10-Q

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 November 1, 2003
[  ]	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 [  ]

   Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  [X]     No [  ]

   As of November 29, 2003, 18,041,039 shares of the registrant's common stock were outstanding.
 
 

1

ITEM 1 - FINANCIAL STATEMENTS

BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands)

	(Unaudited)
	November 1, 2003			November 2, 2002			February 1, 2003
ASSETS
Current Assets
Cash and Cash Equivalents	$	52,750		$	35,192		$	32,121
Receivables		64,534			65,400			82,486
Inventories		376,602			381,444			392,584
Prepaid Expenses and Other Current Assets		24,717			32,226			20,978
Total Current Assets		518,603			514,262			528,169
Other Assets		84,056			82,834			83,292
Goodwill and Intangible Assets, Net		20,435			19,178			18,602
Property and Equipment		271,405			249,560			255,966
Allowances for Depreciation       and Amortization		(186,598	)		(167,742	)		(171,153	)
		84,807			81,818			84,813
	$	707,901		$	698,092		$	714,876
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes Payable	$	16,000		$	37,000		$	29,000
Accounts Payable		107,894			112,928			129,209
Accrued Expenses		93,613			97,296			100,801
Income Taxes		14,272			8,950			5,352
Current Maturities of Long-Term Debt		3,500			20,000			20,000
Total Current Liabilities		235,279			276,174			284,362
Long-Term Debt and Capitalized    Lease Obligations		100,000			103,492			103,493
Other Liabilities		28,317			31,216			30,414
Shareholders' Equity
Common Stock		67,640			66,171			66,311
Additional Capital		55,135			49,798			50,224
Unamortized Value of Restricted Stock		(2,691	)		(2,191	)		(1,961	)
Accumulated Other Comprehensive Loss		(5,366	)		(12,166	)		(11,147	)
Retained Earnings		229,587			185,598			193,180
		344,305			287,210			296,607
	$	707,901		$	698,092		$	714,876

See Notes to Condensed Consolidated Financial Statements.

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BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

(Thousands, except per share amounts)

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	November 1,  2003			November 2, 2002			November 1, 2003			November 2, 2002
Net Sales	$	493,433		$	486,318		$	1,398,261		$	1,389,311
Cost of Goods Sold		288,721			287,681			820,557			832,231
Gross Profit		204,712			198,637			577,704			557,080
Selling & Administrative Expenses		172,278			167,123			511,317			497,786
Operating Earnings		32,434			31,514			66,387			59,294
Interest Expense		2,256			2,840			7,679			9,506
Interest Income		(118	)		(128	)		(318	)		(275	)
Earnings Before Income Taxes		30,296			28,802			59,026			50,063
Income Tax Provision		9,096			7,780			17,267			14,239
NET EARNINGS	$	21,200		$	21,022		$	41,759		$	35,824
BASIC EARNINGS PER     COMMON SHARE	$	1.19		$	1.21		$	2.37		$	2.06
DILUTED EARNINGS PER     COMMON SHARE	$	1.13		$	1.18		$	2.25		$	2.01
DIVIDENDS PER COMMON SHARE	$	.10		$	.10		$	.30		$	.30

See Notes to Condensed Consolidated Financial Statements.

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

(Thousands)

	Thirty-nine Weeks Ended
	November 1, 2003			November 2, 2002
Operating Activities:
Net earnings	$	41,759		$	35,824
Adjustments to reconcile Net earnings to Net
Cash Provided by Operating Activities:
Depreciation and amortization		19,657			17,803
Loss on disposal or impairment of facilities & equipment		3,746			1,961
Provision for losses on accounts receivable		278			485
Changes in Operating Assets and Liabilities:
Receivables		17,674			2,420
Inventories		15,982			14,783
Prepaid expenses and other current assets		(3,739	)		7,012
Accounts payable and accrued expenses		(28,503	)		3,343
Income taxes		8,920			8,400
Other assets and liabilities		(182	)		(4,863	)
Net Cash Provided by Operating Activities		75,592			87,168
Investing Activities:
Capital expenditures		(21,668	)		(15,097	)
Other		368			130
Net Cash Used by Investing Activities		(21,300	)		(14,967	)
Financing Activities:
Decrease in notes payable		(13,000	)		(27,250	)
Principal payments of long-term debt		(20,000	)		(28,550	)
Proceeds from stock options exercised		4,696			1,624
Debt issuance costs		-			(265	)
Dividends paid		(5,359	)		(5,280	)
Net Cash Used by Financing Activities		(33,663	)		(59,721	)
Increase in Cash and Cash Equivalents		20,629			12,480
Cash and Cash Equivalents at Beginning of Period		32,121			22,712
Cash and Cash Equivalents at End of Period	$	52,750		$	35,192

See Notes to Condensed Consolidated Financial Statements.

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 and statements of earnings have been reclassified to conform to 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 February 1, 2003.
 

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 1, 2003 and November 2, 2002 (000's, except per share data):
 

	Thirteen Weeks Ended				Thirty-nine Weeks
	November 1 2003		November 2,  2002		November 1,  2003		November 2,  2002
Numerator:
Net earnings - Basic and Diluted	$	21,200	$	21,022	$	41,759	$	35,824
Denominator:
Weighted average shares        outstanding - Basic		17,761		17,394		17,634		17,349
Effect of potentially dilutive securities		937		399		900		517
Weighted average shares        outstanding - Diluted		18,698		17,793		18,534		17,866
Basic earnings per common share	$	1.19	$	1.21	$	2.37	$	2.06
Diluted earnings per common share	$	1.13	$	1.18	$	2.25	$	2.01

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The following options were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares (000's):
 

	Thirteen Weeks Ended		Thirty-nine Weeks Ended
	November 1,  2003	November 2,  2002	November 1, 2003	November 2,  2002
Options to purchase shares of common stock	35	584	37	388

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 1, 2003 and November 2, 2002 (000's):
 

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	November 1, 2003			November 2, 2002			November 1, 2003		November 2, 2002
Net Earnings	$	21,200		$	21,022		$	41,759	$	35,824
Other Comprehensive Income:
Foreign Currency Translation Adjustment		2,448			649			5,707		722
Unrealized Gains (Losses) on Derivative Instruments		(88	)		(1,045	)		74		(2,913	)
		2,360			(396	)		5,781		(2,191	)
Comprehensive Income	$	23,560		$	20,626		$	47,540	$	33,633

Note 4 - Business Segment Information

Applicable business segment information is as follows for the periods ended November 1, 2003 and November 2, 2002 (000's):
 

	Famous Footwear		Wholesale Operations		Naturalizer Retail			Other			Totals
Thirteen Weeks Ended November 1, 2003
External Sales	$	301,588	$	140,062	$	49,789		$	1,994		$	493,433
Intersegment Sales		-		35,968		-			-			35,968
Operating earnings (loss)		23,427		15,421		(166	)		(6,248	)		32,434
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 earnings (loss)		22,585		11,712		1,535			(4,318	)		31,514

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	Famous Footwear		Wholesale Operations		Naturalizer Retail			Other			Totals
Thirty-nine Weeks Ended November 1, 2003
External Sales	$	831,634	$	418,950	$	142,296		$	5,381		$	1,398,261
Intersegment Sales		-		100,718		-			-			100,718
Operating earnings (loss)		46,914		40,980		(2,534	)		(18,973	)		66,387
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 earnings (loss)		40,237		36,932		246			(18,121	)		59,294

The "Other" segment includes Corporate administrative and other expenses, which are not allocated to the operating units, and the Company's investment in its majority-owned subsidiary, Shoes.com, Inc., a footwear e-commerce company.

