<Page 1>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended July 29, 2000
[ ] 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 SHOE COMPANY, 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)
N/A
(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 26, 2000, 18,031,540 shares of the registrant's common
stock were outstanding.
<Page 2>
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
(Unaudited)
-------------------
July 29, July 31, January 29,
2000 1999 2000
--------- -------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 31,945 $ 34,642 $ 34,158
Receivables, net 60,832 72,975 68,236
Inventories 447,817 412,485 365,989
Other Current Assets 22,572 22,085 19,391
--------- --------- ---------
Total Current Assets 563,166 542,187 487,774
Other Assets 77,119 76,066 77,964
Property and Equipment 240,945 228,750 231,072
Less allowances for depreciation
and amortization (153,155) (144,168) (146,472)
--------- --------- ---------
87,790 84,582 84,600
--------- --------- ---------
$ 728,075 $ 702,835 $ 650,338
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes Payable $ 14,000 $ 2,000 $ -
Accounts Payable 170,303 163,404 113,820
Accrued Expenses 85,750 92,472 89,547
Income Taxes 6,500 11,897 4,402
Current Maturities of Long-Term Debt 10,000 10,000 10,000
--------- --------- ---------
Total Current Liabilities 286,553 279,773 217,769
Long-Term Debt and Capitalized
Lease Obligations 162,035 172,033 162,034
Other Liabilities 19,657 19,175 20,590
Shareholders' Equity
Common Stock 67,882 68,436 68,486
Additional Capital 48,514 49,183 49,153
Unamortized Value of Restricted Stock (2,932) (3,882) (3,566)
Accumulated Other Comprehensive Loss (6,752) (8,772) (6,034)
Retained Earnings 153,118 126,889 141,906
--------- --------- ---------
259,830 231,854 249,945
--------- --------- ---------
$ 728,075 $ 702,835 $ 650,338
========= ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<Page 3>
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------- ----------------------
July 29, July 31, July 29, July 31,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $418,709 $410,100 $812,978 $806,926
Cost of Goods Sold 251,056 249,025 483,839 488,044
-------- -------- -------- --------
Gross Profit 167,653 161,075 329,139 318,882
Selling and Administrative Expenses 150,392 141,533 298,335 283,182
Interest Expense 4,314 4,392 8,579 9,075
Other Income (771) (2,628) (1,433) (1,333)
-------- -------- -------- --------
Earnings Before Income Taxes 13,718 17,778 23,658 27,958
Income Tax Provision 4,520 7,261 7,912 11,125
-------- -------- -------- --------
NET EARNINGS $ 9,198 $ 10,517 $ 15,746 $ 16,833
======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE $ .51 $ .59 $ .88 $ .95
======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE $ .51 $ .58 $ .87 $ .93
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE $ .10 $ .10 $ .20 $ .20
======== ======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<Page 4>
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
----------------------
July 29, July 31,
2000 1999
--------- --------
<S> <C> <C>
Net Cash Provided by Operating Activities $ 3,158 $ 10,278
Investing Activities:
Proceeds from the sale of le coq sportif 805 9,281
Capital expenditures (14,655) (14,577)
--------- ---------
Net Cash Used by Investing Activities (13,850) (5,296)
Financing Activities:
Increase in short-term notes payable 14,000 2,000
Principal payments of long-term debt - (15,000)
Payments for purchase of treasury stock (1,883) -
Proceeds from issuance of common stock 10 773
Dividends paid (3,648) (3,645)
--------- ---------
Net Cash Provided (Used) by Financing Activities 8,479 (15,872)
--------- ---------
Decrease in Cash and Cash Equivalents (2,213) (10,890)
Cash and Cash Equivalents at Beginning of Period 34,158 45,532
--------- ---------
Cash and Cash Equivalents at End of Period $ 31,945 $ 34,642
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<Page 5>
BROWN SHOE COMPANY, 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 the Company's 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 January 29, 2000.
