the federal income tax expense (benefit) computed at statutory tax rates and the actual
income tax expense (benefit) recorded is as follows (in thousands):
Federal income tax expense (benefit) at the
statutory rate
State income taxes, net
Uncertain tax position
Other
Job credits
Total income tax expense (benefit)
2016
Fiscal Year
2015
2014
$
$
(22,072)
(1,084)
(743)
654
(1,921)
(25,166)
$
$
1,958
$
332
128
474
(1,077)
1,815
$
17,314
1,811
92
590
(1,188)
18,619
F-26
Stage Stores, Inc.
Notes to Consolidated Financial Statements – (continued)
Deferred tax assets (liabilities) consisted of the following (in thousands):
January 28, 2017
January 30, 2016
Gross deferred tax assets:
Net operating loss
Accrued expenses
Lease obligations
Deferred compensation
Deferred income
Other
Gross deferred tax liabilities:
Inventory
Depreciation and amortization
$
10,184
$
2,893
16,762
12,048
3,956
4,434
50,277
(4,706)
(45,703)
(50,409)
Valuation allowance
Net deferred tax liabilities
$
(415)
(547)
$
469
2,719
19,186
11,223
4,592
2,879
41,068
(6,725)
(54,218)
(60,943)
(402)
(20,277)
ASC 740, Income Taxes, requires recognition of future tax benefits of deferred tax assets to the extent such realization
is more likely than not. In the current year, we generated federal and state net operating losses estimated at $9.7 million which
are included in deferred tax assets. There is sufficient taxable income in prior years available to carryback these losses once the
net operating loss amount is fixed and determinable, eliminating the need for a valuation allowance.
Consistent with the requirements of ASC 740, the tax benefits recognized related to pre-reorganization deferred tax
assets were recorded as a direct addition to additional paid-in capital. The remaining valuation allowance of $0.4 million at
January 28, 2017 and January 30, 2016, respectively, was established for pre-reorganization state net operating losses, which
may expire prior to utilization. Adjustments to tax expense are made to reduce the recorded valuation allowance 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 from pre-reorganization state losses which, if not
utilized, will expire in varying amounts between 2018 and 2021.
As of January 28, 2017, we had no unrecognized tax benefits. In the second quarter of 2016, we released a $0.7
million benefit associated with the favorable resolution of an uncertain tax position under audit. A reconciliation of the
beginning and ending amount of total unrecognized tax benefits, including associated interest, is as follows (in thousands):
Balance, beginning of period
Release of FIN 48 reserve
Balance, end of period
2016
743
(743)
—
$
$
F-27
Stage 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. We recognize
penalty and interest accrued related to unrecognized tax benefits as an income tax expense. During the years ended January 28,
2017, January 30, 2016, and January 31, 2015, the amount of penalties and interest accrued was approximately nil. We are
subject to U.S. federal income tax examinations by tax authorities for 2013 forward. We are also subject to audit by the taxing
authorities of 38 states for years generally after 2012. The outcome of tax audits cannot be predicted 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 adjust
our provision for income taxes in the period such resolution occurs.
NOTE 15 - DISCONTINUED OPERATIONS
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 specialty department 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):
Net Sales
$
— $
— $
2,414
Pre-tax loss from discontinued operations
—
—
11,231
2016
Fiscal Year
2015
2014
There were no assets or liabilities related to Steele’s included in the condensed consolidated financial statements as of
January 28, 2017 or January 30, 2016.
F-28
Stage 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):
Net sales
Gross profit
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Basic weighted average shares
Diluted weighted average shares
Net sales
Gross profit
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Basic weighted average shares
Diluted weighted average shares
$
$
$
$
$
$
$
$
Q1
332,750
66,987
(15,460)
(0.57)
(0.57)
26,932
26,932
Q1
369,313
80,929
(8,637)
(0.27)
(0.27)
31,750
31,750
Fiscal Year 2016
Q2
338,385
85,570
41
$
Q3
317,140
56,590
(15,634)
— $
—
27,111
27,175
(0.58)
(0.58)
27,155
27,155
Fiscal Year 2015
$
$
Q2
380,916
98,455
1,615
0.05
0.05
31,982
32,013
Q3
351,575
76,096
(10,183)
(0.32)
(0.32)
32,017
32,017
$
$
$
$
Q4
454,443
88,905
(6,844)
(0.25)
(0.25)
27,163
27,163
Q4
502,629
140,951
20,985
0.72
0.71
28,828
28,848
NOTE 17 - SUBSEQUENT EVENT
On March 30, 2017, we prevailed in our bid to acquire select assets of Gordmans Stores, Inc. (“Gordmans”) through a
bankruptcy auction. Under the terms of the transaction, we will, subject to exceptions in the purchase agreement, acquire a
minimum of 50 Gordmans store leases, with rights to assume leases for an additional seven stores and a distribution center; all
of Gordmans’ inventory, furniture, fixtures, equipment and other assets at the 57 store locations; and the trademarks and other
intellectual property of Gordmans. We intend to fund the transaction and related investments from existing cash and availability
under our credit facility. The transaction is expected to close during our first quarter of fiscal 2017, subject to the approval of
the court administering the Gordmans bankruptcy and customary closing conditions. The Gordmans stores are a natural
complement to our current operations, bringing beneficial diversification and scale to our business, while creating synergies
through the use of our current infrastructure.
