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 May 5, 2001 |
| |
| [ ] | 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
(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 June 2, 2001, 17,444,938 shares of the registrant's common stock were outstanding.
1
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
| | (Unaudited)
| | | |
| | May 5,
2001
| | April 29,
2000
| | February 3,
2001
| |
| | | | | | |
| ASSETS | | | | | | | | | |
| Current Assets | | | | | | | | | |
| Cash and Cash Equivalents | $ | 35,971 | | $ | 32,509 | | $ | 50,491 | |
| Receivables, net | | 54,605 | | | 56,360 | | | 64,403 | |
| Inventories | | 452,170 | | | 424,101 | | | 427,830 | |
| Other Current Assets | | 20,375 | | | 20,164 | | | 20,008 | |
|
| |
| |
| |
| Total Current Assets | | 563,121 | | | 533,134 | | | 562,732 | |
| | | | | | | | | |
| Other Assets | | 86,422 | | | 77,918 | | | 86,732 | |
| | | | | | | | | |
| Property and Equipment | | 249,821 | | | 234,304 | | | 245,608 | |
Less Allowances for Depreciation
and Amortization | | (159,683 | ) | | (150,311 |
) | | (155,003 | ) |
|
| |
| |
| |
| | | 90,138 | | | 83,993 | | | 90,605 | |
|
| |
| |
| |
| | $ | 739,681 | | $ | 695,045 | | $ | 740,069 | |
|
| |
| |
| |
| | | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
| Current Liabilities | | | | | | | | | |
| Notes Payable | $ | 75,000 | | $ | 16,743 | | $ | 66,500 | |
| Accounts Payable | | 128,469 | | | 149,945 | | | 127,887 | |
| Accrued Expenses | | 76,556 | | | 78,806 | | | 89,954 | |
| Income Taxes | | 3,345 | | | 3,321 | | | 1,850 | |
| Current Maturities of Long-Term Debt | | 25,000 | | | 10,000 | | | 10,000 | |
|
| |
| |
| |
| Total Current Liabilities | | 308,370 | | | 258,815 | | | 296,191 | |
| | | | | | | | | | |
Long-Term Debt and Capitalized
Lease Obligations | | 137,039 | | | 162,035 | | | 152,037 | |
| Other Liabilities | | 21,138 | | | 20,149 | | | 21,869 | |
| | | | | | | | | | |
| Shareholders' Equity | | | | | | | | | |
| Common Stock | | 65,434 | | | 68,498 | | | 65,477 | |
| Additional Capital | | 47,488 | | | 49,072 | | | 46,578 | |
| Unamortized Value of Restricted Stock | | (2,655 | ) | | (3,340 | ) | | (2,386 | ) |
| Accumulated Other Comprehensive Loss | | (7,999 | ) | | (6,811 | ) | | (7,138 | ) |
| Retained Earnings | | 170,866 | | | 146,627 | | | 167,441 | |
|
| |
| |
| |
| | | 273,134 | | | 254,046 | | | 269,972 | |
|
| |
| |
| |
| | $ | 739,681 | | $ | 695,045 | | $ | 740,069 | |
|
| |
| |
| |
See Notes to Condensed Consolidated Financial Statements.
