Famous Footwear 2012 Annual Report Download - page 37

2012 BROWN SHOE COMPANY, INC. FORM 10-K 35
RESTRUCTURING AND OTHER SPECIAL CHARGES, NET
During 2012, we recorded restructuring and other special charges, net, of $24.0 million, including $21.0 million in
expenses related to our portfolio realignment, $2.3 million related to an organizational change and $0.7 million related
to the integration of ASG. See the Financial Highlights section above and Note 2 and Note 4 to the consolidated
financial statements for additional information related to these charges and the acquisition and integration of ASG.
During 2011, we recorded restructuring and other special charges, net, of $23.7 million, including $17.2 million in
expenses related to our portfolio realignment and $6.5 million in expenses related to the acquisition and integration
of ASG. See the Financial Highlights section above and Note 2 and Note 4 to the consolidated financial statements for
additional information related to these charges and the acquisition of ASG.
During 2010, we recorded restructuring and other special charges, net, of $7.9 million, including $6.8 million in
expenses related to our information technology initiatives and $1.1 million in acquisition-related costs related to
our February 17, 2011 acquisition of ASG. See the Financial Highlights section above and Note 2 and Note 4 to the
consolidated financial statements for additional information related to these charges and the acquisition of ASG.
IMPACT OF INFLATION AND CHANGING PRICES
While we have felt the eects of inflation on our business and results of operations, it has not had a significant impact on
our business over the last three years. Inflation can have a long-term impact on our business because increasing costs of
materials and labor may impact our ability to maintain satisfactory profit rates. For example, our products are manufactured
in other countries, and a decline in the value of the U.S. dollar and the impact of labor shortages in China may result in higher
manufacturing costs. Similarly, any potential significant shortage of quantities or increases in the cost of the materials that
are used in our manufacturing process, such as leather and other materials or resources, could have a material negative
impact on our business and results of operations. In addition, inflation is often accompanied by higher interest rates, which
could have a negative impact on consumer spending, in which case our net sales and profit rates could decrease. Moreover,
increases in inflation may not be matched by increases in income, which also could have a negative impact on consumer
spending. If we incur increased costs that are unable to be recovered through price increases, or if consumer spending
decreases generally, our business, results of operations, financial condition and cash flows may be adversely aected. In an
eort to mitigate the impact of these incremental costs on our operating results, we expect to pass on some portion of cost
increases to our consumers and adjust our business model, as appropriate, to minimize the impact of higher costs. Further
discussion of the potential impact of inflation and changing prices is included in Item 1A, Risk Factors.
LIQUIDITY AND CAPITAL RESOURCES
Borrowings
($ millions) February 2, 2013 January 28, 2012 (Decrease) Increase
Borrowings under Credit Agreement . . . . . . . . . . . . . $ 105.0 $ 201.0 $ (96.0)
Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 198.8 198.6 0.2
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 303.8 $ 399.6 $ (95.8)
Total debt obligations decreased $95.8 million, or 24.0%, to $303.8 million at the end of 2012 compared to $399.6 million
at the end of last year due to a decrease in borrowings under our revolving credit agreement. Interest expense in 2012 was
$23.4 million compared to $26.1 million in 2011 and $19.7 million in 2010.
Credit Agreement
On January 7, 2011, Brown Shoe Company, Inc. and certain of its subsidiaries (the “Loan Parties”) entered into a Third
Amended and Restated Credit Agreement, which was further amended on February 17, 2011 (as so amended, the
“Credit Agreement”). The Credit Agreement matures on January 7, 2016 and provides for a revolving credit facility in
an aggregate amount of up to $530.0 million (eective February 17, 2011), subject to the calculated borrowing base
restrictions, and provides for an increase at our option by up to $150.0 million from time to time during the term of
the Credit Agreement (the “general purpose accordion feature”) subject to satisfaction of certain conditions and the
willingness of existing or new lenders to assume the increase.
On February 17, 2011, ASG and TBMC, the sole domestic subsidiary of ASG, became borrowers under the Credit
Agreement. In conjunction with the sale of TBMC on October 25, 2011, TBMC ceased to be a borrower under the Credit
Agreement. See Note 2 to the consolidated financial statements for further information on the acquisition of ASG and
the subsequent sale of TBMC.
Borrowing availability under the Credit Agreement is limited to the lesser of the total commitments and the borrowing
base, which is based on stated percentages of the sum of eligible accounts receivable and inventory, as defined, less
applicable reserves. Under the Credit Agreement, the Loan Parties’ obligations are secured by a first-priority security
interest in all accounts receivable, inventory and certain other collateral.