-----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, mixbNTx9qavj+FsU+Xvt/3pjBAtxK0omQRvXAs2jL46ydxWqslbeHURG0jvHQZwQ 8AVTc5jEf9zcKY23spg1OA== 0000014707-94-000050.txt : 19941215 0000014707-94-000050.hdr.sgml : 19941215 ACCESSION NUMBER: 0000014707-94-000050 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941029 FILED AS OF DATE: 19941213 SROS: MSE SROS: NYSE 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: 94564535 BUSINESS ADDRESS: STREET 1: 8400 MARYLAND AVE STREET 2: P O BOX 29 CITY: ST LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 3148544000 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 October 29, 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 November 26, 1994, 17,965,646 shares of the registrant's common stock were outstanding. 2 BROWN GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Thousands)
(Unaudited) ----------------------------- October 29, October 30, January 29, 1994 1993 1994 ----------- ----------- ----------- ASSETS Current Assets Cash and Cash Equivalents $ 31,382 $ 25,497 $ 16,892 Receivables, net of allowances of $11,361 at October 29, 1994, $7,685 at October 30, 1993, and $10,817 at January 29, 1994 115,271 123,596 109,825 Inventories (net of adjustment to last-in, first-out cost of $37,351 at October 29, 1994, $52,127 at October 30, 1993, and $43,665 at January 29, 1994) 322,901 293,788 286,992 Net Current Assets of Discontinued Operations (429) 131,165 100,210 Other Current Assets 60,978 35,824 66,142 ---------- ---------- --------- Total Current Assets 530,103 609,870 580,061 Property, Plant and Equipment 199,818 210,607 198,051 Less allowances for depreciation and amortization (105,930) (118,503) (111,356) ---------- ---------- --------- 93,888 92,104 86,695 Net Noncurrent Assets of Discontinued Operations 1,739 31,103 17,839 Other Assets 58,908 54,597 55,335 ---------- ---------- --------- $ 684,638 $ 787,674 $ 739,930 ========== ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes Payable $ 59,450 $ 149,760 $ 146,090 Accounts Payable 97,261 79,355 84,694 Accrued Expenses 102,624 84,247 97,226 Income Taxes 6,824 10,589 3,788 Current Maturities of Long-Term Debt 2,078 7,705 7,709 ---------- ---------- --------- Total Current Liabilities 268,237 331,656 339,507 Long-Term Debt and Capitalized Lease Obligations 135,214 137,352 135,324 Other Liabilities 30,324 26,369 31,236 Stockholders' Equity Common Stock 67,437 65,742 66,075 Additional Capital 46,537 33,523 35,979 Cumulative Translation Adjustment (3,221) (2,976) (3,287) Unamortized Value of Restricted Stock (11,468) (6,295) (6,827) Retained Earnings 151,578 202,303 141,923 ---------- ---------- --------- 250,863 292,297 233,863 ---------- ---------- --------- $ 684,638 $ 787,674 $ 739,930 ========== ========== =========
See Notes to Condensed Consolidated Financial Statements. 3 BROWN GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Thousands, except per share)
Three Months Ended Nine Months Ended ------------------------ -------------------------- October 29, October 30, October 29, October 30, 1994 1993 1994 1993 ----------- ----------- ------------ ------------- Net Sales $ 406,934 $ 382,631 $1,129,422 $1,037,302 Cost of Goods Sold 267,422 253,452 738,649 685,627 --------- --------- ---------- ---------- Gross Profit 139,512 129,179 390,773 351,675 --------- --------- ---------- ---------- Selling and Administrative Expenses 113,315 106,171 334,011 304,331 Interest Expense 3,988 4,224 12,477 12,996 Other (Income) Expense (844) 319 (1,991) 255 --------- --------- ---------- ---------- Earnings from Continuing Operations Before Income Taxes and Cumulative Effect of Accounting Change 23,053 18,465 46,276 34,093 Income Tax Provision 8,127 6,063 16,483 11,671 --------- --------- ---------- ---------- Earnings from Continuing Operations Before Cumulative Effect of Accounting Change 14,926 12,402 29,793 22,422 Cumulative Effect of Change in Accounting for Postemployment Benefits -- -- -- (2,214) Earnings from Discontinued Operations, Net of Taxes 777 1,792 1,282 1,538 --------- --------- ---------- ---------- NET EARNINGS $ 15,703 $ 14,194 $ 31,075 $ 21,746 ========= ========= ========== ========== NET EARNINGS (LOSS) PER COMMON SHARE: Continuing Operations $ .85 $ .72 $ 1.70 $ 1.30 Cumulative Effect of Accounting Change -- -- -- (.13) Discontinued Operations .04 .10 .07 .09 --------- --------- ---------- ---------- NET EARNINGS PER COMMON SHARE $ .89 $ .82 $ 1.77 $ 1.26 ========= ========= ========== ========== Weighted Average Number of Outstanding Shares of Common Stock 17,595 17,287 17,530 17,238 DIVIDENDS PER COMMON SHARE $ .40 $ .40 $ 1.20 $ 1.20 ========= ========= ========== ==========
See Notes to Condensed Consolidated Financial Statements. 4 BROWN GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Thousands)
