UNITED STATES

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) February 26, 2003

 
 
 

BROWN SHOE COMPANY, INC. (Exact name of registrant as specified in its charter)
New York (State or other jurisdiction of incorporation or organization)
1-2191 (Commission File Number)	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)

Page 1

 
 

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
 

(c)	Exhibit
	99.1	Press Release issued February 26, 2003

Item 9. Regulation FD Disclosure.

On February 26, 2003, Brown Shoe Company, Inc. (the "Company") issued a press release (the "Press Release") announcing its results of operations for the quarter and year ended February 1, 2003. A copy of the Press Release is being filed as exhibit 99.1 hereto, and the statements contained therein  are incorporated by reference herein.

In accordance with General Instruction B.2. of Form 8-K, the information contained in Item 9 shall not be deemed "Filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
 
 

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 

	BROWN SHOE COMPANY, INC.
	(Registrant)
Date: February 26, 2003	By:      /s/ Michael I. Oberlander
	Michael I. Oberlander            Vice President, General Counsel and Corporate Secretary

Page 2

INDEX TO EXHIBITS

Exhibit No.	Description
99.1		Press Release, dated February 26, 2003

 

Page 3

EX-99.1 CHARTER 3 form8k022703exh99.htm EXHIBIT 99.1 - PRESS RELEASE 2/26/03

Exhibit 99.1

 

NYSE: BWS
For Immediate Release
Contact: Beth Fagan
Vice President, Public Affairs
314-854-4093

Brown Shoe Reports Earnings Per Share Up Sharply to $2.52 for Fiscal 2002;
Results for 4th Quarter Reach $0.51

            ST. LOUIS, MISSOURI, February 26, 2003 -- Brown Shoe Company, Inc. (NYSE: BWS) today announced earnings of $2.52 per diluted share for the 52-week fiscal year ended February 1, 2003, dramatically higher than the previous year's earnings and slightly higher than the company's most recent guidance. With the effects of nonrecurring gains and nonrecurring losses factored out, the company's earnings rose 56 percent from a year ago.

            Sales for the 52 weeks rose to $1,841,443,000, an increase of 4.9 percent from the $1,755,848,000 for the 52 weeks of fiscal 2001. Net income for fiscal 2002 -- including after-tax recoveries of $1.2 million, or 7 cents per diluted share, of nonrecurring charges recorded in fiscal 2001 -- was $45,172,000, or $2.52 per diluted share. That compared with a net loss of $3,962,000, or 23 cents per diluted share, in fiscal 2001 - a loss that included nonrecurring charges of $32.2 million, or $1.84 per diluted share, from initiatives to improve competitiveness, eliminate redundant infrastructure, increase profitability and restructure debt.

            To better illustrate the ongoing operating results of the company, income in 2002 excluding the nonrecurring gain, was $43,957,000, or $2.45 per diluted share. Excluding the nonrecurring charges, income in 2001 was $28,257,000, or $1.61 per diluted share. After these exclusions, net earnings rose 56 percent; and earnings per share increased 52 percent.

            "In fiscal 2001 we initiated a broad program to improve our profitability and our competitiveness," said Ron Fromm, Brown Shoe Chairman and CEO. "In fiscal 2002, we reaped the benefits."

            Sales for the fourth quarter of fiscal 2002 were $452,132,000, an 8.9 percent increase over sales of $415,270,000 in the fourth quarter of fiscal 2001. Income for the fourth quarter, including the recovery of nonrecurring charges taken in 2001, was $9,348,000, or 51 cents per diluted share. That compared with a loss of $28,019,000, or $1.63 per diluted share, in the fourth quarter of 2001. Excluding the recovery, income in the fourth quarter of 2002 was $8,133,000, or 45 cents per diluted share. Excluding the nonrecurring charge, income in the fourth quarter of 2001 was $4,200,000, or 24 cents per diluted share.

