Famous Footwear 2004 Annual Report Download - page 68

Table of Contents
Notes to Consolidated Financial Statements (continued)
BROWN SHOE COMPANY, INC. 2003 FORM 10-K
The fair value of the Company’s long-term debt was based upon the borrowing rates available to the Company at January 31, 2004 and
February 1, 2003, as applicable, for financing arrangements with similar terms and maturities.
Carrying amounts reported on the balance sheets for cash, cash equivalents, receivables and notes payable approximate fair value due to the
short-term maturity of these instruments.
13. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to significant concentration of credit risk consisted primarily of cash, cash
equivalents and trade accounts receivable.
The Company maintains cash and cash equivalents and certain other financial instruments with various financial institutions. The financial
institutions are located throughout the world, and the Company’s policy is designed to limit exposure to any one institution or geographic
region. The Company’s periodic evaluations of the relative credit standing of these financial institutions are considered in the Company’s
investment strategy.
The Company’s footwear wholesaling businesses sell primarily to department stores, mass merchandisers and independent retailers across
the United States and Canada. Receivables arising from these sales are not collateralized; however, a portion is covered by documentary
letters of credit. Credit risk is affected by conditions or occurrences within the economy and the retail industry. The Company maintains an
allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers and historical trends.
14. COMMITMENTS AND CONTINGENCIES
Environmental Remediation
The Company is involved in environmental remediation and ongoing compliance activities at several sites. The Company is remediating,
under the oversight of Colorado authorities, the groundwater and indoor air at its owned facility in Colorado (also known as the Redfield site)
and residential neighborhoods adjacent to and near the property that have been affected by solvents previously used at the facility. During
fiscal 2003, 2002 and 2001, the Company incurred charges of $0.8 million, $4.1 million and $1.4 million, respectively, related to this
remediation. The total anticipated future cost of remediation activities at January 31, 2004 is $8.2 million and is accrued within other accrued
expenses and other liabilities, but the ultimate cost may vary. The cumulative costs incurred through January 31, 2004 are $12.5 million.
The Company assesses future recoveries from insurance companies related to remediation costs by estimating a range of probable
recoveries and recording the low end of the range. Recoveries from other responsible parties are recorded when a contractual agreement is
reached. As of January 31, 2004, recorded recoveries totaled $4.8 million and are recorded in other noncurrent assets on the consolidated
balance sheet. $4.5 million of the recorded recoveries are expected from certain insurance companies as indemnification for amounts spent
for remediation associated with the Redfield site. The insurance companies are contesting their indemnity obligations, and the Company has
sued its insurers seeking recovery of defense costs, indemnity and other damages related to the former operations and the remediation at the
site. The Company believes insurance coverage in place entitles it to reimbursement for more than the recovery recorded. The Company
believes the recorded recovery is supported by the fact the limits of the insurance policies at issue exceed the amount of the recorded
recovery, and certain insurers have offered to settle these claims. The Company is unable to estimate the ultimate recovery from the
insurance carriers, but is pursuing resolution of its claims.
The Company has completed its remediation efforts at its closed New York tannery and two associated landfills. In 1995, state environmental
authorities reclassified the status of these sites as being properly closed and requiring only continued maintenance and monitoring over the
next 20 years. In addition, various federal and state authorities have identified the Company as a potentially responsible party for remediation
at certain other landfills.
Based on information currently available, the Company had an accrued liability of $10.4 million as of January 31, 2004, to complete the
cleanup, maintenance and monitoring at all sites. Of the $10.4 million liability, $2.3 million is
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