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(Mark One)

[X]	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended November 2, 2002
[  ]	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 December 6, 2002, 17,653,267 shares of the registrant's common stock were outstanding.
 
 

ITEM 1 - FINANCIAL STATEMENTS

(Thousands)

	(Unaudited)
	November 2, 2002				November 3,  2001			February 2, 2002
ASSETS
Current Assets
Cash and Cash Equivalents	$		35,192		$	25,152		$	22,712
Receivables			65,400			55,962			68,305
Inventories			381,444			445,065			396,227
Other Current Assets			32,226			23,157			39,666
Total Current Assets			514,262			549,336			526,910
Other Assets			74,107			66,918			68,764
Goodwill and Intangible Assets, Net			19,178			20,669			19,050
Property and Equipment			249,560			251,566			251,650
Allowances for Depreciation       and Amortization			(167,742	)		(162,685	)		(165,904	)
			81,818			88,881			85,746
	$		689,365		$	725,804		$	700,470
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes Payable		$	37,000		$	85,000		$	64,250
Accounts Payable			112,928			109,748			122,360
Accrued Expenses			97,296			70,527			84,521
Income Taxes			8,950			2,464			550
Current Maturities of Long-Term Debt			20,000			28,550			28,550
Total Current Liabilities			276,174			296,289			300,231
Long-Term Debt and Capitalized    Lease Obligations			103,492			123,490			123,491
Other Liabilities			22,489			19,294			20,092
Shareholders' Equity
Common Stock			66,171			65,506			65,564
Additional Capital			49,798			47,836			47,948
Unamortized Value of Restricted Stock			(2,191	)		(2,057	)		(1,909	)
Accumulated Other Comprehensive Loss			(12,166	)		(9,311	)		(9,975	)
Retained Earnings			185,598			184,757			155,028
			287,210			286,731			256,656
		$	689,365		$	725,804		$	700,470

See Notes to Condensed Consolidated Financial Statements.

(Thousands, except per share)

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	November 2, 2002			November 3,  2001			November 2,  2002			November 3,  2001
Net Sales	$	486,318		$	462,361		$	1,389,311		$	1,340,578
Cost of Goods Sold		287,681			280,874			832,231			814,499
Gross Profit		198,637			181,487			557,080			526,079
Selling & Administrative Expenses		165,596			161,098			494,733			479,651
Interest Expense		2,840			4,827			9,506			15,591
Other Expense (Income)		1,399			312			2,778			(1,665	)
Earnings Before Income Taxes		28,802			15,250			50,063			32,502
Income Tax Provision		7,780			3,399			14,239			8,445
NET EARNINGS	$	21,022		$	11,851		$	35,824		$	24,057
BASIC EARNINGS PER     COMMON SHARE	$	1.21		$	.69		$	2.06		$	1.40
DILUTED EARNINGS PER     COMMON SHARE	$	1.18		$	.68		$	2.01		$	1.37
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 1 - 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 position, 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.

Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications did not affect net income.

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 on Form 10-K for the year ended February 2, 2002.

Note 2 - Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per common share for the periods ended November 2, 2002 and November 3, 2001 (000's, except per share data):
 

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	November 2, 2002			November 3,  2001			November 2,  2002			November 3,  2001
Numerator:
Net earnings - Basic and Diluted	$	21,022		$	11,851		$	35,824		$	24,057
Denominator:
Weighted average shares        outstanding - Basic		17,394			17,208			17,349			17,179
Effect of potentially dilutive securities		399			206			517			383
Weighted average shares        outstanding - Diluted		17,793			17,414			17,866			17,562
Basic earnings per common share	$	1.21		$	.69		$	2.06		$	1.40
Diluted earnings per common share	$	1.18		$	.68		$	2.01		$	1.37

Note 3 - Comprehensive Income

Comprehensive Income includes changes in equity related to foreign currency translation adjustments and unrealized gains/losses from derivatives used for hedging activities.

The following table sets forth the reconciliation from Net Earnings to Comprehensive Income for the periods ended November 2, 2002 and November 3, 2001 (000's):
 

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	November 2, 2002			November 3, 2001			November 2, 2002			November 3, 2001
Net Earnings	$	21,022		$	11,851		$	35,824		$	24,057
Other Comprehensive Income:
Foreign Currency Translation Adjustment		649			(1,345	)		722			(2,141	)
Unrealized (Losses ) Gains        on Derivative Instruments		(1,045	)		226			(2,913	)		(32	)
		(396	)		(1,119	)		(2,191	)		(2,173		)
Comprehensive Income	$	20,626		$	10,732		$	33,633		$	21,884

Note 4 - Business Segment Information

Applicable business segment information is as follows for the periods ended November 2, 2002 and November 3, 2001 (000's):
 

	Famous Footwear			Wholesale Operations			Naturalizer Retail			Other			Totals
Thirteen Weeks Ended November 2, 2002
External Sales	$	294,535		$	140,795		$	49,898		$	1,090		$	486,318
Intersegment Sales		-			38,502			-			-			38,502
Operating profit (loss)		22,585			12,694			1,529			(4,096	)		32,712
Thirteen Weeks Ended November 3, 2001
External Sales	$	280,942		$	128,915		$	52,159		$	345		$	462,361
Intersegment Sales		-			37,039			-			-			37,039
Operating profit (loss)		14,189			12,308			(1,354	)		(4,386	)		20,757
Thirty-nine Weeks Ended November 2, 2002
External Sales	$	832,896		$	403,824		$	149,375		$	3,216		$	1,389,311
Intersegment Sales		-			97,835			-			-			97,835
Operating profit (loss)		40,237			37,760			240			(15,652	)		62,585
Thirty-nine Weeks Ended November 3, 2001
External Sales	$	803,102		$	379,226		$	157,711		$	539		$	1,340,578
Intersegment Sales		-			94,706			-			-			94,706
Operating profit (loss)		23,781			37,326			(385	)		(13,414	)		47,308

