Famous Footwear 2012 Annual Report Download - page 52

50 2012 BROWN SHOE COMPANY, INC. FORM 10-K
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Brown Shoe Company, Inc. (the “Company”), founded in 1878 and incorporated in 1913, is a global footwear retailer and
wholesaler. The Company’s shares are traded under the “BWS” symbol on the New York Stock Exchange.
The Company provides a broad oering of licensed, branded and private-label casual, dress and athletic footwear products
to women, men and children. Footwear is sold at a variety of price points through multiple distribution channels both
domestically and internationally. The Company currently operates 1,277 retail shoe stores in the United States, Canada,
China and Guam primarily under the Famous Footwear and Naturalizer names. In addition, through its Wholesale
Operations segment, the Company designs, sources and markets footwear to retail stores domestically and internationally,
including national chains, department stores, independent retailers, mass merchandisers, online retailers and catalogs.
In 2012, approximately 67% of the Company’s net sales were at retail compared to 66% in 2011 and 70% in 2010. See
Note 7 for additional information regarding the Company’s business segments.
The Company’s business is seasonal in nature due to consumer spending patterns with higher back-to-school and Christmas
and Easter holiday season sales. Traditionally, the third fiscal quarter accounts for a substantial portion of the Company’s
earnings for the year.
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned
subsidiaries, after the elimination of intercompany accounts and transactions.
Noncontrolling Interests
Noncontrolling interests in the Company’s consolidated financial statements result from the accounting for noncontrolling
interests in partially-owned consolidated subsidiaries or aliates. Noncontrolling interests represent partially-owned
subsidiaries’ or consolidated aliates’ losses and components of other comprehensive income that are attributable to the
noncontrolling parties’ equity interests. The Company consolidates B&H Footwear Company Limited (“B&H Footwear”),
a joint venture, into its consolidated financial statements. Net losses attributable to noncontrolling interests represent the
share of net losses that are attributable to the equity that is owned by the Company’s partners. Transactions between the
Company and B&H Footwear have been eliminated in the consolidated financial statements. The Company acquired the
final 50% of the outstanding stock of Edelman Shoe, Inc. (“Edelman Shoe”) on June 4, 2010. Prior to that date, the equity
interests held by other parties in Edelman Shoe were accounted for as a noncontrolling interest. Subsequent to June 4, 2010,
Edelman Shoe became a wholly-owned subsidiary of the Company. See Note 2 to the consolidated financial statements for
further information on Edelman Shoe.
Accounting Period
The Company’s fiscal year is the 52- or 53-week period ending the Saturday nearest to January 31. Fiscal years 2012, 2011 and
2010 ended on February 2, 2013, January 28, 2012, and January 29, 2011, respectively. Fiscal year 2012 included 53 weeks and
fiscal years 2011 and 2010 each included 52 weeks. The impact of the 53rd week in 2012 was an increase to net sales at our
retail segments of approximately $21.2 million. The net earnings impact of the 53rd week was immaterial to 2012.
Basis of Presentation
Certain prior-period amounts on the consolidated financial statements have been reclassified to conform to current-period
presentation. These reclassifications did not aect net earnings attributable to Brown Shoe Company, Inc.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires
management to make estimates and assumptions that aect the amounts reported in the financial statements and
accompanying notes. Actual results could dier from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be
cash equivalents.
Receivables
The Company evaluates the collectibility of selected accounts receivable on a case-by-case basis and makes adjustments to
the bad debt reserve for expected losses. The Company considers factors such as ability to pay, bankruptcy, credit ratings and
payment history. For all other accounts, the Company estimates reserves for bad debts based on experience and past-due
status of the accounts. If circumstances related to customers change, estimates of recoverability would be further adjusted.
The Company recognized a provision for doubtful accounts of $0.4 million in 2012, $1.3 million in 2011 and $0.5 million in 2010.
Customer allowances represent reserves against our wholesale customers’ accounts receivable for margin assistance,
product returns, customer deductions and co-op advertising allowances. We estimate the reserves needed for margin
assistance by reviewing inventory levels on the retail floors, sell-through rates, historical dilution, current gross margin levels
and other performance indicators of our major retail customers. Product returns and customer deductions are estimated
using historical experience and anticipated future trends. Co-op advertising allowances are estimated based on customer
agreements. The Company recognized a provision for customer allowances of $52.5 million in 2012, $56.1 million in 2011 and
$43.0 million in 2010.