SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended February 3, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission file Number 0-14681
J. BAKER, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2866591
(State of Incorporation) (I.R.S. Employer Identification Number)
555 Turnpike Street, Canton, Massachusetts 02021
(Address of principal executive offices)
(617) 828-9300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.50 per share
7% Convertible Subordinated Notes Due 2002
Preferred Stock Purchase Rights
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $97,438,470 as of April 1, 1996 (based on the last
reported sales price of the registrant's stock in the over-the-counter market on
such date).
The number of shares outstanding of the registrant's common stock as of April 1,
1996 was 13,878,261.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the definitive proxy statement for the 1996 Annual Meeting
of Stockholders are incorporated by reference in Part III.
<PAGE>
J. Baker, Inc.
Form 10-K Report
Year Ended February 3, 1996
Part I
DESCRIPTION OF BUSINESS
General
J. Baker, Inc. ("J. Baker" or the "Company", which term shall include
all subsidiaries of the Company) is engaged in the retail sale of footwear and
apparel. The Company sells footwear through self-service licensed shoe
departments in mass merchandising department stores, through full and
semi-service licensed shoe departments in department and specialty stores and
through its Parade of Shoes chain of women's shoe stores. In all of these
operations, the Company emphasizes the sale of quality footwear at comparatively
low prices. The Company is engaged in the retail sale of apparel through its
chain of Casual Male Big & Tall men's stores which sells sportswear to the
larger size man, and through its chain of Work 'n Gear work clothing stores
which sell utility workwear, uniforms and personalized work clothes, as well as
uniforms for laboratory and medical purposes.
On September 5, 1995, the Company announced its intent to dispose of
its Fayva footwear division by the end of fiscal 1996. For additional
information on the disposal of the Fayva division, see Industry Segments,
Footwear, Disposal of Fayva and Note 2 to the Consolidated Financial Statements.
The Company's businesses are seasonal, with its largest footwear volume
generated in the Easter, back to school and Christmas seasons. The Casual Male
Big & Tall division does its largest sales volumes in June (Father's Day) and
the Christmas season, and the Work 'n Gear stores generate their largest sales
volume during the second half of the fiscal year. On a combined basis, sales
during the second half of each fiscal year have consistently exceeded those
during the first half of the year. Unseasonable weather may affect sales of
shoes and boots as well as of work clothing, especially during the traditional
high-volume periods.
The Company is required to carry a substantial inventory in order to
provide prompt deliveries to its licensed shoe departments, Parade of Shoes,
Casual Male Big & Tall, and Work 'n Gear stores. Order backlogs, however, are
not material to the Company's business. The inventories needed in the operation
of the Company's footwear and apparel businesses are currently available from a
number of domestic and overseas sources, with no single source accounting for
more than eight percent of the Company's merchandise.
The Company benefits by "most favored nation" provisions in trade
agreements between the United States and certain countries in which the
Company's suppliers are located. From time to time, the United States Congress
has proposed legislation which could result in such provisions being struck from
particular trade agreements, which could, in turn, result in higher costs to the
Company. There has been extensive Congressional debate with respect to the "most
favored nation" provision of the trade agreement between the United States and
China which was renewed for one year in July, 1992 and has since been extended
through June, 1996. The failure of this provision to be renewed would likely
result in substantially increased costs to the Company in the purchase of
footwear from China. However, the Company believes that all of its competitors
in the footwear industry would be similarly affected.
Industry Segments
The Company is engaged in the sale of footwear and apparel manufactured
by others. Financial information with respect to the Company's industry segments
can be found in Note 15 to the Consolidated Financial Statements.
Footwear
Licensed Shoe Department Operations
In a licensed shoe department operation, the store and the Company
enter into a license agreement under which the Company has the exclusive right
to operate a shoe department in the store for a period of years. The department
is operated under the store name in space supplied by the store, and the store
collects payments from customers and credits the Company. The Company pays the
store a license fee, generally a percentage of net sales, for the right to
operate the department and for the use of the space. The license fee ordinarily
covers utilities, janitorial service, cash collection and handling, packaging
and advertising.
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In its licensed shoe department operations, the Company sells a wide
variety of family footwear, including men's, women's and children's dress,
casual and athletic footwear as well as work shoes and slippers. Most of the
shoes offered by the Company in its licensed departments are sold under the
Company's trademarks or on an unbranded basis, although the Company also sells
name brand merchandise at discounted prices in its mass merchandising licensed
accounts.
On January 30, 1993, the Company acquired all of the outstanding stock
of Morse Shoe, Inc. ("Morse"), in a merger whereby Morse became a wholly owned
subsidiary of the Company. As an operator of licensed footwear departments and
of the Fayva chain of family shoe stores, the merger of Morse into the Company
resulted in the addition of approximately 500 licensed shoe departments operated
by the Company.
On November 19, 1993, the Company acquired majority ownership of the
outstanding stock of Tishkoff Enterprises, Inc. ("TEI"), an operator of full
service, semi-service and self service licensed shoe departments in department
and specialty stores. The remaining shares of TEI were acquired by the Company
on December 13, 1993 and pursuant to a merger and thereafter, the corporate name
of TEI was changed to Shoe Corporation of America ("SCOA"). As of February 3,
1996, SCOA operated 505 licensed footwear departments in sixteen chains with
locations in 36 states throughout the United States. Sales in SCOA licensed
departments accounted for 18% of the Company's revenue in the fiscal year ended
February 3, 1996. For additional information on the acquisition of SCOA, see
Note 3 to the Consolidated Financial Statements.
On April 19, 1996, the Company announced that it had executed a letter
of intent for the sale of its SCOA division to an entity to be formed by Bain
Capital along with Dennis B. Tishkoff, SCOA's President, and division
management. The transaction is subject to certain conditions, including the
negotiation and execution of a definitive purchase agreement. The transaction
should result in a positive impact on liquidity, although the Company may incur
a one-time restructuring charge should the transaction be consummated. Sales in
the Company's SCOA division were $183.6 million for the fiscal year ended
February 3, 1996.
Merchandise sold by the Company's SCOA division is predominantly in
conventional, full service department stores and includes a strong
representation of national brands complemented by private label merchandise. A
small portion of the licensed department business conducted by SCOA is in
specialty apparel accounts. The Company's licensed shoe departments in mass
merchandising department stores are operated on a self-service basis, but those
departments operated by SCOA in conventional department and specialty stores are
on a semi-service, full service or self-service basis. The Company's personnel
employed in particular departments are responsible for stocking and layout of
shelves, responding to customer inquiries and related administrative tasks.
The Company and its predecessors have operated licensed shoe
departments in mass merchandising department stores for more than forty years.
The Company's SCOA division has operated licensed shoe departments in mass
merchandising and conventional department and specialty stores for approximately
ten years. Sales in all licensed departments accounted for 52.5%, 48.9% and
46.5% of the Company's total revenues in the years ended February 3, 1996,
January 28, 1995 and January 29, 1994, respectively. At February 3, 1996, the
Company operated a total of 1,592 licensed shoe departments under license
agreements with 40 different department and specialty store operators. During
fiscal 1996, the Company opened 126 departments and closed 224, representing a
net decrease of 98 units for the year. The Company's licensed departments are
located in forty-three states and in the District of Columbia.
The Company conducts its licensed department operations under written
agreements for fixed terms. Of the 1,592 licensed shoe departments which the
Company operated at February 3, 1996, 1,254, or 79% are covered by agreements
with terms expiring in less than five years, 31 or 2% are covered by agreements
with terms expiring in five to ten years, and 307, or 19% are covered by
agreements with terms expiring in more than ten years.
Of the Company's licensed departments at February 3, 1996, 307 were
operated under license with Ames Department Stores, Inc. ("Ames"), a major mass
merchandising retailer in the eastern United States. For the fiscal year ended
February 3, 1996, Ames accounted for 9.4% of the Company's total revenues.
On June 23, 1995, Bradlees, Inc. ("Bradlees"), a licensor of the
Company, filed for protection under Chapter 11 of the United States Bankruptcy
Code. At the time of the bankruptcy filing, the Company had outstanding accounts
receivable of approximately $1.8 million due from Bradlees. Under bankruptcy
law, Bradlees has the option of continuing (assuming) the existing license
agreement with the Company or terminating (rejecting) that agreement. If the
license agreement is assumed, Bradlees must cure all defaults under the
agreement and the Company will collect in full the outstanding past due
receivable. The Company has no assurance that the agreement will be assumed or
that Bradlees will
<PAGE>
continue in business. Although the Company believes that the rejection of the
license agreement or the cessation of Bradlees' business is not probable, in the
event that the agreement is rejected or Bradlees does not continue in business,
the Company believes it will have a substantial claim for damages. If such a
claim is necessary, the amount realized by the Company, relative to the carrying
values of the Company's Bradlees-related assets, will be based on the relevant
facts and circumstances. The Company does not expect this filing under the
Bankruptcy Code to have a material adverse effect on future earnings. The
Company's sales in the Bradlees chain for the fiscal year ended February 3, 1996
were $59.8 million.
On October 18, 1995, Jamesway ("Jamesway"), then a licensor of the
Company, filed for protection under Chapter 11 of the United States Bankruptcy
Code and announced its intention to liquidate its inventory, fixed assets and
real estate and to cease operation of its business in all of its 90 stores. The
Company participated in Jamesway's going out of business sales and liquidated
substantially all of its footwear inventory in the 90 Jamesway stores during the
going out of business sales. At the time of the bankruptcy filing, the Company
had outstanding accounts receivable of approximately $1.4 million due from
Jamesway. Since Jamesway ceased operation of its business, the Company believes
that rejection of its license agreement is probable and has asserted a
substantial claim for damages. The Company does not expect the closing of the
Jamesway stores to have a material adverse effect on future earnings. The
Company's sales in the Jamesway chain for the fiscal year ended February 3, 1996
were $24.3 million.
The Company's licensed shoe department business faces competition at
two levels: (1) for sales to retail customers and (2) for the business of the
department store chains which are its shoe licensor customers. The Company's
retail shoe businesses compete with the shoe departments of department store
chains, conventional shoe chains, specialty stores and independent retailers.
The Company's success in its licensed department operations is substantially
dependent upon the success of the department store chains in which the Company
operates licensed departments. Within the particular market that is served by
the mass merchandising department store chains, the Company believes that the
primary competitive factors are the price and the breadth and suitability of the
selection of footwear that is offered.
The Company also faces potential competition from the in-house
operational capabilities of its licensors. Because of the large scale of many
licensing arrangements and years of commitment that are involved, the Company
has observed that changes in these arrangements do not frequently occur and are
more often initiated by external factors such as mergers or acquisitions
involving the licensors or business terminations by other licensees, rather than
by competition among licensees for the business of a licensor. To the extent
that there is active competition for new business in this area, the Company
believes that the principal factors weighed by a potential licensor are the
quality of the licensee's operations, as reflected by sales results, and the
price paid to the licensor in the form of the license fee.
Due to a general contraction in the retail industry, the filing for
protection under Chapter 11 of the United States Bankruptcy Code by certain of
the Company's licensors and the possible sale of the Company's SCOA division,
the Company may experience declines in the number of licensed departments that
it operates.
Parade of Shoes Operations
The Company's Parade of Shoes chain emphasizes the retail sale of
quality, primarily leather, women's shoes. The stores generally occupy 2,000 to
3,000 square feet of retail space located in suburban strip shopping centers,
regional malls and downtown urban locations in major metropolitan areas. The
stores feature dress, casual and athletic footwear at every day value prices
available for selection in a casual, self-service atmosphere.
Sales from Parade of Shoes stores accounted for 11.3%, 11.3% and 9.6%
of the Company's total revenues in the years ended February 3, 1996, January 28,
1995 and January 29, 1994, respectively.
A total of 168 Parade of Shoes stores were in operation in thirteen
states in the eastern and midwestern United States and the District of Columbia
on February 3, 1996. During the year, the Company opened 8 stores and closed 31
stores. The Company believes that the same competitive factors that affect its
licensed department operations, as well as the availability of leather and brand
name shoes and the general style and quality of merchandise, are present in the
market that is served by the Company's Parade of Shoes chain. Among competitors
of Parade of Shoes are department stores and other specialty shoe chains. The
Company may experience increased direct competition with Parade of Shoes based
on comparable merchandising approaches in the future.
In deciding to open a Parade store, the Company reviews market
demographics, store occupancy costs and costs to build and stock each location.
Based on these factors and others, management of the Company projects sales
volumes and estimates operating costs for each location and decides to open a
store if such projections demonstrate that an acceptable
<PAGE>
return on the Company's inventory and fixed asset investment can be realized.
Parade of Shoes stores require an average inventory and fixed asset investment
of approximately $200,000.
Decisions are made to close Parade locations when management of the
Company believes that these locations are not generating acceptable profit
levels. Most store closings occur at lease expiration, and costs to close stores
are expensed at time of closing.
Disposal of Fayva
On September 5, 1995, the Company announced its intent to dispose of
its Fayva footwear division by the end of fiscal 1996. When the Company acquired
Morse in early 1993, it did so primarily for the strategic fit of the Morse and
Baker licensed footwear divisions. In addition, the Company believed, at that
time, that it could improve the operations of Morse's Fayva division. Fayva's
profitability had suffered in the years prior to the Company's acquisition of
Morse due, in part, to the financial difficulties of Morse. The Company believed
that by bringing additional financial resources to Fayva, along with making
divisional management changes, it could restore the division to profitability.
However, after operating Fayva for two and one half years, the Company decided
to dispose of Fayva due to the continued operating losses generated by the
division, along with Fayva's declining market share in an already crowded
discount retail footwear industry.
During the third quarter of fiscal 1996, the Company recorded
restructuring charges of $69.3 million ($41.6 million or $3.00 per share on an
after tax basis) related to the disposal of Fayva. Such charges include the
costs to exit from and dispose of the Fayva division, including the loss on the
disposal of inventory, severance payments, the write off of fixed assets and the
costs to dispose of store leases. As part of its Fayva exit strategy, the
Company engaged a third party to maximize the Company's net recovery from the
liquidation of the Fayva inventory. All of Fayva's inventory was liquidated by
the end of fiscal 1996. The Company also hired a consultant to mitigate the
disposition costs of the Fayva store leases. For additional information on the
disposal of the Fayva division, see Note 2 to the Consolidated Financial
Statements.
Apparel
Casual Male Big & Tall
According to retailer and manufacturer estimates, big (42" waist or
larger) and tall (6'3" or taller) men represent an estimated 10% to 13% of the
adult male population in the United States. The Company believes the clothing
demands of these customers have not been met. The big and tall customer
frequently has difficulty finding an adequate selection of apparel in his size
at department and men's specialty stores. Furthermore, only a limited number of
big and tall specialty stores exist, and these typically have a narrow selection
of current sportswear fashions. The majority of big and tall specialty stores
are operated by companies with less than five units.
Casual Male Big & Tall stores offer brand name and private label
sportswear in a wider variety of styles, colors and fabrics than most other big
and tall retailers. Merchandise is generally priced lower than department stores
and other traditional retailers of big and tall apparel. The Company started
fiscal 1996 with 319 stores and ended the year with 400 stores (including three
licensed departments), having opened 81 stores. The 400 stores are located in
forty-four states throughout the United States. Sales in the Casual Male Big &
Tall stores accounted for 21.0%, 17.4% and 16.1% of the Company's total revenues
for the years ended February 3, 1996, January 28, 1995 and January 29, 1994,
respectively.
In deciding to open a Casual Male store, the Company reviews market
demographics, store occupancy costs and costs to build and stock each location.
Based on these factors and others, management of the Company projects sales
volumes and estimates operating costs for each location and decides to open a
store if such projections demonstrate that an acceptable return on the Company's
inventory and fixed asset investment can be realized. Casual Male stores require
an average inventory and fixed asset investment of approximately $200,000.
Decisions are made to close Casual Male locations when management of
the Company believes that these locations are not generating acceptable profit
levels. Most store closings occur at lease expiration, and costs to close stores
are expensed at time of closing.
The Company's Casual Male Big & Tall stores face competition from
department stores, specialty stores, discount stores, mail order companies and
off-price and other retailers who sell big and tall merchandise. While
competition exists on a local level from smaller chains, Casual Male faces
competition on a national scale from Repp, Ltd., a division of Edison Brothers,
Inc. There can be no assurance that other retailers will not adopt purchasing
and marketing concepts similar to those of the Casual Male Big & Tall chain. The
Company believes the fashion and selection of its merchandise, its favorable
prices and its ability to obtain desirable store locations are important factors
in enabling it to compete effectively.
<PAGE>
Work 'n Gear
Currently located in thirteen states throughout the Northeastern United
States, the Work 'n Gear stores sell utility workwear and footwear which is
generally used by persons engaged in outdoor labor activities. The Work 'n Gear
stores also sell laboratory and medical uniforms as well as personalized
uniforms for maintenance and other uses. The Company operated 69 Work 'n Gear
stores at February 3, 1996, having opened nine stores and closed one store
during fiscal 1996.
Traditional competition for utility workwear has existed in certain
large, full-service department stores, which, increasingly, are discontinuing
this line of apparel. Competition also exists from local Army and Navy stores
but, to the Company's knowledge, no specific specialty store of the Work 'n Gear
variety exists on a national basis. Competition in the medical uniform business
of Work 'n Gear is found in small storefront vendors of medical and laboratory
uniforms as well as in several larger companies, such as Life Uniform Stores, Z
& H Uniforms and WearGuard Corporation, which sells primarily through its
catalog.
Neither the utility workwear nor the uniform businesses of the Work 'n
Gear stores are dependent upon any one supplier for its inventory. The customer
base is the diverse population of working men and women in the United States,
and no specific customer accounts for any substantial portion of the business.
Sales in the Work 'n Gear stores accounted for 4.8%, 4.2% and 3.9% of
the Company's total revenues for the years ended February 3, 1996, January 28,
1995 and January 29, 1994, respectively.
Trademarks
The Company has no patents, franchises or concessions, except for
agreements granting it the right to operate licensed departments. The Company
owns certain trademarks which it uses in its business. The Company does not
consider these trademarks to be materially important to its business.
Research and Development
The Company does not engage in any Company-sponsored research or
customer-sponsored research.
Environment
The Company has not been required to make any material capital
equipment expenditures, or suffered any material effect on its earnings or
competitive position, as a result of compliance with federal, state or local
environmental laws.
Employees
As of February 3, 1996, the Company employed approximately 5,678
persons full-time and 5,901 persons part-time, of whom approximately 4,425
full-time and 5,884 part-time employees were engaged in retail operations at the
store level. Approximately 465 of the Company's full-time and part-time
employees are covered by collective bargaining agreements.
The Company believes that its employee relations are good.
Executive Officers of the Company
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Name Age Office
Sherman N. Baker 76 Chairman of the Board
Jerry M. Socol 54 President and Chief Executive Officer
Alan I. Weinstein 53 Senior Executive Vice President, Chief Financial Officer,
Chief Administrative Officer and Secretary
David A. Levin 44 Senior Executive Vice President, Director of Shoe
Merchandising and Operations, Acting President of Parade of
Shoes and General Manager of International Shoe Operations
Larry I. Kelley 53 Executive Vice President and President and Chief Executive
Officer of The Casual Male, Inc.
James Lee 49 Executive Vice President and President of the Licensed
Discount Division
Stuart M. Needleman 48 Executive Vice President and President of Work 'n Gear
Dennis B. Tishkoff 53 Executive Vice President and President and Chief Executive
Officer of Shoe Corporation of America
</TABLE>
<PAGE>
Mr. Baker has been the Chairman of the Board of the Company since
March, 1990. From 1970 until March, 1990, Mr. Baker served as Chief Executive
Officer of the Company and its predecessor.
Mr. Socol has been President of the Company since September, 1988 and
Chief Executive Officer of the Company since March, 1990. Prior to joining the
Company in 1988, Mr.Socol was President and Chief Executive Officer of Filene's
Department Stores, a division of the May Department Stores Company, from May to
June, 1988. Mr. Socol was Chairman and Chief Executive Officer of Filene's
Department Stores, a division of Federated Department Stores, Inc., from August,
1987 to May, 1988. From January, 1984 to August, 1987, Mr. Socol was President
of Filene's Department Stores.
