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 August 2, 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 August 30, 1997, 18,021,477 shares of the registrant's common stock
were outstanding.
<PAGE>
BROWN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
(Unaudited)
--------------------
August 2, August 3, February 1,
1997 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 42,320 $ 35,120 $ 38,686
Receivables, net of allowances of
$8,974 at August 2, 1997,
$10,723 at August 3, 1996, and
$10,203 at February 1, 1997 73,484 77,760 90,246
Inventories, net of adjustment to
last-in, first-out cost of
$17,203 at August 2, 1997,
$22,835 at August 3, 1996, and
$18,846 at February 1, 1997 439,208 410,282 398,803
Other Current Assets 37,634 41,724 37,040
--------- --------- ---------
Total Current Assets 592,646 564,886 564,775
Property and Equipment 208,234 199,279 202,229
Less allowances for depreciation
and amortization (124,368) (114,981) (116,849)
--------- --------- ---------
83,866 84,298 85,380
Other Assets 72,110 69,729 72,220
--------- --------- ---------
$ 748,622 $ 718,913 $ 722,375
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes Payable $ 47,000 $ 121,000 $ 62,000
Accounts Payable 160,795 157,015 124,697
Accrued Expenses 80,154 72,739 71,053
Income Taxes 5,674 5,703 4,005
Current Maturities of Long-Term Debt 2,000 2,000 2,000
--------- --------- ---------
Total Current Liabilities 295,623 358,457 263,755
Long-Term Debt and Capitalized
Lease Obligations 197,025 104,022 197,025
Other Liabilities 23,929 26,314 24,558
Shareholders' Equity
Common Stock 67,590 67,376 67,387
Additional Capital 46,814 46,467 46,310
Cumulative Translation Adjustment (6,599) (4,829) (4,433)
Unamortized Value of Restricted Stock (5,290) (7,075) (5,700)
Retained Earnings 129,530 128,181 133,473
--------- --------- ---------
232,045 230,120 237,037
--------- --------- ---------
$ 748,622 $ 718,913 $ 722,375
========= ========= =========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
BROWN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
--------------------- ----------------------
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $378,823 $389,983 $770,638 $745,768
Cost of Goods Sold 232,587 245,462 478,569 465,370
-------- -------- -------- --------
Gross Profit 146,236 144,521 292,069 280,398
Selling and Administrative Expenses 134,746 130,786 272,753 261,470
Interest Expense 5,364 4,522 11,129 9,255
Other (Income) Expense 346 261 (90) (140)
-------- -------- -------- --------
Earnings Before Income Taxes 5,780 8,952 8,277 9,813
Income Tax Provision 2,250 3,438 3,205 3,772
-------- -------- -------- --------
NET EARNINGS $ 3,530 $ 5,514 $ 5,072 $ 6,041
======== ======== ======== ========
NET EARNINGS PER COMMON SHARE $ .20 $ .31 $ .29 $ .34
======== ======== ======== ========
Weighted Average Number of
Outstanding Shares
of Common Stock 17,786 17,637 17,766 17,626
DIVIDENDS PER COMMON SHARE $ .25 $ .25 $ .50 $ .50
======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
BROWN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
----------------------
August 2, August 3,
1997 1996
--------- ---------
<S> <C> <C>
Net Cash Provided by Operating Activities $ 36,942 $ 8,357
Investing Activities:
Capital expenditures (9,677) (7,815)
Other 370 944
--------- ---------
Net Cash Used by Investing Activities (9,307) (6,871)
Financing Activities:
Increase (decrease) in short-term notes payable (15,000) 9,000
Principal payments of long-term debt (1,450)
Proceeds from issuance of common stock 14
Dividends paid (9,015) (8,974)
--------- ---------
Net Cash Used by Financing Activities (24,001) (1,424)
--------- ---------
Increase in Cash and Cash Equivalents 3,634 62
Cash and Cash Equivalents at Beginning of Period 38,686 35,058
--------- ---------
Cash and Cash Equivalents at End of Period $ 42,320 $ 35,120
========= =========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<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 by 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
twenty-six week periods ended August 2, 1997 and August 3, 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 $0.9 million and
$4.0 million in the thirteen weeks and twenty-six weeks ended August 3, 1996,
respectively.<PAGE>
Note D: 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 August 2, 1997 and
August 3, 1996, and the related condensed consolidating statements of earnings
and cash flows for the twenty-six weeks ended August 2, 1997 and August 3,
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.
