Brown Shoe Company Reports Second Quarter 2012 Results

Brown Shoe Company, Inc. (NYSE: BWS, brownshoe.com) today reported its second quarter 2012 financial results, with net sales of $599.3 million versus second quarter 2011 net sales of $620.6 million. Results for both the second quarter of 2012 and 2011 included sales of $8.5 million and $25.8 million, respectively, from brands and businesses the company has exited over the past nine months. Excluding exited sales, net sales were down 0.7% year-over-year.

The second quarter net loss of ($2.5) million, or ($0.06) per diluted share, improved when compared to ($4.6) million, or ($0.11) per diluted share, in 2011. The second quarter 2012 loss included portfolio realignment charges of $12.4 million and $2.3 million of charges related to a previously announced organizational change. On an adjusted * basis, net earnings of $6.8 million, or $0.16 per diluted share, improved compared to a loss of ($2.7) million, or ($0.06) per diluted share, in the prior year. Gross profit margin for the second quarter of 2012 was 39.0% versus 37.6% in 2011.

“For the second quarter, we delivered record setting sales and operating earnings at Famous Footwear, which was coupled with strong performance from our Contemporary Fashion brands,” said Diane Sullivan, president and chief executive officer of Brown Shoe Company. “We also continued to see leverage from our strategic portfolio realignment efforts, and this quarter’s results are another positive proof point we are delivering against our commitment to drive shareholder value.”

US$M, except per share (unaudited)
  13 Weeks   26 Weeks   52 Weeks
  2Q’12   2Q’11   Change   2Q’12   2Q’11   Change   2Q’12   2Q’11   Change
Famous Footwear     350.3       344.9     1.6 %     697.4       687.7     1.4 %     1,466.1       1,464.7     --  
Wholesale Operations     195.0       215.2     (9.4 %)     418.2       432.1     (3.2 %)     856.9       833.2     2.8 %
Specialty Retail    

54.0
     

60.5
    (10.8 %)    

110.1
     

120.3
   

(8.5

%)
   

245.4
     

262.9
    (6.6 %)
Consolidated net sales   $ 599.3     $ 620.6     (3.4 %)   $ 1,225.7     $ 1,240.1     (1.2 %)   $ 2,568.4     $ 2,560.8     0.3 %
Gross profit     233.8       233.6     0.1 %     472.9       481.6     (1.8 %)     987.9       999.1     (1.1 %)
Margin     39.0 %     37.6 %   140 bps     38.6 %     38.8 %   -20 bps     38.5 %     39.0 %   -50 bps
SG&A     219.3       233.9     (6.3 %)     438.2       468.1     (6.4 %)     907.5       942.1     (3.7 %)
% of net sales     36.5 %     37.7 %   -120 bps     35.8 %     37.7 %   -190 bps     35.3 %     36.8 %   -150 bps
Net restructuring, other special charges     7.4       0.7     n/m       18.9       2.4     n/m       40.2       6.7     n/m  
Impairment of intangible assets     5.8       --     n/m       5.8       --     n/m       5.8       --     n/m  
Operating earnings (loss)     1.3       (1.0 )   n/m       10.0       11.1     (9.9 %)     34.4       50.3     (31.5 %)
% of net sales     0.2 %    

(0.2

%)
  40 bps     0.8 %     0.9 %   -10 bps     1.3 %     2.0 %   -70 bps
Net interest expense     5.7       7.5     (23.8 %)     11.8       14.1     (16.5 %)     24.1       24.3     (0.3 %)
Earnings (loss) before income tax     (4.4 )     (8.5 )   48.0 %     (1.8 )     (3.0 )   40.6 %     10.3       26.0     (60.6 %)
Tax rate     38.3 %     35.5 %           38.8 %     29.6 %           5.1 %     24.6 %      

Net earnings from discontinued operations
    --       0.7     n/m       --       1.0     n/m       14.7       1.0     n/m  
Net earnings (loss)     ($2.5 )     ($4.6 )   45.0 %     ($0.8 )     ($0.9 )   8.8 %   $ 24.7     $ 21.0     17.4 %
Per diluted share     ($0.06 )     ($0.11 )   45.5 %     ($0.02 )     ($0.02 )   --     $ 0.58     $ 0.47     23.4 %
Adjusted operating earnings   $ 15.9     $ 1.2     n/m     $ 37.4     $ 17.7     111.2 %   $ 85.0     $ 61.2     38.9 %
Per diluted share   $ 0.16       ($0.06 )   n/m     $ 0.39     $ 0.09     333.3 %   $ 1.00     $ 0.65     53.8 %
           

Second Quarter Highlights

Famous Footwear reported record second quarter 2012 sales of $350.3 million, a 1.6% year-over-year improvement, with both running and sandals contributing, up 12.8% and 3.7%, respectively. On a same-store-sales basis, the second quarter was up 3.9% over the prior year. During the quarter, the company closed or relocated 26 stores and added 14 new stores, and average revenue per square foot improved 6.7% year-over-year.

