SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 5, 1998
BROWN GROUP, INC.
(Exact name of registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation or organization)
1-2191 43-0197190
(Commission File Number) (IRS Employer Identification Number)
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)
Page 1 of 10 Pages
Item 5. Other Events
------------
On March 5, 1998, Brown Group, Inc. announced operating
results for the fiscal year ended January 31, 1998.
Brown Group, Inc. also announced additional losses at
its Pagoda International division which offset favorable
results from core operations.
Attached as an exhibit to this report is a copy of a
press release issued on March 5, 1998, which press
release is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Information and Exhibits
--------------------------------------------------------
Exhibit No. Description of Exhibit
----------- ----------------------
99.1 Press release dated March 5, 1998
SIGNATURE
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 hereunto duly
authorized.
BROWN GROUP, INC.
(Registrant)
By /s/ H. E. Rich
Executive Vice President and
Chief Financial Officer
Date: March 5, 1998
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
BROWN GROUP REPORTS FISCAL YEAR 1997 RESULTS: PROGRESS IN CORE
OPERATIONS OFFSET BY LOSSES/CHARGES AT INTERNATIONAL
SALES DIVISION
ST. LOUIS, MISSOURI, March 5, 1998 . . . Brown Group, Inc. (NYSE: BG) reported
consolidated net sales for the 52-week fiscal year 1997, which ended January
31, 1998, of $1,567,202,000 compared to $1,525,052,000 in fiscal 1996, an
increase of 2.8 percent.
The company reported a net loss of $20,896,000, or a basic loss per share of
$1.19, for fiscal year 1997 compared to net earnings of $20,315,000, or basic
earnings per share of $1.16, in fiscal year 1996. The 1997 net loss includes
after-tax restructuring charges and operating losses of $45,617,000 associated
with the company's Pagoda International sales division and an after-tax loss of
$1,500,000 related to the sale of Famous Footwear's fixtures manufacturing
facilities.
Excluding these items, the company's core operations earned $26,221,000, or
basic earnings per share of $1.49, in fiscal year 1997 compared to earnings of
$26,015,000, or basic earnings per share of $1.48, in 1996. The 1996 earnings
include $4,900,000 or $.28 per share of non-recurring gains related to LIFO
inventory liquidations and income taxes.
Net sales for the fourth quarter of fiscal year 1997, which ended January 31,
1998, were $362,678,000 compared to $358,937,000 in 1996, an increase of 1.0
percent. A net loss of $12,645,000, or a basic loss per share of $.72, was
reported for the quarter compared to net earnings of $1,369,000, or basic
earnings per share of $.08, in the fourth quarter of 1996.
The fourth quarter 1997 net loss includes after-tax charges and operating
losses of $15,502,000 associated with the Pagoda International sales business
and an after-tax loss of $1,500,000 related to the sale of Famous Footwear's
fixtures manufacturing facilities. Excluding these items, the company's core
operations earned $4,357,000, or basic earnings per share of $.25, in the
fourth quarter of 1997 compared to $4,569,000, or basic earnings per share of
$.26, in the fourth quarter of 1996. The 1996 results include a non-recurring
gain of $1,900,000 related to income taxes.
Announcement of these results was made by B. A. Bridgewater, Jr., Chairman of
the Board, President and Chief Executive Officer, who said:
"Brown Group made excellent progress in its core businesses -- Famous
Footwear, Brown Shoe Company and the Canadian Operations -- during fiscal
year 1997. Continuing momentum in these businesses resulted in combined
net earnings totaling more than $26 million, exceeding plan and prior
estimates. These earnings are about even with results last year that
included non-recurring gains of $4.9 million. Unfortunately, this
progress was overshadowed by severe losses at the Pagoda International
sales division and charges taken in the second half of the year to
restructure that business. Prospects for further progress in the core
businesses are encouraging.
"At Famous Footwear, strengthened operating execution led to fiscal 1997
sales of $849.9 million that were up 8.8 percent over 1996, with
same-store sales up 1.9 percent for the year. Sales per square foot
increased 5.6 percent, reflecting strong productivity in the newer stores,
and the maturing of stores opened in the 1994 to 1995 period. Operating
earnings of $34.5 million were up 38.3 percent. These operating earnings
exclude a pretax non-recurring loss on the sale of the Famous Fixtures
business, which was completed in early February 1998. The fixture
operation had annual sales in 1997 of $21 million and had incurred net
losses in the $1 to $2.5 million range over the past several years,
depressing Famous Footwear's earnings. Excluding the non-recurring charge
and operating losses at the Fixtures operation, Famous Footwear's
operating earnings in 1997 were $37.8 million.