Nine Months Ended -------------------------- October 29, October 30, 1994 1993 ----------- ----------- Net Cash Provided (Used) by Operating Activities of: Continuing operations $ 28,434 $ (737) Discontinued operations (498) (22,399) --------- --------- Net Cash Provided (Used) by Operating Activities 27,936 (23,136) Investing Activities Capital expenditures (23,804) (17,896) Proceeds from sales of assets of discontinued operations 118,519 -- Other 817 94 --------- --------- Net Cash Provided (Used) by Investing Activities 95,532 (17,802) Financing Activities Increase/(decrease) in short-term notes payable (86,640) 138,115 Principal payments of long-term debt (5,746) (95,076) Addition to long-term debt -- 20,000 Dividends paid (21,420) (20,957) Other 4,828 2,728 --------- --------- Net Cash Provided (Used) by Financing Activities (108,978) 44,810 --------- --------- Increase (Decrease) in Cash and Cash Equivalents 14,490 3,872 Cash and Cash Equivalents at Beginning of Period 16,892 21,625 --------- --------- Cash and Cash Equivalents at End of Period $ 31,382 $ 25,497 ========= =========
See Notes to Condensed Consolidated Financial Statements. 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):
October 29, October 30, January 29, 1994 1993 1994 ----------- ----------- ----------- Finished Goods $ 303,191 $ 277,108 $ 263,770 Work in Process 3,115 3,028 6,291 Raw Materials and Supplies 16,595 13,652 16,931 ---------- ---------- ---------- $ 322,901 $ 293,788 $ 286,992 ========== ========== ==========
Note D - Discontinued Operations -------------------------------- During the third quarter of 1994, the company announced the sale of its Cloth World chain of fabric stores to Fabri-Centers of America, Inc. The sale was completed on October 2, 1994. In addition, as of the end of the third quarter of 1994, the company announced its decision to close the Maryland Square catalog operation. The closure of this business should be completed in the first quarter of 1995. In fiscal 1993, the company announced a formal plan to withdraw from the Wohl leased shoe department business, which involved the management of shoe departments in department stores. 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The company completed its withdrawal from the last Wohl Shoe Company leased shoe departments at the end of October 1994. In the first nine months of fiscal 1994, withdrawal activity from the leased department business has generated approximately $49.0 million in cash, primarily from the sale of inventory and fixed assets. During the third quarter, $8.5 million of the reserve established for the withdrawal from the leased shoe department business was transferred to cover the exit costs associated with the Cloth World sale and the closure of the Maryland Square catalog operation, previously discussed. This reserve transfer was made possible because of earlier than expected withdrawals from leased departments at better than expected terms. Final settlement with lessors and inventory adjustments will be made during the fourth quarter of 1994. At fiscal year end, the primary remaining liability will be for employee severance, which will be paid throughout 1995. Summarized results of these businesses are shown separately as Discontinued Operations in the accompanying condensed consolidated financial statements. Assets and liabilities shown are at their estimated net realizable value, and consist primarily of inventory and leasehold improvements. Prior period financial statements have been reclassified to conform to the current year presentation. Sales from discontinued operations, which includes Cloth World and Maryland Square, were $39.8 million for the quarter ended October 29, 1994, and $149.0 million for the first nine months of fiscal 1994. Prior year sales from discontinued operations, which includes Cloth World, Maryland Square, and Wohl Leased Departments, were $138.9 million for the quarter ended October 30, 1993, and $392.5 million for the first nine months of fiscal 1993. Note E - Commitments and Contingencies -------------------------------------- There have been no material developments during the quarter ended October 29, 1994, related to the company's environmental contingencies described in the company's Form 10-K for the period ended January 29, 1994. 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. 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ Results of Operations --------------------- Quarter Ended October 29, 1994 compared to the Quarter ended October 30, 1993 ----------------------------------------------------------------------------- Consolidated net sales for the third quarter ended October 29, 1994, were $406.9 million, an increase of 6.4% from last year's third quarter. Earnings from continuing operations of $14.9 million for the third quarter of 1994 compare to $12.4 million last year, an increase of 20.4%. Net earnings of $15.7 million for the third quarter of 1994 compare to $14.2 million last year, a 10.6% increase. Included in net earnings is aftertax income from discontinued operations of $.8 million in 1994 and $1.8 million in 1993. Sales from the footwear retailing operations increased 12.8% from the third quarter of 1993. Famous Footwear's sales increased 25.6% due to a same-store increase of 1.4% and 141 more units in operation. The Canadian retailing operation's sales also showed