<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 October 29, 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 November 26, 1994, 17,965,646 shares of the registrant's common stock
were outstanding.
<PAGE>
<PAGE> 2
BROWN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
(Unaudited)
-----------------------------
October 29, October 30, January 29,
1994 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 31,382 $ 25,497 $ 16,892
Receivables, net of allowances of
$11,361 at October 29, 1994,
$7,685 at October 30, 1993, and
$10,817 at January 29, 1994 115,271 123,596 109,825
Inventories (net of adjustment to
last-in, first-out cost of
$37,351 at October 29, 1994,
$52,127 at October 30, 1993, and
$43,665 at January 29, 1994) 322,901 293,788 286,992
Net Current Assets of Discontinued
Operations (429) 131,165 100,210
Other Current Assets 60,978 35,824 66,142
---------- ---------- ---------
Total Current Assets 530,103 609,870 580,061
Property, Plant and Equipment 199,818 210,607 198,051
Less allowances for depreciation
and amortization (105,930) (118,503) (111,356)
---------- ---------- ---------
93,888 92,104 86,695
Net Noncurrent Assets of
Discontinued Operations 1,739 31,103 17,839
Other Assets 58,908 54,597 55,335
---------- ---------- ---------
$ 684,638 $ 787,674 $ 739,930
========== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable $ 59,450 $ 149,760 $ 146,090
Accounts Payable 97,261 79,355 84,694
Accrued Expenses 102,624 84,247 97,226
Income Taxes 6,824 10,589 3,788
Current Maturities of Long-Term Debt 2,078 7,705 7,709
---------- ---------- ---------
Total Current Liabilities 268,237 331,656 339,507
Long-Term Debt and Capitalized
Lease Obligations 135,214 137,352 135,324
Other Liabilities 30,324 26,369 31,236
Stockholders' Equity
Common Stock 67,437 65,742 66,075
Additional Capital 46,537 33,523 35,979
Cumulative Translation Adjustment (3,221) (2,976) (3,287)
Unamortized Value of Restricted Stock (11,468) (6,295) (6,827)
Retained Earnings 151,578 202,303 141,923
---------- ---------- ---------
250,863 292,297 233,863
---------- ---------- ---------
$ 684,638 $ 787,674 $ 739,930
========== ========== =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
<PAGE> 3
BROWN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ --------------------------
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Net Sales $ 406,934 $ 382,631 $1,129,422 $1,037,302
Cost of Goods Sold 267,422 253,452 738,649 685,627
--------- --------- ---------- ----------
Gross Profit 139,512 129,179 390,773 351,675
--------- --------- ---------- ----------
Selling and Administrative
Expenses 113,315 106,171 334,011 304,331
Interest Expense 3,988 4,224 12,477 12,996
Other (Income) Expense (844) 319 (1,991) 255
--------- --------- ---------- ----------
Earnings from Continuing
Operations Before Income
Taxes and Cumulative Effect
of Accounting Change 23,053 18,465 46,276 34,093
Income Tax Provision 8,127 6,063 16,483 11,671
--------- --------- ---------- ----------
Earnings from Continuing
Operations Before Cumulative
Effect of Accounting Change 14,926 12,402 29,793 22,422
Cumulative Effect of Change
in Accounting for
Postemployment Benefits -- -- -- (2,214)
Earnings from Discontinued
Operations, Net of Taxes 777 1,792 1,282 1,538
--------- --------- ---------- ----------
NET EARNINGS $ 15,703 $ 14,194 $ 31,075 $ 21,746
========= ========= ========== ==========
NET EARNINGS (LOSS) PER COMMON SHARE:
Continuing Operations $ .85 $ .72 $ 1.70 $ 1.30
Cumulative Effect of
Accounting Change -- -- -- (.13)
Discontinued Operations .04 .10 .07 .09
--------- --------- ---------- ----------
NET EARNINGS PER COMMON SHARE $ .89 $ .82 $ 1.77 $ 1.26
========= ========= ========== ==========
Weighted Average Number of
Outstanding Shares
of Common Stock 17,595 17,287 17,530 17,238
DIVIDENDS PER COMMON SHARE $ .40 $ .40 $ 1.20 $ 1.20
========= ========= ========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
<PAGE> 4
BROWN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
October 29, October 30,
1994 1993
----------- -----------
<S> <C> <C>
Net Cash Provided (Used) by Operating Activities of:
Continuing operations $ 28,434 $ (737)
Discontinued operations (498) (22,399)
--------- ---------
Net Cash Provided (Used) by Operating Activities 27,936 (23,136)
Investing Activities
Capital expenditures (23,804) (17,896)
Proceeds from sales of assets of discontinued
operations 118,519 --
Other 817 94
--------- ---------
Net Cash Provided (Used) by Investing Activities 95,532 (17,802)
Financing Activities
Increase/(decrease) in short-term notes payable (86,640) 138,115
Principal payments of long-term debt (5,746) (95,076)
Addition to long-term debt -- 20,000
Dividends paid (21,420) (20,957)
Other 4,828 2,728
--------- ---------
Net Cash Provided (Used) by Financing Activities (108,978) 44,810
