Famous Footwear 2012 Annual Report Download - page 70

68 2012 BROWN SHOE COMPANY, INC. FORM 10-K
availability falls below the greater of (i) 12.5% of the lesser of (x) the borrowing base or (y) the total commitments and
(ii) $35.0 million, and the fixed charge coverage ratio is less than 1.0 to 1.0, the Company would be in default under the
Credit Agreement. The Credit Agreement also contains certain other covenants and restrictions. The Company was in
compliance with all covenants and restrictions under the Credit Agreement as of February 2, 2013.
The maximum amount of borrowings under either the Credit Agreement or Former Credit Agreement at the end of any
month was $230.0 million in 2012 and $373.0 million in 2011. The average daily borrowings during the year were $141.2 million
in 2012 and $257.2 million in 2011. The weighted-average interest rates approximated 2.8% in 2012 and 2.9% in 2011.
At February 2, 2013, the Company had $105.0 million in borrowings outstanding and $9.0 million in letters of credit
outstanding under the Credit Agreement. Total additional borrowing availability was $380.6 million at February 2, 2013.
$200 Million Senior Notes Due 2019
On May 11, 2011, the Company closed on an oering (the “Oering”) of $200.0 million aggregate principal amount of 7.125%
Senior Notes due 2019 (the “2019 Senior Notes”). The Company used a portion of the net proceeds to call and redeem the
outstanding 8.75% senior notes due in 2012 (the “2012 Senior Notes”). The Company used the remaining net proceeds for
general corporate purposes, including repaying amounts outstanding under the Credit Agreement.
The 2019 Senior Notes are guaranteed on a senior unsecured basis by each of the subsidiaries of the Company that is an
obligor under the Credit Agreement. Interest on the 2019 Senior Notes is payable on May 15 and November 15 of each
year beginning on November 15, 2011. The 2019 Senior Notes mature on May 15, 2019. Prior to May 15, 2014, the Company
may redeem some or all of the 2019 Senior Notes at a redemption price equal to the sum of the principal amount of the
2019 Senior Notes to be redeemed, plus accrued and unpaid interest, plus a “make whole” premium. After May 15, 2014,
the Company may redeem all or a part of the 2019 Senior Notes at the redemption prices (expressed as a percentage of
principal) set forth below plus accrued and unpaid interest, if redeemed during the 12-month period beginning on May 15 of
the years indicated below:
Year Percentage
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.344%
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.563%
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.781%
2017 and thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
In addition, prior to May 15, 2014, the Company may redeem up to 35% of the 2019 Senior Notes with the proceeds from
certain equity oerings at a redemption price of 107.125% of the principal amount of the 2019 Senior Notes to be redeemed,
plus accrued and unpaid interest thereon, if any, to the redemption date.
The 2019 Senior Notes also contain certain other covenants and restrictions that limit certain activities, including, among
other things, levels of indebtedness, payments of dividends, the guarantee or pledge of assets, certain investments,
common stock repurchases, mergers and acquisitions and sales of assets. Proceeds from the sale of TBMC were reinvested
into our business as allowed by the 2019 Senior Notes. As of February 2, 2013, the Company was in compliance with all
covenants and restrictions relating to the 2019 Senior Notes.
Cash payments of interest for these financing arrangements during 2012, 2011 and 2010 were $20.3 million, $23.2 million
and $18.0 million, respectively.
Loss on Early Extinguishment of Debt
During 2011, the Company completed a cash tender oer for the 2012 Senior Notes and called for redemption and repaid
the remaining notes that were not tendered. The Company incurred a loss on the early extinguishment of the 2012 Senior
Notes prior to maturity totaling $1.0 million, of which approximately $0.6 million was non-cash.
11. LEASES
The Company leases all of its retail locations and certain oce locations, distribution centers and equipment. The minimum
lease terms for the Company’s retail stores generally range from five to 10 years. Approximately one-half of the retail store
leases are subject to renewal options for varying periods. The term of the leases for oce facilities and distribution centers
averages approximately 15 years with renewal options of five to 20 years.
At the time its retail facilities are initially leased, the Company often receives consideration from landlords for a portion
of the cost of leasehold improvements necessary to open the store, which are recorded as a deferred rent obligation
upon receipt and amortized to income over the lease term as a reduction of rent expense. In addition to minimum rental
payments, certain of the retail store leases require contingent payments based on sales levels. A majority of the Company’s
retail operating leases contain provisions that allow it to modify amounts payable under the lease or terminate the lease in
certain circumstances, such as experiencing actual sales volume below a defined threshold and/or co-tenancy provisions
associated with the facility.