-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rTd68+pi60W5Zoqr88nsv9kWS6AIPxrbrpGi34r8OkadF1COCJlDemCvWiOyNA73 d2NYBp2+EEPXTGziqDusng== 0000014707-94-000041.txt : 19940915 0000014707-94-000041.hdr.sgml : 19940915 ACCESSION NUMBER: 0000014707-94-000041 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940730 FILED AS OF DATE: 19940913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROWN GROUP INC CENTRAL INDEX KEY: 0000014707 STANDARD INDUSTRIAL CLASSIFICATION: 3140 IRS NUMBER: 430197190 STATE OF INCORPORATION: NY FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02191 FILM NUMBER: 94548822 BUSINESS ADDRESS: STREET 1: 8400 MARYLAND AVE CITY: ST LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 3148544165 MAIL ADDRESS: STREET 1: P O BOX 29 CITY: ST LOUIS STATE: MO ZIP: 63166 FORMER COMPANY: FORMER CONFORMED NAME: BROWN SHOE CO INC DATE OF NAME CHANGE: 19720327 10-Q 1 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 30, 1994 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________ ____________ Commission file number 1-2191 ____________ BROWN GROUP, INC. (Exact name of registrant as specified in its charter) New York 43-0197190 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 8300 Maryland Avenue St. Louis, Missouri 63105 (Address of principal executive offices) (Zip Code) (314) 854-4000 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] As of August 27, 1994, 17,936,275 shares of the registrant's common stock were outstanding. BROWN GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Thousands)
(Unaudited) ------------------- July 30, July 31, January 29, 1994 1993 1994 -------- -------- ----------- ASSETS Current Assets Cash and Cash Equivalents $ 26,928 $ 2,249 $ 16,892 Receivables, net of allowances of $10,802 at July 30, 1994, $8,201 at July 31, 1993, and $11,425 at January 29, 1994 112,031 117,136 109,968 Inventories (net of adjustment to last-in, first-out cost of $51,722 at July 30, 1994, $67,583 at July 31, 1993, and $52,849 at January 29, 1994) 415,917 409,565 375,465 Net Current Assets of Discontinued Operations 2,964 60,588 38,942 Other Current Assets 67,590 38,126 70,598 -------- -------- -------- Total Current Assets 625,430 627,664 611,865 Property, Plant and Equipment 229,570 240,701 232,942 Less allowances for depreciation and amortization (127,342) (139,209) (135,512) -------- -------- -------- 102,228 101,492 97,430 Net Noncurrent Assets of Discontinued Operations 2,308 21,075 7,062 Other Assets 57,415 54,798 55,377 --------- --------- --------- $ 787,381 $ 805,029 $ 771,734 ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes Payable $ 111,089 $ 130,763 $ 146,090 Accounts Payable 148,646 126,130 105,437 Accrued Expenses 111,815 86,498 108,287 Income Taxes 7,983 6,128 3,788 Current Maturities of Long-Term Debt 3,095 6,704 7,709 --------- -------- -------- Total Current Liabilities 382,628 356,223 371,311 Long-Term Debt and Capitalized Lease Obligations 135,220 138,377 135,324 Other Liabilities 30,640 26,479 31,236 Stockholders' Equity Common Stock 67,203 65,529 66,075 Additional Capital 44,938 32,243 35,979 Cumulative Translation Adjustment (4,254) (2,206) (3,287) Unamortized Value of Restricted Stock (12,056) (6,720) (6,827) Retained Earnings 143,062 195,104 141,923 238,893 283,950 233,863 --------- --------- --------- $ 787,381 $ 805,029 $ 771,734 ========= ========= =========
See Notes to Condensed Consolidated Financial Statements. 2 3 BROWN GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Thousands, except per share)
Three Months Ended Six Months Ended ------------------ ------------------ July 30, July 31, July 30, July 31, 1994 1993 1994 1993 -------- -------- -------- -------- Net Sales $404,491 $381,028 $831,709 $770,100 Cost of Goods Sold 256,903 243,140 529,147 492,632 -------- -------- -------- -------- Gross Profit 147,588 137,888 302,562 277,468 -------- -------- -------- -------- Selling and Administrative Expenses 132,786 124,062 271,527 251,476 Interest Expense 4,286 4,177 8,641 8,926 Other (Income) Expense (687) (396) (1,338) (46) -------- ------- -------- -------- Earnings from Continuing Operations Before Income Taxes and Cumulative Effect of Accounting Change 11,203 10,045 23,732 17,112 Income Tax Provision 3,762 3,563 8,360 6,147 -------- ------- -------- -------- Earnings from Continuing Operations