"Good inventory flow and well-managed distribution costs, particularly at
the company's second distribution center, which opened in the fall of
1995, contributed to Famous Footwear's improved results for the year. The
progress at Famous Footwear is particularly encouraging in light of the
slow-down in the athletic footwear industry. Famous Footwear stores are
uniquely positioned to serve men's, women's and children's changing
fashion needs. The company opened 60 new stores during the year and
closed 39, ending the year with 815 stores in operation.
"The company's core wholesale businesses -- Brown Branded Marketing and
Pagoda U.S.A. -- also reported solid progress for the year. Sales of
$432.7 million were slightly below last year's level, but better margins
and tightly controlled expenses led to operating earnings of $31.1 million
compared to $32.0 million in fiscal year 1996, which included $4.0 million
of non-recurring gains from the liquidation of LIFO inventories at Brown
Shoe Company. Sales of the Naturalizer and NaturalSPORT brands increased
slightly in 1997, and the continued emphasis on product development and
investment in aggressive brand marketing, which increased 18 percent in
1997, is contributing to the improved results.
"At Naturalizer Retail, sales of $130.1 million were about even with
fiscal year 1996 sales with same-store sales down .9 percent. An
operating loss of $2.9 million was recorded for the year. However, the
real estate strategy initiated in 1997 is achieving expected results, as
average store volume increased 5 percent in the fall season. The plan to
exit under-performing locations and to operate fewer stores but in better
shopping centers also resulted in comparable store sales increases of 11
percent for the fall season in our 36 new and remodeled cherry wood stores
open at least twelve months. There were 341 stores in operation at
year-end.
"The company's Canadian Operations continued their solid performance
during 1997. Sales of $76.2 million were up 4.1 percent over the prior
year and operating earnings increased 19.1 percent to $7.8 million. These
results were led by improved sales at the Retail division, where same-
store sales were up 5.2 percent for the year on top of a 7.3 percent same-
store sales increase in 1996. There were 107 Naturalizer stores and 16 F.
X. LaSalle stores in operation in Canada at fiscal year-end.
"On October 8, 1997, Brown Group announced that excessive inventories and
increasing losses at its Pagoda International sales division had led to a
decision to reduce substantially investment in that business, and to shift
resources to the company's profitable core businesses. As a result of the
completion of the contract for sale of Pagoda International's Brazilian
inventory to Calcados Dilly Ltda. and the impact of the Brazilian
government's financial austerity program, additional losses and provisions
of approximately $9 million were announced on February 5, 1998. As a
result of further review of the division, a year-end charge of $6 million
was also incurred to provide for additional unanticipated high costs.
With these provisions, we have taken actions to deal with these severe
problems and free capital to invest in the ninety-five percent of the
company represented by our core operations.
"Brown Group's management of cash flow for fiscal year 1997 was excellent;
positive cash flow of $21 million was $59 million better than last year,
and resulted in short-term borrowings, net of cash and short-term
investments, of less than $4 million at year-end. At its meeting held
today, the company's Board of Directors declared a regular quarterly
dividend of $.10 per share, payable April 1, 1998. This is the 301st
consecutive quarterly dividend paid by the company.
"In view of the progress with our core operations and balance sheet, the
costs at Pagoda International are particularly disappointing. But
aggressive provisions in 1997 for dealing with that business, although
costly and troublesome, leave us with a higher degree of confidence that
our plans in 1998 will be achieved.
"That confidence is supported by early momentum: Famous Footwear achieved
a 4.4 percent same-store sales gain in February, Naturalizer Retail
returned to a gain, and wholesale forward orders solidly support our
profit plans at Pagoda U.S.A. and Brown Branded Marketing. As Brown Group
emerges from the impact of restructuring Pagoda International, our
developing earning power and strength as a corporation will become
clear."
Safe Harbor Statement Under the Private Securities Litigation Act of 1995:
This press release contains certain forward-looking statements that are
subject to various risks and uncertainties that could cause actual results to
differ materially. These include general economic conditions, competition,
consumer apparel and footwear buying trends, and political and economic
conditions in Brazil and China, which are significant footwear sourcing
countries. The Company's reports to the Securities and Exchange Commission
from time to time contain detailed information relating to such factors.
