Famous Footwear 2004 Annual Report Download - page 42

Table of Contents
BROWN SHOE COMPANY, INC. 2003 FORM 10-K
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Brown Shoe Company, Inc. (the “Company”), founded in 1878, is a footwear retailer and wholesaler. The Company’s shares trade under the
“BWS” symbol on the New York and Chicago Stock Exchanges.
The Company provides a broad offering of branded, licensed and private-label casual, athletic and dress footwear products to women,
children and men. Footwear is sold at a variety of price points through multiple distribution channels both domestically and internationally.
The Company currently operates 1,271 retail shoe stores in the United States and Canada primarily under the Famous Footwear and
Naturalizer names. In addition, through its Wholesale division, the Company designs, sources and markets footwear to retail stores
domestically and internationally, including department stores, mass merchandisers and specialty shoe stores. In fiscal 2003, approximately
69% of the Company’s sales were at retail, compared to 69% in 2002 and 71% in 2001. See Note 6 for additional information regarding the
Company’s business segments.
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, after the
elimination of intercompany accounts and transactions.
Accounting Period
The Company’s fiscal year is the 52- or 53-week period ending the Saturday nearest to January 31. Fiscal years 2003, 2002 and 2001 ended
on January 31, 2004, February 1, 2003 and February 2, 2002, respectively. Fiscal years 2003, 2002 and 2001 each included 52 weeks.
Reclassifications
Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications did not affect net
earnings.
Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ
from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with maturities of three months or less when purchased to be cash equivalents. Cash
and cash equivalents are stated at cost, which approximates fair value.
Receivables
The Company evaluates the collectibility of selected accounts receivable on a case-by-case basis and makes adjustments to the bad debt
reserve for expected losses. The Company considers factors such as ability to pay, bankruptcy, credit ratings and payment history. For all
other accounts, the Company estimates reserves for bad debts based on experience and past due status of the accounts. If circumstances
related to customers change, estimates of recoverability would be further adjusted. During fiscal 2003, 2002 and 2001, the Company
recognized a provision for (recoveries from) doubtful accounts of $(0.2) million, $0.7 million and $0.8 million, respectively.
Inventories
All inventories are valued at the lower of cost or market, with 95% of consolidated inventories using the last-in, first-out (LIFO) method. If the
first-in, first-out (FIFO) method had been used, inventories would have been $12.3 million and $12.1 million higher at January 31, 2004 and
February 1, 2003, respectively. Substantially all inventory is finished goods.
The cost of inventory, inbound freight and duties, markdowns, shrinkage and royalty expense are reflected in cost of goods sold. Costs of
warehousing and distribution are reflected in selling and administrative expense and are
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