Before Cumulative Effect of Accounting Change 7,441 6,482 15,372 10,965 Cumulative Effect of Change in Accounting for Postemployment Benefits -- -- -- (2,214) Loss from Discontinued Operations, Net of Taxes -- (915) -- (1,199) -------- ------- -------- -------- NET EARNINGS $ 7,441 $ 5,567 $ 15,372 $ 7,552 ======== ======== ======== ======== NET EARNINGS (LOSS) PER COMMON SHARE: Continuing Operations $ .42 $ .38 $ .88 $ .64 Cumulative Effect of Accounting Change -- -- -- (.13) Discontinued Operations -- (.05) -- (.07) -------- -------- -------- -------- NET EARNINGS PER COMMON SHARE $ .42 $ .33 $ .88 $ .44 ======== ======== ======== ======== Weighted Average Number of Outstanding Shares of Common Stock 17,543 17,238 17,497 17,214 DIVIDENDS PER COMMON SHARE $ .40 $ .40 $ .80 $ .80 ======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements. 3 4 BROWN GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Thousands)
Six Months Ended -------------------- July 30, July 31, 1994 1993 -------- -------- Net Cash Provided (Used) by Operating Activities of: Continuing operations $ 36,514 $ (37,987) Discontinued operations (7,499) 2,029 --------- --------- Net Cash Provided (Used) by Operating Activities 29,015 (35,958) Investing Activities Capital expenditures (17,512) (14,414) Proceeds from sales of assets of discontinued operations 48,231 44 Other 744 (366) --------- --------- Net Cash Provided (Used) by Investing Activities 31,463 (14,736) Financing Activities Increase/(decrease) in short-term notes payable (35,001) 119,118 Principal payments of long-term debt (4,720) (95,050) Addition to long-term debt -- 20,000 Dividends paid (14,233) (13,960) Proceeds from issuance of common stock 3,512 1,210 --------- --------- Net Cash Provided (Used) by Financing Activities (50,442) 31,318 Increase (Decrease) in Cash and Cash Equivalents 10,036 (19,376) Cash and Cash Equivalents at Beginning of Period 16,892 21,625 --------- --------- Cash and Cash Equivalents at End of Period $ 26,928 $ 2,249 ========= =========
See Notes to Condensed Consolidated Financial Statements. 4 5 BROWN GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note A - Basis of Presentation ------------------------------ The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and reflect all adjustments which management believes necessary (which include only normal recurring accruals and the effect on LIFO inventory valuation of estimated annual inflationary cost increases and year-end inventory levels) to present fairly the results of operations. These statements, however, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations and cash flow in conformity with generally accepted accounting principles. The Corporation's business is subject to seasonal influences, and interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole. For further information refer to the consolidated financial statements and footnotes included in the Corporation's Annual Report and Form 10-K for the period ended January 29, 1994. Note B - Earnings Per Share --------------------------- Net earnings per share of Common Stock is computed by dividing net earnings by the weighted average number of shares outstanding. The dilutive effect of stock options is not significant and is therefore excluded from the calculation. Note C - Inventories -------------------- The components of inventory are as follows ($000):
July 30, July 31, January 29, 1994 1993 1994 -------- -------- ----------- Finished Goods $394,076 $392,330 $352,243 Work in Process 5,251 3,042 6,291 Raw Materials and Supplies 16,590 14,193 16,931 -------- -------- -------- $415,917 $409,565 $375,465 ======== ======== ========
Note D - Sale of Cloth World ---------------------------- On August 25, 1994, the corporation announced an agreement to sell the net assets of its Cloth World chain of fabric stores to Fabri-Centers of America, Inc., for $62 million, subject to final balance sheet adjustments. There will be no significant gain or loss to the corporation on the sale. Cloth World operates 343 stores selling fabrics and sewing accessories. The transaction is expected to be completed in early October, 1994, and Cloth World will be accounted as discontinued operations in the third quarter. Cloth World had sales of $224.1 million in fiscal 1993 and $103.5 million in the first six months of fiscal 1994. Cloth World had operating profit of $3.9 million in fiscal 1993 and $1.1 million in the first six months of fiscal 1994. 