            The after-tax nonrecurring gains in fiscal 2002 resulted from the recovery of $.5 million from the reserve established to close under-performing Naturalizer retail stores and $.7 million from the severance reserve established to implement a new shared services platform. Both programs were completed at lower costs than originally estimated.

            Commenting on the year's results, Fromm said, "Our consolidated sales, margins and profits continued to grow, with improvement coming from nearly every area. Our Wholesale branded, licensed and private label businesses had an exceptional year, as our footwear performed well at retail. In fact, Naturalizer, our leading brand, showed double-digit growth for its third straight year. It gained 17.8 percent in wholesale sales. Furthermore, the Naturalizer Retail segment performed better than in fiscal 2001.

            "Famous Footwear's new management team significantly improved its operating earnings. We put fresher merchandise in our Famous Footwear stores and our consumers responded. Our inventory turns at Famous Footwear, our branded family shoe-store chain, rose 19 percent in a year when traffic was down. Our gross margin rate remained strong throughout the year.

            "Many of these improvements were the payoff to initiatives begun in 2001 under the name of Project IMPACT, the company's enterprise-wide program to achieve Improved Performance and Competitive Transformation.

            "Under Project IMPACT, we instituted new supply chain processes at Famous Footwear. We cleared aged goods and lowered our inventories while increasing the freshness of our product offering at Famous Footwear. We improved our consumer-focused product design processes to win more market share for our wholesale businesses. We launched a shared services initiative to boost our administrative efficiencies. We closed 106 under-performing Naturalizer stores in the U.S. And we built a new management team at Famous Footwear," Fromm said.

            "It worked. And in the process, our teams managed these initiatives at a cost of $1.2 million, or 7 cents per share, less than we had anticipated.

            "Looking ahead, we expect 2003 to be a year in which we will balance our investment needs while sustaining our earnings momentum. We estimate earnings per share of $2.75, after factoring in the significant investment we are making in operations. Our major investments will be geared to driving traffic at our Famous Footwear stores and building greater preference for our wholesale brands."

Full-Year Results for Famous Footwear

           Famous Footwear achieved record sales in fiscal 2002 of $1.075 billion. This 2.9 percent increase reflected higher sales from new stores and increased square footage, offset in part by a 1.3 percent decrease in same-store sales. The same-store sales decline resulted from lower traffic counts through most of the year. However, because of an improved product mix, the percentage of customers making purchases increased.

            In fiscal 2002, 53 new stores opened and 55 closed, leaving the company with 918 at year's end. The new stores averaged about 10,000 square feet each, and the closing stores averaged about 5,000 square feet, so total square footage increased from 5.9 million square feet at the end of fiscal 2001 to 6.2 million at the end of fiscal 2002.

            Fiscal 2002 operating earnings for Famous Footwear were $46.3 million, versus $25.5 million in fiscal 2001 -- excluding nonrecurring charges last year of $16.5 million, $16 million of which was to write down inventory to accelerate the clearance of older merchandise. The chain's significant improvement in operating earnings resulted from Project IMPACT-related changes in its buying, allocation and merchandising functions. These changes resulted in a fresher product mix, which led customers to increase their purchases of higher-margin, trend-right, in-season merchandise.

            "Famous Footwear emerged from 2002 much stronger," Fromm said, "with nearly all operating metrics positive except for store traffic levels. Inventories at year-end on a per square foot basis have been reduced 21% over the past 24 months, with the percentage of aged inventory at historically low levels. Under the leadership of Joe Wood, our new management team has done an outstanding job in their first year. We look for metrics to improve even further in 2003."

Full-Year Results for Wholesale Division

           Wholesale sales were $566.4 million, up 12.5 percent from the $503.3 million recorded a year ago. Operating earnings were $55.2 million, up 6.0 percent from last year's $52.0 million, excluding nonrecurring charges of $0.5 million.

            The sales gain was spread among nearly all of the operation's branded, licensed and private label divisions.

            Sales of the company's flagship Naturalizer brand rose 17.8 percent, after rising 28.6 percent last year and 18.6 percent the year before. Naturalizer continues to gain market share in department stores, moving up to the third position in fiscal 2002 from fourth the year before. In fiscal 2000 the brand was in sixth position and was seventh in 1999.

