Famous Footwear 2011 Annual Report Download - page 66

64 2011 BROWN SHOE COMPANY, INC. FORM 10-K
Intangible assets of $42.5 million as of January 28, 2012 and $13.7 million as of January 29, 2011 are not subject to
amortization. All remaining intangible assets are subject to amortization and have useful lives ranging from four to
20 years. Amortization expense related to intangible assets was $8.3 million, $6.7 million and $6.8 million in 2011, 2010
and 2009, respectively. The Company estimates the following amortization expense related to intangible assets:
$7.6 million in 2012, 2013, 2014 and $6.7 million in 2015 and 2016.
The increase in the goodwill and intangible assets of the Wholesale Operations segment from January 29, 2011 to
January 28, 2012 refl ects the Company’s purchase of ASG on February 17, 2011 and the subsequent sale of TBMC on
October 25, 2011. The Company’s purchase of ASG resulted in goodwill of $61.2 million and intangible assets of $46.7 million.
The Company’s sale of TBMC resulted in the elimination of $21.6 million of goodwill and $8.0 million of intangible assets.
The remaining intangible assets associated with the Company’s acquisition of ASG, after the sale of TBMC, will be
amortized on a straight-line basis over their estimated useful lives, ranging from four to 20 years, except for the Avia and
RYKÄ trademarks, for which an indefi nite life has been assigned. A summary of the estimated useful lives of intangible
assets associated with the acquisition of ASG by class, excluding intangible assets related to TBMC, which were sold during
2011, as well as the total weighted-average estimated useful life is as follows:
Estimated Useful Initial Fair Value
Intangible Assets Life (in years) ($ in millions)
Subject to amortization
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 $ 1.2
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 4.6
Licensing agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 3.6
Total(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 $ 9.4
Not subject to amortization
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indefi nite $ 28.8
(1) Estimated useful life is calculated as the weighted-average total
As a result of annual impairment testing, the Company did not record any impairment charges during 2011 and 2010 related
to intangible assets.
Goodwill is tested for impairment at least annually, or more frequently if events or circumstances indicate it might be
impaired. A fair-value-based test is applied at the reporting unit level and compares the fair value of the reporting unit,
with attributable goodwill, to the carrying value of such reporting unit. This test requires various judgments and estimates.
The fair value of goodwill is determined using an estimate of future cash fl ows of the reporting unit and a risk-adjusted
discount rate to compute a net present value of future cash fl ows. An adjustment will be recorded for any goodwill that is
determined to be impaired. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the
fair values of recognized and unrecognized assets and liabilities of the reporting unit. The Company performed a goodwill
impairment test as of October 29, 2011, resulting in no impairment charges.
11. LONG-TERM AND SHORT-TERM FINANCING ARRANGEMENTS
Credit Agreement
On January 7, 2011, the Company and certain of its subsidiaries (the “Loan Parties”) entered into a Third Amended
and Restated Credit Agreement (“Former Credit Agreement”), which was further amended on February 17, 2011 (as so
amended, the “Credit Agreement”). The Credit Agreement matures on January 7, 2016 and provides for a revolving credit
facility in an aggregate amount of up to $530.0 million (e ective February 17, 2011), subject to the calculated borrowing
base restrictions, and provides for an increase at the Company’s option by up to $150.0 million from time to time during the
term of the Credit Agreement (the “general purpose accordion feature”) subject to satisfaction of certain conditions and
the willingness of existing or new lenders to assume the increase.
On February 17, 2011, ASG and TBMC, the sole domestic subsidiary of ASG, became borrowers under the Credit Agreement.
In conjunction with the sale of TBMC on October 25, 2011, TBMC ceased to be a borrower under the Credit Agreement.
See Note 2 to the consolidated fi nancial statements for further information on the acquisition of ASG and the subsequent
sale of TBMC.
Borrowing availability under the Credit Agreement is limited to the lesser of the total commitments and the borrowing
base, which is based on stated percentages of the sum of eligible accounts receivable and inventory, as defi ned, less
applicable reserves. Under the Credit Agreement, the Loan Parties’ obligations are secured by a fi rst-priority security
interest in all accounts receivable, inventory and certain other collateral.
Interest on borrowings is at variable rates based on the London Inter-Bank O ered Rate (“LIBOR”) or the prime rate, as
defi ned in the Credit Agreement, plus a spread. The interest rate and fees for letters of credit vary based upon the level of
excess availability under the Credit Agreement. There is an unused line fee payable on the unused portion under the facility
and a letter of credit fee payable on the outstanding face amount under letters of credit.