SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file Number 0-14681
J. BAKER, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2866591
(State of Incorporation) (IRS Employer Identification Number)
555 Turnpike Street, Canton, Massachusetts 02021
(Address of principal executive offices)
(781) 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 whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No
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 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. [ ]
As of April 1, 1998, the aggregate market value of voting stock held by
non-affiliates of the Registrant was $107,772,488 based on the last reported
sales price of Registrant's stock on the NASDAQ Stock Market System.
13,919,190 shares of common stock were outstanding on April 1, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement to be filed
pursuant to Regulation 14A within 120 days after the end of the Registrant's
fiscal year are incorporated by reference in Part III.
<PAGE>
J. Baker, Inc.
Form 10-K Report
Year Ended January 31, 1998
Part I
STATEMENTS MADE OR INCORPORATED INTO THIS ANNUAL REPORT INCLUDE A NUMBER OF
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934.
FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS CONTAINING
THE WORDS "ANTICIPATES", "BELIEVES", "EXPECTS", "INTENDS", "FUTURE" AND WORDS OF
SIMILAR IMPORT, WHICH EXPRESS MANAGEMENT'S BELIEF, EXPECTATIONS OR INTENT
REGARDING THE COMPANY'S FUTURE PERFORMANCE. THE COMPANY'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS.
FACTORS THAT MAY CAUSE SUCH DIFFERENCES ARE DESCRIBED IN THE SECTION ENTITLED
"CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS" FOUND ON PAGE 19 OF THIS ANNUAL
REPORT.
Item 1. 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 apparel and
footwear in three niche markets. The Company is engaged in the retail sale of
apparel through its chain of Casual Male Big & Tall men's stores, which sell
fashion, casual and dress clothing and footwear to the big and tall man; through
its chain of Work 'n Gear work clothing stores, which sell a wide selection of
workwear as well as health-care apparel and uniforms for industry and service
businesses; and through its RX Uniforms stores, which exclusively sell
healthcare apparel. The Company sells footwear through self-service licensed
footwear departments in discount department stores.
On January 13, 1997, the Company announced that it had signed a
definitive agreement for the sale of its Parade of Shoes division to Payless
ShoeSource, Inc. ("Payless") of Topeka, Kansas. The transaction was completed on
March 10, 1997. For additional information on the sale of the Parade of Shoes
division, see Industry Segments, Footwear, Parade of Shoes Division and Note 2
to the Consolidated Financial Statements.
On March 5, 1997, the Company announced that it had sold its Shoe
Corporation of America ("SCOA") division to an entity formed by CHB Capital
Partners of Denver, Colorado along with Dennis B. Tishkoff, President of SCOA,
and certain members of SCOA management. For additional information on the sale
of SCOA, see Industry Segments, Footwear, Shoe Corporation of America Division,
and Note 2 to the Consolidated Financial Statements.
During fiscal 1996, the Company disposed of its Fayva footwear
division. For additional information on the disposal of the Fayva footwear
business, see Industry Segments, Footwear, Fayva Footwear Division and Note 2 to
the Consolidated Financial Statements.
The Company's businesses are seasonal. The Casual Male Big & Tall
division generates 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. The Company's largest footwear
volume is generated in the Easter, back to school and Christmas seasons. On a
combined basis, the Company's 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 Casual Male Big & Tall and Work 'n Gear stores
and its licensed footwear departments. Order backlogs, however, are not material
to the Company's business. The inventories needed in the operation of the
Company's apparel and footwear 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
<PAGE>
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, 1998. 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 apparel and footwear manufactured
by others. Financial information with respect to the Company's industry segments
can be found in Note 12 to the Consolidated Financial Statements.
Apparel
Casual Male Big & Tall Division
Casual Male Big & Tall is the Company's chain of big and tall apparel
stores providing fashion, casual and dress clothing and footwear for the big and
tall man. The chain specializes in a wide range of high quality apparel and
accessories for big (waist sizes from 40" to 66") and tall (6'2" or taller) men
at moderate prices. The Company believes that the clothing demands of these
customers have historically not been met through traditional men's apparel
stores. The big and tall customer frequently has difficulty finding an adequate
selection of apparel in his size in 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.
Casual Male Big & Tall stores offer private label as well as some brand
name casual sportswear and dress wear in a wide variety of styles, colors and
fabrics with a focus on basic merchandise such as sports coats, dress pants and
shirts and a wide variety of casual clothes, including footwear. The stores
target the middle income customer seeking good value at moderate prices and, as
a result, the Casual Male limits the amount of high-fashion-oriented and
low-turnover tailored clothing offered and focuses primarily on basic items and
classic fashion sportswear, thereby minimizing fashion risk and markdowns.
Management believes that the type and selection of its merchandise, favorable
prices and ability to obtain desirable store locations are key factors in
enabling it to compete effectively. Casual Male Big & Tall started fiscal 1998
with 440 stores and ended the year with 459 stores in 47 states, having opened
32 stores and closed 13 stores. Sales in the Casual Male Big & Tall stores
accounted for 43.4%, 26.9% and 21.0% of the Company's total revenues for the
years ended January 31, 1998, February 1, 1997 and February 3, 1996,
respectively. On a pro forma basis, excluding sales generated by the Company's
SCOA and Parade of Shoes divisions, sales in the Casual Male Big & Tall stores
accounted for 44.7% of the Company's sales for the year ended January 31,1998.
The Company's Casual Male Big & Tall division faces competition from a
variety of sources including department stores, specialty stores, discount
stores and off-price and other retailers who sell big and tall merchandise. In
addition, sales of clothing through catalogs and home shopping networks or other
electronic media provide additional sources of competition. The Casual Male
faces competition on a local level from independent retailers and small,
regional retail chains, as well as on a national scale from chains such as
Rochester Big & Tall and Repp, Ltd., a division of Edison Brothers, Inc. Repp,
Ltd., one of Casual Male's largest competitors, operates a chain of
approximately 180 big and tall stores. While Casual Male has successfully
competed on the basis of merchandise selection, including inventory
replenishment on an ongoing basis by color and size, favorable pricing and
desirable store locations, 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. In addition, discount retailers with significant buying power,
such as Wal-Mart, K-Mart and Target stores, represent an increasing source of
competition for Casual Male. The bulk of the merchandise carried by these
department stores is classified as commodity or "basic" items, but their buying
power provides them with a competitive edge and an ability to charge low prices
for such items.
In deciding to open Casual Male stores, the Company reviews market
demographics, drive-by visibility for customers, store occupancy costs and costs
to build and stock each location. Considering 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. New Casual Male stores require an average inventory and fixed
asset investment of approximately $185,000 to $220,000, composed of
approximately $100,000 to $120,000 for fixed assets and $85,000 to $100,000 for
inventory.
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The Company makes decisions to close Casual Male locations when
management believes that these locations are not generating acceptable profit
levels. Most store closings occur at lease expiration, unless lease buyout is a
more economical option for the Company. The costs to close stores are expensed
at the time the decision is reached to close the store.
Work 'n Gear Division
The Work 'n Gear division is the Company's specialty retail chain
focused entirely on utility workwear, uniforms, healthcare apparel and footwear.
Work 'n Gear carries a wide selection of workwear products, including rugged
specialty outerwear, work shirts and pants, cold weather accessories, as well as
a complete line of healthcare apparel and uniforms for industry and service
businesses. The Company started fiscal 1998 with 66 stores and ended the year
with 66 stores, having opened 2 stores (under the name RX Uniforms, which
exclusively sell healthcare apparel) and closed 2 stores. The 66 stores are
located in 13 states in the Northeastern and Midwestern United States. In
addition, the division sells its products through a direct corporate sales
force, which markets workwear and uniforms to large corporate accounts. During
the past fiscal year, the Work 'n Gear division entered into agreements to
provide uniforms to, among others, a national private security firm, a regional
transit authority and a large supermarket chain.
The National Association of Uniform Manufacturers and Distributors
estimates that approximately 26 million people in the United States work force
wear workwear. Although manufacturing industries are generally on the decline in
the United States, service industries are among the fastest growing and
traditionally have accounted for a large portion of uniform wearers in the
United States. For example, the U. S. Government Bureau of Labor Statistics
cites security and healthcare as two of the service industries where there will
be significant growth over the next five years. The Work 'n Gear stores seek to
address the needs of three major groups: (i) those customers who buy work
clothing to be worn on the job, including industrial tops and bottoms, jeans,
work boots, rugged outerwear and other accessories, (ii) those corporate
customers who either supply uniforms or provide a clothing allowance to their
employees to purchase uniforms, and (iii) those customers who work in the
healthcare industry and related fields.
Traditional competition for the sale of workwear is fragmented.
Traditional Army and Navy stores offer a large assortment of workwear items, but
supplement with fishing, hunting and other product lines. Other competitors
include large specialty chains such as Bob's Stores and full service department
stores which typically have more narrow product offerings. To the Company's
knowledge, no specific specialty store similar to Work 'n Gear exists on a
national basis. Competition for corporate workwear (purchased by employers)
comes from large manufacturers such as WearGuard/ARAMARK, Uniforms to You, Crest
Uniform and Fashion Seal, as well as small, independent uniform dealers. In the
healthcare apparel business, competition is dominated by three entities: (i)
Life Uniform, the largest retailer with approximately 300 stores, (ii) catalog
operations led by J. C. Penney and including Tafford, Uniform World, Sears
Roebuck & Company and Jasco, and (iii) over 2,000 independent operators of
healthcare apparel businesses. Management believes that its strategy of
servicing all three segments of the workwear market--consumer, corporate and
healthcare--combined with its retail expertise, affords Work 'n Gear a
significant competitive advantage in the marketplace.
Work 'n Gear stores are generally located in strip shopping centers or
are free standing. Locations in active strip centers are a preferable criterion
for site selection, as the close proximity to other stores increases traffic
into the Work 'n Gear stores, particularly for healthcare apparel and
accessories. Site locations must take into consideration proximity of major
medical facilities, active retail environments, population density, business
presence in the market and competition.
Sales in the Work 'n Gear stores accounted for 8.9%, 5.9% and 4.8% of
the Company's total revenues for the years ended January 31, 1998, February 1,
1997 and February 3, 1996, respectively. On a pro forma basis, excluding sales
generated by the Company's SCOA and Parade of Shoes divisions, sales in the Work
'n Gear stores accounted for 9.2% of the Company's sales for the year ended
January 31, 1998.