Mr. Weinstein has held the positions of Senior Executive Vice
President, Chief Financial Officer and Secretary of the Company since July,
1985. He was also appointed Chief Administrative Officer in 1988. Mr.
Weinstein joined the Company's predecessor in 1968 as Assistant Controller and
has held a variety of positions of increasing responsibility in finance and
administration since that time.
Mr. Levin has held the positions of Senior Executive Vice President,
Director of Shoe Merchandising and Operations, Acting President of Parade of
Shoes and General Manager of International Shoe Operations since June, 1995.
Prior to joining the Company, Mr. Levin was President of Outlet Stores, a
division of Revlon. Previously, Mr. Levin was Senior Vice President, General
Merchandise Manager of Payless Shoe Source, a division of the May Department
Stores Company.
Mr. Kelley has held the positions of Executive Vice President of the
Company and President and Chief Executive Officer of The Casual Male, Inc.
since June, 1991. Before joining the Company, Mr. Kelley was President of
Weathervane Stores from September, 1988 to May, 1991. From June, 1987 to
September, 1988, Mr. Kelley was the President of Brauns Fashion.
Mr. Lee has held the positions of Executive Vice President of the
Company and President of the Company's Licensed Discount Division since January,
1995. From August, 1994 through December, 1994, Mr. Lee was Senior Vice
President and Director of Distribution for the Company's Fayva division. Prior
to joining the Company, Mr. Lee was Senior Vice President and General
Merchandise Manager of Caldor Stores.
Mr. Needleman has held the positions of Executive Vice President of the
Company and President of the Company's Work 'n Gear division since October,
1993. From 1989 through October, 1993, Mr Needleman held the position of Senior
Vice President and Director of Operations of The Casual Male, Inc.
Mr. Tishkoff has held the positions of Executive Vice President of the
Company and President of the Company's SCOA division since November, 1993, when
SCOA was acquired by the Company. Before joining the Company, Mr. Tishkoff was
Chairman, President and Chief Executive Officer of Tishkoff Enterprises, Inc.
d/b/a Shoe Corporation of America.
PROPERTIES
The Company's executive, buying and general offices and one of its
footwear distribution centers ("home office") are located in Canton,
Massachusetts. This facility is located at 555 Turnpike Street, Canton,
Massachusetts on 37 acres of land and is owned by the Company. The home office
contains approximately 750,000 square feet of space, including approximately
150,000 square feet of office space.
The Company leases a building at 40 Industrial Drive, Canton,
Massachusetts that serves as a warehouse for its Massachusetts footwear
operations. The building contains approximately 33,000 square feet of warehouse
space. The lease on this facility expires on June 30, 1997. The Company has one
two-year option to renew the lease.
The Company leases a building at 65 Sprague Street, Readville,
Massachusetts that serves as the administrative offices for Casual Male and Work
'n Gear, and as the distribution center for the Casual Male Big & Tall and Work
'n Gear stores. The building contains approximately 75,000 square feet of office
space and approximately 375,000 square feet of warehouse/distribution space. The
lease on this facility expires on May 31, 1999. The Company has two consecutive
five year options to renew the lease.
<PAGE>
The headquarters for the Company's SCOA division and SCOA's footwear
distribution center is located at 2035 Innis Road, Columbus, Ohio. The facility
is on 17.4 acres of land and is owned by the Company. The building contains
approximately 355,000 square feet, including approximately 18,000 square feet of
office space and 337,000 square feet of warehouse/distribution space.
As of February 3, 1996, the Company had 168 Parade of Shoes stores, all
operating in leased premises ranging from 1,250 to 11,900 square feet, with
average space of approximately 2,400 square feet per store and total space of
approximately 400,000 square feet. The leases run for initial terms of between
three and ten years and average approximately seven years. A majority of the
leases are renewable at the option of the Company for terms of three to five
years.
As of February 3, 1996, the Company operated 400 Casual Male Big & Tall
stores, all in leased premises ranging from 1,875 to 6,900 square feet, with
average space of approximately 3,200 square feet and total space of
approximately 1,290,000 square feet. A majority of the leases run for initial
terms of five years. Most are renewable at the option of the Company for one or
more five year terms.
As of February 3, 1996, the Company operated 69 Work 'n Gear stores,
all in leased premises ranging from 3,300 square feet to 6,200 square feet, with
average space of approximately 4,300 square feet and total space of
approximately 296,000 square feet. A majority of the leases run for initial
terms of five years. Most are renewable at the option of the Company for one or
more five year terms.
See "DESCRIPTION OF BUSINESS - Industry Segments, Footwear, Licensed
Shoe Department Operations", for information regarding the Company's licenses to
operate shoe departments in retail stores of its licensors.
LEGAL PROCEEDINGS
The Company is engaged in the following significant litigation:
On November 10, 1993, a federal jury in Minneapolis, MN returned a
verdict assessing royalties of $1,550,000, and additional damages of $1,500,000,
against the Company in a patent infringement suit brought by Susan Maxwell with
respect to a device used to connect pairs of shoes. Certain post trial motions
were filed by Susan Maxwell seeking treble damages, attorney's fees and
injunctive relief, which motions were granted on March 10, 1995. Judgment has
been entered for Maxwell. The Company has appealed the judgment and believes it
has substantial legal arguments to justify the judgment being overturned in
whole or in part at the appellate level. In the event the Company were not to
prevail, however, total damages, including attorney's fees and interest, are
estimated to be approximately $11 million.
A complaint was also filed by Susan Maxwell in November, 1992 against
Morse Shoe, Inc. ("Morse"), a subsidiary of the Company, alleging infringement
of the patent referred to above. The discovery phase of the case has concluded,
and a trial date will likely be set in the next several months. The Company
believes that Ms. Maxwell's recovery against Morse, if any, will be less than
her recovery against the Company because the number of allegedly infringing
pairs of shoes is substantially less than those involved in the Company's case.
Other than as described above, the Company is not a party to any
material legal proceedings.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
<PAGE>
PART II
MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
Market Information
The Company's Common Stock is traded in the over-the-counter market and
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") under the symbol "JBAK".
The following table sets forth the high and low last reported sales
prices, as reported by NASDAQ, for the Company's Common Stock for each quarterly
period during the years ended February 3, 1996 and January 28, 1995. The prices
set forth below do not include retail mark-ups, mark-downs or commissions.
<TABLE>
<S> <C> <C>
Year Ended February 3, 1996 High Low
First Quarter $15 13/16 $12 1/2
Second Quarter 13 1/2 9 7/8
Third Quarter 10 6 1/8
Fourth Quarter 6 5/8 4 3/8
Year Ended January 28, 1995 High Low
First Quarter $22 $18 1/8
Second Quarter 21 3/4 18
Third Quarter 21 1/8 17 1/8
Fourth Quarter 17 14
</TABLE>
Holders
The approximate number of holders of record of the Company's Common
Stock as of April 1, 1996 was 470. The Company believes that the actual number
of beneficial owners of the Company's Common Stock is substantially greater than
the stated number of holders of record, because a portion of the Common Stock
outstanding is held in "street name".
Dividends
On March 2, 1987, the Board of Directors of the Company adopted a
policy of paying quarterly dividends. For each quarter thereafter, the Company
has paid a 1 1/2 cents per share dividend.
The Company's unsecured revolving credit agreement and its senior
subordinated notes agreement limit the amount of cash dividends that may be paid
to stockholders. For additional information see Note 8 of the Notes to
Consolidated Financial Statements.
Other
On December 15, 1994, the Board of Directors of the Company adopted a
Shareholder Rights Agreement (the "Rights Agreement") designed to enhance the
Company's ability to protect shareholder interests and to ensure that
shareholders receive fair treatment in the event any coercive takeover attempt
of the Company is made in the future. Pursuant to the Rights Agreement, the
Board of Directors declared a dividend distribution of one preferred stock
purchase right (the "Right") for each outstanding share of common stock of the
Company to shareholders of record as of the close of business on January 6,
1995. Each right entitles the holder to purchase from the Company a unit
consisting of one ten thousandth (1/10,000) of a share of Series A Junior
Participating Cumulative Preferred Stock, par value $1.00 per share, at a cash
exercise price of $70 per unit, subject to adjustment, upon the occurrence of
certain events as are set forth in the Rights Agreement. These events include
the earliest to occur of (i) acquisition of 15% or more of the outstanding
shares of common stock of the Company by any person or group (ii) the
commencement of a tender or exchange offer that would result upon its
consummation in a person or a group becoming the beneficial owner of 15% or more
of the outstanding common stock of the Company or (iii) the determination by the
Board of Directors that any person is an "Adverse Person", as defined in the
Rights Agreement. The Rights are not exercisable until or following the
occurrence of one of the above events and will expire on December 14, 2004,
unless previously redeemed or exchanged by the Company as provided in the Rights
Agreement.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the Company are
derived from the financial statements that have been audited and reported on by
KPMG Peat Marwick LLP, independent certified public accountants, and are
qualified in their entirety by reference to the more detailed consolidated
financial statements and the independent auditors' report thereon appearing
elsewhere in this Form 10-K. J. Baker has acquired a number of specialty retail
businesses in recent years, and has disposed of its Fayva division during fiscal
1996. The Company has also experienced a number of licensor bankruptcy filings
in recent years. These acquisitions, the disposal of Fayva and licensor
bankruptcy filings affect the comparability of the financial information herein.
For further discussions see "DESCRIPTION OF BUSINESS" and Notes 2, 3, 4 and 6 to
the Consolidated Financial Statements.
J. BAKER, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
<TABLE>
Year Ended
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2/03/96 1/28/95 1//29/94 1/30/93 2/01/92
Income Statement Data: (53 weeks)
Net sales $1,020,413 $1,042,979 $918,878 $532,256 $493,542
Cost of sales 580,067 579,735 516,855 313,703 291,945
--------- --------- ------- ------- -------
Gross profit 440,346 463,244 402,023 218,553 201,597
Selling, administrative and
general expenses 392,586 389,362 336,283 174,658 165,711
Depreciation and amortization 32,428 27,883 21,874 14,688 12,709
Restructuring charges 69,300 - - - -
-------- -------- ------- ------- -------
Operating income (loss) (53,968) 45,999 43,866 29,207 23,177
Interest income 526 635 704 80 73
Interest expense (10,983) (9,735) (8,146) (8,211) (10,352)
------- ------ ------ ------ -------
Earnings (loss) before taxes and
extraordinary item (64,425) 36,899 36,424 21,076 12,898
Income tax expense (benefit) (25,823) 13,283 13,113 7,798 4,874
------- ------- ------ ------ ------
Earnings (loss) before extraordinary item (38,602) 23,616 23,311 13,278 8,024
Extraordinary item, net of income tax benefit - - - (2,444) -
------- ------- ------- -------- -------
Net earnings (loss) $(38,602) $ 23,616 $ 23,311 $ 10,834 $ 8,024
======= ======= ======= ======== =======
Earnings (loss) per common share:
Primary:
Earnings (loss) before extraordinary item $ (2.79) $ 1.71 $ 1.70 $ 1.25 $ .78
Extraordinary item - - - (.23) -
-------- ------- ------- ------- ------
$ (2.79) $ 1.71 $ 1.70 $ 1.02 $ .78
======= ======= ======= ======= ======
Fully diluted:
Earnings (loss) before extraordinary item $ (2.79) $ 1.46 $ 1.45 $ 1.11 $ .78
Extraordinary item - - - (.18) -
-------- -------- -------- ------- -------
$ (2.79) $ 1.46 $ 1.45 $ .93 $ .78
======== ======= ======= ======= =======
</TABLE>
<PAGE>
J. BAKER, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
<TABLE>
As At
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2/03/96 1/28/95 1/29/94 1/30/93 2/01/92
Balance Sheet Data:
Working capital $205,080 $235,948 $187,095 $138,385 $ 99,110
Total assets 526,082 578,618 502,496 431,798 296,704
Long-term debt 207,766 204,518 154,665 95,864 79,515
Stockholders' equity 184,037 223,317 200,086 172,610 105,012
======== ======== ======= ======== ========
Cash dividends declared
per common share $ .06 $ .06 $ .06 $ .06 $ .06
======== ======== ======= ======= ========
</TABLE>
Store Openings and Closings:
<TABLE>
Footwear* Apparel
-------------------------------------------------------------- ---------------------------
Total Parade
Licensed Licensed of Total Casual Work Total
Discount SCOA Shoe Dept. Shoes Fayva Footwear Male 'n Gear Apparel Total
-------------------------------------------------------------- ---------------------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stores open at
January 30, 1993 1,446 - 1,446 136 425 2,007 214 38 252 2,259
Openings 46 162 208 30 3 241 40 14 54 295
Closings (124) - (124) (4) (33) (161) - - - (161)
----- ---- ----- ---- ---- ----- --- --- ---- -----
Stores open at
January 29, 1994 1,368 162 1,530 162 395 2,087 254 52 306 2,393
Openings 71 321 392 46 2 440 65 9 74 514
Closings (197) (35) (232) (17) (29) (278) - - - (278)
----- ---- ----- ---- --- ----- ---- --- ---- ------
Stores open at
January 28, 1995 1,242 448 1,690 191 368 2,249 319 61 380 2,629
Openings 27 99 126 8 6 140 81 9 90 230
Closings (182) (42) (224) (31) (374) (629) - (1) (1) (630)
----- ----- ----- ---- ----- ----- ---- --- ---- -----
Stores open at
February 3, 1996 1,087 505 1,592 168 - 1,760 400 69 469 2,229
===== ==== ===== ==== ==== ===== ==== === ==== =====
</TABLE>
* Excludes wholesale footwear departments serviced by the Company (all of
which were closed during the year ended January 28, 1995).
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
All references herein to fiscal 1996, fiscal 1995 and fiscal 1994
relate to the years ended February 3, 1996, January 28, 1995 and January 29,
1994, respectively. To the extent that the Company may have incurred increased
costs resulting from inflation, the Company believes that it has been able to
offset these costs through higher revenues. Accordingly, the Company believes
that inflation has had no significant impact on the operations of the Company.
Results of Operations
During the year ended February 3, 1996, the Company has experienced
comparable store sales declines in its footwear and apparel businesses.
Management believes that these comparable store sales declines are primarily due
to the weak domestic retail environment. While the Company does not expect the
retail sector to rebound quickly, J. Baker has taken steps intended to manage
its businesses in a manner consistent with the soft economic environment. These
steps include reducing estimates of future sales, increasing management's focus
on merchandise planning and distribution, cutting expenditures and reducing
store openings. Due to comparable store sales declines, the Company has
attempted to generate additional sales and keep inventories in line by
increasing promotional activities, which have generated additional markdowns.
These additional markdowns were the primary reason for the increase in the
Company's cost of sales. Comparable store sales declines have also been a reason
for the increase in selling, administrative and general expenses as a percentage
of sales.
As part of management's continuing strategic evaluation of its
businesses, during fiscal 1996 the Company disposed of its Fayva shoe division.
For additional information on the disposal of Fayva, see Description of
Business, Industry Segments, Footwear, Disposal of Fayva in Part I of this Form
10-K, and Note 2 to the Consolidated Financial Statements. Also, on April 19,
1996, the Company signed a letter of intent for the sale of its SCOA division.
For additional information, see Note 19 to the Consolidated Financial
Statements. These transactions have and, should the SCOA sale be consummated,
will allow the Company to focus its future efforts on its Casual Male, Parade of
Shoes, Licensed Discount and Work 'n Gear divisions, with the goal of improving
the results of these core businesses.
Fiscal 1996 versus Fiscal 1995
In fiscal 1996, net sales decreased by $22.6 million or 2.2% from net
sales in fiscal 1995. Sales in the Company's footwear operations decreased by
$61.1 million due to a sales decrease in the Company's Fayva division (which is
primarily the result of the closing of all 357 Fayva stores in the third quarter
of fiscal 1996), the elimination of wholesale footwear sales (which is a result
of the closing of all wholesale footwear departments serviced by the Company
during the second quarter of fiscal 1995), a 7.0% decrease in comparable retail
footwear store sales (Comparable retail footwear store sales increases/decreases
are based upon comparisons of weekly sales volume in licensed departments and
Parade of Shoes and Fayva shoe stores which were open in corresponding weeks of
the two comparison periods), and a decrease in the number of discount licensed
shoe departments in operation during fiscal 1996 versus fiscal 1995 (which was
due in large part to Jamesway ceasing operations). This decrease was partially
offset by a sales increase in the Company's SCOA licensed shoe division as a
result of SCOA's beginning business in new licensed departments since the first
quarter of fiscal 1995.
Sales in the Company's specialty apparel operations increased by $38.6
million due to an increase in the number of Casual Male Big & Tall stores and
Work 'n Gear stores in operation at the end of fiscal 1996 over fiscal 1995,
partially offset by a 2.7% decrease in comparable specialty apparel store sales.
(Comparable specialty apparel store sales increases/decreases are based upon
comparisons of weekly sales volume in Casual Male Big & Tall stores and Work 'n
Gear stores which were open in corresponding weeks of the two comparison
periods.)
Cost of sales constituted 56.8% of sales in fiscal 1996 as compared to
55.6% in fiscal 1995. Cost of sales in the Company's footwear operations was
58.8% of sales in fiscal 1996 as compared to 56.8% of sales in fiscal 1995. The
increase in such percentage was primarily attributable to higher markdowns as a
percentage of sales and a decrease in the initial markup on merchandise
purchases, partially offset by the elimination of wholesale footwear sales,
which have a higher cost of sales than retail footwear sales. Cost of sales in
the Company's apparel operations was 51.2% of sales in fiscal 1996 as compared
to 51.0% of sales in fiscal 1995. The increase in such percentage was primarily
attributable to higher markdowns as a percentage of sales, partially offset by a
higher initial markup on merchandise purchases.
<PAGE>
Selling, administrative and general expenses increased $3.2 million or
0.8% over fiscal 1995, primarily due to a relative decrease in sales in the
licensed discount division which has lower selling, administrative and general
expenses than the Company's other divisions. As a percentage of sales, selling,
administrative and general expenses were 38.5% in fiscal 1996 as compared to
37.3% in fiscal 1995. Selling, administrative and general expenses in the
Company's footwear operations were 38.5% in fiscal 1996 as compared to 37.2% of
sales in fiscal 1995. This increase was primarily the result of a change in the
relative mix of footwear sales and a decline in comparable retail footwear
sales. Selling, administrative and general expenses in the Company's apparel
operations were 38.5% of sales in fiscal 1996 as compared to 37.9% of sales in
fiscal 1995, primarily due to an increase in store level expenses from new
stores openings, coupled with comparable store sales declines.
Depreciation and amortization expense increased by $4.5 million in
fiscal 1996 over fiscal 1995 due to an increase in average depreciable and
amortizable assets.
During the fiscal year ended February 3, 1996, the Company recorded
restructuring charges of $69.3 million ($41.6 million on an after tax basis)
related to the disposal of its Fayva footwear division. Such charges included
the costs to exit from and dispose of Fayva, including the loss on disposal of
inventory, severance payments, the write off of fixed assets and the costs to
dispose of store leases.
As a result of the above described effects, the Company reported an
operating loss of $54.0 million (operating income of $15.3 million excluding the
restructuring charges) in fiscal 1996 versus operating income of $46.0 million
in fiscal 1995.
Net interest expense increased $1.4 million to $10.5 million in fiscal
1996 as compared to $9.1 million in fiscal 1995, primarily due to higher average
levels of borrowings and higher interest rates on borrowings in fiscal 1996 as
compared to fiscal 1995.
For fiscal 1996, the Company reported a tax benefit of $25.8 million,
resulting in an effective tax rate of 40.1%, as compared to tax expense of $13.3
million, yielding an effective tax rate of 36.0% in fiscal 1995. See Note 9 to
the Consolidated Financial Statements for further discussion of taxes on
earnings.
Net loss for fiscal 1996 was $38.6 million as compared to net earnings
of $23.6 million in fiscal 1995.
