Famous Footwear 2011 Annual Report Download - page 27

2011 BROWN SHOE COMPANY, INC. FORM 10-K 25
• ASG acquisition and integration costs – We incurred costs of $6.5 million ($4.5 million on an after-tax basis, or $0.11
per diluted share) during 2011 related to the acquisition and integration of ASG recorded within restructuring and other
special charges, net. We incurred costs of $1.1 million ($0.7 million on an after-tax basis, or $0.02 per diluted share)
related to the acquisition of ASG during 2010 recorded within restructuring and other special charges, net. See Note 2
and Note 5 to the consolidated fi nancial statements for additional information.
• Acquisition related cost of goods sold adjustment – We incurred costs of $4.2 million ($2.5 million on an after-tax
basis, or $0.05 per diluted share) during 2011, associated with the impact to cost of goods sold of the inventory fair
value adjustment in connection with the acquisition of ASG, with no corresponding costs during 2010. See Note 2 to
the consolidated fi nancial statements for additional information related to these costs.
• Loss on early extinguishment of debt – During 2011, we incurred expenses of $1.0 million ($0.6 million on an after-tax
basis, or $0.02 per diluted share) to extinguish our senior notes prior to maturity in 2012. There were no corresponding
charges in 2010.
• Information technology initiatives – We incurred expenses of $6.8 million ($4.6 million on an after-tax basis, or
$0.10 per diluted share) in 2010, related to our ERP system that replaced select internally developed and certain
other third-party applications. These expenses were included in restructuring and other special charges, net. See
Note 5 to the consolidated fi nancial statements for additional information.
Our debt-to-capital ratio, as defi ned in the Liquidity and Capital Resources – Working Capital and Cash Flow section,
increased to 49.1% as of January 28, 2012, compared to 45.6% at January 29, 2011, primarily due to our $51.6 million increase
in borrowings under our 2019 Senior Notes and Credit Agreement at the end of 2011, due to the acquisition of ASG, as
described further in Note 2 to the consolidated fi nancial statements, and the repurchase of 2.5 million shares of our
common stock for $25.5 million. Our current ratio, as defi ned in the Liquidity and Capital Resources – Working Capital and
Cash Flow section, was 1.55 to 1 at January 28, 2012, compared to 1.58 to 1 at January 29, 2011. Inventories at January 28, 2012
were $561.8 million, up from $524.3 million at January 29, 2011, primarily due to an increase in inventories for Wholesale
Operations due to the acquisition of ASG, partially o set by a decrease in inventories at Famous Footwear.
Outlook for 2012
We made progress in the fi rst phase of our portfolio realignment e orts during 2011 and will continue these e orts into
2012. The fi rst phase of our portfolio realignment includes selling our AND 1 division (TBMC, which was acquired with
ASG in 2011); closing two distribution centers and a factory in China; exiting certain women’s specialty and private label
brands; exiting the children’s wholesale business; closing or relocating numerous underperforming or poorly aligned retail
stores and other infrastructure changes. These e orts were designed to position us to be somewhat smaller but stronger
and more profi table in the future. While we believe the consumer environment will remain challenging in 2012, we feel our
brands and product o erings are well-positioned in the marketplace and will enable us to further capitalize on consumers’
desire for trend-right products. Going forward we will focus on improving profi tability, continuing to drive our products,
investing in and developing our brands through identifying new design talent and engaging our retail consumer through
e ective marking campaigns and fresh products. As a result, we expect same-store sales at Famous Footwear will remain
fl at or grow in the low single digit percentage range in 2012 and that our wholesale net sales will decrease in the low single
digit percentage range in 2012 as compared to 2011.
Following are the consolidated results and the results by segment for 2011, 2010 and 2009:
CONSOLIDATED RESULTS
2011 2010 2009
% of % of % of
($ millions) Net Sales Net Sales Net Sales
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,582.8 100.0% $ 2,504.1 100.0% $ 2,242.0 100.0%
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,586.2 61.4% 1,500.5 59.9% 1,338.9 59.7%
Gross profi t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 996.6 38.6% 1,003.6 40.1% 903.1 40.3%
Selling and administrative expenses . . . . . . . . . . . . . . . . . . 937.3 36.3% 923.0 36.9% 859.7 38.4%
Restructuring and other special charges, net . . . . . . . . . . . . . 23.7 0.9% 7.9 0.3% 11.9 0.5%
Operating earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.6 1.4% 72.7 2.9% 31.5 1.4%
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26.1) (1.0)% (19.7) (0.8)% (20.2) (0.9)%
Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . (1.0) 0.0% – – – –
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6 0.0% 0.2 0.0% 0.4 0.0%
Earnings before income taxes from continuing operations. . . . . . 9.1 0.4% 53.2 2.1% 11.7 0.5%
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.4) (0.1)% (16.1) (0.6)% (1.3) (0.1)%
Net earnings from continuing operations . . . . . . . . . . . . . . . 8.7 0.3% 37.1 1.5% 10.4 0.4%
Discontinued operations:
Earnings from operations of subsidiary, net of tax . . . . . . . . 1.7 0.1% – – – –
Gain on sale of subsidiary, net of tax. . . . . . . . . . . . . . . . 14.0 0.5% – – – –
Net earnings from discontinued operations . . . . . . . . . . . . . . 15.7 0.6% – – – –
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.4 0.9% 37.1 1.5% 10.4 0.4%
Net (loss) earnings attributable to noncontrolling interests . . . . . (0.2) (0.1)% (0.1) 0.0% 0.9 0.0%
Net earnings attributable to Brown Shoe Company, Inc. . . . . . . . $ 24.6 1.0% $ 37.2 1.5% $ 9.5 0.4%