Footwear
Restructuring
The Company has restructured its footwear operations (the "Footwear
Restructuring") in order to focus its efforts on the management, development and
growth of its Casual Male Big & Tall and Work 'n Gear apparel businesses. In
connection with the Footwear Restructuring, in March, 1997 the Company completed
the sales of its SCOA and Parade of Shoes businesses. In addition, the Company
reduced its investment in its Licensed Discount footwear business. The Company
decided to concentrate its efforts in the Licensed Discount division primarily
on its five largest licensors, while exploring future strategic options for this
business and continuing to close departments upon the termination of licenses
where the Company believes it is appropriate to do so. As a result, the Company
undertook an evaluation of the value of the assets in
<PAGE>
the Licensed Discount footwear business, and wrote off certain assets which
did not benefit future operations and wrote down other assets to estimated fair
value. In fiscal 1997, the Company recorded a pre-tax charge of $166.6 million
($117.1 million, or $8.42 basic loss per share, on an after-tax basis) related
to the sales of the SCOA and Parade of Shoes businesses, the write-down to
estimated fair value of certain assets related to its Licensed Discount footwear
business, and severance and consolidation costs related to the downsizing of the
Company's administrative areas and its corporate facilities. Of the pre-tax
charge, $122.3 million was included as a separate component of results of
operations in the Company's Consolidated Statement of Earnings for the year
ended February 1, 1997, and the majority of the remaining charge, which related
to the reduction of the Licensed Discount division's inventory valuation, was
included in cost of sales. Also, in fiscal 1996, the Company recorded a
restructuring charge of $69.3 million ($41.6 million, or $3.00 basic loss per
share, on an after-tax basis) related to the liquidation of its Fayva footwear
business. For additional information, See Note 2 to the Consolidated Financial
Statements.
Licensed Discount Footwear Division
In a licensed footwear department operation, a discount department
store chain and the Company enter into a license agreement under which the
Company has the exclusive right to operate a footwear department in the host
stores for a specified 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 discount department
store chain 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. In some circumstances, the license fee also covers staffing
costs.
In its licensed footwear 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, boots and slippers. Most of
the footwear offered by the Company in its licensed departments is sold under
the Company's private labels or on an unbranded basis, although the Company also
sells name brand merchandise at discounted prices in its licensed accounts.
The Company's licensed footwear departments are operated on a
self-serve 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. In certain accounts, the Company's licensed
footwear departments are serviced in a similar manner by employees of the
licensor.
The Company and its predecessors have operated licensed footwear
departments in mass merchandising department stores for more than forty years.
Sales in the Licensed Discount division accounted for 44.7%, 33.8% and 34.5% of
the Company's total revenues in the years ended January 31, 1998, February 1,
1997 and February 3, 1996, respectively. On a pro forma basis, excluding sales
generated by the Company's SCOA and Parade of Shoes divisions, sales in the
Licensed Discount division accounted for 46.1% of the Company's sales for the
year ended January 31, 1998. At January 31, 1998, the Company operated a total
of 859 licensed footwear departments under license agreements with 16 different
discount department store operators. During fiscal 1998, the Company opened 11
departments and closed 89, representing a net decrease of 78 units for the year.
As previously indicated, the Company intends to concentrate its resources in
this division on the major chains in which it operates licensed footwear
departments. As a result, the Company may continue to experience declines in the
number of licensed departments it operates. The Company's licensed discount
departments are located in 38 states and in the District of Columbia.
The Company conducts its licensed footwear department operations under
written agreements for fixed terms. Of the 859 licensed footwear departments
which the Company operated at January 31, 1998, 561, or 65%, are covered by
agreements with terms expiring in less than five years and 298, or 35%, are
covered by an agreement, which expires in July, 2009, with Ames Department
Stores, Inc. ("Ames"), a major mass merchandising retailer in the eastern United
States. For the fiscal year ended January 31, 1998, Ames accounted for 15.4% of
the Company's total revenues. On a pro forma basis, excluding sales generated by
the Company's SCOA and Parade of Shoes divisions, sales in Ames accounted for
15.9% of the Company's sales for the year ended January 31, 1998.
On June 23, 1995, Bradlees Stores, 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. On April
13, 1998, Bradlees filed its Joint Plan of Reorganization and Disclosure
Statement with the United States Bankruptcy Court for the Southern District of
New York. If the license agreement is assumed, Bradlees must cure all defaults
under the agreement and
<PAGE>
the Company will collect in full the outstanding past due receivable. Although
the Company believes that 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 January 31, 1998 were $47.7 million. See Note 3 to the Consolidated
Financial Statements.
On October 18, 1995, Jamesway Corporation ("Jamesway"), then a licensor
of the Company, filed for protection under Chapter 11 of the United States
Bankruptcy Code. Subsequently, Jamesway ceased operation of its business in all
of its 90 stores. At the time of the bankruptcy filing, the Company had
outstanding accounts receivable of approximately $1.4 million due from Jamesway.
Because Jamesway ceased operation of its business, the Company filed a claim for
damages as its contract with Jamesway was rejected. The Company negotiated a
settlement of the amount of its claim with Jamesway, which was approved by the
Bankruptcy Court. The Jamesway plan of liquidation was confirmed on June 6,
1997, and the Company received a partial distribution of the amount owed to it
under the settlement during the second quarter of fiscal 1998. In August, 1997,
the Company assigned its right to any further distributions from Jamesway to a
third party and received, in consideration therefor, an additional percentage of
the amount owed to the Company under its settlement of its claim with Jamesway.
See Note 3 to the Consolidated Financial Statements.
The Company's licensed footwear 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 footwear licensor customers. The Company's
success in its licensed footwear department operations is substantially
dependent upon the success of the department store chains in which the Company
operates licensed footwear departments. Within the particular market that is
served by the department store chains, the Company believes that the primary
competitive factors are the quality, price and the breadth and suitability of
the selection of footwear that is offered, as well as store location, customer
service and promotional activities.
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.
Shoe Corporation of America Division
The Company's SCOA division operated full-service, semi-service and
self-service licensed footwear departments in department and specialty stores.
SCOA was acquired by the Company in the fourth quarter of fiscal 1994. Sales in
the SCOA licensed departments accounted for 1.6%, 19.8% and 18.0% of the
Company's revenues in the fiscal years ended January 31, 1998, February 1, 1997
and February 3, 1996, respectively.
On March 5, 1997, the Company announced that it had sold its SCOA
business to an entity formed by CHB Capital Partners of Denver, Colorado along
with Dennis B. Tishkoff, President of SCOA, and certain members of SCOA
management. The decision to divest the SCOA business was a result of the
refocusing of the Company's management efforts primarily on its apparel
businesses and the desire of SCOA management to operate the division
independently. The transaction involved the transfer to the buyer of the
division's inventory, fixed assets, intellectual property and license agreements
for the various department and specialty store chains serviced by SCOA as well
as the assumption by the buyer of certain liabilities of the SCOA division. Net
cash proceeds from the transaction of approximately $40.0 million were used to
pay down the Company's bank debt. For additional information, see Note 2 to the
Consolidated Financial Statements.
Parade of Shoes Division
The Parade of Shoes division, which the Company began in 1985, provided
primarily leather dress and casual shoes and athletic footwear at everyday value
prices available for selection in a casual, self-service atmosphere. Sales in
the Parade of Shoes stores accounted for 1.4%, 13.7% and 11.3% of the Company's
revenues in the fiscal years ended January 31, 1998, February 1, 1997 and
February 3, 1996, respectively.
On January 13, 1997, the Company announced that it had signed a
definitive agreement for the sale of its Parade of Shoes business to Payless.
The Company decided to divest the Parade of Shoes business in order to refocus
management
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efforts primarily on the Company's apparel businesses. The transaction, which
was completed on March 10, 1997, involved the transfer to Payless of the
division's inventory, fixed assets, intellectual property and leases on the 186
then remaining Parade of Shoes stores. Net cash proceeds from the transaction of
approximately $20.0 million were used to pay down the Company's bank debt. For
additional information, see Note 2 to the Consolidated Financial Statements.
Fayva Footwear Division
On September 5, 1995, the Company announced its intent to dispose of
its Fayva footwear business, which was completed by the end of fiscal 1996. 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. For additional information,
see Note 2 to the Consolidated Financial Statements.
Trademarks
The Company has no franchises or concessions except for agreements
granting it the right to operate licensed footwear departments. The Company owns
certain trademarks, which it uses in its business, and owns one patent. The
Company does not consider these trademarks and patent 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 January 31, 1998, the Company employed approximately 3,169
persons full-time and 3,461 persons part-time, of whom approximately 2,284
full-time and 3,312 part-time employees were engaged in retail operations at the
store level. Approximately 360 of the Company's full-time and part-time
employees are covered by collective bargaining agreements. The Company believes
that its employee relations are generally good. In connection with the
divestitures of the SCOA and Parade of Shoes divisions and certain corporate
downsizing, the Company reduced its work force during the first quarter of
fiscal 1998 by approximately 3,481 employees, of whom approximately 1,693 were
full-time and 1,788 were part-time.
Executive Officers of the Company
<TABLE>
<S> <C> <C>
Name Age Office
---- --- ------
Sherman N. Baker 78 Chairman of the Board
Alan I. Weinstein 55 President and Chief Executive Officer
Stuart M. Glasser 50 Executive Vice President and President and Chief
Executive Officer of The Casual Male, Inc.
James Lee 51 Executive Vice President and President of the Licensed Discount
Division
Roger J. Osborne 45 Executive Vice President and President of Work 'n Gear
Philip G. Rosenberg 48 Executive Vice President, Chief Financial Officer and Treasurer
</TABLE>
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. Weinstein has held the positions of President and Chief Executive
Officer since November, 1996 and March, 1997, respectively. From September,
1996 through March, 1997, Mr. Weinstein served as Acting Chief Executive Officer
of the Company. From July, 1985 through September, 1996, Mr. Weinstein
held the positions of Senior Executive Vice President, Chief Financial Officer
and Secretary of the Company. 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.
<PAGE>
Mr. Glasser has held the positions of Executive Vice President of the
Company and President and Chief Executive Officer of The Casual Male, Inc. since
September, 1997. Prior to joining the Company, from January, 1991 until
September, 1997, Mr. Glasser was an Executive Vice President and General
Merchandise Manager of men's, boy's, children's and cosmetics for Bloomingdales,
a division of Federated Department Stores, Inc. Prior to 1991, Mr. Glasser
served as President and Chief Executive of the department store division of
Elder-Beerman Stores Corp. and prior to that he served as an Executive Vice
President of Lord & Taylor.
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. Osborne has held the positions of Executive Vice President of the
Company and President of the Company's Work 'n Gear division since June, 1997.
From November, 1996 until June, 1997, Mr. Osborne served as Senior Vice
President and Zone Director for Mid-West and East coast markets for Hollywood
Entertainment Corp. From January, 1995 to November, 1996, Mr. Osborne held the
position of Senior Vice President and Director of Operations of the Company's
Licensed Discount footwear department business. Mr. Osborne was employed as
Senior Vice President and Director of Store Operations for Pic 'n Pay Stores,
Inc., a chain of discount footwear stores, from 1988 to January, 1995.
Mr. Rosenberg has held the position of Executive Vice President since
September, 1996 and was appointed Chief Financial Officer in March, 1997.