Certain prior year operating earnings (losses) have been recast to include amounts that were previously classified as non-operating expenses to conform to current year presentation.
 

Note 5 - Restructuring Reserves

In the fourth quarter of fiscal 2001, the Company recorded charges and reserves of $16.8 million to close 97 domestic Naturalizer retail stores. During fiscal 2002, the Company decided to keep four of the originally identified stores open and to close an additional 13 stores, resulting in 106 stores being included under this program. At February 1, 2003, the reserve balance was $0.5 million, and negotiations with landlords to buy out of store leases had been completed for all but one store. During the first half of fiscal 2003, payments to landlords depleted the reserve balance.

Also in the fourth quarter of fiscal 2001, the Company established a reserve of $3.5 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, Finance and Information Systems functions. At February 1, 2003, the reserve balance was $0.3 million. During the first quarter of fiscal 2003, the reserve balance was depleted due to payments related to the terminated employees and the reversal of $0.1 million of unrequired reserve.
 
 

7

Note 6 - Goodwill and Other Intangible Assets

Goodwill and intangible assets were attributable to the Company's operating segments as follows (000's):
 

	November 1, 2003		November 2,  2002		February 1, 2003
Famous Footwear	$	3,529	$	3,529	$	3,529
Wholesale Operations		10,248		10,263		10,259
Naturalizer Retail		5,323		4,506		4,614
Other		1,335		880		200
	$	20,435	$	19,178	$	18,602

The change between periods for the Naturalizer Retail segment reflects changes in the Canadian dollar exchange rate. The change in the Other segment from February 1, 2003 to November 1, 2003 of $1.1 million reflects the acquisition of additional shares of Shoes.com Inc. by the Company.

Note 7 - Stock-Based Compensation

As of November 1, 2003, the Company had four stock-based compensation plans, which are described more fully in Note 16 of the Company's fiscal 2002 Annual Report on Form 10-K. The Company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. Compensation expense is recognized in net earnings for stock appreciation units, stock performance plans and restricted stock grants. No stock-based employee compensation cost is reflected in net earnings for stock options, as all option grants had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to stock options outstanding (000's, except per share amounts):
 

	Thirteen Weeks Ended				Thirty-nine Weeks Ended
	November 1, 2003		November 2, 2002		November 1,  2003		November 2,  2002
Net earnings, as reported	$	21,200	$	21,022	$	41,759	$	35,824
Deduct: Total stock-based employee     compensation expense determined under     the fair value based method for stock option     awards, net of related tax effect		548		509		1,732		1,478
Pro forma net earnings	$	20,652	$	20,515	$	40,027	$	34,346
Earnings per share:
Basic - as reported	$	1.19	$	1.21	$	2.37	$	2.06
Basic - pro forma	$	1.16	$	1.18	$	2.27	$	1.98
Diluted - as reported	$	1.13	$	1.18	$	2.25	$	2.01
Diluted - pro forma	$	1.10	$	1.15	$	2.16	$	1.92

8

Note 8 - Off-Balance Sheet Arrangements

The Company is contingently liable for remaining lease commitments of approximately $13 million, which primarily relate to the Cloth World and Meis specialty retailing chains, which were sold in prior years. These obligations will continue to decline over the next several years as leases expire. In addition, the Company is a guarantor of an Industrial Development Bond financing of $3.5 million for a manufacturing and warehouse facility in Bedford County, Pennsylvania. In 1985, this facility and the business that operated the facility were sold to another party, which assumed this obligation. This financing is scheduled to be paid annually beginning in 2004 through 2009. In order for the Company to incur any liability related to this guarantee, the current owners would have to default. At this time, the Company does not believe this is reasonably likely to occur.

Note 9 - Contingencies

The Company has been remediating, under the oversight of Colorado authorities, the groundwater and indoor air at its owned property in Denver, Colorado and residential neighborhoods adjacent to and near the property, which have been affected by solvents previously used at and near the property. In March 2000, a class-action lawsuit related to this Colorado site was filed in Colorado State Court against the Company, and a prior operator at the site. Plaintiffs alleged claims for trespass, nuisance, strict liability, negligence and exemplary damages arising from the alleged release of solvents that had contaminated the groundwater and indoor air in the areas adjacent to and near the site and were seeking damages in excess of $380 million for diminution in property values, remediation damages, loss of use and enjoyment, annoyance and discomfort, and punitive damages.

On December 8, 2003, a Colorado State Court jury found the Company partially responsible for alleged environmental impacts on the neighborhood and entered a verdict against the Company of $1.0 million for loss of use and enjoyment and annoyance and discomfort.

In connection with this lawsuit, the court held hearings on motions filed by plaintiffs and the co-defendant seeking various sanctions against the Company alleging certain improper discovery practices. Rulings on such hearings are pending. The Company is not able to assess or estimate a loss, or range of loss, if any, or the ultimate outcome of such hearings, but it does not believe these proceedings will have a material adverse affect on the Company's financial position.

9

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Quarter ended November 1, 2003 compared to the Quarter ended November 2, 2002

The third quarter is traditionally the Company's highest sales volume quarter, which generates a significant portion of annual earnings. The high sales volume is driven by the back-to-school selling season at Famous Footwear, which occurs primarily in the month of August. Famous Footwear's results for the quarter reflect a successful back-to-school season. The Company's Wholesale operations also performed well in the quarter. Improved results over the prior year's comparable quarter at these divisions were partially offset by lower results at the Naturalizer Retail segment and higher Corporate administrative costs.

Consolidated net sales increased $7.1 million, or 1.5%, from $486.3 million in the third quarter last year to $493.4 million in this year's third quarter. The increase primarily reflected higher sales at the Company's Famous Footwear division of $7.1 million. Sales at the Company's Wholesale operations decreased $0.7 million, or 0.5%, in the quarter and decreased $0.1 million, or 0.2%, at Naturalizer Retail. Same-store sales for the quarter increased 0.7% at Famous Footwear and 1.9% in the domestic Naturalizer stores, but decreased 6.2% in the Canadian Naturalizer stores. Same-store sales changes are calculated by comparing the sales in stores that have been open 13 months. This method avoids the distorting effect that grand opening sales have in the first month of operation. Relocated or expanded stores are treated as new stores. Closed stores are excluded from the calculation.

Consolidated gross profit as a percent of sales for the third quarter of 2003 increased to 41.5% from 40.8% during the same period last year. This increase was due to higher margins in the Company's Famous Footwear and Wholesale segments primarily as a result of higher initial markups. The gross profit rate in the Naturalizer Retail segment declined from last year primarily due to higher markdowns in the Canadian stores.

Selling and administrative expenses, which include warehousing and distribution costs of $12.1 million in 2003 and $12.5 million in 2002, increased to 34.9% as a percent of sales for the third quarter of 2003 from 34.4% for the same period last year. This increase was primarily attributable to higher Famous Footwear and Naturalizer Retail store operating costs of $3.6 million and higher administrative costs of $4.4 million, partially offset by lower marketing costs of $1.9 million. The Company records warehousing and distribution costs in selling and administrative expenses. Accordingly, the Company's Gross Profit and Selling and administrative expense rates, as a percent of sales, may not be comparable to other companies

Consolidated operating earnings for the third quarter of 2003 of $32.4 million, or 6.6% of sales, were 2.9% above the $31.5 million, or 6.5% of sales, for the same period last year, as the effect of higher sales and gross profit rates were partially offset by higher selling and administrative expenses.

