<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended July 30, 1994
[ ] Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from __________ to __________
____________
Commission file number 1-2191
____________
BROWN GROUP, INC.
(Exact name of registrant as specified in its charter)
New York 43-0197190
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
8300 Maryland Avenue
St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
(314) 854-4000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
As of August 27, 1994, 17,936,275 shares of the registrant's common stock were
outstanding.
<PAGE>
<PAGE 2>
BROWN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
(Unaudited)
-------------------
July 30, July 31, January 29,
1994 1993 1994
-------- -------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 26,928 $ 2,249 $ 16,892
Receivables, net of allowances of
$10,802 at July 30, 1994,
$8,201 at July 31, 1993, and
$11,425 at January 29, 1994 112,031 117,136 109,968
Inventories (net of adjustment to
last-in, first-out cost of
$51,722 at July 30, 1994,
$67,583 at July 31, 1993, and
$52,849 at January 29, 1994) 415,917 409,565 375,465
Net Current Assets of Discontinued
Operations 2,964 60,588 38,942
Other Current Assets 67,590 38,126 70,598
-------- -------- --------
Total Current Assets 625,430 627,664 611,865
Property, Plant and Equipment 229,570 240,701 232,942
Less allowances for depreciation
and amortization (127,342) (139,209) (135,512)
-------- -------- --------
102,228 101,492 97,430
Net Noncurrent Assets of
Discontinued Operations 2,308 21,075 7,062
Other Assets 57,415 54,798 55,377
--------- --------- ---------
$ 787,381 $ 805,029 $ 771,734
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable $ 111,089 $ 130,763 $ 146,090
Accounts Payable 148,646 126,130 105,437
Accrued Expenses 111,815 86,498 108,287
Income Taxes 7,983 6,128 3,788
Current Maturities of Long-Term Debt 3,095 6,704 7,709
--------- -------- --------
Total Current Liabilities 382,628 356,223 371,311
Long-Term Debt and Capitalized
Lease Obligations 135,220 138,377 135,324
Other Liabilities 30,640 26,479 31,236
Stockholders' Equity
Common Stock 67,203 65,529 66,075
Additional Capital 44,938 32,243 35,979
Cumulative Translation Adjustment (4,254) (2,206) (3,287)
Unamortized Value of Restricted Stock (12,056) (6,720) (6,827)
Retained Earnings 143,062 195,104 141,923
238,893 283,950 233,863
--------- --------- ---------
$ 787,381 $ 805,029 $ 771,734
========= ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
<PAGE> 3
BROWN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ------------------
July 30, July 31, July 30, July 31,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $404,491 $381,028 $831,709 $770,100
Cost of Goods Sold 256,903 243,140 529,147 492,632
-------- -------- -------- --------
Gross Profit 147,588 137,888 302,562 277,468
-------- -------- -------- --------
Selling and Administrative
Expenses 132,786 124,062 271,527 251,476
Interest Expense 4,286 4,177 8,641 8,926
Other (Income) Expense (687) (396) (1,338) (46)
-------- ------- -------- --------
Earnings from Continuing
Operations Before Income
Taxes and Cumulative Effect
of Accounting Change 11,203 10,045 23,732 17,112
Income Tax Provision 3,762 3,563 8,360 6,147
-------- ------- -------- --------
Earnings from Continuing
Operations Before Cumulative
Effect of Accounting Change 7,441 6,482 15,372 10,965
Cumulative Effect of Change
in Accounting for
Postemployment Benefits -- -- -- (2,214)
Loss from Discontinued
Operations, Net of Taxes -- (915) -- (1,199)
-------- ------- -------- --------
NET EARNINGS $ 7,441 $ 5,567 $ 15,372 $ 7,552
======== ======== ======== ========
NET EARNINGS (LOSS) PER COMMON SHARE:
Continuing Operations $ .42 $ .38 $ .88 $ .64
Cumulative Effect of
Accounting Change -- -- -- (.13)
Discontinued Operations -- (.05) -- (.07)
-------- -------- -------- --------
NET EARNINGS PER COMMON SHARE $ .42 $ .33 $ .88 $ .44
======== ======== ======== ========
Weighted Average Number of
Outstanding Shares
of Common Stock 17,543 17,238 17,497 17,214
DIVIDENDS PER COMMON SHARE $ .40 $ .40 $ .80 $ .80
======== ======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
<PAGE> 4
BROWN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Six Months Ended
--------------------
July 30, July 31,
1994 1993
-------- --------
<S> <C> <C>
Net Cash Provided (Used) by Operating Activities of:
