Famous Footwear 2011 Annual Report Download - page 29

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2011 BROWN SHOE COMPANY, INC. FORM 10-K 27
Selling and administrative expenses increased $63.3 million in 2010 compared to 2009. We experienced higher selling
and merchandising costs, driven by higher sales volumes across all of our segments. We also incurred higher marketing
expenses and higher anticipated payments under our incentive plans. These increases were partially o set by a decline in
our retail facilities expenses as a result of our lower store count and cost savings initiatives. As a percent of net sales, selling
and administrative expenses decreased to 36.9% in 2010 from 38.4% in 2009. This decrease is due to the better leveraging
of our expense base over the higher sales volume.
Restructuring and Other Special Charges, Net
Restructuring and other special charges, net increased $15.8 million to $23.7 million during 2011, compared to $7.9 million
last year as a result of the following items (see Note 5 to the consolidated fi nancial statements for additional information
related to these charges and recoveries):
• Portfolio realignment – We incurred charges of $17.2 million during 2011 related to our portfolio realignment with no
corresponding charges in 2010.
• Acquisition and integration related costs – We incurred $6.5 million of costs during 2011 related to the acquisition and
integration of ASG, which we purchased on February 17, 2011, with $1.1 million in corresponding charges last year.
• Information technology initiatives – We incurred no charges during 2011 related to our ERP system with $6.8 million in
corresponding charges last year. Subsequent to going live on our ERP system in the fourth quarter of 2010, all expenses
related to our ERP system have been refl ected in selling and administrative expenses.
As a percent of net sales, restructuring and other special charges, net, increased to 0.9% in 2011, from 0.3% last year,
refl ecting the above-named factors.
Restructuring and other special charges, net, decreased $4.0 million to $7.9 million during 2010, compared to $11.9 million
in 2009 as a result of the following items:
• Information technology initiatives – We incurred charges of $6.8 million during 2010 related to our ERP system, with
$9.2 million in corresponding charges in 2009.
• Acquisition-related costs – We incurred $1.1 million of costs during 2010 related to the acquisition of ASG, which closed on
February 17, 2011, with no corresponding costs in 2009.
• Organizational changes – During 2009, we incurred charges of $4.6 million related to the retirement of two executive
o cers with no corresponding charges in 2010.
• Headquarters consolidation – During 2009, we recorded income of $1.9 million as a result of an expanded sublease
arrangement related to our former Famous Footwear division headquarters in Madison, Wisconsin with no corresponding
income recorded in 2010.
As a percent of net sales, restructuring and other special charges, net decreased to 0.3% in 2010, from 0.5% in 2009,
refl ecting the above-named factors.
Operating Earnings
Operating earnings decreased $37.1 million, or 51.1%, to $35.6 million in 2011 compared to $72.7 million last year due to the
increases in restructuring and other special charges, net and selling and administrative expenses and the decrease in gross
profi t, all partially o set by an increase in net sales, as discussed above.
We reported operating earnings of $72.7 million in 2010 compared to $31.5 million in 2009 due to the increase in net sales
and decline in restructuring and other special charges, net, partially o set by an increase in our selling and administrative
expenses and a decline in gross margin, as discussed above.
Interest Expense
Interest expense increased $6.4 million, or 33.1%, to $26.1 million in 2011 compared to $19.7 million last year and decreased
$0.5 million, or 2.7%, in 2010 compared to $20.2 million in 2009.
The increase in interest expense in 2011 was primarily due to higher average borrowings under our Credit Agreement and the
increase in long-term debt in connection with the refi nancing of our senior notes in early 2011 as a result of the additional
capital needed in connection with our acquisition of ASG and the repurchase of 2.5 million shares of our common stock.
The decrease in interest expense in 2010 is primarily due to lower rates on borrowings under our Credit Agreement,
increased capitalization of interest related to our ERP system and decreased interest expense associated with a sublease
arrangement that was expanded during 2009. Increased interest expense resulting from higher average borrowings under
our Credit Agreement partially o set these decreases.
Loss on Early Extinguishment of Debt
During 2011, we redeemed all of our senior notes due in 2012. We incurred certain debt extinguishment costs to retire
these notes prior to maturity totaling $1.0 million, of which $0.6 million was non-cash charges related to unamortized debt
issuance costs and $0.4 million represented cash paid for tender premiums. We did not incur such costs in 2010 or 2009.