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 November 1, 1997
[ ] 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 29, 1997, 18,020,177 shares of the registrant's common stock
were outstanding.
<PAGE>
BROWN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
(Unaudited)
-------------------------
November 1, November 2, February 1,
1997 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 25,496 $ 28,091 $ 38,686
Receivables, net of allowances of
$10,512 at November 1, 1997,
$11,049 at November 2, 1996, and
$10,203 at February 1, 1997 85,598 87,425 90,246
Inventories, net of adjustment to
last-in, first-out cost of
$16,984 at November 1, 1997,
$19,646 at November 2, 1996, and
$18,846 at February 1, 1997 393,972 408,813 398,803
Other Current Assets 35,471 39,378 37,040
--------- --------- ---------
Total Current Assets 540,537 563,707 564,775
Property and Equipment 210,262 206,458 202,229
Less allowances for depreciation
and amortization (126,701) (121,676) (116,849)
--------- --------- ---------
83,561 84,782 85,380
Other Assets 72,795 71,653 72,220
--------- --------- ---------
$ 696,893 $ 720,142 $ 722,375
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes Payable $ 32,000 $ 42,000 $ 62,000
Accounts Payable 124,007 130,247 124,697
Accrued Expenses 87,647 75,596 71,053
Income Taxes 16,794 5,410 4,005
Current Maturities of Long-Term Debt 2,000 2,000 2,000
--------- --------- ---------
Total Current Liabilities 262,448 255,253 263,755
Long-Term Debt and Capitalized
Lease Obligations 197,027 199,023 197,025
Other Liabilities 23,282 25,446 24,558
Shareholders' Equity
Common Stock 67,579 67,359 67,387
Additional Capital 46,755 46,340 46,310
Cumulative Translation Adjustment (7,298) (3,600) (4,433)
Unamortized Value of Restricted Stock (4,601) (6,274) (5,700)
Retained Earnings 111,701 136,595 133,473
--------- --------- ---------
214,136 240,420 237,037
--------- --------- ---------
$ 696,893 $ 720,142 $ 722,375
========= ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
BROWN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
------------------------ ------------------------
November 1, November 2, November 1, November 2,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 433,886 $ 420,347 $1,204,524 $1,166,115
Cost of Goods Sold 278,056 264,160 756,625 729,530
--------- --------- ---------- ----------
Gross Profit 155,830 156,187 447,899 436,585
--------- --------- ---------- ----------
Selling and Administrative Expenses 146,871 134,061 419,624 395,531
Interest Expense 5,145 4,445 16,274 13,700
Other (Income) Expense 395 (672) 305 (812)
--------- --------- ---------- ----------
Earnings Before Income Taxes 3,419 18,353 11,696 28,166
Income Tax 16,742 5,448 19,947 9,220
--------- --------- ---------- ----------
NET EARNINGS (LOSS) $ (13,323) $ 12,905 $ (8,251) $ 18,946
========= ========= ========== ==========
NET EARNINGS (LOSS) PER
COMMON SHARE $ (.75) $ .73 $ (.46) $ 1.07
========= ========= ========== ==========
Weighted Average Number of
Outstanding Shares
of Common Stock 17,806 17,702 17,779 17,651
DIVIDENDS PER COMMON SHARE $ .25 $ .25 $ .75 $ .75
========= ========= ========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
BROWN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
-----------------------
November 1, November 2,
1997 1996
----------- -----------
<S> <C> <C>
Net Cash Provided (Used) by Operating Activities $ 45,223 $ (1,758)
Investing Activities:
Capital expenditures (15,311) (13,810)
Other 390 1,100
---------- ---------
Net Cash Used by Investing Activities (14,921) (12,710)
Financing Activities:
Decrease in short-term notes payable (30,000) (70,000)
Repurchase of long-term debt - (6,450)
Proceeds from issuance of long-term debt - 100,000
Proceeds from issuance of common stock 29
Dividends paid (13,521) (13,465)
Debt issuance expense - (2,584)
---------- ---------
Net Cash Provided (Used) by Financing Activities (43,492) 7,501
---------- ---------
Decrease in Cash and Cash Equivalents (13,190) (6,967)
Cash and Cash Equivalents at Beginning of Period 38,686 35,058
---------- ---------
Cash and Cash Equivalents at End of Period $ 25,496 $ 28,091
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
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 Company'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 Company's Annual Report and Form 10-K for the period
ended February 1, 1997.
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.
In February 1997, Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share," was issued which the Company is required to adopt at the
end of fiscal 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
interim and annual periods. The impact of the provisions of SFAS No. 128 on
the calculation of Basic and Diluted earnings per share for the thirteen and
thirty-nine week periods ended November 1, 1997 and November 2, 1996 is not
material.
Note C - Inventories
--------------------
During fiscal 1996, the remaining domestically manufactured footwear at Brown
Shoe Company was sold resulting in a liquidation of LIFO inventory layers. The
effect of this liquidation was to increase pretax earnings by $4.0 million in
the thirty-nine weeks ended November 2, 1996.
<PAGE>
Note D - Restructuring Charges
------------------------------
Included in the Consolidated Statements of Earnings for the thirteen weeks and
thirty nine weeks ended November 1, 1997 is an after tax non-recurring charge
of $21.0 million for the cost of reducing the company's investment in Pagoda
International's operations. The charge includes $13.0 million of which $7.9
million is reflected in Cost of Goods Sold for inventory write-down, $4.2
million in Selling and Administrative Expenses for bad debt, severance, and
other restructuring expenses, and $.9 million in Other (Income) Expense for
the disposal of fixed assets. In addition, an $8.0 million provision for
income taxes was recorded for the repatriation of approximately $23.5 million
of foreign cash to the United States. Taxes were not previously provided on
these accumulated earnings as they were considered to be permanently reinvested
in the Company's international operations. No activity has been reflected
against the reserve in the third quarter. The $21.0 million charge resulted
in a reduction of earnings of $1.18 per share for the thirteen weeks and
thirty nine weeks ended November 1, 1997.