10

The decrease in interest expense of $0.6 million was a result of lower average borrowings during the third quarter of 2003.

The consolidated tax rate was 30.0% of pre-tax earnings for the third quarter of 2003 an increase from 27.0% last year. The increase in the rate reflects a higher percentage of income being generated by domestic operations, which have higher tax rates than those in the foreign jurisdictions in which the Company operates. The Company's effective tax rate is below the Federal statutory rate of 35% because the foreign jurisdictions have lower tax rates. The Company does not provide deferred taxes on unremitted foreign earnings as it is the Company's intention to reinvest these earnings indefinitely, or to repatriate the earnings only when it is tax advantageous to do so.

Net earnings of $21.2 million for the third quarter of 2003 were 0.8% higher than net earnings of $21.0 million in the third quarter of 2002. Diluted earnings per share were $1.13 in the third quarter of 2003 compared to $1.18 in the third quarter of 2002, a decrease of 4.2%. The percentage change in net earnings differs from the percentage change in diluted earnings per share as the result of an increased number of shares outstanding and a greater dilutive effect of outstanding stock options in 2003, reflecting an increase in the market price of the Company's stock.

Famous Footwear

Famous Footwear's total sales increased 2.4%, or $7.1 million, during the third quarter of 2003 to $301.6 million. The increase was due to a same-store sales increase of 0.7%, or $1.9 million, reflecting higher purchase conversion ratios, which more than offset lower traffic counts in the stores, and a net $5.2 million of sales from new stores, net of closures.

Famous Footwear's gross profit as a percent of sales increased 1.0% from 43.5% in the third quarter of 2002 to 44.5% in the third quarter of 2003. This improvement was principally due to a 1.1% increase in initial markups, due to a fresher mix of product, and 0.2% from lower shrinkage, partially offset by a higher markdown provision of 0.3%.

Selling and administrative expenses in the quarter were $110.9 million, an increase of $5.3 million from last year. As a percent of sales, such costs were 36.8% this year, an increase of 0.9% from last year's rate of 35.9%. This increase principally reflected a 0.6% increase in retail facilities costs due to new stores not yet being leveraged with corresponding higher sales.

As a result of the higher sales and gross profit rates, operating earnings for the third quarter of 2003 of $23.4 million, or 7.8% of sales, were 3.7% above the $22.6 million, or 7.7% of sales, for the same period last year.

During the third quarter of 2003, Famous Footwear opened 19 stores and closed 20, ending the quarter with 908 stores, compared with 922 stores at the end of the third quarter last year.
 
 

11

Wholesale Operations

The Company's Wholesale operations had net sales of $140.1 million during the third quarter of 2003 compared to $140.8 million in the same quarter last year, a decrease of 0.5%. This sales decrease was primarily due to lower sales to the Company's mass merchandise customers by the Buster Brown and Co. children's footwear group of 14.2% and by the women's private label footwear group of 25.2%. Offsetting those sales declines were increases in the LifeStride brand, which had a sales gain of 18.3% in the quarter, as well as an increase in sales in the men's and athletic footwear group. Sales of the Naturalizer brand increased 2.9%. The sales changes in all brands and groups were due to unit variations as average prices did not change significantly.

The gross profit rate, as a percent of sales, increased from 31.8% in the third quarter of last year to 32.4% in this year's quarter, due to better margin rates and a greater mix of higher-margin, branded product sales partially offset by higher markdowns in Canada.

Selling and administrative expenses decreased 9.7% from last year's $33.2 million to this year's $30.0 million, and as a percent of sales from 23.6% last year to 21.4% this year. This decrease of 2.2% is principally due to lower marketing costs of 2.0%. Expenses for the quarter include a $0.6 million impairment charge to reduce the carrying value of the Company's footwear manufacturing facility in Canada based on expected future cash flows. In the fourth quarter of fiscal 2003, the Company announced that it would be closing its remaining Canadian manufacturing facility in early 2004, and that an aftertax charge of $3.8 - $4.2 million would be recorded in the fourth quarter for severance and asset writedowns.

As a result of the improved margin rate and lower expenses, Wholesale operating earnings of $15.4 million were up 31.7% from the $11.7 million earned in the third quarter of 2002.

Naturalizer Retail

In the Company's Naturalizer Retail operations, which includes stores in both the United States and Canada, net sales decreased 0.2% to $49.8 million in the third quarter of 2003 compared to $49.9 million in the same period last year. The decrease of $0.1 million was due to a $2.1 million decline from fewer stores open than last year and by a net $0.3 million decrease in same-store sales (1.9% gain in the United States stores and a 6.2% decrease in the Canadian stores), offset by a $2.3 million increase from the effect of changes in the Canadian exchange rate.

Gross profit as a percent of sales of 48.6% in the third quarter of 2003 was 1.3% below last year's level of 49.9%. The decrease was principally due to higher markdowns in the Canadian stores.

Selling and administrative expenses increased $0.9 million in the third quarter, and as a percent of sales, increased to 48.9% this year from 46.9% last year. The increase, as a percent of sales, of 2.0% was principally due to higher marketing expenses of 0.5%, higher store selling costs of 0.3% and higher retail facilities costs of 1.7% partially offset by lower merchandising costs of 0.7%.
 
 

12

As a result of the lower sales and gross profit and higher expenses, an operating loss of $0.2 million occurred in the third quarter of 2003, which was below the operating earnings of $1.5 million in the third quarter of 2002. The decline in operating earnings was primarily attributable to the Canadian operations where same-store sales declines have been incurred over the past two years. In response to this trend, the Company is repositioning the product mix in these stores to carry a greater proportion of the United States Naturalizer product line to present a more relevant and younger product line to its customer base.

During the third quarter of 2003, no stores were opened and 3 were closed in the United States, resulting in 210 stores open as of November 1, 2003, compared to 232 at the same time last year. In Canada, 1 store was opened and 1 store closed, resulting in 173 stores open this year compared to 172 at the same time last year.

Other Segment

Net sales in the Other segment increased from $1.1 million in the third quarter of 2002 to $2.0 million in 2003, as the e-commerce sales of our Shoes.com majority-owned subsidiary continued to strengthen. An operating loss of $0.2 million was incurred for this business, which was equal to the loss in the same period last year. The most significant component of this "Other" segment is unallocated Corporate administrative and other expenses. These costs increased by $1.9 million, or 47.7% in the third quarter of 2003 principally as a result of higher consulting costs of $0.5 million and higher salaries and incentive and benefit plan costs of $1.0 million.
 

Nine Months ended November 1, 2003 compared to the Nine Months ended November 2, 2002

Consolidated net sales for the first nine months of 2003 were $1.398 billion, an increase of 0.6% from the first nine months of 2002 total of $1.389 billion. Sales of the Wholesale segment were up 3.7% to $419.0 million. Sales decreased in the Famous Footwear segment by $1.3 million, or 0.2%, and in the Naturalizer Retail segment by $7.1 million, or 4.7%, substantially offsetting Wholesale's increase. Same-store sales decreased 2.5% at Famous Footwear and 4.9% in the Canadian Naturalizer stores, and increased 1.3% in the domestic Naturalizer stores.

