<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE SECOND QUARTER ENDED MAY 2, 1998
Commission File Number 0-934
B.B. WALKER COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-0581797
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
414 East Dixie Drive, Asheboro, NC 27203
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (336) 625-1380
--------------
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
--- ---
On June 15, 1998, 1,720,954 shares of the Registrant's voting common stock
with a par value of $1.00 per share were outstanding.
<PAGE>
B.B. WALKER COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
May 2, November 1,
Assets 1998 1997
------ ----------- -----------
Cash $ 1 $ 1
Accounts receivable, less allowance
for doubtful accounts of $545 in
1998 and $503 in 1997 8,065 9,084
Inventories 9,488 9,533
Prepaid expenses 150 413
Deferred income tax benefit 237 237
------- -------
Total current assets 17,941 19,268
Property, plant and equipment, net of
accumulated depreciation and amortization
of $6,393 in 1998 and $6,256 in 1997 1,727 1,750
Other assets 142 156
------- -------
$ 19,810 $ 21,174
======= =======
1
(Continued)
<PAGE>
B.B. WALKER COMPANY
CONSOLIDATED BALANCE SHEETS, Continued
(In thousands)
(Unaudited)
May 2, November 1,
Liabilities and Shareholders' Equity 1998 1997
------------------------------------ ----------- -----------
Borrowings under finance agreement $ 6,910 $ 7,364
Accounts payable, trade 3,235 3,937
Accrued salaries, wages and bonuses 470 468
Other accounts payable and accrued liabilities 701 489
Current portion of long-term obligations 882 1,087
Income taxes payable 192 23
------- -------
Total current liabilities 12,390 13,368
------- -------
Long-term obligations 3,155 3,216
Minority interests in consolidated subsidiary 33 33
Shareholders' equity:
7% cumulative preferred stock, $100 par value,
1,150 shares authorized, 828 shares issued
and outstanding in 1998 and 1997 83 83
Common stock, $1 par value, 6,000,000 shares
authorized, 1,720,954 shares in 1998 and
1,726,534 shares in 1997 issued and
outstanding 1,721 1,727
Capital in excess of par value 2,717 2,724
Retained earnings (deficit) (205) 129
Shareholders' loans (84) (106)
------- -------
Total shareholders' equity 4,232 4,557
------- -------
$ 19,810 $ 21,174
======= =======
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
2
<PAGE>
B.B. WALKER COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF LOSS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Second Quarter Ended Six Months Ended
-------------------------- --------------------------
May 2, May 3, May 2, May 3,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 7,779 $ 8,099 $ 15,511 $ 16,388
Interest and other income 53 15 184 47
----------- ----------- ----------- -----------
Total revenues 7,832 8,114 15,695 16,435
----------- ----------- ----------- -----------
Cost of products sold 5,730 6,001 11,522 12,182
Selling and administrative expenses 1,922 1,722 3,823 3,602
Depreciation and amortization 65 114 139 239
Interest expense 265 294 541 654
----------- ----------- ----------- -----------
Total costs and expenses 7,982 8,131 16,025 16,677
----------- ----------- ----------- -----------
Loss before income taxes and
minority interest (150) (17) (330) (242)
Provision for (benefit from) income taxes - 10 - (80)
Minority interest - - 1 1
----------- ----------- ----------- -----------
Net loss (150) (27) (331) (163)
Retained earnings (deficit) at beginning of period (53) (26) 129 111
Dividends on preferred stock (2) (2) (3) (3)
----------- ----------- ----------- -----------
Retained earnings (deficit) at end of period $ (205) $ (55) $ (205) $ (55)
=========== =========== =========== ===========
Net loss per share:
Primary $ (.09) $ (.02) $ (.19) $ (.10)
=========== =========== =========== ===========
Fully diluted $ (.09) $ (.02) $ (.19) $ (.10)
=========== =========== =========== ===========
Weighted average common shares outstanding:
Primary 1,726 1,727 1,726 1,727
=========== =========== =========== ===========
Fully diluted 1,735 1,732 1,738 1,730
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
3
<PAGE>
B.B. WALKER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months
Ended
------------------------
May 2, May 3,
1998 1997
----------- -----------
Cash Flows From Operating Activities:
Net loss $ (331) $ (163)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 139 239
Gain on sale of property, plant and equipment (3) (26)
Deferred income taxes - 150
(Increase) decrease in:
Accounts receivable, net 1,019 2,825
Inventories 45 2,310
Prepaid expenses 263 191