Subsequent to November 1, 1997, Pagoda International signed a letter of intent
with Calcados Dilly Ltda., a Brazilian footwear manufacturing and marketing
company. According to the terms of the agreement, Dilly, Ltda. will assume all
distribution responsibilities in Brazil and will act as a distributor of the
Company's children's character licensed footwear brands and le coq sportif.
Dilly, Ltda. will begin purchasing of the Brazilian inventories no later than
February 1, 1998 for a period not to exceed thirty months. In addition, the
Company plans to continue as a licensee and supplier of children's character
licensed footwear in Europe, but negotiations are underway to shift inventory
ownership and marketing to various distributors.
Note E: Condensed Consolidating Financial Information
-----------------------------------------------------
Certain of the Company's debt is unconditionally and jointly and severally
guaranteed by certain wholly-owned domestic subsidiaries of the Company.
Accordingly, condensed consolidating balance sheets as of November 1, 1997 and
November 2, 1996, and the related condensed consolidating statements of
earnings and cash flows for the thirty-nine weeks ended November 1, 1997 and
November 2, 1996, are provided. These condensed consolidating financial
statements have been prepared using the equity method of accounting in
accordance with the requirements for presentation of such information.
Management believes that this information, presented in lieu of complete
financial statements for each of the guarantor subsidiaries, provides
meaningful information to allow investors to determine the nature of the assets
held by, and the operations and cash flows of, each of the consolidating
groups.
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF NOVEMBER 1, 1997
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents . . $ 1,081 $ (2,866) $ 27,281 $ - $ 25,496
Receivables, net. . . . . . . 29,090 12,400 44,108 - 85,598
Inventory, net. . . . . . . . 60,234 315,310 33,135 (14,707) 393,972
Other current assets. . . . . 3,616 20,315 6,349 5,191 35,471
-------- -------- -------- -------- ----------
Total Current Assets . . . . 94,021 345,159 110,873 (9,516) 540,537
Property and Equipment, net. . . 18,107 58,206 7,248 - 83,561
Other Assets . . . . . . . . . . 43,561 16,571 12,872 (209) 72,795
Investment in Subsidiaries . . . 250,657 44,215 3,811 (298,683) -
-------- -------- -------- --------- ----------
Total Assets . . . . . . . . $406,346 $464,151 $134,804 $(308,408) $ 696,893
======== ======== ======== ========= ==========
Liabilities &
Shareholders' Equity
Current Liabilities
Notes payable . . . . . . . . $ 32,000 $ - $ - $ - $ 32,000
Accounts payable. . . . . . . 5,793 92,957 25,257 - 124,007
Accrued expenses. . . . . . . 25,040 41,306 16,184 5,117 87,647
Income taxes. . . . . . . . . 3,781 11,804 694 515 16,794
Current maturities of
long-term debt . . . . . . . 2,000 - - - 2,000
-------- -------- -------- --------- ----------
Total Current Liabilities. 68,614 146,067 42,135 5,632 262,448
Long-Term Debt and Capitalized
Lease Obligations. . . . . . 197,027 - 75 (75) 197,027
Other Liabilities. . . . . . . . 20,704 2,077 592 (91) 23,282
Intercompany Payable (Receivable) (94,135) 86,854 17,331 (10,050) -
Shareholders' Equity . . . . . . 214,136 229,153 74,671 (303,824) 214,136
-------- -------- -------- --------- ----------
Total Liabilities and
Shareholders' Equity . $406,346 $464,151 $134,804 $(308,408) $ 696,893
======== ======== ======== ========= ==========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales. . . . . . . . . . . . $193,682 $922,032 $286,098 $(197,288) $1,204,524
Cost of goods sold . . . . . . . 137,950 578,452 237,610 (197,387) 756,625
-------- -------- -------- --------- ----------
Gross profit . . . . . . . . . . 55,732 343,580 48,488 99 447,899
Selling and
administrative expenses. 55,501 308,397 56,849 (1,123) 419,624
Interest expense . . . . . . . . 16,173 2 99 - 16,274
Intercompany interest
(income) expense. . . . . . . (11,414) 11,425 (11) - -
Other (income) expense . . . . . (2,907) 337 1,653 1,222 305
Equity in (earnings)
of subsidiaries . . . . . . . 6,138 11,887 - (18,025) -
-------- -------- -------- --------- ----------
Earnings (Loss) Before
Income Taxes . . . . . . . . (7,759) 11,532 (10,102) 18,025 11,696
Income tax provision (benefit) . 492 17,670 1,785 - 19,947
-------- -------- -------- -------- ----------
Net Earnings (Loss) . . . . . $ (8,251) $ (6,138) $(11,887) $ 18,025 $ (8,251)
======== ======== ======== ========= ==========
</TABLE>
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Cash Provided (Used) by
Operating Activities . . . . $ 24,028 $ 19,519 $(11,979) $ 13,655 $ 45,223
Investing Activities:
Capital expenditures . . . . (2,588) (11,647) (1,076) - (15,311)
Other. . . . . . . . . . . . 383 - 7 - 390
-------- -------- -------- --------- --------
Net Cash Used by
Investing Activities . . . . (2,205) (11,647) (1,069) - (14,921)
Financing Activities:
Increase (decrease) in
short-term notes payable . . (30,000) - - - (30,000)
Proceeds from issuance of
common stock . . . . . . . . 29 - - - 29
Dividends paid. . . . . . . . (13,521) - - - (13,521)
Intercompany financing. . . . 22,880 (17,048) 10,022 (15,854) -
