Famous Footwear 2013 Annual Report Download - page 67

2013 BROWN SHOE COMPANY, INC. FORM 10-K 65
The Company allocated goodwill and intangible assets to the sale of ASG, as further described in Note 2 to the
consolidated financial statements, based on the relative fair values of the operations disposed and the portion of
the Wholesale Operations segment retained. The Company allocated $25.7 million of goodwill and $27.3 million of
intangible assets to ASG in 2013, which is included in noncurrent assets – discontinued operations at February 2, 2013.
During 2012, the Company terminated the Etienne Aigner license agreement, due to a dispute with the licensor and
recognized an impairment charge of $5.8 million, to reduce the remaining unamortized value of the licensed trademark
intangible asset to zero. The impairment is reflected as a component of discontinued operations in the consolidated
statements of earnings. Also during 2012, the Company acquired a trademark for $5.0 million. The trademark is being
amortized over a 15 year useful life.
Intangible assets of $21.0 million as of February 1, 2014 and February 2, 2013 are not subject to amortization. All remaining
intangible assets are subject to amortization and have useful lives ranging from four to 20 years. Amortization expense
for continuing operations related to intangible assets was $6.0 million, $6.3 million, and $7.5 million in 2013, 2012, and
2011, respectively. The Company estimates $4.0 million of amortization expense related to intangible assets in 2014 and
$3.9 million of amortization expense in each of the years from 2015 through 2018. As a result of its annual impairment
testing, the Company did not record any other impairment charges during 2013 and 2012 related to intangible assets.
Goodwill is tested for impairment at least annually, or more frequently if events or circumstances indicate it might be
impaired. A fair-value-based test is applied at the reporting unit level and compares the fair value of the reporting unit,
with attributable goodwill, to the carrying value of such reporting unit. This test requires various judgments and estimates.
The fair value of goodwill is determined using an estimate of future cash flows of the reporting unit and a risk-adjusted
discount rate to compute a net present value of future cash flows. An adjustment will be recorded for any goodwill that is
determined to be impaired. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the
fair values of recognized and unrecognized assets and liabilities of the reporting unit. The Company performed a goodwill
impairment test as of the first day of the Company’s fourth fiscal quarter, resulting in no impairment charges.
10. LONG-TERM AND SHORT-TERM FINANCING ARRANGEMENTS
Credit Agreement
On January 7, 2011, the Company and certain of its subsidiaries (the “Loan Parties”) entered into a Third Amended and
Restated Credit Agreement (“Former Credit Agreement”), which was further amended on February 17, 2011 (as so amended,
the “Credit Agreement”). The Credit Agreement matures on January 7, 2016 and provides for a revolving credit facility in an
aggregate amount of up to $530.0 million (eective February 17, 2011), subject to the calculated borrowing base restrictions,
and provides for an increase at the Company’s option by up to $150.0 million from time to time during the term of the
Credit Agreement (the “general purpose accordion feature”) subject to satisfaction of certain conditions and the willingness
of existing or new lenders to assume the increase.
Borrowing availability under the Credit Agreement is limited to the lesser of the total commitments and the borrowing base,
which is based on stated percentages of the sum of eligible accounts receivable and inventory, as defined, less applicable
reserves. Under the Credit Agreement, the Loan Parties’ obligations are secured by a first-priority security interest in all
accounts receivable, inventory, and certain other collateral.
Interest on borrowings is at variable rates based on the London Interbank Oered Rate (“LIBOR”) or the prime rate, as
defined in the Credit Agreement, plus a spread. The interest rate and fees for letters of credit vary based upon the level of
excess availability under the Credit Agreement. There is an unused line fee payable on the unused portion under the facility
and a letter of credit fee payable on the outstanding face amount under letters of credit.
The Credit Agreement limits the Company’s ability to incur additional indebtedness, create liens, make investments or
specified payments, give guarantees, pay dividends, make capital expenditures, and merge or acquire or sell assets. In
addition, certain additional covenants would be triggered if excess availability were to fall below specified levels, including
fixed charge coverage ratio requirements. Furthermore, if excess availability falls below the greater of (i) 15.0% of the lesser
of (x) the borrowing base or (y) the total commitments and (ii) $35.0 million for three consecutive business days, or an
event of default occurs, the lenders may assume dominion and control over the Company’s cash (a “cash dominion event”)
until such event of default is cured or waived or the excess availability exceeds such amount for 30 consecutive days.
The Credit Agreement contains customary events of default, including, without limitation, payment defaults, breaches
of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of
bankruptcy and insolvency, judgment defaults in excess of a certain threshold, the failure of any guaranty or security
document supporting the agreement to be in full force and eect, and a change of control event. In addition, if the excess
availability falls below the greater of (i) 12.5% of the lesser of (x) the borrowing base or (y) the total commitments and