<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 April 29, 1995
[ ] 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 May 27, 1995, 17,945,902 shares of the registrant's common stock were
outstanding.
<PAGE>
<PAGE> 2
BROWN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
(Unaudited)
---------------------
April 29, April 30, January 28,
1995 1994 1995
--------- --------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 20,457 $ 21,264 $ 18,922
Receivables, net of allowances of
$12,012 at April 29, 1995,
$10,581 at April 30, 1994, and
$11,664 at January 28, 1995 91,159 103,507 98,079
Inventories (net of adjustment to
last-in, first-out cost of
$37,566 at April 29, 1995,
$44,335 at April 30, 1994, and
$37,286 at January 28, 1995) 336,746 292,930 322,029
Net Current Assets of Discontinued
Operations 94,689
Other Current Assets 54,753 66,878 39,930
--------- --------- ---------
Total Current Assets 503,115 579,268 478,960
Property and Equipment 208,783 189,580 203,227
Less allowances for depreciation
and amortization (114,436) (101,286) (110,323)
--------- --------- ---------
94,347 88,294 92,904
Net Noncurrent Assets of
Discontinued Operations 15,474
Other Assets 62,895 56,018 64,651
--------- --------- ---------
$ 660,357 $ 739,054 $ 636,515
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes Payable $ 75,231 $ 145,166 $ 41,085
Accounts Payable 105,925 83,940 85,045
Accrued Expenses 87,051 102,825 92,231
Income Taxes 9,262 1,386 (642)
Current Maturities of Long-Term Debt 52,799 3,112 2,063
--------- --------- ---------
Total Current Liabilities 330,268 336,429 219,782
Long-Term Debt and Capitalized
Lease Obligations 57,465 135,289 133,213
Other Liabilities 33,169 30,852 33,793
Shareholders' Equity
Common Stock 67,261 66,426 67,388
Additional Capital 46,634 38,085 46,957
Cumulative Translation Adjustment (4,507) (4,402) (5,556)
Unamortized Value of Restricted Stock (9,483) (6,409) (10,878)
Retained Earnings 139,550 142,784 151,816
239,455 236,484 249,727
--------- --------- ---------
$ 660,357 $ 739,054 $ 636,515
========= ========= =========
</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
--------------------
April 29, April 30,
1995 1994
--------- ---------
<S> <C> <C>
Net Sales $ 357,442 $ 369,488
Cost of Goods Sold 237,247 242,028
--------- ---------
Gross Profit 120,195 127,460
--------- ---------
Selling and Administrative Expenses 123,916 112,044
Interest Expense 3,916 4,279
Other (Income) Expense (608) (463)
--------- ---------
Earnings (Loss) from Continuing Operations Before
Income Taxes (7,029) 11,600
Income Taxes (2,618) 4,266
--------- ---------
Earnings (Loss) from Continuing Operations (4,411) 7,334
Earnings from Discontinued Operations, Net of Taxes -- 597
--------- ---------
NET EARNINGS (LOSS) $ (4,411) $ 7,931
========= =========
NET EARNINGS (LOSS) PER COMMON SHARE:
Continuing Operations $ (.25) $ .42
Discontinued Operations -- .03
--------- ---------
NET EARNINGS (LOSS) PER COMMON SHARE $ (.25) $ .45
========= =========
Weighted Average Number of
Outstanding Shares
of Common Stock 17,608 17,451
DIVIDENDS PER COMMON SHARE $ .40 $ .40
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
<PAGE> 4
BROWN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended
---------------------
April 29, April 30,
1995 1994
--------- ---------
<S> <C> <C>
Net Cash Provided (Used) by Operating Activities of:
Continuing operations $ 6,505 $ 13,477
Discontinued operations -- (1,495)
--------- --------
Net Cash Provided (Used) by Operating Activities 6,505 11,982
Investing Activities:
Capital expenditures (7,537) (7,606)
Proceeds from sales of assets of discontinued
operations -- 9,978
Other 1,120 383
--------- ---------
Net Cash Provided (Used) by Investing Activities (6,417) 2,755
Financing Activities:
Increase/(decrease) in short-term notes payable 9,146 (924)
Principal payments of long-term debt (13) (4,635)
Dividends paid (7,181) (7,070)
Payments for purchase of treasury stock (824)
Proceeds from issuance of common stock 319 2,264
--------- --------
Net Cash Provided (Used) by Financing Activities 1,447 (10,365)
--------- --------
Increase (Decrease) in Cash and Cash Equivalents 1,535 4,372
Cash and Cash Equivalents at Beginning of Period 18,922 16,892
--------- --------
Cash and Cash Equivalents at End of Period $ 20,457 $ 21,264
========= ========
</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 28, 1995.