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

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	November 2, 2002			November 3, 2001			November 2, 2002			November 3, 2001
Total operating profit	$	32,712		$	20,757		$	62,585		$	47,308
Interest expense		(2,840	)		(4,827	)		(9,506	)		(15,591	)
Non-operating other (expense) income		(1,070	)		(680	)		(3,016	)		785
Earnings before income taxes	$	28,802		$	15,250		$	50,063		$	32,502

Operating profit represents gross profit less selling and administrative expenses and other operating income or expense. The "Other" segment includes Corporate general 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 5 - Restructuring Reserves

In the fourth quarter of fiscal 2001, the Company recorded charges and reserves to close 97 domestic Naturalizer retail stores. The yearend reserve balance of $15.5 million, was to cover costs to buyout store leases, liquidate inventories, writedown fixed assets to net realizable value, and pay severance costs for terminated employees. As of November 2, 2002, 92 Naturalizer retail stores were closed, and after further evaluation, the Company decided to keep four of the originally identified stores open, and to close an additional 13 stores. As a result, a total of 106 stores are now planned to be closed by the end of fiscal 2002 under this program. Following is a summary of the activity in the reserve, by category of cost (000's):
 

	Lease  Buyouts			Inventory Markdowns			Fixed Assets  Writeoffs			Employee Severance			Total
Balance, February 2, 2002	$	7,836		$	3,602		$	3,746		$	342		$	15,526
Expenditures through     August 3, 2002		(3,088	)		(1,802	)		(2,785	)		(127	)		(7,802	)
Balance August 3, 2002		4,748			1,800			961			215			7,724
Expenditures through     November 2, 2002		(2,161	)		(410	)		(778	)		(1	)		(3,350	)
Balance, November 2, 2002	$	2,587		$	1,390		$	183		$	214		$	4,374

Also in the fourth quarter of fiscal 2001, the Company established a reserve of $3.1 million for severance costs related to the elimination of 117 positions as the company moved to a new Shared Services platform for its Human Resources, Accounting and Information Systems functions and related personnel. As of November 2, 2002, 72 positions had been eliminated under this program and $0.8 million and $1.3 million of the reserve was utilized in the third quarter and first nine months of fiscal 2002, respectively, leaving a reserve balance of $1.8 million at the end of the third quarter of 2002.

Costs are being charged to these reserves as incurred, and the reserves are reviewed periodically to determine their adequacy.

Note 6 - Goodwill and Other Intangible Assets

Effective at the beginning of fiscal 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." This statement requires goodwill and intangible assets with indefinite lives no longer be amortized but instead be tested for impairment at least annually. Under SFAS No. 142, all goodwill and indefinite-lived intangible asset amortization ceased effective February 3, 2002. The Company completed the required impairment tests, as of the beginning of fiscal 2002, and found no impairment. On an ongoing basis, the Company expects to perform impairment tests during the fourth quarter.

In the third quarter of 2001, goodwill and indefinite-lived intangible asset amortization was $0.3 million, on an aftertax basis, or $.02 per share. For the first nine months of fiscal 2001, goodwill and intangible amortization was $0.9 million, on an aftertax basis, or $.05 per share.

As of November 2, 2002, goodwill of $18.1 million (net of $10.8 million accumulated amortization) and intangible assets of $1.1 million (net of $0.3 million accumulated amortization) were attributable to the Company's operating segments as follows: $3.6 million for Famous Footwear, $10.2 million for Wholesale operations, $4.5 million for Naturalizer Retail and $0.9 million for the "Other" segment.

Note 7 - Impact of Recently Issued Accounting Standards

At the beginning of fiscal 2002, the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. Among other things, SFAS No. 144 supersedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of business. SFAS No. 144 retains the basic provisions of APB No. 30 for the presentation of discontinued operations in the income statement but broadens that presentation to apply to a component of an entity rather than a segment of a business. The adoption of SFAS No. 144 did not impact the Company's financial statements, as the stores closed during the first nine months of fiscal 2002 did not meet the requirements to be reported as discontinued operations under SFAS No. 144.
 
 

In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 145, "Rescission of FASB Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145, among other things, eliminates the requirement to classify gains and losses from the extinguishment of indebtedness as extraordinary. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002, with earlier adoption encouraged. The Company expects the only known impact of adopting SFAS No. 145 to be the reclassification of the fiscal 2001 extraordinary loss from early extinguishment of debt.

On July 30, 2002, the Financial Accounting Standards Board issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity." SFAS No. 146 is different from EITF 94-3 in that SFAS No. 146 requires a liability be recognized for a cost associated with an exit or disposal activity only when the liability is incurred. In contrast, under EITF 94-3, a company recognized a liability for an exit cost when it committed to an exit plan. SFAS No. 146 is effective for exit or disposal activities initiated af