Fiscal 1995 versus Fiscal 1994
In fiscal 1995, net sales increased by $124.1 million or 13.5% over net
sales in fiscal 1994. Sales in the Company's footwear operations increased by
$83.4 million primarily as a result of sales in the newly-acquired SCOA licensed
shoe division, coupled with an increase in the number of Parade of Shoes stores
in operation during fiscal 1995 versus fiscal 1994. The sales increase in
footwear operations was partially offset by a 3.0% decrease in comparable retail
footwear store sales, a decrease in the number of discount licensed shoe
departments and Fayva shoe stores in operation during fiscal 1995 versus fiscal
1994 and a $23.6 million decrease in wholesale footwear sales (which is a result
of the closing of 149 wholesale footwear departments during the second quarter
of fiscal 1995). Sales in the Company's specialty apparel operations increased
by $40.7 million as a result of an increase in the number of Casual Male Big &
Tall stores and Work 'n Gear stores in operation at the end of fiscal 1995 over
fiscal 1994, and a 3.5% increase in comparable specialty apparel store sales.
Cost of sales constituted 55.6% of sales in fiscal 1995 as compared to
56.2% in fiscal 1994. This decrease was attributable primarily to a relative
increase in sales in divisions which have lower costs of sales. Cost of sales in
the Company's footwear operations was 56.8% of sales in fiscal 1995 as compared
to 57.5% of sales in fiscal 1994. The decrease in such percentage was primarily
attributable to a lower cost of sales in the newly acquired SCOA licensed shoe
division as compared to the Company's other shoe divisions, partially offset by
higher markdowns as a percentage of sales, and a lower initial markup on
merchandise purchases. Cost of sales in the Company's apparel operations was
51.0% of sales in fiscal 1995 as compared to 51.3% of sales in fiscal 1994. An
increase in initial markup on merchandise purchases in apparel operations was
partially offset by an increase in markdowns as a percentage of sales.
Selling, administrative and general expenses increased $53.1 million or
15.8% over fiscal 1994, primarily due to the newly acquired SCOA division and
the increase in the number of Parade of Shoes stores, Casual Male Big & Tall
stores and Work 'n Gear stores in operation during fiscal 1995 versus fiscal
1994. As a percentage of sales, selling, administrative and general expenses
were 37.3% in fiscal 1995 as compared to 36.6% in fiscal 1994. This increase was
due primarily to
<PAGE>
the relative decrease in sales in the licensed discount shoe division as
compared to the other shoe divisions, the increase in sales in specialty apparel
and shoe stores and the decrease in wholesale footwear sales, which have lower
selling, administrative and general expenses than retail sales. Selling,
administrative and general expenses in the Company's footwear operations were
37.2% as compared to 36.6% of sales in fiscal 1994 primarily as a result of a
change in the relative mix of sales (the Company's licensed discount and
wholesale shoe divisions have lower selling, administrative and general expenses
as compared to those in the Company's other footwear divisions). Selling,
administrative and general expenses in the Company's apparel operations were
37.9% of sales in fiscal 1995 as compared to 36.6% of sales in fiscal 1994,
primarily due to an increase in store level expenses.
Depreciation and amortization expense increased by $6.0 million in
fiscal 1995 over fiscal 1994 due to an increase in depreciable and amortizable
assets.
As a result of the above described effects, the Company's operating
income increased 4.9% to $46.0 million from $43.9 million in fiscal 1994. As a
percentage of sales, operating income was 4.4% in fiscal 1995 as compared to
4.8% in fiscal 1994.
Net interest expense was $9.1 million in fiscal 1995 as compared to
$7.4 million in fiscal 1994, primarily due to higher average levels of
borrowings and higher interest rates on borrowings in fiscal 1995 as compared to
fiscal 1994.
Taxes on earnings for fiscal 1995 were $13.3 million, yielding an
effective tax rate of 36.0%, as compared to taxes of $13.1 million, yielding an
effective rate of 36.0% in fiscal 1994. See Note 9 to the Consolidated Financial
Statements for further discussion of taxes on earnings.
Net earnings for fiscal 1995 were $23.6 million as compared to net
earnings of $23.3 million in fiscal 1994, an increase of 1.3%.
Financial Condition
February 3, 1996 versus January 28, 1995
Accounts receivable at February 3, 1996 decreased from the balance at
January 28, 1995 primarily due to the reduction in the number of units operated
in January, 1996 as compared to January, 1995 in the Company's licensed shoe
divisions.
Merchandise inventories at February 3, 1996 were lower than at January
28, 1995 primarily due to the closing of the Fayva division, including the
liquidation of all of Fayva's inventory, by the end of the fourth quarter of
fiscal 1996.
The income tax receivable of $7.2 million at February 3, 1996 is
primarily due to the estimated federal income tax refund due which is related to
the federal income tax carryback benefits resulting from the disposal of the
Fayva division.
The decrease in net property, plant and equipment is the result of the
net write-off of $18.5 million of furniture, fixtures and leasehold improvements
as a result of the closing of the Company's Fayva division, coupled with the
recording of $22.0 million in depreciation expense during fiscal 1996, partially
offset by the Company incurring capital expenditures of $28.1 million in fiscal
1996, primarily for the opening of new stores and the renovation of existing
units.
The decrease in other assets is primarily due to the recording of
amortization expense in fiscal 1996.
The decrease in accounts payable is primarily due to the reduction in
inventory levels as a result of the disposal of the Company's Fayva division.
The ratio of accounts payable to merchandise inventory was 36.8% at February 3,
1996 as compared to 36.2% at January 28, 1995.
Accrued expenses at February 3, 1996 increased from the balance at
January 28, 1995 primarily due to accruals for lease termination costs as a
result of the disposal of the Company's Fayva division.
Liquidity and Capital Resources
The Company currently has a $240 million revolving credit facility on
an unsecured basis with Fleet National Bank of Massachusetts, The First National
Bank of Boston, Natwest Bank, N.A., The Yasuda Trust and Banking Company, Ltd.,
Bank Hapoalim B.M., National City Bank, Columbus, Standard Chartered Bank and
Citizens Bank of Massachusetts (the
<PAGE>
"Banks"). As amended to date, the aggregate commitment amount under this
revolving credit facility will be reduced by $10 million on December 29, 1996.
Borrowings under the revolving credit facility bear interest at variable rates
and, at the discretion of the Company, can be in the form of loans, bankers'
acceptances and letters of credit. This facility expires in June, 1997.
Consistent with prior practices, the Company will attempt to extend or
renegotiate the revolving credit facility prior to the end of fiscal 1997. As of
February 3, 1996, the Company had outstanding obligations under the revolving
credit facility of $181.7 million, consisting of loans, obligations under
bankers' acceptances and letters of credit.
In June, 1992 the Company issued $70 million of 7% convertible
subordinated notes due 2002. The notes are convertible at a conversion price of
$16.125 per share, subject to adjustment in certain events. The Company used the
net proceeds to repay all of the $20 million outstanding principal amount of its
10.53% senior term notes, $27.5 million principal amount of its 11.21% senior
subordinated notes, and a portion of outstanding bank indebtedness under its
unsecured revolving credit facility. In connection with repayment of the senior
term notes and senior subordinated notes, the Company paid redemption premiums
totalling approximately $2.0 million.
The Company expects to open approximately 40 Casual Male Big & Tall
stores (13 of which are conversions of former Fayva locations) and approximately
43 Parade of Shoes stores (all of which are conversions of former Fayva
locations), and to close approximately three Casual Male Big & Tall stores,
eight Parade of Shoes stores, and three Work 'n Gear stores in fiscal 1997.
The Company believes that amounts available under its revolving credit
facility, along with internally generated funds, will be sufficient to meet its
current operating and capital requirements under ordinary circumstances through
the end of the current fiscal year.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
The Company cautions that any forward-looking statements (as such term
is defined in the Private Securities Litigation Reform Act of 1995) contained in
this Form 10-K or made by management of the Company involve risks and
uncertainties, and are subject to change based on various important factors. The
following factors, among others, in some cases have affected and in the future
could affect the Company's financial performance and actual results, and could
cause actual results for fiscal 1997 and beyond to differ materially from those
expressed or implied in any such forward-looking statements: changes in consumer
spending patterns, consumer preferences and overall economic conditions, the
impact of competition and pricing, changes in weather patterns, the financial
condition of the retailers in whose stores the Company operates licensed shoe
departments, changes in existing or potential duties, tariffs or quotas,
availability of suitable store locations at appropriate terms and ability to
hire and train associates.
<PAGE>
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
J. BAKER, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
<TABLE>
Consolidated Financial Statements: PAGE
<S> <C>
Independent Auditors' Report 17
Consolidated balance sheets as of February 3, 1996 and January 28, 1995 18
Consolidated statements of earnings for the years ended February 3, 19
1996, January 28, 1995 and January 29, 1994
Consolidated statements of stockholders' equity for the years ended 20
February 3, 1996, January 28, 1995 and January 29, 1994
Consolidated statements of cash flows for the years ended February 3, 21
1996, January 28, 1995 and January 29, 1994
Notes to consolidated financial statements 22
</TABLE>
All schedules have been omitted as they are inapplicable or not required, or the
information has been included in the consolidated financial statements or in the
notes thereto.
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
J. Baker, Inc.:
We have audited the accompanying consolidated balance sheets of J. Baker, Inc.
and subsidiaries as of February 3, 1996 and January 28, 1995, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended February 3, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of J. Baker, Inc. and
subsidiaries as of February 3, 1996 and January 28, 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended February 3, 1996 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
March 13, 1996, except for
Note 19, as to which
the date is April 19, 1996
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
February 3, 1996 and January 28, 1995
<TABLE>
<S> <C> <C>
Assets 1996 1995
---- ----
Current assets:
Cash and cash equivalents $ 3,287,141 $ 4,915,491
Accounts receivable:
Trade, net 19,514,985 21,549,133
Other 3,219,862 4,000,371
--------- ----------
22,734,847 25,549,504
---------- ----------
Merchandise inventories 285,703,289 333,686,950
Prepaid expenses 8,600,990 7,946,144
Income tax receivable 7,236,732 -
Deferred income taxes 9,198,000 2,120,000
---------- ----------
Total current assets 336,760,999 374,218,089
----------- -----------
Property, plant and equipment, at cost:
Land and buildings 25,064,423 24,988,513
Furniture, fixtures and equipment 115,099,770 119,614,758
Leasehold improvements 43,442,932 47,448,521
---------- ----------
183,607,125 192,051,792
Less accumulated depreciation and amortization 62,524,262 58,271,956
---------- -----------
Net property, plant and equipment 121,082,863 133,779,836
----------- -----------
Deferred income taxes 6,939,000 -
Other assets, at cost, less accumulated amortization 61,298,880 70,620,341
----------- -----------
$526,081,742 $578,618,266
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 1,500,000 $ 1,500,000
Accounts payable 105,113,721 120,792,457
Accrued expenses 25,066,874 15,504,950
Income taxes payable - 472,357
---------- -----------
Total current liabilities 131,680,595 138,269,764
----------- -----------
Deferred income taxes - 6,136,000
Other liabilities 2,598,026 6,377,762
Long-term debt, net of current portion 133,000,000 128,300,000
Senior subordinated debt 4,412,711 5,864,835
Convertible subordinated debt 70,353,000 70,353,000
Stockholders' equity:
Common stock, par value $.50 per share, authorized 40,000,000 shares,
13,872,647 shares issued and outstanding in 1996 (13,840,647 in 1995) 6,936,324 6,920,324
Preferred stock, par value $1.00 per share, authorized 2,000,000 shares
(none issued and outstanding) - -
Series A junior participating cumulative preferred stock, par value $1.00
per share, authorized 100,000 shares (none issued and outstanding) - -
Additional paid-in capital 115,213,017 115,074,822
Retained earnings 61,888,069 101,321,759
----------- -----------
Total stockholders' equity 184,037,410 223,316,905
----------- -----------
$526,081,742 $578,618,266
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
For the years ended February 3, 1996, January 28, 1995 and January 29, 1994
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
Net sales $1,020,412,703 $1,042,978,875 $918,877,733
Cost of sales 580,067,086 579,734,911 516,854,748
----------- ----------- -----------
Gross profit 440,345,617 463,243,964 402,022,985
Selling, administrative and general expenses 392,585,851 389,362,380 336,283,342
Depreciation and amortization 32,428,001 27,882,778 21,873,610
Restructuring charges 69,300,000 - -
---------- ----------- -----------
Operating income (loss) (53,968,235) 45,998,806 43,866,033
Interest income 526,188 635,574 703,778
Interest expense (10,983,067) (9,735,209) (8,145,769)
----------- ---------- ---------
Earnings (loss) before taxes (64,425,114) 36,899,171 36,424,042
Income tax expense (benefit) (25,823,000) 13,283,000 13,113,000
---------- ---------- ----------
Net earnings (loss) $(38,602,114) $ 23,616,171 $ 23,311,042
=========== =========== ===========
Earnings (loss) per common share:
Primary $ (2.79) $ 1.71 $ 1.70
=========== =========== ===========
Fully Diluted $ (2.79) $ 1.46 $ 1.45
=========== =========== ===========
Number of shares used to compute earnings (loss) per common share:
Primary 13,858,273 13,831,552 13,674,553
========== ========== ==========
Fully diluted 13,905,545 18,363,042 18,286,267
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders'
Equity For the years ended February 3, 1996, January 28,
1995 and January 29, 1994
<TABLE>
Additional Total
Common Stock Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
--------- -------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 30, 1993 13,474,165 $6,737,083 $109,827,161 $56,046,071 $172,610,315
Net income for the year ended
January 29, 1994 - - - 23,311,042 23,311,042
Shares issued in connection with
acquisition of Shoe Corporation
of America, Inc. 51,428 25,714 944,990 - 970,704
Exercise of stock options 129,232 64,616 1,089,955 - 1,154,571
Shares purchased by former Casual
Male stockholders 88,044 44,022 1,793,922 - 1,837,944
Conversion of convertible debt 49,820 24,910 998,392 - 1,023,302
Retirement of stock (42) (21) (3) - (24)
Dividends paid ($.06 per share) - - - (821,380) (821,380)
---------- ---------- ------------ ----------- ------------
Balance, January 29, 1994 13,792,647 6,896,324 114,654,417 78,535,733 200,086,474
---------- ---------- ----------- ----------- -----------
Net income for the year ended
January 28, 1995 - - - 23,616,171 23,616,171
Exercise of stock options 48,000 24,000 420,405 - 444,405
Dividends paid ($.06 per share) - - - (830,145) (830,145)
---------- ---------- ----------- ---------- ----------
Balance, January 28, 1995 13,840,647 6,920,324 115,074,822 101,321,759 223,316,905
---------- ---------- ----------- ----------- -----------
Net loss for the year ended
February 3, 1996 - - - (38,602,114) (38,602,114)
Exercise of stock options 32,000 16,000 138,195 - 154,195
Dividends paid ($.06 per share) - - - (831,576) (831,576)
---------- ---------- ----------- ----------- -----------
Balance, February 3, 1996 13,872,647 $6,936,324 $115,213,017 $ 61,888,069 $184,037,410
========== ========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended February 3, 1996, January 28, 1995
and January 29, 1994
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net earnings (loss) $ (38,602,114) $ 23,616,171 $ 23,311,042
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization:
Fixed assets 21,985,599 19,015,776 14,161,472
Deferred charges, intangible assets and
deferred financing costs 10,490,278 8,922,497 7,758,674
Deferred income taxes (20,153,000) 7,955,364 9,886,000
Loss on disposal of Fayva assets 29,900,000 - -
Change in:
Accounts receivable 3,088,464 8,466,255 (427,878)
Merchandise inventories 36,583,661 (56,854,448) (52,930,182)
Prepaid expenses (3,030,223) (1,449,914) (2,109,595)
Accounts payable (15,678,736) 12,529,534 (5,463,796)
Accrued expenses 9,561,924 (9,986,666) (12,878,976)
Income taxes payable/receivable (7,709,089) 1,165,288 (1,796,559)
Other liabilities (4,045,342) (7,267,692) (7,451,093)
---------- ---------- ----------
Net cash provided by (used in)
operating activities 22,391,422 6,112,165 (27,940,891)
---------- ---------- ----------
Cash flows from investing activities: Capital expenditures for:
Property, plant and equipment (28,062,433) (44,513,548) (24,115,405)
Other assets (1,379,958) (12,000,475) (2,480,695)
Net cash paid in acquisition of Shoe Corp. of America - - (2,698,507)
Payments received on note receivable 2,900,000 - -
---------- ----------- ----------
Net cash used in investing activities (26,542,391) (56,514,023) (29,294,607)
---------- ----------- ----------
Cash flows from financing activities:
Repayment of senior debt (1,500,000) (2,636,300) -
Proceeds from other long term debt 4,700,000 51,300,000 52,262,950
Release of restricted cash - 3,455,357 -
Proceeds from issuance of common stock, net of retirements 154,195 444,405 2,992,493
Payment of dividends (831,576) (830,145) (821,380)
---------- ---------- ----------
Net cash provided by financing activities 2,522,619 51,733,317 54,434,063
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (1,628,350) 1,331,459 (2,801,435)
Cash and cash equivalents at beginning of year 4,915,491 3,584,032 6,385,467
---------- ---------- ----------
Cash and cash equivalents at end of year $ 3,287,141 $ 4,915,491 $ 3,584,032
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial
Statements February 3, 1996, January 28, 1995
and January 29, 1994
(1) Summary of Significant Accounting Policies
Nature of Operations
J. Baker, Inc. and subsidiaries (the "Company") is engaged in the
retail sale of footwear and apparel through 2,229 locations in 48
states and the District of Columbia. The Company sells footwear
through 1,087 self-service licensed shoe departments in mass
merchandising department stores, through a total of 505 full and
semi-service licensed shoe departments in department and specialty
stores and through its Parade of Shoes chain of 168 women's shoe
stores. In all of these operations, the Company emphasizes the sale
of quality footwear at comparatively low prices. The Company is
engaged in the retail sale of apparel through its 400 store chain of
Casual Male Big & Tall men's stores which sells sportswear to the
larger size man, and through its 69 store chain of Work 'n Gear work
clothing stores which sell utility workwear, uniforms and
personalized work clothes, as well as uniforms for laboratory and
medical purposes.
Basis of Presentation and Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses. Actual results could differ from
these estimates.
Fiscal Year
The Company follows a 52 - 53 week fiscal year ending on the
Saturday nearest January 31. The fiscal year ended February 3, 1996
contained 53 weeks, and the fiscal years ended January 28, 1995 and
January 29, 1994 contained 52 weeks.
Fair Value of Financial Instruments
The carrying amount of cash, cash equivalents, trade receivables and
trade payables approximate fair value because of the short maturity
of these financial instruments. The fair value of the Company's
long-term instruments is estimated based on market values for
similar instruments. At February 3, 1996, the difference between the
carrying value of long-term instruments and their estimated fair
value is not material.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid instruments with
maturities of three months or less and are stated at cost which
approximates market.
Merchandise Inventories
Merchandise inventories, which consist entirely of finished goods,
are valued at the lower of cost or market, principally by the retail
inventory method.
Depreciation and Amortization of Property, Plant and Equipment
Depreciation and amortization of the Company's property, plant and
equipment are provided on the straight-line method over the
following periods:
<TABLE>
<S> <C>
Furniture and fixtures 7 years
Machinery and equipment 7 years
Leasehold improvements 10 years
Building, building improvements and
land improvements 40 years
</TABLE>
Maintenance and repairs are charged to expense as incurred. Major
renewals or replacements are capitalized. When properties are
retired or otherwise disposed of, the asset and related reserve
account are relieved and the resulting gain or loss, if any, is
credited or charged to earnings.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Earnings Per Common Share
Earnings per common share of the Company is based on the weighted
average number of shares of common stock outstanding during the
applicable period. Primary earnings per share is based on the
weighted average number of shares of common stock outstanding during
such period. Stock options and warrants are excluded from the
calculation since they have less than a 3% dilutive effect.
Fully diluted earnings per share is based on the weighted average
number of shares of common stock outstanding during the applicable
period. Included in this calculation is the dilutive effect of stock
options and warrants. Included in this calculation for the periods
ended January 28, 1995 and January 29, 1994 is the dilutive effect
of common stock issuable under the 7% convertible subordinated notes
due 2002. The common stock issuable under the 7% convertible
subordinated notes was not included in the calculation for the
period ended February 3, 1996 because its effect would be
antidilutive.
Revenue Recognition
The Company recognizes revenue at the time of sale in its retail
stores and at the time of shipment in its wholesale division.
