Famous Footwear 2004 Annual Report Download - page 64

Table of Contents
Notes to Consolidated Financial Statements (continued)
BROWN SHOE COMPANY, INC. 2003 FORM 10-K
that convert variable rate interest payable on $100 million of long-term borrowings under the revolving credit agreement to a fixed rate of
6.88%. See Note 11 for further information related to the interest rate swap agreements. The other $19.5 million of borrowings under the
revolving bank credit agreement (classified as short-term notes payable on the balance sheet) has an average interest rate of 4.25%.
The revolving bank credit agreement is secured by accounts receivable and inventory of the Company and its wholly-owned domestic and
Canadian subsidiaries.
The maximum amount of short-term borrowings under the current revolving bank credit arrangement at the end of any month was
$53.0 million in 2003 and $82.6 million in 2002. The average daily short-term borrowings during the year were $16.9 million in 2003 and
$34.6 million in 2002. The weighted average short-term interest rates approximated 3.8% in 2003 and 4.5% in 2002.
Cash payments of interest for fiscal 2003, 2002 and 2001 were $10.2 million, $12.9 million and $23.2 million, respectively.
In the fourth quarter of fiscal 2003, the Company redeemed its capitalized lease obligation of $3.5 million, which was scheduled to mature in
October 2009.
In January 2002, the Company redeemed its 9.5% $100 million notes scheduled to mature in 2006. The call premium and the write-off of
deferred debt issuance expenses associated with this debt and the Company’s previous revolving credit agreement totaled $7.6 million.
10. LEASES
The Company leases all of its retail locations and certain office locations, distribution centers and equipment. The minimum lease terms for
our retail stores generally range from five to ten years. The term of the leases for the office facilities and distribution centers averages
approximately 20 years. Approximately one-half of the retail store leases are subject to renewal options for varying periods. The office and
distribution centers have renewal options of 15 to 20 years. In addition to minimum rental payments, certain of the retail store leases require
contingent payments based on sales levels.
Rent expense for operating leases was:
($ thousands) 2003 2002 2001
Minimum payments $118,804 $115,303 $108,729
Contingent payments 469 699 1,233
$119,273 $116,002 $109,962
Future minimum payments under noncancelable operating leases with an initial term of one year or more were as follows at January 31,
2004:
($ thousands)
2004 $118,180
2005 100,031
2006 83,953
2007 69,741
2008 55,605
Thereafter 133,132
Total minimum operating lease payments $560,642
11. DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments, primarily foreign exchange contracts and interest rate swaps, to reduce its exposure to
market risks from changes in foreign exchange rates and interest rates. These derivatives, designated as cash flow hedges, are used to
hedge the procurement of footwear from foreign countries and the