The company’s Contemporary Fashion platform was up 11.7% in the second quarter, with continued strong growth from the Sam Edelman brand. In the Healthy Living portfolio, the company’s LifeStride brand delivered double-digit sales growth in the second quarter. Excluding brands the company exited over the past nine months, Wholesale Operations sales were down 3.1% year-over-year in the second quarter.

Consolidated gross profit was flat in the second quarter, while gross profit margin improved by 140 basis points. The company continued to target SG&A reduction, resulting in a decline of $14.6 million to 36.5% of net sales. For the quarter, adjusted operating earnings improved to $15.9 million from $1.2 million in the second quarter of 2011.

Inventory at the end of the second quarter was $621.1 million, down 1.1% compared to $627.9 million in the prior year. Wholesale inventory was down 2.8%, while Famous Footwear inventory was flat.

At quarter-end, Brown Shoe Company had approximately $405.0 million in availability under its revolving credit facility and $47.4 million in cash and cash equivalents. The company’s debt-to-capital ratio declined to 43.6% from 53.4% in the second quarter of 2011.

Financial Review and 2012 Outlook

“While we’re encouraged by our performance in both the second quarter and the first half -- including the continued successful execution of our ongoing portfolio realignment efforts -- we remain cautious about the overall macroeconomic environment,” said Russ Hammer, chief financial officer of Brown Shoe Company. “As a result, while we are raising the bottom of our adjusted EPS guidance range to $0.85, we are maintaining the top of the range at $0.95.”
Metric   FY’12
Consolidated net sales   $2.57 to $2.59 billion
Famous Footwear same-store sales   Up low-single digits
Wholesale Operations net sales   Down low- to mid-single digits, reflecting brand exits
Gross profit margin   Up 20 to 40 basis points
SG&A   $920 to $925 million
Non-recurring costs   ~$34 million
Net interest expense   $23 to $25 million
Effective tax rate   38% to 40%
Earnings per diluted share   $0.34 to $0.44
Adjusted earnings per diluted share   $0.85 to $0.95
Depreciation and amortization   $56 to $57 million
Capital expenditures   $58 to $63 million
 

Investor Conference Call

Brown Shoe Company will webcast an investor conference call at 9:00 a.m. ET today, Aug. 28, 2012. The webcast and accompanying slides will be available at brownshoe.com/investor. A live conference call will be available at (877) 217-9089 for analysts in North America or (706) 679-1723 for international analysts by using the conference ID 20401315. A replay will be available on the website for a limited period. Investors may also access the replay by dialing (855) 859-2056 in North America or (404) 537-3406 internationally and using the conference ID 20401315 through Sept. 11, 2012.

*Non-GAAP Financial Measures

In this press release, the company’s financial results are provided both in accordance with generally accepted accounting principles (GAAP) and using certain non-GAAP financial measures. In particular, the company provides historic and estimated future operating earnings, net earnings and earnings per diluted share adjusted to exclude certain gains, charges and recoveries, which are non-GAAP financial measures. These results are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help identify underlying trends in the company’s business and provide useful information to both management and investors by excluding certain items that may not be indicative of the company’s core operating results. These measures should not be considered a substitute for or superior to GAAP results.

Definitions

All references in this press release, outside of the condensed consolidated financial statements that follow, unless otherwise noted, related to net earnings (loss) attributable to Brown Shoe Company, Inc. and diluted earnings per common share attributable to Brown Shoe Company, Inc. shareholders, are presented as net earnings and earnings per diluted share, respectively.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This press release contains certain forward-looking statements and expectations regarding the company’s future performance and the performance of its brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These risks include (i) changing consumer demands, which may be influenced by consumers’ disposable income, which in turn can be influenced by general economic conditions; (ii) intense competition within the footwear industry; (iii) rapidly changing fashion trends and purchasing patterns; (iv) customer concentration and increased consolidation in the retail industry; (v) political and economic conditions or other threats to the continued and uninterrupted flow of inventory from China, where ASG has manufacturing facilities and both ASG and Brown Shoe Company rely heavily on third-party manufacturing facilities for a significant amount of their inventory; (vi) Brown Shoe Company’s ability to utilize its new information technology system to successfully execute its strategies, including integrating ASG’s business; (vii) the ability to recruit and retain senior management and other key associates; (viii) the ability to attract, retain and maintain good relationships with licensors and protect intellectual property rights; (ix) the ability to secure/exit leases on favorable terms; (x) the ability to maintain relationships with current suppliers; (xi) compliance with applicable laws and standards with respect to lead content in paint and other product safety issues; (xii) the ability to source product at a pace consistent with increased demand for footwear; (xiii) the impact of rising prices in a potentially inflationary global environment; and (xiv) the ability of Brown Shoe Company to execute on its portfolio realignment. The company’s reports to the Securities and Exchange Commission contain detailed information relating to such factors, including, without limitation, the information under the caption Risk Factors in Item 1A of the company’s Annual Report on Form 10-K for the year ended January 28, 2012, which information is incorporated by reference herein and updated by the company’s Quarterly Reports on Form 10-Q. The company does not undertake any obligation or plan to update these forward-looking statements, even though its situation may change.