Store Opening and Closing Costs
Direct incremental store opening costs are amortized to expense over
a twelve month period. All costs related to store closings are
expensed at the time of closing.
Deferred Lease Acquisition Costs
Costs incurred in connection with the acquisition of license
agreements have been classified as deferred lease acquisition costs
and are being amortized over the terms of the respective leases,
which range from three to twenty years.
The Company periodically reviews deferred lease acquisition costs to
assess recoverability based on the likelihood and level of ongoing
value of each licensor's agreement. Impairments in value would be
recognized in operating results if a permanent diminution were to
occur (see Notes 4 and 7).
Income Taxes
Deferred taxes are provided for using the asset and liability method
for temporary differences between financial and tax reporting.
Recent Accounting Pronouncements
On October 23, 1995, the Financial Accounting Standards Board issued
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123"). The provisions of this statement are effective for fiscal
years beginning after December 15, 1995.
As permitted under SFAS No. 123, the Company has elected not to
adopt the fair value based method of accounting for its stock-based
compensation plans, but will continue to account for such
compensation under the provisions of APB Opinion No. 25. The Company
will comply with the disclosure requirements of SFAS No.
123 in fiscal 1997.
The Company is required to implement Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed Of" in
fiscal 1997. As the Company continually evaluates the realizability
of long-lived assets, including goodwill, lease acquisition costs
and other intangible assets, the adoption of SFAS No. 121 is not
anticipated to have a material effect on the Company's financial
statements.
Reclassifications
Certain reclassifications have been made to the consolidated
financial statements of prior years to conform to the 1996
presentation.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Disposition of Fayva Shoe Division
In the year ended February 3, 1996, the Company recorded
restructuring charges of $69.3 million (which had an after-tax
effect of $41.6 million or $3.00 per share) as a result of the
liquidation of the Company's Fayva footwear division. Restructuring
charges include actual costs for employee severance and other
benefits of $3.5 million (a total of 2,545 full and part-time
employees were terminated), fixed asset write-offs of $18.5 million
and a loss on the disposal of inventory of $20.5 million. Also
included in restructuring charges is a charge of $26.8 million for
costs related to the disposition of the Fayva store leases.
Accrued at February 3, 1996 are severance and lease termination
costs of $13.3 million. These costs are expected to be paid by the
end of the next fiscal year.
(3) Acquisition of Shoe Corporation of America, Inc.
On November 19, 1993, the Company acquired 83% of the outstanding
common stock and all of the outstanding preferred stock of Tishkoff
Enterprises, Inc. of Columbus, Ohio ("TEI"), an operator of
full-service, semi- service and self-service licensed shoe
departments in department stores, specialty stores and discount
stores. The 83% interest in the outstanding common stock was
acquired from certain TEI stockholders in exchange for a total of
57,341 shares of the Company's common stock (6,001 of which shares
are being issued to former TEI stockholders in the fiscal year
ending February 1, 1997) and the right to receive payments equal in
the aggregate to 8.3% of the consolidated pre-tax earnings of TEI
over a six year period commencing January 29, 1994 (the "TEI
Contingent Payment"), with a maximum aggregate payment of
$4,980,000. The acquisition of all of the outstanding preferred
stock of TEI was made for a payment of $650,000 in cash. On December
13, 1993, the stockholders of TEI approved the merger of JBAK
Acquisition Corp., an Ohio corporation and a wholly owned subsidiary
of the Company, with and into TEI (the "Merger") and TEI became a
wholly owned subsidiary of the Company. In connection with the
Merger, the Company paid cash consideration to the remaining TEI
stockholders in the amount of $442,000, in payment for the remaining
17% interest in TEI common stock. Subsequent to the Merger, the
corporate name of TEI was changed to Shoe Corporation of America,
Inc. ("SCOA").
The acquisition was accounted for under the purchase method of
accounting and, accordingly, the results of operations of SCOA are
included in the consolidated statements of earnings since the date
of acquisition. The purchase price of $3,822,000, which includes
$500,000 of direct costs associated with the Merger, was allocated
to the assets and liabilities of SCOA based on their respective fair
values at November 19, 1993.
During the fiscal years ended February 3, 1996 and January 28, 1995,
the excess of cost over net assets acquired was adjusted by $266,000
and $970,000, respectively, for amounts accrued for the TEI
Contingent Payment right. In addition, during the fiscal year ended
January 28, 1995, the Company completed its analysis of the
allocation of the purchase price and adjusted downward the
preliminary estimate of the fair value of the acquired net assets by
$1,764,000 as follows:
<TABLE>
<S> <C>
Adjustments to reflect fair value of net assets:
Merchandise inventories $(2,282,000)
Deferred income taxes 1,065,000
Accrued expenses (547,000)
$(1,764,000)
</TABLE>
As a result, the increase in the excess of cost over net assets
acquired is included in Other Assets and is being amortized on a
straight-line basis over twenty years.
SCOA operated 505, 448 and 162 licensed footwear departments at
February 3, 1996, January 28, 1995 and January 29, 1994,
respectively. The increase in the number of licensed departments was
primarily a result of the acquisition of new accounts.
On April 19, 1996, the Company announced that it had executed a
letter of intent for the sale of its SCOA division. For further
information, see Note 19.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Bankruptcy Filings of Licensors
On June 23, 1995, Bradlees Stores, Inc. ("Bradlees") filed for
protection under Chapter 11 of the United States Bankruptcy Code. At
the time of the bankruptcy filing, the Company had outstanding
accounts receivable of approximately $1.8 million due from Bradlees.
Under bankruptcy law, Bradlees has the option of continuing
(assuming) the existing license agreement with the Company or
terminating (rejecting) that agreement. If the license agreement is
assumed, Bradlees must cure all defaults under the agreement and the
Company will collect in full the outstanding past due receivable.
The Company has no assurance that the agreement will be assumed or
that Bradlees will continue in business. Although the Company
believes that the rejection of the license agreement or the
cessation of Bradlees' business is not probable, in the event that
the agreement is rejected or Bradlees does not continue in business,
the Company believes it will have a substantial claim for damages.
If such a claim is necessary, the amount realized by the Company,
relative to the carrying values of Bradlees-related assets, will be
based on the relevant facts and circumstances. The Company does not
expect this filing under the Bankruptcy Code to have a material
adverse effect on future earnings. The Company's sales in the
Bradlees chain for the fiscal year ended February 3, 1996 were $59.8
million.
On October 18, 1995, Jamesway ("Jamesway"), then a licensor of the
Company, filed for protection under Chapter 11 of the United States
Bankruptcy Code and announced its intention to liquidate its
inventory, fixed assets and real estate and to cease operation of
its business in all of its 90 stores. The Company participated in
Jamesway's going out of business sales and liquidated substantially
all of its footwear inventory in the 90 Jamesway stores during the
going out of business sales. At the time of the bankruptcy filing,
the Company had outstanding accounts receivable of approximately
$1.4 million due from Jamesway. Since Jamesway ceased operation of
its business, the Company believes that rejection of its license
agreement is probable and has asserted a substantial claim for
damages. The Company does not expect the closing of the Jamesway
stores to have a material adverse effect on future earnings. The
Company's sales in the Jamesway chain for the fiscal year ended
February 3, 1996 were $24.3 million.
On April 26, 1990, Ames Department Stores, Inc., and related
entities ("Ames"), a significant licensor of the Company (see Notes
7 and 14), filed for protection under Chapter 11 of the United
States Bankruptcy Code. On December 18, 1992, the Company and Ames
executed Amendment No. 2 to the Ames license agreement and the
Company and Ames executed a certain Stipulation which was filed with
the United States Bankruptcy Court for the Southern District of New
York and approved on January 6, 1993, the consummation date of Ames'
Plan of Reorganization. The Stipulation provided that the license
agreement between Ames and the Company shall be modified and amended
and the license agreement assumed by Ames. Further, pursuant to the
Stipulation, the Company settled its $13.7 million pre-petition
claim with Ames and, in return, the Company received $5 million in
cash and a promissory note issued by Ames in the amount of $8.7
million bearing interest at the rate of 6.0% per annum and having a
final maturity on December 1, 1997. At February 3, 1996, the
outstanding balance of the Ames promissory note is $5.8 million. The
Stipulation further provided for a mortgage lien on and security
interest in the real property and buildings in Rocky Hill,
Connecticut comprising the executive offices of Ames, which mortgage
lien and security interest shall be used as security in repayment of
the promissory note, and which shall be senior to all other liens
and security interests except those granted in favor of certain
banks under a credit agreement with such banks.
Carried on the balance sheet at February 3, 1996 in Other Assets
(see Note 7) are deferred lease acquisition costs of $19.3 million
attributable to the Ames license agreement, which expires in 2009,
subject to earlier termination upon failure to meet certain
operating requirements. The Company is amortizing the deferred lease
acquisition costs of the Ames license agreement over the remaining
term of the license agreement, since the Company believes, based on
its assessment of the likelihood and level of ongoing business with
Ames, that the value of the license agreement supports the
historical carrying cost at February 3, 1996. Any net store closing
by Ames will likely reduce the value of the Ames license agreement
to a level below the current carrying value of the deferred lease
acquisition costs. This would result in a non-cash write-down of the
asset, which would be reflected in the Company's earnings. The
amount of the write-down would depend on the Company's historical
sales volume in the closed stores.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Accounts Receivable
Trade accounts receivable are principally comprised of amounts due
from landlords of the Company's licensed shoe departments. The
Company performs regular credit evaluations of its licensors, and
generally does not require collateral from its licensors.
The following is a summary of the activity affecting the allowance
for doubtful accounts receivable for the years ended February 3,
1996, January 28, 1995 and January 29, 1994:
<TABLE>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $1,972,723 $ 521,922 $ 382,417
Additions charged to expense 1,413,580 1,450,801 285,000
Write-offs, net of recoveries (169,054) - (145,495)
-------- -------- -------
Balance, end of year $3,217,249 $1,972,723 $ 521,922
========= ========= =========
</TABLE>
(6) Acquisition of The Casual Male
On February 2, 1991, the Company acquired the Casual Male, Inc.
pursuant to Casual Male's Plan of Reorganization under Chapter 11 of
the United States Bankruptcy Code. Former Casual Male stockholders
who elected to receive a contingent payment right in lieu of $.25 per
common share, up to a maximum of $1,000 per stockholder, were
entitled to receive a percentage of the net earnings of Casual Male
for the seven year period ending January 30, 1998, with a maximum
aggregate payment of $5.0 million (the "Contingent Payment"). On
April 12, 1993 the Contingent Payment Agreement was amended to
provide that participants in the Contingent Payment would instead
receive an aggregate of $2.4 million immediately in satisfaction of
the obligation of the Company to make the Contingent Payment. The
excess of net assets over the cost of the acquired business has been
reduced by the $2.4 million Contingent Payment, and the balance is
being amortized on a straight line basis over fifteen years.
(7) Other Assets
Other assets, net of accumulated amortization, at February 3, 1996
and January 28, 1995 were comprised of:
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Deferred lease acquisition costs, net of accumulated
amortization of $18,628,527 and $14,906,951 $ 29,799,508 $33,483,667
Systems development costs, net of accumulated
amortization of $9,566,062 and $6,674,202 14,165,479 15,910,645
Excess of costs over net assets acquired, net of
accumulated amortization of $1,828,479 and $1,211,133 10,131,228 10,482,967
Notes Receivable, net of current portion of
$2,900,000 and $2,900,000 3,888,000 6,741,000
Other intangible assets and deferred charges, net of
accumulated amortization of $2,556,558 and $2,925,233 2,372,428 3,115,002
Cash surrender value of officers' life insurance, net 539,306 474,128
Deposits 402,931 412,932
----------- -----------
$ 61,298,880 $ 70,620,341
=========== ===========
</TABLE>
Deferred lease acquisition costs consist primarily of payments made
in connection with the acquisition of license agreements and are
being amortized over the terms of the respective license agreements
(see Notes 1 and 4). Systems development costs are being amortized
on a straight line basis over eight years. The excess of costs over
net assets acquired is the result of the acquisitions of various
businesses and is being amortized over periods of fifteen to twenty
years. Notes receivable consist of a 6.0% note from Ames maturing on
December 1, 1997
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(see Note 4), and a $988,000 ($941,000 at January 28, 1995), 10.25%
note from Hills Department Store Company ("Hills") maturing on
September 30, 2003. Other intangible assets and deferred charges
consist primarily of costs incurred for the issuance of debt and are
being amortized over periods of three to ten years.
(8) Debt
Long-Term Debt
Long-term debt at February 3, 1996 and January 28, 1995 was
comprised of:
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Loans under revolving credit facility $133,000,000 $128,300,000
Weighted average interest rate 7.89% 6.75%
</TABLE>
The Company has a $240 million revolving credit facility on an
unsecured basis with Fleet National Bank of Massachusetts, The First
National Bank of Boston, Natwest Bank, N.A., The Yasuda Trust and
Banking Company, Ltd., Bank Hapoalim B.M., National City Bank,
Columbus, Standard Chartered Bank and Citizens Bank of Massachusetts
(the "Banks"). As amended to date, the aggregate commitment amount
under this revolving credit facility will be reduced by $10 million
on December 29, 1996. Borrowings under the revolving credit facility
can, at the discretion of the Company, be in the form of any
combination of loans, bankers' acceptances and letters of credit.
Loans under the revolving credit facility bear interest, at the
Company's discretion, at Fleet National Bank of Massachusetts'
corporate base rate or at the London Interbank Offered Rate (LIBOR)
plus a margin. The margin amount, as well as a commitment fee, is
determined based on a financial ratio as defined in the revolving
credit facility.
This facility expires in June, 1997. At February 3, 1996, the
Company had $58.3 million available for borrowing under this
facility.
Senior Subordinated Debt
In June 1989, the Company issued $35 million of senior subordinated
notes with detachable warrants which enable the holders to purchase
600,000 shares of the Company's common stock at a price of $20 per
share, subject to adjustments. At February 3, 1996, the detachable
warrants enable holders to purchase approximately 640,000 shares at
$18.80 per share. Subject to certain conditions, the Company may
repurchase all, but not less than all, of the outstanding warrants
for 150% of the then per share warrant exercise price. The senior
subordinated notes of $5,912,711 at February 3, 1996 ($7,364,835 at
January 28, 1995) are presented net of $87,289 ($135,165 at January
28, 1995), which reflects the unaccreted portion of the $1,710,000
value originally assigned to the detachable warrants. The value of
the warrants was recorded as additional paid-in capital and is being
accreted using the effective interest method.
The senior subordinated debt was reduced by $27.5 million in June
1992 with proceeds from the $70 million 7% convertible subordinated
notes referred to below. The senior subordinated notes are due in
installments of $1.5 million per year beginning in May 1995 with a
final payment in May 1999. Interest, at 11.21%, is payable
semiannually.
Convertible Subordinated Debt
Convertible subordinated debt at February 3, 1996 and January 28,
1995 was comprised of:
<TABLE>
1996 1995
---- ----
<S> <C> <C>
7% convertible subordinated notes $70,000,000 $70,000,000
Convertible debentures 353,000 353,000
---------- ----------
$70,353,000 $70,353,000
========== ==========
</TABLE>
In June 1992, the Company issued $70 million of 7% convertible
subordinated notes due 2002. The notes are convertible into common
stock at a conversion price of $16.125 per share, subject to
adjustment in certain events. The Company used the net proceeds to
repay all of the $20 million outstanding principal amount of its
senior
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
term notes, $27.5 million principal amount of its senior
subordinated notes, and a portion of outstanding bank indebtedness
under its unsecured revolving credit facility.
Prior to the Company's acquisition of Morse Shoe, Inc. ("Morse"),
94% of the Morse convertible debentures converted into Morse common
stock. Since the acquisition of Morse on January 30, 1993, holders
of $2.7 million of additional Morse convertible debentures converted
their debt into 49,820 shares of J. Baker common stock. The
remaining balance of $353,000 convertible debentures accrue no
interest until January 15, 1997, at which time the rate will be 8%,
and no principal will be payable until January 15, 2002. The debt is
subject, under certain circumstances, to mandatory conversion.
Approximately 6,500 shares of J. Baker common stock are reserved for
any future conversions of the remaining Morse convertible
debentures.
The Company's revolving credit facility and senior subordinated
notes contain various covenants and restrictive provisions,
including restrictions on the incurrence of additional indebtedness
and liens, the payment of dividends and the maintenance of specified
financial ratios, minimum levels of working capital and other
financial criteria. At February 3, 1996, the Company was in
compliance with such covenants.
The Company is restricted, under various debt agreements, from
paying cash dividends unless tangible net worth exceeds certain
required levels. As defined by the most restrictive of those
agreements, minimum tangible net worth, as so defined, was $183
million at February 3, 1996. At February 3, 1996, the Company's
tangible net worth, as so defined, was approximately $202 million.
Scheduled principal repayments of long-term debt, senior
subordinated notes and convertible subordinated debt for the next
five fiscal years and thereafter are as follows:
<TABLE>
<S> <C>
Fiscal year
ending January
1997 $ 1,500,000
1998 134,500,000
1999 1,500,000
2000 1,500,000
2001 -
Thereafter 70,353,000
</TABLE>
(9) Taxes on Earnings
Income tax expense (benefit) attributable to income (loss) from
continuing operations consists of:
<TABLE>
Current Deferred Total
------- -------- -------
<S> <C> <C> <C>
Year ended February 3, 1996:
Federal $(7,311,000) $(13,271,000) $(20,582,000)
State and city 1,641,000 (6,882,000) (5,241,000)
---------- ----------- -----------
$(5,670,000) $(20,153,000) $(25,823,000)
=========== =========== ===========
Year ended January 28, 1995:
Federal $ 4,132,000 $ 5,308,000 $ 9,440,000
State and city 2,100,000 1,743,000 3,843,000
---------- ----------- -----------
$ 6,232,000 $ 7,051,000 $13,283,000
========== ========== ==========
Year ended January 29, 1994:
Federal $ 1,773,000 $ 9,827,000 $11,600,000
State and city 1,454,000 59,000 1,513,000
---------- ----------- ----------
$ 3,227,000 $ 9,886,000 $13,113,000
========== =========== ===========
</TABLE>
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following is a reconciliation between the statutory federal
income tax rate and the Company's effective rate for the years ended
February 3, 1996, January 28, 1995 and January 29, 1994:
<TABLE>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate (35.0%) 35.0% 35.0%
State income taxes, net of federal
income tax benefit (5.3%) 6.8% 1.5%
Jobs tax credits (0.6%) (1.6%) (1.4%)
Change in beginning of year
balance of the valuation
allowance for deferred tax assets - (2.6%) 5.7%
Change in federal tax rate - - (1.2%)
Other 0.8% (1.6%) (3.6%)
------ ----- -----
(40.1%) 36.0% 36.0%
====== ===== =====
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at February 3, 1996 and January 28, 1995 are presented
below:
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to greater
acquired tax bases $ 550,000 $ 550,000
Inventory, principally due to additional costs
capitalized for tax purposes and greater
acquired tax bases 1,500,000 3,500,000
Intangible assets (71,000) (105,000)
Other assets 516,000 573,000
Nondeductible accruals and reserves 9,154,000 7,304,000
Operating loss and credit carryforwards 42,443,000 21,897,000
---------- ----------
Total gross deferred tax assets 54,092,000 33,719,000
Less valuation allowance (14,969,000) (14,969,000)
----------- ----------
Net deferred tax assets 39,123,000 18,750,000
----------- ----------
Deferred tax liabilities:
Fixed assets, principally due to accelerated tax
depreciation and lesser acquired tax bases (13,970,000) (13,767,000)
Intangible assets, principally due to
lesser acquired tax bases (6,426,000) (6,723,000)
Other liabilities (2,590,000) (2,276,000)
---------- ----------
Total gross deferred tax liabilities (22,986,000) (22,766,000)
---------- ----------
Net deferred tax asset (liability) $ 16,137,000 $ (4,016,000)
=========== ===========
</TABLE>
At February 3, 1996 and January 28, 1995, the net deferred tax asset
(liability) consisted of the following:
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Deferred tax asset - current $ 9,198,000 $ 2,120,000
Deferred tax asset (liability) - noncurrent 6,939,000 (6,136,000)
----------- -----------
$ 16,137,000 $ (4,016,000)
=========== ===========
</TABLE>
The valuation allowance for deferred tax assets as of January 28, 1995 was
$14,969,000. There was no change in the total valuation allowance for the year
ended February 3, 1996.