Other assets 14 10
Increase (decrease) in:
Accounts payable, trade (702) (1,338)
Accrued salaries, wages and bonuses 2 (326)
Other accounts payable and accrued liabilities 212 (86)
Income taxes payable 169 833
------- -------
Net cash provided by operating activities 827 4,619
------- -------
Cash Flows From Investing Activities:
Capital expenditures (116) -
Proceeds from disposal of property,
plant and equipment 3 26
------- -------
Net cash provided by (used for)
investing activities (113) 26
------- -------
Cash Flows From Financing Activities:
Net borrowing under finance agreement (454) (4,312)
Proceeds from issuance of long-term obligations 37 66
Payment on long-term obligations (303) (405)
Loans to shareholders, net of repayments 9 9
Dividends paid on 7% cumulative preferred stock (3) (3)
------- -------
Net cash used for financing activities (714) (4,645)
------- -------
Net change in cash - -
Cash at beginning of year 1 1
------- -------
Cash at end of second quarter $ 1 $ 1
======= =======
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
4
<PAGE>
B.B. WALKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
- ------
A summary of the Company's significant accounting policies is presented on
page 9 of its 1997 Annual Report to Shareholders. Users of financial
information presented for interim periods are encouraged to refer to the
footnotes contained in the Annual Report to Shareholders when reviewing
interim financial results.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary for a fair presentation
of the financial results of B.B. Walker Company and Subsidiary (the "Company")
for the interim periods included. All such adjustments are of a normal
recurring nature. The results of operations for the interim periods shown in
this report are not necessarily indicative of the results to be expected for
the fiscal year.
The Company's operations are reported on a fifty-two, fifty-three week fiscal
year that ends on the Saturday closest to October 31. The results for the
first six months ended May 2, 1998 and May 3, 1997 each include twenty-six
weeks of operations. The second quarters for 1998 and 1997 each include
thirteen weeks of operations.
Note 2
- ------
The Company has adopted the provisions of the Statement of Financial
Accounting Standards No. 128, Earnings Per Share (SFAS No. 128) effective
January 31, 1998. SFAS No. 128 requires the presentation of basic and diluted
earnings per share. Basic EPS is computed by dividing income available to
common shareholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed giving
effect to all dilutive potential common shares that were outstanding during
the period. Dilutive potential common shares consist of the incremental
common shares issuable upon exercise of stock options. All prior period
earnings per share amounts have been restated to comply with SFAS No. 128.
In accordance with the disclosure requirements of SFAS No. 128, a
reconciliation of the numerator and denominator of basic and diluted earnings
per share for the second quarters and six months ended May 2, 1998 and May 3,
1997, respectively, is provided as follows (amounts in thousands, except share
amounts):
<TABLE>
<CAPTION>
SECOND QUARTER ENDED
May 2, 1998 May 3, 1997
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net loss $ (150) $ (27)
Less: Dividends on
preferred stock (2) (2)
--------- ---------
BASIC EPS
Net loss attributable
to common
shareholders (152) 1,725,921 $ (.09) (29) 1,726,534 $ (.02)
Effect of dilutive
securities 9,143 5,230
--------- ------------ ------ --------- ------------ ------
DILUTED EPS
Net loss attributable
to common
shareholders $ (152) 1,735,064 $ (.09) $ (29) 1,731,764 $ (.02)
========= ============ ====== ========= ============ ======
</TABLE>
5
<PAGE>
B.B. WALKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Note 2, Continued
- -----------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
May 2, 1998 May 3, 1997
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net loss $ (331) $ (163)
Less: Dividends on
preferred stock (3) (3)
--------- ---------
BASIC EPS
Net loss attributable
to common
shareholders (334) 1,726,227 $ (.19) (166) 1,726,534 $ (.10)
Effect of dilutive
securities 11,736 3,853
--------- ------------ ------ --------- ------------ ------
DILUTED EPS
Net loss attributable
to common
shareholders $ (334) 1,737,963 $ (.19) $ (166) 1,730,387 $ (.10)
========= ============ ====== ========= ============ ======
</TABLE>
Note 3
- ------
Long-term obligations consist of the following amounts (in thousands):
(Unaudited)
May 2, November 1,
1998 1997
----------- -----------
Notes payable to banks $ 2,246 $ 2,502