2
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share)
| | | Thirteen Weeks Ended
| |
| | | | | | May 5,
2001
| | April 29,
2000
| |
| | | | | | | | |
| | | | | | | | | | | | |
| Net Sales | | | | | | | $ | 436,138 | | $ | 394,757 | |
| Cost of Goods Sold | | | | | | | | 261,090 | | | 232,783 | |
| | | | |
| |
| |
| Gross Profit | | | | | | | | 175,048 | | | 161,974 | |
| | | | | | | | | | | | |
| Selling and Administrative Expenses | | | | | | | | 160,049 | | | 147,943 | |
| Interest Expense | | | | | | | | 5,517 | | | 4,265 | |
| Other (Income) Expense | | | | | | | | 55 | | | (174 | ) |
| | | | |
| |
| |
| Earnings Before Income Taxes | | | | | | | | 9,427 | | | 9,940 | |
| | | | | | | | | | | | |
| Income Tax Provision | | | | | | | | 3,016 | | | 3,392 | |
| | | | |
| |
| |
| NET EARNINGS | | | | | | | $ | 6,411 | | $ | 6,548 | |
| | | | |
| |
| |
| | | | | | | | | | | | |
| BASIC EARNINGS PER COMMON SHARE | | | | | $ | .37 | | $ | .37 | |
| | | | |
| |
| |
| | | | | | | | | | | | |
| DILUTED EARNINGS PER COMMON SHARE | | | | | $ | .36 | | $ | .36 | |
| | | | |
| |
| |
| | | | | | | | | | | | |
| DIVIDENDS PER COMMON SHARE | | | | | $ | .10 | | $ | .10 | |
| | | | |
| |
| |
See Notes to Condensed Consolidated Financial Statements.
3
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
| | Thirteen Weeks Ended
| |
| | May 5,
2001
| | April 29,
2000
| |
| | | | |
| Net Cash Used by Operating Activities | $ | (14,198 | ) | $ | (11,384 | ) |
| | | | | | | |
| Investing Activities: | | | | | | |
| Capital expenditures | | (6,147 | ) | | (5,320 | ) |
| Other | | 101 | | | 129 | |
|
| |
| |
| | | | | | | |
| Net Cash Used by Investing Activities | | (6,046 | ) | | (5,191 | ) |
| | | | | | | |
| Financing Activities: | | | | | | |
| Increase in short-term notes payable | | 8,500 | | | 16,743 | |
| Payments for purchase of treasury stock | | (2,198 | ) | | - | |
| Proceeds from stock options exercised | | 1,169 | | | 10 | |
| Dividends paid | | (1,747 | ) | | (1,827 | ) |
|
| |
| |
| | | | | | | |
| Net Cash Provided by Financing Activities | | 5,724 | | | 14,926 | |
|
| |
| |
| | | | | | | |
| Decrease in Cash and Cash Equivalents | | (14,520 | ) | | (1,649 | ) |
| | | | | | | |
| Cash and Cash Equivalents at Beginning of Period | | 50,491 | | | 34,158 | |
|
| |
| |
| | | | | | | |
| Cash and Cash Equivalents at End of Period | $ | 35,971 | | $ | 32,509 | |
|
| |
| |
See Notes to Condensed Consolidated Financial Statements.
4
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 generally accepted accounting principles.
The fiscal 2000 Statement of Income has 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 share for the periods ended May 5, 2001 and April 29, 2000 (000's, except per share data):
| | | | Thirteen Weeks Ended
| |
| | | | | | May 5,
2001
| | April 29,
2000
| |
| | | | | | | | |
| Numerator: | | | | | | | | | | | | |
| Net earnings - Basic and Diluted | | | | | | | $ | 6,411 | | $ | 6,548 | |
| | | | |
| |
| |
| | | | | | | | | | | | |
| Denominator: | | | | | | | | | | | | |
| Weighted average shares outstanding - Basic | | | 17,145 | | | 17,919 | |
| Effect of potentially dilutive securities | | | | | | 501 | | | 141 | |
| | | | |
| |
| |