At February 3, 1996, the Company has net operating loss carryforwards and
general business credit carryforwards for federal income tax purposes of
approximately $87.0 million and $1.3 million, respectively, which expire in
years ended January, 2002 through January, 2011. The Company also has minimum
tax credit carryforwards of approximately $4.0 million available to reduce
future regular federal income taxes, if any, over an indefinite period.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Pension and Profit Sharing Plans
The Company has a noncontributory pension plan (the "Pension Plan") which
covers substantially all non-union employees and is administered by Trustees
who are officers of the Company.
The following table sets forth the Pension Plan's funded status at February 3,
1996 and January 28, 1995:
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $11,420,000 $ 7,637,000
Nonvested 1,053,000 704,000
---------- ----------
Total accumulated benefit obligations $12,473,000 $ 8,341,000
========== ==========
Plan assets at fair value $12,137,000 $10,183,000
Actuarial present value of projected benefit
obligations (17,100,000) (12,823,000)
----------- -----------
Deficiency of plan assets over
projected benefit obligations (4,963,000) (2,640,000)
Unrecognized prior service benefit (494,000) (90,000)
Unrecognized net transitional liability 1,100,000 1,221,000
Unrecognized net actuarial loss 2,612,000 229,000
---------- -----------
Accrued pension cost $(1,745,000) $(1,280,000)
========== ==========
</TABLE>
In December 1993, the Board of Directors of the Company established
a Supplemental Retirement plan (the "Supplemental Plan") to provide
benefits attributable to compensation in excess of $150,000, but
less than $254,064. The following table sets forth the Supplemental
Retirement plan's funded status at February 3, 1996 and January 28,
1995:
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 203,000 $ 23,000
Nonvested 89,000 10,000
-------- --------
Total accumulated benefit obligations $ 292,000 $ 33,000
======== ========
Plan assets at fair value $ - $ -
Actuarial present value of projected benefit obligations (829,000) (791,000)
--------- ---------
Deficiency of plan assets over projected
benefit obligations (829,000) (791,000)
Unrecognized prior service cost 433,000 594,000
Unrecognized net actuarial loss 80,000 10,000
--------- ---------
Accrued pension cost $(316,000) $(187,000)
======== =========
</TABLE>
Assumptions used to develop the plans' funded status were discount
rate (7.25% in 1996, 8.5% in 1995) and increase in compensation
levels (4.5%).
Plan assets of both the Pension Plan and the Supplemental Plan
consist primarily of common stock, U.S. government obligations,
mutual funds and insurance contracts.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Net pension cost for the years ended February 3, 1996, January 28,
1995 and January 29, 1994 included the following components:
<TABLE>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned
during the year $1,260,000 $1,223,000 $ 767,000
Interest cost on projected
benefit obligation 1,199,000 1,056,000 869,000
Actual return on plan assets (1,528,000) (66,000) (763,000)
Net amortization and deferral 655,000 (565,000) 234,000
--------- ---------- ---------
Net pension cost $1,586,000 $1,648,000 $1,107,000
========= ========== =========
</TABLE>
Assumptions used to develop the net periodic pension cost for fiscal
1996 were discount rate (8.5%), expected long-term return on assets
(9.0%) and increase in compensation levels (5.0%).
In January 1992, the Company implemented a qualified 401(k) profit
sharing plan available to full-time employees who meet the plan's
eligibility requirements. Under the 401(k) plan, the Company matches
25% (50% for the years ended January 28, 1995 and January 29, 1994)
of the qualified employee's contribution up to 3% of the employee's
salary. The total cost of the matching contribution was $441,000,
$915,000 and $1,033,000 for the years ended February 3, 1996,
January 28, 1995 and January 29, 1994, respectively.
The Company has established incentive bonus plans for certain
executives and employees. The bonus calculations are based on the
achievement of certain profit levels, as defined in the plans. For
the years ended February 3, 1996, January 28, 1995 and January 29,
1994, $50,000, $940,000 and $1,025,000, respectively, was provided
for bonuses under the plans.
The Company does not provide post-retirement benefits other than
pensions as defined under SFAS #106.
(11) Stock Options
The Company has options outstanding under the Amended and Restated
1985 Stock Option Plan, the 1992 Directors' Stock Option Plan and
the 1994 Equity Incentive Plan (the "Stock Option Plans"). In
addition, the Company has granted options which are not part of any
Stock Option Plan.
The Amended and Restated 1985 Stock Option Plan provided for the
issuance of incentive and non-qualified stock options to key
employees at an option price of not less than 100% of the fair
market value of a share on the date of grant of the option. Under
this plan, there are no shares of common stock available for grant
at February 3, 1996 as no options could be granted under this plan
after June, 1995.
In fiscal 1995, the Company established the 1994 Equity Incentive
Plan, which provides for the issuance of one million shares of
common stock to officers and employees in the form of stock options
(both incentive options and non-qualified options), grants of
restricted stock, grants of performance shares and unrestricted
grants of stock. At February 3, 1996, 75,000 shares of common stock
are reserved for grants of performance shares, and 676,800 shares of
common stock remain available for grant.
Options under the Amended and Restated 1985 Stock Option Plan and
the 1994 Equity Incentive Plan become exercisable either ratably
over four years or upon grant, at the discretion of the Board of
Directors, and expire ten years from the date of grant.
The 1992 Directors' Stock Option Plan provides for the automatic
grant of an option to purchase 2,500 shares of the Company's common
stock upon initial election to the Board of Directors and, in
addition, at the close of business on the fifth business day
following the Company's annual meeting of stockholders. Options
under the Directors' Plan are granted at a price equal to the
closing price of the Company's common stock on the date of grant.
They are exercisable in full as of the date of grant and expire ten
years from the date of grant. Under this plan, there are 32,500
shares of common stock available for grant at February 3, 1996.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
Data with respect to stock options granted is as follows:
Stock Option Plans Non-plan
------------------ ---------
Shares Price Range Shares Price Range
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
January 30, 1993, options outstanding 570,177 $ .95 - 17.38 62,500 $6.75 - 16.63
Granted 452,500 16.50 - 23.75 - -
Exercised (129,232) .95 - 17.00 - -
Cancelled (71,025) 4.88 - 21.75 - -
------- ------------- ------- -------------
January 29, 1994, options outstanding 822,420 .95 - 23.75 62,500 6.75 - 16.63
Granted 336,025 14.38 - 21.00 - -
Exercised (48,000) 4.88 - 17.00 - -
Cancelled (81,550) 4.88 - 21.75 - -
------- ------------- ------ -------------
January 28, 1995, options outstanding 1,028,895 .95 - 23.75 62,500 6.75 - 16.63
Granted 288,000 5.50 - 13.25 50,000 13.00
Exercised (22,000) .95 - 6.00 (10,000) 6.75
Cancelled (221,225) 4.88 - 23.75 - -
--------- ------------- ------ ------------
February 3, 1996, options outstanding 1,073,670 $ 4.88 - 22.38 102,500 $6.75 - 16.63
========= ============= ======= =============
Exercisable at February 3, 1996 486,602 $ 4.88 - 22.38 102,500 $6.75 - 16.63
========= ============= ======= =============
</TABLE>
(12) Commitments and Contingent Liabilities
Leases
The Company operates mainly from leased premises under license
agreements generally requiring payment of annual rentals contingent
upon sales. The Company leases its computers, vehicles and certain
of its offices and warehouse facilities, in addition to its retail
stores.
At February 3, 1996, minimum rental commitments under operating
leases are as follows:
<TABLE>
<S> <C> <C>
Fiscal Year
ending January Net minimum rentals Minimum sub-rentals
-------------- -------------------- -------------------
(in thousands)
1997 $ 44,138 $ 89
1998 40,847 83
1999 35,321 83
2000 26,174 73
2001 19,175 44
Thereafter 51,886 4
------- -----
$217,541 $ 376
======= =====
</TABLE>
Rent expense for the years ended February 3, 1996, January 28, 1995
and January 29, 1994 was as follows:
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
---- ----- ----
(in thousands)
Minimum rentals $ 52,284 $ 53,189 $ 46,012
Contingent rentals 93,289 90,275 78,694
------- ------- -------
145,573 143,464 124,706
Less sublease rentals 336 409 332
------- ------- -------
Net rentals $145,237 $143,055 $124,374
======= ======= =======
</TABLE>
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Other Commitments and Contingencies
The Company has employment agreements with certain of its officers
under which it is committed to pay an aggregate of approximately
$4.3 million through April, 1998.
During fiscal 1996, the Company's Board of Directors adopted
executive severance agreements which create certain liabilities in
the event of the termination of the covered executives within three
years following a change of control of the Company or the
termination of certain key executives of the Company. The aggregate
commitment amount under these executive severance agreements, should
all twelve covered employees be terminated, is approximately $1.8
million.
The Company also has consulting agreements under which it is
required to pay an aggregate of approximately $1.2 million through
fiscal 2001.
At February 3, 1996 and January 28, 1995, the Company was
contingently liable under letters of credit totalling $18.8 million
and $31.8 million, respectively. These letters of credit, which have
terms of one month to one year, are used primarily to collateralize
the Company's obligations to third parties for the purchase of
inventory. The fair value of these letters of credit is estimated to
be the same as the contract values based on the nature of the fee
arrangements with the issuing banks. No material loss is anticipated
due to the non-performance by counterparties to these arrangements.
On November 10, 1993, a federal jury in Minneapolis, MN returned a
verdict assessing royalties of $1,550,000, and additional damages of
$1,500,000, against the Company in a patent infringement suit
brought by Susan Maxwell with respect to a device used to connect
pairs of shoes. Certain post trial motions were filed by Susan
Maxwell seeking treble damages, attorney's fees and injunctive
relief, which motions were granted on March 10, 1995. Judgment has
been entered for Maxwell. The Company has appealed the judgment and
believes it has substantial legal arguments to justify the judgment
being overturned in whole or in part at the appellate level. In the
event the Company were not to prevail, however, total damages,
including attorney's fees and interest, are estimated to be
approximately $11 million.
A complaint was also filed by Susan Maxwell in November, 1992
against Morse Shoe, Inc. ("Morse"), a subsidiary of the Company,
alleging infringement of the patent referred to above. The discovery
phase of the case has concluded, and a trial date will likely be set
in the next several months. The Company believes that Ms. Maxwell's
recovery against Morse, if any, will be less than her recovery
against the Company because the number of allegedly infringing pairs
of shoes is substantially less than those involved in the Company's
case.
Morse has filed a breach of contract lawsuit against a former
wholesale customer. There can be no assurance of what amount the
Company will realize as a result of this lawsuit.
(13) Stockholders' Equity
The Board of Directors of the Company is authorized by vote or
votes, from time to time adopted, to provide for the issuance of
Preferred Stock in one or more series and to fix and state the
voting powers, designations, preferences and relative participating,
optional or other special rights of the shares of each series and
the qualifications, limitations and restrictions thereof.
On December 15, 1994, the Board of Directors of the Company adopted
a Shareholder Rights Agreement (the "Rights Agreement") designed to
enhance the Company's ability to protect shareholder interests and
to ensure that shareholders receive fair treatment in the event any
coercive takeover attempt of the Company is made in the future.
Pursuant to the Rights Agreement, the Board of Directors declared a
dividend distribution of one preferred stock purchase right (the
"Right") for each outstanding share of common stock of the Company
to shareholders of record as of the close of business on January 6,
1995. Each right entitles the holder to purchase from the Company a
unit consisting of one ten thousandth (1/10,000) of a share of
Series A Junior Participating Cumulative Preferred Stock, par value
$1.00 per share, at a cash exercise price of $70 per unit, subject
to adjustment, upon the occurrence of certain events as are set
forth in the Rights Agreement. These events include the earliest to
occur of (i) acquisition of 15% or more of the outstanding shares of
common stock of the Company
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
by any person or group (ii) the commencement of a tender or exchange
offer that would result upon its consummation in a person or a group
becoming the beneficial owner of 15% or more of the outstanding
common stock of the Company or (iii) the determination by the Board
of Directors that any person is an "Adverse Person", as defined in
the Rights Agreement. The Rights are not exercisable until or
following the occurrence of one of the above events and will expire
on December 14, 2004, unless previously redeemed or exchanged by the
Company as provided in the Rights Agreement.
(14) Principal Licensor
Sales in licensed departments operated under the Ames license
agreement accounted for 9.4%, 9.5% and 11.5% of the Company's net
sales in the years ended February 3, 1996, January 28, 1995 and
January 29, 1994, respectively.
(15) Segment Information
The Company is a specialty retailer conducting business through
retail stores in two business segments: footwear and apparel.
Information about operations for each of these segments is
summarized as follows:
<TABLE>
Year Ended
--------------------------------------------------------------
February 3, 1996 January 28, 1995 January 29, 1994
---------------- ---------------- ----------------
(53 weeks) ($ in thousands)
<S> <C> <C> <C>
Footwear
Net sales $757,091 $818,220 $734,827
Restructuring costs (69,300) - -
Operating profit (loss) (51,768) 44,993 43,382
Identifiable assets 377,530 456,552 396,958
Depreciation and amortization 20,524 20,363 15,075
Additions to property, equipment and
leasehold improvements 13,271 31,298 13,814
Apparel
Net sales $263,322 $224,759 $184,051
Operating profit 24,814 26,974 23,802
Identifiable assets 104,923 89,111 65,842
Depreciation and amortization 6,973 4,130 2,373
Additions to property, equipment and
leasehold improvements 10,461 11,570 8,654
Consolidated
Net sales $1,020,413 $1,042,979 $918,878
Restructuring costs (69,300) - -
Operating profit (loss) before general
corporate expense (26,954) 71,967 67,184
General corporate expense (27,014) (25,968) (23,318)
Interest expense, net (10,457) (9,100) (7,442)
Earnings (loss) before income taxes $ (64,425) $ 36,899 $ 36,424
Identifiable assets $482,453 $545,663 $462,800
Corporate assets 43,629 32,955 39,696
Total assets $526,082 $578,618 $502,496
Depreciation and amortization $ 32,428 $ 27,883 $ 21,874
Additions to property, equipment and
leasehold improvements $ 28,062 $ 44,514 $ 24,115
</TABLE>
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(16) Selected Quarterly Financial Data (Unaudited)
<TABLE>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Year ended February 3, 1996
Net sales $231,385 $272,520 $245,255 $271,253 $1,020,413
Gross profit 103,532 120,202 104,600 112,012 440,346
Net earnings (loss) $ 638 $ 1,397 $(41,328) $ 691 $ (38,602)
======= ======= ======== ======= =========
Earnings (loss) per common share:
Primary $ .05 $ .10 $ (2.98) $ .05 $ (2.79)
======= ======= ======= ======= =========
Fully diluted $ .05 $ .10 $ (2.98) $ .05 $ (2.79)
======= ======= ======= ======= =========
Year ended January 28, 1995
Net sales $221,338 $256,336 $262,015 $303,290 $1,042,979
Gross profit 97,219 117,289 119,349 129,387 463,244
Net earnings $ 3,197 $ 7,134 $ 6,592 $ 6,693 $ 23,616
======= ======= ======== ======= ========
Earnings per common share:
Primary $ .23 $ .52 $ .47 $ .49 $ 1.71
======= ======= ======= ======= =========
Fully diluted $ .22 $ .43 $ .40 $ .41 $ 1.46
======= ======= ======= ======= =========
</TABLE>
(17) Advertising Costs
Advertising costs are charged to expense as incurred. The Company
incurred advertising costs of $20.5 million, $20.1 million and $16.5
million in the years ended February 3, 1996, January 28, 1995 and
January 29, 1994, respectively.
(18) Supplemental Schedules to Consolidated Statements of Cash Flows
<TABLE>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash paid for interest $ 11,069,341 $ 8,765,653 $ 6,799,091
Cash paid for income taxes $ 2,039,089 $ 4,162,348 $ 5,022,668
=========== ============ ============
Common stock issued in connection
with the acquisition of Shoe
Corporation of America (see Note 3) $ 970,704
============
Non-cash financing activities:
Conversion of subordinated debt (see Note 8) $ 2,707,000
============
Non-cash investing activities:
Notes receivable (see Notes 4 and 7) $ 47,000 $ 95,000 $ 846,000
============ =========== ============
</TABLE>
(19) Subsequent Event
On April 19, 1996, the Company announced that it had executed a
letter of intent for the sale of its SCOA division to an entity to be
formed by Bain Capital along with Dennis B. Tishkoff, SCOA's
President, and division management. The transaction is subject to
certain conditions, including the negotiation and execution of a
definitive purchase agreement. The transaction should result in a
positive impact on liquidity, although the Company may incur a
one-time restructuring charge should the transaction be consummated.
Sales in the Company's SCOA division were $183.6 million for the
fiscal year ended February 3, 1996.
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing in the Proxy Statement under the captions
"ELECTION OF DIRECTORS", "Information About Board of Directors and Committees",
"Executive Compensation" and "Employment Arrangements" is incorporated herein by
this reference.
EXECUTIVE COMPENSATION
The information appearing in the Proxy Statement under the caption
"Executive Compensation", "Employment Arrangements" and "Information About Board
of Directors and Committees" is incorporated herein by this reference.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing in the Proxy Statement under the caption "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" is incorporated herein by
this reference.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing in the Proxy Statement under the caption "Certain
Relationships and Related Transactions" is incorporated herein by this
reference.
PART IV
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1,2.The financial statements, notes thereto, and independent auditors'
report listed in the Index to Consolidated Financial Statements set
forth in Item 8.
3. The Exhibits listed in the Exhibit Index.
(b) None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
J. Baker, Inc.
Registrant)
By/s/Sherman N. Baker By/s/Jerry M. Socol
Sherman N. Baker Jerry M. Socol
Chairman of the Board President and Chief
Executive Officer
By/s/Philip G. Rosenberg By/s/Alan I. Weinstein
Philip G. Rosenberg Alan I. Weinstein
First Senior Vice President Senior Executive Vice President
and Principal Accounting Officer and Principal Financial Officer
April 30, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
/s/Sherman N. Baker /s/J. Christopher Clifford
Sherman N. Baker, Director J. Christopher Clifford, Director
/s/Ervin Cruce /s/Douglas Kahn
Ervin Cruce, Director Douglas Kahn, Director
/s/David Pulver /s/Melvin M. Rosenblatt
David Pulver, Director Melvin M. Rosenblatt, Director
/s/Nancy Ryan /s/Stanley Simon
Nancy Ryan, Director Stanley Simon, Director
/s/Jerry M. Socol
Jerry M. Socol, Director
All as of April 30, 1996
<PAGE>
EXHIBITS
Filed with
Annual Report on Form 10-K
of
J. BAKER, INC.
555 Turnpike Street
Canton, MA 02021
For the Year Ended February 3, 1996
<PAGE>
EXHIBIT INDEX
<TABLE>
Exhibit Page No.
<S> <C> <C>
3. Articles of Organization and By-Laws
(.01) Amended and Restated Articles of Organization of the Company, *
as filed with the Secretary of the Commonwealth of Massachusetts
on September 26, 1990 (filed as Exhibit 3.01 to the Company's
Form 10-K Report for the year ended February 2, 1991).
(.02) By-Laws of the Company, as amended by the Board of Directors *
on September 11, 1990 (filed as Exhibit 19.01 to the Company's
Form 10-Q Report for the quarter ended November 3, 1990).
4. Instruments Defining the Rights of Security Holders, Including Indentures
(.01) Senior Notes and Senior Subordinated Notes with Stock Purchase *
Warrants dated as of May 1, 1989 (filed as Exhibit 4.01 to the
Company's Form 10-Q Report for the quarter ended July 29, 1989).
(.02) Amendment dated as of November 13, 1995 to Senior Subordinated *
Note Agreement dated May 1, 1989 (filed as Exhibit 4.02 to the
Company's Form 10-Q Report for the quarter ended October 28, 1995).
(.03) Indenture dated as of January 15, 1992 by and between Morse Shoe, *
Inc. and State Street Bank and Trust Company as Trustee with
respect to Convertible Subordinated Debentures due 2002 (filed as
Exhibit 4.12 to the Company's Form 10-K Report for the year ended
January 30, 1993).