-------- -------- -------- --------- --------
Net Cash Provided (Used) by
Financing Activities. . . . . (20,612) (17,048) 10,022 (15,854) (43,492)
Increase (Decrease) in Cash
and Cash Equivalents. . . . . 1,211 (9,176) (3,026) (2,199) (13,190)
Cash and Cash Equivalents at
Beginning of Period . . . . . (130) 6,310 30,307 2,199 38,686
-------- -------- -------- --------- --------
Cash and Cash Equivalents at
End of Period . . . . . . . . $ 1,081 $ (2,866) $ 27,281 $ - $ 25,496
======== ======== ======== ======== ========
</TABLE>
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF NOVEMBER 2, 1996
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents . . . $ 1,204 $ 7,993 $ 18,894 $ - $ 28,091
Receivables, net. . . . . . . . 32,339 12,820 42,266 - 87,425
Inventory, net. . . . . . . . . 68,012 305,520 48,529 (13,248) 408,813
Other current assets. . . . . . 9,565 17,764 8,073 3,976 39,378
-------- -------- -------- --------- --------
Total Current Assets . . . . . 111,120 344,097 117,762 (9,272) 563,707
Property and Equipment, net. . . . 17,789 58,927 8,066 - 84,782
Other Assets . . . . . . . . . . . 42,860 16,036 13,112 (355) 71,653
Investment in Subsidiaries . . . . 260,982 52,932 3,811 (317,725) -
-------- -------- -------- --------- --------
Assets . . . . . . . . . $432,751 $471,992 $142,751 $(327,352) $720,142
======== ======== ======== ========= ========
Liabilities & Shareholders' Equity
Current Liabilities
Notes payable . . . . . . . . . $ 42,000 $ - $ - $ - $ 42,000
Accounts payable. . . . . . . . 3,959 99,861 26,427 - 130,247
Accrued expenses. . . . . . . . 28,762 35,974 13,374 (2,514) 75,596
Income taxes. . . . . . . . . . 1,084 3,120 2,292 (1,086) 5,410
Current maturities of
long-term debt . . . . . . . . 2,000 - - - 2,000
-------- -------- -------- --------- --------
Total Current Liabilities . 77,805 138,955 42,093 (3,600) 255,253
Long-Term Debt and Capitalized
Lease Obligations. . . . . . . 199,023 - 125 (125) 199,023
Other Liabilities. . . . . . . . . 20,619 2,944 496 1,387 25,446
Intercompany Payable (Receivable). (105,116) 97,874 9,392 (2,150) -
Shareholders' Equity . . . . . . . 240,420 232,219 90,645 (322,864) 240,420
-------- -------- -------- --------- --------
Total Liabilities and
Shareholders' Equity . . $432,751 $471,992 $142,751 $(327,352) $720,142
======== ======== ======== ========= ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
THIRTY-NINE WEEKS ENDED NOVEMBER 2, 1996
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales. . . . . . . . . . . . . $190,659 $887,925 $304,664 $(217,133) $1,166,115
Cost of goods sold . . . . . . . . 136,593 566,661 243,512 (217,236) 729,530
-------- -------- -------- --------- ----------
Gross profit. . . . . . . . . . 54,066 321,264 61,152 103 436,585
Selling and
administrative expenses . . . . 54,899 289,709 51,802 (879) 395,531
Interest expense . . . . . . . . . 13,296 211 193 - 13,700
Intercompany interest
(income) expense. . . . . . . . (10,607) 10,637 (30) - -
Other (income) expense . . . . . . (3,504) 170 1,540 982 (812)
Equity in (earnings)
of subsidiaries . . . . . . . . (17,557) (5,386) - 22,943 -
-------- -------- -------- --------- ----------
Earnings (Loss) Before
Income Taxes . . . . . . . . . 17,539 25,923 7,647 (22,943) 28,166
Income tax provision (benefit) . . (1,407) 8,366 2,261 - 9,220
-------- -------- -------- --------- ----------
Net Earnings (Loss) . . . . . . $ 18,946 $ 17,557 $ 5,386 $ (22,943) $ 18,946
======== ======== ======== ========= ==========
</TABLE>
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THIRTY-NINE WEEKS ENDED NOVEMBER 2, 1996
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Cash Provided (Used) by
Operating Activities . . . . . $(22,926) $ 28,786 $(9,272) $ 1,654 $ (1,758)
Investing Activities:
Capital expenditures . (833) (11,216) (1,761) - (13,810)
Other . . . . . . . 1,096 4 - - 1,100
-------- -------- ------- ------- ---------
Net Cash Provided (Used) by
Investing Activities . 263 (11,212) (1,761) - (12,710)
Financing Activities:
Increase (decrease) in
short-term notes payable . (70,000) - - - (70,000)
Repurchase of long-term debt . (6,450) - - - (6,450)
Process from issuance of
long-term debt . . 100,000 - - - 100,000
Dividends paid. . . (13,465) - - (13,465)
Intercompany financing 16,657 (18,547) 3,544 (1,654) -
Debt issuance expense. (2,584) - - - (2,584)
-------- -------- ------- ------- ---------
Net Cash Provided (Used) by
Financing Activities . 24,158 (18,547) 3,544 (1,654) 7,501
Increase (Decrease) in Cash and
Cash Equivalents. . 1,495 (973) (7,489) - (6,967)
Cash and Cash Equivalents at
Beginning of Period (291) 8,966 26,383 - 35,058
-------- -------- ------- ------- ---------
Cash and Cash Equivalents at
End of Period . . . $ 1,204 $ 7,993 $18,894 $ - $28,091
======== ======== ======= ======= =======
</TABLE>
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------
Results of Operations
---------------------
Quarter ended November 1, 1997 compared to the Quarter ended November 2, 1996
-----------------------------------------------------------------------------
Consolidated net sales for the fiscal quarter ended November 1, 1997, were
$433.9 million, compared to $420.3 million in the quarter ended November 2,
1996.
