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The Company had no
interest rate derivative instruments outstanding at February 3, 2001,
and January 29, 2000.
In June 1998, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (SFAS 133). The statement, which was amended in June
2000 by SFAS No. 138, “Accounting for Certain Derivative Instruments
and Certain Hedging Activities,” is effective for the Company beginning
in fiscal 2001. SFAS 133 requires all derivative instruments be recorded
on the balance sheet at their fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value
of derivatives will either be offset against the change in fair value
of the hedged assets, liabilities, or firm commitments through earnings
or recognized in Other Comprehensive Income until the hedged item is recognized
in earnings. The ineffective portion of a derivative’s change in
fair value will be recognized immediately in earnings. Based on the Company’s
derivative positions at February 3, 2001, the Company does not believe
that adoption of SFAS 133 will have a significant effect on earnings or
the financial position of the Company.
[10]
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts
and fair values of the Company’s financial instruments at February
3, 2001, and January 29, 2000, are (in thousands):
The fair value of
the Company’s long-term debt was based upon the borrowing rates currently
available to the Company for financing arrangements with similar terms
and maturities.
Carrying amounts
reported on the balance sheet for cash, cash equivalents and receivables
approximate fair value due to the short-term maturity of these instruments.
[11]
CONCENTRATIONS OF CREDIT RISK
Financial instruments,
which potentially subject the Company to significant concentration of
credit risk, consisted primarily of cash, cash equivalents and trade accounts
receivable.
The Company maintains
cash and cash equivalents and certain other financial instruments with
various financial institutions. The financial institutions are located
throughout the world, and the Company’s policy is designed to limit
exposure to any one institution or geographic region. The Company’s
periodic evaluations of the relative credit standing of these financial
institutions are considered in the Company’s investment strategy.
The Company’s
footwear wholesaling businesses sell primarily to department stores, mass
merchandisers, and independent retailers across the United States and
Canada. Receivables arising from these sales are not collateralized, however,
a portion is covered by documentary letters of credit. Credit risk is
affected by conditions or occurrences within the economy and the retail
industry. The Company maintains an allowance for doubtful accounts based
upon factors surrounding the credit risk of specific customers, historical
trends and other information.
[12]
COMMITMENTS AND CONTINGENCIES
The Company is involved
in environmental remediation and ongoing compliance activities at several
sites. The Company is remediating a residential area adjacent to owned
property in Colorado, under the over-sight of Colorado authorities. This
residential area has been affected by types of solvents previously used
at the facility. The Company is also remediating the owned property. In
fiscal 2000, a class-action lawsuit was filed against the Company related
to this site. The Company does not believe that the ultimate outcome of
this lawsuit will have a materially adverse effect on its results of operations
or financial condition. During fiscal 2000 and 1999, the Company incurred
charges of $3.0 million and $1.8 million, respectively, related to this
site.
The Company has completed
its remediation efforts at its closed New York tannery and two associated
landfills. In 1995, state environmental authorities reclassified the status
of these sites as being properly closed and requiring only continued maintenance
and monitoring over the next 23 years. In addition, various federal and
state authorities have identified the Company as a potentially responsible
party for remediation at certain landfills from the sale or disposal of
solvents and other by-products from the closed tannery and shoe manufacturing
facilities.
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