(.04) First Supplemental Indenture dated as of January 30, 1993 to *
the Indenture dated January 15, 1992 under which Convertible
Subordinated Debentures Due 2002 were issued by Morse Shoe, Inc.
(filed as Exhibit 4.01 to the Company's Form 10-Q Report for the
quarter ended May 1, 1993).
(.05) Indenture dated as of June 12, 1992 by and between J. Baker, Inc. *
and The First National Bank of Boston as Trustee with respect to
7% Convertible Subordinated Notes due 2002 (filed as Exhibit 4.08 to
the Company's Form 10-Q Report for the quarter ended August 1,
1992).
(.06) Revolving Credit and Loan Agreement by and among JBI, Inc., J. *
Baker, Inc. and Fleet National Bank of Massachusetts, et al
(formerly Shawmut Bank, N.A.), dated as of February 1, 1993
(filed as Exhibit 4.03 to the Company's Form 10-K Report for the
year ended January 30, 1993).
(.07) Guarantee Agreement dated as of February 1, 1993, between J. *
Baker, Inc., Fleet National Bank of Massachusetts, et al, and
subsidiaries of J. Baker, Inc. (filed as Exhibit 4.09 to the
Company's Form 10-K Report for the year ended January 30, 1993).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
(.08) Security Agreement dated as of February 1, 1993, between JBI, *
Inc., J. Baker, Inc., and Fleet National Bank of Massachusetts,
et al (filed as Exhibit 4.10 to the Company's Form 10-K Report for
the year ended January 30, 1993).
(.09) Stock Pledge Agreement dated as of February 1, 1993 by and *
between JBI, Inc., J. Baker, Inc., Fleet National Bank of
Massachusetts, et al, and subsidiaries of J. Baker, Inc.
(filed as Exhibit 4.11 to the Company's Form 10-K Report
for the year ended January 30, 1993).
(.10) First Amendment and Waiver Agreement by and among JBI, Inc., J. *
Baker, Inc, and Fleet National Bank of Massachusetts, et al,
dated as of November 19, 1993 (filed as Exhibit 4.01 to the
Company's Form 10-Q Report for the quarter ended October 30, 1993).
(.11) Assumption Agreement by Tishkoff Enterprises, Inc. dated as *
of November 19, 1993 (filed as Exhibit 4.02 to the Company's
Form 10-Q Report for the quarter ended October 30, 1993).
(.12) First Amendment to Pledge Agreement by and among JBI, Inc., J. *
Baker, Inc. and Fleet National Bank of Massachusetts, et al,
dated as of November 19, 1993 (filed as Exhibit 4.03 to the
Company's Form 10-Q Report for the quarter ended October 30, 1993).
(.13) Second Amendment to Pledge Agreement by and among JBI, Inc., J. *
Baker, Inc. and Fleet National Bank of Massachusetts, et al,
dated as of December 30, 1993 (filed as Exhibit 4.14 to the
Company's Form 10-K Report for the year ended January 29, 1994).
(.14) Assumption Agreement by Shoe Corporation of America, Inc. dated as *
of December 30, 1993 (filed as Exhibit 4.15 to the Company's
Form 10-K Report for the year ended January 29, 1994).
(.15) Second Amendment Agreement to Revolving Credit and Loan Agreement *
by and among JBI, Inc, J. Baker, Inc. and Fleet National Bank of
Massachusetts, et al, dated as of April 29, 1994 (filed as Exhibit
4.01 to the Company's Form 10-Q Report for the quarter ended April
30, 1994).
(.16) Third Amendment Agreement to Revolving Credit and Loan Agreement *
by and among JBI, Inc., J. Baker, Inc., and Fleet National Bank
of Massachusetts, et al, dated as of December 1, 1994 (filed as
Exhibit 4.01 to the Company's Form 10-Q Report for the quarter ended
October 29, 1994).
(.17) Fourth Amendment Agreement to Revolving Credit and Loan Agreement *
by and among JBI, Inc., J. Baker, Inc. and Fleet National Bank of
Massachusetts, et al, dated as of March 6, 1995 (filed as Exhibit
4.16 to the Company's Form 10-K Report for the year ended January
28, 1995).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
(.18) Fifth Amendment Agreement to Revolving Credit and Loan Agreement *
by and among JBI, Inc., J. Baker, Inc. and Fleet National Bank
of Massachusetts, et al, dated as of May 19, 1995 (filed as Exhibit
4.01 to the Company's Form 10-Q Report for the quarter ended April
29, 1995).
(.19) Assumption Agreement between TCMB&T and Fleet National Bank *
of Massachusetts, et al, dated as of May 19, 1995 (filed as
Exhibit 4.02 to the Company's Form 10-Q Report for the quarter
ended April 29, 1995).
(.20) Second Amendment Agreement to Pledge Agreement among JBI, Inc., *
J. Baker, Inc. and Fleet National Bank of Massachusetts, et al,
dated as of May 19, 1995 (filed as Exhibit 4.03 to the Company's
Form 10-Q Report for the quarter ended April 29, 1995).
(.21) Sixth Amendment Agreement to Revolving Credit and Loan Agreement *
by and among JBI, Inc., J. Baker, Inc. and Fleet National Bank of
Massachusetts, et al, dated as of September 12, 1995 (filed as
Exhibit 4.01 to the Company's Form 10-Q Report for the quarter ended
July 29, 1995).
(.22) Seventh Amendment Agreement to Revolving Credit and Loan *
Agreement by and among JBI, Inc., J. Baker, Inc. and Fleet
National Bank of Massachusetts, et al, dated as of November 17, 1995
(filed as Exhibit 4.01 to the Company's Form 10-Q Report for the
quarter ended October 28, 1995).
(.23) Shareholder Rights Agreement between J. Baker, Inc. and Fleet *
National Bank of Massachusetts, dated as of December 15, 1994
(filed as Exhibit 4.01 to the Company's Form 8-K Report dated
December 15, 1994).
10. Material Contracts
(.01) License Agreement between Ames Department Stores, Inc., et al and *
JBI Holding Company, Inc. (filed as Exhibit 10.01 to the Company's
Form 10-K Report for the year ended January 30, 1988).
(.02) Agreement between JBI Holding Company, Inc. and JBI, Inc. re: *
Assignment of Ames License Agreement (filed as Exhibit 10.02 to
the Company's Form 10-K Report for the year ended January 30,
1988).
(.03) Amendment No. 1 dated April 29, 1989 to Agreement between Ames *
Department Stores, Inc. and JBI Holding Company, Inc. (filed as
Exhibit 10.04 to the Company's Form 10-Q Report for the quarter
ended April 29, 1989).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
(.04) Amendment No. 2 dated December 18, 1992, to Agreement between *
Ames Department Stores, Inc. and JBI Holding Company, Inc. (filed
as Exhibit 10.04 to the Company's Form 10-K Report for the year
ended January 30, 1993).
(.05) Guaranty and Indemnity Agreement dated April 28, 1989 between J. *
Baker, Inc. and Ames Department Stores, Inc. (filed as Exhibit
10.05 to the Company's Form 10-Q Report for the quarter ended April
29, 1989).
(.06) Plan of Reorganization of The Casual Male Corporation dated *
November 1, 1990 as revised November 20, 1990 (filed as Exhibit
2.01 to the Company's Form 10-Q Report for the quarter ended
November 3, 1990).
(.07) Executive Employment Agreement dated March 25, 1993 between *
Sherman N. Baker and J. Baker, Inc. (filed as Exhibit 10.01
to the Company's Form 10-Q Report for the quarter ended
July 31, 1993).
(.08) Amendment to Employment Agreement between J. Baker, Inc. and *
Sherman N.Baker, dated March 31, 1995 (filed as Exhibit 4.10
to the Company's Form 10-K Report for the year ended January
28, 1995).
(.09) Amendment to Employment Agreement between J. Baker, Inc. and **
Sherman N. Baker, dated March 31, 1996, attached.
(.10) Executive Employment Agreement between J. Baker, Inc. and Alan *
I. Weinstein, dated March 25, 1993 (filed as Exhibit 10.04 to the
Company's Form 10-Q Report for the quarter ended July 31, 1993).
(.11) Amendment to Employment Agreement between J. Baker, Inc. and Alan *
I. Weinstein, dated April 27, 1994 (filed as Exhibit 10.01 to the
Company's Form 10-Q Report for the quarter ended July 30, 1994).
(.12) Amendment to Employment Agreement between J. Baker, Inc. and Alan *
I. Weinstein, dated April 25, 1995 (filed as Exhibit 10.01 to the
Company's Form 10-Q Report for the quarter ended April 29, 1995).
(.13) Amendment to Employment Agreement between J. Baker, Inc. and Alan **
I. Weinstein, dated March 7, 1996, attached.
(.14) Amendment to Employment Agreement between J. Baker, Inc. and Alan **
I. Weinstein, dated April 5, 1996, attached.
(.15) Executive Employment Agreement between J. Baker, Inc. and Jerry *
M. Socol, dated March 25, 1993 (filed as Exhibit 10.11 to the
Company's Form 10-K Report for the year ended January 29, 1994).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
(.16) Amendment to Employment Agreement between J. Baker, Inc. and Jerry *
M. Socol, dated June 9, 1994 (filed as Exhibit 10.01 to the
Company's Form 10-Q Report for the quarter ended July 29, 1995).
(.17) Amendment to Employment Agreement between J. Baker, Inc. and Jerry *
M. Socol, dated July 14, 1995 (filed as Exhibit 10.02 to the
Company's Form 10-Q Report for the quarter ended July 29, 1995).
(.18) Amendment to Employment Agreement between J. Baker, Inc. and Jerry **
M. Socol, dated March 7, 1996, attached.
(.19) Amendment to Employment Agreement between J. Baker, Inc. and Jerry **
M. Socol, dated April 5, 1996, attached.
(.20) Executive Employment Agreement between J. Baker, Inc. and Larry I. *
Kelley, dated March 25, 1993 (filed as Exhibit 10.06 to the
Company's Form 10-Q Report for the quarter ended July 31, 1993).
(.21) Amendment to Employment Agreement between J. Baker, Inc. and Larry *
I. Kelley, dated April 27, 1994 (filed as Exhibit 10.02 to the
Company's Form 10-Q Report for the quarter ended July 30, 1994).
(.22) Amendment to Employment Agreement between J. Baker, Inc. and Larry *
I. Kelley, dated May 2, 1995 (filed as Exhibit 10.02 to the
Company's Form 10-Q Report for the quarter ended April 29, 1995).
(.23) Amendment to Employment Agreement between J. Baker, Inc. and Larry *
I. Kelley, dated November 7, 1995 (filed as Exhibit 10.03 to the
Company's Form 10-Q Report for the quarter ended October 28, 1995)
(.24) Amendment to Employment Agreement between J. Baker, Inc. and Larry **
I. Kelley, dated April 5, 1996, attached.
(.25) Promissory Note of Larry I. Kelley dated June 3, 1991 (filed as *
Exhibit 10.33 to the Company's Form 10-K Report for the year ended
February 1, 1992).
(.26) Promissory Note of Larry I. Kelley dated February 2, 1993 (filed *
as Exhibit 10.15 to the Company's Form 10-K Report for the year
ended January 29, 1994).
(.27) Promissory Note of Larry I. Kelley dated April 30, 1993 (filed as *
Exhibit 10.16 to the Company's Form 10-K Report for the year ended
January 29, 1994).
(.28) Executive Employment Agreement dated as of November 1, 1993 *
between Stuart M. Needleman and J. Baker, Inc. (filed as Exhibit
10.03 to the Company's Form 10-Q Report for the quarter ended
October 30, 1993).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
(.29) Amendment to Employment Agreement between J. Baker, Inc. and *
Stuart M. Needleman, dated February 13, 1995 (filed as Exhibit
10.24 to the Company's Form 10-K Report for the year ended January
28, 1995).
(.30) Amendment to Employment Agreement between J. Baker, Inc. and *
Stuart M. Needleman, dated November 10, 1995 (filed as Exhibit
10.04 to the Company's Form 10-Q Report for the quarter ended
October 28, 1995).
(.31) Executive Employment Agreement dated as of November 19, 1993 *
between Dennis B. Tishkoff and J. Baker, Inc. (filed as Exhibit
10.04 to the Company's Form 10-Q Report for the quarter ended
October 30, 1993).
(.32) Amendment to Employment Agreement between J. Baker, Inc. and *
Dennis B. Tishkoff, dated February 8, 1995 (filed as Exhibit
10.26 to the Company's Form 10-K Report for the year ended January
28, 1995).
(.33) Amendment to Employment Agreement between J. Baker, Inc. and *
Dennis B. Tishkoff, dated April 25, 1995 (filed as Exhibit
10.03 to the Company's Form 10-Q Report for the quarter ended April
29, 1995).
(.34) Amendment to Employment Agreement between J. Baker, Inc. and *
Dennis B. Tishkoff, dated November 26, 1995 (filed as Exhibit
10.05 to the Company's Form 10-Q Report for the quarter ended
October 28, 1995).
(.35) Executive Employment Agreement between J. Baker, Inc. and James *
Lee, dated January 26, 1995 (filed as Exhibit 10.27 to the
Company's Form 10-K Report for the year ended January 28, 1995).
(.36) Amendment to Employment Agreement between J. Baker, Inc. and *
James D. Lee, dated November 6, 1995 (filed as Exhibit 10.02
to the Company's Form 10-Q Report for the quarter ended
October 28, 1995).
(.37) Forgiveness Loan made by James Lee in favor of Morse Shoe, Inc., *
dated August 26, 1994 (filed as Exhibit 10.03 to the Company's
Form 10-Q Report for the quarter ended July 29, 1995).
(.38) Promissory Note made by James Lee in favor of J. Baker, Inc., *
dated May 19, 1995 (filed as Exhibit 10.04 to the Company's Form
10-Q Report for the quarter ended July 29, 1995).
(.39) Executive Employment Agreement between J. Baker, Inc. and David **
A. Levin, dated June 12, 1995, attached.
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
(.40) Amendment to Employment Agreement between J. Baker, Inc. and **
David A. Levin, dated April 5, 1996, attached.
(.41) Severance Compensation Agreement between J. Baker, Inc. and **
Philip G. Rosenberg, dated November 1, 1995, attached.
(.42) J. Baker, Inc. Amended and Restated 1985 Stock Option Plan (filed *
as Exhibit 19.02 to the Company's Form 10-Q Report for the quarter
ended August 1, 1992).
(.43) J. Baker, Inc. 1994 Equity Incentive Plan dated as of March 29, *
1994 (filed as Exhibit 10.23 to the Company's Form 10-K Report
for the year ended January 29, 1994).
(.44) J. Baker, Inc. 1992 Directors Stock Option Plan dated as of *
April 13, 1992 (filed as Exhibit 19.03 to the Company's Form
10-Q Report for the quarter ended August 1, 1992).
(.45) Stock Purchase Agreement by and among J. Baker, Inc. and Tishkoff *
Enterprises, Inc. and certain stockholders of Tishkoff Enterprises, Inc.
dated November 19, 1993 (filed as Exhibit 2.01 to the Company's Form
10-Q Report dated October 30, 1993).
(.46) Mortgage and Security Agreement dated as of December 30, 1992 by *
and between JBI Holding Company, Inc. and Ames Department Stores,
Inc., (filed as Exhibit 10.22 to the Company's Form 10-K Report for
the year ended January 30, 1993).
(.47) Promissory Note dated as of December 30, 1992 made by Ames *
Department Stores, Inc. in favor of JBI Holding Company, Inc.
(filed as Exhibit 4.14 to the Company's Form 10-K Report for the
year ended January 30, 1993).
(.48) Agreement and Plan of Reorganization by and among J. Baker, Inc., *
Morse Acquisition, Inc. and Morse Shoe, Inc. dated October 22,
1992, as amended by Letter Amendments dated December 7, 1992 and
December 10, 1992 (filed as Exhibits 2.01-2.03 to the Company's Form
10-Q Report dated October 31, 1992).
(.49) Agreement of Merger among J. Baker, Inc., JBAK Acquisition Corp. *
and Tishkoff Enterprises, Inc. dated December 3, 1993 (filed as
Exhibit 10.30 to the Company's Form 10-K Report for the year ended
January 29, 1994).
(.50) Agency Agreement by and between Gordon Brothers Partners, Inc. *
and Morse Shoe, Inc., dated September 22, 1995 (filed as Exhibit
10.01 to the Company's Form 10-Q Report for the quarter ended
October 28, 1995).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
11. Statement re: Computation of Primary and Fully Diluted Earnings **
Per Share, attached.
12. Statement re: Computation of Earnings to Fixed Charges, attached. **
22. Subsidiaries of the Registrant, attached. **
23. Consent of KPMG Peat Marwick, attached. **
27. Financial Data Schedule, attached. **
</TABLE>
* Incorporated herein by reference
** Included herein
<PAGE>
EXHIBIT 10.09
SECOND AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED MARCH 25, 1993
Reference is made to the Executive Employment Agreement dated as of
March 25, 1993, as amended on March 31, 1995 (the "Agreement") by and between J.
Baker, Inc. and Sherman N. Baker. Pursuant to paragraph 19 of the Agreement and
in order to further amend certain provisions of the Agreement, the Agreement is
hereby amended as follows:
1. Paragraph 3(a) of the Agreement entitled "Compensation" is hereby
amended by deleting the figure "$315,000" in the third line thereof and
inserting in its place the figure "$283,500".
2. Paragraph 6 of the Agreement is hereby amended by deleting the
phrase "ending on April 1, 1996" in the fifth line thereof and inserting in its
place the phrase "ending on April 1, 1997".
3. All other terms of the Agreement shall remain unchanged and
continue in full force and effect.
J. BAKER, INC.
By:/s/ Jerry M. Socol March 31, 1996
Jerry M. Socol Date
President and
Chief Executive Officer
/s/ Sherman N. Baker March 31, 1996
Sherman N. Baker Date
<PAGE>
EXHIBIT 10.13
THIRD AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED MARCH 25, 1993
Reference is made to the Executive Employment Agreement dated as of
March 25, 1993 as amended by an Amendment dated April 27, 1994 and a Second
Amendment dated April 25, 1995 (the "Agreement") by and between J. Baker, Inc.
and Alan I. Weinstein. Pursuant to paragraph 19 of the Agreement and in order
to further amend certain provisions of the Agreement, the Agreement is further
amended as follows:
1. Paragraph 9 of the Agreement is hereby amended by adding the
following three subparagraphs:
"(d) Without Cause. During the Term hereof and prior to any
Change of Control of the Company, the Company may terminate this
Agreement at any time without cause. In such event, the Company shall
pay to the Employee, in accordance with the Company's regular pay
intervals for its senior executives, an amount equal to the greater of
(i) the amount of Base Salary the Employee would have received through
the last day of the Term or (ii) one (1) year of Base Salary.
(e) Change of Control. In the event the Employee's employment
with the Company is terminated either by the Company or by the Employee
within one (1) year after a Change of Control of the Company occurring
during the Term hereof (regardless of whether such Employee's
termination occurs after the expiration of the Term) then, in such
event, the Company shall pay the Employee at his sole and exclusive
option an amount in cash (the "Severance Payment") equal to either (i)
the greater of (a) the amount of Base Salary the Employee would have
received through the last day of the Term or (b) two (2) years Base
Salary, payable to the Employee in a single lump sum cash payment; or
(ii) three (3) years Base Salary payable in accordance with the
Company's regular pay intervals for its senior executives; provided,
however, that any amounts payable to the Employee pursuant to this
subparagraph (e)(ii) which exceed one (1) year of Base Salary shall be
reduced by any salary or other compensation earned by the Employee from
subsequent employment. For purposes of this Agreement "Base Salary"
shall mean the Employee's Base Salary as set forth in Paragraph 3 of
this Agreement, as such Base Salary may be increased from time to time.
"Change of Control" of the Company shall have the meaning set forth in
the Company's 1994 Equity Incentive Plan as approved by the
Stockholders of the Company on June 7, 1994 (and without regard to any
subsequent amendments thereto). If any of the termination events set
forth in this subparagraph (e) shall occur during the Term hereof or
other applicable time periods, the provisions of paragraph 7 hereof
shall be null and void and have no further force or effect.