Notes payable to governmental authorities 589 610
Promissory notes payable to shareholders 1,202 1,182
Capital lease obligations - 9
------- -------
4,037 4,303
Less portion payable within one year 882 1,087
------- -------
$ 3,155 $ 3,216
======= =======
Note 4
- ------
Inventories are composed of the following amounts (in thousands):
(Unaudited)
May 2, November 1,
1998 1997
----------- -----------
Finished goods $ 5,830 $ 4,883
Work in process 601 884
Raw materials and supplies 3,057 3,766
------- -------
$ 9,488 $ 9,533
======= =======
6
<PAGE>
B.B. WALKER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
- ---------------------
The following summarizes the results of operations for the Company for the
second quarters and six months ended May 2, 1998 and May 3, 1997:
Second Six
Quarter Ended Months Ended
May 2, May 3, May 2, May 3,
1998 1997 1998 1997
-------- -------- -------- --------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 73.7% 74.1% 74.3% 74.3%
------ ------ ------ ------
Gross margin 26.3% 25.9% 25.7% 25.7%
Selling and administrative
expenses 24.7% 21.3% 24.6% 22.0%
Depreciation and amortization .8% 1.4% .9% 1.5%
Interest expense 3.4% 3.6% 3.5% 4.0%
Interest and other income (.7%) (.2%) (1.2%) (.3%)
------ ------ ------ ------
Loss before income taxes
and minority interest (1.9%) (.2%) (2.1%) (1.5%)
Provision for income taxes - .1% - (.5%)
Minority interest - - - -
------ ------ ------ ------
Net loss (1.9%) (.3%) (2.1%) (1.0%)
====== ====== ====== ======
NET SALES
- ---------
For the second quarter of 1998, the Company's net sales were $7,779,000, or
$320,000 (3.9%) lower than net sales of $8,099,000 in the second quarter of
1997. For the six month period ended May 2, 1998, net sales were $15,511,000,
an $877,000 (5.4%) decrease from the net sales of $16,388,000 in the
comparable six month period ended May 3, 1997. The Company's sales include
sales of footwear manufactured and wholesaled by the Company and sales from
the Company's retail outlets. Footwear manufactured and wholesaled by the
Company, which includes branded, private label and institutional sales,
comprised 92.9% of net sales in the second quarter of 1998 and 93.0% of net
sales in the second quarter of 1997. Retail sales made up the remaining net
sales of 7.1% in 1998 and 7.0% in 1997. For the comparable six month periods,
manufactured footwear comprised 92.7% of net sales in 1998 and 92.4% of net
sales in 1997. The remaining net sales of 7.3% in 1998 and 7.6% in 1997 were
sales from retail outlets.
7
<PAGE>
B.B. WALKER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, Continued
The primary cause for the decrease in net sales is attributed to a reduction
in sales volume from the Company's outdoor styles. The Company repositioned
its product lines in the first quarter of 1997 and eliminated many
underperforming styles, the majority of which were outdoor styles. These
styles were not replaced as the Company focused on its strengths, western and
work footwear. The Company closed out these styles during the first six
months of 1997 and, accordingly, no comparable sales were made in the first
six months of 1998. This reduction in net sales has been partially offset by
higher western branded sales in 1998 versus 1997.
For the comparable six month periods, branded net sales in 1998 were $598,000
(6.0%) lower than 1997 branded net sales. Branded pairs shipped were down
15.1% in the first six months of 1998 while price per pair was up 9.7%. In
the second quarter, sales of the Company's branded footwear in 1998 were up
$153,000 (3.0%) from 1997's second quarter. Branded pairs shipped were down
11.4% in the second quarter while price per pair improved 13.3%. The
improvement in price per pair can be attributed to product mix. More of the
Company's branded net sales are coming from its western styles that carry a
higher price per pair than its work or outdoor styles. The Company has also
introduced new styles that are priced in a higher range than previous
offerings. In addition, during the first six months of 1997, the Company
closed out many lower priced styles.
Private label sales in the first six months were down $307,000 (7.3%) from the
prior year. Pairs shipped were down 7.9% while the price per pair remained
fairly steady. For the second quarter, private label sales fell $606,000
(29.8%) from the prior year's second quarter. Pairs shipped in the second
quarter of 1998 were 30.5% lower while the price per pair sold was comparable
to the prior year. Private label sales are primarily driven by a few large
customers and are dependent on the timing of orders.
