2.	DISCONTINUED OPERATIONS

The Company’s discontinued operations include The Basketball Marketing Company, Inc. (“TBMC”), the Avia and Nevados brands of American Sporting Goods Corporation, the Etienne Aigner brand, and the Vera Wang brand. The Company applied discontinued operations accounting in accordance with ASC Topic 205-20, Presentation of Financial Statements –Discontinued Operations.

In aggregate, discontinued operations include net sales of $26.3 million, $120.3 million, and $167.8 million in 2013, 2012, and 2011, respectively. Discontinued operations include a loss before income taxes of $10.5 million and $7.5 million in 2013 and 2012, respectively, and earnings before income taxes of $7.4 million in 2011. In addition, discontinued operations include a net loss on disposition/impairment of $11.5 million and $3.5 million in 2013 and 2012, respectively, and a net gain on disposition/impairment of $14.0 million in 2011.

American Sporting Goods Corporation

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. (“the Buyer”), pursuant to which the 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 the Buyer and distributed certain assets to BSIC. The aggregate purchase price for the stock of American Sporting Goods Corporation 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, as further described below. 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 was due November 14, 2013, earned interest at a 3% annual rate, and was secured by a guarantee by American Sporting Goods Corporation and a lien on certain assets of ASG. In accordance with the terms of the promissory note, the Company received a payment of $12.2 million on November 14, 2013, representing the note principal and accrued interest.

As a result of the sale of ASG, the Company recorded an impairment 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 carrying value of the net assets to be sold. During the second quarter of 2013, the Company recognized a gain upon disposition of the ASG subsidiary of $1.0 million ($1.0 million after tax, $0.02 per diluted share).

ASG was previously included in the Wholesale Operations segment. Discontinued operations include net sales of $20.3 million, $77.6 million, and $98.1 million in 2013, 2012, and 2011, respectively. Discontinued operations include losses before income taxes of $1.6 million and $7.1 million in 2013 and 2012, respectively, and earnings before income taxes of $1.8 million in 2011.

Vera Wang

During the first quarter of 2013, the Company communicated its intention not to renew the Vera Wang license agreement. The results of Vera Wang were previously included in the Wholesale Operations segment. Discontinued operations include net sales of $5.7 million, $14.8 million, and $21.8 million in 2013, 2012, and 2011, respectively. Discontinued operations include losses before income taxes of $1.9 million in 2013, $1.8 million in 2012 and earnings before income taxes of $1.4 million in 2011.

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 results of Etienne Aigner were previously included in the Wholesale Operations segment. Discontinued operations included net sales of $0.3 million, $27.9 million and $28.1 million in 2013, 2012, and 2011, respectively. It also included losses before income taxes of $7.0 million in 2013 and earnings before income taxes of $1.4 million and $1.2 million in 2012 and 2011, respectively. As a result of the termination of the license agreement in 2012, the Company recorded an impairment charge of $5.8 million ($3.5 million on an after-tax basis, or $0.08 per diluted share) to reduce the value of the license intangible asset to zero.

The Basketball Marketing Company, Inc.

On October 25, 2011, the Company sold TBMC for $55.4 million in cash. TBMC markets and sells footwear bearing the AND 1 brand-name and was acquired in the Company’s February 17, 2011 acquisition of American Sporting Goods Corporation. In conjunction with the sale, the Company recorded a gain of $20.6 million ($14.0 million after-tax, or $0.32 per diluted share), which is reflected in the consolidated statements of earnings as a component of discontinued operations.

TBMC was previously included in the Wholesale Operations segment. Discontinued operations included net sales and earnings before income taxes of $19.7 million and $3.0 million, respectively, in 2011.

Assets and liabilities of discontinued operations at February 1, 2014 and February 2, 2013 were as follows:



	February 1,		February 2,
($ thousands)		2014		2013

Assets of Discontinued Operations
Current assets
Receivables, net	$	–	$	14,291
Inventories, net		111		29,587
Prepaid expenses and other current assets		8		3,231
Current assets - discontinued operations		119		47,109
Other assets		–		419
Goodwill		–		25,650
Intangible assets, net		–		27,275
Property and equipment, net		–		1,233
Noncurrent assets - discontinued operations		–		54,577
Total assets - discontinued operations	$	119	$	101,686

Liabilities of Discontinued Operations
Current liabilities
Trade accounts payable	$	139	$	9,082
Other accrued expenses		569		4,177
Current liabilities - discontinued operations		708		13,259
Other liabilities		–		6,996
Noncurrent liabilities - discontinued operations		–		6,996
Total liabilities - discontinued operations	$	708	$	20,255

(

(Loss) earnings from discontinued operations, net of tax, for 2013, 2012, and 2011 were as follows:



($ thousands)	2013		2012		2011
Net sales	$	26,318	$	120,269	$	167,753
Cost of goods sold		19,927		98,485		127,828
Gross profit		6,391		21,784		39,925
Selling and administrative expenses		6,103		27,291		31,895
Restructuring and other special charges, net		10,768		1,587		–
Operating (loss) earnings		(10,480)		(7,094)		8,030
Interest expense		16		409		712
Interest income		–		–		(75)
(Loss) earnings before income taxes from discontinued operations		(10,496)		(7,503)		7,393
Income tax benefit (provision)		5,922		3,066		(3,059)
(Loss) earnings from discontinued operations, net of tax	$	(4,574)	$	(4,437)	$	4,334