Famous Footwear 2014 Annual Report Download - page 57

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56 2014 BROWN SHOE COMPANY, INC. FORM 10-K
Plan Assets
Pension assets are managed in accordance with the prudent investor standards of the Employee Retirement Income
Security Act (“ERISA”). The plan’s investment objective is to earn a competitive total return on assets, while also ensuring
plan assets are adequately managed to provide for future pension obligations. This results in the protection of plan surplus
and is accomplished by matching the duration of the projected benefit obligation using leveraged fixed income instruments
and, while maintaining an equity commitment, managing an equity overlay strategy. The overlay strategy is intended to
protect the managed equity portfolios against adverse stock market environments. The Company delegates investment
management of the plan assets to specialists in each asset class and regularly monitors manager performance and
compliance with investment guidelines. The Company’s overall investment strategy is to achieve a mix of approximately
97% of investments for long-term growth and 3% for near-term benefit payments with a wide diversification of asset
types, fund strategies and fund managers. The target allocations for plan assets for 2014 were 70% equities and 30%
debt securities. Allocations may change periodically based upon changing market conditions. Equities did not include any
Company stock at January 31, 2015 or February 1, 2014.
Assets of the Canadian pension plans, which total approximately $4.5 million at January 31, 2015, were invested 58% in
equity funds, 37% in bond funds and 5% in money market funds. The Canadian pension plans did not include any Company
stock as of January 31, 2015 or February 1, 2014.
A financial instrument’s level within the valuation hierarchy is based upon the lowest level of input that is significant to
the fair value measurement. Refer to further discussion on the fair value hierarchy in Note 13 to the consolidated financial
statements. Following is a description of the pension plan investments measured at fair value, including the general
classification of such investments pursuant to the valuation hierarchy.
• Cash and cash equivalents include cash collateral and margin as well as money market funds. The fair values are
based on unadjusted quoted market prices in active markets with sucient volume and frequency and therefore
are classified within Level 1 of the fair value hierarchy.
• Investments in corporate stocks – common, U.S. government securities, mutual funds, preferred securities, real
estate investment trusts and S&P 500 Index put and call options (traded on security exchanges) are classified
within Level 1 of the fair value hierarchy because the fair values are based on unadjusted quoted market prices in
active markets with sucient volume and frequency.
• Corporate debt instruments and interest rate swap agreements are valued at fair value based on vendor-quoted
pricing for which inputs are observable and can be corroborated; therefore, these are classified within Level 2 of
the fair value hierarchy.
• The unallocated insurance contract is valued at contract value, which approximates fair value; therefore, this
contract is classified within Level 3 of the fair value hierarchy. The unallocated insurance contract fair value was
$0.1 million as of both January 31, 2015 and February 1, 2014.
• The alternative investment fund, with a fair value of $10.7 million as of January 31, 2015, is an investment in a
pool of long-duration domestic investment grade assets. This investment is valued at fair value based on prices
supplied by the company or industry source of the investment grade assets and therefore, are classified within
Level 3 of the fair value hierarchy.
• The other pension plan assets, with a fair value of $0.4 million as of February 1, 2014, were not priced and therefore
were classified within Level 3 of the fair value hierarchy.
The fair values of the Company’s pension plan assets at January 31, 2015 by asset category are as follows:
Fair Value Measurements at January 31, 2015
($ thousands) Total Level 1 Level 2 Level 3
Asset
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 95,560 $ 95,560 $ – $ –
U.S. government securities . . . . . . . . . . . . . . . . . . . . . . . . . . 84,141 84,141 – –
Mutual fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,240 29,240 – –
Corporate stocks – common . . . . . . . . . . . . . . . . . . . . . . . . . 184,486 184,486 – –
S&P 500 Index options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,731 11,731 – –
Preferred securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286 286 – –
Interest rate swap agreements . . . . . . . . . . . . . . . . . . . . . . . . 7,268 – 7,268 –
Alternative investment fund . . . . . . . . . . . . . . . . . . . . . . . . . 10,733 – 10,733 –
Unallocated insurance contract. . . . . . . . . . . . . . . . . . . . . . . . 89 – – 89
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 423,534 $ 405,444 $ 18,001 $ 89