Consolidated gross profit as a percent of sales for the nine months of 2003 increased to 41.3% from 40.1% for the same period last year. This increase was primarily due to higher margins at the Company's Famous Footwear and Wholesale segments. The gross profit rate in the Naturalizer Retail segment declined from last year primarily due to higher markdowns in the Canadian stores.

13

Selling and administrative expenses for the first nine months of 2003, which include warehousing and distribution costs of $37.9 million ($38.8 million in 2002), increased $13.5 million to 36.6% from 35.8% as a percent of sales for the same period last year. This increase reflects approximately $1.6 million in increased spending for marketing, $3.9 million for selling and product development to support the further building of the Company's brands and licenses, $6.5 million of higher store operating costs primarily related to larger and remodeled stores in the Famous Footwear segment and higher general and administrative costs of $2.4 million.

Consolidated operating earnings for the first nine months of 2003 of $66.4 million, or 4.7% of sales, were 12.0% above the $59.3 million, or 4.3% of sales, for the same period last year, as the effect of higher gross profit rates were partially offset by higher selling and administrative expenses.

The decrease in interest expense of $1.8 million was a result of lower average borrowings outstanding.

The consolidated tax rate was 29.3% of pre-tax earnings for the first nine months of 2003 compared to 28.4% last year. The increase in the rate reflects a higher percentage of earnings being generated by domestic operations with higher tax rates.

Net earnings of $41.8 million for the first nine months of 2003 were 16.6% higher than net earnings of $35.8 million for the first nine months of 2002. Diluted earnings per share were $2.25 for the first nine months of 2003 compared to $2.01 in the first nine months of 2002, an increase of 11.9%. The percentage change in earnings per share is less than the percentage change in net earnings as a result of an increase in the number of outstanding shares and a greater dilutive effect of outstanding stock options in 2003.

Famous Footwear

Sales at Famous Footwear for the first nine months of 2003 decreased 0.2%, or $1.3 million, from the first nine months of last year to $831.6 million. This decrease reflects a 2.5% decrease in same-store sales, or $19.2 million, offset by a net $17.9 million of sales from new stores, net of closures.

Gross profit as a percent of sales increased 2.2% from 42.2% in the first nine months of last year to 44.4% this year. The improvement, as a percent of sales, principally reflects a 1.8% increase from higher initial markups, a 0.2% decrease in shrinkage, and a 0.2% decrease in the markdown provision.

Selling and administrative expenses for the first nine months of 2003 were $322.8 million, an increase of $10.9 million or 3.5% from the prior year. As a percent of sales, such costs were 38.8% in 2003 compared to 37.4% last year, an increase of 1.4%, principally from a 0.8% increase in retail facilities costs, a 0.2% increase in marketing costs and a 0.5% increase in merchandising and administrative expenses.

14

The effect of higher margins was greater than the increase in selling and administrative expenses, resulting in an increase in operating earnings for the first nine months of 2003 of 16.6% to $46.9 million. As a percent of sales, operating earnings were 5.6% in 2003 compared to 4.8% in 2002.

During the first nine months of fiscal 2003, Famous opened 51 stores and closed 61, ending the first nine months with 908 stores, compared with 922 stores at the end of the first nine months last year.

Wholesale Operations

The Company's Wholesale operations' net sales for the first nine months of 2003 increased 3.7% to $419.0 million from the same period last year. This increase included a 25.7% increase in LifeStride and a 31.0% increase in the men's and athletic footwear group, partially offset by declines in the women's private label and children's divisions. The Naturalizer brand was even with last year's sales.

Gross profit increased to 32.9% as a percent of sales for the first nine months of 2003 from 32.0% last year, primarily due to higher margins on the Company's branded and licensed product sales.

Selling and administrative expenses increased $4.2 million. As a percent of sales, such expenses were 23.1% this year compared to 23.0% last year, an increase of 0.1%. This increase is principally due to a 0.9% increase in costs in the selling, product development and merchandising areas as new positions were added, partially offset by lower administrative and sourcing costs of 0.6%.

Operating earnings for the first nine months of 2003 of $41.0 million were 11.0% higher than the same period last year as the effect of higher sales and gross profit rates were partially offset by higher expenses.

Naturalizer Retail

In the Company's Naturalizer Retail operations, net sales decreased 4.7% to $142.3 million in the first nine months of 2003 compared to $149.4 million in the same period last year. The decrease of $7.1 million was due to a $11.3 million decline from fewer stores open than last year, a net $1.1 million decrease in same-store sales (1.3% gain in the United States stores and a 4.9% decrease in the Canadian stores), partially offset by a $5.3 million increase from the effect of changes in the Canadian exchange rate.

Gross profit as a percent of sales of 47.7% in the first nine months of 2003 was 1.5% below last year's level of 49.2%. The decrease was principally due to higher markdowns, which were necessary to clear seasonal merchandise, particularly in the Canadian stores.

15

Selling and administrative expenses decreased $2.9 million in the first nine months due to fewer stores. As a percent of sales, such expenses were 49.5% in the first nine months of 2003, up 0.5% from last year's 49.0%. The increase principally reflects a 0.9% increase in retail facilities costs and 0.2% in higher warehousing costs, partially offset by a 0.6% decrease in merchandising and administrative costs.

As a result of the lower sales and margins, an operating loss of $2.5 million was incurred in the first nine months of 2003 compared to operating earnings of $0.2 million for the same period in 2002.

During the first nine months of 2003, 2 stores were opened and 9 were closed in the United States, resulting in 210 stores open as of November 1, 2003, compared to 232 at the same time last year. In Canada, 2 stores were opened and 1 was closed, resulting in 173 stores open this year compared to 172 at the same time last year.

Other Segment

For the first nine months of 2003, the Other segment's net sales increased to $5.4 million from $3.2 million for the comparable period last year, reflecting higher e-commerce sales at Shoes.com Inc. Shoes.com's operating loss of $0.5 million declined in 2003 from the $0.9 million loss incurred in the first nine months of 2002. Unallocated Corporate administrative and other expenses increased $1.3 million, or 6.9%, in the first nine months of 2003, principally due to higher salaries, benefits, and incentive plan costs of $3.5 million, partially offset by lower remediation costs of $1.1 million and consulting costs of $1.6 million.
 

Liquidity and Capital Resources

A summary of key financial data and ratios at the dates indicated is as follows:

	November 1, 2003	November 2, 2002	February 1,  2003
Working Capital (millions)	$283.3	$238.1	$243.8
Current Ratio	2.2:1	1.9:1	1.9:1
Total Debt as a Percentage   of Total Capitalization	25.8%	35.8%	34.0%

Cash provided from operating activities for the first nine months of fiscal 2003 was $75.6 million, compared to $87.2 million for the same period last year.

At November 1, 2003, receivables were $64.5 million, a decrease of $0.9 million from the level at November 2, 2002, reflecting substantially flat Wholesale sales in the third quarter of 2003.
 
 

16

Inventories, substantially all of which were finished goods in all periods, of $376.6 million at November 1, 2003 were $4.8 million or 1.3% lower than at the same time in 2002 but $68.5 million or 15.4% lower than the level as of November 3, 2001. The significant decrease achieved in fiscal 2002 was part of the Company's initiative to reduce inventories and improve "freshness and velocity." This program is continuing and is a significant factor in the improved gross profit rates being achieved, particularly at Famous Footwear.