<PAGE>
(f) Severance Payment Limitation Upon Change of Control. If
all or part of the Severance Payment payable to the Employee pursuant
to subparagraph 9(e) hereof, when added to other payments payable to
the Employee as a result of a Change of Control, constitute Parachute
Payments, the following limitation shall apply. If the Parachute
Payments, net of the sum of the Excise Tax, Federal income and
employment taxes and state and local income taxes on the amount of the
Parachute Payments in excess of the Threshold Amount, are greater than
the Threshold Amount, the Employee shall be entitled to the full
Severance Payment payable under subparagraph 9(e) of this Agreement. If
the Threshold Amount is greater than the Parachute Payments, net of the
sum of the Excise Tax, Federal income and employment taxes and state
and local income taxes on the amount of the Parachute Payments in
excess of the Threshold Amount, then the Severance Payment payable
under subparagraph 9(e) of this Agreement shall be reduced to the
extent necessary so that the maximum Parachute Payments shall not
exceed the Threshold Amount. The Company shall select a firm of
independent certified public accountants to determine which of the
foregoing alternative provisions shall apply. For purposes of
determining the amount of the Federal income and employment taxes, and
state and local income taxes on the amount of the Parachute Payments in
excess of the Threshold Amount, the Employee shall be deemed to pay
Federal income taxes at the highest marginal rate of Federal income
taxation applicable to individuals for the calendar year in which the
Severance Payments under subparagraph 9(e) of this Agreement are
payable and state and local income taxes at the highest marginal rates
of individual taxation in the state and locality of the Employee's
residence for the calendar year in which the Severance Payments under
Subparagraph 9(e) of this Agreement are payable, net of the maximum
reduction in Federal income taxes which could be obtained from
deduction of such state and local taxes.
For purposes of this Agreement:
"Parachute Payments" shall mean any payment or provision by the Company
of any amount or benefit to and for the benefit of the Employee,
whether paid or payable or provided or to be provided under the terms
of this Agreement or otherwise, that would be considered "parachute
payments" within the meaning of Section 280G(B)(2)(A) of the Internal
Revenue Code and the regulations promulgated thereunder.
"Threshold Amount" shall mean three times the Employee's "base amount"
within the meaning of Section 280(G)(b)(3) of the Internal Revenue Code
and the regulations promulgated thereunder, less one dollar.
"Excise Tax" shall mean the excise tax imposed by Section 4999 of the
Internal Revenue Code.
<PAGE>
2. All other terms of the Agreement shall remain unchanged and
continue in full force and effect.
J. BAKER, INC.
/s/ Jerry M. Socol March 7, 1996
By: Jerry M. Socol Date
President and
Chief Executive Officer
/s/ Alan I. Weinstein March 7, 1996
Alan I. Weinstein Date
<PAGE>
EXHIBIT 10.14
FOURTH AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED MARCH 25, 1993
Reference is made to the Executive Employment Agreement dated as of
March 25, 1993, as amended by an Amendment dated April 27, 1994, a Second
Amendment dated April 25, 1995 and a Third Amendment dated March 8, 1996 (the
"Agreement") by and between J. Baker, Inc. and Alan I. Weinstein. Pursuant to
paragraph 19 of the Agreement and in order to further amend certain provisions
of the Agreement, the Agreement is hereby amended as follows:
1. Paragraph 6 of the Agreement is hereby amended by deleting the
phrase "ending on April 1, 1997" in the fifth line thereof and inserting in its
place the phrase "ending on April 1, 1998".
2. All other terms of the Agreement shall remain unchanged and
continue in full force and effect.
J. BAKER, INC.
By:/s/ Jerry M. Socol April 5, 1996
Jerry M. Socol Date
President and
Chief Executive Officer
/s/ Alan I. Weinstein April 5, 1996
Alan I. Weinstein Date
<PAGE>
EXHIBIT 10.18
THIRD AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED MARCH 25, 1993
Reference is made to the Executive Employment Agreement dated as of
March 25, 1993 as amended by an Amendment dated June 9, 1994 and a Second
Amendment dated July 14, 1995 (the "Agreement") by and between J. Baker, Inc.
and Jerry M. Socol. Pursuant to paragraph 19 of the Agreement and in order to
further amend certain provisions of the Agreement, the Agreement is further
amended as follows:
1. Paragraph 9 of the Agreement is hereby amended by adding the
following three subparagraphs:
"(d) Without Cause. During the Term hereof and prior to any
Change of Control of the Company, the Company may terminate this
Agreement at any time without cause. In such event, the Company shall
pay to the Employee, in accordance with the Company's regular pay
intervals for its senior executives, an amount equal to the greater of
(i) the amount of Base Salary the Employee would have received through
the last day of the Term or (ii) one (1) year of Base Salary.
(e) Change of Control. In the event the Employee's employment
with the Company is terminated either by the Company or by the Employee
within one (1) year after a Change of Control of the Company occurring
during the Term hereof (regardless of whether such Employee's
termination occurs after the expiration of the Term) then, in such
event, the Company shall pay the Employee at his sole and exclusive
option an amount in cash (the "Severance Payment") equal to either (i)
the greater of (a) the amount of Base Salary the Employee would have
received through the last day of the Term or (b) two (2) years Base
Salary, payable to the Employee in a single lump sum cash payment; or
(ii) three (3) years Base Salary payable in accordance with the
Company's regular pay intervals for its senior executives; provided,
however, that any amounts payable to the Employee pursuant to this
subparagraph (e)(ii) which exceed one (1) year of Base Salary shall be
reduced by any salary or other compensation earned by the Employee from
subsequent employment. For purposes of this Agreement "Base Salary"
shall mean the Employee's Base Salary as set forth in Paragraph 3 of
this Agreement, as such Base Salary may be increased from time to time.
"Change of Control" of the Company shall have the meaning set forth in
the Company's 1994 Equity Incentive Plan as approved by the
Stockholders of the Company on June 7, 1994 (and without regard to any
subsequent amendments thereto). If any of the termination events set
forth in this subparagraph (e) shall occur during the Term hereof or
other applicable time periods, the provisions of paragraph 7 hereof
shall be null and void and have no further force or effect.
<PAGE>
(f) Severance Payment Limitation Upon Change of Control. If
all or part of the Severance Payment payable to the Employee pursuant
to subparagraph 9(e) hereof, when added to other payments payable to
the Employee as a result of a Change of Control, constitute Parachute
Payments, the following limitation shall apply. If the Parachute
Payments, net of the sum of the Excise Tax, Federal income and
employment taxes and state and local income taxes on the amount of the
Parachute Payments in excess of the Threshold Amount, are greater than
the Threshold Amount, the Employee shall be entitled to the full
Severance Payment payable under subparagraph 9(e) of this Agreement. If
the Threshold Amount is greater than the Parachute Payments, net of the
sum of the Excise Tax, Federal income and employment taxes and state
and local income taxes on the amount of the Parachute Payments in
excess of the Threshold Amount, then the Severance Payment payable
under subparagraph 9(e) of this Agreement shall be reduced to the
extent necessary so that the maximum Parachute Payments shall not
exceed the Threshold Amount. The Company shall select a firm of
independent certified public accountants to determine which of the
foregoing alternative provisions shall apply. For purposes of
determining the amount of the Federal income and employment taxes, and
state and local income taxes on the amount of the Parachute Payments in
excess of the Threshold Amount, the Employee shall be deemed to pay
Federal income taxes at the highest marginal rate of Federal income
taxation applicable to individuals for the calendar year in which the
Severance Payments under subparagraph 9(e) of this Agreement are
payable and state and local income taxes at the highest marginal rates
of individual taxation in the state and locality of the Employee's
residence for the calendar year in which the Severance Payments under
Subparagraph 9(e) of this Agreement are payable, net of the maximum
reduction in Federal income taxes which could be obtained from
deduction of such state and local taxes.
For purposes of this Agreement:
"Parachute Payments" shall mean any payment or provision by the Company
of any amount or benefit to and for the benefit of the Employee,
whether paid or payable or provided or to be provided under the terms
of this Agreement or otherwise, that would be considered "parachute
payments" within the meaning of Section 280G(B)(2)(A) of the Internal
Revenue Code and the regulations promulgated thereunder.
"Threshold Amount" shall mean three times the Employee's "base amount"
within the meaning of Section 280(G)(b)(3) of the Internal Revenue Code
and the regulations promulgated thereunder, less one dollar.
"Excise Tax" shall mean the excise tax imposed by Section 4999 of the
Internal Revenue Code.
<PAGE>
2. All other terms of the Agreement shall remain unchanged and
continue in full force and effect.
J. BAKER, INC.
/s/ J. Christopher Clifford March 7, 1996
By: J. Christopher Clifford Date
Chairman, Compensation
Committee of the Board of Directors
/s/ Jerry M. Socol March 7, 1996
Jerry M. Socol Date
<PAGE>
EXHIBIT 10.19
FOURTH AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED MARCH 25, 1993
Reference is made to the Executive Employment Agreement dated as of
March 25, 1993, as amended by an Amendment dated June 6, 1994, a Second
Amendment dated July 14, 1995 and a Third Amendment dated March 7, 1996 (the
"Agreement") by and between J. Baker, Inc. and Jerry M. Socol. Pursuant to
paragraph 19 of the Agreement and in order to amend certain provisions of the
Agreement, the Agreement is hereby amended as follows:
1. Paragraph 6 of the Agreement is hereby amended by deleting the
phrase "ending on April 1, 1997" in the fifth line thereof and inserting in its
place the phrase "ending on April 1, 1998".
2. All other terms of the Agreement shall remain unchanged and
continue in full force and effect.
J. BAKER, INC.
By:/s/ Sherman N. Baker April 5, 1996
Sherman N. Baker Date
Chairman of the Board of Directors
/s/ Jerry M. Socol April 5, 1996
Jerry M. Socol Date
<PAGE>
EXHIBIT 10.24
FOURTH AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED MARCH 25, 1993
Reference is made to the Executive Employment Agreement dated as of
March 25, 1993, as amended by an Amendment dated April 27, 1994, a Second
Amendment dated May 2, 1995 and a Third Amendment dated November 7, 1995 (the
"Agreement") by and between J. Baker, Inc. and Larry I. Kelley. Pursuant to
paragraph 19 of the Agreement and in order to further amend certain provisions
of the Agreement, the Agreement is hereby amended as follows:
1. Paragraph 6 of the Agreement is hereby amended by deleting the
phrase "ending on April 1, 1997" in the fifth line thereof and inserting in its
place the phrase "ending on April 1, 1998".
2. All other terms of the Agreement shall remain unchanged and
continue in full force and effect.
J. BAKER, INC.
By:/s/ Jerry M. Socol April 5, 1996
Jerry M. Socol Date
President and
Chief Executive Officer
/s/ Larry I. Kelley April 5, 1996
Larry I. Kelley Date
<PAGE>
EXHIBIT 10.39
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is dated as of June 12, 1995 by and between David Levin
(the "Employee") and J. BAKER, INC., a Massachusetts corporation (the
"Company").
WHEREAS, the Employee and the Company desire to set forth in writing
the terms and conditions of the Employee's employment agreement with the Company
from the date hereof;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment. Under and subject to the terms and conditions set forth
herein, the Company hereby agrees to employ the Employee during the Term (as
defined in Section 6 hereof) as its Senior Executive Vice President and Director
of Shoe Merchandising and Operations and/or in such other senior executive
management position(s) with the Company, or any parent or subsidiary of the
Company, as the Board of Directors of the Company (the "Board") may determine
from time to time, and the Employee hereby accepts such employment.
2. Duties. The Employee agrees, during the Term and any extension of
the Term, faithfully to perform for the Company, and any subsidiary or parent of
the Company, the duties of the Director of Shoe Merchandising and Operations,
and/or such other duties as may be assigned to him from time to time by the
Company. The Employee further agrees to devote his entire business time,
attention and energies exclusively to such employment and to conform to the
rules, regulations, instructions, personnel practices and policies of the
Company and its subsidiaries, as existing and amended from time to time. The
Employee may be required to relocate his principal residence only to an area in
which the Company or a subsidiary of the Company has or determines to have
significant operations.
3. Compensation.
(a) Base Salary. The Company shall pay the Employee during the
Term an annual base salary ("Base Salary") of not less than $375,000, payable in
equal installments in accordance with the Company's regular pay intervals for
its senior executives.
(b) Cash Incentive Compensation. In addition to his annual
base salary as determined pursuant to Section 3(a), the Company shall pay to the
Employee a one-time guaranteed bonus payment (the "Guaranteed Bonus Payment") of
$100,000 on January 31, 1996; provided, however, that if the Employee shall
voluntarily terminate his employment with the
<PAGE>
Company prior to June 12, 1996, the Guaranteed Bonus Payment, if having already
been paid to the Employee, shall be repaid to the Company within five (5)
business days of such voluntary termination. For the fiscal year commencing
February 4, 1996 and thereafter, the Employee shall be paid such amounts, if
any, to which the Employee is entitled, as an officer of the Company, under the
Company's Cash Incentive Compensation Plan (the "Incentive Plan"), as from time
to time such plan may be amended.
4. Other Benefits.
(a) Fringe Benefits. The Employee shall be entitled to
participate in all benefit programs that the Company establishes and makes
available to management generally and in any event shall be entitled to receive
benefits at least substantially comparable to those provided pursuant to the
present practices of the Company and its subsidiaries.
(b) Paid Vacations. The Employee shall be entitled to an
annual paid vacation of four weeks in each calendar year, to be taken at such
time or times as the Employee and the Company shall mutually agree, provided,
however, that no more than two weeks shall be taken during any three month
period unless otherwise agreed upon by the Company's Chief Executive Officer.
5. Expenses. The Company shall reimburse the Employee for all
reasonable travel, entertainment and other business expenses incurred or paid by
the Employee in performing his duties under this Agreement upon presentation by
the Employee of expense statements or vouchers and such other supporting
information as the Company may from time to time request, provided, however,
that the amount available for such expenses may be fixed in advance by the Board
after consultation with the Employee. The Company shall also pay or reimburse
the reasonable relocation expenses of the Employee (consistent with the present
policies of the Company) in connection with a relocation of the Employee's
principal residence to the greater Boston area from his New Jersey residence.
6. Effective Date and Term. This Agreement shall become effective as of
the date hereof and the Employee's employment under this Agreement shall
commence on such date and, unless sooner terminated as provided herein or
extended, shall continue for a term (the "Term") ending on June 12, 1997. The
Employee and the Company have obligations hereunder extending past the Term.
<PAGE>
7. Noncompetition.
(a) During the Employee's employment under this Agreement or
otherwise and for a period of two years after the date of termination of such
employment (the "Termination Date"), the Employee will not, without the express
written consent of the Company, anywhere in the United States or any territory
or possession thereof or in any foreign country in which the Company was active
as of the Termination Date: (i) compete with the Company or any other entity
directly or indirectly controlled by the Company (each an "Affiliate"), in the
Company's Business (as defined in Section 7(c) hereof); or (ii) otherwise
interfere with, disrupt or attempt to interfere with or disrupt the relationship
between the Company or an Affiliate and any person or business that was a
customer, supplier, lessor, licensor, manufacturer, contractor, designer or
employee of the Company or such Affiliate on the Termination Date or within two
years prior to the Termination Date.
(b) The term "compete" as used in this Section 7 means
directly or indirectly, or by association with any entity or business, either as
a proprietor, partner, employee, agent, consultant, director, officer,
shareholder (provided that the Employee may make passive investments in
competitive enterprises the shares of which are listed on a national securities
exchange if the Employee at no time owns directly or indirectly more than 2% of
the outstanding equity ownership of such enterprise) or in any other capacity or
manner (i) to solicit, hire, purchase from, sell to, rent from, or otherwise
conduct business related to the Company's Business with any party that is a
customer or supplier of the Company or an Affiliate or (ii) operate any retail
store or leased footwear department ("Leased Department") which sells products
related to the Company's Business (as defined in Section 7(c) hereof).
(c) The term "Company's Business" as used in this Section 7
means the operation of any of the following specialty retail businesses, as a
principal business unit, either alone or in combination: (i) Leased Departments
in discount or mass merchandising department stores; (ii) Leased Departments in
conventional full service department and specialty stores; (iii) retail stores
offering discount or "off price" women's footwear; (iv) retail stores offering
discount or "off price" family footwear; (v) retail stores offering casual
clothing for "Big and Tall" men; or (vi) retail stores offering primarily work
related clothing and uniforms for medical and laboratory purposes or the mail
order catalog sales thereof. The term shall also include any additional
specialty retail businesses which the Company may acquire subsequent to the date
hereof and which are operated as principal business units of the Company on the
Termination Date.
(d) The term "supplier" as used in this Section 7 shall mean
any party or affiliate of a party from which, on the Termination Date or within
two years prior to the Termination Date, the Company or an Affiliate purchased
products sold by the Company or an Affiliate or was in contact or actively
planning to contact in connection with the purchase of products sold by the
Company or an Affiliate on or before the Termination Date or which the Company
or an Affiliate was contemplating the sale of at some time after the Termination
Date.
<PAGE>
(e) The term "customer" as used in this Section 7 shall mean
any party or affiliate of a party, that on the Termination Date or within two
years prior to the Termination Date, was a wholesale vendee or prospective
wholesale vendee of the Company or an Affiliate or in connection with whose
business the Company or an Affiliate operated a Leased Department, a retail
store for the sale of discount or "off price" women's footwear, discount or "off
price" family footwear, casual clothing for "Big and Tall" men, work related
clothing and uniforms for medical and laboratory purposes or any other specialty
retail business which the Company operated as a principal business unit on the
Termination Date, had contacted in connection with the potential operation of
such businesses within two years prior to the Termination Date or which the
Company or an Affiliate was actively planning to contact in connection with the
potential operation of any such businesses on the Termination Date.
8. Confidential Information. The Employee will never use for his own
advantage or disclose any proprietary or confidential information relating to
the business operations or properties of the Company, any Affiliate or any of
their respective customers, suppliers, landlords, licensors or licensees. Upon
termination of the Employee's employment, the Employee will surrender and
deliver to the Company all documents and information of every kind relating to
or connected with the Company and Affiliates and their respective businesses,
customers, suppliers, landlords, licensors and licensees.
9. Termination.
(a) Death. In any event of the death of the Employee during
the Term, his employment shall terminate and the Company shall pay to the
Employee's surviving spouse, or to the Employee's estate if their is no
surviving spouse, (i) the Employee's base salary for one year from the date of
death, payable in accordance with the Company's regular pay intervals for its
senior executives and (ii) amounts under the Incentive Plan, if any, payable
with respect to the fiscal year in which his death occurs which otherwise would
have been paid to the Employee on the basis of the results for such fiscal year,
prorated to the date of his death. Upon the death of the Employee, the rights of
the Employee's surviving spouse or estate hereunder, as the case may be, shall
be limited solely to the benefits set forth in this Section 9(a).
(b) Disability. In the event that the Employee shall become
disabled (as hereinafter defined) during the Term, the Company shall have the
right to terminate the Employee's employment upon written notice, provided,
however, that in such event the Company shall (i) continue to pay the Employee's
base salary for one year from the date such termination occurs, payable in
accordance with the Company's regular pay intervals for its senior executives
and (ii) pay to the Employee amounts under the Incentive Plan, if any, which
otherwise would have been paid to the Employee on the basis of the results for
the fiscal year in which such termination occurs, prorated to the date of such
termination. For purposes of this Agreement, the
<PAGE>
Employee shall be considered disabled on the date when any physical or mental
illness or other incapacity shall, in the judgment of a majority of the members
(other than the Employee) of the Board, after consulting with or being advised
by one or more physicians (it being understood that one of such physicians may
be the Employee's physician but that the Board shall not be bound by his views),
have prevented the performance in a manner reasonably satisfactory to the
Company of the Employees duties under this Agreement for a period of six
consecutive months.
(c) For Cause. The Company may by notice terminate the
Employee's employment at any time for cause, which shall mean (i) failure by the
Employee to cure a material breach of this Agreement within 15 days after
written notice thereof by the Company, (ii) the continuation after notice by the
Company of willful misconduct by the Employee in the performance of the
Employee's duties hereunder or (iii) the commission by the Employee of an act
constituting a felony. In such event all obligations of the Company hereunder
shall thereupon terminate, including the obligation to pay any amounts under the
Incentive Plan with respect to the fiscal year in which such termination occurs,
but the Employee shall be entitled to receive any accrued salary and other
amounts under the Incentive Plan accrued with respect to any prior fiscal years.