Note B - Earnings Per Share
---------------------------
The following table sets forth the computation of basic and diluted
earnings per share for the periods ended July 29, 2000 and July 31,
1999 (000's, except per share data):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------- ----------------------
July 29, July 31, July 29, July 31,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Numerator:
Net earnings -
Basic and Diluted $ 9,198 $10,517 $15,746 $16,833
======= ======= ======= =======
Denominator:
Weighted average shares
outstanding-Basic 17,863 17,861 17,891 17,812
Effect of potentially
dilutive securities 194 387 167 300
------- ------- ------- -------
Weighted average shares
outstanding-Diluted 18,057 18,248 18,058 18,112
======= ======= ======= =======
Basic earnings per
common share $ .51 $ .59 $ .88 $ .95
======= ======= ======= =======
Diluted earnings per
common share $ .51 $ .58 $ .87 $ .93
======= ======= ======= =======
</TABLE>
<Page 6>
Note C - Comprehensive Income
-----------------------------
Comprehensive Income includes all changes in equity except those
resulting from investments by shareholders and distributions to
shareholders.
The following table sets forth the reconciliation from Net Earnings to
Comprehensive Income for the periods ended July 29, 2000 and July 31,
1999 (000's):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------- ----------------------
July 29, July 31, July 29, July 31,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Earnings $ 9,198 $10,517 $15,746 $16,833
Foreign Currency
Translation Adjustment 59 (1,736) (718) 70
------- ------- ------- -------
Comprehensive Income $ 9,257 $ 8,781 $15,028 $16,903
======= ======= ======= =======
</TABLE>
Note D - Business Segment Information
-------------------------------------
Applicable business segment information is as follows for the periods
ended July 29, 2000 and July 31, 1999 (000's):
<TABLE>
<CAPTION>
Famous Wholesale Naturalizer Pagoda
Footwear Operations Retail International Other Totals
-------- ---------- ------------ ------------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Thirteen Weeks Ended July 29, 2000
External sales $254,072 $109,583 $ 55,054 $ - $ - $418,709
Intersegment sales - 43,243 - - - 43,243
Operating
profit (loss) 13,482 5,507 1,711 - (2,923) 17,777
Thirteen Weeks Ended July 31, 1999
External sales $237,522 $120,348 $ 49,977 $ 93 $ 2,160 $410,100
Intersegment sales - 41,888 - - - 41,888
Operating
profit (loss) 13,935 8,778 865 (206) (3,301) 20,071
Twenty-six Weeks Ended July 29, 2000
External sales $491,024 $219,917 $102,037 $ - $ - $812,978
Intersegment sales - 96,063 - - - 96,063
Operating
profit (loss) 24,500 13,566 (13) - (6,149) 31,904
Twenty-six Weeks Ended July 31, 1999
External sales $461,135 $246,655 $ 94,106 $ 327 $ 4,703 $806,926
Intersegment sales - 91,031 - - - 91,031
Operating
profit (loss) 25,308 18,664 (323) (676) (6,593) 36,380
</TABLE>
<Page 7>
Reconciliation of operating profit to earnings before income taxes
(000's):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------- ----------------------
July 29, July 31, July 29, July 31,
2000 1999 2000 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Total operating profit $ 17,777 $ 20,071 $ 31,904 $ 36,380
Interest expense (4,314) (4,392) (8,579) (9,075)
Non-operating other income 255 2,099 333 653
-------- -------- -------- --------
Earnings before income taxes $ 13,718 $ 17,778 $ 23,658 $ 27,958
======== ======== ======== ========
</TABLE>
Operating profit represents gross profit less selling and
administrative expenses and other operating income or expense. The
"Other" segment includes Corporate selling and administrative
expenses, which are not allocated to the operating units. Results
from the Scholze Tannery business are also included in the "Other"
segment in fiscal 1999. At the end of fiscal 1999, the Company sold
the Scholze Tannery business at approximately book value.
Note E - Stock Repurchase Program
---------------------------------
On May 4, 2000, the Company announced the approval by the Board of
Directors of a stock repurchase program which allows the Company to
repurchase up to 2 million shares of the Company's outstanding common
stock. In the second quarter of fiscal 2000, the Company purchased
153,700 shares at a cost of $1.9 million under this authorization.