Additions to property and equipment of $21.7 million for the first nine months of 2003 were $6.6 million higher than additions of $15.1 million in the first nine months of 2002. This increase primarily relates to the major store remodel initiative started by Famous Footwear in the fourth quarter of 2002 and ending in the second quarter of 2003. Approximately 70% of the 2003 capital expenditures relate to the Famous Footwear division, primarily for new stores and remodels of existing stores. The remaining expenditures were primarily for new and remodeled stores at the Company's domestic and Canadian Naturalizer stores. Depreciation and amortization expense was $19.7 million in the nine months of 2003 compared to $17.8 million for the same period last year.

The Company's total outstanding debt at November 1, 2003 was $119.5 million, which is $41.0 million lower than at the same time last year. At November 1, 2003, $16.0 million was borrowed and $17.0 million of letters of credit were outstanding under the Company's revolving bank Credit Agreement, which leaves additional borrowing availability of approximately $145 million. Total debt as a percentage of total capitalization is calculated by dividing total debt by the sum of total debt plus shareholders' equity. The decrease in the ratio at November 1, 2003 to 25.8% compared to 34.0% at the end of fiscal 2002 and 35.8% at November 2, 2002 was due to the decrease in outstanding debt and increases in shareholders' equity.

In the fourth quarter of fiscal 2003, the Company plans to prepay its Industrial Revenue Bonds capital lease obligations of $3.5 million. Accordingly, this capital lease obligation was classified as a current liability as of the end of the third quarter of 2003.

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 nine months of fiscal 2003, no shares were purchased under this authorization. Since the inception of this program, the Company has repurchased 928,900 shares for approximately $11.3 million.
 
 

17

Forward-Looking Statements

This Form 10-Q contains forward-looking statements. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These include (i) general economic conditions and the consumer's preferences and purchasing patterns, which may be influenced by consumers' disposable income; (ii) the uncertainties of currently pending litigation; (iii) intense competition within the footwear industry; and (iv) and political and economic conditions or other threats to continued and uninterrupted flow of inventory from Brazil and China, where the Company relies heavily on third-party manufacturing facilities for a significant amount of its inventory. In Item 1 of the Company's fiscal 2002 Annual Report on Form 10-K, detailed risk factors that could cause variations in results to occur are listed and further described. 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 on Form 10-K for the year ended February 1, 2003.
 

ITEM 4 - CONTROLS AND PROCEDURES

It is the Chief Executive Officer's and Chief Financial Officer's ultimate responsibility to ensure the Company maintains disclosure controls and procedures designed to provide reasonable assurance that material information, both financial and non-financial, and other information required under the securities laws to be disclosed is identified and communicated to senior management on a timely basis. The Company's disclosure controls and procedures include mandatory communication of material events, automated accounting processing and reporting, management review of monthly, quarterly and annual results, an established system of internal controls and internal control reviews by the Company's internal auditors.

As of November 1, 2003, management of the Company, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures with respect to the information generated for use in this Quarterly Report. Based upon and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded the Company's disclosure controls were effective to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. There have been no changes in the Company's internal control over financial reporting during the quarter ended November 1, 2003, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
 
 

18

 

It should be noted that while the Company's management, including the Chief Executive Officer and Chief Financial Officer, believes the Company's disclosure controls and procedures provide a reasonable level of assurance, they do not expect that the Company's disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance the objectives of the control system are met. Further, the design of a control system must reflect the fact there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to errors or fraud may occur and not be detected.
 
 

19

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

The Company has been remediating, under the oversight of Colorado authorities, the groundwater and indoor air at its owned property in Denver, Colorado and residential neighborhoods adjacent to and near the property, which have been affected by solvents previously used at and near the property. In March 2000, a class-action lawsuit related to this Colorado site was filed in Colorado State Court against the Company, and a prior operator at the site. Plaintiffs alleged claims for trespass, nuisance, strict liability, negligence and exemplary damages arising from the alleged release of solvents that had contaminated the groundwater and indoor air in the areas adjacent to and near the site and were seeking damages in excess of $380 million for diminution in property values, remediation damages, loss of use and enjoyment, annoyance and discomfort, and punitive damages.

On December 8, 2003, a Colorado State Court jury found the Company partially responsible for alleged environmental impacts on the neighborhood and entered a verdict against the Company of $1.0 million for loss of use and enjoyment and annoyance and discomfort.

In connection with this lawsuit, the court held hearings on motions filed by plaintiffs and the co-defendant seeking various sanctions against the Company alleging certain improper discovery practices. Rulings on such hearings are pending. The Company is not able to assess or estimate a loss, or range of loss, if any, or the ultimate outcome of such hearings, but it does not believe these proceedings will have a material adverse affect on the Company's financial position.

There have been no material developments during the quarter ended November 1, 2003 in any other legal proceedings described in the Company's Annual Report on Form 10-K for the year ended February 1, 2003.

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Item 6 - Exhibits and Reports on Form 8-K
 

(a)	(3)	(i)	Certificate of Incorporation of the Company incorporated herein by reference to Exhibit 3 (a) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 4, 2002.
		(ii)	Bylaws of the Company as amended through December 4, 2003, filed herewith.
	(31.1)		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	(31.2)		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	(32.1)		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)	Reports on Form 8-K:
	The Company filed a current report on Form 8-K dated August 19, 2003 furnishing information under Item 9, which announced the Company's second quarter results for fiscal 2003.
	The Company filed a current report on Form 8-K dated September 23, 2003 furnishing information under Item 9, which announced that members of its executive management team would be speaking with financial analysts during the "Sidoti West Coast Emerging Growth Institutional Investor Forum" on September 23, 2003 and the Wells Fargo Securities Consumer Conference on September 25, 2003.
	The Company filed a current report on Form 8-K dated November 6, 2003 furnishing information under Item 9, which announced October retail sales and confirmed earnings guidance for third quarter and full year.
	The Company filed a current report on Form 8-K dated November 19, 2003 furnishing information under Item 9, which announced the Company's third quarter results for fiscal 2003 and certain forward-looking guidance.
	The Company filed a current report on Form 8-K dated December 8, 2003 furnishing information under Item 9, which announced that members of its executive management team would be speaking with financial analysts during the "FFANY" footwear show in New York City on December 8 - 10, 2003.

21

 

The Company filed a current report on Form 8-K dated December 9, 2003 furnishing information under Item 9, which announced its plans to close its Perth, Ontario manufacturing facility by early March 2004.

The Company filed a current report on Form 8-K dated December 9, 2003 furnishing information under Item 9, which announced a jury verdict in the class-action lawsuit related to environmental impacts in a neighborhood near a former Company plant.

 

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: December 15, 2003	/s/ Andrew M. Rosen
	Senior Vice President, Chief Financial Officer and Treasurer On Behalf of the Corporation as the  Principal Financial Officer

EX-3 3 bws10q2ndqex3ii.htm BYLAWS OF THE COMPANY

Exhibit 3.ii.

 
 
 
 
 
 
 

BROWN SHOE COMPANY, INC.

A New York corporation
 
 
 
 
 
 

BYLAWS
 
 
 
 
 
 

Effective: December 4, 2003

BYLAWS

of

Brown Shoe Company, Inc.
 
 
 

ARTICLE I
Meetings of Stockholders

            Section 1. Annual Meeting. The annual meeting of the stockholders shall be held at such place within or without the State of New York as may from time to time be fixed by resolution of the Board of Directors on the fourth Thursday in May in each and every year (or if said day be a legal holiday, then on the next succeeding day not a legal holiday), at eleven o'clock in the forenoon; provided, however, that the day and time fixed for such meeting in any year may be changed by resolution of the Board of Directors to such other day not a legal holiday and to such other time as the Board of Directors may deem desirable or appropriate. If no other place for the annual meeting is determined by the Board of Directors and specified in the notice of such meeting, the annual meeting shall be held at the principal offices of the Company. The annual meeting of stockholders shall be held for the purpose of electing directors and transacting only such other business as may be properly brought before the meeting.