5 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) REVIEW BY INDEPENDENT AUDITORS At the Corporation's request, its independent auditors, Ernst & Young, have performed a review of the accompanying financial statements. Their review was performed in accordance with the standards for such reviews established by the American Institute of Certified Public Accountants. 6 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ Results of Operations --------------------- Quarter ended July 30, 1994 compared to the Quarter ended July 31, 1993 ----------------------------------------------------------------------- Consolidated net sales for the second quarter ended July 30, 1994, were $404.5 million, an increase of 6.2% from last year's second quarter. Earnings from continuing operations of $7.4 million for the second quarter of 1994 compare to $6.5 million last year, an increase of 14.8%. Net earnings of $7.4 million for the second quarter of 1994 compare to $5.6 million last year, a 33.7% increase. Last year's net earnings figure reflects aftertax losses from discontinued operations of $.9 million. Sales from the footwear retailing operations increased 12.8% from the second quarter of 1993. Famous Footwear's sales increased 23.1% due to a same-store increase of 1.7% and 122 more units in operation. The Canadian retailing operation's sales also showed improvement, posting an increase of 10.0% with a same-store increase of 13.9%. Naturalizer stores' sales increased 3.4% over last year's second quarter, reflecting same-store sales gains of 6.1% and a net decrease of 24 units. These increases were partially offset by an overall sales decline of 68.8% at the Connie and Regal stores, reflecting 88 fewer units in operation as a result of the phasing out of these stores as part of the restructuring initiatives announced in fiscal 1993. Sales from footwear wholesaling activities increased 1.8% over the same period last year. Increases in licensed product sales and the NaturalSport branded footwear were offset by decreased sales of Connie and men's product due to the corporation's exit from the men's business in May 1994. Cloth World's second quarter sales decreased 2.4% and same-store sales were flat with last year. Sales increases of home decorating items were more than offset by decreases in other departments. Gross profit as a percent of sales increased to 36.5% from 36.2% for the same period last year. Retailing footwear activities experienced an increase in gross profit as a percent of sales of .9%, which was partially offset by a decrease in wholesale margins of 1.1%. Cloth World's gross profit as a percent of sales decreased 3.2% from the same period last year. Selling and administrative expenses as a percentage of sales increased slightly to 32.8% from 32.6% primarily due to costs associated with the rapid expansion of Famous Footwear. Expenses continue to be tightly controlled in all areas of the corporation. The decrease in the effective tax rate to 33.6% in the second quarter of fiscal 1994 from 35.5% for the same period in 1993 is primarily due to lower state taxes. Year-to-Date 1994 compared to Year-to-Date 1993 ----------------------------------------------- Consolidated net sales increased by 8.0% compared to the first six months of last year. Earnings from continuing operations of $15.4 million for the first six months of 1994 compare to $11.0 million last year, an increase of 40.2%. 7 8 Net earnings for the first six months of 1994 were $15.4 million compared to $7.6 million for the same period last year. Last year's net earnings figure reflects aftertax losses from discontinued operations of $1.2 million and an aftertax charge of $2.2 million for an accounting change related to postemployment benefits. Sales in the footwear retailing operations increased 13.9% compared to the first six months of last year. Sales at Famous Footwear increased 23.9%, while increasing 3.8% on a same-store basis. There were 633 Famous Footwear stores in operation at the end of the second quarter, 122 more than at the same time last year. The Canadian retailing operation's sales also improved, increasing by 9.5%, including a same-store increase of 14.1%. The Naturalizer retailing