From September, 1996 through March, 1997, Mr. Rosenberg served as Acting
Chief Financial Officer of the Company. In addition, Mr. Rosenberg has held
the positions of Treasurer and Chief Accounting Officer since June, 1992.
Mr. Rosenberg joined the Company's predecessor in May, 1970 and has held
a variety of positions of increasing responsibility in finance and
administration since that time.
Item 2. PROPERTIES
The executive and administrative offices of the Company, the licensed
footwear department business and the Work 'n Gear division, and the warehouse
and distribution centers of the licensed footwear department business and the
Work 'n Gear division are located in Canton, Massachusetts. This facility is
located on 37 acres of land and is owned by JBAK Canton Realty, Inc. ("JBAK
Realty"), a wholly-owned subsidiary of JBAK Holding, Inc. ("JBAK Holding") and
an indirect, wholly-owned subsidiary of J. Baker, Inc. In December, 1996, JBAK
Realty obtained a $15.5 million mortgage loan from The Chase Manhattan Bank (the
"Mortgage Loan") secured by the real estate, buildings and other improvements
owned by JBAK Realty located at 555 Turnpike Street, Canton, Massachusetts (the
"Canton Property"). JBAK Realty leases the Canton Property to JBI, Inc., a
wholly-owned subsidiary of J. Baker, Inc. This facility contains approximately
750,000 square feet of space, including approximately 150,000 square feet of
office space.
The Company leases a building at 437 Turnpike Street, Canton,
Massachusetts that serves as the administrative offices for Casual Male Big &
Tall. The building contains approximately 53,000 square feet of office space.
The lease on this facility expires on January 31, 2008.
The Company leases a building in Readville, Massachusetts that serves
primarily as the distribution center for Casual Male Big & Tall. The building
contains approximately 75,000 square feet of office space and approximately
375,000 square feet of warehouse/distribution space. The lease on the Readville
facility expires on May 31, 1999. The Company has two consecutive five-year
options to renew the lease.
As of January 31, 1998, the Company operated 459 Casual Male Big & Tall
stores, all in leased premises ranging from 1,710 to 5,987 square feet, with
average space of approximately 3,260 square feet and total space of
approximately 1,495,000 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 January 31, 1998, the Company operated 66 Work 'n Gear stores
(including 2 stores under the name RX Uniforms, which exclusively sell
healthcare apparel), all in leased premises ranging from 2,430 square feet to
6,200 square feet, with average space of approximately 4,305 square feet and
total space of approximately 284,000 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.
<PAGE>
See "Item 1. BUSINESS--Industry Segments, Footwear, Licensed Discount
Footwear Division", for information regarding the Company's licenses to operate
footwear departments in retail stores of its licensors.
Item 3. LEGAL PROCEEDINGS
On September 17, 1997, the Company settled a patent infringement
lawsuit brought against the Company and Morse Shoe, Inc., a subsidiary of the
Company, by Susan Maxwell. Pursuant to the settlement agreement, both cases were
dismissed with prejudice with no admissions of liability and the parties
executed a mutual release of all claims. Under the terms of the settlement, the
Company agreed to make payments to Ms. Maxwell of $4,137,000, in the aggregate,
over a three-year period and in connection with the settlement, has recorded a
one-time charge to earnings of $3.4 million ($2.1 million on an after-tax basis)
during the third quarter of fiscal 1998 reflecting costs of the settlement not
previously accrued for.
The Company is not currently a defendant in any material legal
proceedings.
Item 4. 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
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
Market Information
The Company's Common Stock is traded on The Nasdaq Stock Market(SM)
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 January 31, 1998 and February 1, 1997. The prices
set forth below do not include retail mark-ups, mark-downs or commissions.
<TABLE>
<S> <C> <C>
Year Ended January 31, 1998 High Low
---- ---
First Quarter $ 9 13/16 $ 6 3/8
Second Quarter 9 7 5/8
Third Quarter 9 9/16 7 1/8
Fourth Quarter 7 3/4 4 1/2
Year Ended February 1, 1997 High Low
---- ---
First Quarter $ 9 7/8 $ 4 1/8
Second Quarter 10 1/2 6 3/8
Third Quarter 7 5 3/8
Fourth Quarter 7 5 5/16
</TABLE>
Holders
The approximate number of holders of record of the Company's Common
Stock as of April 1, 1998 was 809. 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 secured credit agreements and its senior subordinated
notes agreement limit the amount of cash dividends that may be paid to
stockholders. For additional information, see Note 5 to the 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 set forth in the Rights Agreement. These events include the
earliest to occur of (i) the 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>
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the Company are
derived from the consolidated 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, sold its SCOA and Parade of Shoes
businesses in fiscal 1998 and disposed of its Fayva footwear business during
fiscal 1996. The Company has also experienced a number of licensor bankruptcy
filings in recent years. These acquisitions, the sales of SCOA and Parade of
Shoes, the liquidation of Fayva and licensor bankruptcy filings affect the
comparability of the financial information herein. For further discussions, see
"Item 1. BUSINESS" and Notes 2 and 3 to the Consolidated Financial Statements.
J. BAKER, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended
--------------------------------------------------------------
1/31/98 2/01/97 2/03/96 1/28/95 1/29/94
------- ------- ------- ------- -------
Income Statement Data: (53 weeks)
- ----------------------
Net sales $ 592,151 $897,492 $1,020,413 $1,042,979 $918,878
Cost of sales 327,827 542,247 580,067 579,735 516,855
------- ------- ------- ------- -------
Gross profit 264,324 355,245 440,346 463,244 402,023
Selling, administrative and
general expenses 226,151 347,977 392,586 389,362 336,283
Depreciation and amortization 15,102 29,431 32,428 27,883 21,874
Restructuring and other non-recurring charges - 122,309 69,300 - -
Litigation settlement charges 3,432 - - - -
--------- -------- ---------- -------- --------
Operating income (loss) 19,639 (144,472) (53,968) 45,999 43,866
Interest income (109) (254) (526) (635) (704)
Interest expense 13,497 13,056 10,983 9,735 8,146
--------- -------- -------- -------- --------
Earnings (loss) before income taxes 6,251 (157,274) (64,425) 36,899 36,424
Income tax expense (benefit) 2,438 (45,846) (25,823) 13,283 13,113
--------- ------- -------- ------- --------
Net earnings (loss) $ 3,813 $(111,428) $ (38,602) $ 23,616 $ 23,311
========= ======== ========= ======== =======
Earnings (loss) per common share:
Basic $ 0.27 $ (8.02) $ (2.79) $ 1.71 $ 1.70
======== ======== ======== ======= ========
Diluted $ 0.27 $ (8.02) $ (2.79) $ 1.46 $ 1.45
========= ======== ======== ======= ========
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
As At
---------------------------------------------------------------------
1/31/98 2/01/97 2/03/96 1/28/95 1/29/94
------- ------- ------- ------- -------
Balance Sheet Data:
------------------
Working capital $122,789 $182,122 $205,080 $235,948 $187,095
Total assets 335,067 388,541 526,082 578,618 502,496
Long-term debt 186,251 214,092 207,766 204,518 154,665
Stockholders' equity 75,263 71,989 184,037 223,317 200,086
======= ======= ======= ======= =======
Cash dividends declared
per common share $ .06 $ .06 $ .06 $ .06 $ .06
====== ======= ======= ======= =======
</TABLE>
<PAGE>
J. BAKER, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Store Openings and Closings:
- ----------------------------
Apparel Footwear
---------------------------- ----------------------------------------------------------
Total Parade
Casual Work Total Licensed Licensed of Total
Male 'n Gear Apparel Discount SCOA Shoe Dept. Shoes Fayva Footwear Total
------ ------ ------- -------- ---- ---------- ----- ----- -------- -----
Stores open at
January 28, 1995 319 61 380 1,242 448 1,690 191 368 2,249 2,629
Openings 81 9 90 27 99 126 8 6 140 230
Closings - (1) (1) (182) (42) (224) (31) (374) (629) (630)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Stores open at
February 3, 1996 400 69 469 1,087 505 1,592 168 - 1,760 2,229
Openings 49 - 49 38 56 94 42 - 136 185
Closings (9) (3) (12) (188) (107) (295) (22) - (317) (329)
------ ----- ----- ----- ----- ----- ---- ----- ----- -----
Stores open at
February 1, 1997 440 66 506 937 454 1,391 188 - 1,579 2,085
Openings 32 2 34 11 - 11 - - 11 45
Closings (13) (2) (15) (89) (454) (543) (188) - (731) (746)
------ ----- ----- ---- ----- ----- ----- ----- ----- ----
Stores open at
January 31, 1998 459 66 525 859 - 859 - - 859 1,384
===== ===== ===== ===== ======= ===== ===== ====== ===== =====
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
All references herein to fiscal 1998, fiscal 1997 and fiscal 1996
relate to the years ended January 31, 1998, February 1, 1997 and February 3,
1996, 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
The Company completed the Footwear Restructuring in order to focus its
efforts on the management, development and growth of its Casual Male Big & Tall
and Work 'n Gear apparel businesses. In connection with the Footwear
Restructuring, in March, 1997 the Company completed the sales of its SCOA and
Parade of Shoes businesses. In addition, the Company reduced its investment in
its Licensed Discount footwear business. The Company decided to concentrate its
efforts in the Licensed Discount division primarily on its five largest
licensors, while exploring future strategic options for this business and
continuing to close departments upon the termination of licenses where the
Company believes it is appropriate to do so. In fiscal 1997, the Company
recorded a pre-tax charge of $166.6 million ($117.1 million, or $8.42 basic loss
per share, on an after-tax basis) related to the sales of the SCOA and Parade of
Shoes businesses, the write-down to estimated fair value of certain assets
related to its Licensed Discount footwear division, and severance and
consolidation costs related to the downsizing of the Company's administrative
areas and its corporate facilities. Of the pre-tax charge, $122.3 million was
included as a separate component of results of operations as "Restructuring and
other non-recurring charges" in the Company's Consolidated Statement of Earnings
for the year ended February 1, 1997. The Company also recorded a charge to cost
of sales of $37.3 million related to a reduction in the Licensed Discount
division's inventory to estimated fair value. The remaining $7.0 million of the
charge includes an increase in the allowance for doubtful accounts for the
Licensed Discount division's accounts receivable, and losses incurred from
actions taken in order to maximize the cash proceeds received for the assets
sold in the SCOA and Parade of Shoes businesses subsequent to the Company's
decision to dispose of such businesses. In fiscal 1996, the Company recorded a
restructuring charge of $69.3 million ($41.6 million, or $3.00 basic loss per
share, on an after-tax basis) related to the disposal of its Fayva footwear
business. While the Company believes that the restructuring of its footwear
business will serve to improve operations in the future, the Company recognizes
it is operating in a competitive retail environment and has taken steps intended
to manage its remaining businesses in a manner consistent with such economic
environment. These steps include increasing the Company's focus on merchandise
planning and distribution, cutting expenditures and prudently managing store
openings. The Company also has attempted to generate additional sales and manage
inventory levels by increasing promotional activities.