| Weighted average shares outstanding - Diluted | | | 17,646 | | | 18,060 | |
| | | | |
| |
| |
| | | | | | | | | | | | |
| Basic earnings per common share | | | | | | | $ | .37 | | $ | .37 | |
| | | | |
| |
| |
| | | | | | | | | | | | |
| Diluted earnings per common share | | | | | | | $ | .36 | | $ | .36 | |
| | | | |
| |
| |
5
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 May 5, 2001 and April 29, 2000 (000's):
| | | | Thirteen Weeks Ended
| |
| | | | | | May 5,
2001
| | April 29,
2000
| |
| | | | | | | | |
| Net Earnings | | | | | | | $ | 6,411 | | $ | 6,548 | |
| Foreign Currency Translation Adjustment | | | | | | | | (906 | ) | | (777 | ) |
| Unrealized Gains on Derivative Instruments | | | | | | | | 45 | | | - | |
| | | | |
| |
| |
| Comprehensive Income | | | | | | | $ | 5,550 | | $ | 5,771 | |
| | | | |
| |
| |
Note D - Business Segment Information
Applicable business segment information is as follows for the periods ended May 5, 2001 and April 29, 2000 (000's):
| | Famous
Footwear
| | Wholesale
Operations
| | Naturalizer
Retail
| | Other
| | Totals
| |
| | | | | | | | | | |
| | | | | | | | | | | |
| Thirteen Weeks Ended May 5, 2001 | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| External Sales | $ | 255,728 | | $ | 129,422 | | $ | 50,985 | | $ | 3 | | $ | 436,138 | |
| Intersegment Sales | | - | | | 43,048 | | | - | | | - | | | 43,048 | |
| Operating profit (loss) | | 9,854 | | | 11,362 | | | (561 | ) | | (5,403 | ) | | 15,252 | |
| | | | | | | | | | | | | | | | |
| Thirteen Weeks Ended April 29, 2000 | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| External Sales | $ | 236,952 | | $ | 110,823 | | $ | 46,982 | | $ | - | | $ | 394,757 | |
| Intersegment Sales | | - | | | 48,973 | | | - | | | - | | | 48,973 | |
| Operating profit (loss) | | 11,018 | | | 8,060 | | | (1,724 | ) | | (3,226 | ) | | 14,128 | |
| | | | | | | | | | | | | | | | |
6
Reconciliation of operating profit to earnings before income taxes (000's):
| | | | Thirteen Weeks Ended
| |
| | | | | | May 5,
2001
| | April 29,
2000
| |
| | | | | | | | |
| | | | | | | | | | | | | |
| Total operating profit | | | | | | | $ | 15,252 | | $ | 14,128 | |
| Interest expense | | | | | | | | 5,517 | | | 4,265 | |
| Non-operating other (income) expense | | | | | | | | 308 | | | (77 | ) |
| | | | |
| |
| |
| Earnings before income taxes | | | | | | | $ | 9,427 | | $ | 9,940 | |
| | | | |
| |
| |
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 Standard
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 standard 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 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 quarter of fiscal 2001, changes in fair value of derivatives and reclassifications from Other Comprehensive Income to earnings reduced the initial transition adjustment, resulting in an increase in Other Comprehensive Income of $45,000, net of tax, for the quarter. Hedge ineffectiveness for the first quarter of 2001 was immaterial.
7
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 May 5, 2001 and April 29, 2000, and the related condensed consolidating statements of earnings and cash flows for the thirteen weeks ended May 5, 2001 and April 29, 2000 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.