Continuing operations $ 36,514 $ (37,987)
Discontinued operations (7,499) 2,029
--------- ---------
Net Cash Provided (Used) by Operating Activities 29,015 (35,958)
Investing Activities
Capital expenditures (17,512) (14,414)
Proceeds from sales of assets of discontinued
operations 48,231 44
Other 744 (366)
--------- ---------
Net Cash Provided (Used) by Investing Activities 31,463 (14,736)
Financing Activities
Increase/(decrease) in short-term notes payable (35,001) 119,118
Principal payments of long-term debt (4,720) (95,050)
Addition to long-term debt -- 20,000
Dividends paid (14,233) (13,960)
Proceeds from issuance of common stock 3,512 1,210
--------- ---------
Net Cash Provided (Used) by Financing Activities (50,442) 31,318
Increase (Decrease) in Cash and Cash Equivalents 10,036 (19,376)
Cash and Cash Equivalents at Beginning of Period 16,892 21,625
--------- ---------
Cash and Cash Equivalents at End of Period $ 26,928 $ 2,249
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
<PAGE> 5
BROWN GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
------------------------------
The accompanying condensed consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and reflect all adjustments
which management believes necessary (which include only normal recurring
accruals and the effect on LIFO inventory valuation of estimated annual
inflationary cost increases and year-end inventory levels) to present fairly
the results of operations. These statements, however, do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations and cash flow in conformity with generally
accepted accounting principles.
The Corporation's business is subject to seasonal influences, and interim
results may not necessarily be indicative of results which may be expected for
any other interim period or for the year as a whole.
For further information refer to the consolidated financial statements and
footnotes included in the Corporation's Annual Report and Form 10-K for the
period ended January 29, 1994.
Note B - Earnings Per Share
---------------------------
Net earnings per share of Common Stock is computed by dividing net earnings by
the weighted average number of shares outstanding. The dilutive effect of
stock options is not significant and is therefore excluded from the
calculation.
Note C - Inventories
--------------------
The components of inventory are as follows ($000):
<TABLE>
<CAPTION>
July 30, July 31, January 29,
1994 1993 1994
-------- -------- -----------
<S> <C> <C> <C>
Finished Goods $394,076 $392,330 $352,243
Work in Process 5,251 3,042 6,291
Raw Materials and Supplies 16,590 14,193 16,931
-------- -------- --------
$415,917 $409,565 $375,465
======== ======== ========
</TABLE>
Note D - Sale of Cloth World
----------------------------
On August 25, 1994, the corporation announced an agreement to sell the net
assets of its Cloth World chain of fabric stores to Fabri-Centers of America,
Inc., for $62 million, subject to final balance sheet adjustments. There will
be no significant gain or loss to the corporation on the sale. Cloth World
operates 343 stores selling fabrics and sewing accessories. The transaction
is expected to be completed in early October, 1994, and Cloth World will be
accounted as discontinued operations in the third quarter.
Cloth World had sales of $224.1 million in fiscal 1993 and $103.5 million in
the first six months of fiscal 1994. Cloth World had operating profit of $3.9
million in fiscal 1993 and $1.1 million in the first six months of fiscal 1994.
5
<PAGE>
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
REVIEW BY INDEPENDENT AUDITORS
At the Corporation's request, its independent auditors, Ernst & Young, have
performed a review of the accompanying financial statements. Their review was
performed in accordance with the standards for such reviews established by the
American Institute of Certified Public Accountants.
6
<PAGE>
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Results of Operations
---------------------
Quarter ended July 30, 1994 compared to the Quarter ended July 31, 1993
-----------------------------------------------------------------------
Consolidated net sales for the second quarter ended July 30, 1994, were $404.5
million, an increase of 6.2% from last year's second quarter.
Earnings from continuing operations of $7.4 million for the second quarter of
1994 compare to $6.5 million last year, an increase of 14.8%.