Fiscal 1998 versus Fiscal 1997
The Company's net sales decreased by $305.3 million to $592.2 million
in fiscal 1998 from $897.5 million in fiscal 1997, primarily due to the
disposition of the Company's SCOA and Parade of Shoes businesses in March, 1997.
Sales in the Company's apparel operations increased by $15.7 million, primarily
due to an increase in the number of Casual Male Big & Tall stores in operation
at the end of fiscal 1998 as compared to fiscal 1997 and a 0.7% increase in
comparable apparel store sales. (Comparable 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.) Excluding net sales in the Company's SCOA
and Parade of Shoes businesses of $17.7 million in fiscal 1998 and $300.7
million in fiscal 1997, sales in the Company's footwear operations decreased by
$38.1 million to $264.9 million in fiscal 1998 from $303.0 million in fiscal
1997. This decrease was primarily due to a reduction in the number of Licensed
Discount footwear departments in operation during fiscal 1998 as compared to
fiscal 1997 and a 5.1% decrease in comparable retail footwear store sales.
(Comparable retail footwear store sales increases/decreases are based upon
comparisons of weekly sales volume in licensed footwear departments which were
open in corresponding weeks of the two comparison periods.)
The Company's cost of sales constituted 55.4% of sales in fiscal 1998
as compared to 60.4% in fiscal 1997. Cost of sales in the Company's apparel
operations was 52.8% of sales in fiscal 1998 as compared to 52.1% of sales in
fiscal 1997. The increase in such percentage was primarily attributable to
higher markdowns as a percentage of sales and lower initial markups on
merchandise purchases. Cost of sales in the Company's footwear operations was
58.2% of sales in fiscal 1998, as compared to 64.4% of sales in fiscal 1997
(which, exclusive of the $37.3 million write-down of the Licensed Discount
division's inventory, was 58.3% of sales in fiscal 1997). Cost of sales in the
Company's Licensed Discount division was 58.5% of sales in fiscal 1998, as
compared to 70.7% in fiscal 1997 (which, exclusive of the $37.3 million
write-down of the Licensed Discount division's inventory, was 58.4% of sales in
fiscal 1997).
<PAGE>
Selling, administrative and general expenses decreased $121.8 million,
or 35.0%, to $226.2 million in fiscal 1998 from $348.0 million in fiscal 1997,
primarily due to the disposition of the Company's SCOA and Parade of Shoes
businesses in March, 1997 and the downsizing of the Company's Licensed Discount
shoe division and the Company's administrative areas and its corporate
facilities, coupled with the benefit realized from the curtailment of the
Company's defined benefit pension plan in fiscal 1998. As a percentage of sales,
selling, administrative and general expenses were 38.2% of sales in fiscal 1998,
as compared to 38.8% of sales in fiscal 1997. Selling, administrative and
general expenses in the Company's apparel operations were 39.4% of sales in
fiscal 1998, which was comparable to 39.4% of sales in fiscal 1997. Selling,
administrative and general expenses in the Company's footwear operations were
36.9% of sales in fiscal 1998, as compared to 38.5% of sales in fiscal 1997.
This decrease was primarily due to the increased proportion of Licensed Discount
shoe department sales to total footwear sales in fiscal 1998 versus fiscal 1997.
The Company's Licensed Discount shoe division has lower selling, administrative
and general expenses as a percentage of sales than the aggregate selling,
administrative and general expenses as a percentage of sales in the divested
SCOA and Parade of Shoes divisions. Also included in selling, administrative and
general expenses in fiscal 1998 is a non-recurring charge of $700,000 ($427,000,
or $0.03 basic loss per share on an after-tax basis) recorded to write off costs
associated with an abandoned high-yield debt offering.
Depreciation and amortization expense decreased by $14.3 million to
$15.1 million in fiscal 1998 from $29.4 million in fiscal 1997, primarily due to
lower depreciable assets attributable to the write-off of certain fixed and
intangible assets in the fourth quarter of fiscal 1997 related to the overall
restructuring of the Company's footwear businesses. This decrease was partially
offset by depreciation recorded on fiscal 1998 capital expenditures.
During fiscal 1997, the Company recorded a pre-tax charge of $166.6
million related to the divestitures of its SCOA and Parade of Shoes divisions
and the downsizing of the Company's Licensed Discount division and the Company's
administrative areas and its corporate facilities. Of the pre-tax charge, $122.3
million was classified as restructuring and other non-recurring charges. Such
charges included the losses on the sales of the SCOA and Parade of Shoes
divisions, the write-off of assets and obligations related to the reduction of
the Company's investment in its Licensed Discount division, severance and
related costs, and lease obligations and write-offs of assets for excess
corporate facilities. For additional information, see Note 2 to the Consolidated
Financial Statements.
During the third quarter of fiscal 1998, the Company recorded
litigation settlement charges of $3.4 million ($2.1 million on an after-tax
basis), related to the settlement of a patent infringement lawsuit brought
against the Company, reflecting costs of the settlement not previously accrued
for. For additional information, see Note 9 to the Consolidated Financial
Statements.
As a result of the above, the Company's operating income increased to
$19.6 million (operating income of $23.1 million excluding the litigation
settlement charges) in fiscal 1998 from an operating loss of $144.5 million
(operating income of $22.1 million excluding the $166.6 million pre-tax charge)
in fiscal 1997. As a percentage of sales, operating income was 3.3% of sales
(operating income of 3.9% of sales excluding the litigation settlement charges)
in fiscal 1998, as compared to an operating loss of 16.1% of sales (operating
income of 2.5% of sales excluding the $166.6 million pre-tax charge) in fiscal
1997.
Net interest expense increased $586,000 to $13.4 million in fiscal 1998
from $12.8 million in fiscal 1997, primarily due to a change in the Company's
method of financing foreign merchandise purchases with bank borrowings in fiscal
1998 versus the use of bankers' acceptances in fiscal 1997, partially offset by
lower interest rates on bank borrowings and lower levels of bank borrowings in
fiscal 1998 versus fiscal 1997.
Taxes on earnings for fiscal 1998 were $2.4 million, yielding an
effective tax rate of 39.0%, as compared to an income tax benefit of $45.8
million in fiscal 1997, yielding an effective tax rate of 29.2%. The difference
in the effective tax rate primarily reflects the impact of the additional
valuation reserve applied against deferred tax accounts as of February 1, 1997.
See Note 6 to the Consolidated Financial Statements for further discussion of
taxes on earnings.
Net earnings for fiscal 1998 were $3.8 million, as compared to a net
loss of $111.4 million in fiscal 1997.
<PAGE>
Fiscal 1997 versus Fiscal 1996
The Company's net sales decreased by $122.9 million or 12.0% to $897.5
million in fiscal 1997 from $1.02 billion in fiscal 1996. Sales in the Company's
apparel operations increased by $30.5 million, primarily 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 1997 over fiscal 1996 and a 2.7% increase in comparable
apparel store sales. Sales in the Company's footwear operations decreased by
$153.4 million due to a $106.0 million sales decrease in the Company's Fayva
footwear business (which was primarily the result of the closing of all 357
Fayva stores in the third quarter of fiscal 1996), a 1.1% decrease in comparable
retail footwear store sales, and a decrease in the number of Licensed Discount
shoe departments and SCOA licensed shoe departments in operation during fiscal
1997 versus fiscal 1996. (Comparable retail footwear store sales
increases/decreases are based upon comparisons of weekly sales volume in
Licensed Discount shoe departments, SCOA and Parade of Shoes stores which were
open in corresponding weeks of the relevant comparison periods.) The decrease in
the number of Licensed Discount shoe departments was due in large part to
Jamesway Corporation ("Jamesway"), a former licensor of the Company, ceasing
operations in the fourth quarter of fiscal 1996.
The Company's cost of sales constituted 60.4% of sales in fiscal 1997,
as compared to 56.8% in fiscal 1996. Cost of sales in the Company's apparel
operations was 52.1% of sales in fiscal 1997, as compared to 51.2% of sales in
fiscal 1996. The increase in such percentage was primarily due to lower initial
markups on merchandise purchases, partially offset by lower markdowns as a
percentage of sales. Cost of sales in the Company's footwear operations was
64.4% of sales in fiscal 1997, which includes the $37.3 million write-down of
the Licensed Discount shoe department business' inventory in connection with the
Footwear Restructuring, as compared to 58.8% of sales in fiscal 1996. Excluding
the effect of this $37.3 million charge, cost of sales in the Company's footwear
operations was 58.3% of sales in fiscal 1997. The decrease in such percentage,
from 58.8% of sales in fiscal 1996, is attributable to lower markdowns as a
percentage of sales, partially offset by lower initial markups on merchandise
purchases.
Selling, administrative and general expenses decreased $44.6 million,
or 11.4%, to $348.0 million in fiscal 1997 from $392.6 million in fiscal 1996,
primarily due to the closing of the Company's Fayva footwear business in the
third quarter of fiscal 1996. As a percentage of sales, selling, administrative
and general expenses were 38.8% of sales in fiscal 1997 as compared to 38.5% of
sales in fiscal 1996. Selling, administrative and general expenses in the
Company's apparel operations were 39.4% of sales in fiscal 1997, as compared to
38.5% of sales in fiscal 1996. This increase was primarily the result of a
higher allocation of predominantly fixed overhead to the Company's apparel
operations as a result of the proportionate increase in apparel sales to total
Company sales. Selling, administrative and general expenses in the Company's
footwear operations were 38.5% of sales in fiscal 1997, which was comparable to
38.5% of sales in fiscal 1996.
Depreciation and amortization expense decreased by $3.0 million to
$29.4 million in fiscal 1997 from $32.4 million in fiscal 1996, primarily due to
the write-off of certain fixed and intangible assets in the fourth quarter of
fiscal 1997 related to the overall restructuring of the Company's footwear
businesses and the write-off of furniture, fixtures and leasehold improvements
as a result of the closing of the Company's Fayva footwear business in the third
quarter of fiscal 1996. This decrease was partially offset by capital
expenditures for depreciable and amortizable assets.
Of the $166.6 million pre-tax charge recorded in fiscal 1997 for the
divestitures of the SCOA and Parade of Shoes businesses and the downsizing of
the Company's Licensed Discount shoe department business, the Company's
administrative areas and its corporate facilities, $122.3 million has been
classified as restructuring and other non-recurring charges, including $63.7
million for the loss on the sales of the SCOA and Parade of Shoes businesses,
$36.7 million for asset write-offs related to the reduction of the Company's
investment in its Licensed Discount footwear business, $9.3 million for
severance and employee benefit costs, $9.7 million for lease obligations and
asset write-offs for excess corporate facilities, and $2.8 million for other
costs and expenses.