            Sales gains also were achieved by LifeStride, Dr. Scholl's and Children's licensed products, and private label product. In addition, sales and distribution expanded for the Carlos by Carlos Santana and Hot Kiss licensed footwear lines.

Full-Year Results for Naturalizer Retail

            Naturalizer Retail stores, located throughout the U.S. and Canada, posted sales of $195.4 million in 2002, versus $207.0 million last year. Eighty-nine stores were closed in 2002; 22 were opened. Twenty-four stores also were closed in late fiscal 2001, under Project IMPACT.

            The result of this program was better operating results for this segment. Operating earnings in fiscal 2002 were $.5 million, excluding a $.9 million recovery of the charges taken in fiscal 2001. In fiscal 2001, there was an operating loss of $1.9 million, before nonrecurring charges of $16.8 million.

            Same-store sales in the ongoing domestic stores rose 4.3 percent, led by gains in the division's outlet stores and catalog/internet business. In Canada, however, same-store sales fell 6.0 percent. At year's end, there were 389 Naturalizer Retail stores, compared to 456 at the end of fiscal 2001. Plans are to open about five stores in fiscal 2003 while closing 10.

            "Our decision to close under-performing stores, while painful, has produced good results," Fromm said. "We are pleased that this program is complete, and we look forward to continued improved results from this segment, which plays such an important role in building our brand."

            Looking at the company's financial position, net cash provided by operating activities increased nearly five-fold in fiscal 2002 to $103.7 million, up from $21.1 million last year. Total debt decreased to $152 million from $216 million at year-end in 2001. The debt to capital ratio improved to 34.0 percent from 45.7 percent last year.

            Looking ahead, the company remains comfortable with its previous earnings per share estimates of $2.75 for fiscal year 2003. Earnings for the first quarter are planned slightly up compared to 2002 -- within the range of $0.44 to $0.48 per share versus $0.43 in 2002.

Fourth Quarter Earnings and Conference Call

           A conference call to discuss fourth quarter results will be held at 4:30 p.m. EST this afternoon. While the question-and-answer session of the call will be limited to institutional analysts and investors, retail brokers and individual investors are invited to attend via a live web-cast to be hosted at www.companyboardroom.com. At the website, type in the BWS ticker symbol to locate the broadcast.

Safe Harbor Statement Under the Private Securities Litigation Reform 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 contain detailed information relating to such factors.

Brown Shoe is a $1.84 billion footwear company with worldwide operations. The company operates the 900-store Famous Footwear chain, which sells brand name shoes for less. It also operates 400 Naturalizer stores in the U.S. and Canada that sell the Naturalizer brand of shoes and accessories. Brown Shoe, through its wholesale divisions, owns and markets leading footwear brands including Naturalizer, LifeStride, Connie, Buster Brown; it also markets licensed brands including Dr. Scholl's and Carlos by Carlos Santana for adults, and Barbie, Spider-Man and Bob-the-Builder character footwear for children. Brown Shoe press releases are available on the company's web site at www.brownshoe.com.
 
 

BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands)

	February 1, 2003		February 2,  2002
ASSETS
Cash and Cash Investments	$	32,121	$	22,712
Receivables, Net		82,486		68,305
Inventories, Net		392,584		396,227
Other Current Assets		20,978		39,238
Total Current Assets		528,169		526,482
Property, Plant and Equipment - Net		84,813		85,746
Other Assets		92,366		88,242
	$	705,348	$	700,470
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes Payable	$	29,000	$	64,250
Trade Accounts Payable		129,209		122,360
Accrued Expenses		100,801		84,521
Income Taxes		5,352		550
Current Maturities of Long-Term Debt		20,000		28,550
Total Current Liabilities		284,362		300,231
Long-Term Debt and Capitalized Leases		103,493		123,491
Other Liabilities		20,886		20,092
Shareholders' Equity		296,607		256,656
	$	705,348	$	700,470