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents 14,490 3,872
Cash and Cash Equivalents at Beginning of Period 16,892 21,625
--------- ---------
Cash and Cash Equivalents at End of Period $ 31,382 $ 25,497
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<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>
October 29, October 30, January 29,
1994 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Finished Goods $ 303,191 $ 277,108 $ 263,770
Work in Process 3,115 3,028 6,291
Raw Materials and Supplies 16,595 13,652 16,931
---------- ---------- ----------
$ 322,901 $ 293,788 $ 286,992
========== ========== ==========
</TABLE>
Note D - Discontinued Operations
--------------------------------
During the third quarter of 1994, the company announced the sale of its Cloth
World chain of fabric stores to Fabri-Centers of America, Inc. The sale was
completed on October 2, 1994. In addition, as of the end of the third quarter
of 1994, the company announced its decision to close the Maryland Square
catalog operation. The closure of this business should be completed in the
first quarter of 1995. In fiscal 1993, the company announced a formal plan to
withdraw from the Wohl leased shoe department business, which involved the
management of shoe departments in department stores.
<PAGE>
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The company completed its withdrawal from the last Wohl Shoe Company leased
shoe departments at the end of October 1994. In the first nine months of
fiscal 1994, withdrawal activity from the leased department business has
generated approximately $49.0 million in cash, primarily from the sale of
inventory and fixed assets. During the third quarter, $8.5 million of the
reserve established for the withdrawal from the leased shoe department business
was transferred to cover the exit costs associated with the Cloth World sale
and the closure of the Maryland Square catalog operation, previously
discussed. This reserve transfer was made possible because of earlier than
expected withdrawals from leased departments at better than expected terms.
Final settlement with lessors and inventory adjustments will be made during
the fourth quarter of 1994. At fiscal year end, the primary remaining
liability will be for employee severance, which will be paid throughout 1995.
Summarized results of these businesses are shown separately as Discontinued
Operations in the accompanying condensed consolidated financial statements.
Assets and liabilities shown are at their estimated net realizable value, and
consist primarily of inventory and leasehold improvements. Prior period
financial statements have been reclassified to conform to the current year
presentation.
Sales from discontinued operations, which includes Cloth World and Maryland
Square, were $39.8 million for the quarter ended October 29, 1994, and $149.0
million for the first nine months of fiscal 1994. Prior year sales from
discontinued operations, which includes Cloth World, Maryland Square, and Wohl
Leased Departments, were $138.9 million for the quarter ended October 30, 1993,
and $392.5 million for the first nine months of fiscal 1993.
Note E - Commitments and Contingencies
--------------------------------------
There have been no material developments during the quarter ended October 29,
1994, related to the company's environmental contingencies described in the
company's Form 10-K for the period ended January 29, 1994.
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.
<PAGE>
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Results of Operations
---------------------
Quarter Ended October 29, 1994 compared to the Quarter ended October 30, 1993
-----------------------------------------------------------------------------
Consolidated net sales for the third quarter ended October 29, 1994, were
$406.9 million, an increase of 6.4% from last year's third quarter.
Earnings from continuing operations of $14.9 million for the third quarter of
1994 compare to $12.4 million last year, an increase of 20.4%.
Net earnings of $15.7 million for the third quarter of 1994 compare to $14.2
million last year, a 10.6% increase. Included in net earnings is aftertax
income from discontinued operations of $.8 million in 1994 and $1.8 million in
1993.
Sales from the footwear retailing operations increased 12.8% from the third
quarter of 1993. Famous Footwear's sales increased 25.6% due to a same-store
increase of 1.4% and 141 more units in operation. The Canadian retailing
operation's sales also showed improvement, posting an increase of 8.4% with a
same-store increase of 5.8%. Naturalizer stores' sales decreased 11.3% from
last year's third quarter, reflecting same-store sales decreases of 8.4% and
a net decrease of 29 units in operation compared to the same time last year.