Other sales, which consist primarily of sales from the Company's retail
outlets and sales to institutional customers, increased $29,000 (1.3%) in the
first six months of 1998 from the prior year. In the second quarter of 1998,
net sales increased $134,000 (13.3%) over the prior year. The increase is
attributed to stronger institutional sales as the Company continued to solicit
this business to provide volume for the manufacturing facilities. Retail
sales were down primarily because of the closing of its retail outlet in
Myrtle Beach, SC at the end of the first quarter of 1997. This retail store
contributed approximately $79,000 to net sales before closing. In addition,
same store sales for the remaining two retail stores were down approximately
3.3%.
8
<PAGE>
B.B. WALKER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, Continued
GROSS MARGIN
- ------------
The Company's gross margin was 25.7% for the first six months of 1998 and
1997. For the second quarter of 1998 and 1997, the gross margin was 26.3% and
25.9%, respectively. The increase can be attributed to higher margins
generated by a more favorable product mix and cost reduction efforts. In
addition, efficiency in the manufacturing facilities has improved the
operating variances and the Company has produced 7.8% more pairs in 1998 than
1997.
SELLING AND ADMINISTRATIVE EXPENSES
- -----------------------------------
For the six months ended May 2, 1998 and May 3, 1997, selling and
administrative expenses were $3,823,000 and $3,602,000, respectively, or
$221,000 (6.1%) higher in 1998. Selling and administrative expenses in the
second quarter of 1998 were $1,922,000 as compared to $1,722,000 for the
second quarter of 1997, an increase of $200,000 or 11.6%. Most of the
increase for the six month period and the second quarter can be attributed to
salary and benefit costs and advertising expenses. Salary and benefits were
up $113,000 and $101,000 for the six months and second quarter, respectively.
The Company has replaced some positions that were unfilled in the prior year
as well as providing merit increases to key employees. Advertising expenses
have increased $132,000 and $76,000 for the six months and second quarter,
respectively. The Company significantly curtailed its programs in the prior
year in response to business conditions. In 1998, the Company has revamped
several programs and has continued to aggressively build brand recognition for
its products. In addition, the Company has introduced a new brand of work
shoe, DuraTuff, and has heavily promoted it in the market.
INTEREST EXPENSE
- ----------------
Interest expense for the first six months of fiscal 1998 was $541,000, a
decrease of $113,000 from the same period in the prior year. For the
comparable second quarters, interest expense was $265,000, or $29,000 less
than the prior year. The decrease can be attributed to a lower average
outstanding balance on the revolving credit line in 1998 versus 1997. For the
six month period, the average outstanding balance on the revolving credit line
was approximately $6,745,000, or $2,058,000 less than the prior year. The
second quarter saw an average outstanding balance of approximately $6,661,000,
or $1,074,000 lower than the average in the second quarter of 1997. Interest
and other fees incurred for this agreement were incurred at approximately the
same rate in each year. Other fixed long-term debt carried lower balances in
1998 when compared to 1997 as the Company continues to amortize the debt
according to each issue's respective terms. No new material debt was added
during the first six months of 1998.
9
<PAGE>
B.B. WALKER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, Continued
DEPRECIATION AND AMORTIZATION
- -----------------------------
Depreciation and amortization was $139,000 in 1998 as compared to $239,000 in
1997 for the first six months of the year. For the second quarter,
depreciation expense was $65,000 in 1998 compared to $114,000 in 1997. The
Company continues to invest in capital assets only as necessary to maintain
the current level of operations. With the low level of capital expenditures
made in recent years, depreciation charges on fixed assets that are becoming
fully depreciated are not being replaced, resulting in lower depreciation
expense.
PROVISION FOR INCOME TAXES
- --------------------------
For the first six months of 1998, the Company recorded no benefit from income
taxes as compared to the first six months of 1997 where the Company recorded a
benefit from income taxes of $80,000. The Company exhausted all potential
recoveries of income taxes in 1997 and no more carryback exists. Therefore,
the Company's net losses before income taxes are being accounted for as income
tax loss carryforwards. The Company evaluated the valuation allowance
reserved against its deferred income tax asset at the end of the second
quarter and determined that the net deferred income tax asset was
appropriately recorded at its net realizable value.
