Famous Footwear 2013 Annual Report Download - page 55

2013 BROWN SHOE COMPANY, INC. FORM 10-K 53
Impact of New Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2013-02, Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,
which requires entities to provide information about the amounts reclassified out of accumulated other comprehensive
income by component. In addition, entities are required to present, either on the face of the statement where net earnings
are presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income, but only if
the amount is required under accounting principles generally accepted in the United States (“U.S. GAAP”) to be reclassified
to net earnings in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be
reclassified in their entirety to net earnings, entities are required to cross-reference to other disclosures required under
U.S. GAAP that provide additional detail on these amounts. The Company adopted this guidance on February 3, 2013.
See Note 14 to the consolidated financial statements for additional information.
Impact of Prospective Accounting Pronouncements
In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit
When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This guidance requires
entities to present an unrecognized tax benefit as a reduction to a deferred tax asset for a net operating loss (“NOL”)
carryforward, similar tax loss, or tax credit carryforward, rather than as a liability, when the uncertain tax position would
reduce the NOL or other carryforward under the tax law. The amendments in this ASU do not require new recurring
financial disclosures. The guidance is eective prospectively for fiscal years, and interim periods within those years,
beginning after December 15, 2013, with early adoption permitted. The adoption of this presentation guidance is not
expected to have a material impact on the Company’s condensed consolidated financial statements.
2. DISCONTINUED OPERATIONS
The Company’s discontinued operations include The Basketball Marketing Company, Inc. (“TBMC”), the Avia and Nevados
brands of American Sporting Goods Corporation, the Etienne Aigner brand, and the Vera Wang brand. The Company
applied discontinued operations accounting in accordance with ASC Topic 205-20, Presentation of Financial Statements –
Discontinued Operations.
In aggregate, discontinued operations include net sales of $26.3 million, $120.3 million, and $167.8 million in 2013, 2012,
and 2011, respectively. Discontinued operations include a loss before income taxes of $10.5 million and $7.5 million in
2013 and 2012, respectively, and earnings before income taxes of $7.4 million in 2011. In addition, discontinued operations
include a net loss on disposition/impairment of $11.5 million and $3.5 million in 2013 and 2012, respectively, and a net gain
on disposition/impairment of $14.0 million in 2011.
American Sporting Goods Corporation
On May 14, 2013, Brown Shoe International Corp. (“BSIC”), the sole shareholder of American Sporting Goods Corporation,
entered into and simultaneously closed a Stock Purchase Agreement (the “Stock Purchase Agreement”) by and among
the Company, BSIC and Galaxy Brand Holdings, Inc. (“the Buyer”), pursuant to which the Buyer acquired all of the
outstanding capital stock of American Sporting Goods Corporation from BSIC and the Company agreed to provide
certain transition services. In connection with the transaction, American Sporting Goods Corporation sold inventory to
a third party unaliated with the Buyer and distributed certain assets to BSIC. The aggregate purchase price for the
stock of American Sporting Goods Corporation and the provision of such transition services was $74.0 million, subject to
working capital adjustments, minus the amount of the pre-closing cash dividend declared by American Sporting Goods
Corporation and paid to BSIC, representing proceeds from American Sporting Goods Corporation’s sale of inventory.
The Company purchased American Sporting Goods Corporation, comprised of Avia, Nevados, Ryka, AND 1, and other
businesses, on February 17, 2011 and subsequently sold AND 1 during fiscal 2011, as further described below. The Avia and
Nevados businesses were sold under the Stock Purchase Agreement and the Company retained, and is operating, Ryka
and other businesses. In this document, “ASG” refers to the subsidiary disposed on May 14, 2013, including the Avia and
Nevados brands and excluding the Ryka brand and other retained businesses.
The Company received $60.3 million in cash and a promissory note of $12.0 million at closing, from the sale of stock,
the sale of inventory, and for the provision of transitional services, less working capital adjustments. The promissory
note was due November 14, 2013, earned interest at a 3% annual rate, and was secured by a guarantee by American
Sporting Goods Corporation and a lien on certain assets of ASG. In accordance with the terms of the promissory note, the
Company received a payment of $12.2 million on November 14, 2013, representing the note principal and accrued interest.
As a result of the sale of ASG, the Company recorded an impairment charge in the first quarter of 2013 of $12.6 million
($12.6 million after-tax, $0.30 per diluted share), representing the dierence in the fair value less costs to sell as
compared to the carrying value of the net assets to be sold. During the second quarter of 2013, the Company
recognized a gain upon disposition of the ASG subsidiary of $1.0 million ($1.0 million after tax, $0.02 per diluted share).
ASG was previously included in the Wholesale Operations segment. Discontinued operations include net sales of
$20.3 million, $77.6 million, and $98.1 million in 2013, 2012, and 2011, respectively. Discontinued operations include losses
before income taxes of $1.6 million and $7.1 million in 2013 and 2012, respectively, and earnings before income taxes of
$1.8 million in 2011.