Famous Footwear 2011 Annual Report Download - page 53

2011 BROWN SHOE COMPANY, INC. FORM 10-K 51
In September 2011, the FASB issued Accounting Standards Update No. 2011-08, Intangibles-Goodwill and Other (ASC Topic
350) Testing Goodwill for Impairment, (“ASU 2011-08”), which amends current goodwill impairment testing guidance. This
accounting update will allow companies the option to fi rst assess qualitative factors to determine whether it is more likely
than not (a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If, after
considering the totality of events and circumstances, an entity determines it is more likely than not that the fair value of
a reporting unit is more than its carrying amount, performing the two-step impairment test is unnecessary. ASU 2011-08
will be e ective for public companies during the interim and annual periods beginning after December 15, 2011 with early
adoption permitted. The Company plans on adopting the standard in 2012. The adoption of ASU 2011-08 is not expected to
have an impact on the Company’s consolidated balance sheets, results of operations or cash fl ows.
2. ACQUISITIONS AND DIVESTITURES
American Sporting Goods Corporation
On February 17, 2011, the Company entered into a Stock Purchase Agreement with American Sporting Goods Corporation
(“ASG”) and ASG’s stockholders, pursuant to which a subsidiary of the Company acquired all of the outstanding capital
stock of ASG (the “ASG Stock”) from the ASG stockholders on that date. The aggregate purchase price for the ASG Stock
was $156.6 million in cash, including debt assumed by the Company of $11.6 million. The operating results of ASG have
been included in the Company’s fi nancial statements since February 17, 2011 and are consolidated within the Wholesale
Operations segment.
ASG is a designer, manufacturer and marketer of a broad range of athletic footwear with a strong presence in walking,
fi tness and basketball. It was founded in 1983 and is headquartered in Aliso Viejo, California (“Los Angeles”). The
acquisition added performance and lifestyle athletic and outdoor footwear brands to the Company’s portfolio, including
Avia, RYKÄ, AND 1 and Nevados.
E ective February 17, 2011, the Company and certain of its subsidiaries exercised the $150.0 million designated event
accordion feature under the Company’s Credit Agreement to fund the majority of the purchase price to acquire ASG,
increasing the aggregate amount available under the Credit Agreement from $380.0 million to $530.0 million. See Note 11
to the consolidated fi nancial statements for additional information about the Company’s Credit Agreement.
The Company incurred acquisition and integration costs of $6.5 million ($4.5 million on an after-tax basis, or $0.11 per
diluted share) in 2011 and $1.1 million ($0.7 million on an after-tax basis, or $0.02 per diluted share) in 2010. All costs are
recorded as a component of restructuring and other special charges, net. In addition, during 2011, the Wholesale Operations
segment recognized an increase in cost of goods sold related to the impact of the inventory fair value adjustment in
connection with the acquisition of ASG of $4.2 million ($2.5 million on an after-tax basis, or $0.05 per diluted share).
See additional information related to acquisition and integration costs in Note 5 to the consolidated fi nancial statements.
The total consideration paid by the Company in connection with the acquisition of ASG was $156.6 million. The cost to
acquire ASG was allocated to the assets acquired and liabilities assumed according to estimated fair values. The allocation
resulted in acquired goodwill of $61.2 million and intangible assets related to trade names, licensing agreements and customer
relationships of $46.7 million. The goodwill and intangible assets were allocated to the Wholesale Operations segment.
The Company allocated the purchase price of ASG according to its estimate of the fair value of the assets and liabilities as
of the acquisition date, February 17, 2011, as follows:
($ millions) As of February 17, 2011
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.1
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.1
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.5
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4
Prepaid expense and other current assets . . . . . . . . . . . . . . . . . . 12.2
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86.3
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.2
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.7
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 203.8
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13.2
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.0
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.2
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.0
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47.2
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 156.6