Net earnings of $7.4 million for the second quarter of 1994 compare to $5.6
million last year, a 33.7% increase. Last year's net earnings figure reflects
aftertax losses from discontinued operations of $.9 million.
Sales from the footwear retailing operations increased 12.8% from the second
quarter of 1993. Famous Footwear's sales increased 23.1% due to a same-store
increase of 1.7% and 122 more units in operation. The Canadian retailing
operation's sales also showed improvement, posting an increase of 10.0% with
a same-store increase of 13.9%. Naturalizer stores' sales increased 3.4% over
last year's second quarter, reflecting same-store sales gains of 6.1% and a net
decrease of 24 units. These increases were partially offset by an overall
sales decline of 68.8% at the Connie and Regal stores, reflecting 88 fewer
units in operation as a result of the phasing out of these stores as part of
the restructuring initiatives announced in fiscal 1993.
Sales from footwear wholesaling activities increased 1.8% over the same period
last year. Increases in licensed product sales and the NaturalSport branded
footwear were offset by decreased sales of Connie and men's product due to the
corporation's exit from the men's business in May 1994.
Cloth World's second quarter sales decreased 2.4% and same-store sales were
flat with last year. Sales increases of home decorating items were more than
offset by decreases in other departments.
Gross profit as a percent of sales increased to 36.5% from 36.2% for the same
period last year. Retailing footwear activities experienced an increase in
gross profit as a percent of sales of .9%, which was partially offset by a
decrease in wholesale margins of 1.1%. Cloth World's gross profit as a percent
of sales decreased 3.2% from the same period last year.
Selling and administrative expenses as a percentage of sales increased slightly
to 32.8% from 32.6% primarily due to costs associated with the rapid expansion
of Famous Footwear. Expenses continue to be tightly controlled in all areas
of the corporation.
The decrease in the effective tax rate to 33.6% in the second quarter of fiscal
1994 from 35.5% for the same period in 1993 is primarily due to lower state
taxes.
Year-to-Date 1994 compared to Year-to-Date 1993
-----------------------------------------------
Consolidated net sales increased by 8.0% compared to the first six months of
last year.
Earnings from continuing operations of $15.4 million for the first six months
of 1994 compare to $11.0 million last year, an increase of 40.2%.
7
<PAGE>
<PAGE> 8
Net earnings for the first six months of 1994 were $15.4 million compared to
$7.6 million for the same period last year. Last year's net earnings figure
reflects aftertax losses from discontinued operations of $1.2 million and an
aftertax charge of $2.2 million for an accounting change related to
postemployment benefits.
Sales in the footwear retailing operations increased 13.9% compared to the
first six months of last year. Sales at Famous Footwear increased 23.9%, while
increasing 3.8% on a same-store basis. There were 633 Famous Footwear stores
in operation at the end of the second quarter, 122 more than at the same time
last year. The Canadian retailing operation's sales also improved, increasing
by 9.5%, including a same-store increase of 14.1%. The Naturalizer retailing
operation's sales also improved, increasing by 4.4%, including a same-store
increase of 4.3%. These improvements were partially offset by a 54.5% decrease
in sales at Connie and Regal stores as a result of the phasing out of these
stores as part of the corporation's restructuring.
Sales from footwear wholesaling activities increased by 6.0%. This increase
was primarily driven by higher licensed product sales, primarily the Dr.
Scholl's line, higher sales of the children's Lion King product, and increased
sales of NaturalSport and Life Stride products.
Cloth World's sales for the first six months decreased by 4.5% with same-store
sales declining 1.1% and 10 fewer units in operation.
Gross profit as a percentage of sales increased to 36.4% from 36.0% for the
same period last year. Retailing footwear activities experienced an increase
in gross profit as a percent of sales of .8%, which was partially offset by a
decrease in wholesale margins of .6%. Cloth World's gross profit as a percent
of sales decreased .7% from the same period last year.
Selling and administrative expenses as a percentage of sales decreased to 32.6%
from 32.7% for the same period in 1993. Expenses continue to be tightly
controlled in all areas of the corporation.
Other income/expense is a net income of $1.3 million in the first six months
of 1994 compared to income of $46 thousand in the same period last year.
Amounts consist primarily of royalty income. The prior year amount includes
$1.0 million in costs to close the corporation's tannery.