(d) Without Cause. During the Term hereof and prior to any
Change of Control of the Company, the Company may terminate this Agreement at
any time without cause. In such event, the Company shall pay to the Employee, in
accordance with the Company's regular pay intervals for its senior executives,
an amount equal to the greater of (i) the amount of Base Salary the Employee
would have received through the last day of the Term or (ii) one (1) year of
Base Salary.
(e) Change of Control. In the event the Employee's employment
with the Company is terminated either by the Company or by the Employee within
one (1) year after a Change of Control of the Company occurring during the Term
hereof (regardless of whether such Employee's termination occurs after the
expiration of the Term) then, in such event, the Company shall pay the Employee
at his sole and exclusive option an amount in cash (the "Severance Payment")
equal to either (i) the greater of (a) the amount of Base Salary the Employee
would have received through the last day of the Term or (b) two (2) years Base
Salary, payable to the Employee in a single lump sum cash payment; or (ii) three
(3) years Base Salary payable in accordance with the Company's regular pay
intervals for its senior executives; provided, however, that any amounts payable
to the Employee pursuant to this subparagraph (e)(ii) which exceed one (1) year
of Base Salary shall be reduced by any salary or other compensation earned by
the Employee from subsequent employment. For purposes of this Agreement "Base
Salary" shall mean the Employee's Base Salary as set forth in Paragraph 3 of
this Agreement, as such Base Salary may be increased from time to time. "Change
of Control" of the Company shall have the meaning set forth in the Company's
1994 Equity Incentive Plan as approved by the Stockholders of the Company on
June 7, 1994 (and without regard to any subsequent amendments thereto). If any
of the termination events set forth in this subparagraph (e) shall occur during
the Term hereof or other applicable time periods, the provisions of
<PAGE>
paragraph 7 hereof shall be null and void and have no further force or effect.
(f) Severance Payment Limitation Upon Change of Control. If
all or part of the Severance Payment payable to the Employee pursuant to
subparagraph 9(e) hereof, when added to other payments payable to the Employee
as a result of a Change of Control, constitute Parachute Payments, the following
limitation shall apply. If the Parachute Payments, net of the sum of the Excise
Tax, Federal income and employment taxes and state and local income taxes on the
amount of the Parachute Payments in excess of the Threshold Amount, are greater
than the Threshold Amount, the Employee shall be entitled to the full Severance
Payment payable under subparagraph 9(e) of this Agreement. If the Threshold
Amount is greater than the Parachute Payments, net of the sum of the Excise Tax,
Federal income and employment taxes and state and local income taxes on the
amount of the Parachute Payments in excess of the Threshold Amount, then the
Severance Payment payable under subparagraph 9(e) of this Agreement shall be
reduced to the extent necessary so that the maximum Parachute Payments shall not
exceed the Threshold Amount. The Company shall select a firm of independent
certified public accountants to determine which of the foregoing alternative
provisions shall apply. For purposes of determining the amount of the Federal
income and employment taxes, and state and local income taxes on the amount of
the Parachute Payments in excess of the Threshold Amount, the Employee shall be
deemed to pay Federal income taxes at the highest marginal rate of Federal
income taxation applicable to individuals for the calendar year in which the
Severance Payments under subparagraph 9(e) of this Agreement are payable and
state and local income taxes at the highest marginal rates of individual
taxation in the state and locality of the Employee's residence for the calendar
year in which the Severance Payments under Subparagraph 9(e) of this Agreement
are payable, net of the maximum reduction in Federal income taxes which could be
obtained from deduction of such state and local taxes.
For purposes of this Agreement:
"Parachute Payments" shall mean any payment or provision by the Company
of any amount or benefit to and for the benefit of the Employee, whether paid or
payable or provided or to be provided under the terms of this Agreement or
otherwise, that would be considered "parachute payments" within the meaning of
Section 280G(B)(2)(A) of the Internal Revenue Code and the regulations
promulgated thereunder.
"Threshold Amount" shall mean three times the Employee's "base amount"
within the meaning of Section 280(G)(b)(3) of the Internal Revenue Code and the
regulations promulgated thereunder, less one dollar.
"Excise Tax" shall mean the excise tax imposed by Section 4999 of the
Internal Revenue Code.
10. Approval of Board. The Company represents that this Agreement
has been duly approved by the Board and is in all respects valid and binding
upon the Company.
<PAGE>
11. Key Person Insurance. The Employee agrees to take such actions as
may be reasonably required to permit the Company to maintain key person life
insurance on the Employee's life in such amounts and for such periods of time,
if any, as the Company deems appropriate, with all benefits being payable to the
Company. Upon payment by the Employee of the cash surrender value, if any, of
any such policy and any paid but unearned premiums for such policy, the Company
will assign such policy to the Employee upon termination (other than because of
the Employee's death) of the Employee's employment with the Company, provided,
however, that, in the event the Employee's employment is terminated by reason of
the disability of the Employee and the death of the Employee may reasonably be
expected within one year after such termination as a result of such disability,
the Company shall not be required to assign any such policy.
12. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been given
and received when actually delivered, one business day after dispatch by
telegraphic means, two business days after dispatch by recognized overnight
delivery service, or five days after mailing by certified or registered mail
with proper postage affixed, return receipt requested and addressed as follows
(or to such other address as a party entitled to receive notice hereunder may
have designated by notice pursuant to this Section 12):
(a) If to the Company:
J. Baker, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Attention: Chief Executive Officer
(b) If to the Employee:
David Levin
11 Phillips Pond Road
Natick, Massachusetts 01760
13. Severability. If any provision of this Agreement or its application
to any person or circumstances is invalid or unenforceable, then the remainder
of this Agreement or the application of such provision to other persons or
circumstances shall not be affected thereby. Further, if any provision or
application hereof is invalid or unenforceable, then a suitable and equitable
provision shall be substituted therefor in order to carry out so far as may be
valid or enforceable the intent and purposes of the invalid and unenforceable
provision.
<PAGE>
14. Applicable Law. This Agreement shall be interpreted and
construed in accordance with, and shall be governed by, the laws of the
Commonwealth of Massachusetts without giving effect to the conflict of law
provisions thereof.
15. Assignment. Neither of the parties hereto shall, without the
written consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder, provided, however, that in the event that the Company
sells all or substantially all of its assets the Company may assign its rights
and transfer its obligations hereunder to the purchaser of such assets. A merger
of the Company with or into another corporation shall be deemed not to be an
assignment of this Agreement, and, in any such event, this Agreement shall inure
to the benefit of and be binding upon the surviving corporation and the
Employee. Subject to the foregoing, this Agreement shall be binding upon, and
shall inure to the benefit of, the parties and their respective successors,
heirs, administrators, executors, personal representatives and assigns.
16. Headings. This section and paragraph headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
17. Remedies. It is specifically understood and agreed that any breach
of the provisions of Section 7 or 8 of this Agreement is likely to result in
irreparable injury to the Company, that damages at law will be inadequate remedy
for such breach, and that in addition to any other remedy it may have, the
Company shall be entitled to enforce the specific performance of said Sections
and to seek both temporary and permanent injunctive relief therefor without the
necessity of proving actual damages.
18. Waiver of Breach. Any waiver by either the Company or the Employee
of a breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach.
19. Amendment of Agreement. This Agreement may be altered, amended or
modified, in whole or in part, only by a writing signed by both the Employee and
the Company.
<PAGE>
20. Integration. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter thereof and supersedes
all prior agreements whether oral or written with respect to such subject matter
between the parties.
Intending to be legally bound, the Company and the Employee have signed
this Agreement as if under seal as of the date set forth at the head of the
first page.
J. BAKER, INC.
/s/ Jerry M. Socol
Jerry M. Socol
President and Chief Executive Officer
/s/ David A. Levin
David Levin
<PAGE>
EXHIBIT 10.40
AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED JUNE 12, 1995
Reference is made to the Executive Employment Agreement dated as of
June 12, 1995 (the "Agreement") by and between J. Baker, Inc. and David Levin.
Pursuant to paragraph 19 of the Agreement and in order to amend certain
provisions of the Agreement, the Agreement is hereby amended as follows:
1. Paragraph 6 of the Agreement is hereby amended by deleting the
phrase "ending on June 12, 1997" in the fifth line thereof and inserting in its
place the phrase "ending on April 1, 1998".
2. All other terms of the Agreement shall remain unchanged and
continue in full force and effect.
J. BAKER, INC.
By:/s/ Jerry M. Socol April 5, 1996
Jerry M. Socol Date
President and
Chief Executive Officer
/s/ David A. Levin April 5, 1996
David Levin Date
<PAGE>
EXHIBIT 10.41
SEVERANCE COMPENSATION AGREEMENT
This Severance Compensation Agreement (the "Agreement") by and between
J. Baker, Inc., a Massachusetts corporation together with its subsidiaries and
divisions (the "Company") with its principal place of business at 555 Turnpike
Street, Canton, Massachusetts and Philip G. Rosenberg of 36 Castle Drive,
Sharon, Massachusetts 02067 (the "Executive") shall be effective as of the 1st
day of November, 1995 (the "Agreement").
In consideration of the agreements contained herein including the
undertakings of the parties hereto, the receipt and sufficiency of which are
hereby acknowledged by each of the parties hereto, it is covenanted and agreed
as follows:
1. Severance Compensation upon Termination of Employment.
(a) (i) In the event the Executive's employment with the Company is
terminated (A) by the Company or (B) by the Executive for "good reason" within
three (3) years after a Change in Control of the Company occurring during the
Term hereof (regardless of whether such Executive's termination occurs after the
expiration of the Term), or (ii) in the event the Executive's employment is
terminated (C) by the Company (except if such termination is for "cause") or (D)
by the Executive for good reason within three (3) years after the employment of
any of Messrs. Socol, Weinstein or Levin, respectively, with the Company has
terminated during the Term hereof for any reason including, without limitation,
dismissal, resignation, retirement, death or termination for any other reason,
then, in such event, the Company shall pay to the Executive an amount, in cash,
(the "Severance Payment") equal to the Executive's Annual Base Salary. For
purposes of this Agreement "Annual Base Salary" shall mean the Executive's base
salary in effect on the date of this Agreement, as such base salary may be
increased from time to time.
(b) In the event the Executive's employment is terminated as described
in Section 1(a)(i) above, the Severance Payment shall be made to the Executive
in a single lump sum cash payment. In the event the Executive's employment is
terminated as described in Section 1(a)(ii) above, the Severance Payment shall
be made to the Executive in accordance with the Company's regular pay intervals
for its senior executives beginning immediately following the Executive's
termination of employment with the Company.
(c) Notwithstanding the Executive's rights to receive the payments and
benefits pursuant to this agreement, the Executive shall not be deemed to have
waived any rights the Executive may have at law or equity with respect to the
termination of his employment.
<PAGE>
(d) A termination for "good reason" shall be deemed to have occurred,
and the Executive shall be entitled to the benefits set forth in this Section 1,
if the Executive voluntarily terminates his employment after the occurrence of
any of the following events, if either the circumstances set forth in paragraphs
(a)(i) or (a)(ii) has occurred: (i) the assignment to the Executive of any
duties inconsistent with the highest position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities attained by
the Executive during the period of his employment by the Company; (ii) a
relocation of the Executive outside the metropolitan Boston area; or (iii) a
decrease in the Executive's compensation (including base salary, bonus or fringe
benefits). For purposes hereof, "Cause" shall mean (i) failure by the Employee
to cure a material breach of this Agreement within 15 days after written notice
thereof by the Company, (ii) the continuation after notice by the Company of
willful misconduct by the Employee in the performance of the Employee's duties
hereunder or (iii) the commission by the Employee of an act constituting a
felony; and "Change of Control of the Company" shall have the meaning set forth
in the Company's 1994 Equity Incentive Plan, as approved by the Stockholders of
the Company on June 7, 1994 (and without regard to any subsequent amendments
thereto).
2. Term.
This Agreement shall become effective as of the date hereof and shall
continue, unless sooner terminated or extended, for a period of two (2) years
thereafter (the initial two year term and any extension thereof are herein
referred to as the "Term").
3. Nonguarantee of Employment.
Nothing contained in this Agreement shall be construed as a contract of
employment between the Company and the Executive, or as a right of the Executive
to continue in the employ of the Company, or as a limitation of the right of the
Company to discharge the Executive with or without cause.
4. Successors.
(a) This Agreement shall be binding upon the Company, its successors
and assigns, and in the event of a Change of Control of the Company or in the
event the Company shall be merged or consolidated or otherwise combined into one
or more other corporations or other entities, or substantially all of its assets
are sold or otherwise transferred to one or more other corporations or entities,
this Agreement shall be binding upon the corporation or entity resulting from
such merger or consolidation or to which such assets shall be sold or
transferred and shall be assignable by it by way of transfer of assets, merger,
consolidation or combination to the same extent as if it were the Company.
Except as provided above in this Section 4(a), this Agreement shall not be
assignable by the Company or its successors and assigns. The Company
<PAGE>
will require any successor or assign (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance satisfactory to
the Executive, expressly, absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
5. Assignment.
This Agreement shall not be assignable by the Executive and shall not
be subject to attachment, execution, pledge or hypothecation.
6. Notice.
For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and either delivered in hand
or by mail by United States registered or certified mail, return receipt
requested, postage prepaid, and shall be deemed to have been duly given the
sooner of when actually received or three (3) days following deposit in the mail
by United States registered or certified mail, return receipt requested, postage
prepaid, as follows:
If to the Company:
J. Baker, Inc.
555 Turnpike Street
Canton, MA 02021
Attn: Chief Executive Officer
If to the Executive:
Philip G. Rosenberg
36 Castle Drive
Sharon, MA 02067
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
<PAGE>
7. Modification.
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
the Executive and the Company. No waiver by either party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such party shall be deemed a waiver of any other provisions hereof or of any
similar or dissimilar provisions or conditions at the same or any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
8. Validity.
The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect.
9. Governing Law.
This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts without giving effect to the conflicts of law principles thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
J. BAKER, INC.
By:/s/ Jerry M. Socol
Jerry M. Socol
President and
Chief Executive Officer
EXECUTIVE:
/s/ Philip Rosenberg
Philip G. Rosenberg
<PAGE>
EXHIBIT 11
J. BAKER, INC. AND SUBSIDIARIES
Computation of Primary and Fully Diluted Earnings Per Share*
<TABLE>
Quarter Ended Year Ended
February 3, January 28, February 3, January 28,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY:
Net Earnings $ 690,603 $6,692,957 $(38,602,114) $23,616,171
========= ========= =========== ==========
Weighted average number of common
shares outstanding 13,872,378 13,840,534 13,858,273 13,831,552
========== ========== =========== ==========
Earnings (Loss) Per Share $0.0498 $0.484 $(2.790) $1.707
========== ========== =========== =========
ASSUMING FULL DILUTION:
Net Earnings (Loss) (1) $ 690,603 $7,476,957 $(38,602,114) $26,752,171
========= ========= =========== ==========
Weighted average number of common
shares outstanding 13,872,378 13,840,534 13,858,273 13,831,552
Dilutive effect of outstanding stock options
and warrants 4,927 152,826 47,272 190,405
Dilutive effect of convertible subordinated debt - 4,341,085 - 4,341,085
---------- --------- --------- ----------
Weighted average number of common
shares as adjusted 13,877,305 18,334,445 13,905,545 18,363,042
========== ========== ========== ==========
Earnings (Loss) Per Share $0.050 $0.408 $(2.776) $1.457
========== ========== ========== ==========
</TABLE>
1 For the purpose of calculating fully diluted earnings per share for the
quarter and year ended January 28, 1995, the conversion of the 7% convertible
debt results in an after tax benefit from reduced interest expense.
* This calculation is submitted in accordance with Item 601(b)(11) of Regulation
S-K.
<PAGE>
EXHIBIT 12
J. BAKER, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
Fiscal Years Ended
------------------------------------------------------------------
February 2, January 30, January 29, January 28, February 3,
1992 1993 1994 1995 1996*
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Historical ratio of earnings to fixed charges
Earnings (loss) from continuing operations
before taxes and extraordinary item per
consolidated statements of earnings (1) $12,898 $21,076 $36,424 $36,899 $(64,425)
Add:
Portion of rents representative of the
interest factor 5,459 6,564 15,227 17,593 17,316
Interest on indebtedness including the
amortization of debt expense and
detachable warrant value (1) 10,352 8,211 8,146 9,735 10,983
------- ------ ------- ------- -------
Earnings (loss) before fixed charges,
as adjusted $28,709 $35,851 $59,797 $64,227 $(36,126)
====== ====== ====== ====== =======
Fixed charges
Interest on indebtedness including the
amortization of debt expense and
detachable warrant value (1) $ 10,352 $ 8,211 $ 8,146 $ 9,735 $ 10,983
------- ------- -------- ------- --------
Rents $ 16,376 $ 19,691 $ 45,680 $ 52,780 $ 51,948
Portion of rents representative of
the interest factor (2) $ 5,459 $ 6,564 $ 15,227 $ 17,593 $ 17,316
------- ------- ------- ------- -------
Fixed charges (1) + (2) $ 15,811 $ 14,775 $ 23,373 $ 27,328 $ 28,299
======= ======== ======= ======= =======
Ratio of earnings (loss) to fixed charges 1.82x 2.43x 2.56x 2.35x (1.28)x
======= ======== ======= ======= =======
</TABLE>
(*) 1996 reflects the impact of restructuring charges of $69,300,000.
<PAGE>
EXHIBIT 22
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<S> <C> <C>
State or other
Jurisdiction Name under which
Name of Incorporation Business is done
- ---------------- --------------------- --------------------
JBI, Inc. Massachusetts JBI, Inc.
J. Baker, Inc.
Parade of Shoes
Shoe Corporation of America
JBI Holding Company, Inc.* Delaware JBI Holding Company, Inc.
Morse Shoe, Inc.* Delaware Morse Shoe, Inc.
Spencer Companies, Inc. Massachusetts Spencer Companies, Inc.
The Casual Male, Inc. Massachusetts Casual Male Big & Tall
TCM Holding Company, Inc.** Delaware TCM Holding Company, Inc.
TCMB&T, Inc. Massachusetts Casual Male Big & Tall
WGS Corp. Massachusetts Work 'n Gear
</TABLE>
* Subsidiaries of JBI, Inc.
** Subsidiary of The Casual Male, Inc.
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
J. Baker, Inc.
We consent to the incorporation by reference in Registration Statements of J.
Baker, Inc. on Form S-8 No. 33-10385, No. 33-20302, No. 33-39425, No. 33-59786,
No. 33-59788, No. 33-59790 and No. 33-60605, and on Form S-3 No. 33-51645 and
No. 333-2797 of our report dated March 13, 1996, except for note 19, as to which
the date is April 19, 1996, appearing in the Annual Report on Form 10-K of
J. Baker, Inc. for the year ended February 3, 1996.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Boston, Massachusetts
April 30, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF J. BAKER, INC. FOR THE YEAR ENDED FEBRUARY 3, 1996 AND
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> FEB-03-1996
<CASH> 3,287,141
<SECURITIES> 0
<RECEIVABLES> 25,952,096
<ALLOWANCES> 3,217,249
<INVENTORY> 285,703,289
<CURRENT-ASSETS> 336,760,999
<PP&E> 183,607,125
<DEPRECIATION> 62,524,262
<TOTAL-ASSETS> 526,081,742
<CURRENT-LIABILITIES> 131,680,595
<BONDS> 207,765,711
0
0
<COMMON> 6,936,324
<OTHER-SE> 177,101,086
<TOTAL-LIABILITY-AND-EQUITY> 526,081,742
<SALES> 1,020,412,703
<TOTAL-REVENUES> 1,020,412,703
<CGS> 580,067,086
<TOTAL-COSTS> 580,067,086
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,456,879
<INCOME-PRETAX> (64,425,114)
<INCOME-TAX> (25,823,000)
<INCOME-CONTINUING> (38,602,114)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (38,602,114)
<EPS-PRIMARY> (2.79)
<EPS-DILUTED> (2.79)
</TABLE>