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF AUGUST 2, 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 . . $ 1,324 $ 10,533 $ 30,463 $ - $ 42,320
Receivables, net. . . . . . . 30,538 10,225 32,721 - 73,484
Inventory, net. . . . . . . . 67,010 339,202 47,535 (14,539) 439,208
Other current assets . . . . 7,321 17,416 7,544 5,353 37,634
---------- ------------ ------------- ------------ ------------
Total Current Assets. 106,193 377,376 118,263 (9,186) 592,646
Property and Equipment, net. . . 18,328 57,784 7,754 - 83,866
Other Assets . . . . . 42,701 16,661 12,973 (225) 72,110
Investment in Subsidiaries . . . 265,382 58,691 3,811 (327,884) -
---------- ------------ ------------- ------------ ------------
Total Assets . . . . . . . . $ 432,604 $ 510,512 $ 142,801 $ (337,295) $ 748,622
========== ============ ============= ============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable . . . . . . . . $ 47,000 $ - $ - $ - $ 47,000
Accounts payable. . . . . . . 6,599 132,319 21,877 - 160,795
Accrued expenses. . . . . . . 25,953 44,901 13,875 (4,575) 80,154
Income taxes. . . . . . . . . 4,627 1,428 (1,203) 822 5,674
Current maturities of
long-term debt . . . . . . . 2,000 - - - 2,000
--------- ----------- ------------- ------------ -------------
Total Current Liabilities 86,179 178,648 34,549 (3,753) 295,623
Long-Term Debt and Capitalized
Lease Obligations. . . . . . 197,025 - 75 (75) 197,025
Other Liabilities. . . . . . . . 21,184 2,244 597 (96) 23,929
Intercompany Payable (Receivable) (103,829) 86,441 17,738 (350) -
Shareholders' Equity . . . . . . 232,045 243,179 89,842 (333,021) 232,045
--------- ----------- ------------- ------------ -------------
Total Liabilities and
Shareholders' Equity . $ 432,604 $ 510,512 $ 142,801 $ (337,295) $ 748,622
========== =========== ============= ============ =============
</TABLE>
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
TWENTY-SIX WEEKS ENDED AUGUST 2, 1997
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales. . . . . . . . . . . $123,986 $ 588,349 $ 185,494 $ (127,191) $ 770,638
Cost of goods sold . . . . . . 88,250 370,691 146,891 (127,263) 478,569
--------- ------------ ------------- ----------- ------------
Gross profit . . . . . . . . . 35,736 217,658 38,603 72 292,069
Selling and
Administrative expenses. . . . 38,012 200,324 35,110 (693) 272,753
Interest expense . . . . . . . 11,033 - 96 - 11,129
Intercompany interest
(income) expense. . . . . . (7,721) 7,720 1 - -
Other (income) expense . . . . (1,790) 319 616 765 (90)
Equity in (earnings)
of subsidiaries. . . . . . (7,888) (2,589) - 10,477 -
--------- ------------ ------------- ----------- ------------
Earnings (Loss) Before
Income Taxes . . . . . . 4,090 11,884 2,780 (10,477) 8,277
Income tax provision (benefit) (982) 3,996 191 - 3,205
-------- ------------ ------------- ----------- ------------
Net Earnings . . . . . . . $ 5,072 $ 7,888 $ 2,589 $ (10,477) $ 5,072
======== ============ ============= =========== ============
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
TWENTY-SIX WEEKS ENDED AUGUST 2, 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. . . . $ 13,914 $ 28,416 $ (9,343) $ 3,955 $ 36,942
Investing Activities:
Capital expenditures. . . . (2,008) (6,732) ( 937) - (9,677)
Other . . . . . . . . . . . 363 - 7 - 370
-------- ------------ ------------ ------------ ------------
Net Cash (Used) by
Investing Activities. . . . (1,645) (6,732) (930) - (9,307)
Financing Activities:
Increase (decrease) in
short-term notes payable . (15,000) - - - (15,000)
Proceeds from issuance of
common stock . . . . . . . 14 - - - 14
Dividends paid. . . . . . . (9,015) - - - (9,015)
Intercompany financing. . . 13,186 (17,461) 10,429 (6,154) -
-------- ------------ ------------ ------------ ------------
Net Cash Provided (Used) by
Financing Activities. . . . (10,815) (17,461) 10,429 (6,154) (24,001)
Increase (Decrease) in Cash and
Cash Equivalents. . . . . . 1,454 4,223 156 (2,199) 3,634
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 . . . . . . . $ 1,324 $ 10,533 $ 30,463 $ - $ 42,320
======== ============ ============ ============ ============
</TABLE>
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF AUGUST 3, 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 . . . $ 1,893 $ 10,241 $ 22,986 $ - $ 35,120
Receivables, net. . 30,871 12,457 34,432 - 77,760
Inventory, net. . . 60,050 317,125 44,461 (11,354) 410,282