improvement, posting an increase of 8.4% with a same-store increase of 5.8%. Naturalizer stores' sales decreased 11.3% from last year's third quarter, reflecting same-store sales decreases of 8.4% and a net decrease of 29 units in operation compared to the same time last year. Sales declined 83.9% at the Connie and Regal stores, reflecting 117 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 remained flat compared to the same period last year. Strong performances from the NaturalSport, Life Stride, Dr. Scholl's and Disney character brands were offset by decreased shipments to Pagoda's discount customers and reduced shipments of Connie product along with lower men's shipments due to the company's exit from this business in May 1994. Gross profit as a percent of sales increased to 34.3% from 33.8% for the same period last year. Wholesale footwear activities experienced an increase in gross profit as a percent of sales due to lower markdowns in 1994. The wholesale gains were partially offset by a decrease in retail margins on increased retail sales. These decreased margins are primarily the result of increased promotions by Famous Footwear. Selling and administrative expenses as a percentage of sales increased slightly to 27.8% from 27.7% reflecting the growth in Pagoda's worldwide sourcing capabilities. The increase in the effective tax rate to 35.3% in the third quarter of fiscal 1994 from 32.8% for the same period in 1993 is primarily due to the change in the mix of earnings among member companies and the benefit realized in 1993 from revaluing the company's deferred tax assets at the new federal tax rates. Overall, the 20.4% increase in earnings from continuing operations reflects the continuing recovery of the company's wholesale business, strong performances by Canadian operations, and growth at Famous Footwear. 8 Year-to-Date 1994 compared to Year-to-Date 1993 ----------------------------------------------- Consolidated net sales increased 8.9% to $1.1 billion compared to the first nine months of last year. Earnings from continuing operations of $29.8 million for the first nine months of 1994 compare to $22.4 million last year, an increase of 32.9%. Net earnings for the first nine months of 1994 were $31.1 million compared to $21.7 million for the same period last year. The current year-to-date net earnings figure reflects aftertax income from discontinued operations of $1.3 million. Last year's net earnings figure reflects aftertax income from discontinued operations of $1.5 million and aftertax losses of $2.2 million for an accounting change related to postemployment benefits. Sales from the footwear retailing operations increased 14.0% compared to the first nine months of last year. Famous Footwear's sales increased 24.5%, while increasing 2.9% on a same-store basis. There were 679 Famous Footwear stores in operation at the end of the third quarter, 141 more than at the same time last year. The Canadian retailing operation's sales also improved, increasing 9.1%, including same-store increases and seven more units in operation. Naturalizer stores' sales decreased 1.2% from last year with flat same-store sales. Sales decreased 64.0% at the Connie and Regal stores as a result of the phasing out of these stores as part of the company's restructuring. Sales from footwear wholesaling activities increased by 3.7%. This increase was primarily driven by higher licensed product sales, primarily in the Dr. Scholl's line, higher sales of the children's Lion King product, and increased sales of NaturalSport and Life Stride products. These increases were partially offset by decreased shipments to Pagoda's discount customers and reduced shipments of Connie product along with lower men's shipments due to the company's exit from this business in May 1994. Gross profit as a percentage of sales increased to 34.6% from 33.9% for the same period last year. Wholesaling footwear activities experienced an increase in gross profit as a percent of sales, which was partially offset by a decrease in retail margins. Selling and administrative expenses as a percentage of sales increased to 29.6% from 29.3% for the same period in 1993 reflecting continuing spending on systems to support the rapid expansion of Famous Footwear and worldwide sourcing capabilities of Pagoda. Other Income/Expense increased from net expense of $.3 million in 1993 to income of $2.0 million in 1994. This improvement reflects higher royalty income in 1994. The prior year amount includes $1.0 million of additional remediation costs for the company's closed tannery. The increase in the effective tax rate to 35.6% for the first nine months of 1994 from 34.2% for the same period in 1993 is primarily due to the change in the mix of earnings among member companies and the benefit realized in 1993 from revaluing the company's deferred tax assets at the new federal tax rates. Discontinued Operations ----------------------- During the third quarter of 1994, the company announced the sale of its Cloth World chain of fabric stores to Fabri-Centers of America, Inc. The sale was completed on October 2, 1994, for $62.0 million in cash, subject to final balance sheet adjustments. The $62.0 million received to date was used to reduce short-term debt and invest in the company's expanding Famous Footwear business. The estimated exit costs associated with the sale of this business consist primarily of warehouse closure, severance, and other transaction costs, which will be paid during the fourth quarter of 1994 and the first half of 1995. 