Famous Footwear 2005 Annual Report Download - page 4

Fiscal฀2005฀began฀well,฀and฀as฀it฀unfolded,฀just฀got฀better,฀demonstrating฀again฀that฀our฀strategies฀for฀
unlocking฀ the฀profit฀and฀ performance฀ potential฀of฀ Brown฀Shoe฀Company฀are฀sound.฀ As฀a฀ result,฀we฀
entered฀2006฀with฀heightened฀confidence,฀excited฀about฀the฀ever-improving฀prospects฀for฀our฀brands฀
and฀retail฀concepts.฀
We฀ undertook฀ two฀ major฀ initiatives฀ in฀ 2005฀ that฀ make฀ us฀ stronger฀ in฀ both฀ the฀ near฀ and฀ long฀ term.฀
First,฀we฀grew฀our฀brand฀portfolio฀with฀the฀acquisition฀of฀Bennett฀Footwear,฀marketer฀of฀better฀brands฀
like฀Via฀Spiga,฀Franco฀Sarto฀and฀Etienne฀Aigner.฀ Second,฀we฀executed฀a฀plan฀to฀close฀95฀underper-
forming฀Naturalizer฀stores,฀which฀were฀holding฀back฀our฀Specialty฀Retail฀division.฀ Both฀should฀improve฀
our฀future฀earnings฀potential. ฀฀
2005฀Results
Our฀company฀produced฀strong฀financial฀results฀in฀2005.฀Net฀sales฀rose฀18฀percent฀to฀a฀record฀$2.3฀billion.฀฀
Net฀earnings฀were฀$41.0฀million.฀While฀down฀slightly฀from฀2004,฀they฀included฀charges฀of฀$21.8฀million,฀
or฀$0.77฀per฀diluted฀share,*฀related฀to฀our฀major฀initiatives฀to฀strengthen฀the฀business.฀These฀charges฀were฀
comprised฀of฀$12.0฀million฀in฀additional฀taxes฀associated฀with฀repatriated฀foreign฀earnings฀and฀$0.6฀million฀
for฀a฀bridge฀loan฀fee,฀both฀to฀help฀finance฀the฀Bennett฀acquisition;฀and฀$9.2฀million฀in฀charges฀related฀to฀the฀
Naturalizer฀store฀closings.฀Excluding฀these฀charges,฀2005฀showed฀material฀improvement฀over฀2004.฀฀฀฀฀฀฀฀฀฀฀฀฀฀
We฀also฀made฀strides฀in฀the฀overall฀category฀of฀asset฀management,฀as฀we฀focused฀on฀improving฀our฀inven-
tory฀turns฀and฀bringing฀fresher฀product฀to฀our฀wholesale฀and฀retail฀customers.฀At฀year-end,฀our฀inventories฀
were฀down฀$7.2฀million – a฀significant฀achievement฀considering฀ending฀levels฀included฀inventory฀from฀the฀
acquired฀Bennett฀brands฀and฀stores.฀฀฀฀
This฀performance฀left฀us฀with฀a฀strong฀balance฀sheet฀that฀can฀only฀prove฀valuable฀as฀we฀seek฀to฀continue฀
growing฀the฀company.฀ Cash฀flow฀from฀operating฀activities฀reached฀$146.8฀million.฀ Debt฀to฀capital,฀which฀
rose฀to฀about฀42฀percent฀early฀in฀the฀year฀after฀the฀Bennett฀acquisition,฀declined฀to฀31.5฀percent฀by฀year’s฀
end.฀And,฀as฀a฀show฀of฀confidence,฀your฀Board฀of฀Directors฀voted฀shortly฀after฀the฀fiscal฀year฀ended฀to฀split฀
our฀stock฀3-for-2฀and฀raise฀the฀dividend.
All฀of฀this฀leaves฀us฀pleased,฀of฀course,฀and฀proud฀of฀the฀efforts฀of฀our฀12,800฀employees.฀฀Yet฀it฀also฀leaves฀us฀
unsatisfied.฀In฀our฀view,฀our฀progress฀only฀highlights฀how฀much฀more฀we฀can฀achieve฀if฀we฀stay฀determined฀
to฀make฀ourselves฀a฀great฀company.฀฀฀฀
This฀ financial฀ summary฀ represents฀ one฀ way฀ of฀ looking฀ at฀ our฀ progress.฀ Another฀ is฀ to฀ examine฀ progress฀
through฀the฀prism฀of฀our฀four฀enterprise฀wide฀strategies,฀which,฀as฀you฀may฀recall,฀we฀began฀to฀apply฀more฀
vigorously฀across฀the฀entire฀company฀in฀early฀2004.฀ Much฀of฀our฀progress฀in฀2005฀resulted฀from฀the฀suc-
cessful฀application฀of฀these฀strategies:฀฀฀ ฀
฀
To฀our฀shareholders,฀partners฀and฀employees
•฀Creating฀differentiation
•฀Delivering฀compelling฀product
•฀Leading฀in฀speed-to-market
•฀Growing฀our฀portfolio
*All฀per฀share฀data฀is฀adjusted฀to฀reflect฀our฀3-for-2฀stock฀split฀on฀April฀3,฀2006.