Other current assets . 14,618 16,542 7,204 3,360 41,724
-------- ------------ ------------- ------------ ------------
Total Current Assets. 107,432 356,365 109,083 (7,994) 564,886
Property and Equipment, net. . 18,280 58,182 7,836 - 84,298
Other Assets . . . . . 40,942 16,287 12,892 (392) 69,729
Investment in Subsidiaries . . 248,975 49,334 3,811 (302,120) -
-------- ------------ ------------- ------------ ------------
Total Assets . . . . . . . . . $415,629 $ 480,168 $ 133,622 $ (310,506) $ 718,913
======== ============ ============= ============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable . . . . . . . . . $121,000 $ - $ - $ - $ 121,000
Accounts payable. . . . . . . . 4,381 126,862 25,772 - 157,015
Accrued expenses. . . . . . . . 31,565 33,784 12,963 (5,573) 72,739
Income taxes. . . . . . . . . . 2,630 1,739 1,904 (570) 5,703
Current maturities of
long-term debt . . 2,000 - - - 2,000
-------- ------------ ------------- ------------ ------------
Total Current Liabilities . 161,576 162,385 40,639 (6,143) 358,457
Long-Term Debt and Capitalized
Lease Obligations. . . . . . . 104,022 - 125 (125) 104,022
Other Liabilities. . . . . . . . . 21,378 2,942 636 1,358 26,314
Intercompany Payable (Receivable). (101,467) 93,397 6,409 1,661 -
Shareholders' Equity . . . . . . . 230,120 221,444 85,813 (307,257) 230,120
-------- ------------ ------------- ------------ ------------
Total Liabilities and
Shareholders' Equity . . $415,629 $ 480,168 $ 133,622 $ (310,506) $ 718,913
======== ============ ============= ============ ============
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
TWENTY-SIX WEEKS ENDED AUGUST 3, 1996
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales. . . . . . . . . . . . . $121,403 $ 564,845 $ 194,818 $ (135,298) $ 745,768
Cost of goods sold . . . . . . . . 86,213 358,539 155,970 (135,352) 465,370
-------- ----------- ------------- ----------- ------------
Gross profit. . . . . . . . . . 35,190 206,306 38,848 54 280,398
Selling and administrative expenses 37,438 190,151 34,467 (586) 261,470
Interest expense . . . . . . . . . 8,965 211 79 - 9,255
Intercompany interest
(income) expense. . . . . . . . (7,420) 7,435 (15) - -
Other (income) expense . . . . . . (1,913) 82 1,051 640 (140)
Equity in (earnings) of
subsidiaries. . . . . . . . . . (6,782) (1,788) - 8,570 -
-------- ----------- ------------- ----------- ------------
Earnings (Loss) Before
Income Taxes . . . . . . . . . 4,902 10,215 3,266 (8,570) 9,813
Income tax provision (benefit) . . (1,139) 3,433 1,478 - 3,772
-------- ----------- ------------- ----------- ------------
Net Earnings . . . . . . . . . $ 6,041 $ 6,782 $ 1,788 $ (8,570) $ 6,041
======== =========== ============= =========== ============
</TABLE>
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
TWENTY-SIX WEEKS ENDED AUGUST 3, 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 . . . $(17,073) $ 30,310 $ (2,723) $ (2,157) $ 8,357
Investing Activities:
Capital expenditures . . . (565) (6,015) (1,235) - (7,815)
Other . . . . . . . . . . 940 4 - - 944
-------- ------------ ------------ ----------- ------------
Net Cash Provided (Used) by
Investing Activities . . . 375 (6,011) (1,235) - (6,871)
Financing Activities:
Increase (decrease) in
short-term notes payable. 9,000 - - - 9,000
Repurchase of long-term debt (1,450) - - - (1,450)
Dividends paid . . . . . . (8,974) - - - (8,974)
Intercompany financing . . 20,306 (23,024) 561 2,157 -
-------- ------------ ------------ ----------- ------------
Net Cash Provided (Used) by
Financing Activities . . . 18,882 (23,024) 561 2,157 (1,424)
Increase (Decrease) in Cash
and Cash Equivalents . . . 2,184 1,275 (3,397) - 62
Cash and Cash Equivalents at
Beginning of Period. . . . (291) 8,966 26,383 - 35,058
-------- ------------ ------------ ----------- ------------
Cash and Cash Equivalents at
End of Period . . . . . . $ 1,893 $ 10,241 $ 22,986 $ - $ 35,120
======== ============ ============ =========== ============
</TABLE>
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------
Results of Operations
---------------------
Quarter ended August 2, 1997 compared to the Quarter ended August 3, 1996
-------------------------------------------------------------------------
Consolidated net sales for the fiscal quarter ended August 2, 1997, were $378.8
million, compared to $390.0 million in the quarter ended August 3, 1996.
