Discontinued Operations

3 Months Ended

May 03, 2014

Discontinued Operations [Abstract]

Discontinued Operations

Note 3 Discontinued Operations

The Company’s discontinued operations include the Avia and Nevados brands of American Sporting Goods Corporation, as well as the Etienne Aigner and Vera Wang brands. There were no net sales or loss from discontinued operations for the thirteen weeks ended May 3, 2014.  In aggregate, discontinued operations included net sales of $20.5 million and loss before income taxes of $9.2million for the thirteen weeks ended May 4, 2013.  For the thirteen weeks ended May 4, 2013, discontinued operations also included  disposition/impairment of discontinued operations of $12.6 million.

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. 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 matured on November 14, 2013.  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. 

In anticipation of the sale of ASG, the Company recorded an impairment charge in the first quarter of 2013 of $12.6 million ($12.6million 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. The $12.6 million impairment charge is reflected as disposition/impairment of discontinued operations, net of tax in the condensed consolidated statements of earnings. ASG was previously included in the Wholesale Operations segment.  Discontinued operations include net sales and earnings before income taxes of $18.3 million and $1.2 million, respectively, for the thirteen weeks ended May 4, 2013.

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 are reflected as a component of discontinued operations.  The results of Etienne Aigner were previously included in the Wholesale Operations segment.  Discontinued operations include net sales and loss before income taxes of $0.2 million and $7.0 million, respectively, for the thirteen weeks ended May 4, 2013.

Vera Wang

During the first quarter of 2013, the Company communicated its intention not to renew the Vera Wang license agreement. The financial results of Vera Wang are reflected as a component of discontinued operations.  The results of Vera Wang were previously included in the Wholesale Operations segment.   Discontinued operations include net sales and loss before income taxes of $2.0 million and $3.4 million, respectively, for the thirteen weeks ended May 4, 2013.

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

	May 3,		May 4,		February 1,
($ thousands)		2014		2013		2014
Assets of Discontinued Operations
Current assets
Receivables, net	$	–	$	12,166	$	–
Inventories, net		–		23,250		111
Prepaid expenses and other current assets		–		3,743		8
Current assets - discontinued operations		–		39,159		119
Other assets		–		287		–
Goodwill		–		10,295		–
Intangible assets, net		–		27,057		–
Property and equipment, net		–		1,034		–
Noncurrent assets - discontinued operations		–		38,673		–
Total assets - discontinued operations	$	–	$	77,832	$	119
Liabilities of Discontinued Operations
Current liabilities
Trade accounts payable	$	–	$	4,642	$	139
Other accrued expenses		–		11,541		569
Current liabilities - discontinued operations		–		16,183		708
Other liabilities		–		6,768		–
Noncurrent liabilities - discontinued operations		–		6,768		–
Total liabilities - discontinued operations	$	–	$	22,951	$	708

Loss from discontinued operations, net of tax for the thirteen weeks ended May 3, 2014 and May 4, 2013 is as follows:

	Thirteen Weeks Ended
($ thousands)	May 3, 2014		May 4, 2013
Net sales	$	–	$	20,537
Cost of goods sold		–		16,630
Gross profit		–		3,907
Selling and administrative expenses		–		4,861
Restructuring and other special charges, net		–		8,286
Operating loss		–		(9,240)
Interest expense		–		(69)
Interest income		–		89
Loss before income taxes from discontinued operations		–		(9,220)
Income tax benefit		–		3,583
Loss from discontinued operations, net of tax	$	–	$	(5,637)