 
 

BROWN SHOE COMPANY, INC.
CONSOLIDATED STATEMENTS OF EARNINGS

(Thousands, except per share)

	Thirteen Weeks Ended						Fifty-Two Weeks Ended
	February 1, 2003			February 2,  2002			February 1, 2003			February 2, 2002
Net Sales	$	452,132		$	415,270		$	1,841,443		$	1,755,848
Cost of Goods Sold		268,423			275,050			1,100,654			1,089,549
Gross Profit		183,709			140, 220			740,789			666,299
- % of Sales		40.6%			33.8%			40.2%			37.9%
Selling & Administrative Expenses		165,838			170,595			660,571			650,246
- % of Sales		36.7%			41.1%			35.9%			37.0%
Interest Expense		2,730			4,649			12,236			20,240
Loss on Early Redemption of Debt		-			7,556			-			7,556
Other Expense		3,705			3,153			6,483			1,488
Earnings (Loss) Before Income Taxes		11,436			(45,733	)		61,499			(13,231	)
Income Tax (Provision) Benefit		(2,088	)		17,714			(16,327	)		9,269
Net Earnings (Loss)	$	9,348		$	(28,019	)	$	45,172		$	(3,962	)
Net Earnings (Loss) per Common Share - Basic	$	.54		$	(1.63	)	$	2.60		$	(.23	)
- Diluted	$	.51		$	(1.63	)	$	2.52		$	(.23	)
Average Basic Number of Common Shares Outstanding		17,421			17,215			17,367			17,188
Average Diluted Number of Common Shares Outstanding		18,157			17,473			17,939			17,539

 
 
 

BROWN SHOE COMPANY, INC.
CONSOLIDATED STATEMENTS OF EARNINGS BEFORE NONRECURRING ITEMS

(Thousands, except per share)

	Thirteen Weeks Ended					Fifty-Two Weeks Ended
	February 1, 2003			February 2,  2002		February 1, 2003			February 2, 2002
Net Sales	$	452,132		$	415,270	$	1,841,443		$	1,755,848
Cost of Goods Sold		269,226			254,950		1.101,457			1,069,449
Gross Profit		182,906			160,320		739,986			686,399
- % of Sales		40.5%			38.6%		40.2%			39.1%
Selling & Administrative Expenses		167,047			150,538		661,780			630,189
- % of Sales		36.9%			36.3%		35.9%			35.9%
Interest Expense		2,730			4,649		12,236			20,240
Other Expense		3,705			1,947		6,483			282
Earnings Before Income Taxes		9,424			3,186		59,487			35,688
Income Tax (Provision) Benefit		(1,291	)		1,014		(15,530	)		(7,431	)
Earnings Before Nonrecurring Items	$	8,133		$	4,200	$	43,957		$	28,257
Earnings per Common Share Before Nonrecurring Items       - Basic	$	.47		$	.24	$	2.53		$	1.64
-Diluted	$	.45		$	.24	$	2.45		$	1.61
Average Basic Number of Common Shares Outstanding		17,421			17,215		17,367			17,188
Average Diluted Number of Common Shares Outstanding		18,157			17,473		17,939			17,539

 
 

BROWN SHOE COMPANY, INC.
CONSOLIDATED CASH FLOWS
(Unaudited)