Net earnings of $3.5 million for the second quarter of 1997 compare to net
earnings of $5.5 million for the second quarter of 1996. The 1996 results
include the aftertax credit of $0.6 million from liquidation of LIFO
inventories.
Second quarter 1997 sales from the footwear retailing operations increased 5.7%
from the second quarter of 1996. Famous Footwear's total sales of $213.7
million increased 6.6% from last year reflecting a same-store sales decrease
of 0.2% offset by 16 more stores in operation. The Canadian retailing
operation's sales of $15.0 million increased 10.6% with a same-store sales
increase of 7.1% and four more units than the prior year. The Naturalizer
Retail division's total sales decreased 1.4% in the 1997 quarter to $34.8
million, which reflects five fewer stores and a decline of 1.6% on a same-store
basis.
Sales from footwear wholesaling businesses decreased 18.0% to $115.3 million
compared to $140.6 million in last year's second quarter. The sales decline
was primarily caused by lower sales at the Pagoda Division, which marketed
footwear related to Disney's "Hunchback of Notre Dame" movie in the second
quarter last year.
Gross profit as a percent of sales increased to 38.6% from 37.1% for the same
period last year primarily due to the higher margins from a more efficient
sourcing of footwear in the Company's wholesale operations, partially offset
by lower margins at Famous Footwear reflecting a more promotional marketplace.
Selling and administrative expenses as a percent of sales increased to 35.6%
from 33.5% for the same period last year. This increase reflects higher
advertising expenditures and lower sales in the wholesale operations.
Six Months ended August 2, 1997 compared to the Six Months ended August 3, 1996
-------------------------------------------------------------------------------
Consolidated net sales for the first half of 1997 were $770.6 million, an
increase of 3.3% from the first six months of 1996 total of $745.8 million.
Net earnings of $5.1 million for the first half of 1997 compare to net earnings
of $6.0 million for the first half of 1996. The 1996 results include the
aftertax credit of $2.6 million from liquidation of LIFO inventories.
Sales from the footwear retailing operations increased 6.1% to $505.3 million
from the first half of 1996. Famous Footwear's total sales for the first six
months of 1997 increased 7.7% to $413.7 million, reflecting a 1.5% increase in
same-store sales and 16 more units in operation. Naturalizer stores' total
sales decreased 3.7% to $65.8 million in the first half of 1997 with a
corresponding 3.5% decline on a same-store basis. Sales from the Canadian
retailing operation during the first half of 1997 increased 9.1% to $25.8
million, with a same-store sales increase of 5.8% and four more units than in
the six-month period ended August 3, 1996.
Sales from footwear wholesaling businesses for the first six months of 1997
decreased 1.6% to $265.3 million from the same period last year. Higher sales
at the Brown Branded Marketing division were offset by lower sales at Pagoda
due to last year's Disney movie related sales.
Gross profit as a percent of sales increased to 37.9% for the six-month period
ended August 2, 1997 from 37.6% for the six-month period ended August 3, 1996.
This improvement is due primarily to higher margins at the Company's wholesale
operations.
Selling and administrative expenses as a percent of sales increased to 35.4%
for the first six months of 1997 from 35.1% for the first six months of 1996.