Note F - Condensed Consolidated 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 July 29, 2000 and July 31, 1999, and the related condensed
consolidating statements of earnings and cash flows for the twenty-six
weeks ended July 29, 2000 and July 31, 1999, 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 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 8>
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JULY 29, 2000
(Thousands)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and
cash equivalents $ 2,092 $ (11) $ 29,864 $ - $ 31,945
Receivables, net 29,200 11,767 19,865 - 60,832
Inventories 48,212 395,257 18,189 (13,841) 447,817
Other current assets (5,459) 21,288 2,248 4,495 22,572
-------- -------- -------- -------- --------
Total Current Assets 74,045 428,301 70,166 (9,346) 563,166
Other Assets 50,057 20,781 6,285 (4) 77,119
Property and
Equipment, net 14,228 67,093 6,469 - 87,790
Investment in
Subsidiaries 264,403 39,956 - (304,359) -
-------- -------- -------- -------- --------
Total Assets $402,733 $556,131 $ 82,920 $(313,709) $728,075
======== ======== ======== ========= ========
Liabilities & Shareholders' Equity
Current Liabilities
Notes payable $ 14,000 $ - $ - $ - $ 14,000
Accounts payable 2,994 152,395 14,914 - 170,303
Accrued expenses 22,792 54,788 10,110 (1,940) 85,750
Income taxes 3,692 1,193 1,379 236 6,500
Current maturities
of long-term debt 10,000 - - - 10,000
-------- -------- -------- -------- --------
Total Current
Liabilities 53,478 208,376 26,403 (1,704) 286,553
Long-Term Debt and
Capitalized Lease
Obligations 162,035 - - - 162,035
Other Liabilities 20,348 (1,335) 644 - 19,657
Intercompany Payable
(Receivable) (92,958) 83,489 15,917 (6,448) -
Shareholders' Equity 259,830 265,601 39,956 (305,557) 259,830
-------- -------- -------- -------- --------
Total Liabilities
and Shareholders'
Equity $402,733 $556,131 $ 82,920 $(313,709) $728,075
======== ======== ======== ========= ========
</TABLE>
<Page 9>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
TWENTY-SIX WEEKS ENDED JULY 29, 2000
(Thousands)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales $127,002 $692,596 $146,004 $(152,624) $812,978
Cost of goods sold 93,923 427,191 115,349 (152,624) 483,839
-------- -------- -------- --------- --------
Gross profit 33,079 265,405 30,655 - 329,139
Selling and
administrative
expenses 34,759 245,670 18,543 (637) 298,335
Interest expense 8,512 3 64 - 8,579
Intercompany interest
(income) expense (6,431) 6,458 (27) - -
Other (income) expense (1,559) (25) (486) 637 (1,433)
Equity in (earnings)
of subsidiaries (17,902) (10,148) - 28,050 -
-------- -------- -------- --------- --------
Earnings (Loss)
Before Income Taxes 15,700 23,447 12,561 (28,050) 23,658
Income tax
provision (benefit) (46) 5,545 2,413 - 7,912
-------- -------- -------- --------- --------
Net Earnings (Loss) $ 15,746 $ 17,902 $ 10,148 $ (28,050) $ 15,746
======== ======== ======== ========= =========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
TWENTY-SIX WEEKS ENDED JULY 29, 2000
(Thousands)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Cash Provided
(Used) by
Operating Activities $ 931 $ 2,147 $ 435 $ (355) $ 3,158
Investing Activities:
Capital expenditures (540) (13,144) (971) - (14,655)
Other 805 - - - 805
-------- -------- -------- --------- --------
Net Cash (Used)
Provided by
Investing Activities 265 (13,144) (971) - (13,850)
Financing Activities:
Increase in short-term
notes payable 14,000 - - - 14,000
Proceeds from issuance
of common stock 10 - - - 10
Payments for purchase of
treasury stock (1,883) - - - (1,883)
Dividends paid (3,648) - - - (3,648)
Intercompany financing (16,434) 10,101 5,978 355 -
-------- -------- -------- -------- --------
Net Cash Provided (Used)
by Financing Activities (7,955) 10,101 5,978 355 8,479
Increase (Decrease) in
Cash and Cash
Equivalents (6,759) (896) 5,442 - (2,213)
Cash and Cash Equivalents
at Beginning of Period 8,851 885 24,422 - 34,158
-------- -------- -------- -------- --------
Cash and Cash Equivalents
at End of Period $ 2,092 $ (11) $ 29,864 $ - $ 31,945
======== ======== ======== ======== ========
</TABLE>
<Page 10>
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JULY 31, 1999
(Thousands)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and