Of the $63.7 million loss recorded on the sales of the Company's SCOA
and Parade of Shoes businesses, inventory, fixed asset and intangible asset
write-offs totaled $31.7 million, $14.2 million and $14.8 million, respectively,
while $3.0 million was recorded for transaction related costs and expenses.
Included in the $36.7 million of asset write-offs and obligations
related to the reduction of the Company's investment in its Licensed Discount
shoe department business are write-offs of intangible assets of $33.9 million,
which the Company deems to have no future value, and $2.8 million in accrued
costs relating to the repositioning and downsizing of this business.
<PAGE>
Total asset write-offs and write-downs included in restructuring and
other non-recurring charges amounted to $99.6 million, while the balance of the
charge required cash outlays, primarily in fiscal 1998.
For additional information, see Note 2 to the Consolidated Financial
Statements.
During fiscal 1996, the Company recorded restructuring charges of $69.3
million related to the liquidation of its Fayva footwear business. Such charges
included the actual costs for employee severance and other benefits of $3.5
million, 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 was a charge
of $26.8 million for costs related to the disposition of the Fayva store leases.
For additional information, see Note 2 to the Consolidated Financial Statements.
As a result of the above described effects, the Company's operating
loss increased to $144.5 million (operating income of $22.1 million excluding
the $166.6 million pre-tax charge) in fiscal 1997 from an operating loss of
$54.0 million (operating income of $15.3 million excluding the $69.3 million of
restructuring charges) in fiscal 1996. As a percentage of sales, the operating
loss was 16.1% of sales (operating income of 2.5% of sales excluding the $166.6
million pre-tax charge) in fiscal 1997 as compared to an operating loss of 5.3%
of sales (operating income of 1.5% of sales excluding the $69.3 million of
restructuring charges) in fiscal 1996.
Net interest expense increased $2.3 million to $12.8 million in fiscal
1997, as compared to $10.5 million in fiscal 1996 due to higher average levels
of borrowings and higher interest rates.
In fiscal 1997, the Company reported an income tax benefit of $45.8
million, yielding an effective tax rate of 29.2%, as compared to an income tax
benefit of $25.8 million in fiscal 1996, yielding an effective tax rate of
40.1%. The difference in the effective tax rate primarily reflects the impact of
the additional valuation reserve applied against deferred tax accounts as of
February 1, 1997. See Note 6 to the Consolidated Financial Statements for
further discussion of taxes on earnings.
The net loss for fiscal 1997 was $111.4 million as compared to a net
loss of $38.6 million in fiscal 1996.
Financial Condition
January 31, 1998 versus February 1, 1997
The increase in accounts receivable at January 31, 1998 from February
1, 1997 was primarily due to the reclassification of expected litigation
settlement proceeds from non-current assets at February 1, 1997 to accounts
receivable at January 31, 1998. This increase was partially offset by settlement
of the Company's Chapter 11 claim against Jamesway Corporation, a former
licensor of the Company, and the payoff of the Ames promissory note.
The increase in merchandise inventories at January 31, 1998 from
February 1, 1997 is primarily due to additional inventory required for new
Casual Male locations and the Work 'n Gear corporate sales division and an
increase in in-transit inventory, partially offset by a reduction in footwear
inventory, primarily due to the closing of licensed footwear departments during
the year.
The decrease in current deferred income taxes and the corresponding
increase in non-current deferred income taxes at January 31, 1998 from February
1, 1997 was primarily the result of timing differences between the recording of
restructuring and other non-recurring charges in fiscal 1997 and the deduction
of those charges on the Company's fiscal 1998 tax returns. At January 31, 1998,
the deferred income taxes associated with the net operating loss carryforwards
generated by such charges are classified as non-current.
The decrease in assets held for sale at January 31, 1998 from February
1, 1997 was due to the receipt of the cash proceeds from the divestitures of the
Company's SCOA and Parade of Shoes businesses in March, 1997.
The decrease in net property, plant and equipment at January 31, 1998
from February 1, 1997 is the result of the recording of $13.3 million in
depreciation expense during fiscal 1998, partially offset by the Company
incurring capital expenditures of $8.8 million in fiscal 1998, primarily for the
opening of new stores and the renovation of existing units.
The decrease in accounts payable at January 31, 1998 from February 1,
1997 is primarily due to an increase in direct import merchandise purchases,
which are paid for sooner than domestic merchandise purchases, coupled with the
Company's
<PAGE>
decision to eliminate bankers' acceptance financing of foreign merchandise
purchases in its footwear operations. The ratio of accounts payable to
merchandise inventory was 32.7% at January 31, 1998, as compared to 39.0% at
February 1, 1997.
The decrease in accrued expenses at January 31, 1998 from February 1,
1997 was primarily due to payments of costs related to the restructuring of the
Company's footwear operations, including severance and employee benefits, lease
obligations and other various restructuring costs.
The decrease in other liabilities at January 31, 1998 from February 1,
1997 was primarily due to payment of $3.0 million to former stockholders of SCOA
to satisfy a contractual contingent payment obligation, based on earnings, to
such former SCOA stockholders, coupled with reductions in amounts reserved for
insurance, equipment leases and payments for former officers.
The decrease in long-term debt, net of current portion, at January 31,
1998 from February 1, 1997 was primarily due to repayment of the Company's bank
debt with the net cash proceeds from the sales of the Company's SCOA and Parade
of Shoes divisions.
Liquidity and Capital Resources
The Company's primary cash needs have historically been for operating
expenses, working capital, interest payments, capital expenditures for ongoing
operations and acquisitions. In fiscal 1998, the Company's primary sources of
capital to finance its cash needs were the proceeds received on the sales of the
Company's SCOA and Parade of Shoes businesses, and borrowings under bank credit
facilities.
On May 30, 1997, the Company replaced its $145 million credit facility
by obtaining two separate revolving credit facilities, both of which are
guaranteed by J. Baker, Inc. One facility, which finances the Company's apparel
businesses, was a $100 million revolving credit facility with Fleet National
Bank, BankBoston, N.A., The Chase Manhattan Bank, Imperial Bank, USTrust,
Wainwright Bank & Trust Company and Bank Polska Kasa Opieki S.A. (the "Apparel
Credit Facility"). The Apparel Credit Facility is secured by all of the capital
stock of The Casual Male, Inc. and three other subsidiaries of the Company. The
aggregate commitment under the Apparel Credit Facility was reduced from $100
million to $90 million on December 31, 1997, by amendment was increased to $95
million on April 3, 1998 and will automatically be reduced by $10 million on
each of December 31, 1998 and December 31, 1999. Borrowings under the Apparel
Credit Facility bear interest at variable rates and can be in the form of loans,
bankers' acceptances and letters of credit. This facility expires on May 31,
2000.
To finance its Licensed Discount footwear business, the Company
obtained a $55 million revolving credit facility, secured by substantially all
of the assets of JBI, Inc. and Morse Shoe, Inc., with BankBoston Retail Finance
Inc. (formerly known as GBFC, Inc.) and Fleet National Bank (the "Footwear
Credit Facility"). The aggregate commitment under the Footwear Credit Facility
was reduced by $5 million on June 30, 1997. Aggregate borrowings under the
Footwear Credit Facility are limited to an amount determined by a formula based
on various percentages of eligible inventory and accounts receivable. Borrowings
under the Footwear Credit Facility bear interest at variable rates and can be in
the form of loans or letters of credit. This facility expires on May 31, 2000.
As of January 31, 1998, the Company had aggregate borrowings
outstanding under its Apparel Credit Facility and its Footwear Credit Facility
totaling $74.6 million and $34.2 million, respectively, consisting of loans and
obligations under letters of credit.
Net cash used in operating activities for fiscal 1998 was $23.4
million, as compared to net cash provided by operating activities of $9.6
million in fiscal 1997. The $33.0 million decrease was primarily due to
expenditures related to the Footwear Restructuring and the receipt of an $8.3
million federal income tax refund in the first six months of fiscal 1997. Net
cash provided by operating activities was $9.6 million in fiscal 1997, as
compared to $22.4 million in fiscal 1996. The decrease of $12.8 million was due
in part to payment of costs associated with the liquidation of Fayva.
Net cash provided by investing activities for fiscal 1998 was $51.9
million, as compared to net cash used in investing activities of $14.5 million
in fiscal 1997. The $66.4 million increase was primarily due to the receipt of
$60.1 million in proceeds from the sales of the SCOA and Parade of Shoes
businesses in fiscal 1998. Net cash used in investing activities was $14.5
million in fiscal 1997, as compared to net cash used of $26.5 million in fiscal
1996. The $12.0 million decrease was primarily due to an $11.7 million reduction
in capital expenditures in fiscal 1997 as compared to fiscal 1996.
<PAGE>
Net cash used in financing activities for fiscal 1998 was $28.5
million, as compared to net cash provided by financing activities of $5.6
million in fiscal 1997. The $34.1 million decrease was primarily due to a net
repayment of indebtedness of $26.8 million in fiscal 1998, as compared to
repayment of indebtedness of $8.7 million in fiscal 1997 and the receipt of
$14.9 million in net proceeds from the Mortgage Loan, referred to below, in
fiscal 1997. Net cash provided by financing activities in fiscal 1997 was $5.6
million, as compared to $2.5 million in fiscal 1996. The $3.1 million increase
was primarily due to the receipt of $14.9 million in net proceeds from the
Mortgage Loan in fiscal 1997, offset in part by the repayment of indebtedness of
$8.7 million as compared to the receipt of $3.2 million in net proceeds of
indebtedness in fiscal 1996.
The Company invested $8.8 million, $16.4 million and $28.1 million in
capital expenditures during fiscal 1998, fiscal 1997 and fiscal 1996,
respectively. The Company's capital expenditures generally relate to new store
and licensed shoe department openings and remodeling of existing stores and
departments, coupled with expenditures for general corporate purposes.
On December 30, 1996, JBAK Canton Realty, Inc. ("JBAK Realty"), a
wholly-owned subsidiary of JBAK Holding, Inc. ("JBAK Holding") and an indirect,
wholly-owned subsidiary of J. Baker, Inc., obtained a $15.5 million mortgage
loan from The Chase Manhattan Bank (the "Mortgage Loan") secured by the real
estate, buildings and other improvements owned by JBAK Realty at 555 Turnpike
Street, Canton, Massachusetts (the "Canton Property"). JBAK Realty leases the
Canton Property to JBI, Inc. a wholly-owned subsidiary of J. Baker, Inc. The
Canton Property is used as the Company's corporate headquarters. Proceeds of the
Mortgage Loan were used to pay down loans under the Company's revolving credit
facility.
