Note 5

Restructuring and Other Special Charges, Net

Portfolio Realignment

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 of facilities in China; and other infrastructure changes. These portfolio realignment efforts began in 2011 and will continue through 2012.

The termination of the Etienne Aigner license agreement is also considered part of the Company’s portfolio realignment efforts. During the second quarter of 2012, the Company terminated the Etienne Aigner license agreement (“former license agreement”), due to a dispute with the licensor. 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.

During the third quarter of 2012, the Company incurred costs related to its portfolio realignment activities of $2.6 million ($1.6 million after-tax, or $0.04 per diluted share). These costs are reflected on the condensed consolidated statement of earnings as $2.3 million in restructuring and other special charges, net, and $0.3 million in cost of goods sold. Of the $2.3 million in restructuring and other special charges, net, $1.5 million is included in the Wholesale Operations segment, $0.4 million is included in the Famous Footwear segment, $0.3 million is included in the Specialty Retail segment, and $0.1 million is included in the Other segment. Of the $0.3 million in cost of goods sold, $0.2 million is included in the Wholesale Operations segment and $0.1 million is included in the Specialty Retail segment.

During the thirty-nine weeks ended October 27, 2012, the Company incurred costs related to its portfolio realignment activities of $27.0 million ($17.4 million after-tax, or $0.41 per diluted share). These costs are reflected on the condensed consolidated statement of earnings as $18.3 million in restructuring and other special charges, net, $5.8 million in impairment of intangible assets and $2.9 million in cost of goods sold. Of the $18.3 million in restructuring and other special charges, net, $7.7 million is included in the Famous Footwear segment, $6.1 million is included in the Wholesale Operations segment, $3.6 million is included in the Specialty Retail segment and $0.9 million is included in the Other segment. The intangible impairment of $5.8 million was recorded in the Wholesale Operations segment. Of the $2.9 million in cost of goods sold, $2.6 million is included in the Wholesale Operations segment and $0.3 million is included in the Specialty Retail segment.

During the thirteen and thirty-nine weeks ended October 29, 2011, the Company incurred costs related to its portfolio realignment activities of $4.5 million ($2.8 million after-tax, or $0.07 per diluted share). These costs are reflected on the condensed consolidated statement of earnings as $3.6 million in restructuring and other special charges, net, and $0.9 million in cost of goods sold. All of these costs are included in the Wholesale Operations segment.

The Company believes its portfolio realignment will result in total expense of approximately $50 million, of which $46.2 million was recorded as of October 27, 2012. The majority of the remaining $3.8 million is expected to be incurred in the Wholesale Operations segment. Inclusive of the TBMC gain, the net expense is expected to be approximately $30 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
Additional charges in third quarter 2012		1.0		0.2		0.6		0.8		2.6
Amounts settled in third quarter 2012		(2.0)		(1.0)		(1.7)		(1.4)		(6.1)
Reserve balance at October 27, 2012	$	3.3	$	0.6	$	4.7	$	0.2	$	8.8

Acquisition and Integration Related Costs

In the thirty-nine weeks ended October 27, 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 third quarter of 2012. During the thirteen and the thirty-nine weeks ended October 29, 2011, the Company incurred acquisition and integration costs of $1.1 million ($0.8 million on an after-tax basis, or $0.02 per diluted share) and $3.5 million ($2.9 million on an after-tax basis, or $0.08 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 October 27, 2012, there is a remaining liability of $0.6 million related to severance.

Organizational Change

During the thirty-nine weeks ended October 27, 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. All of these costs are recorded in the Other segment and as a component of restructuring and other special charges, net. No organizational change costs were incurred during the third quarter of 2012 or the full year of 2011.