8
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MAY 5, 2001
| (Thousands) | Parent
| | Guarantor
Subsidiaries
| | Non-Guarantor
Subsidiaries
| | Eliminations
| | Consolidated
Totals
| |
| | | | | | | | | | |
| Assets | | | | | | | | | | | | | | | |
| Current Assets | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | 3,057 | | $ | 8,707 | | $ | 24,207 | | $ | - | | $ | 35,971 | |
| Receivables, net | | 30,635 | | | 13,113 | | | 10,857 | | | - | | | 54,605 | |
| Inventories | | 44,891 | | | 415,624 | | | 109 | | | (8,454 | ) | | 452,170 | |
| Other current assets (liabilities) | | (7,321 | ) | | 21,921 | | | 1,041 | | | 4,734 | | | 20,375 | |
|
| |
| |
| |
| |
| |
| Total Current Assets | | 71,262 | | | 459,365 | | | 36,214 | | | (3,720 | ) | | 563,121 | |
| Other Assets | | 50,818 | | | 31,680 | | | 3,928 | | | (4 | ) | | 86,422 | |
| Property and Equipment, net | | 14,778 | | | 74,163 | | | 1,197 | | | - | | | 90,138 | |
| Investment in Subsidiaries | | 291,372 | | | 22,940 | | | - | | | (314,312 | ) | | - | |
|
| |
| |
| |
| |
| |
| Total Assets | $ | 428,230 | | $ | 588,148 | | $ | 41,339 | | $ | (318,036 | ) | $ | 739,681 | |
|
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | |
| Liabilities & Shareholders' Equity | | | | | | | | | | | | | |
| Current Liabilities | | | | | | | | | | | | | | | |
| Notes payable | $ | 75,000 | | $ | - | | $ | - | | $ | - | | $ | 75,000 | |
| Accounts payable | | 3,793 | | | 115,416 | | | 9,260 | | | - | | | 128,469 | |
| Accrued expenses | | 18,696 | | | 52,269 | | | 4,969 | | | 622 | | | 76,556 | |
| Income taxes | | (291 | ) | | 1,589 | | | 1,748 | | | 299 | | | 3,345 | |
Current maturities of
long-term debt | | 25,000 | | | - | | | - | | | - | | | 25,000 | |
|
| |
| |
| |
| |
| |
| Total Current Liabilities | | 122,198 | | | 169,274 | | | 15,977 | | | 921 | | | 308,370 | |
Long-Term Debt and
Capitalized Lease Obligations | | 137,039 | | | - | | | - | | | - | | | 137,039 | |
| Other Liabilities (Assets) | | 21,142 | | | (1,249 | ) | | 1,245 | | | - | | | 21,138 | |
| Intercompany Payable (Receivable) | | (125,283 | ) | | 123,111 | | | 1,702 | | | 470 | | | - | |
| Shareholders' Equity | | 273,134 | | | 297,012 | | | 22,415 | | | (319,427 | ) | | 273,134 | |
|
| |
| |
| |
| |
| |
Total Liabilities and
Shareholders' Equity |
$ | 428,230 | |
$ | 588,148 | |
$ | 41,339 | |
$ | (318,036 | ) | $ | 739,681 | |
|
| |
| |
| |
| |
| |
9
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
THIRTEEN WEEKS ENDED MAY 5, 2001
| (Thousands) | Parent
| | Guarantor
Subsidiaries
| | Non-Guarantor
Subsidiaries
| | Eliminations
| | Consolidated
Totals
| |
| | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Net Sales | $ | 69,101 | | $ | 374,224 | | $ | 63,673 | | $ | (70,860 | ) | $ | 436,138 | |
| Cost of goods sold | | 46,015 | | | 229,586 | | | 55,502 | | | (70,013 | ) | | 261,090 | |
|
| |
| |
| |
| |
| |
| Gross profit | | 23,086 | | | 144,638 | | | 8,171 | | | (847 | ) | | 175,048 | |
| | | | | | | | | | | | | | | |
| Selling and administrative expenses | | 22,035 | | | 134,375 | | | 4,486 | | | (847 | ) | | 160,049 | |
| Interest expense | | 5,486 | | | 8 | | | 23 | | | - | | | 5,517 | |