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 expects to open approximately 14 Casual Male Big & Tall
stores, 20 Licensed Discount footwear departments and 1 Work 'n Gear store
(under the name RX Uniforms, which exclusively sells healthcare apparel) and to
close approximately 6 Casual Male Big & Tall stores and 9 Licensed Discount
footwear departments in fiscal 1999.
The Company believes that amounts available under its revolving credit
facilities, along with other potential sources of funds and cash flows from
operations, will be sufficient to meet its operating and capital requirements
for the foreseeable future. From time to time, the Company evaluates potential
acquisition candidates in pursuit of strategic initiatives and growth goals in
its niche apparel markets. Financing of potential acquisitions will be
determined based on the financial condition of the Company at the time of such
acquisitions, and may include borrowings under current or new commercial credit
facilities or the issuance of publicly issued or privately placed debt or equity
securities.
Year 2000 Compliance
The Company is faced with "Year 2000" remediation issues. Many computer
programs were written with a two-digit date field and if these programs are not
made Year 2000 compliant, they will be unable to correctly process date
information on or after Year 2000. While these issues impact all of the
Company's data processing systems to some extent, they are most significant in
connection with various mainframe "legacy" computer programs.
In fiscal 1997, the Company developed a plan to address the Year 2000
issues as they relate to the mainframe legacy computer programs and began
converting such computer systems to be Year 2000 compliant. The plan for such
mainframe programs provides for the conversion efforts to be completed by the
end of fiscal 1999. The Company intends to determine the extent to which it may
be vulnerable to any failures by its key business partners, major suppliers and
service providers to remedy their own Year 2000 issues, and is in the process of
initiating formal communications with these parties. At this time, the Company
is unable to estimate the nature or extent of any potential adverse impact
resulting from the failure of key business partners, major suppliers and service
providers to achieve Year 2000 compliance, although the Company does not
currently anticipate that it will experience any material shipment delays from
its major suppliers due to Year 2000 issues. However, there can be no assurance
that these third parties will not experience Year 2000 problems or that any such
problems would have a material effect on the Company. Because the cost and
timing of Year 2000 compliance by third parties such as key business partners,
major suppliers and service providers is not within the Company's control, no
assurance can be given with respect to the cost or timing of such efforts or any
potential adverse effects on the Company of any failure by these third parties
to achieve Year 2000 compliance. The total cost of the Company's Year 2000
project is estimated to be $2.0 million and is being funded through operating
cash flows. The Company is expensing all costs associated with these computer
systems changes as the costs are incurred. As of January 31, 1998, $488,000 has
been expensed.
<PAGE>
Certain Factors That May Affect Future Results
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 1999 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,
availability of credit, interest rates, the impact of competition and pricing,
the weather, 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, ability to hire and train associates and Year 2000
conversion.
Item 7(a). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
J. BAKER, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
<TABLE>
<S> <C>
Consolidated Financial Statements: PAGE
Independent Auditors' Report 21
Consolidated balance sheets as of January 31, 1998 and February 1, 1997 22
Consolidated statements of earnings for the years ended January 31, 1998, 23
February 1, 1997 and February 3, 1996
Consolidated statements of stockholders' equity for the years ended 24
January 31, 1998, February 1, 1997 and February 3, 1996
Consolidated statements of cash flows for the years ended January 31, 1998, 25
February 1, 1997 and February 3, 1996
Notes to consolidated financial statements 26
</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 January 31, 1998 and February 1, 1997, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended January 31, 1998. 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 January 31, 1998 and February 1, 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended January 31, 1998 in conformity with generally accepted accounting
principles.
/s/KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
Boston, Massachusetts
March 23, 1998
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
January 31, 1998 and February 1, 1997
<TABLE>
<S> <C> <C>
Assets 1998 1997
------ ---- ----
Current assets:
Cash and cash equivalents $ 3,995,995 $ 3,969,116
Accounts receivable:
Trade, net 9,576,156 14,771,734
Other 9,485,578 1,737,786
----------- -----------
19,061,734 16,509,520
----------- -----------
Merchandise inventories 159,407,002 146,045,496
Prepaid expenses 4,418,171 6,031,033
Deferred income taxes, net 5,230,000 37,548,000
Assets held for sale - 62,255,582
----------- -----------
Total current assets 192,112,902 272,358,747
----------- -----------
Property, plant and equipment, at cost:
Land and buildings 19,532,487 19,340,925
Furniture, fixtures and equipment 72,359,381 74,244,548
Leasehold improvements 24,832,306 23,100,973
----------- -----------
116,724,174 116,686,446
Less accumulated depreciation and amortization 44,595,098 40,032,801
----------- -----------
Net property, plant and equipment 72,129,076 76,653,645
----------- -----------
Deferred income taxes, net 55,950,000 26,199,000
Other assets, at cost, less accumulated amortization 14,875,434 13,329,628
------------ -----------
$335,067,412 $388,541,020
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt $ 2,060,387 $ 2,012,327
Accounts payable 52,108,352 57,006,085
Accrued expenses 14,176,048 29,837,310
Income taxes payable 979,560 1,380,664
------------ -----------
Total current liabilities 69,324,347 90,236,386
----------- -----------
Other liabilities 4,229,800 12,223,290
Long-term debt, net of current portion 114,407,640 140,787,673
Senior subordinated debt 1,490,111 2,951,411
Convertible subordinated debt 70,353,000 70,353,000
Stockholders' equity:
Common stock, par value $.50 per share, authorized 40,000,000 shares,
13,919,577 shares issued and outstanding in 1998 (13,892,397 in 1997) 6,959,789 6,946,199
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 115,697,467 115,416,223
Accumulated deficit (47,394,742) (50,373,162)
----------- ------------
Total stockholders' equity 75,262,514 71,989,260
----------- ------------
$335,067,412 $388,541,020
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
For the years ended January 31, 1998, February 1, 1997 and February 3, 1996
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
---- ---- ----
Net sales $592,151,411 $ 897,491,941 $1,020,412,703
Cost of sales 327,826,816 542,246,938 580,067,086
----------- ----------- -----------
Gross profit 264,324,595 355,245,003 440,345,617
Selling, administrative and general expenses 226,151,041 347,977,056 392,585,851
Depreciation and amortization 15,102,619 29,430,473 32,428,001
Restructuring and other non-recurring charges - 122,309,000 69,300,000
Litigation settlement charges 3,432,000 - -
------------ ------------ -----------
Operating income (loss) 19,638,935 (144,471,526) (53,968,235)
Interest income (108,750) (253,750) (526,188)
Interest expense 13,496,578 13,056,127 10,983,067
---------- ---------- -----------
Earnings (loss) before income taxes 6,251,107 (157,273,903) (64,425,114)
Income tax expense (benefit) 2,438,000 (45,846,000) (25,823,000)
----------- ----------- ------------
Net earnings (loss) $ 3,813,107 $(111,427,903) $(38,602,114)
============ ============ ===========
Earnings (loss) per common share:
Basic $ 0.27 $ (8.02) $ (2.79)
=========== ============ ===========
Diluted $ 0.27 $ (8.02) $ (2.79)
=========== ============ ============
Number of shares used to compute earnings (loss) per
common share:
Basic 13,911,080 13,887,544 13,858,273
=========== =========== ===========
Diluted 13,970,299 13,887,544 13,858,273
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders'
Equity For the years ended January 31, 1998, February 1, 1997
and February 3, 1996
<TABLE>
<S> <C> <C> <C> <C> <C>
Retained
Additional Earnings/ Total
Common Stock Paid-in (Accumulated Stockholders'
Shares Amount Capital Deficit) Equity
------- ------- ----------- ----------- ------------
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
Net loss for the year ended
February 1, 1997 - - - (111,427,903) (111,427,903)
Shares issued in connection with the
acquisition of Shoe Corporation
of America 6,001 3,001 104,942 - 107,943
Exercise of stock options 13,749 6,874 98,264 - 105,138
Dividends paid ($.06 per share) - - - (833,328) (833,328)
----------- ---------- ------------ ------------ -----------
Balance, February 1, 1997 13,892,397 6,946,199 115,416,223 (50,373,162) 71,989,260
Net earnings for the year ended
January 31, 1998 - - - 3,813,107 3,813,107
Exercise of stock options 8,500 4,250 43,550 - 47,800
Shares issued to certain employees 18,680 9,340 237,694 - 247,034
Dividends paid ($.06 per share) - - - (834,687) (834,687)
----------- ---------- ------------ ------------ ------------
Balance, January 31, 1998 13,919,577 $6,959,789 $115,697,467 $(47,394,742) $75,262,514
=========== ========== ============ ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended January 31, 1998, February 1, 1997
and February 3, 1996
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
---- ---- ----
Cash flows from operating activities:
Net earnings (loss) $ 3,813,107 $ (111,427,903) $ (38,602,114)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization:
Fixed assets 13,334,762 21,151,307 21,985,599
Deferred charges, intangible assets and
deferred financing costs 1,806,557 8,317,866 10,490,278
Deferred income taxes, net 2,567,000 (47,610,000) (20,153,000)
Loss on disposals and revaluation of assets - 99,600,000 29,900,000
Change in:
Accounts receivable 568,003 1,544,648 3,088,464
Merchandise inventories (15,442,592) 50,782,034 36,583,661
Prepaid expenses 1,612,862 (1,758,077) (3,030,223)
Accounts payable (4,897,733) (29,177,966) (15,678,736)
Accrued expenses (18,514,062) 5,340,437 9,561,924
Income taxes payable/receivable (401,104) 8,617,396 (7,709,089)
Other liabilities (7,873,826) 4,182,155 (4,045,342)
------------ ----------- -----------
Net cash provided by (used in)
operating activities (23,427,026) 9,561,897 22,391,422
------------ ----------- -----------
Cash flows from investing activities: Capital expenditures for:
Property, plant and equipment (8,810,193) (16,420,644) (28,062,433)
Other assets (2,304,132) (1,921,816) (1,379,958)
Payments received on note receivable 2,900,000 3,888,000 2,900,000
Net proceeds from sales of footwear businesses 60,134,835 - -
---------- -------------- ---------------
Net cash provided by (used in)
investing activities 51,920,510 (14,454,460) (26,542,391)
---------- ----------- -----------
Cash flows from financing activities:
Repayment of senior debt (1,500,000) (1,500,000) (1,500,000)
Proceeds from (repayment of) revolving credit facility (125,800,000) (7,200,000) 4,700,000
Proceeds from apparel and footwear credit
facilities 99,980,354 -
- -
Proceeds from (repayment of) mortgage payable (512,327) 15,500,000 -
Payment of mortgage escrow, net (94,779) (605,215) -
Proceeds from issuance of common stock, net of retirements 294,834 213,081 154,195
Payment of dividends (834,687) (833,328) (831,576)
----------- ---------- -----------
Net cash provided by (used in)
financing activities (28,466,605) 5,574,538 2,522,619
------------- --------- -----------
Net increase (decrease) in cash and cash equivalents 26,879 681,975 (1,628,350)
Cash and cash equivalents at beginning of year 3,969,116 3,287,141 4,915,491
----------- ----------- -----------
Cash and cash equivalents at end of year $ 3,995,995 $ 3,969,116 $ 3,287,141
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1998, February 1, 1997 and February 3, 1996
(1) Summary of Significant Accounting Policies
Nature of Operations
J. Baker, Inc. and subsidiaries (the "Company") is engaged in the
retail sale of apparel and footwear. As of January 31, 1998, the
Company's Casual Male Big & Tall, Work 'n Gear and Licensed Discount
footwear businesses operated 1,384 locations in 47 states and the
District of Columbia. The Company operates the 459 store chain of
Casual Male Big & Tall men's stores which sell fashion, casual and
dress clothing and footwear to the big and tall man; the 64 store
chain of Work 'n Gear work clothing stores, which sell a wide
selection of workwear as well as healthcare apparel and uniforms for
industry and service businesses, and 2 RX Uniforms stores, which
exclusively sell healthcare apparel; and sells footwear through 859
self-service licensed footwear departments in discount department
stores. See Note 2 for information regarding the divestitures of the
Company's Shoe Corporation of America ("SCOA") and Parade of Shoes
divisions and the liquidation of the Company's Fayva footwear
division.