            Section 2. Notice of Stockholder Business at Annual Meeting. In addition to any other requirements imposed by or pursuant to law, the Company's Certificate of Incorporation or these Bylaws, to be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, the Chairman of the Board, or the Chief Executive Officer, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, the Chairman of the Board, or the Chief Executive Officer, or (c), subject to Article II, Section 8 hereof, otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Company. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Company, not less than 90 days nor more than 120 days prior to the meeting; provided, however, that in the event that less than 100 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. For purposes of these Bylaws, "public disclosure" shall mean disclosure in a press release reported by the Dow Jones, Associated Press, Reuters or comparable national news service, or in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Company's books, of the stockholder proposing such business, (c) the class and number of shares of the Company which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything in the Bylaws to the contrary, but subject to Article II, Section 8 hereof, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 2. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. The Chairman of an annual meeting shall have absolute authority to decide questions of compliance with the foregoing procedures, and his or her ruling thereon shall be final and conclusive. The provisions of this Section 2 shall also govern what constitutes timely notice for purposes of Rule 14a-4(c) under the Exchange Act. The meeting may be adjourned from time to time until its business is completed.

            Section 3. Special Meetings. Special meetings of the stockholders may be held upon call by the majority of the Board of Directors, the Chairman of the Board, or the Chief Executive Officer, at such time as may be fixed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer, and at such place within or without the State of New York as may be stated in the call and notice. The meeting may be adjourned from time to time until its business is completed.

            Section 4. Notice of Meetings. Written notice of the time, place and purpose or purposes of every meeting of stockholders, signed by the Chairman of the Board or the Chief Executive Officer, the President or a Vice-President or the Secretary or an Assistant Secretary, shall be served either personally, by mail or electronically, not less than ten days nor more than sixty days before the meeting, upon each stockholder of record entitled to vote at such meeting and upon each other stockholder of record who, by reason of any action proposed at such meeting, would be entitled to have his stock appraised if such action were taken.

            If mailed, such notice shall be directed to each stockholder at his address as it appears on the stock book unless he shall have filed with the Secretary of the Company a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. Such further notice shall be given by mail, publication or otherwise, as may be required by the Certificate of Incorporation of the Company or by law.

            Section 5. Quorum. At every meeting of the stockholders, the holders of record of shares entitled in the aggregate to a majority of the number of votes which could at the time be cast by the holders of all shares of the capital stock of the Company then outstanding and entitled to vote if all such holders were present or represented at the meeting, shall constitute a quorum, unless a different percentage shall be required by law, the Company's Certificate of Incorporation or these Bylaws. If at any meeting there shall be no quorum, the holders of a majority of the shares of stock entitled to vote so present or represented may adjourn the meeting from time to time, without notice other than announcement at the meeting, until such quorum shall have been obtained, when any business may be transacted which might have been transacted at the meeting as first convened had there been a quorum.

            Section 6. Voting. At all meetings of the stockholders, each holder of record of outstanding shares of stock of the Company, entitled to vote thereat, may so vote either in person or by proxy. A proxy may be appointed either by instrument in writing executed by such holder or by his duly authorized attorney, or by such others means, including the transmission of a telegram, cablegram or other means of electronic transmission, such as telephone and Internet, as may be authorized under the laws of the State of New York. No proxy shall be valid after the expiration of eleven months from the date of its execution or transmission unless the stockholder executing or transmitting it shall have specified therein a longer time during which it is to continue to force.

            Section 7. Record of Stockholders.

1. The Board of Directors may prescribe a period, not exceeding sixty days nor less than ten days prior to any meeting of the stockholders, during which no transfer of stock on the books of the company may be made. In lieu of prohibiting the transfer of stock as aforesaid, the Board of Directors may fix a day or hour, not more than sixty days prior to the day of holding any meeting of stockholders, as the time as of which stockholders entitled to notice of and to vote at such meeting shall be determined, and all persons who were holders of record of voting stock at such time, and no others, shall be entitled to notice of and to vote at such meeting.

 
2. A complete list of the stockholders entitled to vote at such meeting shall be prepared with the address of each stockholder and the number of shares held by each, which list shall be produced and kept open at the time and place of the meeting, and, upon request, shall be subject to the inspection of any stockholder during the whole time of the meeting. Failure to comply with the above requirements in respect of lists of stockholders shall not affect the validity of any action taken at such meeting.

            Section 8. Inspectors of Election. At all elections of directors by the stockholders, the chairman of the meeting shall appoint two Inspectors of Election. Before entering upon the discharge of his duties, each such inspector shall take and subscribe an oath or affirmation faithfully to execute the duties of inspector at such meeting as provided by law with strict impartiality and according to the best of his ability and thereupon the inspectors shall take charge of the polls and after the balloting shall make a certificate of the result of the vote taken. No director or candidate for the office of director shall be appointed such inspector.

ARTICLE II
Directors

Section 1. Number. The number of directors within the maximum and minimum limits provided for in the Certificate of Incorporation may be changed from time to time by the stockholders or by the Board of Directors by an amendment to these Bylaws. Subject to amendment of these Bylaws, as aforesaid, the number of directors of the Corporation shall be eight. Such directors shall be classified in respect of the time for which they shall severally hold office, by dividing them into two classes consisting of three directors each and one class consisting of two directors. At each annual election, the successors of the directors of the class whose term shall expire in that year shall be elected to hold office for the term of three years so that the term of office of one class of directors shall expire in each year.

            Section 2. Meetings of the Board. Meetings of the Board of Directors shall be held at such place within or without the State of New York as may from time to time be fixed by resolution of the Board, or as may be specified in the call of any meeting. Regular meetings of the Board of Directors shall be held at such times as may from time to time be fixed by resolution of the Board. Notice need not be given of the regular meetings of the Board held at times fixed by resolution of the Board. Special meetings of the Board may be held at any time upon the call of the Chairman of the Board or any two directors by (i) facsimile or electronic notice, duly sent to, or written notice, duly served in person on each director, in either case not less than forty-eight hours before such meeting or (ii) written notice, duly sent to each director not less than three days before such meeting. Special meetings of the Board of Directors may be held without notice, if all of the directors are present or if those not present waive notice of the meeting in writing. Any one or more of the directors may participate in a meeting of the Board of Directors by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.

            Section 3. Quorum. The attendance of a majority of the Board of Directors shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the Directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors, except as otherwise may be specifically provided by law or by the Company's Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

            Section 4. Vacancies. Vacancies in the Board of Directors may be filled by a vote of a majority of the directors in office even though less than a quorum; provided that, in case of an increase in the number of directors pursuant to an amendment of these Bylaws made by the stockholders, the stockholders may fill the vacancy or vacancies so created at the meeting at which the bylaw amendment is effected. The directors so chosen shall hold office, unless they are removed therefrom by the stockholders, for the unexpired portion of the term of the directors whose place shall be vacant and until the election of their successors.

            Section 5. Resignations. Any director of the Company may resign at any time by giving written notice to the Chairman of the Board or to the Secretary of the Company. Such resignation shall take effect at the time specified therein; and unless otherwise specified therein the acceptance of such resignation shall not be necessary to make it effective.