About Brown Shoe Company

Brown Shoe Company is a $2.6 billion, global, footwear company that puts consumers and their needs first, by targeting the strategic Family, Healthy Living and Contemporary Fashion platforms. We have more than 130 years of experience, passion and product innovation and operate more than 1,300 Famous Footwear and Naturalizer retail stores across the United States, Canada and China. We also design, source and market many well-known wholesale shoe brands -- such as Naturalizer, Dr. Scholl's Shoes, LifeStride, Sam Edelman, Franco Sarto, Via Spiga, Vera Wang, Avia and Ryka -- across multiple distribution channels. In addition to our retail and wholesale operations, we maintain a strong online presence with our ecommerce sites, Famous.com, Naturalizer.com and Shoes.com. Visit brownshoe.com to learn more about us. Brown Shoe Company: feel good and live better... feet first!
 
 
 
 
 
SCHEDULE 1
 
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
           
13 Weeks Ended 26 Weeks Ended 52 Weeks Ended
(Thousands, except per share data) July 28, 2012 July 30, 2011 July 28, 2012 July 30, 2011 July 28, 2012 July 30, 2011
 
Net sales $ 599,279 $ 620,590 $ 1,225,720 $ 1,240,145 $ 2,568,399 $ 2,560,762
Cost of goods sold   365,465     386,985     752,842     758,576     1,580,450     1,561,669  
 
Gross profit   233,814     233,605     472,878     481,569     987,949     999,093  
 
Selling and administrative expenses 219,261 233,914 438,175 468,054 907,540 942,067
Restructuring and other special charges, net 7,491 689 18,946 2,433 40,184 6,739
Impairment of intangible assets   5,777     -     5,777     -     5,777     -  
 
Operating earnings (loss)   1,285     (998 )   9,980     11,082     34,448     50,287  
 
Interest expense (5,758 ) (6,520 ) (11,915 ) (13,218 ) (24,838 ) (23,543 )
Loss on early extinguishment of debt - (1,003 ) - (1,003 ) - (1,003 )
Interest income   77     65     160     150     654     286  
 
(Loss) earnings before income taxes from continuing operations   (4,396 )   (8,456 )   (1,775 )   (2,989 )   10,264     26,027  
 
Income tax benefit (provision)   1,682     3,005     689     886     (523 )   (6,393 )
 
Net (loss) earnings from continuing operations   (2,714 )   (5,451 )   (1,086 )   (2,103 )   9,741     19,634  
 
Discontinued operations:
Earnings from operations of subsidiary, net of tax of $0, $475, $0, $690, $622 and $690, respectively - 683 - 976 725 976
Gain on sale of subsidiary, net of tax of $0, $0, $0, $0, $6,670 and $0, respectively   -     -     -     -     13,965     -  
 
Net earnings from discontinued operations   -     683     -     976     14,690     976  
 
Net (loss) earnings   (2,714 )   (4,768 )   (1,086 )   (1,127 )   24,431     20,610  
 
Net loss attributable to noncontrolling interests   (179 )   (159 )   (246 )   (206 )   (239 )   (395 )
 
Net (loss) earnings attributable to Brown Shoe Company, Inc. $ (2,535 ) $ (4,609 ) $ (840 ) $ (921 ) $ 24,670   $ 21,005  
 
Basic (loss) earnings per common share:
From continuing operations $ (0.06 ) $ (0.13 ) $ (0.02 ) $ (0.04 ) $ 0.23 $ 0.46
From discontinued operations   -     0.02     -     0.02     0.35     0.02  
Basic (loss) earnings per common share attributable to
Brown Shoe Company, Inc. shareholders $ (0.06 ) $ (0.11 ) $ (0.02 ) $ (0.02 ) $ 0.58   $ 0.48  
 
Diluted (loss) earnings per common share:
From continuing operations $ (0.06 ) $ (0.13 ) $ (0.02 ) $ (0.04 ) $ 0.23 $ 0.45
From discontinued operations   -     0.02     -     0.02     0.35     0.02  
Diluted (loss) earnings per common share attributable to
Brown Shoe Company, Inc. shareholders $ (0.06 ) $ (0.11 ) $ (0.02 ) $ (0.02 ) $ 0.58   $ 0.47  
 
Basic number of shares 40,687 41,852 40,555 42,164 40,322 42,262
Diluted number of shares   40,687     41,852     40,555     42,164     40,689     42,683  
 
 
 
 
 
 
SCHEDULE 2
 
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
   
(Unaudited)
(Thousands) July 28, 2012 July 30, 2011 January 28, 2012
ASSETS
 
Cash and cash equivalents $ 47,397 $ 62,553 $ 47,682
Receivables, net 134,016 158,595 154,022
Inventories, net 621,067 627,929 561,797
Prepaid expenses and other current assets   49,500   49,360   51,637
Total current assets   851,980   898,437   815,138
 
Property and equipment, net 134,724 139,078 131,471
Goodwill and intangible assets, net 131,074 174,299 140,590
Other assets   136,396   139,109   140,277
Total assets $ 1,254,174 $ 1,350,923 $ 1,227,476
 