Intercompany interest
(income) expense | | (3,964 | ) | | 3,966 | | | (2 | ) | | - | | | - | |
| Other (income) expense | | 397 | | | (15 | ) | | (327 | ) | | - | | | 55 | |
| Equity in earnings of subsidiaries | | (7,729 | ) | | (4,262 | ) | | - | | | 11,991 | | | - | |
|
| |
| |
| |
| |
| |
Earnings Before
Income Taxes | | 6,861 | | | 10,566 | | | 3,991 | | | (11,991 | ) | | 9,427 | |
| Income tax provision | | 450 | | | 2,540 | | | 26 | | | - | | | 3,016 | |
|
| |
| |
| |
| |
| |
| Net Earnings | $ | 6,411 | | $ | 8,026 | | $ | 3,965 | | $ | (11,991 | ) | $ | 6,411 | |
|
| |
| |
| |
| |
| |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THIRTEEN WEEKS ENDED MAY 5, 2001
| (Thousands) | Parent
| | Guarantor
Subsidiaries
| | Non-Guarantor
Subsidiaries
| | Eliminations
| | Consolidated
Totals
| |
| | | | | | | | | | |
Net Cash Provided (Used) by
Operating Activities |
$ | (2,964 | ) |
$
| (17,227 | ) | $ | 5,994 | |
$ | (1 | ) | $ | (14,198 | ) |
| | | | | | | | | | | | | | | |
| Investing Activities: | | | | | | | | | | | | | | | |
| Capital expenditures | | (945 | ) | | (4,867 | ) | | (335 | ) | | - | | | (6,147 | ) |
| Other | | 101 | | | - | | | - | | | - | | | 101 | |
|
| |
| |
| |
| |
| |
Net Cash Provided (Used) by
Investing Activities | | (844 | ) | | (4,867 | ) | | (335 | ) | | - | | | (6,046 | ) |
| | | | | | | | | | | | | | | |
| Financing Activities: | | | | | | | | | | | | | | | |
Increase in short-term
notes payable | | 8,500 | | | - | | | - | | | - | | | 8,500 | |
Proceeds from stock
options exercised | | 1,169 | | | - | | | - | | | - | | | 1,169 | |
Payments for purchase of
Treasury stock | | (2,198 | ) | | - | | | - | | | - | | | (2,198 | ) |
| Dividends paid | | (1,747 | ) | | - | | | - | | | - | | | (1,747 | ) |
| Intercompany financing | | (5,842 | ) | | 16,168 | | | (16,527 | ) | | 6,201 | | | - | |
|
| |
| |
| |
| |
| |
Net Cash Provided (Used) by
Financing Activities | | (118 | ) | | 16,168 | | | (16,527 | ) | | 6,201 | | | 5,724 | |
| | | | | | | | | | | | | | | |
Increase (Decrease) in Cash and
Cash Equivalents | | (3,926 | ) | | (5,926 | ) | | (10,868 | ) | | 6,200 | | | (14,520 | ) |
Cash and Cash Equivalents at
Beginning of Period | | 6,983 | | | 14,633 | | | 35,075 | | | (6,200 | ) | | 50,491 | |
|
| |
| |
| |
| |
| |
Cash and Cash Equivalents at
End of Period |
$ | 3,057 | |
$ | 8,707 | |
$ | 24,207 | |
$ | - | |
$ | 35,971 | |
|
| |
| |
| |
| |
| |
10
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF APRIL 29, 2000
| (Thousands) | Parent
| | Guarantor
Subsidiaries
| | Non-Guarantor
Subsidiaries
| | Eliminations
| | Consolidated
Totals
| |
| | | | | | | | | | |
| Assets | | | | | | | | | | | | | | | |
| Current Assets | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | 1,246 | | $ | 7,614 | | $ | 23,649 | | $ | - | | $ | 32,509 | |
| Receivables, net | | 29,188 | | | 16,891 | | | 10,281 | | | - | | | 56,360 | |
| Inventories | | 42,510 | | | 392,399 | | | 144 | | | (10,952 | ) | | 424,101 | |
| Other current assets (liabilities) | | (5,270 | ) | | 20,175 | | | 816 | | | 4,443 | | | 20,164 | |
|
| |
| |
| |
| |
| |