            Section 6. Organization. The Board of Directors shall have general power to direct the management of the business and affairs of the Company, and may adopt such rules and regulations as they shall deem proper, not inconsistent with law or with these Bylaws, for the conduct of their meetings and for the management of the business and affairs of the Company. Directors need not be stockholders.

            Section 7. Compensation. Directors, as such, shall not receive any stated salary for their services, but by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board, and directors shall be entitled to compensation other than a stated salary in such form and in such amounts as the Board may determine. However, this Bylaw shall not be construed to preclude any director from serving in any other capacity and receiving compensation therefor. Members of the Executive Committee and all other committees may be allowed a fixed sum and expenses of attendance, if any, for attendance at committee meetings, and such other compensation in such forms and in such amounts as the Board may determine.

            Section 8. Notice and Qualification of Stockholder Nominees to Board of Directors. Only persons who are nominated in accordance with procedures set forth in this Section 8 shall be qualified for election as Directors. Nominations of persons for election to the Board of Directors of the Company may be made at a meeting of stockholders by or at the direction of the Board of Directors or by any stockholder of the Company entitled to vote for the election of Directors at the meeting who complies with the procedures set forth in this Section 8. In order for persons nominated to the Board of Directors, other than those persons nominated by or at the direction of the Board of Directors, to be qualified to serve on the Board of Directors, such nomination shall be made pursuant to timely notice in writing to the Secretary of the Company. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Company not less than 90 days nor more than 120 days prior to the meeting; provided, however, that in the event that less than 100 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a Director (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Company which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitation of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including without limitation such person's written consent to be named in the proxy statement as a nominee and to serving as a Director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Company's books, of such stockholder and (ii) the class and number of shares of the Company which are beneficially owned by such stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Company that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be qualified for election as a Director of the Company unless nominated in accordance with the procedure set forth in this Section 8. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with procedures prescribed by the Bylaws, and if he should so determine, he shall so declare to the meeting, and the defective nomination shall be disregarded. The Chairman of a meeting shall have absolute authority to decide questions of compliance with the foregoing procedures, and his or her ruling thereon shall be final and conclusive.

ARTICLE III
Committees

            Section 1. Executive Committee. The Board of Directors may, by resolution passed by a majority of the whole Board, designate an Executive Committee to consist of three or more of the directors, including the Chairman of the Board ex-officio, one of whom shall be designated Chairman of the Executive Committee. A majority of the members of the Executive Committee shall be non-employee Directors. The Executive Committee shall have and may exercise, so far as may be permitted by law, all of the powers of the Board in the direction of the management of the business and affairs of the Company during the intervals between meetings of the Board of Directors; but the Executive Committee shall not have the power to fill vacancies in the Board, or to change the membership of, or to fill vacancies in, the Executive Committee, or to make or amend bylaws of the Company. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve, the Executive Committee. The Executive Committee may hold meetings and make rules for the conduct of its business and appoint such committees and assistants as it shall from time to time deem necessary. A majority of the members of the Executive Committee shall constitute a quorum. All action of the Executive Committee shall be reported to the Board at its meeting next succeeding such action. Any one or more members of the Executive Committee may participate in a meeting of the Executive Committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.

            Section 2. Other Committees. The Board of Directors may, in its discretion, by resolution, appoint other committees, composed of two or more members, which shall have and may exercise such powers as shall be conferred or authorized by the resolution appointing them. A majority of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board shall have power at any time to change the membership of any such committee, to fill vacancies, and to discharge any such committee.

            Section 3. Committees- General Rules. Each Committee of the Board of Directors shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. Vacancies in the membership of each Committee shall be filled by the Board of Directors at any regular or special meeting of the Board of Directors. A Director who may be disqualified, by reason of personal interest, from voting on any particular matter before a meeting of a Committee may nevertheless be counted for the purpose of constituting a quorum of the Committee. At all meetings of a Committee, a majority of the Committee members then in office shall constitute a quorum for the purpose of transacting business, and the acts of a majority of the Committee members present at any meeting at which there is a quorum shall be the acts of the Committee.

ARTICLE IV
Officers

            Section 1. Officers. The Board of Directors, as soon as may be after the election of directors held in each year, shall elect a Chairman of the Board of Directors, a Chief Executive Officer, a President, one or more Vice-Presidents, a Secretary, and a Treasurer, and from time to time may appoint such Assistant Secretaries, Assistant Treasurers and such other officers, agents and employees as it may deem proper. Any two of such offices, except that of President and Secretary, may be held by the same person. The Chairman of the Board shall be chosen from among the directors, but no other officer need be a director.

            Section 2. Term of Office. The term of office of all officers shall be one year or until their respective successors are chosen and qualified; but at any meeting the Board may suspend or remove any one or more of the officers for a cause satisfactory to the Board, and the action thus taken shall be conclusive. In the event of the suspension of an officer, the Board shall fix the term of such suspension.

            Section 3. Powers and Duties. The officers, agents and employees of the Company shall each have such powers and duties in the management of the property and affairs of the Company, subject to the control of the Board of Directors, as generally pertain to their respective offices, as well as such powers and duties as from time to time may be prescribed by the Board of Directors. The Board of Directors may require any such officer, agent or employee to give security for the faithful performance of his duties.

ARTICLE V
Powers to Contract; Indemnification

            Section 1. Contracts. All contracts and agreements purporting to be the act of this Company shall be signed by the Chairman of the Board, Chief Executive Officer, President, or by a Vice-President, or by such other officer or other person as may be designated by the Board of Directors or Executive Committee or the Chairman of the Board, Chief Executive Officer, President or by a Vice-President in order that the same shall be binding upon the Company.

            Section 2. Indemnification.

1. Actions Involving Directors and Officers. The Company shall indemnify each person who at any time is serving or has served as a director or officer of the Company or at the request of the Company is serving or has served as a director or officer (or in a similar capacity) of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any claim, liability or expense incurred as a result of such service, to the maximum extent permitted by law.

 
2. Actions Involving Employees or Agents.

1. The Company may, if it deems appropriate, indemnify any person who at any time is or has been an employee or agent of the Company or who at the request of the Company is or has been an employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any claim, liability or expense incurred as a result of such service, to the maximum extent permitted by law or to such lesser extent as the Company, in its discretion, may deem appropriate.

 
2. To the extent that any person referred to in subsection 2(b) of this Section 2 has been successful, on the merits or otherwise, in the defense of a civil or criminal proceeding arising out of the services referred to therein, he shall be entitled to indemnification as authorized in such subsections.

 
3. Advance Payment of Expenses. Expenses incurred by a person who is or was a director or officer of the Company or who is or was at the request of the Company serving as a director or officer (or in a similar capacity) of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, in defending a civil or criminal action or proceeding shall be paid by the Company in advance of the final disposition of such action or proceeding, and expenses incurred by a person who is or was an employee or agent of the Company or who is or was at the request of the Company serving as an employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, in defending a civil or criminal action or proceeding may be paid by the Company in advance of the final disposition of such action or proceeding as authorized by the Board of Directors, in either case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amounts as, and to the extent, required by law.

4. Not exclusive. The indemnification and advancement of expenses provided or permitted by this Section 2 shall not be deemed exclusive of any other rights to which any person who is or was a director, officer, employee or agent of the Company or who is or was at the request of the Company serving as a director or officer (or in a similar capacity), employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise may be entitled, whether pursuant to the Company's Certificate of Incorporation, Bylaws, the terms of any resolution of the shareholders or Board of Directors of the Company, any agreement or contract or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office.