The decrease in the effective tax rate to 35.2% for the first six months of
fiscal 1994 from 35.9% for the same period in 1993 is primarily due to lower
state taxes.
Discontinued Operations
-----------------------
The discontinuance of the Wohl Leased Department business, which was announced
in January 1994 and for which the corporation established a $34.8 million
reserve, is proceeding at a faster than planned rate. The corporation has
completed negotiations with all 26 lessors and has withdrawn from operating 23
of the department-store groups, including the largest, Carter Hawley Hale. The
corporation anticipates exiting the remaining three packages by the end of
October 1994, with costs within the provisions recorded in January 1994. In
the first half of 1994, withdrawal activity from the leased department business
has generated approximately $40.7 million in cash, primarily from the sale of
inventory and fixed assets. This additional cash flow was used to repay
short-term debt and invest in the corporation's expanding Famous Footwear
business.
8
<PAGE>
<PAGE> 9
To date, charges of $13.2 million have been charged against the reserve for
discontinued operations. These charges consisted of $8.4 million of non-cash
charges for asset writeoffs and $4.8 million of cash charges related to
severance and benefit costs and other expenses.
Restructuring
-------------
The restructuring initiatives announced in January 1994, for which the
corporation established a $45.4 million reserve, are proceeding on schedule.
During the first six months of 1994, four manufacturing facilities and 75
Naturalizer, Connie and Regal retail stores were closed. The store closings
are expected to be completed in 1994 as Brown Shoe Company and Pagoda proceed
with the merging of the operations of the two companies.
To date, charges of $18.7 million have been charged against the restructuring
reserve. These charges consisted of $11.1 million of non-cash charges for
asset writeoffs and $6.6 million of cash charges related to lease buyouts,
inventory markdowns, and severance and benefit costs.
Financial Condition
-------------------
A summary of key financial data and ratios at the dates indicated is as
follows:
<TABLE>
<CAPTION>
July 30, July 31, January 29,
1994 1993 1994
-------- -------- -----------
<S> <C> <C> <C>
Working Capital (millions) $242.8 $271.4 $240.6
Current Ratio 1.6 1.8 1.6
Total Debt as a Percentage of
Total Capitalization 51.1% 49.3% 55.3%
</TABLE>
Cash flow of $36.5 million from operating activities of continuing operations
for the first six months of fiscal 1994 compares to usage of $38.0 million last
year. Growth in Famous Footwear inventory to support expansion was offset in
1994 by liquidation of inventory from the closure of Connie and Regal stores
and reduction of inventories at Brown Shoe, which relates to both the closing
of Connie stores and leased departments. Net cash used by operating activities
for the first six months of 1993 included use of cash of approximately $88.7
million for increasing inventories to support growth at Famous Footwear. Total
cash flow from discontinued operations increased by approximately $38.7 million
primarily due to the sale of certain discontinued assets and liquidation of
inventory.
Financing activities in the first six months of 1994 reflect decreases in notes
payable and long-term debt, which is due primarily to the company using the
funds generated by continuing and discontinued operations to reduce short-term
debt.
The increase in the ratio of total debt as a percentage of total capitalization
at July 30, 1994, compared to the end of the first six months of 1993, is
caused primarily by the impact on stockholders' equity of restructuring and
discontinued operations disposal charges recorded in January 1994. In spite
of the increase in this ratio, the Corporation's financial condition and debt
to capitalization ratios continue to provide additional borrowing capacity, if
needed.
9
<PAGE>
<PAGE> 10
Sale of Cloth World
-------------------
On August 25, 1994, the corporation announced an agreement to sell the net
assets of its Cloth World chain of fabric stores to Fabri-Centers of America,
Inc., for $62 million, subject to final balance sheet adjustments. There will
be no significant gain or loss to the corporation on the sale. Cloth World
operates 343 stores selling fabrics and sewing accessories. The transaction
is expected to be completed in early October, 1994, and Cloth World will be
accounted as discontinued operations in the third quarter.
Cloth World had sales of $224.1 million in fiscal 1993 and $103.5 million in
the first six months of fiscal 1994. Cloth World had operating profit of $3.9
million in fiscal 1993 and $1.1 million in the first six months of fiscal 1994.
