Note 5

Restructuring and Other Special Charges, Net

Acquisition and Integration Related Costs

In the first half of 2012, the Company incurred integration costs related to ASG of $0.7 million ($0.4 million on an after-tax basis, or $0.01 per diluted share), with no charges during the second quarter of 2012. During the second quarter and the first half of 2011, the Company incurred acquisition and integration costs of $0.7 million ($0.4 million on an after-tax basis, or $0.01 per diluted share) and $2.4 million ($2.1 million on an after-tax basis, or $0.04 per diluted share), respectively. All of the 2012 costs are included in the Wholesale Operations segment as a component of restructuring and other special charges, net. All of the 2011 costs were included in the Other segment as a component of restructuring and other special charges, net. As of July 28, 2012, there is a remaining liability of $0.8 million related to severance.

Portfolio Realignment

In 2011, the Company began its portfolio realignment efforts. The Company's portfolio realignment efforts include selling the AND 1 division (TBMC, which was acquired with ASG); exiting certain women's specialty and private label brands; exiting the children's wholesale business; closing two U.S. distribution centers; closing or relocating numerous underperforming or poorly aligned retail stores; closing a factory in China; and other infrastructure changes. The termination of the Etienne Aigner license agreement is also considered part of the Company's portfolio realignment efforts. Effective July 12, 2012, the Company terminated the Etienne Aigner license agreement ("former 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. In conjunction with the termination, in the second quarter of 2012, the Company recognized an impairment charge of $5.8 million to reduce the remaining unamortized value of the licensed trademark intangible asset to zero. The Company also recognized additional charges of $1.3 million in the second quarter of 2012, for markdowns and other costs related to the termination of the former license agreement. These portfolio realignment efforts began in 2011 and will continue through 2012.

During the second quarter of 2012, the Company incurred costs related to its portfolio realignment activities of $12.4 million ($8.0 million after-tax, or $0.19 per diluted share). These costs are reflected on the condensed consolidated statement of earnings as $5.8 million in impairment of intangible assets, $5.2 million in restructuring and other special charges, net, and $1.4 million in cost of goods sold. The intangible impairment of $5.8 million was recorded in the Wholesale Operations segment. Of the $5.2 million in restructuring and other special charges, net, $2.6 million is included in the Specialty Retail segment, $2.1 million is included in the Wholesale Operations segment, $0.3 million is included in the Famous Footwear segment and $0.2 million is included in the Other segment. The $1.4 million in cost of goods sold is included in the Wholesale Operations segment. There were no portfolio realignment costs recognized in the second quarter of 2011.

During the first half of 2012, the Company incurred costs related to its portfolio realignment activities of $24.4 million ($15.8 million after-tax, or $0.37 per diluted share). These costs are reflected on the condensed consolidated statement of earnings as $16.0 million in restructuring and other special charges, net, $5.8 million in impairment of intangible assets and $2.6 million in cost of goods sold. Of the $16.0 million in restructuring and other special charges, net, $7.3 million is included in the Famous Footwear segment, $4.6 million is included in the Wholesale Operations segment, $3.3 million is included in the Specialty Retail segment and $0.8 million is included in the Other segment. The intangible impairment of $5.8 million was recorded in the Wholesale Operations segment. Of the $2.6 million in cost of goods sold, $2.4 million is included in the Wholesale Operations segment and $0.2 is included in the Specialty Retail segment. There were no portfolio realignment costs for the first half of 2011.

The Company believes its portfolio realignment will result in total expense of approximately $50 million, of which $43.7 million was recorded as of July 28, 2012. The Company expects approximately half of the $50 million of expense will relate to severance and other employee-related costs. Inclusive of the TBMC gain, the net expense is expected to be approximately $29 million.

The following is a summary of the charges and settlements by category of costs:



($ millions)	Employee			Markdowns and Royalty Shortfalls			Facility			Other			Total
Original charges and reserve balance	$	8.9		$	6.1		$	1.4		$	2.8		$	19.2
Amounts settled in 2011		(3.1	)		(4.5	)		(0.1	)		(1.5	)		(9.2	)
Reserve balance at January 28, 2012	$	5.8		$	1.6		$	1.3		$	1.3		$	10.0
Additional charges in first quarter 2012		3.4			1.4			6.0			1.3			12.1
Amounts settled in first quarter 2012		(3.5	)		(2.2	)		(2.4	)		(1.0	)		(9.1	)
Reserve balance at April 28, 2012	$	5.7		$	0.8		$	4.9		$	1.6		$	13.0
Additional charges in second quarter 2012		2.0			1.4			2.9			6.1			12.4
Amounts settled in second quarter 2012		(3.4	)		(0.8	)		(2.0	)		(6.9	)		(13.1	)
Reserve balance at July 28, 2012	$	4.3		$	1.4		$	5.8		$	0.8		$	12.3

Organizational Change

During the second quarter and first half of 2012, the Company incurred costs of $2.3 million ($1.4 million on an after-tax basis, or $0.03 per diluted share) related to an organizational change at the corporate headquarters.