Discontinued Operations

6 Months Ended

Aug. 03, 2013

Discontinued Operations [Abstract]

Discontinued Operations

Note 3 Discontinued Operations

The Company’s discontinued operations included the Avia and Nevados brands of the American Sporting Goods Corporation division, as well as the Etienne Aigner and Vera Wang brands. In aggregate, discontinued operations included $3.8 million and $24.3 million of net sales in the thirteen and twenty-six week periods ended August 3, 2013, respectively. Discontinued operations included $34.4 million and $62.6 million of net sales for the thirteen and twenty-six week periods ended July 28, 2012, respectively.

Discontinued operations included a loss before income taxes of $2.0 million and $11.2 million in the thirteen and twenty-six week periods ended August 3, 2013, respectively. Also included in discontinued operations was a $1.0 million gain and $11.5 million of costs associated with the Company’s impairment of net assets/disposition of discontinued operations for the thirteen and twenty-six weeks ended August 3, 2013, respectively. For the thirteen and twenty-six week periods ended July 28, 2012, discontinued operations included a loss before income taxes of $7.5 million and $11.5 million, respectively.

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. (“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 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 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 ASG were considered held for sale as of May 4, 2013 and were classified as discontinued operations. As a result of the sale, 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. During the second quarter of 2013, the Company recognized a gain upon disposition of subsidiary of $1.0 million ($1.0 million after tax, $0.02 per diluted share). These charges are reflected in the condensed consolidated statement of earnings as a component of discontinued operations. ASG was previously included in the Wholesale Operations segment.

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.

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.

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:

	August 3,		July 28,		February 2,
($ thousands)		2013		2012		2013
Discontinued Assets
Current assets
Receivables, net	$	387	$	26,482	$	14,291
Inventories, net		700		35,099		29,587
Prepaid expenses and other current assets		574		5,074		3,231
Total current assets		1,661		66,655		47,109
Other assets		–		606		419
Goodwill		–		25,650		25,650
Intangible assets, net		–		27,695		27,275
Property and equipment, net		–		1,204		1,233
Total assets	$	1,661	$	121,810	$	101,686
Discontinued Liabilities
Current liabilities
Trade accounts payable	$	942	$	10,065	$	9,082
Other accrued expenses		2,594		6,623		4,177
Total current liabilities		3,536		16,688		13,259
Other liabilities		–		8,613		6,996
Total liabilities	$	3,536	$	25,301	$	20,255