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 July 31, 2004 |
| [ ] | 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
|
(Exact name of registrant as specified in its charter) |
|
|
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) |
|
St. Louis, Missouri (Address of principal executive offices) |
(Zip Code) |
|
(Registrant's telephone number, including area code) |
|
Indicate by checkmark 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 [ ]
Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
As of August 28, 2004, 18,189,166 common shares were outstanding.
Page 1
| PART I
|
FINANCIAL INFORMATION
|
| ITEM 1
|
FINANCIAL STATEMENTS
|
| BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||||
|
|
|||||||||
| ($ thousands)
|
July 31, 2004
|
|
August 2, 2003
|
|
January 31, 2004
|
|
|||
| Assets | |||||||||
| Current Assets | |||||||||
| Cash and cash equivalents |
$
|
71,478
|
$
|
50,406
|
$
|
55,657
|
|||
| Receivables |
83,938
|
75,271
|
81,930
|
||||||
| Inventories |
453,016
|
417,731
|
376,210
|
||||||
| Prepaid expenses and other current assets |
21,718
|
26,405
|
15,888
|
||||||
|
|
|
|
|
|
|
|
|
|
|
| Total current assets |
630,150
|
569,813
|
529,685
|
||||||
|
|
|
|
|
|
|
|
|
|
|
| Other assets |
85,274
|
83,883
|
83,692
|
||||||
| Goodwill and intangible assets, net |
20,382
|
18,999
|
20,405
|
||||||
| Property and equipment |
283,399
|
268,754
|
272,151
|
||||||
| Allowances for depreciation and amortization |
(196,426
|
) |
(181,155
|
) |
(186,603
|
) | |||
|
|
|
|
|
|
|
|
|
|
|
| Total property and equipment |
86,973
|
87,599
|
85,548
|
||||||
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
$
|
822,779
|
$
|
760,294
|
$
|
719,330
|
|||
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and Shareholders' Equity | |||||||||
| Current Liabilities | |||||||||
| Notes payable |
$
|
27,500
|
$
|
19,000
|
$
|
19,500
|
|||
| Trade accounts payable |
192,243
|
174,541
|
116,677
|
||||||
| Accrued expenses |
96,420
|
90,653
|
96,707
|
||||||
| Income taxes |
7,377
|
12,422
|
2,960
|
||||||
| Current maturities of long-term debt |
-
|
10,000
|
-
|
||||||
|
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
323,540
|
306,616
|
235,844
|
||||||
|
|
|
|
|
|
|
|
|
|
|
| Other Liabilities | |||||||||
| Long-term debt and capitalized lease obligations |
100,000
|
103,494
|
100,000
|
||||||
| Other liabilities |
27,373
|
29,411
|
28,358
|
||||||
|
|
|
|
|
|
|
|
|
|
|
| Total other liabilities |
127,373
|
132,905
|
128,358
|
||||||
|
|
|
|
|
|
|
|
|
|
|
| Shareholders' Equity | |||||||||
| Common stock |
68,209
|
67,308
|
67,787
|
||||||
| Additional capital |
65,155
|
53,902
|
62,772
|
||||||
| Unamortized value of restricted stock |
(3,188
|
) |
(2,896
|
) |
(3,408
|
) | |||
| Accumulated other comprehensive loss |
(3,974
|
) |
(7,726
|
) |
(4,934
|
) | |||
| Retained earnings |
245,664
|
210,185
|
232,911
|
||||||
|
|
|
|
|
|
|
|
|
|
|
| Total shareholders' equity |
371,866
|
320,773
|
355,128
|
||||||
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities and shareholders' equity |
$
|
822,779
|
$
|
760,294
|
$
|
719,330
|
|||
|
|
|
|
|
|
|
|
|
|
|
Page 2
| BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS |
||||||||||||
|
|
|
|||||||||||
|
|
|
|
||||||||||
| ($ thousands, except per
share amounts)
|
July 31, 2004
|
|
August 2, 2003
|
|
July 31, 2004
|
|
August 2, 2003
|
|
||||
| Net sales | $ |
458,657
|
$ |
458,384
|
$
|
950,489