Sales declined 83.9% at the Connie and Regal stores, reflecting 117 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 remained flat compared to the same
period last year. Strong performances from the NaturalSport, Life Stride, Dr.
Scholl's and Disney character brands were offset by decreased shipments to
Pagoda's discount customers and reduced shipments of Connie product along with
lower men's shipments due to the company's exit from this business in May 1994.
Gross profit as a percent of sales increased to 34.3% from 33.8% for the same
period last year. Wholesale footwear activities experienced an increase in
gross profit as a percent of sales due to lower markdowns in 1994. The
wholesale gains were partially offset by a decrease in retail margins on
increased retail sales. These decreased margins are primarily the result of
increased promotions by Famous Footwear.
Selling and administrative expenses as a percentage of sales increased slightly
to 27.8% from 27.7% reflecting the growth in Pagoda's worldwide sourcing
capabilities.
The increase in the effective tax rate to 35.3% in the third quarter of fiscal
1994 from 32.8% for the same period in 1993 is primarily due to the change in
the mix of earnings among member companies and the benefit realized in 1993
from revaluing the company's deferred tax assets at the new federal tax rates.
Overall, the 20.4% increase in earnings from continuing operations reflects the
continuing recovery of the company's wholesale business, strong performances
by Canadian operations, and growth at Famous Footwear.
<PAGE>
<PAGE> 8
Year-to-Date 1994 compared to Year-to-Date 1993
-----------------------------------------------
Consolidated net sales increased 8.9% to $1.1 billion compared to the first
nine months of last year.
Earnings from continuing operations of $29.8 million for the first nine months
of 1994 compare to $22.4 million last year, an increase of 32.9%. Net earnings
for the first nine months of 1994 were $31.1 million compared to $21.7 million
for the same period last year. The current year-to-date net earnings figure
reflects aftertax income from discontinued operations of $1.3 million. Last
year's net earnings figure reflects aftertax income from discontinued
operations of $1.5 million and aftertax losses of $2.2 million for an
accounting change related to postemployment benefits.
Sales from the footwear retailing operations increased 14.0% compared to the
first nine months of last year. Famous Footwear's sales increased 24.5%, while
increasing 2.9% on a same-store basis. There were 679 Famous Footwear stores
in operation at the end of the third quarter, 141 more than at the same time
last year. The Canadian retailing operation's sales also improved, increasing
9.1%, including same-store increases and seven more units in operation.
Naturalizer stores' sales decreased 1.2% from last year with flat same-store
sales. Sales decreased 64.0% at the Connie and Regal stores as a result of the
phasing out of these stores as part of the company's restructuring.
Sales from footwear wholesaling activities increased by 3.7%. This increase
was primarily driven by higher licensed product sales, primarily in the Dr.
Scholl's line, higher sales of the children's Lion King product, and increased
sales of NaturalSport and Life Stride products. These increases were partially
offset by decreased shipments to Pagoda's discount customers and reduced
shipments of Connie product along with lower men's shipments due to the
company's exit from this business in May 1994.
Gross profit as a percentage of sales increased to 34.6% from 33.9% for the
same period last year. Wholesaling footwear activities experienced an increase
in gross profit as a percent of sales, which was partially offset by a decrease
in retail margins.
Selling and administrative expenses as a percentage of sales increased to 29.6%
from 29.3% for the same period in 1993 reflecting continuing spending on
systems to support the rapid expansion of Famous Footwear and worldwide
sourcing capabilities of Pagoda.
Other Income/Expense increased from net expense of $.3 million in 1993 to
income of $2.0 million in 1994. This improvement reflects higher royalty
income in 1994. The prior year amount includes $1.0 million of additional
remediation costs for the company's closed tannery.
The increase in the effective tax rate to 35.6% for the first nine months of
1994 from 34.2% for the same period in 1993 is primarily due to the change in
the mix of earnings among member companies and the benefit realized in 1993
from revaluing the company's deferred tax assets at the new federal tax rates.
Discontinued Operations
-----------------------
During the third quarter of 1994, the company announced the sale of its Cloth
World chain of fabric stores to Fabri-Centers of America, Inc. The sale was
completed on October 2, 1994, for $62.0 million in cash, subject to final
balance sheet adjustments. The $62.0 million received to date was used to
reduce short-term debt and invest in the company's expanding Famous Footwear
business. The estimated exit costs associated with the sale of this business
consist primarily of warehouse closure, severance, and other transaction costs,
which will be paid during the fourth quarter of 1994 and the first half of
1995.
