2. DISCONTINUED OPERATIONS AND OTHER DISPOSITIONS

Discontinued Operations

The Company’s discontinued operations include the prior operations of our Avia, Nevados, Etienne Aigner and Vera Wang brands. The Company applied discontinued operations accounting in accordance with ASC Topic 205-20, Presentation of Financial Statements –Discontinued Operations. The Company had no discontinued operations in 2015 or 2014. In 2013, discontinued operations included net sales of $26.3 million and a loss before income taxes of $10.5 million. Discontinued operations also included a net loss on disposition/impairment of $11.5 million in 2013.

Avia and Nevados

The Company purchased Avia and Nevados on February 17, 2011 as part of its acquisition of American Sporting Goods Corporation. On May 14, 2013, Caleres International Corp. ("CI"), (formerly known as Brown Shoe International Corp.), 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, CI 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 CI. Under the Stock Purchase Agreement, the Avia and Nevados businesses were sold and the Company retained certain other businesses. In connection with the transaction, American Sporting Goods Corporation sold inventory to a third party unaffiliated with the Buyer and distributed certain assets to CI. The aggregate purchase price for the stock of American Sporting Goods Corporation and the provision of 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 CI, representing proceeds from American Sporting Goods Corporation's sale of inventory. In this document, “ASG” refers to the subsidiary disposed on May 14, 2013, including the Avia and Nevados brands and excluding 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). Avia and Nevados were previously included in the Brand Portfolio segment. Discontinued operations include net sales of $20.3 million and losses before income taxes of $1.6 million in 2013.

Vera Wang

During the first quarter of 2013, the Company decided not to renew the Vera Wang license agreement. The results of Vera Wang were previously included in the Brand Portfolio segment. Discontinued operations include net sales of $5.7 million and losses before income taxes of $1.9 million in 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 paid Etienne Aigner $6.5 million. The results of Etienne Aigner were previously included in the Brand Portfolio segment. Discontinued operations included net sales of $0.3 million and losses before income taxes of $7.0 million in 2013.

Loss from discontinued operations for 2013 was as follows:





($ thousands)	2013
Net sales	$	26,318
Cost of goods sold	19,927
Gross profit	6,391
Selling and administrative expenses	6,103
Restructuring and other special charges, net	10,768
Operating loss	(10,480		)
Interest expense	16
Loss before income taxes from discontinued operations	(10,496		)
Income tax benefit	5,922
Loss from discontinued operations, net of tax	$	(4,574	)

Other Dispositions

On December 12, 2014, Caleres Investment Company, Inc. ("CIC") (formerly known as Brown Shoe Investment Company, Inc.), the sole shareholder of Shoes.com, Inc., simultaneously entered into and closed a Stock Purchase Agreement by and among CIC and an affiliate of ShoeMe Technologies Limited ("the Purchaser"), pursuant to which the Purchaser acquired all of the outstanding capital stock, inventory and other assets of Shoes.com from CIC and the Company agreed to provide certain transition services. The aggregate purchase price of the sale was $15.0 million, subject to working capital and other adjustments. The Company received $4.4 million in cash and a $7.5 million face value secured convertible note ("convertible note") at closing. The convertible note requires installments over four years with the first principal payment of $1.25 million due on July 1, 2017 and quarterly installments of $0.6 million thereafter, plus accrued interest, until it matures on December 12, 2019. Interest accrues at an annual rate of 6% until December 11, 2016, 7% until December 11, 2017, 8% until December 11, 2018, and 9% until the maturity date. The principal and outstanding accrued interest is convertible into common stock of the Purchaser at a specified conversion price per share, at the Company's option, or automatically upon a qualified initial public offering ("IPO") by the Purchaser at the IPO price. The fair value of the convertible note of $7.1 million and $7.0 million at January 30, 2016 and January 31, 2015, respectively, is included in other assets on the consolidated balance sheets. The Company recognized interest income of $0.5 million in 2015 and an immaterial amount of interest in 2014.

After consideration of working capital adjustments and performance obligations related to our transition services, the net purchase price was $10.1 million. The Company recognized a pre-tax gain on the sale of the subsidiary of $4.7 million, representing the difference in the fair value of proceeds less costs to sell, as compared to the carrying value of the net assets. In response to the sale, the Company incurred restructuring and other special charges of $1.5 million, primarily for severance, to eliminate certain positions supporting the Company's e-commerce platforms as well as positions in other administrative functions. These charges included $0.8 million within the Famous Footwear segment, $0.3 million within the Brand Portfolio segment and $0.4 million within the Other category. The Company recognized tax benefits of $6.6 million in 2014 associated with the disposition and an additional $1.7 million in 2015 upon settlement of the tax attributes associated with the disposition. These tax benefits were driven in part by the utilization of operating and capital loss carryforwards that previously were not anticipated to be utilized, and therefore, fully reserved on the Company's consolidated balance sheet.

The operating results of Shoes.com were included in the Famous Footwear segment in continuing operations through December 12, 2014. The operations of Shoes.com were not significant to the Famous Footwear segment or the Company's financial results. In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which the Company adopted during the third quarter of 2014, the financial position and operating results of Shoes.com were not classified as a discontinued operation as the disposition did not represent a strategic shift resulting in a major impact on the Company's operations or financial results.