A net loss of $13.3 million for the third quarter of 1997 compares to net
earnings of $12.9 million for the third quarter of 1996. The 1997 loss
includes an aftertax, non-recurring charge of $21.0 million for the cost of
reducing the company's investment in its Pagoda International division's
operations. The 1997 loss also includes a $5.0 million loss from Pagoda
International operations compared to breakeven results in 1996. The 1996
results include a $1.6 million benefit from a reduction in tax valuation
reserves.
Third quarter 1997 sales from the footwear retailing operations increased 8.6%
from the third quarter of 1996. Famous Footwear's total sales of $243.1
million increased 8.9% from last year representing a same-store sales increase
of 1.0% and 29 more stores in operation, reflecting a total of 812 stores in
operation. The Naturalizer Retail division's total sales increased 6.1% in the
1997 quarter to $33.1 million, resulting from an increase of 2.7% on a same-
store basis and one less store in operation. The Canadian retailing operation's
sales of $13.5 million increased 10.1%, which resulted from a same-store sales
increase of 7.4% and six more stores in operation than in the third quarter of
1996.
Sales from footwear wholesaling businesses decreased 6.1% to $144.2 million
compared to $153.6 million in last year's third quarter. The sales decline was
primarily caused by lower sales at the Brown Branded Marketing division and
the Pagoda International operations.
Gross profit as a percent of sales decreased to 35.9% from 37.2% for the same
period last year. Excluding the restructuring charge impact, the gross profit
as a percent of sales was 37.7% resulting in a slight increase over prior year
primarily due to the higher margins at Famous Footwear.
Selling and administrative expenses as a percent of sales increased to 33.9%
from 31.9% for the same period last year. Selling and administrative expenses
as a percent of sales were 32.9% excluding the restructuring charge impact.
The increase reflects a higher expense rate at the company's wholesaling
operations and the effect from a greater mix of retail sales.
Excluding the restructuring charge and operating losses from Pagoda
International, the consolidated tax rate was 40.8% of consolidated pre-tax
income for the third quarter of 1997 compared to 29.7% in last year's quarter,
which reflected a $1.6 million reduction in tax valuation reserves.
Nine Months ended November 1, 1997 compared to the Nine Months ended
November 1, 1996
--------------------------------------------------------------------
Consolidated net sales for the first nine months of 1997 were $1,204.5 million,
an increase of 3.3% from the first nine months of 1996 total of $1,166.1
million.
<PAGE>
A net loss of $8.3 million for the first nine months of 1997 compares to net
earnings of $18.9 million for the first nine months of 1996. The 1997 loss
includes an aftertax, non-recurring charge of $21.0 million related to Pagoda
International's operations. The 1997 loss also includes a $9.1 million loss
from Pagoda International operations compared to a $2.6 million loss in 1996.
The 1996 results include aftertax credits of $2.6 million from liquidation of
LIFO inventories and $1.6 million from a reduction in tax valuation reserves.
Sales from the footwear retailing operations increased 7.0% to $795.0 million
from the first nine months of 1996. Famous Footwear's total sales for the
first nine months of 1997 increased 8.1% to $656.8 million, reflecting a 1.4%
increase in same-store sales and 29 more units in operation. Naturalizer
Retail division's total sales decreased 0.7% to $98.9 million in the first nine
months of 1997 with a corresponding 1.5% decline on a same-store basis. Sales
from the Canadian retailing operation during 1997 increased 9.4% to $39.3
million, with a same-store sales increase of 6.3% and six more units than in
the nine-month period ended November 2, 1996.
Sales from footwear wholesaling businesses for the first nine months of 1997
decreased 3.2% to $409.5 million from the same period last year. These higher
1996 sales were reflected at the Pagoda Division and primarily resulted from
the sale of footwear for Disney's "Hunchback of Notre Dame" movie in the prior
year.
Gross profit as a percent of sales decreased to 37.2% for the nine-month period
ended November 1, 1997 from 37.4% for the nine-month period ended November 2,
1996. Excluding the restructuring charge impact, the gross profit as a percent
of sales was 37.8% resulting in an increase over prior year primarily due to
a higher mix of retail sales.
Selling and administrative expenses as a percent of sales increased to 34.8%
for the first nine months of 1997 from 33.9% for the first nine months of 1996.
The increase reflects lower sales in the wholesale operations as the
restructuring charge has no significant impact on the first nine months of 1997
expenses.
The consolidated tax rate was 35.3% excluding the restructuring charge and
losses from Pagoda International operations. This tax rate compares to the
1996 tax rate of 35.2% excluding the impact of the reversal of the tax
valuation reserve.
Financial Condition
-------------------
A summary of key financial data and ratios at the dates indicated is as
follows:
November 1, November 2, February 1,
1997 1996 1997
----------- ----------- -----------
Working Capital (millions) $278.1 $308.5 $301.0
Current Ratio 2.1:1 2.2:1 2.1:1
Total Debt as a Percentage of
Total Capitalization 51.9% 50.3% 52.4%
Net Debt (Total Debt less Cash and
Cash Equivalents) as a Percentage
of Total Capitalization 49.0% 47.2% 48.4%
<PAGE>
Cash flow from operating activities for the first nine months of fiscal 1997
was a net generation of $45.2 million versus a use of $1.8 million last year.