Financial Condition
-------------------
A summary of key financial data and ratios at the dates indicated is as
follows:
August 2, August 3, February 1,
1997 1996 1997
--------- --------- -----------
Working Capital (millions) $297.0 $206.4 $301.0
Current Ratio 2.0:1 1.6:1 2.1:1
Total Debt as a Percentage of
Total Capitalization 51.5% 49.7% 52.4%
Net Debt (Total Debt less Cash and
Cash Equivalents) as a Percentage
of Total Capitalization 46.7% 45.5% 48.4%
Cash flow from operating activities for the first half of fiscal 1997 was a net
generation of $36.9 million versus $8.4 million last year. In 1997's first
half, cash was generated by lower levels of accounts receivable as well as
better management of inventory.
The improvement in the current ratio at August 2, 1997, compared to August 3,
1996, is due to the debt repositioning that the Company completed in the fourth
quarter of 1996, which included the issuance of $100 million of long-term debt
and a reduction in short-term notes payable.
The decrease in the ratio of total debt as a percentage of total capitalization
at August 2, 1997, compared to the end of fiscal 1996, is due primarily to the
Company's lower level of short-term notes payable. At August 2, 1997, $47.0
million was borrowed and $24.8 million of letters of credit were outstanding
under the Company's $155 million revolving bank Credit Agreement.
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 August 2,
1997, in the legal proceedings described in the Company's Form 10-K for the
period ended February 1, 1997.
Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
At the Annual Meeting of Shareholders held on May 22, 1997, one proposal
described in the Notice of Annual Meeting of Shareholders dated April 16,
1997, was voted upon.
The shareholders elected four directors, Mr. Joseph L. Bower, Mr.
Harry E. Rich, Mr. Jerry E. Ritter, and Mr. Thomas A. Williams, for
terms of three years each. The voting for each director was as
follows:
Directors For Withheld
--------- ---------- --------
Joseph L. Bower 15,508,557 300,212
Harry E. Rich 15,533,842 274,927
Jerry E. Ritter 15,526,142 282,627
Thomas A. Williams 15,613,846 194,923
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.
(11) Computation of Earnings Per Share
(Page 14)
(27) Financial Data Schedule (Page 15)
<PAGE>
(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.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BROWN GROUP, INC.
Date: September 12, 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.
(Thousands, except per share)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
--------------------- ----------------------
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PRIMARY
Weighted average shares outstanding 17,786 17,637 17,766 17,626
Net effect of dilutive stock options
based on the treasury stock method
using average market price 99 27 66 14
--------- --------- --------- ---------
TOTAL 17,885 17,664 17,832 17,640
========= ========= ========= =========
Net earnings $ 3,530 $ 5,514 $ 5,072 $ 6,041
========= ========= ========= =========
Net earnings per share (1) $ .20 $ .31 $ .29 $ .34
========= ========= ========= =========
FULLY DILUTED
Weighted average shares outstanding 17,786 17,637 17,766 17,626
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 99 27 69 15
--------- --------- --------- ---------
TOTAL 17,885 17,664 17,835 17,641
========= ========= ========= =========
Net earnings $ 3,530 $ 5,514 $ 5,072 $ 6,041
========= ========= ========= =========
Net earnings per share (1) $ .20 $ .31 $ .29 $ .34
========= ========= ========= =========
</TABLE>
(1) The dilutive effect of stock options was not
included in weighted average shares outstanding
for purposes of calculating earnings per share
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> AUG-02-1997
<CASH> 42,320
<SECURITIES> 0
<RECEIVABLES> 73,484
<ALLOWANCES> 0
<INVENTORY> 439,208
<CURRENT-ASSETS> 592,646
<PP&E> 208,234
<DEPRECIATION> (124,368)
<TOTAL-ASSETS> 748,622
<CURRENT-LIABILITIES> 295,623
<BONDS> 197,025
0
0
<COMMON> 67,590
<OTHER-SE> 164,455
<TOTAL-LIABILITY-AND-EQUITY> 748,622
<SALES> 770,638
<TOTAL-REVENUES> 770,638
<CGS> 478,569
<TOTAL-COSTS> 751,322
<OTHER-EXPENSES> (90)
<LOSS-PROVISION> (88)
<INTEREST-EXPENSE> 11,129
<INCOME-PRETAX> 8,277
<INCOME-TAX> 3,205
<INCOME-CONTINUING> 5,072
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,072
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