LIABILITIES AND EQUITY
 
Borrowings under revolving credit agreement $ 116,000 $ 250,000 $ 201,000
Trade accounts payable 294,255 295,826 190,611
Other accrued expenses   148,838   139,698   132,969
Total current liabilities   559,093   685,524   524,580
 
Long-term debt 198,726 198,540 198,633
Deferred rent 29,371 33,445 32,361
Other liabilities   59,286   42,692   58,186
Total other liabilities   287,383   274,677   289,180
 
Total Brown Shoe Company, Inc. shareholders’ equity 406,901 390,077 412,669
Noncontrolling interests   797   645   1,047
Total equity   407,698   390,722   413,716
Total liabilities and equity $ 1,254,174 $ 1,350,923 $ 1,227,476
 
 
 
 
 
 
SCHEDULE 3
 
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
   
26 Weeks Ended
(Thousands) July 28, 2012 July 30, 2011
OPERATING ACTIVITIES:
Net loss $ (1,086 ) $ (1,127 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 26,726 29,428
Amortization of debt issuance costs 1,256 1,163
Loss on early extinguishment of debt - 1,003
Share-based compensation expense 3,275 3,007
Tax (benefit) deficiency related to share-based plans (738 ) 453
Loss on disposal of facilities and equipment 1,358 454
Impairment charges for facilities and equipment 3,131 746
Impairment of intangible assets 5,777 -
Deferred rent (2,990 ) (1,233 )
Provision for doubtful accounts 1,008 422
Changes in operating assets and liabilities, net of acquired business:
Receivables 18,997 (23,921 )
Inventories (59,363 ) (56,405 )
Prepaid expenses and other current and noncurrent assets 2,864 9,247
Trade accounts payable 103,668 115,236
Accrued expenses and other liabilities 16,961 (33,999 )
Other, net   (1,484 )   (1,011 )
Net cash provided by operating activities   119,360     43,463  
 
INVESTING ACTIVITIES:
Capital expenditures (27,102 ) (21,781 )
Acquisition cost - (156,636 )
Cash recognized on initial consolidation   -     3,121  
Net cash used for investing activities   (27,102 )   (175,296 )
 
FINANCING ACTIVITIES:
Borrowings under revolving credit agreement 334,000 965,500
Repayments under revolving credit agreement (419,000 ) (913,500 )
Proceeds from issuance of 2019 Senior Notes - 198,540
Redemption of 2012 Senior Notes - (150,000 )
Dividends paid (6,005 ) (6,197 )
Debt issuance costs - (5,828 )
Acquisition of treasury stock - (22,408 )
Issuance of common stock under share-based plans, net (2,058 ) 693
Tax benefit (deficiency) related to share-based plans   738     (453 )
Net cash (used for) provided by financing activities   (92,325 )   66,347  
Effect of exchange rate changes on cash and cash equivalents   (218 )   1,491  
Decrease in cash and cash equivalents (285 ) (63,995 )
Cash and cash equivalents at beginning of period   47,682     126,548  
 
Cash and cash equivalents at end of period $ 47,397   $ 62,553  
 
 
 
 
 
 
SCHEDULE 4
 
BROWN SHOE COMPANY, INC.
RECONCILIATION OF NET EARNINGS AND DILUTED EARNINGS PER SHARE (GAAP BASIS) TO ADJUSTED NET EARNINGS AND ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP BASIS)
           
 
13 Weeks Ended July 28, 2012 13 Weeks Ended July 30, 2011
(Thousands, except per share data)

Pre-Tax

Impact of

Charges/

Other Items

Net Earnings

Attributable to

Brown Shoe

Company, Inc.

Diluted

Earnings Per

Share

Pre-Tax

Impact of

Charges/

Other Items

Net Earnings

Attributable to

Brown Shoe

Company, Inc.

Diluted

Earnings Per

Share
 
GAAP earnings $ (2,535 ) $ (0.06 ) $ (4,609 ) $ (0.11 )
 

Charges/Other Items:
Portfolio realignment
Business exits and cost reductions $ 12,355 7,951 0.19 $ - - -
Organizational change 2,283 1,395 0.03 - - -
ASG acquisition and integration-related costs - - - 689 438 0.01

ASG cost of good sold adjustment (1)
- - - 1,479 873 0.02
Loss on early extinguishment of debt - - - 1,003 638 0.02
           
Total charges/other items $ 14,638     9,346     0.22   $ 3,171   1,949     0.05  
 
Adjusted earnings $ 6,811   $ 0.16   $ (2,660 ) $ (0.06 )
 
 
 
26 Weeks Ended July 28, 2012 26 Weeks Ended July 30, 2011
(Thousands, except per share data)

Pre-Tax

Impact of

Charges/

Other Items

Net Earnings

Attributable to

Brown Shoe

Company, Inc.

Diluted

Earnings Per

Share

Pre-Tax

Impact of

Charges/

Other Items

Net Earnings

Attributable to

Brown Shoe

Company, Inc.