In 1997's first nine months, cash flow improved primarily as a result of lower
accounts receivable and continued improvement in inventory management.
The decrease in the ratio of total debt as a percentage of total capitalization
at November 1, 1997, compared to the end of fiscal 1996, is due primarily to
the Company's lower level of short-term notes payable. At November 1, 1997,
$32.0 million was borrowed and $17.3 million of letters of credit were
outstanding under the Company's $155 million revolving bank Credit Agreement.
As a result of the $21.0 million restructuring charge during the third quarter
of 1997, the Company amended its revolving Credit Agreement and its 7.36%
Senior Note Agreement to modify certain financial covenants.
Forward Looking Statements
--------------------------
From time to time, the Company publishes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Actual results could differ materially. In Exhibit 99 to the Company's fiscal
1996 Annual Report on Form 10-K, detailed factors that could cause variations
in results to occur are listed and discussed. Such Exhibit is incorporated
herein by reference.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
--------------------------
There have been no material developments during the quarter ended November
1, 1997, in the legal proceedings described in the Company's Form 10-K for
the period ended February 1, 1997.
Item 6 - Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Listing of Exhibits
(3) (i) (a) Certificate of Incorporation of the
Company as amended through February
16, 1984, incorporated herein by
reference to Exhibit 3 to the
Company's Report on Form 10-K for the
fiscal year ended November 1, 1986.
(i) (b) Amendment of Certificate of
Incorporation of the Company filed
February 20, 1987, incorporated
herein by reference to Exhibit 3 to
the Company's Report on Form 10-K for
the fiscal year ended January 30,
1988.
(ii) Bylaws of the Company as amended
through February 1, 1997,
incorporated herein by reference to
Exhibit 3 to the Company's Report on
Form 10-K for the fiscal year ended
February 1, 1997.
(4) (b) (iv) Amendment No. 1, dated October 8,
1997, to the Credit Agreement between
the Company and the Lenders named
therein, NationsBank, N.A., as Agent,
and First Chicago Capital Markets,
Inc., as Syndication Agent, filed
herewith.
(c) (i) Amendment No. 2, dated October 7,
1997, to the Senior Note Agreement
between the Company and Prudential
Insurance Company of America, as
amended, filed herewith.
(11) Computation of Earnings Per Share
(Page 16)
(27) Financial Data Schedule (Page 17)
(99.1) Discussion of Certain Risk Factors
That Could Affect the Company's
Operating Results as incorporated
herein by reference to the Company's
Report on Form 10-K for the fiscal
year ended February 1, 1997.
(b) Reports on Form 8-K:
The Corporation filed a current report on Form 8-K dated
August 8, 1997 in response to Items 5 and 7, amending its
Rights Agreement to replace Boatmen's Trust Company as rights
agent with First Chicago Trust Company of New York.
The Corporation filed a current report on Form 8-K dated
October 9, 1997 in response to Items 5 and 7, which announced
the decision to substantially reduce its investment in its
Pagoda International division.
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 12, 1997 /s/ Harry E. Rich
---------------------------------
Executive Vice President
and Chief Financial Officer and
On Behalf of the Corporation as
the Principal Financial Officer
<PAGE>
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
BROWN GROUP, INC.
<TABLE>
<CAPTION>
(Thousands, except per share)
Thirteen Weeks Ended Thirty-nine Weeks Ended
------------------------ ------------------------
November 1, November 2, November 1, November 2,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <S> <S> <S>
PRIMARY
Weighted average shares outstanding 17,806 17,702 17,779 17,651
Net effect of dilutive stock options
based on the treasury stock method
using average market price 42 119 58 21
--------- --------- --------- ----------
TOTAL 17,848 17,821 17,837 17,672
========= ========= ========= ==========
Net earnings (loss) $ (13,323) $ 12,905 $ (8,251) $ 18,946
========= ========= ========= ==========
Net earnings (loss) per share (1) $ (.75) $ .73 $ (.46) $ 1.07
========= ========= ========= ==========
FULLY DILUTED
Weighted average shares outstanding 17,806 17,702 17,779 17,651
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 42 137 58 56
--------- --------- --------- ----------
TOTAL 17,848 17,839 17,837 17,707
========= ========= ========= ==========
Net earnings (loss) $ (13,323) $ 12,905 $ (8,251) $ 18,946
========= ========= ========= ==========
Net earnings (loss) per share (1) $ (.75) $ .73 $ (.46) $ 1.07
========= ========= ========= ==========
</TABLE>
(1) The dilutive effect of stock options was not
included in weighted average shares outstanding
for purposes of calculating earnings per share
<PAGE>
EXHIBT 4.b.iv.
EXHIBIT
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 (the "Amendment") dated as of October 8, 1997, to
the Credit Agreement referenced below, is by and among BROWN GROUP, INC., a New
York corporation, certain of its subsidiaries and affiliates identified herein,
the lenders identified herein and NATIONSBANK, N.A., as successor to The
Boatmen's National Bank of St. Louis, as Agent. Terms used but not otherwise
defined shall have the meanings provided in the Credit Agreement.