operation's sales also improved, increasing by 4.4%, including a same-store increase of 4.3%. These improvements were partially offset by a 54.5% decrease in sales at Connie and Regal stores as a result of the phasing out of these stores as part of the corporation's restructuring. Sales from footwear wholesaling activities increased by 6.0%. This increase was primarily driven by higher licensed product sales, primarily the Dr. Scholl's line, higher sales of the children's Lion King product, and increased sales of NaturalSport and Life Stride products. Cloth World's sales for the first six months decreased by 4.5% with same-store sales declining 1.1% and 10 fewer units in operation. Gross profit as a percentage of sales increased to 36.4% from 36.0% for the same period last year. Retailing footwear activities experienced an increase in gross profit as a percent of sales of .8%, which was partially offset by a decrease in wholesale margins of .6%. Cloth World's gross profit as a percent of sales decreased .7% from the same period last year. Selling and administrative expenses as a percentage of sales decreased to 32.6% from 32.7% for the same period in 1993. Expenses continue to be tightly controlled in all areas of the corporation. Other income/expense is a net income of $1.3 million in the first six months of 1994 compared to income of $46 thousand in the same period last year. Amounts consist primarily of royalty income. The prior year amount includes $1.0 million in costs to close the corporation's tannery. The decrease in the effective tax rate to 35.2% for the first six months of fiscal 1994 from 35.9% for the same period in 1993 is primarily due to lower state taxes. Discontinued Operations ----------------------- The discontinuance of the Wohl Leased Department business, which was announced in January 1994 and for which the corporation established a $34.8 million reserve, is proceeding at a faster than planned rate. The corporation has completed negotiations with all 26 lessors and has withdrawn from operating 23 of the department-store groups, including the largest, Carter Hawley Hale. The corporation anticipates exiting the remaining three packages by the end of October 1994, with costs within the provisions recorded in January 1994. In the first half of 1994, withdrawal activity from the leased department business has generated approximately $40.7 million in cash, primarily from the sale of inventory and fixed assets. This additional cash flow was used to repay short-term debt and invest in the corporation's expanding Famous Footwear business. 8 9 To date, charges of $13.2 million have been charged against the reserve for discontinued operations. These charges consisted of $8.4 million of non-cash charges for asset writeoffs and $4.8 million of cash charges related to severance and benefit costs and other expenses. Restructuring ------------- The restructuring initiatives announced in January 1994, for which the corporation established a $45.4 million reserve, are proceeding on schedule. During the first six months of 1994, four manufacturing facilities and 75 Naturalizer, Connie and Regal retail stores were closed. The store closings are expected to be completed in 1994 as Brown Shoe Company and Pagoda proceed with the merging of the operations of the two companies. To date, charges of $18.7 million have been charged against the restructuring reserve. These charges consisted of $11.1 million of non-cash charges for asset writeoffs and $6.6 million of cash charges related to lease buyouts, inventory markdowns, and severance and benefit costs. Financial Condition ------------------- A summary of key financial data and ratios at the dates indicated is as follows:
July 30, July 31, January 29, 1994 1993 1994 -------- -------- ----------- Working Capital (millions) $242.8 $271.4 $240.6 Current Ratio 1.6 1.8 1.6 Total Debt as a Percentage of Total Capitalization 51.1% 49.3% 55.3%
