(Mark One)

[X]	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended August 4,November 3, 2001
[  ]	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from  _____________     to _____________

 

BROWN SHOE COMPANY, INC. (Exact name of registrant as specified in its charter)
New York (State or other jurisdiction of incorporation or organization)	43-0197190 (IRS Employer Identification Number)
8300 Maryland Avenue St. Louis, Missouri (Address of principal executive offices)	63105 (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 SeptemberDecember 1, 2001, 17,468,48517,464,835 shares of the registrant's common stock were outstanding.

(Thousands)

	(Unaudited)
	August 4, 2001			July 29, 2000			February 3, 2001
ASSETS
Current Assets
Cash and Cash Equivalents	$	47,126		$	31,945		$	50,491
Receivables		63,760			60,832			64,403
Inventories		496,951			447,817			427,830
Other Current Assets		24,405			22,572			20,008
Total Current Assets		632,242			563,166			562,732
Other Assets		87,814			77,119			86,732
Property and Equipment		250,069			240,945			245,608
Less Allowances for Depreciation       and Amortization		(160,730	)		(153,155	)		(155,003	)
		89,339			87,790			90,605
	$	809,395		$	728,075		$	740,069
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes Payable	$	68,000		$	14,000		$	66,500
Accounts Payable		200,801			170,303			127,887
Accrued Expenses		77,150			85,750			89,954
Income Taxes		3,574			6,500			1,850
Current Maturities of Long-Term Debt		28,550			10,000			10,000
Total Current Liabilities		378,075			286,553			296,191
Long-Term Debt and Capitalized    Lease Obligations		133,489			162,035			152,037
Other Liabilities		20,278			19,657			21,869
Shareholders' Equity
Common Stock		65,506			67,882			65,477
Additional Capital		47,842			48,514			46,578
Unamortized Value of Restricted Stock		(2,244	)		(2,932	)		(2,386	)
Accumulated Other Comprehensive Loss		(8,192	)		(6,752	)		(7,138	)
Retained Earnings		174,641			153,118			167,441
		277,553			259,830			269,972
	$	809,395		$	728,075		$	740,069

 

	(Unaudited)
	November 3, 2001			October 28, 2000			February 3, 2001
ASSETS
Current Assets
Cash and Cash Equivalents	$	25,152		$	44,634		$	50,491
Receivables		55,962			57,942			64,403
Inventories		445,065			444,355			427,830
Other Current Assets		23,157			26,979			20,008
Total Current Assets		549,336			573,910			562,732
Other Assets		87,587			80,125			86,732
Property and Equipment		251,566			247,235			245,608
Less Allowances for Depreciation       and Amortization		(162,685	)		(156,144	)		(155,003	)
		88,881			91,091			90,605
	$	725,804		$	745,126		$	740,069
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes Payable	$	85,000		$	59,000		$	66,500
Accounts Payable		109,748			141,292			127,887
Accrued Expenses		70,527			85,562			89,954
Income Taxes		2,464			8,606			1,850
Current Maturities of Long-Term Debt		28,550			10,000			10,000
Total Current Liabilities		296,289			304,460			296,191
Long-Term Debt and Capitalized    Lease Obligations		123,490			152,037			152,037
Other Liabilities		19,294			19,443			21,869
Shareholders' Equity
Common Stock		65,506			66,553			65,477
Additional Capital		47,836			47,465			46,578
Unamortized Value of Restricted Stock		(2,057	)		(2,596	)		(2,386	)
Accumulated Other Comprehensive Loss		(9,311	)		(7,915	)		(7,138	)
Retained Earnings		184,757			165,679			167,441
		286,731			269,186			269,972
	$	725,804		$	745,126		$	740,069

See Notes to Condensed Consolidated Financial Statements.

(Thousands, except per share)

	Thirteen Weeks Ended						Twenty-six Weeks Ended
	August 4, 2001			July 29, 2000			August 4, 2001			July 29, 2000
Net Sales	$	442,079		$	419,147		$	878,217		$	813,904
Cost of Goods Sold		272,535			251,056			533,625			483,839
Gross Profit		169,544			168,091			344,592			330,065
Selling & Administrative Expenses		158,504			150,392			318,553			298,335
Interest Expense		5,247			4,314			10,764			8,579
Other Income		(2,032	)		(333	)		(1,977	)		(507	)
Earnings Before Income Taxes		7,825			13,718			17,252			23,658
Income Tax Provision		2,030			4,520			5,046			7,912
NET EARNINGS	$	5,795		$	9,198		$	12,206		$	15,746
BASIC EARNINGS PER     COMMON SHARE	$	.34		$	.51		$	.71		$	.88
DILUTED EARNINGS PER     COMMON SHARE	$	.33		$	.51		$	.69		$	.87
DIVIDENDS PER COMMON SHARE	$	.10		$	.10		$	.20		$	.20

 

