Famous Footwear 2012 Annual Report Download - page 69

2012 BROWN SHOE COMPANY, INC. FORM 10-K 67
Intangible assets of $42.5 million as of February 2, 2013 and January 28, 2012 are not subject to amortization. All remaining
intangible assets are subject to amortization and have useful lives ranging from four to 20 years. Amortization expense
related to intangible assets was $7.2 million, $8.3 million and $6.7 million in 2012, 2011 and 2010, respectively. The Company
estimates the following amortization expense related to intangible assets: $6.9 million in 2013 and 2014 and $6.0 million in
2015, 2016 and 2017.
During 2012, the Company terminated the Etienne Aigner license agreement, due to a dispute with the licensor and
recognized an impairment charge of $5.8 million, to reduce the remaining unamortized value of the licensed trademark
intangible asset to zero. Also during 2012, the Company acquired a trademark for $5.0 million. The trademark is being
amortized over a 15 year useful life.
The decrease in intangible assets of the Wholesale Operations segment from January 28, 2012 to February 2, 2013 is
primarily related to the impairment of the Etienne Aigner licensed trademark and amortization, partially oset by the
acquisition of a trademark.
As a result of its annual impairment testing, the Company did not record any other impairment charges during 2012 and
2011 related to intangible assets.
Goodwill is tested for impairment at least annually, or more frequently if events or circumstances indicate it might be
impaired. A fair-value-based test is applied at the reporting unit level and compares the fair value of the reporting unit,
with attributable goodwill, to the carrying value of such reporting unit. This test requires various judgments and estimates.
The fair value of goodwill is determined using an estimate of future cash flows of the reporting unit and a risk-adjusted
discount rate to compute a net present value of future cash flows. An adjustment will be recorded for any goodwill that is
determined to be impaired. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the
fair values of recognized and unrecognized assets and liabilities of the reporting unit. The Company performed a goodwill
impairment test as of the first day of the Company’s fourth fiscal quarter, resulting in no impairment charges.
10. LONG-TERM AND SHORT-TERM FINANCING ARRANGEMENTS
Credit Agreement
On January 7, 2011, the Company and certain of its subsidiaries (the “Loan Parties”) entered into a Third Amended and
Restated Credit Agreement (“Former 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 the Company’s 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.
Interest on borrowings is at variable rates based on the London Inter-Bank Oered Rate (“LIBOR”) or the prime rate, as
defined in the Credit Agreement, plus a spread. The interest rate and fees for letters of credit vary based upon the level of
excess availability under the Credit Agreement. There is an unused line fee payable on the unused portion under the facility
and a letter of credit fee payable on the outstanding face amount under letters of credit.
The Credit Agreement limits the Company’s ability to incur additional indebtedness, create liens, make investments or
specified payments, give guarantees, pay dividends, make capital expenditures and merge or acquire or sell assets. In
addition, certain additional covenants would be triggered if excess availability were to fall below specified levels, including
fixed charge coverage ratio requirements. Furthermore, if excess availability falls below the greater of (i) 15.0% of the lesser
of (x) the borrowing base or (y) the total commitments and (ii) $35.0 million for three consecutive business days, or an
event of default occurs, the lenders may assume dominion and control over the Company’s cash (a “cash dominion event”)
until such event of default is cured or waived or the excess availability exceeds such amount for 30 consecutive days.
The Credit Agreement contains customary events of default, including, without limitation, payment defaults, breaches
of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of
bankruptcy and insolvency, judgment defaults in excess of a certain threshold, the failure of any guaranty or security
document supporting the agreement to be in full force and eect and a change of control event. In addition, if the excess