<PAGE>
<PAGE> 9
In addition to the Cloth World sale, the company announced its decision to
close the Maryland Square catalog operation. The closure of this business
should be completed during the first quarter of 1995. The costs of exiting
this business consists primarily of inventory liquidation costs and employee
severance costs.
The company completed its withdrawal from the last Wohl Shoe Company leased
shoe departments at the end of October 1994. In the first nine months of
fiscal 1994, withdrawal activity from the leased department business has
generated approximately $49.0 million in cash, primarily from the sale of
inventory and fixed assets. During the third quarter, $8.5 million of the
reserve established for the withdrawal from the leased shoe department business
was transferred to cover the exit costs associated with the Cloth World sale
and the closure of the Maryland Square catalog operation, previously discussed.
This reserve transfer was made possible because of earlier than expected
withdrawals from leased departments at better than expected terms. Final
settlement with lessors and inventory adjustments will be made during the
fourth quarter of 1994. At fiscal year end, the primary remaining liability
will be for employee severance, which will be paid throughout 1995.
Restructuring
-------------
The restructuring initiatives announced in January 1994, for which the company
established a $45.4 million reserve, are proceeding on schedule. To date, 5
plants and 146 Naturalizer, Connie and Regal retail stores have been closed.
All but 5 of the 122 Connie and Regal stores have been closed and the closings
will be completed by year-end. The men's shoe business has been sold, and
substantial consolidation of Pagoda and Brown Shoe Company administrative
operations has been accomplished.
To date, charges of $27.6 million have been charged against the restructuring
reserve. These charges consisted of $11.2 million of non-cash charges for
asset writeoffs and $16.4 million of cash charges related to lease buyouts,
inventory liquidation costs, and severance and benefit costs.
Financial Condition
-------------------
A summary of key financial data and ratios at the dates indicated is as
follows:
<TABLE>
<CAPTION>
October 29, October 30, January 29,
1994 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Working Capital (millions) $261.9 $278.2 $240.6
Current Ratio 2.0 1.8 1.7
Total Debt as a Percentage of
Total Capitalization 44.0% 50.2% 55.3%
Net Debt (Total Debt less Cash
and Cash Equivalents) as a
Percentage of Total Capitalization 39.7% 48.0% 53.8%
</TABLE>
Cash flow of $28.4 million from operating activities of continuing operations
for the first nine months of fiscal 1994 compares to $.1 million for the same
period 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 generated by
operating activities for the first nine months of 1993 included use of cash of
$34.9 million for increasing inventories to support growth at Famous Footwear.
Total cash flow from discontinued operations increased by $140.4 million
primarily due to the sale of Cloth World and the sale of certain discontinued
assets and liquidation of inventory.
<PAGE>
<PAGE> 10
Financing activities for the first nine 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 decrease in the ratio of total debt as a percentage of total capitalization
at October 29, 1994 compared to the end of the first nine months of 1993, is
due primarily to the company paying down both short-term and long-term debt
with additional cash flow generated from discontinued operations. The
company's financial condition and debt to capitalization ratios provide
additional borrowing capacity, if needed.
PART II - OTHER INFORMATION
---------------------------
Item 1 - Legal Proceedings
--------------------------
There have been no material developments during the quarter ended
October 29, 1994, in the legal proceedings described in the company's
Form 10-K for the period ended January 29, 1994.
Item 5 - Other Information
--------------------------
Due to the discontinuance of Cloth World and Maryland Square businesses,
previously released financial information has been restated to reflect
these businesses as discontinued operations along with Wohl leased
departments. The following summaries of "Restated Quarterly Information"
and "Restated Annual Financial Information" are presented for
informational purposes:
<PAGE>
<PAGE> 11
RESTATED QUARTERLY INFORMATION (Unaudited)
Following is a summary of selected restated quarterly information (in thousands
of dollars except per share). All information presented has been restated for
discontinued operations except for the third quarter of fiscal year ended
January 28, 1995, and market values.
