Famous Footwear 2014 Annual Report Download - page 55

54 2014 BROWN SHOE COMPANY, INC. FORM 10-K
The following is a summary of the Company’s portfolio realignment expense for our continuing and discontinued operations
for 2013 and 2012:
2013 2012
Loss Per Loss Per
Pre-tax After-tax Diluted Pre-tax After-tax Diluted
($ millions, except per share data) Expense Expense Share Expense Expense Share
Continuing Operations
Business exits and cost reductions . . . . . . . . . . . . . . . . . . . $ 1.2 $ 0.8 $ 0.02 $ 21.9 $ 14.3 $ 0.33
Non-cash impairments/dispositions . . . . . . . . . . . . . . . . . . 4.7 4.7 0.11 – – –
Total Continuing Operations . . . . . . . . . . . . . . . . . . . . 5.9 5.5 0.13 21.9 14.3 0.33
Discontinued Operations
Business exits and cost reductions . . . . . . . . . . . . . . . . . . . 13.3 6.4 0.13 2.2 1.5 0.04
Non-cash impairments/dispositions . . . . . . . . . . . . . . . . . . 11.5 11.5 0.27 5.8 3.5 0.08
Total Discontinued Operations . . . . . . . . . . . . . . . . . . . 24.8 17.9 0.40 8.0 5.0 0.12
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30.7 $ 23.4 $ 0.53 $ 29.9 $ 19.3 $ 0.45
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 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 Brand Portfolio segment. Of the $21.9 million incurred during 2012, $13.3 million was included in the
Brand Portfolio segment, $7.8 million was included in the Famous Footwear segment and $0.8 million was included in
the Other category.
The following is a summary of the charges and settlements by category of costs:
Markdowns Total by Classification
and Royalty Continuing Discontinued
($ millions) Employee Shortfalls Facility Other Total Operations Operations
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
Amounts settled in 2014 . . . . . . . . . . . . . . . . . (0.9) – (0.4) – (1.3) (0.4) (0.9)
Reserve balance at January 31, 2015. . . . . . . . . . . $ 0.1 $ – $ 1.0 $ – $ 1.1 $ 1.1 $ –
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 ($4.7 million after tax, or $0.11 per diluted share) 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. In accordance with the terms of the promissory note, as of January 31, 2015,
the Company has received aggregate installment payments of $6.3 million. As part of the Sale Agreement, the Company
agreed to purchase, under specific performance criteria, 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.
Organizational Change
During 2014, the Company incurred costs of $1.9 million ($1.2 million on an after-tax basis, or $0.03 per diluted share) related
to a management change at the corporate headquarters, with no corresponding charges in 2013. During 2012, the Company
recorded costs of $2.3 million ($1.4 million on an after-tax basis, or $0.03 per diluted share) related to a management
change. These costs were recognized as restructuring and other special charges, net and included in the Other category.