Diluted

Earnings Per

Share
 
GAAP earnings $ (840 ) $ (0.02 ) $ (921 ) $ (0.02 )
 

Charges/Other Items:
Portfolio realignment
Business exits and cost reductions $ 24,446 15,834 0.37 $ - - -
Organizational change 2,283 1,395 0.03 - - -
ASG acquisition and integration-related costs 675 441 0.01 2,433 2,105 0.04

ASG cost of goods sold adjustment (1)
- - - 4,189 2,477 0.05
Loss on early extinguishment of debt - - - 1,003 638 0.02
           
Total charges/other items $ 27,404     17,670     0.41   $ 7,625   5,220     0.11  
 
Adjusted earnings $ 16,830   $ 0.39   $ 4,299   $ 0.09  
 
 
 
52 Weeks Ended July 28, 2012 52 Weeks Ended July 30, 2011
(Thousands, except per share data)

Pre-Tax

Impact of

Charges/

Other Items

Net Earnings

Attributable to

Brown Shoe

Company, Inc.

Diluted

Earnings Per

Share

Pre-Tax

Impact of

Charges/

Other Items

Net Earnings

Attributable to

Brown Shoe

Company, Inc.

Diluted

Earnings Per

Share
 
GAAP earnings $ 24,670 $ 0.58 $ 21,005 $ 0.47
 

Charges/Other Items:
Portfolio realignment
Business exits and cost reductions $ 43,600 27,870 0.65 $ - - -
Gain on sale of subsidiary (20,635 ) (13,965 ) (0.32 ) - - -
Organizational change 2,283 1,395 0.03 - - -
ASG acquisition and integration-related costs 4,699 2,855 0.06 3,552 2,829 0.06

ASG cost of goods sold adjustment (1)
- - - 4,189 2,477 0.06
Loss on early extinguishment of debt - - - 1,003 638 0.01
IT initiatives - - - 3,187 2,088 0.05
           
Total charges/other items $ 29,947     18,155     0.42   $ 11,931   8,032     0.18  
 
Adjusted earnings $ 42,825   $ 1.00   $ 29,037   $ 0.65  
 
 

(1) In accordance with GAAP, purchase accounting rules require the company to record inventory at fair value (i.e., expected selling price less costs to sell) on the acquisition date. This results in lower than typical gross margins when the acquired inventory is sold. This adjustment reflects the elimination of the unfavorable impact of lower gross margins for ASG product sold in the first and second quarters of 2011.
 
 
 
 
 
 
SCHEDULE 5
 
BROWN SHOE COMPANY, INC.
SUMMARY FINANCIAL RESULTS BY SEGMENT
                   
 
SUMMARY FINANCIAL RESULTS
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended
July 28, July 30, July 28, July 30, July 28, July 30, July 28, July 30, July 28, July 30,
(Thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Net Sales $ 350,318 $ 344,930 $ 194,966 $ 215,117 $ 53,995 $ 60,543 $ - $ - $ 599,279 $ 620,590
 
Gross Profit $ 156,919 $ 148,995 $ 55,554 $ 60,414 $ 21,341 $ 24,196 $ - $ - $ 233,814 $ 233,605
Adjusted Gross Profit $ 156,919 $ 148,995 $ 56,949 $ 61,893 $ 21,316 $ 24,196 $ - $ - $ 235,184 $ 235,084
 
Gross Profit Rate 44.8 % 43.2 % 28.5 % 28.1 % 39.5 % 40.0 % - - 39.0 % 37.6 %
Adjusted Gross Profit Rate 44.8 % 43.2 % 29.2 % 28.8 % 39.5 % 40.0 % - - 39.2 % 37.9 %
 
Operating Earnings (Loss) $ 20,539 $ 7,495 $ (2,548 ) $ 2,925 $ (5,795 ) $ (3,012 ) $ (10,911 ) $ (8,406 ) $ 1,285 $ (998 )
Adjusted Operating Earnings (Loss) $ 20,845 $ 7,495 $ 6,703 $ 4,404 $ (3,247 ) $ (3,012 ) $ (8,378 ) $ (7,717 ) $ 15,923 $ 1,170
 
Operating Earnings (Loss) % 5.9 % 2.2 % (1.3 %) 1.4 % (10.7 %) (5.0 %) - - 0.2 % (0.2 %)
Adjusted Operating Earnings (Loss) % 6.0 % 2.2 % 3.4 % 2.0 % (6.0 %) (5.0 %) - - 2.7 % 0.2 %
 
Same-store Sales % 3.9 % 0.2 % - - (1.5 %) 5.2 % - - - -
 
Number of Stores 1,054 1,116 - - 224 245 - - 1,278 1,361
                                       
 
 

RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended
July 28, July 30, July 28, July 30, July 28, July 30, July 28, July 30, July 28, July 30,
(Thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Gross Profit $ 156,919 $ 148,995 $ 55,554 $ 60,414 $ 21,341 $ 24,196 $ - $ - $ 233,814 $ 233,605
 

Charges/Other Items:
Portfolio realignment
Business exits and cost reductions - - 1,395 - (25 ) - - - 1,370 -
ASG cost of good sold adjustment - - - 1,479 - - - - - 1,479
                   
Total charges/other items   -     -     1,395     1,479     (25 )   -     -     -     1,370     1,479  
 