<TABLE>
<CAPTION>
Quarters
--------------------------------------------------
First Second Third Fourth
-------- -------- --------- -------
<S> <C> <C> <C> <C>
1994
Net Sales $369,488 $353,000 $406,934
Cost of Goods Sold 242,028 229,199 267,422
Earnings (Loss) From:
Continuing Operations 7,334 7,533 14,926
Discontinued Operations 597 (92) 777
Net Earnings 7,931 7,441 15,703
Per Share of Common Stock:
Earnings From
Continuing Operations $ .42 $ .43 $ .85
Net Earnings .45 .42 .89
Dividends Paid .40 .40 .40
Market Value:
High 38-1/2 38-1/2 37-7/8
Low 34-5/8 34-1/2 33-3/8
1993
Net Sales $326,765 $327,906 $382,631 $323,737
Cost of Goods Sold 215,841 216,334 253,452 229,816
Earnings (Loss) From Continuing
Operations Before Cumulative
Effect of Accounting Change 3,895 6,125 12,402 (31,718)
Cumulative Effect of Change in
Accounting for Postemployment
Benefits (2,214) -- -- --
Discontinued Operations 304 (558) 1,792 (21,640)
Net Earnings (Loss) 1,985 5,567 14,194 (53,358)
Per Share of Common Stock:
Earnings (Loss) From Continuing
Operations Before Cumulative
Effect of Accounting Change $ .23 $ .36 $ .72 $ (1.82)
Cumulative Effect of Change in
Accounting for Postemployment
Benefits (.13) -- -- --
Net Earnings (Loss) .11 .33 .82 (3.07)
Dividends Paid .40 .40 .40 .40
Market Value:
High 33-7/8 33-1/2 35-3/4 36
Low 28-3/4 29-3/4 31-3/4 32-5/8
</TABLE>
<PAGE>
<PAGE> 12
RESTATED ANNUAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1993 1992 1991 1990
---------- ---------- ---------- ----------
Thousands, except per share (52 weeks) (52 weeks) (52 weeks) (52 weeks)
<S> <C> <C> <C> <C>
Operations
Net Sales $1,361,039 $1,243,842 $1,191,591 $1,208,001
Cost of goods sold 915,443 834,591 806,090 801,858
---------- ---------- ---------- ----------
Gross profit 445,596 409,251 385,501 406,143
---------- ---------- ---------- ----------
Selling and administrative
expenses 422,248 381,835 361,281 348,053
Interest expense 17,334 16,260 15,431 18,174
Other expense(income)-net 21,191 8,318 (2,244) (3,905)
---------- ---------- ---------- ----------
460,773 406,413 374,468 362,322
---------- ---------- ---------- ----------
Earnings (loss) from
continuing operations
before income taxes and
cumulative effect of
accounting changes (15,177) 2,838 11,033 43,821
Income taxes (5,881) (401) 2,771 15,125
---------- ---------- ---------- ----------
Earnings (loss) from
continuing operations
before cumulative effect
of accounting changes (9,296) 3,239 8,262 28,696
Earnings (loss) from
discontinued operations,
net of income taxes 4,298 1,425 7,433 3,079
Gain on (provision for)
disposal of discontinued
operations, net of
income taxes (24,400) -- -- --
Cumulative effect of changes
in accounting for post-
employment benefits in
1993 and postretirement
benefits and income taxes
in 1991 (2,214) -- (11,931) --
---------- ---------- ---------- ----------
Net earnings (loss) $ (31,612) $ 4,664 $ 3,764 $ 31,775
========== ========== ========== ==========
Returns from continuing
operations before
accounting changes:
Return on net sales (0.7%) 0.3% 0.7% 2.4%
Return on beginning
stockholders' equity (3.2%) 1.0% 2.5% 8.5%
Return on average
invested capital (1.6%) 0.6% 1.5% 5.1%
Dividends paid $ 27,979 $ 27,714 $ 27,646 $ 27,789
Capital expenditures 27,207 17,496 19,902 24,917
Per Common Share
Earnings (loss) from
continuing operations
before accounting changes $ (.54) $ .19 $ .48 $ 1.67
Net earnings (loss) (1.83) .27 .22 1.85
Dividends paid 1.60 1.60 1.60 1.60
Stockholders' equity 13.27 16.69 18.10 19.47
Financial Position
Receivables, net $ 109,825 $ 114,042 $ 83,900 $ 101,467
Inventories 286,992 253,586 228,219 227,707
Working capital 240,554 262,611 297,239 285,310
Property, plant and
equipment, net 86,695 88,500 104,144 104,886
Total assets 739,930 705,165 654,696 678,224
Long-term debt and
capitalized lease
obligations 135,324 123,024 144,564 128,611
Stockholders' equity 233,863 288,988 313,387 336,182
Average Common shares
outstanding 17,270 17,132 17,070 17,184
</TABLE>
All data presented reflects the fiscal year ended on the Saturday nearest to
January 31.
