Famous Footwear 2014 Annual Report Download - page 53

52 2014 BROWN SHOE COMPANY, INC. FORM 10-K
Vera Wang
During the first quarter of 2013, the Company communicated its intention not to renew the Vera Wang license agreement.
The results of Vera Wang were previously included in the Brand Portfolio segment. Discontinued operations include net
sales of $5.7 million and $14.8 million in 2013 and 2012, respectively. Discontinued operations include losses before income
taxes of $1.9 million and $1.8 million in 2013 and 2012, respectively.
Etienne Aigner
During the second quarter of 2012, the Company terminated the Etienne Aigner license agreement due to a dispute with
the licensor. On April 29, 2013, an agreement to resolve the dispute was reached, pursuant to which the Company agreed
to pay Etienne Aigner $6.5 million. The results of Etienne Aigner were previously included in the Brand Portfolio segment.
Discontinued operations included net sales of $0.3 million and $27.9 million in 2013 and 2012, respectively. It also included
losses before income taxes of $7.0 million in 2013 and earnings before income taxes of $1.4 million in 2012. As a result of the
termination of the license agreement in 2012, the Company recorded an impairment charge of $5.8 million ($3.5 million on
an after-tax basis, or $0.08 per diluted share) to reduce the value of the license intangible asset to zero.
Assets and liabilities of discontinued operations at February 1, 2014 were as follows:
($ thousands) February 1, 2014
Assets of Discontinued Operations
Current assets
Inventories, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 111
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Current assets - discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Total assets - discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 119
Liabilities of Discontinued Operations
Current liabilities
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 139
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569
Current liabilities - discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 708
Total liabilities - discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 708
Loss from discontinued operations for 2013 and 2012 was as follows:
($ thousands) 2013 2012
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,318 $ 120,269
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,927 98,485
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,391 21,784
Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,103 27,291
Restructuring and other special charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,768 1,587
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,480) (7,094)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 409
Loss before income taxes from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,496) (7,503)
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,922 3,066
Loss from discontinued operations, net of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4,574) $ (4,437)
Other Dispositions
On December 12, 2014, Brown Shoe Investment Company, Inc. (“BSI”), the sole shareholder of Shoes.com, Inc.,
simultaneously entered into and closed a Stock Purchase Agreement by and among BSI and an aliate of ShoeMe
Technologies Limited (“the Purchaser”), pursuant to which the Purchaser acquired all of the outstanding capital stock,
inventory and other assets of Shoes.com from BSI and the Company agreed to provide certain transition services. The
aggregate purchase price of the sale was $15.0 million, subject to working capital and other adjustments. The Company
received $4.4 million in cash and a $7.5 million face value secured convertible note (“convertible note”) at closing, from
the sale of stock, the sale of inventory and other assets, and the provision of transitional services, less working capital
adjustments. The convertible note requires installments over four years with the first payment of $1.25 million due on
July 1, 2017 and quarterly installments of $0.6 million thereafter, plus accrued interest, until it matures on December 12, 2019.
Interest accrues at an annual rate of 6% until December 11, 2016, 7% until December 11, 2017, 8% until December 11, 2018,
and 9% until the maturity date. The principal and outstanding accrued interest is convertible into common stock of the
Purchaser at a conversion price of CAD 21.50 per share, at the Company’s option, or automatically upon a qualified initial
public oering (“IPO”) by the Purchaser at the IPO price. The Company recorded the note receivable at its fair value of
$7.0 million, which is included in other assets on the consolidated balance sheets.
After consideration of working capital adjustments and performance obligations related to our transition services,
the net purchase price was $10.1 million. The Company recognized a pre-tax gain on the sale of the subsidiary of