Famous Footwear 2011 Annual Report Download - page 40

38 2011 BROWN SHOE COMPANY, INC. FORM 10-K
We determine our expense and obligations for retirement and other benefi t plans based on assumptions related to discount
rates, expected long-term rates of return on invested plan assets, expected salary increases and certain employee-related
factors, such as turnover, retirement age and mortality among others. Our assumptions refl ect our historical experiences
and our best judgment regarding future expectations. Additional information related to our assumptions is as follows:
• Expected long-term rate of return – The expected long-term rate of return on plan assets is based on historical and
projected rates of return for current and planned asset classes in the plan’s investment portfolio. Assumed projected
rates of return for each asset class were selected after analyzing experience and future expectations of the returns. The
overall expected rate of return for the portfolio was developed based on the target allocation for each asset class. The
weighted-average expected rate of return on plan assets used to determine our pension expense for 2011 was 8.5%.
A decrease of 50 basis points in the weighted-average expected rate of return on plan assets would impact pension
expense by approximately $1.5 million. The actual return on plan assets in a given year may di er from the expected
long-term rate of return, and the resulting gain or loss is deferred and recognized into the plans’ expense over time.
• Discount rate – Discount rates used to measure the present value of our benefi t obligations for our pension and other
postretirement benefi t plans are based on a yield curve constructed from a subset of high-quality bonds for which the
timing and amount of cash outfl ows approximate the estimated payouts of the plans. The weighted-average discount
rate selected to measure the present value of our benefi t obligations under our pension and other postretirement
benefi t plans was 4.75% for each. A decrease of 50 basis points in the weighted-average discount rate would have
increased the projected benefi t obligation of the pension and other postretirement benefi t plans by approximately
$21.6 million and $0.1 million, respectively.
See Note 6 to the consolidated fi nancial statements for additional information related to our retirement and other benefi t plans.
Impact of Prospective Accounting Pronouncements
Recent accounting pronouncements and their impact on the Company are described in Note 1 to the consolidated
fi nancial statements.
OFF-BALANCE SHEET ARRANGEMENTS
At January 28, 2012, we were contingently liable for remaining lease commitments of approximately $0.5 million in the
aggregate, which relate to former retail locations that we exited in prior years. These obligations will continue to decline
over the next several years as leases expire. In order for us to incur any liability related to these lease commitments, the
current lessees would have to default.
CONTRACTUAL OBLIGATIONS
The table below sets forth our signifi cant future obligations by time period. Further information on certain of these
commitments is provided in the notes to our consolidated fi nancial statements, which are cross-referenced in this table.
Our obligations outstanding as of January 28, 2012, include the following:
Payments Due by Period
Less Than 1-3 3-5 More Than
($ millions) Total 1 Year Years Years 5 Years
Borrowings under Credit Agreement(1) . . . . . . . . . . . . . . . . . . . . . . . $ 201.0 $ 201.0 $ – $ – $ –
Long-term debt(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200.0 – – – 200.0
Interest on long-term debt(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.3 14.3 28.5 28.5 32.0
Operating lease commitments(3) . . . . . . . . . . . . . . . . . . . . . . . . . . 668.3 156.5 238.4 153.6 119.8
Minimum license commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.0 11.5 18.9 6.6 7.0
Purchase obligations(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 564.8 558.5 5.9 0.4 –
Obligations related to restructuring initiatives(5). . . . . . . . . . . . . . . . . . 11.7 11.7 – – –
Other(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1 0.6 1.7 3.5 6.3
Total(7) (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,805.2 $ 954.1 $ 293.4 $ 192.6 $ 365.1
(1) Interest on borrowings is at variable rates based on LIBOR or the prime rate, as defi ned in the Credit Agreement, plus a spread. The interest
rate and fees for letters of credit varies based upon the level of excess availability under the Credit Agreement. There is an unused line fee
payable on the excess availability under the facility and a letter of credit fee payable on the outstanding exposure under letters of credit.
Interest obligations, which are variable in nature, are not included in the table above. See Note 11 to the consolidated fi nancial statements.
(2) Interest obligations in future periods have been refl ected based on our $200.0 million principal value of Senior Notes and a fi xed interest rate
of 7.125% as of fi scal year ended January 28, 2012. See Note 11 to the consolidated fi nancial statements.
(3) A majority of our retail operating leases contain provisions that allow us to modify amounts payable under the lease or terminate the lease
in certain circumstances, such as experiencing actual sales volume below a defi ned threshold and/or co-tenancy provisions associated with
the facility. The contractual obligations presented in the table above refl ect the total lease obligation, irrespective of our ability to reduce or
terminate rental payments in the future, as noted. See Note 12 to the consolidated fi nancial statements.
(4) Purchase obligations include agreements to purchase goods or services that specify all signifi cant terms, including quantity and price provisions.
(5) See Note 5 to the consolidated fi nancial statements for further information related to these obligations.
(6) Includes obligations for our supplemental executive retirement plan and other postretirement benefi ts. See Note 6 to the consolidated
fi nancial statements.
(7) Excludes liabilities of $0.2 million, established pursuant to the provisions of ASC 740, Income Taxes, due to their uncertain nature in timing
of payments. See Note 7 to the consolidated fi nancial statements.
(8) Excludes liabilities of $1.1 million, $0.6 million and $2.0 million for our non-qualifi ed deferred compensation plan, deferred compensation
plan for non-employee directors and restricted stock units for non-employee directors, respectively, due to the uncertain nature in timing of
payments. See Note 6 and Note 16 to the consolidated fi nancial statements.