W I T N E S S E T H
WHEREAS, a $155 million credit facility has been established in favor of
Brown Group, Inc. (the "Borrower") pursuant to the terms of that Credit
Agreement dated as of January 9, 1997 (as amended and modified, the "Credit
Agreement") among the Borrower, the Guarantors and Lenders identified therein,
First Chicago Capital Markets, Inc., as Syndication Agent, and The Boatmen's
National Bank of St. Louis, a national banking association now known as
NationsBank, N.A., as Agent;
WHEREAS, the Borrower plans to take a special charge against earnings
and has requested modification of certain financial covenants in connection
therewith;
WHEREAS, the modifications requested require the consent of the Required
Lenders;
WHEREAS, the Required Lenders have agreed to the requested modifications
on the terms and conditions set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. The Credit Agreement is amended and modified in the following
respects:
1.1 The following definitions in Section 1.1 are amended and
modified, or added, to read as follows:
"Consolidated Net Income" means for any period, the net income
of the Borrower and its Subsidiaries on a consolidated basis determined
in accordance with GAAP applied on a consistent basis, but excluding for
purposes of determining the Consolidated Fixed Charge Coverage Ratio:
(i) any extraordinary gains or losses, and any non-recurring non-cash
gains or losses and (ii) any taxes on such excluded gains and losses and
any tax deductions or credits on account of any such excluded gains and
losses. As related to items (i) and (ii) above, net losses and
restructuring charges in the third and fourth quarters of fiscal year
1997 related to the decision to restructure the Pagoda International
Division, and income tax expense attributable to the repatriation of
certain cash used to support the operations of the Pagoda International
Division shall in the aggregate be limited to $25,000,000.
"Interest Period" means, with respect to a Eurodollar Revolving
Loan, a period of one, two, three or six months, and if available from
all of the Lenders, 7-days, 14-days, 21-days, nine months or twelve
months, in each case commencing on a Business Day selected by the
Borrower pursuant to this Agreement. In the case of Interest Periods
of one, two, three, six, nine or twelve months duration, such Eurodollar
Interest Period shall end on (but exclude) the day which corresponds
numerically to such date of commencement one, two, three, six, nine or
twelve months thereafter, provided, however, that if there is no such
numerically corresponding day in such next, second, third, sixth, ninth
or twelfth succeeding month, such Eurodollar Interest Period shall end
on the last Business Day of such next, second, third, sixth, ninth or
twelfth succeeding month. If a Eurodollar Interest Period would
otherwise end on a day which is not a Business Day, such Eurodollar
Interest Period shall end on the next succeeding Business Day, provided,
however, that if said next succeeding Business Day falls in a new month,
such Eurodollar Interest Period shall end on the immediately preceding
Business Day.
"Letter of Credit" means any letter of credit issued by the
Issuing Lender for the account of the Borrower in accordance with the
terms of Section 2.3, including drafts (whether at sight or time),
drawing certificates, deferred payment obligations and acceptances
issued or created thereunder or in connection therewith.
1.2 Section 2.4.3(ii) regarding Commercial Letter of Credit
Fees is amended to read as follows:
(ii) Commercial Letter of Credit Fee. In consideration of the
LOC Commitment hereunder, the Borrower agrees to pay to the Agent for
the ratable benefit of the Lenders a fee (the "Commercial Letter of
Credit Fee") on a per annum basis on the average daily maximum amount
available to be drawn under commercial Letters of Credit (whether or not
conditions for drawing thereunder have been satisfied) equal to:
(A) prior to acceptance of a draft or creation of a
deferred payment obligation relating to a commercial Letter of
Credit, fifty percent (50%) of the Applicable Percentage for the
Standby Letter of Credit Fee; and
(B) from acceptance of a draft or creation of a
deferred payment obligation relating to a commercial Letter of
Credit, but prior to payment by the Issuing Lender thereon, one
hundred percent (100%) of the Applicable Percentage for the
Standby Letter of Credit Fee.
The Commercial Letter of Credit Fee shall be payable quarterly in
arrears on the last domestic Business Day of each calendar quarter.
1.3 Section 6.17 regarding the Consolidated Leverage Ratio
is amended to read as follows:
6.17 Consolidated Leverage Ratio.
The Borrower will maintain at all times a Consolidated Leverage
Ratio of not more than:
From October 8, 1997 (being the date of
Amendment No. 1) through the last day of the
second fiscal quarter of 1998 .60 to 1.0
From the first day of the third fiscal quarter
of 1998 to the last day of the first fiscal
quarter of 1999 .575 to 1.0
From the first day of the second fiscal quarter
of 1999 and thereafter .55 to 1.0
1.5 Section 6.19 regarding Consolidated Tangible Net Worth
is amended to read as follows:
6.19 Consolidated Tangible Net Worth.
The Borrower will maintain at all times and on any date of
determination a Consolidated Tangible Net Worth of not less than the
sum of (i) $150,000,000 plus (ii) an amount equal to 50% of cumulative
Consolidated Net Income (with no deduction for cumulative losses) from
and including the fiscal quarter beginning August 4, 1996 through the
Borrower's fiscal quarter then most recently ended on or prior to such
date of determination plus (iii) an amount equal to 100% of the Net
Proceeds from any Equity Transaction occurring after the Closing Date.
1.6 Section 6.24 regarding Restricted Payments is amended
to read as follows:
6.24. Restricted Payments.
The Borrower will not make or permit any Restricted Payment to
occur, except that so long as no Default or Unmatured Default shall
exist immediately prior to or after giving effect thereto, the Borrower
may make Restricted Payments in an aggregate amount not to exceed the
sum of
(A) $35,000,000 plus
(B) an amount equal to fifty percent (50%) of
cumulative Consolidated Net Income (but only to the extent
positive) accrued quarterly from the beginning of the
Borrower's fiscal quarter beginning August 4, 1996 as reduced
by the cumulative amount of Restricted Payments made since
August 4, 1996.
2. This Amendment shall be effective upon execution by the
Borrower, the Guarantors and the Required Lenders.
3. Except as modified hereby, all of the terms and provisions of
the Credit Agreement (including Schedules and Exhibits) shall remain in full
force and effect.
