Famous Footwear 2012 Annual Report Download - page 57

2012 BROWN SHOE COMPANY, INC. FORM 10-K 55
In July 2012, the FASB issued ASU No. 2012-02, Intangibles-Goodwill and Other (ASC Topic 350) Testing Indefinite-Lived
Intangible Assets for Impairment, which amends prior indefinite-lived intangible asset impairment testing guidance. This
standard allows companies the option to first assess qualitative factors to determine whether it is more likely than not
(a likelihood of more than 50%) that an indefinite-lived intangible asset is impaired. If, after considering the totality of events
and circumstances, an entity determines it is more likely than not that an indefinite-lived intangible asset is not impaired,
then calculating the fair value is unnecessary. The Company adopted the standard on July 29, 2012 and it did
not have an impact on the Company’s consolidated financial statements.
Impact of Prospective Accounting Pronouncements
In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (ASC Topic 220) Reporting of Amounts
Reclassified Out of Accumulated Other Comprehensive Income, which amends prior comprehensive income guidance.
This standard requires an entity to present the amounts reclassified out of accumulated other comprehensive income by
component and respective line items of net earnings on either the face of the statement of earnings or in the notes to
the financial statements. The Company plans on adopting the standard in 2013. The adoption is not expected to have an
impact on the Company’s consolidated balance sheets, results of operations or cash flows as it only requires a change in
the format of the current presentation and related disclosures.
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 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 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 operating results of ASG
have been included in the Company’s financial 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, fitness
and basketball. It was founded in 1983 and is now headquartered in Irvine, California. The acquisition added performance and
lifestyle athletic and outdoor footwear brands to the Company’s portfolio, including Avia, Ryka, AND 1 and Nevados.
During 2012, the Company incurred integration related costs totaling $0.7 million ($0.4 million after-tax, or $0.01 per
diluted share) all of which were reflected within the Wholesale Operations segment. During 2011, the Company incurred
acquisition and integration related costs totaling $6.5 million ($4.5 million after-tax, or $0.11 per diluted share). Of the
$6.5 million costs recorded during 2011, $4.0 million was recorded in the Other segment and $2.5 million was reflected
within the Wholesale Operations segment. During 2010, the Company incurred acquisition-related costs totaling
$1.1 million ($0.7 million after-tax, or $0.02 per diluted share). All of the costs incurred in 2010 were reflected within the
Other segment. All of the expenses incurred in 2012, 2011 and 2010 were 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 after-tax, or $0.05 per diluted share). See additional information related to acquisition and
integration costs in Note 4 to the consolidated financial statements.
The Company allocated the purchase price of ASG according to its estimate of the fair value of the assets and liabilities as
of the acquisition date, February 17, 2011, as follows:
($ 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