Famous Footwear 2012 Annual Report Download - page 73

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2012 BROWN SHOE COMPANY, INC. FORM 10-K 71
Money Market Funds
The Company has cash equivalents consisting of short-term money market funds backed by U.S. Treasury securities. The
primary objective of these investing activities is to preserve its capital for the purpose of funding operations and it does not
enter into money market funds for trading or speculative purposes. The fair value is based on unadjusted quoted market
prices for the funds in active markets with sucient volume and frequency (Level 1).
Deferred Compensation Plan Assets and Liabilities
The Company maintains a Deferred Compensation Plan for the benefit of certain management employees. The investment
funds oered to the participant generally correspond to the funds oered in the Company’s 401(k) plan, and the account
balance fluctuates with the investment returns on those funds. The fair value of the assets and corresponding liabilities are
based on unadjusted quoted market prices for the funds in active markets with sucient volume and frequency (Level 1).
Additional information related to the Company’s Deferred Compensation Plan is disclosed in Note 5 to the consolidated
financial statements.
Deferred Compensation Plan for Non-Employee Directors
Non-employee directors are eligible to participate in a deferred compensation plan, whereby deferred compensation
amounts are valued as if invested in the Company’s common stock through the use of PSUs. Under the plan, each
participating director’s account is credited with the number of PSUs equal to the number of shares of the Company’s
common stock that the participant could purchase or receive with the amount of the deferred compensation, based
upon the fair value (as determined based on the average of the high and low prices) of the Company’s common stock
on the last trading day of the fiscal quarter when the cash compensation was earned. Dividend equivalents are paid on
PSUs at the same rate as dividends on the Company’s common stock and are re-invested in additional PSUs at the next
fiscal quarter-end. The PSUs are payable in cash based on the number of PSUs credited to the participating director’s
account, valued on the basis of the fair value at fiscal quarter-end on or following termination of the director’s service.
The fair value of the liabilities is based on an unadjusted quoted market price for the Company’s common stock in an
active market with sucient volume and frequency (Level 1). Additional information related to the Company’s Deferred
Compensation Plan for Non-Employee Directors is disclosed in Note 5 to the consolidated financial statements.
Derivative Financial Instruments
The Company uses derivative financial instruments, primarily foreign exchange contracts, to reduce its exposure to market risks
from changes in foreign exchange rates. These foreign exchange contracts are measured at fair value using quoted forward
foreign exchange prices from counterparties corroborated by market-based pricing (Level 2). Additional information related to
the Company’s derivative financial instruments is disclosed in Note 1 and Note 12 to the consolidated financial statements.
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at
February 2, 2013 and January 28, 2012. The Company did not have any transfers between Level 1 and Level 2 during
2012 or 2011.
Fair Value Measurements
($ thousands) Total Level 1 Level 2 Level 3
Asset (Liability)
As of February 2, 2013:
Cash equivalents – money market funds . . . . . . . . . . . . . . . . . . $ 27,223 $ 27,223 $ – $ –
Non-qualified deferred compensation plan assets . . . . . . . . . . . . . 1,411 1,411 – –
Non-qualified deferred compensation plan liabilities . . . . . . . . . . . (1,411) (1,411) – –
Deferred compensation plan liabilities for non-employee directors . . . (1,139) (1,139) – –
Derivative financial instruments, net . . . . . . . . . . . . . . . . . . . . . 7 – 7 –
As of January 28, 2012:
Cash equivalents – money market funds . . . . . . . . . . . . . . . . . . $ 5,063 $ 5,063 $ – $ –
Non-qualified deferred compensation plan assets . . . . . . . . . . . . . 1,081 1,081 – –
Non-qualified deferred compensation plan liabilities . . . . . . . . . . . (1,081) (1,081) – –
Deferred compensation plan liabilities for non-employee directors . . . (620) (620) – –
Derivative financial instruments, net . . . . . . . . . . . . . . . . . . . . . 206 – 206 –
Impairment Charges
The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Factors the Company considers important that could trigger an impairment review
include underperformance relative to expected historical or projected future operating results, a significant change in the
manner of the use of the asset or a negative industry or economic trend. When the Company determines that the carrying
value of long-lived assets may not be recoverable based upon the existence of one or more of the aforementioned factors,
impairment is measured based on a projected discounted cash flow method. Certain factors, such as estimated store
sales and expenses, used for this nonrecurring fair value measurement are considered Level 3 inputs. Long-lived assets
held and used with a carrying amount of $61.5 million were written down to their fair value, resulting in impairment