Famous Footwear 2012 Annual Report Download - page 30

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28 2012 BROWN SHOE COMPANY, INC. FORM 10-K
Restructuring and Other Special Charges, Net
Restructuring and other special charges, net, increased $0.3 million to $24.0 million during 2012, compared to $23.7 million
last year as a result of the following items (see Note 4 to the consolidated financial statements for additional information
related to these charges and recoveries):
• Portfolio realignment – We incurred charges of $21.0 million in 2012 as compared to $17.2 million during 2011
related to our portfolio realignment initiatives.
• Organizational changes – We incurred costs of $2.3 million 2012, related to corporate organizational changes,
with no corresponding costs in 2011.
• Acquisition and integration related costs – We incurred $0.7 million related to the integration of ASG in 2012 as
compared to $6.5 million during 2011 related to the acquisition and integration of ASG.
As a percent of net sales, restructuring and other special charges, net, remained consistent at 0.9% from 2011 to 2012,
reflecting the above named factors.
Restructuring and other special charges, net, increased $15.8 million to $23.7 million during 2011, compared to $7.9 million
in 2010 as a result of the following items:
• Portfolio realignment – We incurred charges of $17.2 million during 2011 related to our portfolio realignment initiatives
with no corresponding charges in 2010.
• Acquisition and integration related costs – We incurred $6.5 million of costs during 2011 related to the acquisition
and integration of ASG, which we purchased on February 17, 2011, with $1.1 million in corresponding charges in 2010.
• Information technology initiatives – We incurred no charges during 2011 related to our ERP system with $6.8 million
in corresponding charges in 2010. Subsequent to going live on our ERP system in the fourth quarter of 2010, all
expenses related to our ERP system were reflected in selling and administrative expenses.
As a percent of net sales, restructuring and other special charges, net increased to 0.9% in 2011, from 0.3% in 2010,
reflecting the above named factors.
Impairment of Intangible Assets
During 2012, the Company terminated the Etienne Aigner license agreement due to a dispute with the licensor. In
conjunction with the termination, the Company recognized an impairment charge of $5.8 million to reduce the remaining
unamortized value of the licensed trademark intangible asset to zero.
Operating Earnings
Operating earnings increased $26.0 million, or 73.3%, to $61.6 million in 2012, compared to $35.6 million last year due
to lower selling and administrative expenses and higher gross profit, partially oset by an intangible impairment charge,
as discussed above.
We reported operating earnings of $35.6 million in 2011 compared to $72.7 million in 2010 due to the increase in
restructuring and other special charges, net and selling and administrative expenses and the decrease in gross profit,
all partially oset by an increase in net sales, as discussed above.
Interest Expense
Interest expense decreased $2.7 million, or 10.6%, to $23.4 million in 2012 compared to $26.1 million last year and increased
$6.4 million, or 33.1%, in 2011 compared to $19.7 million in 2010. The decrease in interest expense in 2012 was primarily due
to lower average borrowings under our Credit Agreement as compared to 2011.
The increase in interest expense in 2011 was primarily due to higher average borrowings under our Credit Agreement and the
increase in long-term debt in connection with the refinancing of our senior notes in early 2011 as a result of the additional
capital needed in connection with our acquisition of ASG and the repurchase of 2.5 million shares of our common stock.
Loss on Early Extinguishment of Debt
During 2011, we redeemed all of our senior notes due in 2012. We incurred certain debt extinguishment costs to retire
these notes prior to maturity totaling $1.0 million, of which $0.6 million was non-cash charges related to unamortized debt
issuance costs and $0.4 million represented cash paid for tender premiums. We did not incur such costs in 2012 or 2010.
Income Tax Provision
Our consolidated eective tax rate on continuing operations was a provision of 29.4% in 2012 compared to 3.6% in 2011
and 30.4% in 2010. Our consolidated eective tax rate is generally below the federal statutory rate of 35% because our
foreign earnings are subject to lower statutory tax rates.