Adjusted Gross Profit $ 156,919   $ 148,995   $ 56,949   $ 61,893   $ 21,316   $ 24,196   $ -   $ -   $ 235,184   $ 235,084  
 
 
Operating Earnings (Loss) $ 20,539 $ 7,495 $ (2,548 ) $ 2,925 $ (5,795 ) $ (3,012 ) $ (10,911 ) $ (8,406 ) $ 1,285 $ (998 )
 

Charges/Other Items:
Portfolio realignment
Business exits and cost reductions 306 - 9,251 - 2,548 - 250 - 12,355 -
Organizational change - - - - - - 2,283 - 2,283 -
ASG cost of good sold adjustment - - - 1,479 - - - - - 1,479
ASG acquisition and integration-related costs - - - - - - - 689 - 689
                   
Total charges/other items   306     -     9,251     1,479     2,548     -     2,533     689     14,638     2,168  
 
Adjusted Operating Earnings (Loss) $ 20,845   $ 7,495   $ 6,703   $ 4,404   $ (3,247 ) $ (3,012 ) $ (8,378 ) $ (7,717 ) $ 15,923   $ 1,170  
 
 
 
 
 
 
SCHEDULE 5 - CONTINUED
 
BROWN SHOE COMPANY, INC.
SUMMARY FINANCIAL RESULTS BY SEGMENT
                   
 
SUMMARY FINANCIAL RESULTS
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
26 Weeks Ended 26 Weeks Ended 26 Weeks Ended 26 Weeks Ended 26 Weeks Ended
July 28, July 30, July 28, July 30, July 28, July 30, July 28, July 30, July 28, July 30,
(Thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Net Sales $ 697,425 $ 687,657 $ 418,169 $ 432,181 $ 110,126 $ 120,307 $ - $ - $ 1,225,720 $ 1,240,145
 
Gross Profit $ 312,059 $ 305,629 $ 116,309 $ 126,365 $ 44,510 $ 49,575 $ - $ - $ 472,878 $ 481,569
Adjusted Gross Profit $ 312,059 $ 305,629 $ 118,794 $ 130,554 $ 44,706 $ 49,575 $ - $ - $ 475,559 $ 485,758
 
Gross Profit Rate 44.7 % 44.4 % 27.8 % 29.2 % 40.4 % 41.2 % - - 38.6 % 38.8 %
Adjusted Gross Profit Rate 44.7 % 44.4 % 28.4 % 30.2 % 40.6 % 41.2 % - - 38.8 % 39.2 %
 
Operating Earnings (Loss) $ 38,840 $ 26,277 $ (569 ) $ 8,944 $ (9,322 ) $ (6,756 ) $ (18,969 ) $ (17,383 ) $ 9,980 $ 11,082
Adjusted Operating Earnings (Loss) $ 46,171 $ 26,277 $ 12,978 $ 13,133 $ (5,785 ) $ (6,756 ) $ (15,980 ) $ (14,950 ) $ 37,384 $ 17,704
 
Operating Earnings (Loss) % 5.6 % 3.8 % (0.1 %) 2.1 % (8.5 %) (5.6 %) - - 0.8 % 0.9 %
Adjusted Operating Earnings (Loss) % 6.6 % 3.8 % 3.1 % 3.0 % (5.3 %) (5.6 %) - - 3.0 % 1.4 %
 
Same-store Sales % 3.2 % (1.9 %) - - 0.5 % 2.1 % - - - -
 
Number of Stores 1,054 1,116 - - 224 245 - - 1,278 1,361
                                       
 
 
RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
26 Weeks Ended 26 Weeks Ended 26 Weeks Ended 26 Weeks Ended 26 Weeks Ended
July 28, July 30, July 28, July 30, July 28, July 30, July 28, July 30, July 28, July 30,
(Thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Gross Profit $ 312,059 $ 305,629 $ 116,309 $ 126,365 $ 44,510 $ 49,575 $ - $ - $ 472,878 $ 481,569
 

Charges/Other Items:
Portfolio realignment
Business exits and cost reductions - - 2,485 - 196 - - - 2,681 -
ASG cost of good sold adjustment - - - 4,189 - - - - - 4,189
                   
Total charges/other items   -     -     2,485     4,189     196     -     -     -     2,681     4,189  
 
Adjusted Gross Profit $ 312,059   $ 305,629   $ 118,794   $ 130,554   $ 44,706   $ 49,575   $ -   $ -   $ 475,559   $ 485,758  
 
 
Operating Earnings (Loss) $ 38,840 $ 26,277 $ (569 ) $ 8,944 $ (9,322 ) $ (6,756 ) $ (18,969 ) $ (17,383 ) $ 9,980 $ 11,082
 

Charges/Other Items:
Portfolio realignment
Business exits and cost reductions 7,331 - 12,872 - 3,537 - 706 - 24,446 -
Organizational change - - - - - - 2,283 - 2,283 -
ASG acquisition and integration-related costs - - 675 - - - - 2,433 675 2,433
ASG cost of good sold adjustment - - - 4,189 - - - - - 4,189
                   