cash equivalents $ 1,353 $ 1,985 $ 31,304 $ - $ 34,642
Receivables, net 33,521 12,932 26,522 - 72,975
Inventories 45,341 360,123 19,552 (12,531) 412,485
Other current assets (4,958) 21,063 1,595 4,385 22,085
-------- --------- --------- --------- ----------
Total Current Assets 75,257 396,103 78,973 (8,146) 542,187
Other Assets 49,481 20,815 5,815 (45) 76,066
Property and
Equipment, net 14,643 63,549 6,390 - 84,582
Investment in
Subsidiaries 248,577 41,084 - (289,661) -
-------- --------- --------- --------- ----------
Total Assets $387,958 $ 521,551 $ 91,178 $(297,852) $ 702,835
======== ========= ========= ========= ==========
Liabilities & Shareholders' Equity
Current Liabilities
Notes payable $ 2,000 $ - $ - $ - $ 2,000
Accounts payable 6,095 136,967 20,342 - 163,404
Accrued expenses 25,331 52,987 12,092 2,062 92,472
Income taxes 2,096 8,697 339 765 11,897
Current maturities of
long-term debt 10,000 - - - 10,000
-------- --------- --------- --------- ----------
Total Current
Liabilities 45,522 198,651 32,773 2,827 279,773
Long-Term Debt and
Capitalized Lease
Obligations 172,033 41 - (41) 172,033
Other Liabilities 20,312 (1,336) 199 - 19,175
Intercompany Payable
(Receivable) (81,763) 75,433 17,122 (10,792) -
Shareholders' Equity 231,854 248,762 41,084 (289,846) 231,854
-------- --------- --------- --------- ----------
Total Liabilities
and Shareholders'
Equity $387,958 $ 521,551 $ 91,178 $(297,852) $ 702,835
======== ========= ======== ========= ==========
</TABLE>
<Page 11>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
TWENTY-SIX WEEKS ENDED JULY 31, 1999
(Thousands)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales $126,104 $640,099 $173,338 $(132,615) $ 806,926
Cost of goods sold 90,963 390,655 139,041 (132,615) 488,044
-------- -------- -------- --------- -----------
Gross profit 35,141 249,444 34,297 - 318,882
Selling and
administrative expenses 34,550 227,975 21,457 (800) 283,182
Interest expense 9,060 - 15 - 9,075
Intercompany interest
(income) expense (6,881) 6,894 (13) - -
Other (income) expense 15 (2,057) (91) 800 (1,333)
Equity in (earnings)
of subsidiaries (18,682) (9,788) - 28,470 -
-------- -------- ------- --------- -----------
Earnings (Loss) Before
Income Taxes 17,079 26,420 12,929 (28,470) 27,958
Income tax provision 246 7,738 3,141 - 11,125
-------- -------- ------- --------- -----------
Net Earnings (Loss) $ 16,833 $ 18,682 $ 9,788 $ (28,470) $ 16,833
======== ======== ======= ========= ===========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
TWENTY-SIX WEEKS ENDED JULY 31, 1999
(Thousands)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Cash Provided (Used) by
Operating Activities $ 10,420 $(16,041) $ 4,530 $ 11,369 $ 10,278
Investing Activities:
Capital expenditures (200) (13,397) (980) - (14,577)
Proceeds from sale of
le coq sportif - 9,281 - - 9,281
-------- -------- ------- -------- ----------
Net Cash Used by
Investing Activities (200) (4,116) (980) - (5,296)
Financing Activities:
Increase in short-term
notes payable 2,000 - - - 2,000
Principal payments of
long-term debt (15,000) - - - (15,000)
Proceeds from issuance of
common stock 773 - - - 773
Dividends paid (3,645) - - - (3,645)
Intercompany financing (5,181) 17,404 (854) (11,369) -
------- -------- ------- -------- ----------
Net Cash Provided (Used)
by Financing Activities (21,053) 17,404 (854) (11,369) (15,872)
Increase (Decrease)
in Cash and
Cash Equivalents (10,833) (2,753) 2,696 - (10,890)
Cash and Cash
Equivalents at
Beginning of Period 12,186 4,738 28,608 - 45,532
------- -------- ------- -------- ----------
Cash and Cash
Equivalents at
End of Period $ 1,353 $ 1,985 $31,304 $ - $ 34,642
======= ======== ======= ======== ==========
</TABLE>
<Page 12>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------------------------
Results of Operations
---------------------
Quarter ended July 29, 2000 compared to the Quarter ended July 31, 1999
-----------------------------------------------------------------------
Consolidated net sales for the fiscal quarter ended July 29,
2000 were $418.7 million compared to $410.1 million in the
quarter ended July 31, 1999. Net earnings of $9.2 million for
the second quarter of 2000 compares to net earnings of $10.5
million in the second quarter of 1999.
