1. Brown Shoes Company Inc. Melvin K. Thomas ACG2021 SECTION 008

2. Executive Summary
After evaluating the financial statements of Brown Shoe Company I would conclude the company has a solid background, this past year the company did not do as well as but their seems to be promise for this coming fiscal year as the company has acquired a competing firm.
Link to Annual Report:

3. Part A. Introduction Ronald A. Fromm
Chairman of the Board, Chief Executive Officer
Home office:
Brown Shoe Company, Inc Maryland Avenue St. Louis, Missouri
The 2006 fiscal year begins on Sunday January 29, 2006, and ends on Saturday, February 3, 2007.
Brown Shoes is the leading consumer-driven footwear company, operating nearly 1,300 retail shoe stores.
The main geographic area of activity is the U.S. and Canada.

4. Part A. Audit Report Audit Committee Members:
Jerry E. Ritter, W. Patrick McGinnis
Steven W. Korn, Hal J. Upbin
Independent Accounting Firm:
Ernst & Young LLP
The Firm concluded that Brown Shoe Company Inc. did not maintain effective internal control over financial reporting.

5. Part A. Stock Market Information
Most recent price of the company’s stock: $44.54
Twelve month trading range of the company’s stock:
52 Week High$ Week Low$29.64
Dividend: $0.10 per share
Date of the above information: 02/10/06 4:03 p.m. ET
Your opinion about the company stock as an investment? HOLD

6. Part B. Industry Situation and Company Plans
Although Brown Shoe Company has had a rocky year, the small set back of this fiscal year will help Brown propel itself this coming year. The proof of this will is laid out in the companies Investor book. The company has bought out an smaller competitor to gain a better stance in the market. This year the company will also launch a more aggressive marketing campaign. This will help differentiate the company from competitors like Nine West. Also the new licensing and brand agreement will help create more identity for the company.
More information can be found in the Investor Handbook Online:

7. Part C. Income Statement
The Income Statement is in single step format.
In the past two years the company seems to have increased their net sales about $100,000 as indicated from the net sales chart.
The following chart is estimated in billions.

8. Part C. Balance Sheet
Yr.
Assets
Liabilities
Stockholders 04
$846,134
454,831
391,303 03
$739,054
388,974
350,080
Overall there was a large increase in total assets of about $108,000 the larger of the element to contribute to this increase is liabilities.

9. Part C. Statement of Cash Flows
Cash flows from operations is more than net income for the last two years.
The company’s growth through investing activities shows an increase in capital expenditures.
What is the company’s primary source of financing is in current maturities of long term debt.
Overall, cash has increased over the past two years.

10. Part D. Accounting Policies
Critical Accounting Policies
Inventories are the most significant asset as ti represents 50% of total assets in They are using LIFO method.
Income Taxes for the effects of timing differences between financial and tax reporting.
Leasing Accounting, there are two forms being used Construction Allowances Received from landlords and Straight-Line Rents and Rent Holiday.
Store Closing and Impairment Charges, Litigation and Tax Contingences, and Environmental Matters.

11. Part E. Financial Analysis Liquidity Ratios
2004
2003
Comment
Working Capital
$281,324
$292,378
There was a decrease in Working Capital
Current Ratio
1.82
2.24
A major decrease in Current Ratio
Receivable turnover
19.9
22.3
A smaller turnover rate
Avg. days’ sales
18.3
16.3
A larger turnover time frame
Inventory turnover
2.7
2.8
A small decrease in Inventory turnover
Avg. days’ inventory
135.1
130.3

12. Part E. Financial Analysis Profitability Ratios
2004
2003
Comment
Profit Margin
2.2%
2.5%
There was a decrease in Profit margin
Asset Turnover
2.4
2.3
A small increase in asset turnover
Return of assets
5.5%
5.8%
A decrease in ROA
Return on equity
11.7%
12.5%
A decrease in ROE

13. Part E. Financial Analysis Solvency Ratio
For the past two years, calculate and comment on:
Debt to equity ratio 2004: 29%
Debt to equity ratio 2003: 44%
The decrease in ratio show a bit more stability and shows the company is paying off some of the debts it owns.

14. Part E. Financial Analysis Market Strength Ratios
2004
2003
Comment
Price earning per share
19.37
17.90
The value of the stock is increasing
Dividend yield 8%
The Stock has a very predictable dividend pay out. It’s a consistent stock.