Total charges/other items   7,331     -     13,547     4,189     3,537     -     2,989     2,433     27,404     6,622  
 
Adjusted Operating Earnings (Loss) $ 46,171   $ 26,277   $ 12,978   $ 13,133   $ (5,785 ) $ (6,756 ) $ (15,980 ) $ (14,950 ) $ 37,384   $ 17,704  
 
 
 
 
 
 
SCHEDULE 5 - CONTINUED
 
BROWN SHOE COMPANY, INC.
SUMMARY FINANCIAL RESULTS BY SEGMENT
                   
 
SUMMARY FINANCIAL RESULTS
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended 52 Weeks Ended 52 Weeks Ended
July 28, July 30, July 28, July 30, July 28, July 30, July 28, July 30, July 28, July 30,
(Thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Net Sales $ 1,466,082 $ 1,464,709 $ 856,861 $ 833,198 $ 245,456 $ 262,855 $ - $ - $ 2,568,399 $ 2,560,762
 
Gross Profit $ 641,651 $ 650,852 $ 246,290 $ 237,676 $ 100,008 $ 110,565 $ - $ - $ 987,949 $ 999,093
Adjusted Gross Profit $ 641,651 $ 650,852 $ 250,332 $ 241,865 $ 100,586 $ 110,565 $ - $ - $ 992,569 $ 1,003,282
 
Gross Profit Rate 43.8 % 44.4 % 28.7 % 28.5 % 40.7 % 42.1 % - - 38.5 % 39.0 %
Adjusted Gross Profit Rate 43.8 % 44.4 % 29.2 % 29.0 % 41.0 % 42.1 % - - 38.6 % 39.2 %
 
Operating Earnings (Loss) $ 75,078 $ 72,762 $ 7,226 $ 23,465 $ (10,193 ) $ (7,071 ) $ (37,663 ) $ (38,869 ) $ 34,448 $ 50,287
Adjusted Operating Earnings (Loss) $ 85,161 $ 72,762 $ 35,313 $ 28,024 $ (5,663 ) $ (7,071 ) $ (29,781 ) $ (32,500 ) $ 85,030 $ 61,215
 
Operating Earnings (Loss) % 5.1 % 5.0 % 0.8 % 2.8 % (4.2 %) (2.7 %) - - 1.3 % 2.0 %
Adjusted Operating Earnings (Loss) % 5.8 % 5.0 % 4.1 % 3.4 % (2.3 %) (2.7 %) - - 3.3 % 2.4 %
 
Same-store Sales % 1.2 % 3.1 % - - 0.9 % 2.4 % - - - -
 
Number of Stores 1,054 1,116 - - 224 245 - - 1,278 1,361
                                       
 
 
RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended 52 Weeks Ended 52 Weeks Ended
July 28, July 30, July 28, July 30, July 28, July 30, July 28, July 30, July 28, July 30,
(Thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Gross Profit $ 641,651 $ 650,852 $ 246,290 $ 237,676 $ 100,008 $ 110,565 $ - $ - $ 987,949 $ 999,093
 

Charges/Other Items:
Portfolio realignment
Business exits and cost reductions - - 4,042 - 578 - - - 4,620 -
ASG cost of good sold adjustment - - - 4,189 - - - - - 4,189
                   
Total charges/other items   -     -     4,042     4,189     578     -     -     -     4,620     4,189  
 
Adjusted Gross Profit $ 641,651   $ 650,852   $ 250,332   $ 241,865   $ 100,586   $ 110,565   $ -   $ -   $ 992,569   $ 1,003,282  
 
 
Operating Earnings (Loss) $ 75,078 $ 72,762 $ 7,226 $ 23,465 $ (10,193 ) $ (7,071 ) $ (37,663 ) $ (38,869 ) $ 34,448 $ 50,287
 

Charges/Other Items:
Portfolio realignment
Business exits and cost reductions 10,083 - 24,919 - 4,530 - 4,068 - 43,600 -
Organizational change - - - - - - 2,283 - 2,283 -
ASG acquisition and integration-related costs - - 3,168 - - - 1,531 3,552 4,699 3,552
ASG cost of good sold adjustment - - - 4,189 - - - - - 4,189
IT Initiatives - - - 370 - - - 2,817 - 3,187
                   
Total charges/other items   10,083     -     28,087     4,559     4,530     -     7,882     6,369     50,582     10,928  
 
Adjusted Operating Earnings (Loss) $ 85,161   $ 72,762   $ 35,313   $ 28,024   $ (5,663 ) $ (7,071 ) $ (29,781 ) $ (32,500 ) $ 85,030   $ 61,215  
 
 
 
 
 
 
SCHEDULE 6
 
BROWN SHOE COMPANY, INC.
BASIC AND DILUTED EARNINGS PER SHARE RECONCILIATION
           
 
13 Weeks Ended 26 Weeks Ended 52 Weeks Ended
July 28, July 30, July 28, July 30, July 28, July 30,
(Thousands, except per share data) 2012 2011 2012 2011 2012 2011
 