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>
April 29, April 30, January 28,
1995 1994 1995
--------- -------- -----------
<S> <C> <C> <C>
Finished Goods $318,369 $269,953 $298,235
Work in Process 2,215 5,462 4,193
Raw Materials and Supplies 16,162 17,515 19,601
-------- -------- --------
$336,746 $292,930 $322,029
======== ======== ========
</TABLE>
<PAGE>
<PAGE> 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Results of Operations
---------------------
Quarter ended April 29, 1995 compared to the Quarter ended April 30, 1994
-------------------------------------------------------------------------
Consolidated net sales for the first quarter ended April 29, 1995, were $357.4
million, a decrease of 3% from last year's first quarter.
A loss from continuing operations of $4.4 million for the first quarter of 1995
compares to earnings of $7.3 million last year.
The net loss of $4.4 million for the first quarter of 1995 compares to net
earnings of $7.9 million last year. Included in net earnings in 1994 is
aftertax income from discontinued operations of $.6 million.
These results reflect poor spring retail conditions, including very slow sales
in February and March, which severely affected the Corporation's retail
operations and wholesale customers. There is evidence that cautious consumer
spending patterns are likely to continue, margins will be under pressure, and
the seasonally slow second quarter will be challenging.
Sales from the footwear retailing operations increased 10% from the first
quarter of 1994, but were down on a store-for-store basis. Famous Footwear's
total sales increased 21% reflecting a same-store decrease of 3% and 161 more
units in operation. Famous Footwear now operates 754 stores. The Canadian
retailing operation's sales decreased slightly, posting a 1% decrease with a
same-store decrease of 3% and six more units than the prior year. Naturalizer
stores' sales decreased 14% from last year's first quarter, reflecting a
same-store decrease of 10% and 42 fewer units in operation. Naturalizer now
operates 324 stores. In the first quarter of fiscal 1994, the Connie and Regal
stores had sales of $6.2 million; all were closed by the end of fiscal 1994.
Sales from footwear wholesaling activities decreased 17% from the same period
last year. Pagoda's sales decreased 4% and Brown Shoe's decreased 32% as weak
spring retail conditions led to wholesale order cancellations and pushbacks.
Gross profit as a percent of sales decreased to 33.6% from 34.5% for the same
period last year. Decreasing margins at Brown Shoe, due to higher markdowns
in 1995, were offset by increasing margins at Pagoda. A slight decrease in
retail margins was due primarily to increased promotions by Famous Footwear to
stimulate sales.
Selling and administrative expenses as a percent of sales increased to 34.7%
from 30.3% for the same period last year, reflecting lower than planned sales
throughout the Corporation and higher fixed costs at Famous Footwear associated
with investment in systems and distribution infrastructure to support store
expansion.
Other income increased to $.6 million compared to income of $.5 million in 1994
and consists primarily of royalty income.
Restructuring
-------------
The restructuring initiatives announced in January 1994, for which the
Corporation established a $45.4 million reserve, are proceeding as planned.
To date, charges of $30.5 million have been charged against the restructuring
reserve. These charges consisted of $12.1 million of non-cash charges for
asset write-offs and $18.4 million of cash charges related to lease buyouts,
inventory liquidation costs, and severance and benefit costs. The amounts to
be paid out during the remainder of 1995 relate to lease buyouts and severance
and benefit costs.
<PAGE>
<PAGE> 7
Financial Condition
-------------------
A summary of key financial data and ratios at the dates indicated is as
follows:
April 29, April 30, January 28,
1995 1994 1995
--------- --------- -----------
Working Capital (millions) $172.8 $242.8 $259.2
Current Ratio 1.5 1.7 2.2
Total Debt as a Percentage of
Total Capitalization 43.7% 54.5% 41.4%
Net Debt (Total Debt less Cash and
Cash Equivalents) as a Percentage
of Total Capitalization 40.8% 52.6% 38.7%
Cash flow from operating activities of continuing operations for the first
three months of fiscal 1995 was approximately $7.0 million less than in the
first three months of 1994. The decrease was primarily the result of lower
earnings, which were partially offset by lower inventories and accounts
receivable at Brown Shoe and Pagoda.
Financing activities in the first quarter of fiscal 1995 reflect an increase
in notes payable which is due primarily to lower earnings and growth at Famous
Footwear. In the first quarter of 1994, the Corporation was able to reduce
total debt with proceeds from the sale of assets from the discontinued leased
department business.
The decrease in the ratio of total debt as a percentage of total capitalization
at April 29, 1995, compared to the end of the first quarter in 1994, is due
primarily to the Corporation paying down short-term debt in the third quarter
of fiscal 1994 with additional cash flow generated from discontinued
operations. The decrease in the current ratio is due primarily to
approximately $75 million of long-term debt becoming current in the first
quarter of 1995. The Corporation's financial condition and debt to
capitalization ratios provide additional borrowing capacity, if needed.
<PAGE>
<PAGE> 8
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
--------------------------
There have been no material developments during the quarter ended April 29,
1995, in the legal proceedings described in the Corporation's Form 10-K for
the period ended January 28, 1995.
Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
At the Annual Meeting of Shareholders held on May 25, 1995, four proposals
described in the Notice of Annual Meeting of Shareholders dated April 19,
1995, were voted upon.
