Famous Footwear 2013 Annual Report Download - page 29

2013 BROWN SHOE COMPANY, INC. FORM 10-K 27
Impairment of Assets Held for Sale
During the second quarter of 2013, the Company sold certain of its supply chain and sourcing assets as part of its portfolio
realignment eorts. In anticipation of this transaction, the Company recognized an impairment charge in the first quarter
of 2013 of $4.7 million to adjust the assets to their estimated fair value. Refer to Note 4 to the consolidated financial
statements for additional information.
Operating Earnings
Operating earnings increased $24.1 million, or 32.4%, to $98.6 million in 2013, compared to $74.5 million last year, driven
by higher gross profit and a decrease in restructuring and other special charges, net, partially oset by higher selling and
administrative expenses and an impairment charge, as discussed above.
Operating earnings increased $44.0 million, or 144.3%, to $74.5 million in 2012, compared to $30.5 million in 2011 due to
higher gross profit and lower selling and administrative expenses, as discussed above.
Interest Expense
Interest expense decreased $1.7 million, or 7.5%, to $21.3 million in 2013 compared to $23.0 million last year, and decreased
$2.4 million, or 9.7%, in 2012 compared to $25.4 million in 2011. The decrease in interest expense in both periods was due to
lower average borrowings under our Credit Agreement.
Loss on Early Extinguishment of Debt
During 2011, we redeemed our senior notes due in 2012. We incurred certain debt extinguishment costs to retire these
notes prior to maturity totaling $1.0 million, including $0.6 million of non-cash charges related to unamortized debt
issuance costs and $0.4 million of cash paid for tender premiums. We did not incur such costs in 2013 or 2012.
Income Tax (Provision) Benefit
Our consolidated eective tax rate on continuing operations was a provision of 30.6% in 2013 compared to 32.1% in 2012
and a benefit of 30.4% in 2011. Our consolidated eective tax rate is generally below the federal statutory rate of 35%
because our foreign earnings are subject to lower statutory tax rates.
In 2013 and 2012, we recognized pre-tax 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. These factors resulted in an overall eective tax provision rate of 30.6% in 2013 and 32.1% in 2012.
In 2011, we incurred a pre-tax loss in our domestic operations and pre-tax 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. These factors
resulted in an overall eective tax benefit rate of 30.4% in 2011.
Refer to 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 $54.0 million in 2013 compared to $35.2 million in 2012 and
$6.1 million in 2011, as a result of the factors described above.
Net (Loss) Earnings from Discontinued Operations
The Company’s discontinued operations include the operations and sale of our Avia and Nevados brands acquired
during the 2011 acquisition of American Sporting Goods Corporation, as well as the operations and impairment of our
Etienne Aigner and Vera Wang brands. In addition, in 2011, discontinued operations included the operations and sale
of TBMC, which was also acquired in the American Sporting Goods Corporation acquisition. TBMC marketed and sold
footwear bearing the AND 1 brand name. We reported a net loss from discontinued operations of $16.1 million in 2013,
compared to a net loss of $8.0 million in 2012 and net earnings of $18.3 million in 2011.
During 2013, we sold the Avia and Nevados brands that were acquired with the American Sporting Goods Corporation
acquisition. In conjunction with the sale, we recorded a net charge related to the impairment and disposition of those brands
of $11.5 million, representing the dierence in the fair value, less costs to sell, as compared to the carrying value of the net
assets sold. During 2013, the Company also communicated its intention not to renew the Vera Wang license agreement.
During 2012, the Company terminated the Etienne Aigner license agreement due to a dispute with the licensor resulting
in a non-cash impairment charge of $5.8 million ($3.5 million on an after-tax basis, or $0.08 per diluted share).
During 2011, in conjunction with the sale of TBMC, we recorded a gain on sale of the subsidiary of $20.6 million
($14.0 million on an after-tax basis, or $0.32 per diluted share).
Refer to Note 2 to the consolidated financial statements for further discussion regarding discontinued operations.