Famous Footwear 2011 Annual Report Download - page 22

20 2011 BROWN SHOE COMPANY, INC. FORM 10-K
We are subject to periodic litigation and other regulatory proceedings, which could result in the unexpected expenditure of
time and resources.
We are a defendant from time to time in lawsuits and regulatory actions (including environmental matters) relating to our
business and to our past operations. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot
accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have a material adverse
impact on our business, fi nancial condition and results of operations. In addition, regardless of the outcome of any litigation
or regulatory proceedings, such proceedings are expensive and will require that we devote substantial resources and
executive time to defend, thereby diverting management’s attention and resources that are needed to successfully run our
business. See Item 3, Legal Proceedings, for further discussion of pending matters.
Rising insurance costs could adversely a ect our results of operations, fi nancial condition and cash fl ows.
We self-insure a signifi cant portion of our expected losses under our workers’ compensation, employment practices, health,
disability, cyber risk, general liability, automobile and property programs, among others. The liabilities associated with the
risks that are retained by us are estimated by considering our historical claims experience and data from actuarial sources.
The estimated accruals for these liabilities could be a ected if claims di er from the assumptions used and historical
trends. Unanticipated changes in the estimates underlying our reserves for these losses, such as claims experience, infl ation
and regulatory changes, could have a material adverse e ect on our fi nancial condition and results of operations.
During 2010, Congress enacted comprehensive health care reform legislation which, among other things, includes
guaranteed coverage requirements, eliminates pre-existing condition exclusions and annual lifetime maximum limits,
restricts the extent to which policies can be rescinded and imposes new and signifi cant taxes on healthy insurers and
health care benefi ts. Possible adverse e ects of the health reform legislation include increased costs, exposure to expanded
liability and requirements for us to revise ways in which we conduct business.
We are subject to legislative or regulatory initiatives related to global warming/climate change concerns, which could
negatively a ect our business.
There has been an increasing focus and debate on global climate change, including increased attention from regulatory
agencies and legislative bodies. This increased focus may lead to new initiatives directed at regulating an unspecifi ed array
of environmental matters. Legislative, regulatory or other e orts to globally combat climate change could have negative
implications, including, but not limited to, future tax increases, increased costs of transportation and utilities and other cost
increases imposed on foreign sources of production, all of which could decrease our operating earnings. We are unable to
predict the potential e ects that any such future initiatives may have on our business.
ITEM 1B UNRESOLVED STAFF COMMENTS
None.
ITEM 2 PROPERTIES
We own our principal executive, sales and administrative o ces located in Clayton (“St. Louis”), Missouri.
Our retail footwear operations are conducted throughout the United States, Canada, China and Guam and involve the
operation of 1,323 shoe stores, including 106 in Canada and 23 in China. All store locations are leased, with approximately
60% of them having renewal options. Famous Footwear operates a leased 800,000 square-foot distribution center,
including mezzanine levels, in Lebanon, Tennessee, a leased 380,000 square-foot distribution center, including a
mezzanine level, in Bakersfi eld, California and a leased 750,000 square foot distribution center, including a mezzanine
level, in Sun Prairie, Wisconsin that will close during the fi rst quarter of 2012. We also operate an owned 150,000 square-
foot distribution facility in Perth, Ontario.
Our Wholesale Operations segment utilizes leased o ce space in New York, New York, where we also maintain showrooms
for our wholesale brands, and leased o ce space located in Aliso Viejo, California (“Los Angeles”). Our Canada wholesale
division operates from an owned building in Perth, Ontario and from leased o ce space in Laval, Quebec. We also lease
o ce space in China, Hong Kong, Macau and Italy, fi ve sample-making facilities in Dongguan, Putian and JiangXi, China
and we lease two manufacturing facilities in JiangXi, China. The footwear sold through our domestic Wholesale Operations
is processed through one of three main distribution centers: an owned distribution center in Sikeston, Missouri, which has
720,000 square feet, including mezzanine levels, a third-party facility in Chino, California and a 320,000 square-foot leased
facility in Fontana, California. We expect to close our Sikeston, Missouri distribution center in 2012.
We own a vacant manufacturing facility in Stirling, Ontario; an o ce building in Perth, Ontario, which is leased to a third-
party; a building in Denver, Colorado, which is leased to a third-party; and undeveloped land in Colorado and New York.
See Item 3, Legal Proceedings, for further discussion of certain of these properties.