Famous Footwear 2013 Annual Report Download - page 37

2013 BROWN SHOE COMPANY, INC. FORM 10-K 35
Reasons for the major variances in cash provided (used) in the table above are as follows:
Cash flow from operating activities was $93.9 million lower in 2013 as compared to 2012, reflecting the following factors:
• An increase in inventories during 2013 compared to a decrease in 2012 due to early purchases of inventory
for our spring selling season in addition to lower than anticipated sales during the fourth quarter of 2013 for
Famous Footwear;
• An increase in accounts receivable in 2013 as compared to a decrease in 2012 reflecting higher sales of our
Wholesale Operations segment near year-end;
• A smaller increase in trade accounts payable in 2013 compared to 2012 due to the timing and amount of
purchases and payments to vendors;
• Partially oset by higher net earnings.
Cash provided by investing activities was $88.8 million higher in 2013 than last year, primarily reflecting the proceeds
from the sale of American Sporting Goods Corporation. In addition, our purchases of property and equipment were
$11.8 million lower in 2013 than last year due to lower costs related to remodeled oce space and retail stores in 2013,
partially oset by higher costs related to improving our information technology infrastructure. In 2014, we expect
purchases of property and equipment and capitalized software of approximately $53 million to $57 million, primarily
related to new and remodeled retail stores.
Cash used for financing activities was $3.0 million lower in 2013 than in 2012, primarily due to an increase in the issuance
of common stock under our share-based plans and an increase in the tax benefit related to the share-based plans.
We paid dividends of $0.28 per share in each of 2013, 2012 and 2011. The 2013 dividends marked the 91st year of
consecutive quarterly dividends. On March 12, 2014, the Board of Directors declared a quarterly dividend of $0.07 per
share, payable April 1, 2014, to shareholders of record on March 24, 2014, marking the 365th consecutive quarterly
dividend to be paid by the Company. The declaration and payment of any future dividend is at the discretion of the
Board of Directors and will depend on our results of operations, financial condition, business conditions, and other
factors deemed relevant by our Board of Directors; however, we presently expect that dividends will continue to be paid.
As further discussed in Note 19 to the consolidated financial statements, in February 2014, we purchased the Franco Sarto
trademarks for $65.0 million.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Certain accounting issues require management estimates and judgments for the preparation of financial statements.
Our most significant policies requiring the use of estimates and judgments are listed below.
Revenue Recognition
Retail sales, recognized at the point of sale, are recorded net of returns and exclude sales tax. Wholesale sales and sales
through our internet sites are recorded, net of returns, allowances, and discounts, generally when the merchandise has
been shipped and title and risk of loss have passed to the customer. Retail items sold through our internet sites are
made pursuant to a sales agreement that provides for transfer of both title and risk of loss upon our delivery to the
carrier. Reserves for projected merchandise returns, discounts, and allowances are carried based on historical experience
and current expectations. Revenue is recognized on license fees related to our owned brand names, where we are the
licensor, when the related sales of the licensee are made.
Gift Cards
We sell gift cards to our consumers in our retail stores and through our internet sites. Our gift cards do not have
expiration dates or inactivity fees. We recognize revenue from gift cards when (i) the gift card is redeemed by the
consumer, or (ii) the likelihood of the gift card being redeemed by the consumer is remote (“gift card breakage”),
and we determine that we do not have a legal obligation to remit the value of unredeemed gift cards to the relevant
jurisdictions. We determine our gift card breakage rate based upon historical redemption patterns. We recognize gift
card breakage during the 24-month period following the sale of the gift card, according to our historical redemption
pattern. Gift card breakage income is included in net sales in the consolidated statements of earnings and the liability
established upon the sale of a gift card is included in other accrued expenses within the consolidated balance sheets.
We recognized $0.5 million, $0.5 million, and $0.6 million of gift card breakage in 2013, 2012, and 2011, respectively.
Inventories
Inventories are our most significant asset, representing approximately 48% of total assets at the end of 2013. We value
inventories at the lower of cost or market with 93% of consolidated inventories using the last-in, first-out (“LIFO”) method.
An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory
levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected
year-end inventory levels and costs and are subject to the final year-end LIFO inventory valuation.