Discontinued Operations

3 Months Ended

May 04, 2013

Discontinued Operations [Abstract]

Discontinued Operations

Note 3 Discontinued Operations

American Sporting Goods Corporation – Subsequent Event

On May 14, 2013, Brown Shoe International Corp. (“BSIC”), the sole shareholder of American Sporting Goods Corporation, entered into and simultaneously closed a Stock Purchase Agreement (the “Stock Purchase Agreement”) by and among the Company, BSIC, and Galaxy Brand Holdings, Inc. (“Buyer”),  pursuant to which Buyer acquired all of the outstanding capital stock of American Sporting Goods Corporation from BSIC and the Company agreed to provide certain transition services. In connection with the transaction, American Sporting Goods Corporation sold inventory to a third party unaffiliated with Buyer and distributed certain assets to BSIC. The aggregate purchase price for the Stock Purchase Agreement and the provision of such transition services was $74.0 million, subject to working capital adjustments, minus the amount of the pre-closing cash dividend declared by American Sporting Goods Corporation and paid to BSIC representing proceeds from American Sporting Goods Corporation’s sale of inventory.

The Company purchased American Sporting Goods Corporation, comprised of Avia, Nevados, Ryka, AND 1 and other businesses, on February 17, 2011 and subsequently sold AND 1 during fiscal 2011. The Avia and Nevados businesses were sold under the Stock Purchase Agreement and the Company retained and is operating Ryka and other businesses.  In this document “ASG” refers to the subsidiary disposed on May 14, 2013, including the Avia and Nevados brands and excluding the Ryka brand and other retained businesses.

The Company received $60.3 million in cash and a promissory note of $12.0 million at closing, from the sale of stock, the sale of inventory and for the provision of transitional services, less working capital adjustments. The promissory note is due November 14, 2013, earns interest at a 3% annual rate and is secured by a guarantee by ASG and a lien on certain assets of ASG.

The operations of ASGwere considered held for sale as of May 4, 2013 and were classified as discontinued operations. The Company expects to purchase an insignificant amount of footwear from ASG for sale in its retail operations subsequent to the sale. During the first quarters of 2013 and 2012, the Company’s retail operations purchased $1.5 million and $2.8 million, respectively, of Avia and Nevados footwear. As a result of the impending sale, the Company recorded animpairment charge in the first quarter of 2013 of $12.6 million ($12.6 million after-tax, $0.30 per diluted share) representing the difference in the fair value less costs to sell as compared to the net assets to be sold. This impairment charge is reflected in the condensed consolidated statement of earnings as a component of discontinued operations and as a reduction of non current assets – discontinued operations in the condensed consolidated balance sheet. ASG was included in the Wholesale Operations segment.

Loss from discontinued operations in the first quarter of 2013 included $18.3 million of net sales and $1.2 million of earnings before income taxes. In the first quarter of 2012, loss from discontinued operations included $19.4 million of net sales and $2.9 million of loss before income taxes.

Etienne Aigner

During the second quarter of 2012, the Company terminated the Etienne Aigner license agreement due to a dispute with the licensor. On April 29, 2013, an agreement to resolve the dispute was reached, pursuant to which the Company agreed to pay Etienne Aigner $6.5 million. The financial results of Etienne Aigner and the $6.5 million settlement have been reflected as a component of discontinued operations.  

Loss from discontinued operations in the first quarter of 2013 included $0.2 million of net sales and $7.0 million of loss before income taxes. In the first quarter of 2012, loss from discontinued operations included $6.0 million of net sales and $0.2 million of loss before income taxes. These results were included in the Wholesale Operations segment.

Vera Wang

During the first quarter of 2013, the Company communicated its intention not to renew the Vera Wang license agreement. Loss from discontinued operations in the first quarter of 2013 included $2.0 million of net sales and $3.4 million of loss before income taxes. In the first quarter of 2012, loss from discontinued operations included $2.9 million of net sales and $0.9 million of loss before income taxes. These results were included in the Wholesale Operations segment.

The detail of ASG, Etienne Aigner and Vera Wang assets and liabilities reported as discontinued operations in the condensed consolidated balance sheet are as follows:

	May 4,		April 28,		February 2,
($ thousands)		2013		2012		2013
Discontinued Assets
Current assets
Receivables, net	$	12,166	$	23,577	$	14,291
Inventories, net		23,250		37,262		29,587
Prepaid expenses and other current assets		3,743		4,676		3,231
Total current assets		39,159		65,515		47,109
Other assets		287		699		419
Goodwill		10,295		22,849		22,849
Intangible assets, net		27,057		33,873		27,275
Property and equipment, net		1,034		1,246		1,233
Total assets	$	77,832	$	124,182	$	98,885
Discontinued Liabilities
Current liabilities
Trade accounts payable	$	4,642	$	9,486	$	9,082
Other accrued expenses		11,541		5,632		4,177
Total current liabilities		16,183		15,118		13,259
Other liabilities		6,768		9,969		6,996
Total liabilities	$	22,951	$	25,087	$	20,255