4. The Borrower agree to pay all reasonable costs and expenses of
the Agent in connection with the preparation, execution and delivery of this
Amendment, including without limitation the reasonable fees and expenses of
Moore & Van Allen, PLLC.
5. This Amendment may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original and
it shall not be necessary in making proof of this Amendment to produce or
account for more than one such counterpart.
6. This Amendment shall be deemed to be a contract made under,
and for all purposes shall be construed in accordance with the laws of the
State of Missouri.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
BORROWER: BROWN GROUP, INC.
By: /s/ Harry E. Rich
Executive Vice President and
Chief Financial Officer
8300 Maryland Avenue
P.O. Box 29
St. Louis, MO 63166
Telephone No.: (314) 854-4124
Telecopier No.: (314) 854-4098
GUARANTORS: BROWN GROUP INTERNATIONAL, INC.
BROWN GROUP RETAIL, INC.
PAGODA TRADING COMPANY, INC.
SIDNEY RICH ASSOCIATES, INC.
By: /s/ Harry E. Rich
Vice President for each of
the foregoing
8300 Maryland Avenue
P.O. Box 29
St. Louis, MO 63166
Telephone No.: (314) 854-4124
Telecopier No.: (314) 854-4098
LENDERS: NATIONSBANK, N.A.,
individually and as Agent
By: /s/ Juan A. Cazorla
Title: Vice President
NationsBank, N.A.
901 Main Street
TX1-49-213-05
Dallas, TX 75283
Attn: Molly Oxford, Agency Services
Telephone No.: (214) 508-3255
Telecopier No.: (214) 508-2118
with a copy to:
NationsBank Plaza
800 Market Street, 12th Floor
St. Louis, MO 63166-0236
Attn: Juan A. Cazorla
Telephone No.: (314) 466-6695
Telecopier No.: (314) 466-7783
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ John Runger
Title: Managing Director
First Chicago Capital Markets, Inc.
One First National Plaza
National Corporate Banking, Suite 0324
Chicago, IL 60670
Attn: John Runger
Telephone No.: (312) 732-7101
Telecopier No.: (312) 732-1117
SUNTRUST BANK, ATLANTA,
By:
Title:
By:
Title:
25 Park Place, 26th Floor
Mail Code 118
Atlanta, GA 30303
Attn: Linda L. Dash
Telephone No.: (404) 658-4923
Telecopier No.: (404) 658-4905
MORGAN GUARANTY TRUST COMPANY
By: /s/ Stephen Hannan
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Attn: Stephen J. Hannan
Telephone No.: (212) 642-7679
Telecopier No.: (212) 648-5005
ROYAL BANK OF CANADA
By: /s/ Karen T. Hull
Title: Retail Group Manager
New York Branch
Financial Square, 23rd Floor
New York, New York 10005-3531
Attn: Manager, Credit Administration
Telephone No.: (212) 428-6311
Telecopier No.: (212) 428-2372
with a copy to:
1 North Franklin Street
Suite 700
Chicago, IL 60606
Attn: Karen T. Hull,
Retail Group Manager
Telephone No.: (312) 551-1617
Telecopier No.: (312) 551-0805
THE YASUDA TRUST & BANKING LTD.
By: /s/ Rohn Laudenschlager
Title: Senior Vice President
New York Branch
666 Fifth Avenue, 8th Floor
New York, New York 10103
Attn: Joel Powers
Telephone No.: (212) 373-5729
Telecopier No.: (212) 373-5796
BANKBOSTON, N.A.
Retail and Apparel Division
By: /s/ Bethann R. Halligan
Title: Division Executive
100 Federal Street
Mail Stop 01-0-05
Boston, MA 02110-1802
Attn: Bethann R. Halligan
Telephone No.: (617) 434-0144
Telecopier No.: (617) 434-0630
THE SAKURA BANK, LIMITED
By: /s/ Yukiharu Sakumoto
Title: Joint General Manager
227 W. Monroe Street
Suite 4700
Chicago, IL 60606
Attn: Jim Kershner
Telephone No.: (312) 782-2144
Telecopier No.: (312) 332-5345
EXHIBIT 4.c.i.
EXHIBIT
[Execution Copy]
AMENDMENT NO. 2
October 8, 1997
The Prudential Insurance Company
of America
Pruco Life Insurance Company
c/o Prudential Capital Group
2200 Ross Avenue, Suite 4200E
Dallas, Texas 75201
Ladies and Gentlemen:
We refer to the Note Agreement dated as of October 24, 1995, as amended
by Amendment No. 1 dated January 17, 1997 (the "Agreement"), among the
undersigned, Brown Group, Inc. (the "Company") and you. Unless otherwise
defined herein, the terms defined in the Agreement shall be used herein as
therein defined.
The Company plans to take a special charge against earnings and has
requested the holders of the Notes amend certain covenants in the Agreement.
The Company and the holders of the Notes have agreed to amend the Agreement.
Accordingly, it is hereby agreed as follows:
Section 1. Amendments to Agreement. The Agreement is, effective the date
first above written, hereby amended as follows:
Section 1.01. Paragraph 6A. Consolidated Leverage Ratio. Paragraph 6A
is amended in full to read as follows:
"6A. Consolidated Leverage Ratio. The Company will not permit, at any
time, the Consolidated Leverage Ratio to be greater than:
From the Closing Date through August 2, 1997 .55 to 1.0
From August 3, 1997 through the last day of the second
fiscal quarter of 1998 .60 to 1.0
From the first day of the third fiscal quarter of 1998
through the last day of the first fiscal quarter of 1999 .575 to 1.0
From the first day of the second fiscal quarter of 1999
and thereafter .55 to 1.0"
Section 1.02. Paragraph 6C. Consolidated Tangible Net Worth.