(Thousands)
	52 Weeks  Ended  February 1,  2003		52 Weeks  Ended  February 2,  2002
OPERATING ACTIVITIES
Net earnings	$    45,172		$    (3,962)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	24,891		26,707
Loss on disposal or impairment of facilities and equipment	5,081		6,394
Provision for losses on accounts receivable	652		763
Changes in operating assets and liabilities:
Receivables	(14,833	)	(4,665	)
Inventories	3,643		31,603
Prepaid expenses and other current assets	18,260		(19,230	)
Trade payables and accrued expenses	23,129		(10,960	)
Income taxes	4,802		(1,300	)
Other, net	(7,062	)	(4,287	)
Net cash provided by operating activities	103,735		21,063
INVESTING ACTIVITIES
Capital expenditures	(25,648)		(26,319)
Other	148		2,587
Net cash used by investing activities	(25,500	)	(23,732	)
FINANCING ACTIVITIES
Decrease in short-term notes payable	(35,250	)	(2,250	)
Debt issuance costs	(265	)	(5,214	)
Repayments of long-term debt	(28,550	)	(110,000	)
Additions to long-term debt	-		100,000
Payments for purchase of treasury stock	-		(2,630	)
Proceeds from issuance of common stock	2,283		1,972
Dividends paid	(7,044	)	(6,988	)
Net cash used by financing activities	(68,826)		(25,110	)
Increase (decrease) in cash and cash equivalents	9,409		(27,779	)
Cash and cash equivalents at beginning of year	22,712		50,491
Cash and cash equivalents at end of period	$    32,121		$    22,712

NOTES TO CONSOLIDATED STATEMENT OF EARNINGS:

1. In the fourth quarter of fiscal 2002, the Company recorded pretax recoveries from the nonrecurring charges in 2001 of $2,012,000 ($1,215,000 aftertax) of which $803,000 is reflected as a reduction of Cost of Goods Sold and $1,209,000 is reflected as a reduction of Selling & Administrative Expense. These recoveries include $1,100,000 of the severance reserve established to implement a new Shared Services platform and $912,000 of the reserve established to close Naturalizer Retail stores. A tax provision of $797,000 associated with these recoveries was recorded in the fourth quarter of fiscal 2002.
2. In the fourth quarter of fiscal 2001, the Company recorded nonrecurring charges related to the closing of Naturalizer Retail stores, inventory markdowns and management transition costs at Famous Footwear, severance costs for implementation of a Shared Services platform and goodwill impairment in the Company's e-commerce business. These charges totaled $41,363,000 on a pretax basis, of which $20,100,000 were reflected in Cost of Sales, $20,057,000 in Selling & Administrative Expenses, and $1,206,000 in Other Expense. A tax benefit of $14,055,000 associated with the nonrecurring charges was recorded in the fourth quarter of fiscal 2001.
3. Also in the fourth quarter of fiscal 2001, the Company incurred and reported an extraordinary loss on the early redemption of debt, of $4,911,000, net of taxes. In fiscal 2002, the Company adopted Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." The impact of adopting this statement was the reclassification of the fiscal 2001 extraordinary loss of $4,911,000 (net of $2,645,000 in taxes) to a separate line item on the Consolidated Statement of Earnings.
4. Following is a reconciliation from net earnings and earnings per share as reported under GAAP to net earnings and earnings per share excluding nonrecurring charges and recoveries for the fourth quarter and full fiscal year.

	Fourth Quarter
	2002						2001
	Net Earnings			Diluted EPS			Net Earnings (Loss)			Diluted EPS
As Reported	$	9,348		$	.51		$	(28,019	)	$	(1.63	)
Nonrecurring Charges (Recoveries)		(1,215	)		(.06	)		27,308			1.59
Loss on Early Redemption of Debt		-			-			4,911			.28
Earnings Before Nonrecurring     Charges / Recoveries	$	8,133		$	.45		$	4,200		$	.24
	Fiscal Year
	2002						2001
	Net Earnings			Diluted EPS			Net Earnings (Loss)			Diluted EPS
As Reported	$	45,172		$	2.52		$	(3,962	)	$	(.23	)
Nonrecurring Charges (Recoveries)		(1,215	)		(.07	)		27,308			1.56
Loss on Early Redemption of Debt		-			-			4,911			.28
Earnings Before Nonrecurring     Charges / Recoveries	$	43,957		$	2.45		$	28,257		$	1.61

5. The Company's income tax provisions and benefits in the respective periods are influenced by the mix of domestic versus offshore operating income, and the nonrecurring charges and credits recorded in fiscal 2001 and fiscal 2002. Offshore earnings are taxed at lower rates.