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48 2013 BROWN SHOE COMPANY, INC. FORM 10-K
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Brown Shoe Company, Inc. (the “Company”), founded in 1878 and incorporated in 1913, is a global footwear retailer and
wholesaler. The Company’s shares are traded under the “BWS” symbol on the New York Stock Exchange.
The Company provides a broad oering of licensed, branded, and private-label casual, dress, and athletic footwear products
to women, men, and children. Footwear is sold at a variety of price points through multiple distribution channels both
domestically and internationally. The Company currently operates 1,223 retail shoe stores in the United States, Canada, and
Guam primarily under the Famous Footwear and Naturalizer names. In addition, through its Wholesale Operations segment,
the Company designs, sources, and markets footwear to retail stores domestically and internationally, including national
chains, department stores, mass merchandisers, independent retailers, online retailers, and catalogs. In 2013, approximately
70% of the Company’s net sales were at retail compared to 71% in 2012, and 70% in 2011. See Note 7 for additional
information regarding the Company’s business segments.
The Company’s business is seasonal in nature due to consumer spending patterns with higher back-to-school and Christmas
and Easter holiday season sales. Traditionally, the third fiscal quarter accounts for a substantial portion of the Company’s
earnings for the year.
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned
subsidiaries, after the elimination of intercompany accounts and transactions.
Noncontrolling Interests
Noncontrolling interests in the Company’s consolidated financial statements result from the accounting for noncontrolling
interests in partially-owned consolidated subsidiaries or aliates. Noncontrolling interests represent partially-owned
subsidiaries’ or consolidated aliates’ losses and components of other comprehensive income that are attributable to the
noncontrolling parties’ equity interests. The Company consolidates B&H Footwear Company Limited (“B&H Footwear”),
a joint venture, into its consolidated financial statements. Net losses attributable to noncontrolling interests represent the
share of net losses that are attributable to the equity that is owned by the Company’s partners. Transactions between the
Company and B&H Footwear have been eliminated in the consolidated financial statements.
Accounting Period
The Company’s fiscal year is the 52- or 53-week period ending the Saturday nearest to January 31. Fiscal years 2013, 2012,
and 2011 ended on February 1, 2014, February 2, 2013, and January 28, 2012, respectively. Fiscal year 2012 included 53 weeks
and fiscal years 2013 and 2011 each included 52 weeks. The impact of the 53rd week in 2012 was an increase to net sales at
our retail segments of approximately $21.2 million. The net earnings impact of the 53rd week was immaterial to 2012.
Basis of Presentation
Certain prior-period amounts on the consolidated financial statements have been reclassified to conform to the current
period presentation. These reclassifications did not aect net earnings attributable to Brown Shoe Company, Inc.
The consolidated statement of cash flows includes the cash flows from operating, financing, and investing activities
of both continuing operations and discontinued operations. All other financial information is reported on a continuing
operations basis, unless otherwise noted. Refer to Note 2 to the consolidated financial statements for discussion regarding
discontinued operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires
management to make estimates and assumptions that aect the amounts reported in the financial statements and
accompanying notes. Actual results could dier from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be
cash equivalents.
Receivables
The Company evaluates the collectibility of selected accounts receivable on a case-by-case basis and makes adjustments to
the bad debt reserve for expected losses. The Company considers factors such as ability to pay, bankruptcy, credit ratings,
and payment history. For all other accounts, the Company estimates reserves for bad debts based on experience and past-due
status of the accounts. If circumstances related to customers change, estimates of recoverability would be further adjusted.
The Company recognized a provision for doubtful accounts of $0.6 million in 2013, $1.3 million in 2012, and $1.0 million in 2011.
Customer allowances represent reserves against our wholesale customers’ accounts receivable for margin assistance, product
returns, customer deductions, and co-op advertising allowances. We estimate the reserves needed for margin assistance