Cash flow of $36.5 million from operating activities of continuing operations for the first six months of fiscal 1994 compares to usage of $38.0 million last year. Growth in Famous Footwear inventory to support expansion was offset in 1994 by liquidation of inventory from the closure of Connie and Regal stores and reduction of inventories at Brown Shoe, which relates to both the closing of Connie stores and leased departments. Net cash used by operating activities for the first six months of 1993 included use of cash of approximately $88.7 million for increasing inventories to support growth at Famous Footwear. Total cash flow from discontinued operations increased by approximately $38.7 million primarily due to the sale of certain discontinued assets and liquidation of inventory. Financing activities in the first six months of 1994 reflect decreases in notes payable and long-term debt, which is due primarily to the company using the funds generated by continuing and discontinued operations to reduce short-term debt. The increase in the ratio of total debt as a percentage of total capitalization at July 30, 1994, compared to the end of the first six months of 1993, is caused primarily by the impact on stockholders' equity of restructuring and discontinued operations disposal charges recorded in January 1994. In spite of the increase in this ratio, the Corporation's financial condition and debt to capitalization ratios continue to provide additional borrowing capacity, if needed. 9 10 Sale of Cloth World ------------------- On August 25, 1994, the corporation announced an agreement to sell the net assets of its Cloth World chain of fabric stores to Fabri-Centers of America, Inc., for $62 million, subject to final balance sheet adjustments. There will be no significant gain or loss to the corporation on the sale. Cloth World operates 343 stores selling fabrics and sewing accessories. The transaction is expected to be completed in early October, 1994, and Cloth World will be accounted as discontinued operations in the third quarter. Cloth World had sales of $224.1 million in fiscal 1993 and $103.5 million in the first six months of fiscal 1994. Cloth World had operating profit of $3.9 million in fiscal 1993 and $1.1 million in the first six months of fiscal 1994. PART II - OTHER INFORMATION --------------------------- Item 1 - Legal Proceedings -------------------------- There have been no material developments during the quarter ended July 30, 1994, in the legal proceedings described in the Corporation's Form 10-K for the period ended January 29, 1994. Item 5 - Other Information -------------------------- On August 25, 1994, the corporation announced an agreement to sell the net assets of its Cloth World chain of fabric stores to Fabri-Centers of America, Inc., for $62 million, subject to final balance sheet adjustments. There will be no significant gain or loss to the corporation on the sale. The transaction is expected to be completed in early October 1994. The following pro forma financial statements reflect the financial position at July 30, 1994, and results of operations of the corporation for the year ended January 29, 1994, and the six-month period ended July 30, 1994, assuming that Cloth World had been sold as of the beginning of fiscal year 1993. 10 11 ITEM 5 (CONTINUED) ------------------ BROWN GROUP, INC. CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET JULY 30, 1994 (Thousands)
Historical Pro Forma Balances (2) Balances as of Pro Forma as of July 30, 1994 Adjustments July 30, 1994 ------------- ----------- ------------- ASSETS Current Assets Cash and Cash Equivalents $ 26,928 $ 172 $ 26,756 Receivables, net of allowances of $10,802 at July 30, 1994 and $10,682 on a pro forma basis at July 30, 1994 112,031 66 111,965 Inventories (net of adjustments to last-in, first-out cost of $51,722 at July 30, 1994 and $42,160 on a pro forma basis as of July 30, 1994 415,917 80,484 335,433 Net Current Assets of Discontinued Operations 2,964 -- 2,964 Other Current Assets 67,590 2,840 64,750 -------- -------- -------- Total Current Assets 625,430 83,562 541,868 Property, Plant and Equipment 229,570 30,367 199,203 Less allowances for depreciation and amortization (127,342) (21,328) (106,014) -------- -------- -------- 102,228 9,039 93,189 Net Noncurrent Assets of Discontinued Operations 2,308 -- 2,308 Other Assets 57,415 43 57,372 -------- -------- -------- $787,381 $ 92,644 $694,737 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes Payable $111,089 $ 62,000 $ 49,089 Accounts Payable 148,646 18,884 129,762 Accrued Expenses 111,815 11,760 100,055 Income Taxes 7,983 -- 7,983 Current Maturities of Long-Term Debt 3,095 -- 3,095 -------- -------- -------- Total Current Liabilities 382,628 92,644 289,984 Long-Term Debt and Capitalized Lease Obligations 135,220 -- 135,220 Other Liabilities 30,640 -- 30,640 Stockholders' Equity Common Stock 67,203 -- 67,203 Additional Capital 44,938 -- 44,938 Cumulative Translation Adjustment (4,254) -- (4,254) Unamortized Value of Restricted Stock (12,056) -- (12,056) Retained Earnings 143,062 -- 143,062 -------- -------- -------- 238,893 -- 238,893 -------- -------- -------- $787,381 $ 92,644 $694,737 ======== ======== ========