| Total Current Assets | | 67,674 | | | 437,079 | | | 34,890 | | | (6,509 | ) | | 533,134 | |
| Other Assets | | 51,469 | | | 26,160 | | | 293 | | | (4 | ) | | 77,918 | |
| Property and Equipment, net | | 14,374 | | | 68,820 | | | 799 | | | - | | | 83,993 | |
| Investment in Subsidiaries | | 253,636 | | | 4,432 | | | - | | | (258,068 | ) | | - | |
|
| |
| |
| |
| |
| |
| Total Assets | $ | 387,153 | | $ | 536,491 | | $ | 35,982 | | $ | (264,581 | ) | $ | 695,045 | |
|
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | |
| Liabilities & Shareholders' Equity | | | | | | | | | | | | | |
| Current Liabilities | | | | | | | | | | | | | | | |
| Notes payable | $ | 14,000 | | $ | 2,743 | | $ | - | | $ | - | | $ | 16,743 | |
| Accounts payable | | 4,596 | | | 135,966 | | | 9,383 | | | - | | | 149,945 | |
| Accrued expenses | | 18,885 | | | 53,053 | | | 5,946 | | | 922 | | | 78,806 | |
| Income taxes | | (937 | ) | | 2,260 | | | 1,625 | | | 373 | | | 3,321 | |
Current maturities of
long-term debt | | 10,000 | | | - | | | - | | | - | | | 10,000 | |
|
| |
| |
| |
| |
| |
| Total Current Liabilities | | 46,544 | | | 194,022 | | | 16,954 | | | 1,295 | | | 258,815 | |
Long-Term Debt and
Capitalized Lease Obligations | | 162,035 | | | - | | | - | | | - | | | 162,035 | |
| Other Liabilities (Assets) | | 20,836 | | | (714 | ) | | 27 | | | - | | | 20,149 | |
| Intercompany Payable (Receivable) | | (96,308 | ) | | 88,350 | | | 14,569 | | | (6,611 | ) | | - | |
| Shareholders' Equity | | 254,046 | | | 254,833 | | | 4,432 | | | (259,265 | ) | | 254,046 | |
|
| |
| |
| |
| |
| |
Total Liabilities and
Shareholders' Equity |
$ | 387,153 | | $ | 536,491 | | $ | 35,982 | | $ | (264,581 | ) | $ | 695,045 | |
|
| |
| |
| |
| |
| |
11
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
THIRTEEN WEEKS ENDED APRIL 29, 2000
| (Thousands) | Parent
| | Guarantor
Subsidiaries
| | Non-Guarantor
Subsidiaries
| | Eliminations
| | Consolidated
Totals
| |
| | | | | | | | | | |
| Net Sales | $ | 68,806 | | $ | 352,568 | | $ | 52,347 | | $ | (78,964 | ) | $ | 394,757 | |
| Cost of goods sold | | 50,315 | | | 215,236 | | | 46,196 | | | (78,964 | ) | | 232,783 | |
|
| |
| |
| |
| |
| |
| Gross profit | | 18,491 | | | 137,332 | | | 6,151 | | | - | | | 161,974 | |
| | | | | | | | | | | | | | | |
| Selling and administrative expenses | | 17,890 | | | 127,409 | | | 2,986 | | | (342 | ) | | 147,943 | |
| Interest expense | | 4,210 | | | 45 | | | 10 | | | - | | | 4,265 | |
Intercompany interest
(income) expense | | (3,114 | ) | | 3,121 | | | (7 | ) | | - | | | - | |
| Other (income) expense | | (308 | ) | | (22 | ) | | (186 | ) | | 342 | | | (174 | ) |
| Equity in earnings of subsidiaries | | (7,198 | ) | | (3,224 | ) | | - | | | 10,422 | | | - | |
|
| |
| |
| |
| |
| |
Earnings Before
Income Taxes | | 7,011 | | | 10,003 | | | 3,348 | | | (10,422 | ) | | 9,940 | |
| Income tax provision | | 463 | | | 2,805 | | | 124 | | | - | | | 3,392 | |
|
| |
| |
| |
| |
| |
| Net Earnings | $ | 6,548 | | $ | 7,198 | | $ | 3,224 | | $ | (10,422 | ) | $ | 6,548 | |
|
| |
| |
| |
| |
| |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THIRTEEN WEEKS ENDED APRIL 29, 2000
| (Thousands) | Parent