PART II - OTHER INFORMATION
---------------------------
Item 1 - Legal Proceedings
--------------------------
There have been no material developments during the quarter ended July 30,
1994, in the legal proceedings described in the Corporation's Form 10-K for
the period ended January 29, 1994.
Item 5 - Other Information
--------------------------
On August 25, 1994, the corporation announced an agreement to sell the net
assets of its Cloth World chain of fabric stores to Fabri-Centers of
America, Inc., for $62 million, subject to final balance sheet adjustments.
There will be no significant gain or loss to the corporation on the sale.
The transaction is expected to be completed in early October 1994. The
following pro forma financial statements reflect the financial position at
July 30, 1994, and results of operations of the corporation for the year
ended January 29, 1994, and the six-month period ended July 30, 1994,
assuming that Cloth World had been sold as of the beginning of fiscal year
1993.
10
<PAGE>
<PAGE> 11
ITEM 5 (CONTINUED)
------------------
BROWN GROUP, INC.
CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
JULY 30, 1994
(Thousands)
<TABLE>
<CAPTION>
Historical Pro Forma
Balances (2) Balances
as of Pro Forma as of
July 30, 1994 Adjustments July 30, 1994
------------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 26,928 $ 172 $ 26,756
Receivables, net of allowances of
$10,802 at July 30, 1994 and
$10,682 on a pro forma basis
at July 30, 1994 112,031 66 111,965
Inventories (net of adjustments to
last-in, first-out cost of
$51,722 at July 30, 1994 and
$42,160 on a pro forma basis
as of July 30, 1994 415,917 80,484 335,433
Net Current Assets of Discontinued
Operations 2,964 -- 2,964
Other Current Assets 67,590 2,840 64,750
-------- -------- --------
Total Current Assets 625,430 83,562 541,868
Property, Plant and Equipment 229,570 30,367 199,203
Less allowances for depreciation
and amortization (127,342) (21,328) (106,014)
-------- -------- --------
102,228 9,039 93,189
Net Noncurrent Assets of Discontinued
Operations 2,308 -- 2,308
Other Assets 57,415 43 57,372
-------- -------- --------
$787,381 $ 92,644 $694,737
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable $111,089 $ 62,000 $ 49,089
Accounts Payable 148,646 18,884 129,762
Accrued Expenses 111,815 11,760 100,055
Income Taxes 7,983 -- 7,983
Current Maturities of Long-Term Debt 3,095 -- 3,095
-------- -------- --------
Total Current Liabilities 382,628 92,644 289,984
Long-Term Debt and Capitalized
Lease Obligations 135,220 -- 135,220
Other Liabilities 30,640 -- 30,640
Stockholders' Equity
Common Stock 67,203 -- 67,203
Additional Capital 44,938 -- 44,938
Cumulative Translation Adjustment (4,254) -- (4,254)
Unamortized Value of Restricted Stock (12,056) -- (12,056)
Retained Earnings 143,062 -- 143,062
-------- -------- --------
238,893 -- 238,893
-------- -------- --------
$787,381 $ 92,644 $694,737
======== ======== ========
</TABLE>
11
<PAGE>
<PAGE> 12
ITEM 5 (CONTINUED)
- - ------------------
BROWN GROUP, INC.
CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
SIX MONTHS ENDED JULY 30, 1994
(Thousands, except per share)
<TABLE>
<CAPTION>
Consolidated (2)
Historical Pro Forma Pro Forma
Amounts Adjustments Amounts
------------ ----------- ---------
<S> <C> <C> <C>
Net Sales $831,709 $103,525 $728,184
Cost of Goods Sold 529,147 55,054 474,093
-------- -------- --------
Gross Profit 302,562 48,471 254,091
-------- -------- --------
Selling and Administrative Expenses 271,527 47,518 224,009
Interest Expense 8,641 1,470 (1) 7,171
Other (Income) Expense (1,338) (191) (1,147)
-------- -------- --------
Earnings from Continuing Operations
Before Income Taxes and Cumulative
Effect of Accounting Change 23,732 (326) 24,058
Income Tax Provision (Benefit) 8,360 (290) 8,650
-------- -------- --------
Income (Loss) from Continuing Operations
Before Cumulative Effect of
Accounting Change $ 15,372 $ (36) $ 15,408
======== ======== ========
EARNINGS PER COMMON SHARE
Primary
- - -------
Continuing Operations $ .88 $ .88
======== ========
Fully Dulitive
- - --------------
Continuing Operations $ .88 $ .88
======== ========
Weighted Average Number of Outstanding
Shares of Common Stock 17,497 17,497
======== ========
</TABLE>
12
<PAGE>
<PAGE> 13
ITEM 5 (CONTINUED)
- - ------------------
BROWN GROUP, INC.
CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
YEAR ENDED JANUARY 29, 1994
(Thousands, except per share)
<TABLE>
<CAPTION>
Consolidated (2)
Historical Pro Forma Pro Forma
Amounts Adjustments Amounts
------------ ----------- ---------
<S> <C> <C> <C>
Net Sales $1,597,811 $224,066 $1,373,745
Cost of Goods Sold 1,041,096 119,387 921,709
---------- -------- ----------
Gross Profit 556,715 104,679 452,036
Selling and Administrative Expenses 529,741 100,776 428,965
Interest Expense 17,591 2,489 (1) 15,102
Other (Income) Expense 21,211 24 21,187
---------- -------- ----------
Earnings from Continuing Operations
Before Income Taxes and Cumulative
Effect of Accounting Change (11,828) 1,390 (13,218)
Income Tax Provision (Benefit) (5,116) 69 (5,185)
---------- -------- ----------
Income (Loss) from Continuing Operations
Before Cumulative Effect of
Accounting Change $ (6,712) $ 1,321 $ (8,033)
========== ======== ==========
EARNINGS (LOSS) PER COMMON SHARE
Primary
Continuing Operations $ (.39) $ (.47)
========== ==========
Fully Dulitive
Continuing Operations $ (.39) $ (.47)
========== ==========
Weighted Average Number of Outstanding
Shares of Common Stock 17,270 17,270
========== ==========
</TABLE>
(1) Interest expense adjustment is based on the assumption
that the sale price of $62 million in cash was received
at the beginning of fiscal 1993 and used to reduce debt
and, therefore, interest expense for fiscal 1993 and
year-to-date fiscal 1994.
(2) Pro forma adjustments represent assets sold and liabilities
assumed by Fabri-Centers of America, Inc., and results of
operations for the respective periods. All amounts are from
internal financial records and are unaudited. These unaudited
pro forma financial statements do not contain all disclosures
required by generally accepted accounting principles and do not
present the effects of discontinued operations or the cumulative
effect of changes in accounting principles.
13
<PAGE>
<PAGE> 14
Item 6 - Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Listing of Exhibits
(11) Computation of Earnings Per Share (Page 16)
(15) Letter re: unaudited interim financial information
(Page 17)
(27) Financial Data Schedule (Page 18)
(b) Reports on Form 8-K:
The corporation filed a current report on Form 8-K dated
September 1, 1994, in response to Item 5, which announced
the sale of Cloth World.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BROWN GROUP, INC.
Date: September 12, 1994 Harry E. Rich
---------------------------------
Executive Vice President
and Chief Financial Officer
On Behalf of the Corporation and
as the Principal Financial Officer
14
<PAGE>
<PAGE> 15
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Stockholders and Board of Directors
Brown Group, Inc.
We have reviewed the accompanying condensed consolidated balance sheets of
Brown Group, Inc., as of July 30, 1994, and July 31, 1993, and the related
condensed consolidated statements of earnings for the three-month and six-month
periods ended July 30, 1994, and July 31, 1993, and the condensed consolidated
statements of cash flows for the six-month periods ended July 30, 1994, and
July 31, 1993. These financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which will
be performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Brown Group, Inc. as of
January 29, 1994, and the related consolidated statement of earnings,
stockholders' equity, and cash flows for the year then ended and in our report
dated March 2, 1994, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of January 29, 1994
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
\s\ Ernst & Young
August 22, 1994
St. Louis, Missouri
15
<PAGE>
<PAGE> 16
EXHIBIT 11
PART II - OTHER INFORMATION
---------------------------
COMPUTATION OF EARNINGS PER SHARE
BROWN GROUP, INC.