9 In addition to the Cloth World sale, the company announced its decision to close the Maryland Square catalog operation. The closure of this business should be completed during the first quarter of 1995. The costs of exiting this business consists primarily of inventory liquidation costs and employee severance costs. The company completed its withdrawal from the last Wohl Shoe Company leased shoe departments at the end of October 1994. In the first nine months of fiscal 1994, withdrawal activity from the leased department business has generated approximately $49.0 million in cash, primarily from the sale of inventory and fixed assets. During the third quarter, $8.5 million of the reserve established for the withdrawal from the leased shoe department business was transferred to cover the exit costs associated with the Cloth World sale and the closure of the Maryland Square catalog operation, previously discussed. This reserve transfer was made possible because of earlier than expected withdrawals from leased departments at better than expected terms. Final settlement with lessors and inventory adjustments will be made during the fourth quarter of 1994. At fiscal year end, the primary remaining liability will be for employee severance, which will be paid throughout 1995. Restructuring ------------- The restructuring initiatives announced in January 1994, for which the company established a $45.4 million reserve, are proceeding on schedule. To date, 5 plants and 146 Naturalizer, Connie and Regal retail stores have been closed. All but 5 of the 122 Connie and Regal stores have been closed and the closings will be completed by year-end. The men's shoe business has been sold, and substantial consolidation of Pagoda and Brown Shoe Company administrative operations has been accomplished. To date, charges of $27.6 million have been charged against the restructuring reserve. These charges consisted of $11.2 million of non-cash charges for asset writeoffs and $16.4 million of cash charges related to lease buyouts, inventory liquidation costs, and severance and benefit costs. Financial Condition ------------------- A summary of key financial data and ratios at the dates indicated is as follows:
October 29, October 30, January 29, 1994 1993 1994 ----------- ----------- ----------- Working Capital (millions) $261.9 $278.2 $240.6 Current Ratio 2.0 1.8 1.7 Total Debt as a Percentage of Total Capitalization 44.0% 50.2% 55.3% Net Debt (Total Debt less Cash and Cash Equivalents) as a Percentage of Total Capitalization 39.7% 48.0% 53.8%
Cash flow of $28.4 million from operating activities of continuing operations for the first nine months of fiscal 1994 compares to $.1 million for the same period 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 generated by operating activities for the first nine months of 1993 included use of cash of $34.9 million for increasing inventories to support growth at Famous Footwear. Total cash flow from discontinued operations increased by $140.4 million primarily due to the sale of Cloth World and the sale of certain discontinued assets and liquidation of inventory. 10 Financing activities for the first nine 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 decrease in the ratio of total debt as a percentage of total capitalization at October 29, 1994 compared to the end of the first nine months of 1993, is due primarily to the company paying down both short-term and long-term debt with additional cash flow generated from discontinued operations. The company's financial condition and debt to capitalization ratios provide additional borrowing capacity, if needed. PART II - OTHER INFORMATION --------------------------- Item 1 - Legal Proceedings -------------------------- There have been no material developments during the quarter ended October 29, 1994, in the legal proceedings described in the company's Form 10-K for the period ended January 29, 1994. Item 5 - Other Information -------------------------- Due to the discontinuance of Cloth World and Maryland Square businesses, previously released financial information has been restated to reflect these businesses as discontinued operations along with Wohl leased departments. The following summaries of "Restated Quarterly Information" and "Restated Annual Financial Information" are presented for informational purposes: 11 RESTATED QUARTERLY INFORMATION (Unaudited) Following is a summary of selected restated quarterly information (in thousands of dollars except per share). All information presented has been restated for discontinued operations except for the third quarter of fiscal year ended January 28, 1995, and market values.