<PAGE>
<PAGE> 13
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 company filed a current report on Form 8-K dated
September 1, 1994, in response to Item 5, which announced
the sale of Cloth World.
The company filed a current report on Form 8-K dated
October 11, 1994, in response to Item 2, which announced
the completion of the sale of Cloth World on October 2,
1994.
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: December 13, 1994 Harry E. Rich
----------------------------------
Executive Vice President
and Chief Financial Officer
On Behalf of the Corporation and
as the Principal Financial Officer
<PAGE>
<PAGE> 14
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 October 29, 1994, and October 30, 1993, and the
related condensed consolidated statements of earnings for the three-month
and nine-month periods ended October 29, 1994, and October 30, 1993, and the
condensed consolidated statements of cash flows for the nine-month periods
ended October 29, 1994, and October 30, 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
November 22, 1994
St. Louis, Missouri
<PAGE>
<PAGE> 15
EXHIBIT 11
PART II - OTHER INFORMATION
COMPUTATION OF EARNINGS PER SHARE
BROWN GROUP, INC.
(Thousands, except per share)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- ---------------------------
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY
Weighted average shares outstanding 17,595 17,287 17,530 17,238
Net effect of dilutive stock options
based on the treasury stock method
using average market price 79 65 102 59
-------- -------- -------- --------
TOTAL 17,674 17,352 17,632 17,297
======== ======== ======== ========
Earnings from continuing operations
before accounting change $ 14,926 $ 12,402 $ 29,793 $ 22,422
Cumulative effect of accounting change -- -- -- (2,214)
Discontinued operations 777 1,792 1,282 1,538
-------- -------- -------- --------
Net Earnings $ 15,703 $ 14,194 $ 31,075 $ 21,746
======== ======== ======== ========
Earnings per share from continuing
operations before accounting change $ .85 $ .72 $ 1.70 $ 1.30
Cumulative effect of accounting change -- -- -- (.13)
Discontinued operations .04 .10 .07 .09
-------- -------- --------- --------
Net earnings per share (1) $ .89 $ .82 $ 1.77 $ 1.26
======== ======== ========= ========
FULLY DILUTED
Weighted average shares outstanding 17,595 17,287 17,530 17,238
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 79 77 110 71
TOTAL 17,674 17,364 17,640 17,309
======== ======== ======== ========
Earnings from continuing operations
before accounting change $ 14,926 $ 12,402 $ 29,793 $ 22,422
Cumulative effect of accounting change -- -- -- (2,214)
Discontinued operations 777 1,792 1,282 1,538
-------- -------- -------- --------
Net Earnings $ 15,703 $ 14,194 $ 31,075 $ 21,746
======== ======== ======== ========
Earnings per share from continuing
operations before accounting change $ .85 $ .72 $ 1.70 $ 1.30
Cumulative effect of accounting change -- -- -- (.13)
Discontinued operations .04 .10 .07 .09
-------- -------- -------- --------
Net earnings per share (1) $ .89 $ .82 $ 1.77 $ 1.26
======== ======== ======== ========
</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.
<PAGE>
<PAGE> 16
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 November 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 October 29,
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
November 22, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
</LEGEND>
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> OCT-29-1994
<CASH> 31,382
<SECURITIES> 0
<RECEIVABLES> 126,632
<ALLOWANCES> (11,361)
<INVENTORY> 322,901
<CURRENT-ASSETS> 530,103
<PP&E> 199,818
<DEPRECIATION> (105,930)
<TOTAL-ASSETS> 684,638
<CURRENT-LIABILITIES> 268,237
<BONDS> 135,214
<COMMON> 67,437
0
0
<OTHER-SE> 183,426
<TOTAL-LIABILITY-AND-EQUITY> 684,638
<SALES> 1,129,422
<TOTAL-REVENUES> 1,129,422
<CGS> 738,649
<TOTAL-COSTS> 1,072,660
<OTHER-EXPENSES> (1,991)
<LOSS-PROVISION> 3,604
<INTEREST-EXPENSE> 12,477
<INCOME-PRETAX> 46,276
<INCOME-TAX> 16,483
<INCOME-CONTINUING> 29,793
<DISCONTINUED> 1,282
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,075
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.77
</TABLE>