F-29
SHAREHOLDER
INFORMATION (A S OF A P R I L 3 , 2 017)
D I R E C T O R S
Alan Barocas (2), (3)
Senior Executive Vice President
of Leasing, GGP, Inc.
Elaine Crowley (1), (2)
Former Executive Vice President,
Chief Financial Offi cer,
Mattress Giant Corporation
Diane Ellis (1), (3)*
Brand President—Chico’s,
Chico’s FAS, Inc.
Michael Glazer
President and
Chief Executive Offi cer,
Stage Stores, Inc.
Earl Hesterberg (2)*, (3)
President and Chief Executive Offi cer,
Group 1 Automotive, Inc.
Lisa Kranc (2), (3)
Former Senior Vice President,
Marketing, AutoZone, Inc.
William Montgoris (1), (4)
Former Chief Operating Offi cer,
The Bear Stearns Companies, Inc.
C. Clayton Reasor (2), (3)
Former Executive Vice President,
Investor Relations, Strategy
& Government Affairs,
The Phillips 66 Company
Ralph Scozzafava (1)*, (2)
Chief Executive Offi cer,
Dean Foods Company
1) Audit Committee
2) Compensation Committee
3) Corporate Governance &
Nominating Committee
4) Chairman of the Board
*Committee Chairman
E X E C U T I V E
O F F I C E R S
Michael Glazer
President and
Chief Executive Offi cer
Bill Gentner
Chief Marketing Offi cer
Amy Gray
Chief Human Resources Offi cer
Steven Hunter
Chief Information Offi cer
Russ Lundy II
Chief Stores Offi cer
Chad Reynolds
Chief Legal Offi cer and Secretary
Oded Shein
Chief Financial Offi cer
Thorsten Weber
Chief Merchandising Offi cer
S E N I O R
V I C E
P R E S I D E N T S
Tassy Beasley
Planning and Allocation
Roger Blanchard
Stores
Jason Curtis
Finance and Credit
Joan Fluke
Cosmetics
Blake Garner
General Merchandise Manager
Kay Mannino
Visual Merchandising
Presentation and
Product Development
Jack Matzer
General Merchandise Manager
Clark McNaught
General Merchandise Manager
Kevin Richardson
Technology and Security
Michael Smith
Omni-Channel
Randi Sonenshein
Finance and Strategy
Richard Stasyszen
Finance and Controller
Allan Watters
Asset Protection
Kent Williams
Real Estate
C O R P O R AT E
H E A D Q UA R T E R S
Stage Stores, Inc.
2425 West Loop South
Houston, Texas 77027
1-800-579-2302
www.stagestoresinc.com
A N N UA L M E E T I N G
The Annual Meeting of Shareholders
will be held at 8:15 a.m. Central Time
on Thursday, June 1, 2017,
at the Company’s Corporate
Headquarters.
F O R M 1 0 - K
A copy of the Company’s
Annual Report on Form 10-K,
as fi led with the Securities and
Exchange Commission for the
fi scal year ended January 28, 2017,
will be sent without charge upon
written request to the Company’s
Investor Relations Department at
the Company’s Corporate
Headquarters address.
T R A N S F E R AG E N T
A N D R E G I S T R A R
Computershare Investor Services
P.O. Box 30170
College Station, Texas
77842-3170
Within USA and Canada:
1-877-878-7531
Outside USA and Canada:
1-201-680-6578
www.computershare.com/investor
AU D I T O R S
Deloitte & Touche LLP
Houston, Texas
S T O C K L I S T I N G
The Company’s common
stock trades on the New York
Stock Exchange under the
symbol “SSI.”
C O M M O N S T O C K M A R K E T P R I C E
The following table sets forth the high and low market prices per
share of the Company’s common stock for each quarter during
fi scal 2016 as reported on the New York Stock Exchange:
FISCAL 2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
7.56
5.98
5.11
2.84
Low
5.02
5.74
5.02
2.72
2 4 2 5 W E S T L O O P S O U T H | H O U S T O N , T E X A S 7 70 2 7