Quarters -------------------------------------------------- First Second Third Fourth -------- -------- --------- ------- 1994 Net Sales $369,488 $353,000 $406,934 Cost of Goods Sold 242,028 229,199 267,422 Earnings (Loss) From: Continuing Operations 7,334 7,533 14,926 Discontinued Operations 597 (92) 777 Net Earnings 7,931 7,441 15,703 Per Share of Common Stock: Earnings From Continuing Operations $ .42 $ .43 $ .85 Net Earnings .45 .42 .89 Dividends Paid .40 .40 .40 Market Value: High 38-1/2 38-1/2 37-7/8 Low 34-5/8 34-1/2 33-3/8 1993 Net Sales $326,765 $327,906 $382,631 $323,737 Cost of Goods Sold 215,841 216,334 253,452 229,816 Earnings (Loss) From Continuing Operations Before Cumulative Effect of Accounting Change 3,895 6,125 12,402 (31,718) Cumulative Effect of Change in Accounting for Postemployment Benefits (2,214) -- -- -- Discontinued Operations 304 (558) 1,792 (21,640) Net Earnings (Loss) 1,985 5,567 14,194 (53,358) Per Share of Common Stock: Earnings (Loss) From Continuing Operations Before Cumulative Effect of Accounting Change $ .23 $ .36 $ .72 $ (1.82) Cumulative Effect of Change in Accounting for Postemployment Benefits (.13) -- -- -- Net Earnings (Loss) .11 .33 .82 (3.07) Dividends Paid .40 .40 .40 .40 Market Value: High 33-7/8 33-1/2 35-3/4 36 Low 28-3/4 29-3/4 31-3/4 32-5/8
12 RESTATED ANNUAL FINANCIAL INFORMATION
1993 1992 1991 1990 ---------- ---------- ---------- ---------- Thousands, except per share (52 weeks) (52 weeks) (52 weeks) (52 weeks) Operations Net Sales $1,361,039 $1,243,842 $1,191,591 $1,208,001 Cost of goods sold 915,443 834,591 806,090 801,858 ---------- ---------- ---------- ---------- Gross profit 445,596 409,251 385,501 406,143 ---------- ---------- ---------- ---------- Selling and administrative expenses 422,248 381,835 361,281 348,053 Interest expense 17,334 16,260 15,431 18,174 Other expense(income)-net 21,191 8,318 (2,244) (3,905) ---------- ---------- ---------- ---------- 460,773 406,413 374,468 362,322 ---------- ---------- ---------- ---------- Earnings (loss) from continuing operations before income taxes and cumulative effect of accounting changes (15,177) 2,838 11,033 43,821 Income taxes (5,881) (401) 2,771 15,125 ---------- ---------- ---------- ---------- Earnings (loss) from continuing operations before cumulative effect of accounting changes (9,296) 3,239 8,262 28,696 Earnings (loss) from discontinued operations, net of income taxes 4,298 1,425 7,433 3,079 Gain on (provision for) disposal of discontinued operations, net of income taxes (24,400) -- -- -- Cumulative effect of changes in accounting for post- employment benefits in 1993 and postretirement benefits and income taxes in 1991 (2,214) -- (11,931) -- ---------- ---------- ---------- ---------- Net earnings (loss) $ (31,612) $ 4,664 $ 3,764 $ 31,775 ========== ========== ========== ========== Returns from continuing operations before accounting changes: Return on net sales (0.7%) 0.3% 0.7% 2.4% Return on beginning stockholders' equity (3.2%) 1.0% 2.5% 8.5% Return on average invested capital (1.6%) 0.6% 1.5% 5.1% Dividends paid $ 27,979 $ 27,714 $ 27,646 $ 27,789 Capital expenditures 27,207 17,496 19,902 24,917 Per Common Share Earnings (loss) from continuing operations before accounting changes $ (.54) $ .19 $ .48 $ 1.67 Net earnings (loss) (1.83) .27 .22 1.85 Dividends paid 1.60 1.60 1.60 1.60 Stockholders' equity 13.27 16.69 18.10 19.47 Financial Position Receivables, net $ 109,825 $ 114,042 $ 83,900 $ 101,467 Inventories 286,992 253,586 228,219 227,707 Working capital 240,554 262,611 297,239 285,310 Property, plant and equipment, net 86,695 88,500 104,144 104,886 Total assets 739,930 705,165 654,696 678,224 Long-term debt and capitalized lease obligations 135,324 123,024 144,564 128,611 Stockholders' equity 233,863 288,988 313,387 336,182 Average Common shares outstanding 17,270 17,132 17,070 17,184