Famous Footwear achieved a sales increase of 7.0% during the
second quarter of 2000 to $254.1 million. The increase was
driven by 36 more stores, reflecting a total of 875 stores in
operation, slightly offset by a 1.2% same-store sales decline.
Operating earnings for the second quarter of 2000 decreased
2.9% to $13.5 million from $13.9 million last year, due to the
combination of lower same-store sales and competitive pressure
on margins.
The Company's wholesale operations - the Brown Branded, Brown
Pagoda and Brown Canada divisions - had net sales of $109.6
million during the second quarter of 2000 compared to $120.3
million last year. This sales decrease was primarily due to
significant sales of Star Wars movie-related children's shoes
in the second quarter last year. Operating earnings of $5.5
million decreased from $8.8 million in the second quarter of
1999 primarily as a result of the lower sales.
In the Company's Naturalizer Retail operations, which includes
both the United States and Canadian stores, net sales increased
10.2% to $55.1 million in the second quarter of 2000. Same-
store sales in the second quarter of 2000 increased 4.2% in the
United States and 1.7% in Canada. Domestically, the Company
had 14 more stores in operation in 2000; Canada had 6 more
stores in operation. At the end of the second quarter of 2000,
485 stores were in operation including 343 stores in the United
States and 142 stores in Canada. Total Naturalizer retail
operations achieved operating earnings of $1.7 million in the
second quarter of fiscal 2000 compared to $0.9 million in 1999.
The higher operating earnings were primarily due to higher
sales.
Consolidated gross profit as a percent of sales increased to
40.0% from 39.3% during the same period last year. This
increase was primarily due to higher margins at the Company's
wholesale operations and a higher mix of retail sales, which
historically earn higher margins than wholesale sales.
Selling and administrative expenses as a percent of sales
increased to 35.9% from 34.5% during the same period last year.
This increase was due to the lower level of sales within the
wholesale operations, higher expenses within the retail
operations, and a higher mix of retail sales, which carry a
higher expense rate.
Other income in the second quarter of 2000 primarily represents
interest and royalty income. In 1999, Other income included
the gain from the sale of the le coq sportif brand.
<Page 13>
The consolidated tax rate was 32.9% of consolidated pre-tax
income for the second quarter of 2000 compared to 40.8% for
last year. The fiscal 1999 effective rate was higher due a
$1.2 million tax provision to allow repatriation of the
previously untaxed foreign cash generated from the sale of the
le coq sportif business.
Six Months ended July 29, 2000 compared to the Six Months ended
July 31, 1999
---------------------------------------------------------------
Consolidated net sales for the first half of 2000 were $813.0
million, an increase of 0.8% from the first six months of 1999
total of $806.9 million. Net earnings of $15.7 million for the
first half of 2000 compare to net earnings of $16.8 million for
the first half of 1999, a decrease of 6.5%.
Sales at Famous Footwear for the first six months of 2000
increased 6.5% from the first half of last year to $491.0
million, reflecting a 1.1% decrease in same-store sales and 36
more units in operation. Operating earnings for 2000 decreased
3.2% to $24.5 million.
The Company's wholesale sales for the first six months of 2000
decreased 10.8% to $219.9 million from the same period last
year. Operating earnings of $13.6 million decreased $5.1
million from last year due to the decreased sales.
In the Company's Naturalizer Retail operations, net sales
increased 8.4% to $102.0 million in the first six months of
2000. Same-store sales increased 3.6% in the United States
while decreasing 0.9% in Canada. Domestically, the Company had
14 more stores in operation in 2000; Canada had 6 more stores
in operation. Total Naturalizer retail operations broke even in
the first half of 2000 compared to an operating loss of $0.3
million in 1999. The improved operating performance was
primarily due to the higher sales.