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 to 53 week fiscal year ending on the
Saturday nearest January 31. The fiscal year ended February 3, 1996
contained 53 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 January 31, 1998, 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 and
Other Assets
Depreciation and amortization of the Company's property, plant and
equipment and other assets 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
Systems development costs and
other intangible assets 3 to 10 years
</TABLE>
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of", on February 4, 1996. This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less
costs to sell. Adoption of this Statement did not have a material
impact on the Company's financial position, results of operations or
liquidity. See Note 2 regarding asset write-offs as a result of the
Company's decision to downsize its footwear operations.
Earnings (Loss) Per Common Share
In February, 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Accounting Standards No. 128 ("SFAS No. 128"),
"Earnings Per Share" ("EPS"), which the Company adopted in fiscal
1998. Basic EPS is computed by dividing income available to common
shareholders by the weighted average number of common shares
outstanding during the period. Diluted EPS is computed by dividing
income available to common shareholders by the weighted average
number of common shares outstanding, after giving effect to all
dilutive potential common shares, that were outstanding during the
period.
The calculation of diluted earnings (loss) per common share includes
the dilutive effect of outstanding stock options and warrants for
fiscal 1998. Stock options and warrants are excluded from this
calculation for fiscal 1997 and fiscal 1996 because their effect
would be anti-dilutive. The common stock issuable under the 7%
convertible subordinated notes due 2002 and the convertible
debentures was not included in the calculation for fiscal 1998,
fiscal 1997 and fiscal 1996 because its effect would be
antidilutive. All net earnings (loss) per common share amounts for
all periods presented have been restated to conform to SFAS No. 128
requirements.
Net earnings (loss) and shares used to compute net earnings (loss)
per share, basic and diluted, are reconciled below:
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
---- ---- ----
Net earnings (loss), basic and diluted $ 3,813,107 $(111,427,903) $(38,602,114)
========== ============ ===========
Weighted average common shares:
Basic 13,911,080 13,887,544 13,858,273
Effect of dilutive securities:
Stock options 59,219 - -
----------- ----------- -----------
Diluted 13,970,299 13,887,544 13,858,273
========== ========== ==========
</TABLE>
Revenue Recognition
The Company recognizes revenue at the time of sale in its retail
stores and licensed departments.
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 the decision is reached to close the store.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Deferred Lease Acquisition Costs
Costs incurred in connection with the acquisition of license
agreements were classified as deferred lease acquisition costs and
were being amortized over the terms of the respective leases, which
ranged from three to twenty years. See Note 2 regarding asset
write-offs as a result of the Company's decision to downsize its
footwear operations.
Stock Options
Prior to February 4, 1996, the Company accounted for its stock
options in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations. As such, compensation
expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. On
February 4, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation", which permits entities to recognize as
expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25
and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in fiscal 1996 and
future years as if the fair-value-based method defined in SFAS No.
123 had been applied. The Company has elected to continue to apply
the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
Income Taxes
Deferred taxes are provided for using the asset and liability method
for temporary differences between financial and tax reporting.
Effect of Accounting Changes
In 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income", and SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related
Information". Both statements will be adopted by the Company in
fiscal 1999. Current financial statements are presented
substantially in accordance with SFAS No. 131.
Reclassifications
Certain reclassifications have been made to the consolidated
financial statements of prior years to conform to the 1998
presentation.
(2) Restructuring and Other Non-Recurring Charges
The Company has restructured its footwear operations (the "Footwear
Restructuring") in order to focus its efforts on the management,
development and growth of its Casual Male Big & Tall and Work 'n
Gear apparel businesses. In connection with the Footwear
Restructuring, in March, 1997 the Company completed the sales of its
SCOA and Parade of Shoes businesses. In addition, the Company
reduced its investment in its Licensed Discount footwear business.
The Company decided to concentrate its efforts in the Licensed
Discount division on its five largest licensors, while exploring
future strategic options for this business and continuing to close
departments upon termination of the licenses where the Company
believes it is appropriate to do so. In fiscal 1997, the Company
recorded a pre-tax charge of $166.6 million ($117.1 million, or
$8.42 basic loss per share, on an after-tax basis) related to the
sales of the SCOA and Parade of Shoes businesses, the write-down to
estimated fair value of certain assets related to its Licensed
Discount footwear division, and severance and consolidation costs
related to the downsizing of the Company's administrative areas and
its corporate facilities. Of the pre-tax charge, $122.3 million was
included as a separate component of results of operations in the
Company's Consolidated Statement of Earnings for the year ended
February 1, 1997. The Company also recorded a charge to cost of
sales of $37.3 million related to a reduction in the Licensed
Discount division's inventory to estimated fair value. The remaining
$7.0 million of the charge included an increase in the allowance for
doubtful accounts for the Licensed Discount division's accounts
receivable, and losses incurred from actions taken in order to
maximize the cash proceeds received for the assets sold in the SCOA
and Parade of Shoes businesses subsequent to the Company's decision
to dispose of such businesses. In connection with the above events,
the Company reduced its work force during the first quarter of
fiscal 1998 by approximately 3,481 employees, of whom approximately
1,693 were full-time and 1,788 were part-time.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Asset write-offs included in the restructuring and other
non-recurring charges totaled $99.6 million, while the balance of
the charge required cash outlays, primarily in fiscal 1998.
Restructuring and other non-recurring charges included $63.7 million
for the loss on the sales of the SCOA and Parade of Shoes
businesses, $36.8 million for asset write-offs related to the
reduction of the Company's investment in its Licensed Discount
footwear division, $9.3 million for severance and employee benefit
costs, $9.7 million for lease obligations and asset write-offs for
excess corporate facilities, and $2.8 million for other costs and
expenses.
Sale of Shoe Corporation of America Division
On March 5, 1997, the Company announced it had sold its SCOA
division to an entity formed by CHB Capital Partners of Denver
Colorado, along with Dennis B. Tishkoff, President of SCOA, and
certain members of SCOA management. The transaction involved the
transfer to the buyer of the division's inventory, fixed assets,
intellectual property and license agreements for the various
department and specialty store chains serviced by SCOA as well as
the assumption by the buyer of certain liabilities of the SCOA
division. In connection with the sale of SCOA, the Company paid a
total of $3.0 million to former stockholders of SCOA in order to
satisfy a contractual contingent payment obligation, based on
earnings, owed to such former SCOA stockholders. Net cash proceeds
received from the sale, reduced by the amount of the contingent
payment, a $1.4 million one-year escrow account balance and
transaction expenses of $1.3 million, totaled approximately $40.0
million. The Company also remains as guarantor on certain of SCOA's
license agreements for a period not to exceed one year.
Sale of Parade of Shoes Division
On March 10, 1997, the Company completed the sale of its Parade of
Shoes division to Payless. The transaction involved the transfer to
Payless of the division's inventory, fixed assets, intellectual
property and leases on the 186 then remaining Parade of Shoes
stores. Net cash proceeds from the transaction, reduced by a $2.7
million two-year escrow account balance and the retained accounts
payable of the division, were approximately $20.0 million. The
Company remains contingently liable under certain of the Parade of
Shoes store leases assigned to Payless.
Revaluation and Downsizing of Licensed Discount Footwear Division
As part of the restructuring of its footwear business in fiscal
1997, the Company made a determination that it would reduce its
investment in its Licensed Discount footwear business. The Company
currently intends to concentrate the Licensed Discount division's
efforts on its major licensors while exploring future strategic
options for this business. As a result, the Company undertook an
evaluation of the value of the assets in the Licensed Discount
business, and wrote off certain assets which did not benefit future
operations and wrote down other assets to estimated fair value,
including deferred lease acquisition costs, systems development
costs and excess of costs over net assets acquired. Included in the
restructuring and other non-recurring charges for the year ended
February 1, 1997, are write-offs of intangible assets of $33.9
million, which the Company deemed to have no future value, and $2.8
million in accrued costs relating to the repositioning and
downsizing of the Licensed Discount business. In addition, the
Company recorded a charge of $37.3 million to cost of sales,
representing the write-down of the Licensed Discount division's
inventory to estimated fair value, and a charge of $2.2 million to
selling, administrative and general expenses, representing an
increase to the Company's allowance for doubtful accounts related to
amounts expected to be realized from the settlement of Chapter 11
claims with various licensors.
Disposal of Fayva Footwear 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 basic loss per share) as a result
of the liquidation of the Company's Fayva footwear business.
Restructuring charges included 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.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A summary of the restructuring activity is presented below:
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
---- ---- ----
Balance, beginning of year $22,372,000 $ 13,300,000 $ -
Restructuring and other non-recurring charges - 122,309,000 69,300,000
Non-cash asset write-downs - (99,600,000) (29,900,000)
Inventory liquidation, lease termination,
severance and other costs (16,794,000) (13,637,000) (26,100,000)
------------ ------------- -------------
Balance, end of year $ 5,578,000 $22,372,000 $13,300,000
============ =========== ===========
</TABLE>
(3) Bankruptcy Filings of Licensors
On June 23, 1995, Bradlees Stores, 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. On April 13,
1998, Bradlees filed its Joint Plan of Reorganization and Disclosure
Statement with the United States Bankruptcy Court for the Southern
District of New York. 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. 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 January 31, 1998 were $47.7
million.