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	November 3, 2001			October 28, 2000			November 3, 2001			October 28, 2000
Net Sales	$	462,361		$	463,312		$	1,340,578		$	1,277,216
Cost of Goods Sold		280,874			278,955			814,499			762,794
Gross Profit		181,487			184,357			526,079			514,422
Selling & Administrative Expenses		161,098			157,050			479,651			455,385
Interest Expense		4,827			4,747			15,591			13,326
Other (Income) Expense		312			(168	)		(1,665	)		(675	)
Earnings Before Income Taxes		15,250			22,728			32,502			46,386
Income Tax Provision		3,399			7,113			8,445			15,025
NET EARNINGS	$	11,851		$	15,615		$	24,057		$	31,361
BASIC EARNINGS PER     COMMON SHARE	$	.69		$	.88		$	1.40		$	1.76
DILUTED EARNINGS PER     COMMON SHARE	$	.68		$	.88		$	1.37		$	1.75
DIVIDENDS PER COMMON SHARE	$	.10		$	.10		$	.30		$	.30

See Notes to Condensed Consolidated Financial Statements.

(Thousands)

See Notes to Condensed Consolidated Financial Statements.

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) to present fairly the Company's financial condition, results of operations, and cash flows. 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 flows in conformity with accounting principles generally accepted in the United States.

The fiscal 2000 Condensed Consolidated Statements of Earnings have been reclassified to conform to the fiscal 2001 presentation, whereby royalty income, previously reflected in Other Income, has been reclassified to Net Sales.

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 year ended February 3, 2001.

Note B - Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per common share for the periods ended August 4,November 3, 2001 and July 29,October 28, 2000 ($000's, except per share data):
 

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 August 4,November 3, 2001 and July 29,October 28, 2000 (000's):
 

Note D - Business Segment Information

Applicable business segment information is as follows for the periods ended August 4,November 3, 2001 and July 29,October 28, 2000 (000's):
 

Reconciliation of operating profit to earnings before income taxes (000's):
 

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, and the Company's investment in Shoes.com, Inc., a footwear e-commerce company.

Note E - New Accounting Standards

On February 4, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." The statement establishes standards for recognition and measurement of derivatives and hedging activities. In adoption of this statement at the beginning of fiscal 2001, the Company recorded a cumulative transition adjustment to increase Other Comprehensive Income by $0.3 million (net of tax), to recognize the fair value of its derivative instruments. The Company expects to reclassify all of the transition adjustment into earnings in 2001.

The Company uses derivative financial instruments, primarily foreign exchange contracts and interest rate caps and swaps, to reduce its exposure to market risks from changes in foreign exchange rates and interest rates. These derivatives, designated as cash flow hedges, are used to hedge the procurement of footwear from foreign countries and the variability of cash flows paid on variable-rate debt. The terms of these instruments are generally less than one year. The effective portions of changes in the fair value of derivatives are recorded in Other Comprehensive Income and reclassified to earnings when the hedged item affects earnings. The ineffective portions of changes in the fair value of cash flow hedges are immediately recognized in earnings.

During the first sixnine months of fiscal 2001, changes in the fair value of derivatives and reclassifications from Other Comprehensive Income to earnings reducedfrom the initial transition adjustment resultingresulted in a decrease in Other Comprehensive Income of $258,000,$32,000, net of tax (see Note C).
 

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", effective for fiscal years beginning after December 15, 2001. Under the new standards, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the statement. Other intangible assets will continue to be amortized over their useful lives.

The Company will apply the new standards on accounting for goodwill and other intangible assets beginning in the first quarter of fiscal 2002. Application of the nonamortization provisions of the Statement is expected to result in an increase in net income in fiscal 2002 of approximately $1 million ($0.06 per share). During fiscal 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite-lived intangible assets andassets. The Company has not yet determined what the effect of these teststhe application of the new standard will be on the earnings and financial position of the Company.
 

Note F - Consolidation

The consolidated financial statements include the accounts of Brown Shoe Company, Inc. and its wholly-owned and majority-owned subsidiaries, after the elimination of intercompany accounts and transactions. Prior to the first quarter of 2001, the accounts of the Company's Brown Pagoda division were consolidated on a calendar year basis, which was approximately one month earlier than the rest of the Company. In the first quarter of 2001, this one-month reporting lag was eliminated to provide uniform reporting. As a result, the earnings for this division in the month of January, 2001 of $0.2 million were credited directly to Retained Earnings.
 

Note G - Condensed Consolidated Financial Information

Certain of the Company's debt is fully, unconditionally and jointly and severally guaranteed by certain wholly-owned domestic subsidiaries and the Canadian subsidiary of the Company. Accordingly, condensed consolidating balance sheets as of August 4,November 3, 2001 and July 29,October 28, 2000, and the related condensed consolidating statements of earnings and cash flows for the twenty-six week periods then ended.thirty-nine weeks period 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.