|
$
|
904,828
|
||||
| Cost of goods sold |
269,411
|
270,519
|
561,879
|
531,836
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
189,246
|
187,865
|
388,610
|
372,992
|
||||||||
| Selling and administrative expenses |
175,968
|
169,249
|
360,415
|
339,039
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating earnings |
13,278
|
18,616
|
28,195
|
33,953
|
||||||||
| Interest expense |
2,141
|
2,517
|
4,620
|
5,423
|
||||||||
| Interest income |
(170
|
) |
(104
|
) |
(296
|
) |
(200
|
) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings before income taxes |
11,307
|
16,203
|
23,871
|
28,730
|
||||||||
| Income tax provision |
3,493
|
4,647
|
7,490
|
8,171
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings | $ |
7,814
|
$ |
11,556
|
$
|
16,381
|
$
|
20,559
|
||||
|
|
|
|
|
|
|
|
|
|
||||
| Basic net earnings per common share | $ |
0.44
|
$ |
0.66
|
$
|
0.92
|
$
|
1.17
|
||||
|
|
|
|
|
|
|
|
|
|
||||
| Diluted net earnings per common share | $ |
0.41
|
$ |
0.62
|
$
|
0.86
|
$
|
1.11
|
||||
|
|
|
|
|
|
|
|
|
|
||||
| Dividends per common share | $ |
0.10
|
$ |
0.10
|
$
|
0.20
|
$
|
0.20
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 3
| BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
|
|
|||||||
|
|
|
||||||
| ($ thousands)
|
July 31, 2004
|
|
August 2, 2003
|
|
|||
| Operating Activities: | |||||||
| Net earnings |
$
|
16,381
|
$
|
20,559
|
|||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
| Depreciation and amortization |
11,787
|
12,470
|
|||||
| Share-based compensation expense |
711
|
1,867
|
|||||
| Tax benefit related to share-based plans |
709
|
-
|
|||||
| Loss on disposal of facilities and equipment |
403
|
567
|
|||||
| Impairment charges for facilities and equipment |
600
|
966
|
|||||
| Provision for (recoveries from) doubtful accounts |
(344
|
) |
150
|
||||
| Changes in operating assets and liabilities: | |||||||
| Receivables |
(1,664
|
) |
7,065
|
||||
| Inventories |
(76,806
|
) |
(25,147
|
) | |||
| Prepaid expenses and other current assets |
(5,830
|
) |
(5,427
|
) | |||
| Trade accounts payable and accrued expenses |
75,279
|
33,716
|
|||||
| Income taxes |
4,417
|
7,070
|
|||||
| Other, net
|
|
(645
|
)
|
|
542
|
|
|
| Net cash provided
by operating activities
|
|
24,998
|
|
|
54,398
|
|
|
| Investing Activities: | |||||||
| Capital expenditures |
(14,235
|
) |
(16,146
|
) | |||
| Other
|
|
153
|
|
|
248
|
|
|
| Net cash used for
investing activities
|
|
(14,082
|
)
|
|
(15,898
|
)
|
|
| Financing Activities: | |||||||
| Increase (decrease) in short-term notes payable |
8,000
|
(10,000
|
) | ||||
| Principal repayments of long-term debt |
-
|
(10,000
|
) | ||||
| Debt issuance costs |
(1,071
|
) |
-
|
||||
| Proceeds from stock options exercised |
1,605
|
3,342
|
|||||
| Dividends paid
|
|
(3,629
|
)
|
|
(3,557
|
)
|
|
| Net cash provided
by (used for) financing activities
|
|
4,905
|
|
|
(20,215
|
)
|
|
| Increase in cash and cash equivalents |
15,821
|
18,285
|
|||||
| Cash and cash equivalents at
beginning of period
|
|
55,657
|
|
|
32,121
|
|
|
| Cash and cash equivalents
at end of period
|
$
|
71,478
|
|
$
|
50,406
|
|
|
Page 4
| 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 on the condensed consolidated balance sheets, statements of earnings and statements of cash flows have been reclassified to conform to the current period presentation. These reclassifications did not affect net earnings.
