Famous Footwear 2012 Annual Report Download - page 31

2012 BROWN SHOE COMPANY, INC. FORM 10-K 29
In 2012, we recognized pretax earnings in both our domestic operations and foreign jurisdictions. Our overall eective
tax rate was less than the domestic statutory rate due to the mix of earnings in lower rate international jurisdictions.
Our foreign tax jurisdictions have lower tax rates than domestic. These factors resulted in an overall eective tax
provision rate of 29.4% in 2012.
In 2011, we incurred a pretax loss in our domestic operations and pretax earnings in foreign jurisdictions. Our domestic
eective tax rate was less than the statutory rate due to the impact of non-deductible permanent items applied to the
domestic loss and the impact of the earnings mix between domestic and international tax jurisdictions. Our foreign tax
jurisdictions have lower tax rates than domestic. These factors resulted in an overall eective tax provision rate of 3.6%
on continuing operations in 2011.
In 2010, we experienced pretax earnings in both our domestic operations and foreign jurisdictions. This mix of domestic
and foreign pretax earnings resulted in an overall eective tax provision rate of 30.4% in 2010.
See Note 6 to the consolidated financial statements for additional information regarding our tax rates.
Net Earnings from Continuing Operations
We reported net earnings from continuing operations of $27.2 million in 2012 compared to $8.7 million in 2011 and
$37.1 million in 2010, as a result of the factors described above.
Net Earnings from Discontinued Operations
During 2011, we sold TBMC, which markets and sells footwear bearing the AND 1 brand-name. The operations of TBMC
and the gain on sale of this subsidiary were reported as discontinued operations. We reported net earnings from
discontinued operations, net of tax, totaling $15.7 million in 2011, of which $1.7 million related to the operating results
of TBMC, net of tax, and $14.0 million related to the gain on sale of the subsidiary, net of tax.
Net Earnings Attributable to Brown Shoe Company, Inc.
We reported net earnings attributable to Brown Shoe Company, Inc. of $27.5 million in 2012, compared to $24.6 million
last year and $37.2 million in 2010.
Geographic Results
We have both domestic and foreign operations. Domestic operations include the nationwide operation of our Famous
Footwear and Specialty Retail footwear stores, the wholesale distribution of footwear to numerous retail customers
and the operation of our e-commerce websites. Foreign operations primarily consist of wholesale operations in the
Far East and Canada, retailing operations in Canada and China and the operation of our international e-commerce
websites. In addition, we license certain of our trademarks to third parties who distribute and/or operate retail locations
internationally. The Far East operations include first-cost transactions, where footwear is sold at foreign ports to
customers who then import the footwear into the United States and other countries. The breakdown of domestic and
foreign net sales and earnings before income taxes was as follows:
2012 2011 2010
(Loss)
Earnings Before Earnings Before Earnings Before
($ millions) Net Sales Income Taxes Net Sales Income Taxes Net Sales Income Taxes
Domestic . . . . . . . . . . . . . . . $2,295.8 $10.5 $2,259.9 $(1 1 . 1) $2,179.7 $23.8
Foreign . . . . . . . . . . . . . . . . 302.3 28.0 322.9 20.2 324.4 29.4
$2,598.1 $38.5 $2,582.8 $ 9.1 $2,504.1 $53.2
The pretax profitability on foreign sales is higher than on domestic sales because of a lower cost structure and the inclusion in
domestic earnings of the unallocated corporate administrative and other costs.
We recognized earnings before income taxes both domestically and in foreign jurisdictions in 2012. Our domestic earnings
reflected increases in net sales at our Famous Footwear segment, a decrease in selling and administrative expenses and an
increase in gross profit, all partially oset by an intangible impairment charge.
We incurred a domestic loss before income taxes and had foreign earnings before income taxes in 2011. Our domestic loss
reflected decreases in net sales at our Famous Footwear and Specialty Retail segments, a decrease in gross profit, an increase
in selling and administrative expenses and an increase in restructuring and other special charges, net.
We had domestic and foreign earnings before income taxes in 2010 primarily as a result of the strong sales results in both our
retail and wholesale businesses, partially oset by higher selling and administrative expenses, a portion of which are variable
with higher sales volumes. Our performance is primarily attributable to the record sales results and operating earnings gains
within our Famous Footwear segment and sales growth within our Wholesale Operations segment due to capitalization on
key footwear trends.