Famous Footwear 2011 Annual Report Download - page 75

2011 BROWN SHOE COMPANY, INC. FORM 10-K 73
Redfi eld
The Company is remediating, under the oversight of Colorado authorities, the groundwater and indoor air at its owned
facility in Colorado (the “Redfi eld site” or, when referring to remediation activities at or under the facility, the “on-site
remediation”) and residential neighborhoods adjacent to and near the property (the “o -site remediation”) that have been
a ected by solvents previously used at the facility. The on-site remediation calls for the operation of a pump and treat
system (which prevents migration of contaminated groundwater o the property) as the fi nal remedy for the site, subject
to monitoring and periodic review of the on-site conditions and other remedial technologies that may be developed in the
future. O -site groundwater concentrations have been reducing over time since installation of the pump and treat system
in 2000 and injection of clean water beginning in 2003. However, localized areas of contaminated bedrock just beyond
the property line continue to impact o -site groundwater. The modifi ed workplan for addressing this condition includes
converting the o -site bioremediation system into a monitoring well network and employing di erent remediation methods
in these recalcitrant areas. In accordance with the workplan, a pilot test was conducted of certain groundwater remediation
methods and the results of that test were used to develop more detailed plans for remedial activities in the o -site areas,
which were approved by the authorities and are being implemented in a phased manner. The results of groundwater
monitoring are being used to evaluate the e ectiveness of these activities. The Company submitted a proposed expanded
remedy workplan and is awaiting public comment and feedback from the oversight authorities. The liability for the on-site
remediation was discounted at 4.8%. On an undiscounted basis, the on-site remediation liability would be $16.1 million as of
January 28, 2012. The Company expects to spend approximately $0.2 million in each of the next fi ve years and $15.1 million
in the aggregate thereafter related to the on-site remediation.
The cumulative expenditures for both on-site and o -site remediation through January 28, 2012 were $24.5 million.
The Company has recovered a portion of these expenditures from insurers and other third parties. The reserve for the
anticipated future remediation activities at January 28, 2012 is $7.6 million, of which $0.7 million is recorded within other
accrued expenses and $6.9 million is recorded within other liabilities. Of the total $7.6 million reserve, $4.9 million is for
on-site remediation and $2.7 million is for o -site remediation.
Other
The Company has completed its remediation e orts at its closed New York tannery and two associated landfi lls. In 1995,
state environmental authorities reclassifi ed the status of these sites as being properly closed and requiring only continued
maintenance and monitoring through 2024. The Company has an accrued liability of $1.7 million at January 28, 2012,
related to these sites, which has been discounted at 6.4%. On an undiscounted basis, this liability would be $2.3 million.
The Company expects to spend approximately $0.2 million in each of the next fi ve years and $1.3 million in the aggregate
thereafter related to these sites. In addition, various federal and state authorities have identifi ed the Company as a
potentially responsible party for remediation at certain other sites. However, the Company does not currently believe that
its liability for such sites, if any, would be material.
Based on information currently available, the Company has an accrued liability of $9.3 million as of January 28, 2012, to
complete the cleanup, maintenance and monitoring at all sites. Of the $9.3 million liability, $0.9 million is recorded in other
accrued expenses and $8.4 million is recorded in other liabilities. The Company continues to evaluate its estimated costs in
conjunction with its environmental consultants and records its best estimate of such liabilities. However, future actions and
the associated costs are subject to oversight and approval of various governmental authorities. Accordingly, the ultimate
costs may vary, and it is possible costs may exceed the recorded amounts.
Litigation
On April 25, 2008, the Board of Commissioners of the County of La Plata, Colorado, fi led suit against a subsidiary of the
Company in the United States District Court for the District of Colorado, alleging soil and groundwater contamination
associated with a former facility located in Durango, Colorado. The Redfi eld rifl e scope business operated a lens crafting
facility on this property, which was subsequently sold to the County. The County seeks reimbursement for its past
expenditures and a judgment obligating the Company to pay for cleanup of the site. The trial concluded during the third
quarter of 2010, and judgment was received in the fi rst quarter of 2011. The judgment did not have a material adverse e ect
on the Company’s results of operations or fi nancial position.
The Company is involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion
of management, the outcome of such ordinary course of business proceedings and litigation currently pending is not
expected to have a material adverse e ect on the Company’s results of operations or fi nancial position. All legal costs
associated with litigation are expensed as incurred.
Other
In 2004, the Company was notifi ed of the insolvency of an insurance company that insured the Company for workers’
compensation and casualty losses from 1973 to 1989. That company is now in liquidation. Certain claims from that time
period are still outstanding, for which the Company has an accrued liability of $1.6 million as of January 28, 2012. While
management believes it has an appropriate reserve for this matter, the ultimate outcome and cost to the Company may vary.
At January 28, 2012, the Company was contingently liable for remaining lease commitments of approximately $0.5 million
in the aggregate, which relate to former retail locations that it exited in prior years. These obligations will continue to
decline over the next several years as leases expire. In order for the Company to incur any liability related to these lease
commitments, the current lessees would have to default.