Brown Group, Inc. is a $1.5 billion footwear company with worldwide operations.
The company operates the Famous Footwear, Naturalizer and F. X. LaSalle chains
of footwear retail stores and markets leading brands including Naturalizer,
Life Stride, NaturalSPORT, the Larry Stuart Collection, le coq sportif
athletic footwear, and licensed brands including Dr. Scholl's and Disney
character footwear.
Brown Group, Inc. press releases are available by fax through PR Newswire's
Company News On-Call fax service at 800-758-5804, extension 109435. Brown
Group, Inc. news and other company information also are available on the
company's web site at http://www.browngroup.com.
BROWN GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands, except per share)
Thirteen Weeks Ended Fifty-Two Weeks Ended
---------------------- ------------------------
January 31 February 1 January 31 February 1
1998 1997 1998 1997
---------- ---------- ---------- ----------
Net Sales $362,678 $358,937 $1,567,202 $1,525,052
Cost of Goods Sold 231,905 228,758 988,530 958,288
-------- -------- ---------- ----------
Gross Profit 130,773 130,179 578,672 566,764
Selling and
Administrative Expenses 139,912 126,022 559,536 521,553
Interest Expense 5,482 5,627 21,756 19,327
Other Income (757) (529) (452) (1,341)
-------- -------- ---------- ----------
Earnings (Loss) Before
Income Taxes (13,864) (941) (2,168) 27,225
Income Tax
(Provision) Benefit 1,219 2,310 (18,728) (6,910)
-------- -------- ---------- ----------
Net Earnings (Loss) $(12,645) $ 1,369 $ (20,896) $ 20,315
======== ======== ========== ==========
Basic Net Earnings (Loss)
Per Common Share $ (.72) $ .08 $ (1.19) $ 1.16
======== ======== ========== ==========
Diluted Net Earnings (Loss)
Per Common Share $ (.72) $ .08 $ (1.19) $ 1.15
======== ======== ========== ==========
Note A: The consolidated statement of earnings for the thirteen weeks ended
January 31, 1998 includes an after-tax restructuring charge of $10.0 million,
related to the Pagoda International operations, of which $6.8 million is
reflected in cost of goods sold, $3.1 million in selling and administrative
expenses and $.1 million in other income. Results for the fifty-two weeks ended
January 31, 1998 reflect after-tax restructuring charges of $31.0 million
related to the Pagoda International operations, of which $14.7 million is
reflected in cost of goods sold, $7.3 million in selling and administrative
expenses, $1.0 million in other income and $8.0 million in income taxes.
Note B: Results for the thirteen weeks ended February 1, 1997 include $1.9
million of favorable income tax adjustments related to reversal of tax
valuation reserves provided in 1995, and the effect of an adjustment of the
effective tax rate to reflect a higher level of untaxed foreign earnings than
originally anticipated. Results for the fifty-two weeks ended February 1,
1997 reflect an after-tax credit from LIFO inventory liquidations of $2.6
million and a tax credit of $2.3 million from the recovery of tax valuation
reserves.
BROWN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
January 31 February 1
1998 1997
----------- -----------
ASSETS
Cash and Cash Equivalents $ 50,136 $ 38,686
Receivables, Net 77,355 90,246
Inventories (less reserve for valuation to last-in,
first-out cost at January 31, 1998 of $15,617
and February 1, 1997 of $18,846) 380,177 398,803
Other Current Assets 30,862 37,040
---------- ---------
Total Current Assets 538,530 564,775
Property, Plant and Equipment - Net 82,744 85,380
Other Assets 73,714 72,220
---------- ---------
$ 694,988 $ 722,375
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes Payable $ 54,000 $ 62,000
Trade Accounts Payable 118,907 124,697
Accrued Expenses 93,191 71,053
Income Taxes 11,995 4,005
Current Maturities of Long-Term Debt - 2,000
---------- ---------
Total Current Liabilities 278,093 263,755
Long-Term Debt and Capitalized Leases 197,027 197,025
Other Liabilities 20,678 24,558
Shareholders' Equity 199,190 237,037
---------- ---------
$ 694,988 $722,375
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