All data presented reflects the fiscal year ended on the Saturday nearest to January 31. 13 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 company filed a current report on Form 8-K dated September 1, 1994, in response to Item 5, which announced the sale of Cloth World. The company filed a current report on Form 8-K dated October 11, 1994, in response to Item 2, which announced the completion of the sale of Cloth World on October 2, 1994. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BROWN GROUP, INC. Date: December 13, 1994 Harry E. Rich ---------------------------------- Executive Vice President and Chief Financial Officer On Behalf of the Corporation and as the Principal Financial Officer 14 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 October 29, 1994, and October 30, 1993, and the related condensed consolidated statements of earnings for the three-month and nine-month periods ended October 29, 1994, and October 30, 1993, and the condensed consolidated statements of cash flows for the nine-month periods ended October 29, 1994, and October 30, 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 November 22, 1994 St. Louis, Missouri 15 EXHIBIT 11 PART II - OTHER INFORMATION COMPUTATION OF EARNINGS PER SHARE BROWN GROUP, INC. (Thousands, except per share)
Three Months Ended Nine Months Ended ------------------------- --------------------------- October 29, October 30, October 29, October 30, 1994 1993 1994 1993 ----------- ----------- ----------- ----------- PRIMARY Weighted average shares outstanding 17,595 17,287 17,530 17,238 Net effect of dilutive stock options based on the treasury stock method using average market price 79 65 102 59 -------- -------- -------- -------- TOTAL 17,674 17,352 17,632 17,297 ======== ======== ======== ======== Earnings from continuing operations before accounting change $ 14,926 $ 12,402 $ 29,793 $ 22,422 Cumulative effect of accounting change -- -- -- (2,214) Discontinued operations 777 1,792 1,282 1,538 -------- -------- -------- -------- Net Earnings $ 15,703 $ 14,194 $ 31,075 $ 21,746 ======== ======== ======== ======== Earnings per share from continuing operations before accounting change $ .85 $ .72 $ 1.70 $ 1.30 Cumulative effect of accounting change -- -- -- (.13) Discontinued operations .04 .10 .07 .09 -------- -------- --------- -------- Net earnings per share (1) $ .89 $ .82 $ 1.77 $ 1.26 ======== ======== ========= ======== FULLY DILUTED Weighted average shares outstanding 17,595 17,287 17,530 17,238 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 79 77 110 71 TOTAL 17,674 17,364 17,640 17,309 ======== ======== ======== ======== Earnings from continuing operations before accounting change $ 14,926 $ 12,402 $ 29,793 $ 22,422 Cumulative effect of accounting change -- -- -- (2,214) Discontinued operations 777 1,792 1,282 1,538 -------- -------- -------- -------- Net Earnings $ 15,703 $ 14,194 $ 31,075 $ 21,746 ======== ======== ======== ======== Earnings per share from continuing operations before accounting change $ .85 $ .72 $ 1.70 $ 1.30 Cumulative effect of accounting change -- -- -- (.13) Discontinued operations .04 .10 .07 .09 -------- -------- -------- -------- Net earnings per share (1) $ .89 $ .82 $ 1.77 $ 1.26 ======== ======== ======== ========
(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 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 November 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 October 29, 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 November 22, 1994 EX-27 2
5 EXHIBIT 27 QTR-3 JAN-28-1995 OCT-29-1994 31,382 0 126,632 (11,361) 322,901 530,103 199,818 (105,930) 684,638 268,237 135,214 67,437 0 0 183,426 684,638 1,129,422 1,129,422 738,649 1,072,660 (1,991) 3,604 12,477 46,276 16,483 29,793 1,282 0 0 31,075 1.77 1.77
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