Net (loss) earnings attributable to Brown Shoe Company, Inc.:
Net earnings from continuing operations $ (2,714 ) $ (5,451 ) $ (1,086 ) $ (2,103 ) $ 9,741 $ 19,634
Net loss attributable to noncontrolling interests 179 159 246 206 239 395
Net earnings allocated to participating securities   -     -     -     -     (480 )   (765 )
Net (loss) earnings from continuing operations   (2,535 )   (5,292 )   (840 )   (1,897 )   9,500     19,264  
 
Net earnings from discontinued operations - 683 - 976 14,690 976
Net earnings allocated to participating securities   -     -     -     -     (694 )   (37 )
Net earnings from discontinued operations   -     683     -     976     13,996     939  
 
Net (loss) earnings attributable to Brown Shoe Company, Inc. after allocation of earnings to participating securities $ (2,535 ) $ (4,609 ) $ (840 ) $ (921 ) $ 23,496   $ 20,203  
 
 
Basic and diluted common shares attributable to Brown Shoe Company, Inc.:
Basic common shares for continuing operations and discontinued operations 40,687 41,852 40,555 42,164 40,322 42,262
Dilutive effect of share-based awards for continuing operations and discontinued operations   -     -     -     -     367     421  
Diluted common shares for continuing operations and discontinued operations attributable to Brown Shoe Company, Inc.   40,687     41,852     40,555     42,164     40,689     42,683  
 
Basic (loss) earnings per share:
From continuing operations $ (0.06 ) $ (0.13 ) $ (0.02 ) $ (0.04 ) $ 0.23 $ 0.46
From discontinued operations   -     0.02     -     0.02     0.35     0.02  
Basic (loss) earnings per common share attributable to Brown Shoe Company, Inc. shareholders $ (0.06 ) $ (0.11 ) $ (0.02 ) $ (0.02 ) $ 0.58   $ 0.48  
 
Diluted (loss) earnings per share:
From continuing operations $ (0.06 ) $ (0.13 ) $ (0.02 ) $ (0.04 ) $ 0.23 $ 0.45
From discontinued operations   -     0.02     -     0.02     0.35     0.02  
Diluted (loss) earnings per common share attributable to Brown Shoe Company, Inc. shareholders $ (0.06 ) $ (0.11 ) $ (0.02 ) $ (0.02 ) $ 0.58   $ 0.47  
 
 
 
 
 
 
SCHEDULE 7
 
BROWN SHOE COMPANY, INC.
BASIC AND DILUTED ADJUSTED EARNINGS PER SHARE RECONCILIATION
           
 
13 Weeks Ended 26 Weeks Ended 52 Weeks Ended
July 28, July 30, July 28, July 30, July 28, July 30,
(Thousands, except per share data) 2012 2011 2012 2011 2012 2011
 
Adjusted net earnings (loss) attributable to Brown Shoe Company, Inc.:
Adjusted net earnings (loss) from continuing operations $ 6,632 $ (3,502 ) $ 16,584 $ 3,117 $ 27,896 $ 27,666
Net loss attributable to noncontrolling interests 179 159 246 206 239 395
Net earnings allocated to participating securities   (352 )   -     (843 )   (225 )   (1,339 )   (1,068 )
Adjusted net earnings (loss) from continuing operations   6,459     (3,343 )   15,987     3,098     26,796     26,993  
 
Net earnings from discontinued operations - 683 - 976 14,690 976
Net earnings allocated to participating securities   -     -     -     (40 )   (694 )   (37 )
Net earnings from discontinued operations   -     683     -     936     13,996     939  
 
Adjusted net earnings (loss) attributable to Brown Shoe Company, Inc. after allocation of earnings to participating securities $ 6,459   $ (2,660 ) $ 15,987   $ 4,034   $ 40,792   $ 27,932  
 
 
Basic and diluted common shares attributable to Brown Shoe Company, Inc.:
Basic common shares for continuing operations and discontinued operations 40,687 41,852 40,555 42,164 40,322 42,262
Dilutive effect of share-based awards for continuing operations and discontinued operations   88     -     223     540     367     421  
Diluted common shares for continuing operations and discontinued operations attributable to Brown Shoe Company, Inc.   40,775     41,852     40,778     42,704     40,689     42,683  
 
Basic adjusted earnings (loss) per share:
From continuing operations $ 0.16 $ (0.08 ) $ 0.39 $ 0.08 $ 0.66 $ 0.64
From discontinued operations   -     0.02     -     0.02     0.35     0.02  
Basic adjusted earnings (loss) per common share attributable to Brown Shoe Company, Inc. shareholders $ 0.16   $ (0.06 ) $ 0.39   $ 0.10   $ 1.01   $ 0.66  
 
Diluted adjusted earnings (loss) per share:
From continuing operations $ 0.16 $ (0.08 ) $ 0.39 $ 0.07 $ 0.65 $ 0.63
From discontinued operations   -     0.02     -     0.02     0.35     0.02  
Diluted adjusted earnings (loss) per common share attributable to Brown Shoe Company, Inc. shareholders $ 0.16   $ (0.06 ) $ 0.39   $ 0.09   $ 1.00   $ 0.65  
 
 
 

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