Paragraph 6C is amended in full to read as follows:
"6C. Consolidated Tangible Net Worth. The Company will not permit, at
any time and on any date of determination, Consolidated Tangible Net Worth less
than the sum of (i) $150,000,000 plus (ii) an amount equal to 50% of cumulative
Consolidated Net Income (with no deduction for cumulative losses), from and
including the fiscal quarter beginning August 4, 1996 through and including the
Company's fiscal quarter then most recently ended on or prior to such date of
determination plus (iii) an amount equal to 100% of the Net Proceeds from any
Equity Transaction occurring after January 9, 1997."
Section 1.03. Paragraph 6D. Restricted Payments. Paragraph 6D is
amended in full to read as follows:
"6D. Restricted Payments. The Company will not make or permit any
Restricted Payment to occur, except that so long as no Default or Event of
Default shall exist immediately prior to or after giving effect thereto, the
Company may make Restricted Payments in an aggregate amount not to exceed the
sum of
(A) $35,000,000 plus
(B) an amount equal to 50% of cumulative Consolidated Net Income
(but only to the extent positive) accrued quarterly from the beginning of
the Company's fiscal quarter beginning August 4, 1996 as reduced by the
cumulative amount of Restricted Payments made since August 4, 1996."
Section 1.04. Paragraph 10B. Other Terms. Paragraph 10 is amended by
amending the definition of Consolidated Net Income in full to read as follows:
"'Consolidated Net Income' shall mean for any period, the net income of
the Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP applied on a consistent basis, but excluding for purposes
of determining the Consolidated Fixed Charge Coverage Ratio (i) any extra-
ordinary gains or losses, and any non-recurring non-cash gains and losses, and
(ii) any taxes on such excluded gains and losses and any tax deductions or
credits on account of any such excluded gains and losses. As related to items
(i) and (ii) above, net losses and restructuring charges in the third and fourth
quarters of fiscal year 1997 related to the decision to restructure the Pagoda
International Division and income tax expense attributable to the repatriation
of certain cash used to support the operations of the Pagoda International
Division shall, in the aggregate, be limited to $25,000,000."
Section 2. Conditions to Effectiveness. This Amendment shall become
effective, when and only when,
(a) each of the holders of the Notes shall have received
counterparts of this Amendment which shall have been executed by the Company,
each Guarantor, and each of the holders of the Notes; and
(b) the Company shall have paid to you by wire transfer
immediately available funds an amendment fee of $25,000 to be wired to the
following account:
The Bank of New York
New York, New York
ABA # 021-000-018
For the Account of The Prudential
Insurance Company of America
Account # 890-0304-391
Reference: Brown Group
Section 3. Representations and Warranties. Each Credit Party hereby
represents and warrants that the representations and warranties contained in
paragraph 8 of the Agreement are true and correct on the date hereof as of
made on such date, except that the references to "this Agreement" shall mean the
Agreement as amended by this Amendment.
Section 4. Miscellaneous.
4.01. Effect of Amendment. On and after the effective date of this
Amendment, each reference in the Agreement to "this Agreement", "hereunder",
"hereof", or words of like import referring to the Agreement, and each reference
in the Notes to "the Agreement", "thereunder", "thereof", or words of like
import referring to the Agreement, shall mean the Agreement as amended by this
Amendment. The Agreement, as amended by this Amendment, is and shall continue
to be in full force and effect and is hereby in all respects ratified and
confirmed. The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy under the Agreement nor constitute a waiver of any provision of
the Agreement.
4.02. Counterparts. This Amendment may be executed in any number
of counterparts and by any combination of the parties hereto in separate
counterparts, each of which counterparts shall be an original and all of which
taken together shall constitute one and the same Amendment.
If you agree to the terms and provisions hereof, please evidence your
agreement by executing and returning at least a counterpart of this Amendment
to the Company at its address at 8300 Maryland Ave., St. Louis, Missouri 63105,
Attention: Treasurer.
Very truly yours,
BROWN GROUP, INC.
By: /s/ Harry E. Rich
Title: Executive Vice President &
Chief Financial Officer
GUARANTORS
BROWN GROUP INTERNATIONAL, INC.
BROWN GROUP RETAIL, INC.
PAGODA TRADING COMPANY, INC.
SIDNEY RICH ASSOCIATES, INC.
By: /s/ Harry E. Rich
Title: Vice President
Agreed as of the date
first above written:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Jay Squiers
Vice President
PRUCO LIFE INSURANCE COMPANY
By: /s/ Randall M. Kob
Vice President
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] JAN-31-1998
[PERIOD-END] NOV-01-1997
[CASH] 25,496
[SECURITIES] 0
[RECEIVABLES] 85,598
[ALLOWANCES] (10,512)
[INVENTORY] 393,972
[CURRENT-ASSETS] 540,537
[PP&E] 210,262
[DEPRECIATION] (126,701)
[TOTAL-ASSETS] 696,893
[CURRENT-LIABILITIES] 262,448
[BONDS] 197,027
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 67,579
[OTHER-SE] 146,557
[TOTAL-LIABILITY-AND-EQUITY] 696,893
[SALES] 1,204,524
[TOTAL-REVENUES] 1,204,524
[CGS] 756,625
[TOTAL-COSTS] 1,176,249
[OTHER-EXPENSES] 305
[LOSS-PROVISION] 4,615
[INTEREST-EXPENSE] 16,274
[INCOME-PRETAX] 11,696
[INCOME-TAX] 19,947
[INCOME-CONTINUING] (8,251)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (8,251)
[EPS-PRIMARY] (.75)
[EPS-DILUTED] (.75)
</TABLE>