1. The shareholders elected four directors, Mr. B. A. Bridgewater, Jr.,
Mrs. Julie C. Esrey, Mr. Richard A. Liddy, and Mr. William E. Maritz,
for terms of three years each, and General Edward C. Meyer, Retired,
for a term of one year. The voting for each director is as follows:
Directors For Withheld
--------- ---------- --------
B. A. Bridgewater, Jr. 15,834,333 262,705
Julie C. Esrey 15,888,739 208,299
Richard A. Liddy 15,872,023 225,015
William E. Maritz 15,882,589 214,449
General Edward C. Meyer, Retired 15,845,845 251,193
2. The proposal to ratify the appointment of Ernst & Young as the
Corporation's independent auditors was approved by a vote of 16,001,959
in favor to 39,145 against, with 55,934 abstaining.
3. The proposal to declassify the Board of Directors for the purpose of
director elections was rejected, and therefore failed, by a vote of
5,010,955 in favor to 9,135,361 against, with 161,553 abstaining and
1,789,169 broker non-votes.
4. The proposal to adopt and implement a policy of confidential voting at
all meetings of the Corporation's shareholders was rejected, and
therefore failed, by a vote of 6,694,976 in favor to 7,452,462 against,
with 160,431 abstaining and 1,789,169 broker non-votes.
Item 6 - Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Listing of Exhibits
(3) (i) (a) Certificate of Incorporation
of the Corporation as amended
through February 16, 1984,
incorporated herein by
reference to Exhibit 3 to the
Corporation's Report on Form
10-K for the fiscal year
ended November 1, 1986.
(i) (b) Amendment of Certificate of
Incorporation of the
Corporation filed February
20, 1987, incorporated herein
by reference to Exhibit 3 to
the Corporation's Report on
Form 10-K for the fiscal year
ended January 30, 1988.
<PAGE>
<PAGE> 9
(ii) Bylaws of the Corporation as
amended through March 2,
1995, incorporated herein by
reference to Exhibit 3(ii) to
the Corporation's Report on
Form 10-K for the fiscal year
ended January 28, 1995.
(11) Computation of Earnings Per
Share (Page 10)
(27) Financial Data Schedule (Page 11)
(b) Reports on Form 8-K:
There were no reports on Form 8-K for the quarter ended
April 29, 1995.
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: June 12, 1995 /s/ Harry E. Rich
-------------------------------
Executive Vice President
and Chief Financial Officer and
On Behalf of the Corporation as
the Principal Financial Officer
<PAGE>
<PAGE> 10
EXHIBIT 11
PART II - OTHER INFORMATION
COMPUTATION OF EARNINGS PER SHARE
BROWN GROUP, INC.
(Thousands, except per share)
<TABLE>
<CAPTION>
Three Months Ended
---------------------
April 29, April 30,
1995 1994
--------- ---------
<S> <C> <C>
PRIMARY
Weighted average shares outstanding 17,608 17,451
Net effect of dilutive stock options based on
the treasury stock method using average market price 25 110
--------- ---------
TOTAL 17,633 17,561
========= ========
Earnings (loss) from continuing operations $ (4,411) $ 7,334
Discontinued operations -- 597
--------- --------
Net earnings (loss) $ (4,411) $ 7,931
========= ========
Earnings (loss) per share from continuing operations $ (.25) $ .42
Discontinued operations -- .03
--------- --------
Net earnings (loss) per share (1) $ (.25) $ .45
========= ========
FULLY DILUTED
Weighted average shares outstanding 17,608 17,451
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 52 130
--------- --------
TOTAL 17,660 17,581
========= ========
Earnings (loss) from continuing operations $ (4,411) $ 7,334
Discontinued operations -- 597
--------- --------
Net earnings (loss) $ (4,411) $ 7,931
========= ========
Earnings (loss) per share from continuing operations $ (.25) $ .42
Discontinued operations -- .03
--------- --------
Net earnings (loss) per share (1) $ (.25) $ .45
========= ========
</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>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-3-1996
<PERIOD-END> APR-29-1995
<CASH> 20,457
<SECURITIES> 0
<RECEIVABLES> 103,171
<ALLOWANCES> (12,012)
<INVENTORY> 336,746
<CURRENT-ASSETS> 503,115
<PP&E> 208,783
<DEPRECIATION> (114,436)
<TOTAL-ASSETS> 660,357
<CURRENT-LIABILITIES> 330,268
<BONDS> 57,465
<COMMON> 67,261
0
0
<OTHER-SE> 172,194
<TOTAL-LIABILITY-AND-EQUITY> 660,357
<SALES> 357,442
<TOTAL-REVENUES> 357,442
<CGS> 237,247
<TOTAL-COSTS> 361,163
<OTHER-EXPENSES> (608)
<LOSS-PROVISION> 1,423
<INTEREST-EXPENSE> 3,916
<INCOME-PRETAX> (7,029)
<INCOME-TAX> (2,618)
<INCOME-CONTINUING> (4,411)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,411)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