NET INCOME
- ----------
The Company reported a net loss of $150,000 for the second quarter and a net
loss of $331,000 for the six months ended May 2, 1998. For the comparable
periods of 1997, the Company had a net loss of $27,000 for the second quarter
and a net loss of $163,000 for the six months. A lower sales volume in 1998
than 1997 contributed to the larger loss.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Historically, the Company has funded substantially all of its working capital
and capital expenditure requirements through borrowings under its finance
agreement and other indebtedness. The revolving finance agreement provides
flexibility to the Company as the availability of funds fluctuates with the
seasonal needs of the Company. Generally, the Company's working capital needs
are highest in the fourth fiscal quarter and lowest in the first fiscal
quarter. With its revolving finance agreement, the Company finances its
accounts receivable and inventories, paying interest at a variable rate (prime
plus 1.75%, or 10.25%, at May 2, 1998). The Company had outstanding advances
of $6,910,000 at May 2, 1998 and an additional $997,000 available under the
agreement.
10
<PAGE>
B.B. WALKER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, Continued
During the first six months of 1998, the Company generated $827,000 of cash
from operations which was used to reduce the advances under the revolving
finance agreement by $454,000 and reduce other long-term obligations by
$266,000. The Company continues to rely on the revolving finance agreement to
provide working capital and management anticipates that the revolving finance
agreement will continue to provide the necessary liquidity to fund its daily
operations going forward.
Under the Company's financing agreement with the bank, the amount available to
be drawn is determined by a formula based on certain percentages of eligible
accounts receivable and inventories. The credit line available under the
agreement is currently $8,000,000. In addition, the sublimit for inventory,
the maximum advances that can be taken against inventory under the revolving
credit agreement, is $4,000,000. The Company must also meet certain
restrictive financial covenants that were amended effective November 2, 1996
and for periods thereafter. The covenants require the satisfaction of certain
financial tests and the maintenance of certain financial ratios as defined in
the agreement. The Company is required to maintain a consolidated current
ratio of not less than 1.35 to 1, a consolidated debt leverage ratio of not
more than 3 to 1, a consolidated tangible net worth, as defined in the
agreement, of not less than $5,600,000 and consolidated working capital of not
less than $5,250,000. In addition, at the end of the fiscal year, the Company
must be at break even or report net income and can not make capital
expenditures in excess of $150,000 during a fiscal year without the agreement
of the bank. At May 2, 1998, the Company was in technical default of its
consolidated tangible net worth covenant. The Company is currently
negotiating with the bank to establish the terms of an amendment that
addresses the financial covenants contained in the agreement. Upon signing
the amendment, the Company will be in compliance with each of the financial
covenants.
In addition to the revolving credit facility, the financing agreement also
provided a $3,000,000 term loan that was used to repay an existing mortgage
note payable to a bank that carried a balance of approximately $2,060,000.
The term loan bears interest at the bank's prime rate plus 1.75% (10.25% at
May 2, 1998).
All advances under the revolving credit facility and the term loan are secured
by all accounts receivable, inventories, machinery and equipment of the
Company. In addition, the bank has a first lien on the Asheboro land and
facilities and a subordinated lien on the Somerset facilities.
The Company made only minimal capital expenditures during the past three
years. The Company made significant upgrades to its equipment and facilities
in 1993 and 1994. Because of cash flow considerations and restrictions under
the finance agreement with a bank, the Company has only been making capital
expenditures to maintain current levels of operations during the past three
years. Funding for capital expenditures other than the building acquisition
has primarily come from the available balance on the finance agreement.
11
<PAGE>
B.B. WALKER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, Continued
Net working capital, which consists primarily of accounts receivable and
inventories less current liabilities, was $5,551,000 at May 2, 1998 and
$5,900,000 at November 1, 1997. The ratio of current assets to current
liabilities increased to 1.45 to 1 at May 2, 1998 compared to 1.44 to 1 at
November 1, 1997.
FINANCIAL CONDITION
ACCOUNTS RECEIVABLE
- -------------------
Accounts receivable were $8,065,000 at May 2, 1998, or $1,019,000 less than
accounts receivable of $9,084,000 at November 1, 1997. Trade receivables are
historically at their highest point at the end of the fiscal year because of
the heavy sales volume related to Christmas buying by retailers. Second,
certain dating programs offered by the Company begin in the third quarter and
end in the first quarter of the following fiscal year. Accounts receivables
related to these programs are outstanding at the end of the fiscal year but do
not impact accounts receivable in the second quarter.
INVENTORIES
- -----------
Inventories were $9,488,000 at May 2, 1998 and $9,533,000 at November 1, 1997,
a difference of $45,000. Of the decrease, approximately $283,000 is work in
process and $709,000 is raw materials. These were offset by a $947,000
increase in finished goods. The investment in work in process and raw
materials are down as the Company has focused on improving the efficiency of
materials procurement and plant utilization. The increase in finished goods
is attributed to the addition of the new DuraTuff brand to the work line and
lower than expected sales volume.