| | Guarantor
Subsidiaries
| | Non-Guarantor
Subsidiaries
| | Eliminations
| | Consolidated
Totals
| |
| | | | | | | | | | |
| | | | | | | | | | | | | | | |
Net Cash Provided (Used) by
Operating Activities |
$
| (13 | ) | $ | (10,254 | ) | $ | (925 | ) | $ | (192 | ) | $ | (11,384 | ) |
| | | | | | | | | | | | | | | |
| Investing Activities: | | | | | | | | | | | | | | | |
| Capital expenditures | | (120 | ) | | (5,176 | ) | | (24 | ) | | - | | | (5,320 | ) |
| Other | | 129 | | | - | | | - | | | - | | | 129 | |
|
| |
| |
| |
| |
| |
Net Cash Provided (Used) by
Investing Activities | | 9 | | | (5,176 | ) | | (24 | ) | | - | | | (5,191 | ) |
| | | | | | | | | | | | | | | |
| Financing Activities: | | | | | | | | | | | | | | | |
Increase in short-term
notes payable | | 14,000 | | | 2,743 | | | - | | | - | | | 16,743 | |
Proceeds from stock
options exercised | | 10 | | | - | | | - | | | - | | | 10 | |
| Dividends paid | | (1,827 | ) | | - | | | - | | | - | | | (1,827 | ) |
| Intercompany financing | | (19,784 | ) | | 15,747 | | | 3,845 | | | 192 | | | - | |
|
| |
| |
| |
| |
| |
Net Cash Provided (Used) by of
Financing Activities | | (7,601 | ) | | 18,490 | | | 3,845 | | | 192 | | | 14,926 | |
| | | | | | | | | | | | | | | |
Increase (Decrease) in Cash and
Cash Equivalents | | (7,605 | ) | | 3,060 | | | 2,896 | | | - | | | (1,649 | ) |
Cash and Cash Equivalents at of
Beginning of Period | | 8,851 | | | 4,554 | | | 20,753 | | | - | | | 34,158 | |
|
| |
| |
| |
| |
| |
Cash and Cash Equivalents at
End of Period |
$ | 1,246 | | $ | 7,614 | | $ | 23,649 | | $ | - | | $ | 32,509 | |
|
| |
| |
| |
| |
| |
12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Quarter ended May 5, 2001 compared to the Quarter ended April 29, 2000
Consolidated net sales for the first quarter ended May 5, 2001 were $436.1 million compared to $394.8 million in the quarter ended April 29, 2000. Net earnings of $6.4 million for the first quarter of 2001 compares to net earnings of $6.5 million in the first quarter of 2000. Diluted earnings per share was $.36 in both years.
Famous Footwear achieved a sales increase of 7.9% during the first quarter of 2001 to $255.7 million. The increase was driven by 49 more stores (including 26 stores acquired in August 2000 located primarily in the Milwaukee, Wisconsin area), resulting in a total of 919 stores in operation, partially offset by a 3.7% same-store sales decline. Operating earnings for the first quarter of 2001 decreased 10.6% to $9.9 million from $11.0 million last year, due to the lower same-store sales. Reduced traffic in outlet center stores combined with advertising that coincided with poor weather early in the quarter contributed to the decline in same-store sales.
The Company's wholesale operations had net sales of $129.4 million during the first quarter of 2001 compared to $110.8 million last year. This sales increase was primarily due to higher sales of Naturalizer branded product as well as private label women's and children's product. Operating earnings of $11.4 million increased from $8.1 million in the first quarter of 2000 primarily as a result of the higher sales.