11 12 ITEM 5 (CONTINUED) - - ------------------ BROWN GROUP, INC. CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS SIX MONTHS ENDED JULY 30, 1994 (Thousands, except per share)
Consolidated (2) Historical Pro Forma Pro Forma Amounts Adjustments Amounts ------------ ----------- --------- Net Sales $831,709 $103,525 $728,184 Cost of Goods Sold 529,147 55,054 474,093 -------- -------- -------- Gross Profit 302,562 48,471 254,091 -------- -------- -------- Selling and Administrative Expenses 271,527 47,518 224,009 Interest Expense 8,641 1,470 (1) 7,171 Other (Income) Expense (1,338) (191) (1,147) -------- -------- -------- Earnings from Continuing Operations Before Income Taxes and Cumulative Effect of Accounting Change 23,732 (326) 24,058 Income Tax Provision (Benefit) 8,360 (290) 8,650 -------- -------- -------- Income (Loss) from Continuing Operations Before Cumulative Effect of Accounting Change $ 15,372 $ (36) $ 15,408 ======== ======== ======== EARNINGS PER COMMON SHARE Primary - - ------- Continuing Operations $ .88 $ .88 ======== ======== Fully Dulitive - - -------------- Continuing Operations $ .88 $ .88 ======== ======== Weighted Average Number of Outstanding Shares of Common Stock 17,497 17,497 ======== ========
12 13 ITEM 5 (CONTINUED) - - ------------------ BROWN GROUP, INC. CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS YEAR ENDED JANUARY 29, 1994 (Thousands, except per share)
Consolidated (2) Historical Pro Forma Pro Forma Amounts Adjustments Amounts ------------ ----------- --------- Net Sales $1,597,811 $224,066 $1,373,745 Cost of Goods Sold 1,041,096 119,387 921,709 ---------- -------- ---------- Gross Profit 556,715 104,679 452,036 Selling and Administrative Expenses 529,741 100,776 428,965 Interest Expense 17,591 2,489 (1) 15,102 Other (Income) Expense 21,211 24 21,187 ---------- -------- ---------- Earnings from Continuing Operations Before Income Taxes and Cumulative Effect of Accounting Change (11,828) 1,390 (13,218) Income Tax Provision (Benefit) (5,116) 69 (5,185) ---------- -------- ---------- Income (Loss) from Continuing Operations Before Cumulative Effect of Accounting Change $ (6,712) $ 1,321 $ (8,033) ========== ======== ========== EARNINGS (LOSS) PER COMMON SHARE Primary Continuing Operations $ (.39) $ (.47) ========== ========== Fully Dulitive Continuing Operations $ (.39) $ (.47) ========== ========== Weighted Average Number of Outstanding Shares of Common Stock 17,270 17,270 ========== ==========
(1) Interest expense adjustment is based on the assumption that the sale price of $62 million in cash was received at the beginning of fiscal 1993 and used to reduce debt and, therefore, interest expense for fiscal 1993 and year-to-date fiscal 1994. (2) Pro forma adjustments represent assets sold and liabilities assumed by Fabri-Centers of America, Inc., and results of operations for the respective periods. All amounts are from internal financial records and are unaudited. These unaudited pro forma financial statements do not contain all disclosures required by generally accepted accounting principles and do not present the effects of discontinued operations or the cumulative effect of changes in accounting principles. 13 14 Item 6 - Exhibits and Reports on Form 8-K - - ----------------------------------------- (a) Listing of Exhibits (11) Computation of Earnings Per Share (Page 16) (15) Letter re: unaudited interim financial information (Page 17) (27) Financial Data Schedule (Page 18) (b) Reports on Form 8-K: The corporation filed a current report on Form 8-K dated September 1, 1994, in response to Item 5, which announced the sale of Cloth World. 