Famous Footwear 2012 Annual Report Download - page 28

26 2012 BROWN SHOE COMPANY, INC. FORM 10-K
• Organizational change – During 2012, we incurred costs of $2.3 million ($1.4 million after-tax, or $0.03 per diluted share)
related to an organizational change made at our corporate headquarters, with no corresponding costs in 2011 or 2010.
See Note 4 to the consolidated financial statements for additional information related to this change.
• ASG acquisition and integration costs – We incurred costs of $0.7 million ($0.4 million after-tax, or $0.01 per diluted
share) during 2012 related to the integration of ASG. In 2011, we incurred costs related to the acquisition and integration
of ASG of $6.5 million ($4.5 million after-tax, or $0.11 per diluted share) and in 2010 we incurred costs related to the
acquisition of ASG of $1.1 million ($0.7 million after-tax, or $0.02 per diluted share). All of these costs were recorded
within restructuring and other special charges, net. See Note 2 and Note 4 to the consolidated financial statements for
additional information.
• ERP stabilization – During 2011, our results were negatively impacted during the stabilization of our new ERP system
(implemented in 2010) due to increases in allowances and customer charge backs, margin related to lost sales and
incremental stabilization costs. We estimate that the impact of these items reduced earnings before income taxes by
$12.8 million ($7.8 million after-tax, or $0.18 per diluted share), net of a $3.3 million recovery from a third-party service
provider, in 2011.
• Acquisition related cost of goods sold adjustment – During 2011, we incurred costs of $4.2 million ($2.5 million after-tax,
or $0.05 per diluted share), associated with the impact to cost of goods sold of the inventory fair value adjustment in
connection with the acquisition of ASG, with no corresponding costs during 2012 or 2010. See Note 2 to the consolidated
financial statements for additional information related to these costs.
• Loss on early extinguishment of debt – During 2011, we incurred expenses of $1.0 million ($0.6 million after-tax, or
$0.02 per diluted share) to extinguish our senior notes prior to maturity in 2012. There were no corresponding charges
in 2012 or 2010.
• Information technology initiatives – We incurred expenses of $6.8 million ($4.6 million after-tax, or $0.10 per diluted
share) in 2010, related to the implementation of our ERP system that replaced select internally developed and certain
other third-party applications. These expenses were included in restructuring and other special charges, net.
See Note 4 to the consolidated financial statements for additional information.
Our debt-to-capital ratio, as defined in the Liquidity and Capital Resources – Working Capital and Cash Flow section, decreased
to 41.6% as of February 2, 2013, compared to 49.1% at January 28, 2012, primarily due to our $96.0 million decrease in
borrowings under our revolving credit agreement. Our current ratio, as defined in the Liquidity and Capital Resources –
Working Capital and Cash Flow section, was 1.65 to 1 at February 2, 2013, compared to 1.55 to 1 at January 28, 2012. Inventories
at February 2, 2013 were $533.3 million, down from $561.8 million at January 28, 2012, primarily driven by tight inventory
management across our wholesale portfolio and the impact of Wholesale Operations brands we are exiting in conjunction
with our portfolio realignment initiatives.
Outlook for 2013
We’re pleased to have wrapped up a strong 2012. However, like many other peers, we continue to monitor consumer
activity and reaction to changes in tax rates and other economic uncertainties. We expect same-store sales at Famous
Footwear will grow in the low single digit percentage range in 2013 and that our Wholesale Operations net sales will
decrease in the low to mid single digit percentage range in 2013.
Following are the consolidated results and the results by segment for 2012, 2011 and 2010:
CONSOLIDATED RESULTS
2012 2011 2010
% of % of % of
($ millions) Net Sales Net Sales Net Sales
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,598.1 100.0% $ 2,582.8 100.0% $ 2,504.1 100.0%
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,587.7 61.1% 1,586.2 61.4% 1,500.5 59.9%
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,010.4 38.9% 996.6 38.6% 1,003.6 40.1%
Selling and administrative expenses . . . . . . . . . . . . . . . . . . 919.0 35.4% 937.3 36.3% 923.0 36.9%
Restructuring and other special charges, net . . . . . . . . . . . . . 24.0 0.9% 23.7 0.9% 7.9 0.3%
Impairment of intangible assets. . . . . . . . . . . . . . . . . . . . . 5.8 0.2% – – – –
Operating earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.6 2.4% 35.6 1.4% 72.7 2.9%
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23.4) (0.9)% (26.1) (1.0)% (19.7) (0.8)%
Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . – – (1.0) (0.0)% – –
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 0.0% 0.6 0.0% 0.2 0.0%
Earnings before income taxes from continuing operations. . . . . . 38.5 1.5% 9.1 0.4% 53.2 2.1%
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . (11.3) (0.4)% (0.4) (0.1)% (16.1) (0.6)%
Net earnings from continuing operations . . . . . . . . . . . . . . . 27.2 1.1% 8.7 0.3% 37.1 1.5%
Discontinued operations:
Earnings from operations of subsidiary, net of tax . . . . . . . . – – 1.7 0.1% – –
Gain on sale of subsidiary, net of tax. . . . . . . . . . . . . . . . – – 14.0 0.5% – –
Net earnings from discontinued operations . . . . . . . . . . . . . . – – 15.7 0.6% – –
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.2 1.1% 24.4 0.9% 37.1 1.5%
Net loss attributable to noncontrolling interests . . . . . . . . . . . (0.3) (0.0)% (0.2) (0.1)% (0.1) (0.0)%
Net earnings attributable to Brown Shoe Company, Inc. . . . . . . . $ 27.5 1.1% $ 24.6 1.0% $ 37.2 1.5%