Famous Footwear 2014 Annual Report Download - page 32

2014 BROWN SHOE COMPANY, INC. FORM 10-K 31
rates could decrease. Moreover, increases in inflation may not be matched by increases in income, which also could have
a negative impact on consumer spending. If we incur increased costs that are unable to be recovered through price
increases, or if consumer spending decreases generally, our business, results of operations, financial condition, and cash
flows may be adversely aected. In an eort to mitigate the impact of these incremental costs on our operating results,
we expect to pass on some portion of cost increases to our consumers and adjust our business model, as appropriate,
to minimize the impact of higher costs. Further discussion of the potential impact of inflation and changing prices is
included in Item 1A, Risk Factors.
LIQUIDITY AND CAPITAL RESOURCES
Borrowings
($ millions) January 31, 2015 February 1, 2014 (Decrease) Increase
Borrowings under Credit Agreement . . . . . . . . . . . . . $ – $ 7.0 $ (7.0)
Long-term debt - Senior Notes . . . . . . . . . . . . . . . . 199.2 199.0 0.2
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 199.2 $ 206.0 $ (6.8)
Total debt obligations decreased $6.8 million, or 3.3%, to $199.2 million at the end of 2014 compared to $206.0 million at
the end of last year due to a decrease in borrowings under our revolving credit agreement. Interest expense in 2014 was
$20.5 million compared to $21.3 million in 2013 and $23.0 million in 2012.
Credit Agreement
On December 18, 2014, the Company and certain of its subsidiaries (the “Loan Parties”) entered into a Fourth Amended
and Restated Credit Agreement (“Credit Agreement”). The Credit Agreement matures on December 18, 2019 and provides
for a revolving credit facility in an aggregate amount of up to $600.0 million, subject to the calculated borrowing base
restrictions, and provides for an increase at the Company’s option by up to $150.0 million from time to time during the
term of the Credit Agreement, subject to satisfaction of certain conditions and the willingness of existing or new lenders
to assume the increase. Under the Credit Agreement, the Loan Parties’ obligations are secured by a first priority security
interest in all accounts receivable, inventory and certain other collateral. The Credit Agreement amended and restated the
Third Amended and Restated Credit Agreement, dated as of January 7, 2011 (the “Former Credit Agreement”).
Interest on borrowings is at variable rates based on the London Interbank Oered Rate (“LIBOR”) or the prime rate, as
defined in the Credit Agreement, plus a spread. The interest rate and fees for letters of credit vary based upon the level of
excess availability under the Credit Agreement. There is an unused line fee payable on the unused portion under the facility
and a letter of credit fee payable on the outstanding face amount under letters of credit.
We were in compliance with all covenants and restrictions under the Credit Agreement as of January 31, 2015. Refer to
further discussion regarding the Credit Agreement in Note 10 to the consolidated financial statements.
At January 31, 2015, we had no borrowings and $6.3 million in letters of credit outstanding under the Credit Agreement.
Total additional borrowing availability was $525.6 million at January 31, 2015.
$200 Million Senior Notes Due 2019
On May 11, 2011, we 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”). We used a portion of the net proceeds to call and redeem our
outstanding 8.75% senior notes due in 2012 (the “2012 Senior Notes”). We used the remaining net proceeds for
general corporate purposes, including repaying amounts outstanding under the Former Credit Agreement. The 2019
Senior Notes are guaranteed on a senior unsecured basis by each of our subsidiaries 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. The 2019
Senior Notes mature on May 15, 2019. We 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
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.563%
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.781%
2017 and thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
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. As of January 31, 2015, we were in compliance
with all covenants and restrictions relating to the 2019 Senior Notes.