Famous Footwear 2013 Annual Report Download - page 58

56 2013 BROWN SHOE COMPANY, INC. FORM 10-K
The business exits and cost reductions associated with continuing operations were recorded within restructuring and
other special charges, net and cost of goods sold in the consolidated statements of earnings. The business exits and cost
reductions associated with discontinued operations were recorded within (loss) earnings from discontinued operations,
net of tax, in the consolidated statements of earnings. The non-cash impairments/dispositions of the Company’s continuing
operations were recorded within impairment of assets held for sale in the consolidated statements of earnings. The non-
cash impairments/dispositions of the Company’s discontinued operations were recorded within disposition/impairment of
discontinued operations, net of tax in the consolidated statements of earnings. The non-cash impairments/dispositions are
included in Other in the following table.
All of the $5.9 million of expenses for portfolio realignment that were recorded in continuing operations during 2013 were
included in the Wholesale Operations segment. Of the $21.9 million incurred during 2012, $9.2 million was included in the
Wholesale Operations segment, $7.8 million was included in the Famous Footwear segment, $4.1 million was included in
the Specialty Retail segment and $0.8 million was included in the Other segment. Of the $19.2 million incurred during 2011,
$12.1 million was recorded in the Wholesale Operations segment, $3.3 million was recorded in the Other segment,
$2.8 million was recorded in the Famous Footwear segment and $1.0 million was recorded in the Specialty Retail segment.
In conjunction with the sale of TBMC in 2011, the Company recorded a gain of $20.6 million ($14.0 million on an after-tax
basis, or $0.32 per diluted share), which is recorded within disposition/impairment of discontinued operations, net of tax in
the consolidated statements of earnings.
The following is a summary of the charges and settlements by category of costs:
Markdowns Total by Classification
and Royalty Continuing Discontinued
($ millions) Employee Shortfalls Facility Other Total Operations Operations
Original charges and reserve balance . . . . . . . . . . $ 8.9 $ 6.1 $ 1.4 $ 2.8 $ 19.2 $ 19.2 $ –
Amounts settled in 2011 . . . . . . . . . . . . . . . . . . (3.1) (4.5) (0.1) (1.5) (9.2) (9.2) –
Reserve balance at January 28, 2012 . . . . . . . . . . . $ 5.8 $ 1.6 $ 1.3 $ 1.3 $ 10.0 $ 10.0 $ –
Additional charges in 2012. . . . . . . . . . . . . . . . . 6.0 3.1 11.4 9.4 29.9 21.9 8.0
Amounts settled in 2012 . . . . . . . . . . . . . . . . . . (10.1) (4.5) (9.4) (10.4) (34.4) (26.6) (7.8)
Reserve balance at February 2, 2013 . . . . . . . . . . . $ 1.7 $ 0.2 $ 3.3 $ 0.3 $ 5.5 $ 5.3 $ 0.2
Additional charges in 2013 . . . . . . . . . . . . . . . . 2.6 2.7 0.1 25.3 30.7 5.9 24.8
Amounts settled in 2013 . . . . . . . . . . . . . . . . . (3.3) (2.9) (2.0) (25.6) (33.8) (9.7) (24.1)
Reserve balance at February 1, 2014 . . . . . . . . . . . $ 1.0 $ - $ 1.4 $ - $ 2.4 $ 1.5 $ 0.9
Sale of Sourcing and Supply Chain Assets
On April 30, 2013, the Company entered into an agreement to sell certain of its supply chain and sourcing assets
(“Sale Agreement”) for $9.0 million, including $1.5 million in cash and a $7.5 million promissory note, subject to
working capital adjustments. The sale closed during the second quarter of 2013. 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. The promissory note requires installments over two years with the first payment of $3.0 million
due no later than 45 days from the closing date and the remaining balance payable in eight quarterly payments of
$0.6 million, subject to working capital adjustments, plus accrued interest of 5%, compounded monthly, starting
no later than three months after the closing date. During 2013, the Company received $4.2 million of installment
payments in accordance with the terms of the promissory note. As part of the Sale Agreement, the Company agreed
to purchase a minimum of four million pairs of shoes each year for the next two years at market pricing, which can be
fulfilled from a defined group of facilities owned by the purchaser.
Acquisition and Integration Related Costs
On February 17, 2011, the Company entered into a Stock Purchase Agreement with American Sporting Goods
Corporation’s stockholders, pursuant to which the Company acquired all of the outstanding capital stock of American
Sporting Goods Corporation. During 2013, the Company incurred no acquisition or integration related costs associated
with the American Sporting Goods Corporation acquisition. During 2012, the Company incurred integration related
costs totaling $0.7 million ($0.4 million on an after-tax basis, or $0.01 per diluted share). During 2011, the Company
incurred acquisition and integration related costs totaling $6.5 million ($4.5 million on an after-tax basis, or $0.11 per
diluted share). Of the $6.5 million costs recorded during 2011, $4.0 million was recorded in the Other segment and
$2.5 million was reflected within the Wholesale Operations segment. In 2011, $2.9 million of the American Sporting
Goods Corporation acquisition and integration costs related to severance. All of the expenses incurred in 2012 were
recorded within (loss) earnings from discontinued operations, net of tax, in the consolidated statements of earnings
and all of the expenses incurred in 2011 were recorded as a component of restructuring and other special charges, net.
See Note 2 to the consolidated financial statements for further information.
Organizational Change
During 2012, the Company incurred costs of $2.3 million ($1.4 million on an after-tax basis, or $0.03 per diluted share)
related to an organizational change at the corporate headquarters. These costs were recognized as restructuring and other
special charges, net and included in the Other segment. No organizational change costs were incurred during 2013 or 2011.