(Thousands, except per share)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- ------------------
July 30, July 31, July 30, July 31,
1994 1993 1994 1993
-------- -------- -------- --------
<C> <C> <C> <C> <C>
PRIMARY
Weighted average shares outstanding 17,543 17,238 17,497 17,214
Net effect of dilutive stock options
based on the treasury stock method
using average market price 116 57 113 56
-------- -------- ------- -------
TOTAL 17,659 17,295 17,610 17,270
======== ======== ======= =======
Earnings from continuing operations
before accounting change $ 7,441 $ 6,482 $15,372 $10,965
Cumulative effect of accounting change -- -- -- (2,214)
Discontinued operations -- (915) -- (1,199)
-------- -------- ------- -------
Net Earnings $ 7,441 $ 5,567 $15,372 $ 7,552
======== ======== ======= =======
Earnings per share from continuing
operations before accounting change $ .42 $ .38 $ .88 $ .64
Cumulative effect of accounting change -- -- -- (.13)
Discontinued operations -- (.05) -- (.07)
-------- -------- ------- -------
Net earnings per share (1) $ .42 $ .33 $ .88 $ .44
======== ======== ======= =======
FULLY DILUTED
Weighted average shares outstanding 17,543 17,238 17,497 17,214
Net effect of dilutive stock options
based on the treasury stock method
using the period-end market price,
if higher than the average market price 116 71 120 69
-------- -------- ------- -------
TOTAL 17,659 17,309 17,617 17,283
======== ======== ======= =======
Earnings from continuing operations
before accounting change $ 7,441 $ 6,482 $15,372 $10,965
Cumulative effect of accounting change -- -- -- (2,214)
Discontinued operations -- (915) -- (1,199)
-------- -------- ------- -------
Net Earnings $ 7,441 $ 5,567 $15,372 $ 7,552
======== ======== ======= =======
Earnings per share from continuing
operations before accounting change $ .42 $ .38 $ .88 $ .64
Cumulative effect of accounting change -- -- -- (.13)
Discontinued operations -- (.05) -- (.07)
-------- -------- ------- -------
Net earnings per share (1) $ .42 $ .33 $ .88 $ .44
======== ======== ======= =======
</TABLE>
(1) The dilutive effect of stock options was not
included in weighted average shares outstanding
for purposes of calculating earnings per share
because dilution was less than 3% and not material.
16
<PAGE>
<PAGE> 17
EXHIBIT 15
Acknowledgement Letter
Stockholders and Board of Directors
Brown Group, Inc.
We are aware of the incorporation by reference in the Registration Statements
(Form S-8 Numbers 2-58347 and 33-22328) pertaining to the employee stock
purchase plan and employee stock appreciation plans, respectively, and in the
Registration Statement (Form S-3 Number 33-21477) for the registration of debt
of Brown Group, Inc., of our report dated August 22, 1994, relating to the
unaudited condensed consolidated interim financial statements of Brown Group,
Inc. which are included in its Form 10-Q for the quarter ended July 30, 1994.
Pursuant to rule 436(c) of the Securities Act of 1933, our reports are not a
part of the registration statement prepared or certified by accountants
within the meaning of Section 7 or 11 of the Securities Act of 1933.
\s\ Ernst & Young
August 22, 1994
St. Louis, Missouri
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000014707
<NAME> BROWN GROUP, INC.
<S> <C>
<PERIOD-TYPE> QTR-2
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> JUL-30-1994
<CASH> 26,928
<SECURITIES> 0
<RECEIVABLES> 122,833
<ALLOWANCES> (10,802)
<INVENTORY> 415,917
<CURRENT-ASSETS> 625,430
<PP&E> 229,570
<DEPRECIATION> (127,342)
<TOTAL-ASSETS> 787,381
<CURRENT-LIABILITIES> 382,628
<BONDS> 135,220
<COMMON> 67,203
0
0
<OTHER-SE> 171,690
<TOTAL-LIABILITY-AND-EQUITY> 787,381
<SALES> 831,709
<TOTAL-REVENUES> 831,709
<CGS> 529,147
<TOTAL-COSTS> 800,674
<OTHER-EXPENSES> (1,338)
<LOSS-PROVISION> 2,082
<INTEREST-EXPENSE> 8,641
<INCOME-PRETAX> 23,732
<INCOME-TAX> 8,360
<INCOME-CONTINUING> 15,372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,372
<EPS-PRIMARY> .88
<EPS-DILUTED> .88
</TABLE>
