Famous Footwear 2012 Annual Report Download - page 33

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2012 BROWN SHOE COMPANY, INC. FORM 10-K 31
Restructuring and Other Special Charges, Net
We incurred restructuring and other special charges, net, of $7.8 million during 2012 as a result of our portfolio
realignment initiatives, which included closing or relocating underperforming or poorly aligned stores and closing our
Sun Prairie, Wisconsin, distribution center.
During 2011, we incurred restructuring and other special charges, net, of $2.8 million related to the closure of our
Sun Prairie, Wisconsin, distribution center with no corresponding charges in 2010.
Operating Earnings
Operating earnings increased $31.6 million, or 50.5%, to $94.1 million for 2012, compared to $62.5 million last year. The
increase is the result of higher net sales, an increase in gross profit rate and a decrease selling and administrative expenses,
partially oset by higher restructuring and other special charges, net, as described above. As a percent of net sales,
operating earnings increased to 6.2% in 2012 compared to 4.3% last year.
Operating earnings decreased $27.9 million, or 30.9%, to $62.5 million for 2011, compared to $90.4 million for 2010.
The decrease is the result of a lower gross profit, lower net sales and higher restructuring and other special charges,
net, partially oset by a decrease in selling and administrative expenses, as described above. As a percent of net sales,
operating earnings decreased to 4.3% in 2011 compared to 6.1% in 2010.
WHOLESALE OPERATIONS
2012 2011 2010
% of % of % of
($ millions) Net Sales Net Sales Net Sales
Operating Result
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 845.2 100.0% $ 870.9 100.0% $ 754.4 100.0%
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599.6 70.9% 614.6 70.6% 532.4 70.6%
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245.6 29.1% 256.3 29.4% 222.0 29.4%
Selling and administrative expenses . . . . . . . . . . . . . . . . . . 212.9 25.2% 226.6 26.0% 189.1 25.0%
Restructuring and other special charges, net . . . . . . . . . . . . . 9.3 1.1% 13.0 1.5% 0.7 0. 1%
Impairment of intangible assets. . . . . . . . . . . . . . . . . . . . . 5.8 0.7% – – – –
Operating earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17.6 2.1% $ 16.7 1.9% $ 32.2 4.3%
Key Metric
Unfilled order position at year-end . . . . . . . . . . . . . . . . . . . $ 302.0 $ 296.8 $ 243.8
Net Sales
Net sales decreased $25.7 million, or 3.0%, to $845.2 million in 2012 compared to $870.9 million last year. The decrease
was primarily attributable to lower sales of our brands that we are exiting in conjunction with our portfolio realignment
initiatives, and our Avia and Vera Wang brands, partially oset by increases in our Franco Sarto, Sam Edelman, Fergie
and LifeStride brands. Our unfilled order position increased $5.2 million, or 1.8%, to $302.0 million at the end of 2012,
as compared to $296.8 million at the end of 2011, primarily due to increases in Sam Edelman, Dr. Scholl’s Shoes and
LifeStride divisions.
Net sales increased $116.5 million, or 15.4%, to $870.9 million in 2011 compared to $754.4 million in 2010. The increase was
primarily attributable to the acquisition of ASG during early 2011, which contributed $135.5 million in net sales (excluding
$19.7 million of net sales attributable to TBMC that are reflected in discontinued operations). We also experienced an
increase in net sales in our Fergie, Franco Sarto, Sam Edelman, LifeStride and Vera Wang divisions. These increases were
oset by a decline in net sales in our Dr. Scholl’s Shoes and Carlos by Carlos Santana divisions.
Gross Profit
Gross profit decreased $10.7 million, or 4.2%, to $245.6 million in 2012 compared to $256.3 million last year reflecting
lower sales and lower gross profit rate due in part to higher inventory markdowns and customer allowance requirements.
Our gross profit rate decreased to 29.1% in 2012 as compared to 29.4% in 2011 due to higher markdowns.
Gross profit increased $34.3 million, or 15.5%, to $256.3 million in 2011 compared to $222.0 million in 2010 primarily due
to the acquisition of ASG. Our gross profit rate was flat at 29.4% in 2011 as compared to 2010. While the segment did
experience higher profit rates from its newly acquired ASG business, profit rates were negatively impacted by higher
product costs and inventory markdowns. During 2011, we experienced operational challenges related to the stabilization
of our ERP system, which we implemented in late 2010. We estimate that the gross profit impact of these items was a
reduction of $11.9 million (approximately 140 basis points) in 2011, including higher customer allowances, chargebacks
and air freight charges. In addition, we recognized incremental cost of goods sold of $4.2 million (approximately
50 basis points) for the inventory fair value adjustment related to our acquisition of ASG and $1.6 million (approximately
20 basis points) in costs related to the exit of certain women’s specialty and private label brands.