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, 1994 Harry E. Rich --------------------------------- Executive Vice President and Chief Financial Officer On Behalf of the Corporation and as the Principal Financial Officer 14 15 INDEPENDENT ACCOUNTANTS' REVIEW REPORT Stockholders and Board of Directors Brown Group, Inc. We have reviewed the accompanying condensed consolidated balance sheets of Brown Group, Inc., as of July 30, 1994, and July 31, 1993, and the related condensed consolidated statements of earnings for the three-month and six-month periods ended July 30, 1994, and July 31, 1993, and the condensed consolidated statements of cash flows for the six-month periods ended July 30, 1994, and July 31, 1993. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Brown Group, Inc. as of January 29, 1994, and the related consolidated statement of earnings, stockholders' equity, and cash flows for the year then ended and in our report dated March 2, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 29, 1994 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. \s\ Ernst & Young August 22, 1994 St. Louis, Missouri 15 16 EXHIBIT 11 PART II - OTHER INFORMATION --------------------------- COMPUTATION OF EARNINGS PER SHARE BROWN GROUP, INC. (Thousands, except per share)
Three Months Ended Six Months Ended -------------------- ------------------ July 30, July 31, July 30, July 31, 1994 1993 1994 1993 -------- -------- -------- -------- PRIMARY Weighted average shares outstanding 17,543 17,238 17,497 17,214 Net effect of dilutive stock options based on the treasury stock method using average market price 116 57 113 56 -------- -------- ------- ------- TOTAL 17,659 17,295 17,610 17,270 ======== ======== ======= ======= Earnings from continuing operations before accounting change $ 7,441 $ 6,482 $15,372 $10,965 Cumulative effect of accounting change -- -- -- (2,214) Discontinued operations -- (915) -- (1,199) -------- -------- ------- ------- Net Earnings $ 7,441 $ 5,567 $15,372 $ 7,552 ======== ======== ======= ======= Earnings per share from continuing operations before accounting change $ .42 $ .38 $ .88 $ .64 Cumulative effect of accounting change -- -- -- (.13) Discontinued operations -- (.05) -- (.07) -------- -------- ------- ------- Net earnings per share (1) $ .42 $ .33 $ .88 $ .44 ======== ======== ======= ======= FULLY DILUTED Weighted average shares outstanding 17,543 17,238 17,497 17,214 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 116 71 120 69 -------- -------- ------- ------- TOTAL 17,659 17,309 17,617 17,283 ======== ======== ======= ======= Earnings from continuing operations before accounting change $ 7,441 $ 6,482 $15,372 $10,965 Cumulative effect of accounting change -- -- -- (2,214) Discontinued operations -- (915) -- (1,199) -------- -------- ------- ------- Net Earnings $ 7,441 $ 5,567 $15,372 $ 7,552 ======== ======== ======= ======= Earnings per share from continuing operations before accounting change $ .42 $ .38 $ .88 $ .64 Cumulative effect of accounting change -- -- -- (.13) Discontinued operations -- (.05) -- (.07) -------- -------- ------- ------- Net earnings per share (1) $ .42 $ .33 $ .88 $ .44 ======== ======== ======= =======
(1) The dilutive effect of stock options was not included in weighted average shares outstanding for purposes of calculating earnings per share because dilution was less than 3% and not material. 16 17 EXHIBIT 15 Acknowledgement Letter Stockholders and Board of Directors Brown Group, Inc. We are aware of the incorporation by reference in the Registration Statements (Form S-8 Numbers 2-58347 and 33-22328) pertaining to the employee stock purchase plan and employee stock appreciation plans, respectively, and in the Registration Statement (Form S-3 Number 33-21477) for the registration of debt of Brown Group, Inc., of our report dated August 22, 1994, relating to the unaudited condensed consolidated interim financial statements of Brown Group, Inc. which are included in its Form 10-Q for the quarter ended July 30, 1994. Pursuant to rule 436(c) of the Securities Act of 1933, our reports are not a part of the registration statement prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. \s\ Ernst & Young August 22, 1994 St. Louis, Missouri EX-27 2
5 0000014707 BROWN GROUP, INC. QTR-2 JAN-28-1995 JUL-30-1994 26,928 0 122,833 (10,802) 415,917 625,430 229,570 (127,342) 787,381 382,628 135,220 67,203 0 0 171,690 787,381 831,709 831,709 529,147 800,674 (1,338) 2,082 8,641 23,732 8,360 15,372 0 0 0 15,372 .88 .88
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