BORROWINGS UNDER FINANCE AGREEMENT
- ----------------------------------
The balance outstanding under the finance agreement was $6,910,000 at May 2,
1998 as compared to $7,364,000 at November 1, 1997, a decrease of $454,000.
The decrease can be attributed to the cash applied against the outstanding
balance from collections of accounts receivable which were down $1,019,000 in
the first six months of 1998 and better management of inventories.
12
<PAGE>
B.B. WALKER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, Continued
FORWARD-LOOKING STATEMENTS
- --------------------------
The foregoing discussion contains some forward-looking statements about the
Company's financial condition and results of operations, which are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in the forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's judgment only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements
to reflect events and circumstances that arise after the date hereof.
Factors that might cause actual results to differ materially from these
forward-looking statements include (1) the effects of general economic
conditions, (2) the impact of competitive products and pricing in the
footwear industry, (3) failure to achieve anticipated sales results,
(4) management's ability to accurately predict the effect of cost reductions,
and (5) management's ability to accurately predict the adequacy of the
Company's financing arrangement to meet its working capital and capital
expenditure requirements.
13
<PAGE>
PART II. OTHER INFORMATION
- ---------------------------
Item 2. Changes in Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
The Forty-Seventh Annual Meeting of the Shareholders of the Company
was held on Monday, March 16, 1998, as set forth in the Notice of
Annual Meeting of Shareholders dated and mailed on February 23, 1998.
Of the 1,726,534 shares of common stock issued and outstanding on the
record date, 1,380,720 shares or 79.97% of the common stock
outstanding were represented in person or by proxy at the meeting.
For the issues presented to the shareholders for their consideration,
the results were as follows:
1 - The Board of Directors, in accord with the By-laws, established
the number of Directors at six. The shareholders elected the six
persons nominated by them in the proxy statement mailed February
23, 1998. All director nominees had served as directors during
the prior year and all were elected by the shareholders. There
were no other nominations for director presented at the meeting.
The six nominees were elected with results as follows:
Shares Shares Shares Marked
Director For Against Withhold Authority
-------- --------- ------- ------------------
Kent Anderson 1,185,830 - 194,890
George M. Ball 1,187,073 - 193,647
Robert L. Donnell, Jr. 1,186,736 - 193,984
James P. McDermott 1,186,760 - 193,960
Michael C. Miller 1,375,333 - 5,387
Edna A. Walker 1,375,333 - 5,387
2 - Ratification by the Shareholders of the action by the Board of
Directors to appoint Price Waterhouse LLP as the Company's
independent certified public accounting firm for the 1998 fiscal
year. The action was ratified with 1,374,401 shares voting for,
4,190 shares voting against, and 2,129 abstaining from the vote.
14
<PAGE>
PART II. OTHER INFORMATION, Continued
- --------------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed:
(27) Financial Data Schedule for the period ended May 2, 1998
(b) Reports on Form 8-K:
NONE
SIGNATURES
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.
B.B. Walker Company
Date June 16, 1998 KENT T. ANDERSON
------------- -------------------------------
Kent T. Anderson
Chairman of the Board, Chief
Executive Officer and President
Date June 16, 1998 JOHN R. WHITENER
------------- -------------------------------
John R. Whitener
Vice President and Controller
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from B.B.
Walker's Form 10-Q for the second quarter of fiscal 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000104218
<NAME> B.B. WALKER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> MAY-02-1998
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 8,610
<ALLOWANCES> 545
<INVENTORY> 9,488
<CURRENT-ASSETS> 17,941
<PP&E> 8,120
<DEPRECIATION> 6,393
<TOTAL-ASSETS> 19,810
<CURRENT-LIABILITIES> 12,390
<BONDS> 0
0
83
<COMMON> 1,721
<OTHER-SE> 2,428
<TOTAL-LIABILITY-AND-EQUITY> 19,810
<SALES> 15,511
<TOTAL-REVENUES> 15,695
<CGS> 11,522
<TOTAL-COSTS> 15,484
<OTHER-EXPENSES> 1
<LOSS-PROVISION> 211
<INTEREST-EXPENSE> 541
<INCOME-PRETAX> (331)
<INCOME-TAX> 0
<INCOME-CONTINUING> (331)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (331)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
