Famous Footwear 2012 Annual Report Download - page 79

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2012 BROWN SHOE COMPANY, INC. FORM 10-K 77
Other
The Company has completed its remediation eorts at its closed New York tannery and two associated landfills. In 1995,
state environmental authorities reclassified 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 $1.6 million at February 2, 2013,
related to these sites, which has been discounted at 6.4%. On an undiscounted basis, this liability would be $2.0 million.
The Company expects to spend approximately $0.2 million in each of the next five years and $1.0 million in the aggregate
thereafter related to these sites. In addition, various federal and state authorities have identified 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 $9.4 million as of February 2, 2013, to
complete the cleanup, maintenance and monitoring at all sites. Of the $9.4 million liability, $8.4 million is recorded in other
liabilities and $1.0 million is recorded in other accrued expenses. 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
Etienne Aigner License Termination
During the second quarter of 2012, the Company terminated the Etienne Aigner license agreement, due to a dispute with
the licensor. The term of the former license agreement extended through 2018. The former license agreement would have
required guaranteed minimum royalty payments to the licensor of an additional $20.9 million between July 12, 2012 and
contract expiration in 2018. The licensor has disputed the basis on which the Company terminated the former license
agreement, which has resulted in the parties seeking binding arbitration of their dispute. On October 8, 2012, the Company
instituted the arbitration proceedings alleging that the licensor breached the license agreement and is seeking damages.
On October 19, 2012, the licensor responded by denying the Company’s allegations, asserting its own claims for breach of
the license agreement and is seeking damages. The arbitration is currently scheduled for May 2013. Due to the early stage of
the proceedings, the ultimate outcome is uncertain and the Company has not recorded a liability or receivable for this matter.
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 financial position. Legal costs
associated with litigation are generally expensed as incurred.
Other
In 2004, the Company was notified 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 $1.4 million as of February 2, 2013. While
management believes it has an appropriate reserve for this matter, the ultimate outcome and cost to the Company may vary.
At February 2, 2013, the Company was contingently liable for remaining lease commitments of approximately $0.2 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.