In the Company's Naturalizer Retail operations, including stores in both the United States and Canada, net sales increased 8.5% to $51.0 million in the first quarter of 2001. Same-store sales in the first quarter of 2001 increased 5.9% in the United States and 15.1% in Canada. The Company had 19 less stores in operation in the United States in 2001 and had 14 more stores in operation in Canada than in 2000. At the end of the first quarter of 2001, 475 stores were in operation including 320 stores in the United States and 155 stores in Canada. Total Naturalizer Retail operations reported an operating loss of $.6 million in the first quarter of fiscal 2001 compared to a loss of $1.7 million in 2000. The improvement was primarily due to the higher sales and was net of a charge of approximately $0.6 million relating to the closure of underperforming stores during the first quarter of fiscal 2001.
Consolidated gross profit as a percent of sales decreased to 40.1% from 41.0% during the same period last year. This decrease was primarily due to lower margins in the Company's wholesaling operations as a result of higher promotional activities, with some impact from the shift in the mix of business from retail to wholesale, which carries a lower gross profit rate.
13
Selling and administrative expenses as a percent of sales decreased to 36.7% from 37.5% during the same period last year. This decrease was due to lower expenses within the wholesale operations partially offset by higher expenses within the retail operations and a lower mix of retail sales, which carry a higher expense rate.
The consolidated tax rate was 32.0% of pre-tax income for the first quarter of 2001 compared to 34.1% last year. The decrease from last year's effective tax rate reflects a projected lower annual effective tax rate for fiscal 2001 than was anticipated for fiscal 2000 at the end of the first quarter of fiscal 2000.
Financial Condition
A summary of key financial data and ratios at the dates indicated is as follows:
| | May 5,
2001
| | April 29,
2000
| | February 3,
2001
|
| | | | | | |
| Working Capital (millions) | $254.8 | | $274.3 | | 266.5 |
| | | | | |
| Current Ratio | 1.8:1 | | 2.1:1 | | 1.9:1 |
| | | | | |
Total Debt as a Percentage
of Total Capitalization | 46.5% | |
42.6% | | 45.8% |
Cash usage from operating activities for the first quarter of fiscal 2001 was $14.2 million versus $11.4 million last year. This decline resulted primarily from a smaller reduction in accounts receivable compared to last year due to higher sales in the Company's wholesale operations.
The increase in the ratio of total debt as a percentage of total capitalization at May 5, 2001, compared to the end of fiscal 2000, is due to cash usage in the first quarter related to a seasonal increase in inventories. At May 5, 2001, $75.0 million was borrowed and $7.4 million of letters of credit were outstanding under the Company's $165.0 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 first quarter of fiscal 2001, the Company purchased 122,400 shares at a cost of $2.2 million under this authorization. Through the end of the first quarter of 2001, the Company has repurchased a total of 905,400 shares for approximately $10.9 million under this authorization.
14
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 2000 Annual Report on Form 10-K, detailed risk factors that could cause variations in results to occur are listed and further discussed. Such description 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. For further information, see Item 7A of the Company's Annual Report and Form 10-K for the year ended February 3, 2001.
15
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
There have been no material developments during the quarter ended May 5, 2001 in the legal proceedings described in the Company's Annual Report on Form 10-K for the year ended February 3, 2001.Item 4 - Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders held on May 24, 2001, one proposal described in the Notice of Annual Meeting of Shareholders dated April 19, 2001, was voted upon. 1. The shareholders elected three directors, Julie C. Esrey, Richard A. Liddy and John Peters MacCarthy for terms
of three years each.
Directors
| | For
| | Withheld
|
| | | | | |
| Julie C. Esrey | | 15,197,364 | | 121,571 |
| Richard A. Liddy | | 15,193,867 | | 125,068 |
| John Peters MacCarthy | | 15,190,386 | | 128,549 |
Item 6 - Exhibits and Reports on Form 8-K
| (a) | (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 reference 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. |
16
| (b) | Reports on Form 8-K: |
| | |
| | The Company filed a current report on Form 8-K dated February 22, 2001. |
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: June 15, 2001 | | /s/ Andrew M. Rosen
|
| | | Chief Financial Officer and Treasurer
On Behalf of the Corporation as the
Principal Financial Officer |
17
