Famous Footwear 2011 Annual Report Download - page 30

28 2011 BROWN SHOE COMPANY, INC. FORM 10-K
Income Tax Provision
Our consolidated e ective tax rate on continuing operations was a provision of 3.6% in 2011 compared to 30.4% in 2010 and
10.8% in 2009. Our consolidated e ective tax rate is generally below the federal statutory rate of 35% because our foreign
earnings are subject to lower statutory tax rates.
In 2011, we incurred a pretax loss in our domestic operations and pretax earnings in foreign jurisdictions. Our domestic
e ective tax rate was less than the statutory rate due to the impact of non-deductible permanent items applied to the
domestic loss and the impact of the earnings mix between domestic and international tax jurisdictions. Our foreign tax
jurisdictions have lower tax rates than domestic. These factors resulted in an overall e ective tax provision rate of 3.6% on
continuing operations in 2011.
In 2010, we experienced pretax earnings in both our domestic operations and foreign jurisdictions. This mix of domestic
and foreign pretax earnings resulted in an overall e ective tax provision rate of 30.4% in 2010.
In 2009, we incurred a pretax loss in our domestic operations and pretax earnings in foreign jurisdictions. This combination
of a domestic loss and foreign earnings resulted in an overall e ective tax provision rate of 10.8% in 2009.
See Note 7 to the consolidated fi nancial statements for additional information regarding our tax rates.
Net Earnings from Continuing Operations
We reported net earnings from continuing operations of $8.7 million in 2011 compared to $37.1 million in 2010, as a result of
the factors described above.
We reported net earnings from continuing operations of $37.1 million in 2010 compared to $10.4 million in 2009, as a result
of the factors described above.
Net Earnings from Discontinued Operations
During 2011, we sold TBMC, which markets and sells footwear bearing the AND 1 brand-name. As such, the operations of
TBMC and the gain on sale of this subsidiary were reported as discontinued operations. We reported net earnings from
discontinued operations, net of tax, totaling $15.7 million in 2011, of which $1.7 million related to the operating results of
TBMC, net of tax, and $14.0 million related to the gain on sale of the subsidiary, net of tax.
Net Earnings Attributable to Brown Shoe Company, Inc.
We reported net earnings attributable to Brown Shoe Company, Inc. of $24.6 million in 2011, compared to $37.2 million last
year as a result of the reasons noted above.
We reported net earnings attributable to Brown Shoe Company, Inc. of $37.2 million in 2010, compared to $9.5 million in
2009 as a result of the reasons noted above.
Geographic Results
We have both domestic and foreign operations. Domestic operations include the nationwide operation of our Famous Footwear
and Specialty Retail footwear stores, the wholesale distribution of footwear to numerous retail customers and the operation
of our e-commerce websites. Foreign operations primarily consist of wholesale operations in the Far East, retailing operations
in Canada and China and the operation of our international e-commerce websites. In addition, we license certain of our
trademarks to third parties who distribute and/or operate retail locations internationally. The Far East operations include fi rst-
cost transactions, where footwear is sold at foreign ports to customers who then import the footwear into the United States
and other countries. The breakdown of domestic and foreign net sales and earnings before income taxes was as follows:
2011 2010 2009
(Loss) Earnings (Loss) Earnings
Before Income Earnings Before Before Income
($ millions) Net Sales Taxes Net Sales Income Taxes Net Sales Taxes
Domestic . . . . . . . . . . . . . . . . . $2,259.9 $(11.1) $ 2,179.7 $23.8 $ 1,978.7 $(6.8)
Foreign . . . . . . . . . . . . . . . . . . 322.9 20.2 324.4 29.4 263.3 18.5
$2,582.8 $ 9.1 $2,504.1 $53.2 $2,242.0 $ 11.7
The pretax profi tability on foreign sales is higher than on domestic sales because of a lower cost structure and the inclusion
in domestic earnings of the unallocated corporate administrative and other costs.
We incurred a domestic loss before income taxes and had foreign earnings before income taxes in 2011. Our domestic loss
refl ected decreases in net sales at our Famous Footwear and Specialty Retail segments, a decrease in gross margins, an
increase in selling and administrative expenses and an increase in restructuring and other special charges, net.
We had domestic and foreign earnings before income taxes in 2010 primarily as a result of the strong sales results in both
our retail and wholesale businesses, partially o set by higher selling and administrative expenses, a portion of which are
variable with higher sales volumes. Our performance is primarily attributable to the record sales results and operating
earnings gains within our Famous Footwear segment and sales growth within our Wholesale Operations segment due to
capitalization on key footwear trends.