Consolidated gross profit as a percent of sales increased to
40.5% from 39.5% for the same period last year. This increase
was primarily due to a higher mix of retail sales, which
historically earn a higher gross profit rate.
Selling and administrative expenses as a percent of sales
increased to 36.7% from 35.1% for the same period last year.
This increase was primarily due to the lower sales at the
Company's wholesale operations.
Other income for the first half of 2000 consisted primarily of
interest and royalty income. In 1999, other income included
the $2.3 million gain from the sale of the le coq sportif
business, partially offset by additional provisions for
environmental costs associated with an owned facility in
Colorado.
The consolidated tax rate was 33.4% of consolidated pre-tax
income for the first six months of 2000 compared to 39.8% for
last year. As previously described, the 1999 tax provision
includes $1.2 million of taxes related to the repatriation of
foreign cash.
<Page 14>
Financial Condition
-------------------
A summary of key financial data and ratios at the dates
indicated is as follows:
July 29, July 31, January 29,
2000 1999 2000
--------- -------- -----------
Working Capital (millions) $276.6 $262.4 $270.0
Current Ratio 2.0:1 1.9:1 2.2:1
Total Debt as a Percentage of
Total Capitalization 41.7% 44.3% 40.8%
Cash flow from operating activities for the first half of
fiscal 2000 provided $3.2 million versus $10.3 million last
year. In the first half of 2000, cash flow declined primarily
as a result of higher inventories partially offset by higher
accounts payable and lower accounts receivable in the Company's
wholesale operations reflecting lower sales.
The increase in the ratio of total debt as a percentage of
total capitalization at July 29, 2000, compared to the end of
fiscal 1999, is due to the cash usage in the second quarter.
In addition, the Company did not have any notes payable
outstanding at the end of fiscal 1999. At July 29, 2000, $14.0
million was borrowed and $10.4 million of letters of credit
were outstanding under the Company's $155.0 million revolving
bank Credit Agreement.
In May 2000, the Company announced a stock repurchase program
under which the Company was authorized to repurchase up to 2
million shares of the Company's outstanding common stock. In
the second quarter of fiscal 2000, the Company purchased
153,700 shares at a cost of $1.9 million under this
authorization.
Forward-Looking Statements
--------------------------
This Form 10-Q contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of
1995. Actual results could differ materially. In Item 1 of
the Company's fiscal 1999 Annual Report on Form 10-K, detailed
risk factors that could cause variations in results to occur
are listed and further described. Such filing is incorporated
herein by reference.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
-------------------------------------------------------------------
No material changes have taken place in the quantitative and
qualitative information about market risk since the end of the
most recent fiscal year.
<Page 15>
PART II - OTHER INFORMATION
---------------------------
Item 1 - Legal Proceedings
--------------------------
There have been no material developments during the quarter
ended July 29, 2000, in the legal proceedings described in
the Company's Annual Report on Form 10-K for the period ended
January 29, 2000.
Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
The results of the votes cast at the Annual Meeting of
Shareholders held on May 25, 2000 were reported in the
Company's Quarterly Report on Form 10-Q for the quarter ended
April 29, 2000.
Item 6 - Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Listing of Exhibits
(3)(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.
(a)(i) 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.
(a)(ii) Amendment of Certificate of
Incorporation of the Company
filed May 27, 1999,
incorporated herein by
references to Exhibit 3 to the
Company's report on Form 10-Q
for the quarter ended May 1,
1999.
(b) Bylaws of the Company as
amended through March 2, 2000,
incorporated herein by
reference to Exhibit 3 to the
Company's Report on Form 10-K
for the fiscal year ended
January 29, 2000.
(27) Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed no reports on Form 8-K
during the quarter ended July 29, 2000.
<Page 16>
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 SHOE COMPANY, INC.
----------------------------
Date: September 11, 2000 /s/ Andrew M. Rosen
------------------------ ---------------------------
Andrew M. Rosen
Chief Financial Officer and
Treasurer On Behalf of the
Corporation as the Principal
Financial Officer
