Famous Footwear 2011 Annual Report Download - page 21

2011 BROWN SHOE COMPANY, INC. FORM 10-K 19
As a result of these specifi c and other general factors, our operating results will vary from quarter to quarter, and the
results for any particular quarter may not be indicative of results for the full year. Any shortfall in sales or earnings from
the levels expected by investors or securities analysts could cause a decrease in the trading price of our common stock.
In addition, various securities analysts follow our fi nancial results and issue reports on us. These reports include information
about our historical fi nancial results as well as the analysts’ estimates of our future performance. The analysts’ estimates
are based upon their own opinions and are often di erent from our estimates or expectations. If our operating results are
below the estimates or expectations of public market analysts and investors, our stock price could decline.
Changes in tax laws, policies and treaties could result in higher taxes, lower profi tability and increased volatility in our
fi nancial results.
Our fi nancial results are signifi cantly impacted by our e ective tax rates, for both domestic and international operations.
Our e ective income tax rate could be adversely a ected by factors such as changes in the mix of earnings in countries
with di ering statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in permitted
deductions, changes in tax laws, interpretations, policies and treaties, the outcome of income tax audits in various
jurisdictions and any repatriation of earnings from our international operations. The occurrence of such events may result
in higher taxes, lower profi tability and increased volatility in our fi nancial results.
Transitional challenges with acquisitions and/or joint ventures could result in unexpected expenditures of time and resources.
Periodically, we pursue acquisitions of other companies or businesses and/or joint ventures. Although we review the
records of acquisition candidates, the review may not reveal all existing or potential problems. As a result, we may not
accurately assess the value of the business and may, accordingly, ultimately assume unknown adverse operating conditions
and/or unanticipated liabilities. In addition, the business may not perform as well as expected. We face the risk that
the returns on acquisitions and/or joint ventures will not support the expenditures or indebtedness incurred to acquire
or launch such businesses. We also face the risk that we will not be able to integrate acquisitions and/or joint ventures
into our existing operations e ectively without substantial expense, delay or other operational or fi nancial problems.
Integration may be hindered by, among other things, di ering procedures, including internal controls, business practices
and technology systems. We may need to allocate more management resources to integration than we planned, which may
adversely a ect our ability to pursue other profi table activities.
Our business, results of operations, fi nancial condition and cash fl ows could be adversely a ected by the failure of fi nancial
institutions to fulfi ll their commitments under our Credit Agreement.
Our Third Amended and Restated Credit Agreement (the “Credit Agreement”), which matures on January 7, 2016, is
provided by a syndicate of fi nancial institutions, with each institution agreeing severally (and not jointly) to make revolving
credit loans to us in an aggregate amount of up to $530.0 million in accordance with the terms of the Credit Agreement.
In addition, the Credit Agreement provides for up to an additional $150.0 million of optional availability pursuant to a
provision commonly referred to as an “accordion feature.” If one or more of the fi nancial institutions participating in the
senior secured revolving credit facility were to default on its obligation to fund its commitment, the portion of the facility
provided by such defaulting fi nancial institution might not be available to us.
If we are unable to maintain our credit rating, our ability to access capital and interest rates may be negatively impacted.
The credit rating agencies periodically review our capital structure and the quality and stability of our earnings. Any
negative ratings actions could constrain the capital available to our company or our industry and could limit our access to
long-term funding or cause such access to be available at a higher borrowing cost for our operations. We are dependent
upon our ability to access capital at rates and on terms we determine to be attractive. If our ability to access capital
becomes constrained, our interest expense will likely increase, which could adversely a ect our fi nancial condition and
results of operations.
We may be unable to gain the expected e ciencies from our key strategic initiatives.
In 2011, we conducted a review of our portfolio to identify and take action around businesses that either do not fi t our
target consumer platforms – family, healthy living and contemporary fashion – or that are underperforming. As a result of
this review, we announced that we would be exiting certain unprofi table portions of our business, closing certain stores
and making other infrastructure changes. We continue to take actions to respond to this review in an e ort to focus on
our target consumer platforms, maximize operating e ciency and shareholder value and reduce costs. Achievement of
our strategic goals depends in part on our ability to identify, develop and execute initiatives appropriately and e ectively.
There can be no assurance that we will gain the expected e ciencies from our strategic initiatives within a targeted
timeframe or within targeted costs.
Our ability to grow in the future depends upon, among other things, the continued success of our e orts to maintain our
brand image and expand our footwear o erings and retail and wholesale distribution channels. As our business grows,
we may need to improve and enhance our overall fi nancial and managerial controls, reporting systems and procedures to
e ectively manage our growth. We may be unable to successfully implement our current growth strategy or other growth
strategies or e ectively manage our growth, any of which would negatively impact our business, results of operations and
fi nancial condition.