5. Indemnification Agreements Authorized. Without limiting the other provisions of this Section 2, the Company is authorized from time to time to enter into agreements with any director, officer, employee or agent of the Company or with any person who at the request of the Company is serving as a director or officer (or in a similar capacity), employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, providing such rights of indemnification as the Board of Directors may deem appropriate, up to the maximum extent permitted by law; provided that any such agreement with a director or officer of the Company shall not provide for indemnification of such director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled. Any such agreement entered into by the Company with a director may be authorized by the other directors, and such authorization shall not be invalid on the basis that similar agreements may have been or may thereafter be entered into with such other directors.

6. Insurance. The Company may purchase and maintain insurance to indemnify itself or any person who is or was a director, officer, employee or agent of the Company or who is or was at the request of the Company serving as a director or officer (or in a similar capacity), employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the maximum extent allowed by law, whether or not the Company would have the power to indemnify such person under the provisions of this Section 2.

7. Certain Definitions. For the purposes of this Section 2:

1. Any director or officer of the Company who shall serve as a director or officer (or in a similar capacity), employee or agent of any other corporation, partnership, joint venture, trust or other enterprise of which the Company, directly or indirectly, is or was the owner of a majority of either the outstanding equity interests or the outstanding voting stock (or comparable interests) shall be deemed to be serving as such director or officer (or in a similar capacity), employee or agent at the request of the Company, unless the Board of Directors of the Company shall determine otherwise. In all other instances where any person shall serve as a director or officer (or in a similar capacity), employee or agent of another corporation, partnership, joint venture, trust or other enterprise of which the Company is or was a stockholder or creditor, or in which it is or was otherwise interested, if it is not otherwise established that such person is or was serving as such director or officer (or in a similar capacity), employee or agent at the request of the Company, the Board of Directors of the Company may determine whether such service is or was at the request of the Company, and it shall not be necessary to show any actual or prior request for such service.

 
2. A corporation shall be deemed to have requested a person to serve an employee benefit plan where the performance by such person of his duties to the corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person with respect to an employee benefit plan pursuant to applicable law shall be considered fines; and action taken or omitted by a person with respect to an employee benefit plan in the performance of such person's duties for a purpose reasonably believed by such person to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the corporation.

 
3. References to a corporation include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as a director or officer (or in a similar capacity), employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall stand in the same position under the provisions of this Section 2 with respect to the resulting or surviving corporation as he would if he had served the resulting or surviving corporation in the same capacity.

8. Survival. Any indemnification rights provided under or granted pursuant to this Section 2 shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Indemnification rights provided under or granted pursuant to this Section 2 shall survive amendment or repeal of this Section 2 with respect to any acts or omissions occurring prior to such amendment or repeal and persons to whom such indemnification rights are given shall be entitled to rely upon such indemnification rights as a binding contract with the Company.

ARTICLE VI
Capital Stock

            Section 1. Stock Certificates. The interest of each stockholder shall be evidenced by a certificate or certificates for shares of stock of the Company in such form as the Board of Directors may from time to time prescribe. The certificates of stock shall be signed by the Chairman of the Board or the Chief Executive Officer or the President or a Vice-President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary and sealed with the seal of the Company, and shall be countersigned and registered in such manner, if any, as the Board may by resolution prescribe; provided that, in case such certificates are required by such resolution to be signed by a Transfer Agent or Transfer Clerk and by a Registrar, the signatures of the Chairman of the Board or the Chief Executive Officer or the President or a Vice-President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary and the seal of the Company upon such certificates may be facsimiles, engraved or printed.

            Section 2. Transfers. Shares in the capital stock of the Company shall be transferred only on the books of the Company, by the holder thereof in person or by his attorney, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Company or its agents may reasonably require.

            Section 3. Lost or Destroyed Stock Certificates. No certificates for shares of stock of the Company shall be issued in place of any certificate alleged to have been lost, stolen or destroyed, except upon production of such evidence of the loss, theft or destruction and upon indemnification of the Company and its agents to such extent and in such manner as the Board of Directors may from time to time prescribe.

ARTICLE VII
Checks, Notes, etc.

            All checks and drafts on the Company's bank accounts and all bills of exchange and promissory notes and all acceptances, obligations and other instruments for the payment of money, shall be signed by the Chairman of the Board, Chief Executive Officer, President, or a Vice-President, or the Treasurer, or by such other officer or officers or agent or agents as shall be thereunto authorized from time to time by the Board of Directors.

ARTICLE VIII
Fiscal Year

            The fiscal year of the Company shall be determined as ending on the Saturday nearest to each January thirty-first, and each ensuing fiscal year shall commence on the day following the ending date of the immediately preceding fiscal year as so determined.

ARTICLE IX
Corporate Seal

            The corporate seal shall have inscribed thereon the name of the Company and the words "New York", arranged in a circular form around the words and figures "Corporate Seal 1913". In lieu of the corporate seal, a facsimile thereof may be impressed or affixed or reproduced.

ARTICLE X
Amendments

            The Bylaws of the Company may be amended, added to, rescinded or repealed at any meeting of the stockholders by the vote of the holders of record of shares entitled in the aggregate to more than a majority of the number of votes which could at the time be cast by the holders of all shares of the capital stock of the Company then outstanding and entitled to vote if all such holders were present or represented at the meeting, provided notice of the proposed change is given in the notice of the meeting. The Board of Directors may from time to time, by vote of a majority of the Board, amend these Bylaws or make additional bylaws for the Company at any regular or special meeting at which notice of the proposed change is given, subject, however, to the power of the stockholders to alter, amend, or repeal any bylaws made by the Board of Directors.

EX-31

Exhibit 31.1

CERTIFICATIONS

I, Ronald A. Fromm, Chairman, President and Chief Executive Officer of Brown Shoe Company, Inc. (the "Registrant"), certify that:

1. I have reviewed this quarterly report on Form 10-Q of the Registrant;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and we have:

1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
2. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
3. Disclosed in this quarterly report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

1. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

 

Date: December 15, 2003	/s/ Ronald A. Fromm
	Chairman, President and Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATIONS

I, Andrew M. Rosen, Senior Vice President, Chief Financial Officer and Treasurer of Brown Shoe Company, Inc. (the "Registrant"), certify that:
 

1. I have reviewed this quarterly report on Form 10-Q of the Registrant;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and we have:

1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
2. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
3. Disclosed in this quarterly report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

1. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: December 15, 2003	/s/ Andrew M. Rosen
	Senior Vice President, Chief Financial Officer and Treasurer

EX-32

Exhibit 32.1

Certification Pursuant to
18 U.S.C. §1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

        In connection with the Quarterly Report of Brown Shoe Company, Inc. (the "Registrant") on Form 10-Q for the quarter ending November 1, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Ronald A. Fromm, Chairman, President and Chief Executive Officer of the Registrant, and Andrew M. Rosen, Senior Vice President, Chief Financial Officer and Treasurer of the Registrant, certify, to the best of our knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

/s/ Ronald A. Fromm
Ronald A. Fromm
Chairman, President and Chief Executive Officer
Brown Shoe Company, Inc.
December 15, 2003
 
 

/s/ Andrew M. Rosen
Andrew M. Rosen
Senior Vice President, Chief Financial Officer and Treasurer
Brown Shoe Company, Inc.
December 15, 2003