The Company's business is subject to seasonal influences, particularly the back-to-school selling season at Famous Footwear which falls in the Company's third quarter. 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 January 31, 2004.
| Note 2.
|
Earnings Per Share
|
The following table sets forth the computation of basic
and diluted earnings per common share for the periods ended July 31, 2004
and August 2, 2003:
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
||||||||||||
| ($ thousands, except per
share data)
|
|
July 31, 2004
|
|
August 2, 2003
|
|
July 31, 2004
|
|
August 2, 2003
|
|
||||
| NUMERATOR | $ | ||||||||||||
| Net earnings
|
|
$
|
7,814
|
|
|
11,556
|
|
$
|
16,381
|
|
$
|
20,559
|
|
| DENOMINATOR (thousand shares) | |||||||||||||
| Denominator for basic earnings per common share |
17,921
|
17,631
|
17,881
|
17,570
|
|||||||||
| Dilutive effect of unvested
restricted stock and stock options
|
|
|
1,066
|
|
|
901
|
|
|
1,072
|
|
|
893
|
|
| Denominator for diluted earnings
per common share
|
|
|
18,987
|
|
|
18,532
|
|
|
18,953
|
|
|
18,463
|
|
| Basic earnings per common share
|
|
$
|
0.44
|
|
$
|
0.66
|
|
$
|
0.92
|
|
$
|
1.17
|
|
| Diluted earnings per common
share
|
|
$
|
0.41
|
|
$
|
0.62
|
|
$
|
0.86
|
|
$
|
1.11
|
|
Options to purchase 231,167 and 15,000 shares of common
stock for the thirteen week periods and 233,667 and 15,167 for the twenty-six
week periods ended July 31, 2004 and August 2, 2003, respectively, were
not included in the denominator for diluted earnings per common share because
their effect would be antidilutive.
| Note 3.
|
Comprehensive Income
|
Comprehensive income includes changes in shareholders' equity related to foreign currency translation adjustments and unrealized gains or losses from derivatives used for hedging activities.
Page 5
The following table sets forth the reconciliation from
net earnings to comprehensive income for the periods ended July 31, 2004
and August 2, 2003:
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|||||||||||
| ($ Thousands)
|
|
July 31, 2004
|
|
August 2, 2003
|
|
July 31, 2004
|
|
August 2, 2003
|
|
||||
| Net earnings | $ |
7,814
|
$ |
11,556
|
$
|
16,381
|
$
|
20,559
|
|||||
| Other comprehensive income (loss), net of tax: | |||||||||||||
| Foreign currency translation adjustment |
1,218
|
562
|
(92
|
) |
3,259
|
||||||||
| Unrealized gains (losses) on derivative instruments |
(214
|
) |
212
|
(112
|
) |
(555
|
) | ||||||
| Net loss reclassified into earnings |
673
|
372
|
1,164
|
717
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
1,677
|
1,146
|
960
|
3,421
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income
|
|
$
|
9,491
|
|
$
|
12,702
|
|
$
|
17,341
|
|
$
|
23,980
|
|
| Note 4.
|
Business Segment Information
|
Applicable business segment information is as follows
for the periods ended July 31, 2004 and August 2, 2003:
|
|
|
|
|
|
|
|
|
|
|
|
|||||
| ($ thousands) |
Famous
Footwear |
Wholesale
Operations |
Naturalizer
Retail |
Other
|
Totals
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
| Thirteen Weeks Ended July 31, 2004 | |||||||||||||||
| External sales | $ |
269,812
|
$ |
136,886
|
$ |
48,264
|
$ |
3,695
|
$ |
458,657
|
|||||
| Intersegment sales |
-
|
36,553
|
-
|
-
|
36,553
|
||||||||||
| Operating earnings (loss) |
12,631
|
8,963
|
(2,551
|
) |
(5,765
|
) |
13,278
|
||||||||
| Operating segment assets |
401,577
|
219,564
|
63,888
|
137,750
|
822,779
|
||||||||||
| Thirteen Weeks End | |||||||||||||||