In spite of several proactive initiatives to remedy an environmental impact problem in Colorado, Brown Shoe Company lost a lawsuit filed by Denver area residents. The plaintiffs had sought more than $380 million, including punitive damages, but the jury decided Brown should pay just over $1 million for non-economic damages and no punitive damages.
“We always felt that we had stepped-up to our responsibilities and done the right thing in this situation,” said Brown Shoe chairman and CEO Ron Fromm.
The case involved a rifle scope factory operated by Brown about 20 years ago, and by a unit which is no longer a part of the company. A substance called 1,1-dichloroethene vaporized from groundwater into the indoor air of nearby homes. The plaintiffs, residents of several neighborhoods, sued Brown for diminution of property values, annoyance and discomfort.
Brown asserts that this factory was not the only one that was using 1,1 DCE, but it is the only company to step forward and try to fix the problem.
Brown has been testing and remediating the site, and keeping the neighbors informed, for more than five years. The company has spent $10 million and committed to spend $8 million more to resolve the issue entirely.
In other news, Brown Shoe has announced that it will be closing its Perth, Ontario manufacturing facility in March of 2004. The company said that this is an effort to reduce costs and focus its Canadian marketing effort on building the Naturalizer shoe brand.
In a prepared statement, the company said, “As the percentage of lower-cost imported footwear in Canada has increased due to the reduction of tariffs, the company's Canadian manufacturing operation has become uncompetitive.”
Approximately 304 people will lose their jobs in the closing. The plant manufactures primarily women's dress and casual footwear and boots.
Brown will incur an aftertax charge of $3.8-$4.2 million, or $0.20-$0.22 per diluted share in its fourth-quarter net earnings in order to cover severance payments and the write-down of materials. According to the company this action should boost margins “in 2004 and beyond.”