On October 18, 1995, Jamesway Corporation ("Jamesway"), then a
licensor of the Company, filed for protection under Chapter 11 of
the United States Bankruptcy Code. Subsequently, Jamesway ceased
operation of its business in all of its 90 stores. At the time of
the bankruptcy filing, the Company had outstanding accounts
receivable of approximately $1.4 million due from Jamesway. Because
Jamesway ceased operation of its business, the Company filed a claim
for damages as its contract with Jamesway was rejected. The Company
negotiated a settlement of the amount of its claim with Jamesway,
which was approved by the Bankruptcy Court. The Jamesway plan of
liquidation was confirmed on June 6, 1997, and the Company received
a partial distribution of the amount owed to it under the settlement
during the second quarter of fiscal 1998. In August, 1997, the
Company assigned its rights to any further distributions from
Jamesway to a third party and received, in consideration therefor,
an additional percentage of the amount owed to the Company under its
settlement of its claim with Jamesway.
On April 26, 1990, Ames Department Stores, Inc., and related
entities ("Ames"), a significant licensor of the Company (see Note
11), filed for protection under Chapter 11 of the United States
Bankruptcy Code. Pursuant to Ames' Plan of Reorganization, 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. During fiscal 1998, the Company received payments
totaling $2.9 million from Ames representing the outstanding balance
of the Ames promissory note and discharged its mortgage lien and
security interest in Ames' real property and buildings in Rocky
Hill, Connecticut.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) 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 January 31,
1998, February 1, 1997 and February 3, 1996:
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
---- ---- ----
Balance, beginning of year $5,286,617 $3,217,429 $1,972,903
Additions charged to expense 15,000 2,200,000 1,413,580
Write-offs, net of recoveries (4,724,159) (130,812) (169,054)
---------- ---------- ----------
Balance, end of year $ 577,458 $5,286,617 $3,217,429
============ ========== ==========
</TABLE>
(5) Debt
Long-Term Debt
Long-term debt at January 31, 1998 and February 1, 1997 was
comprised of:
<TABLE>
<S> <C> <C>
1998 1997
---- ----
Credit facility (weighted average $ - $125,800,000
interest rate of 8.2% in fiscal 1997)
Apparel credit facility (weighted average 66,300,000 -
interest rate of 7.4% in fiscal 1998)
Footwear credit facility (weighted average 33,680,354 -
interest rate of 8.0% in fiscal 1998)
Mortgage note, net of current portion 14,427,286 14,987,673
----------- -----------
(interest rate of 9.0%)
$114,407,640 $140,787,673
=========== ===========
</TABLE>
On May 30, 1997, the Company replaced its $145 million credit
facility by obtaining two separate revolving credit facilities, both
of which are guaranteed by J. Baker, Inc. One facility, which
finances the Company's apparel businesses, was a $100 million
revolving credit facility with Fleet National Bank, BankBoston,
N.A., The Chase Manhattan Bank, Imperial Bank, USTrust, Wainwright
Bank & Trust Company and Bank Polska Kasa Opieki S.A. (the "Apparel
Credit Facility"). The Apparel Credit Facility is secured by all of
the capital stock of The Casual Male, Inc. and three other
subsidiaries of the Company. The aggregate commitment under the
Apparel Credit Facility was reduced from $100 million to $90 million
on December 31, 1997, by amendment was increased to $95 million on
April 3, 1998 and will automatically be reduced by $10 million on
each of December 31, 1998 and December 31, 1999. Borrowings under
the Apparel Credit Facility bear interest at variable rates and can
be in the form of loans, bankers' acceptances and letters of credit.
This facility expires on May 31, 2000.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
To finance its Licensed Discount footwear business, the Company
obtained a $55 million revolving credit facility, secured by
substantially all of the assets of JBI, Inc. and Morse Shoe, Inc.,
with BankBoston Retail Finance Inc. (formerly known as GBFC, Inc.)
and Fleet National Bank (the "Footwear Credit Facility"). The
aggregate commitment under the Footwear Credit Facility was reduced
by $5 million on June 30, 1997. Aggregate borrowings under the
Footwear Credit Facility are limited to an amount determined by a
formula based on various percentages of eligible inventory and
accounts receivable. Borrowings under the Footwear Credit Facility
bear interest at variable rates and can be in the form of loans or
letters of credit. This facility expires on May 31, 2000.
As of January 31, 1998, the Company had aggregate borrowings
outstanding under its Apparel Credit Facility and its Footwear
Credit Facility totaling $74.6 million and $34.2 million,
respectively, consisting of loans and obligations under letters of
credit.
On December 30, 1996, JBAK Canton Realty, Inc. ("JBAK Realty"), a
wholly-owned subsidiary of JBAK Holding, Inc. ("JBAK Holding") and
an indirect, wholly-owned subsidiary of J. Baker, Inc., obtained a
$15.5 million mortgage loan from The Chase Manhattan Bank (the
"Mortgage Loan") secured by the real estate, buildings and other
improvements owned by JBAK Realty located at 555 Turnpike Street,
Canton, Massachusetts (the "Canton Property"). JBAK Realty leases
the property to JBI, Inc. ("JBI"), a wholly-owned subsidiary of J.
Baker, Inc. The Canton Property is used as the Company's corporate
headquarters. Neither JBAK Holding nor JBAK Realty has agreed to pay
or make its assets available to pay creditors of the Company or JBI.
Neither the Company nor JBI has agreed to make their assets
available to pay creditors of JBAK Holding or JBAK Realty. Proceeds
of the Mortgage Loan were used to pay down loans under the Company's
revolving credit 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 January 31, 1998, 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
at a price equal to the product of (a) the aggregate number, as of
such time, of shares of common stock issuable upon exercise of the
warrant by (b) $18.80 and multiplying the product thereof by 50%.
The senior subordinated notes of $2,990,111 at January 31, 1998
($4,451,411 at February 1, 1997) are presented net of $9,889
($48,589 at February 1, 1997), 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, currently at 12.21%, is
payable quarterly.
Convertible Subordinated Debt
Convertible subordinated debt at January 31, 1998 and February 1,
1997 was comprised of:
<TABLE>
<S> <C> <C>
1998 1997
---- ----
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.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The convertible debentures began accruing interest on January 15,
1997 at a rate of 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 convertible
debentures.
The Company's revolving credit facilities 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. As of January 31, 1998, 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 $68.0
million at January 31, 1998. At January 31, 1998, the Company's
tangible net worth, as so defined, was approximately $71.9 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:
Fiscal year
ending January
--------------
1999 $ 2,060,387
2000 2,112,955
2001 100,650,809
2002 1,086,348
2003 70,802,141
Thereafter 11,608,387
(6) Taxes on Earnings
Income tax expense (benefit) attributable to income (loss) from
operations consists of:
<TABLE>
<S> <C> <C> <C>
Current Deferred Total
------- -------- -----
Year ended January 31, 1998:
Federal $ (604,000) $ 2,130,712 $ 1,526,712
State and city 475,000 436,288 911,288
------------- ------------- -------------
$ (129,000) $ 2,567,000 $ 2,438,000
============ ============ ============
Year ended February 1, 1997:
Federal $ - $ (32,688,000) $(32,688,000)
State and city 1,764,000 (14,922,000) (13,158,000)
------------ ---------- -----------
$ 1,764,000 $ (47,610,000) $(45,846,000)
=========== =========== ===========
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)
========== =========== ===========
</TABLE>
The following is a reconciliation between the statutory federal
income tax rate and the Company's effective rate for the years
ended January 31, 1998, February 1, 1997 and February 3, 1996:
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
---- ---- ----
Statutory federal income tax rate 35.0% (35.0%) (35.0%)
State income taxes, net of federal
income tax benefit 9.5% (5.4%) (5.3%)
Change in beginning of year balance of the valuation
allowance for deferred tax assets - 7.4% -
Other (5.5%) 3.8% 0.2%
----- ------ ------
39.0% (29.2%) (40.1%)
====== ======= ======
</TABLE>
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at January 31, 1998 and February 1, 1997 are presented
below:
<TABLE>
<S> <C> <C>
1998 1997
---- ----
Deferred tax assets:
Accounts receivable $ 177,000 $ 550,000
Inventory 6,006,000 32,692,000
Intangible assets 3,114,000 11,506,000
Other assets 23,000 1,227,000
Nondeductible accruals and reserves 876,000 12,476,000
Operating loss and credit carryforwards 88,763,000 46,759,000
----------- ----------
Total gross deferred tax assets 98,959,000 105,210,000
Less valuation allowance (26,636,000) (26,636,000)
---------- -----------
Net deferred tax assets 72,323,000 78,574,000
----------- -----------
Deferred tax liabilities:
Property, plant and equipment (7,817,000) (5,811,000)
Intangible assets (736,000) (6,426,000)
Other liabilities (2,590,000) (2,590,000)
----------- ----------
Total gross deferred tax liabilities (11,143,000) (14,827,000)
----------- -----------
Net deferred tax asset $ 61,180,000 $ 63,747,000
=========== ===========
</TABLE>
At January 31, 1998 and February 1, 1997, the net deferred tax asset
consisted of the following:
<TABLE>
<S> <C> <C>
1998 1997
---- ----
Deferred tax asset, net - current $ 5,230,000 $ 37,548,000
Deferred tax asset, net - non-current 55,950,000 26,199,000
----------- -----------
$ 61,180,000 $ 63,747,000
=========== ===========
</TABLE>
At January 31, 1998, the Company has net operating loss
carryforwards ("NOLS") and general business credit carryforwards for
federal income tax purposes of approximately $194.0 million and $1.3
million, respectively, which expire in years ended January, 2002
through January, 2013. Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("FAS 109"), requires that the tax
benefit of such NOLS be recorded as an asset to the extent that the
Company assesses the utilization of such NOLS to be "more likely
than not". The NOLS available for future utilization were generated
principally by restructuring and other non-recurring charges which
are not expected to continue. The Company has determined, based upon
the history of prior operating earnings in its ongoing businesses
and its expectations for the future, that operating income of the
Company will more likely than not be sufficient to utilize fully the
$194.0 million of NOLS prior to their expiration in the year 2013.
The Company has minimum tax credit carryforwards of approximately
$4.0 million available to reduce future regular federal income
taxes, if any, over an indefinite period.
(7) 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. In March
1997, the Board of Directors of the Company approved an amendment to
the Pension Plan, which resulted in the freezing of all future
benefits under the plan as of May 3, 1997. As a result, the Company
recognized a gain in fiscal 1998 of $3.7 million (which had an
after-tax effect of $2.2 million). The curtailment gain is included
in selling, administrative and general expenses.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table sets forth the Pension Plan's funded status at
January 31, 1998 and February 1, 1997:
<TABLE>
<S> <C> <C>
1998 1997
---- ----
Actuarial present value of benefit obligations:
Vested $13,519,000 $12,696,000
Non-vested 1,849,000 1,170,000
---------- ----------
Total accumulated benefit obligations $15,368,000 $13,866,000
========== ==========
Plan assets at fair value $19,146,000 $15,737,000
Actuarial present value of projected benefit obligations (15,368,000) (18,832,000)
---------- ----------
Excess (deficiency) of plan assets over projected
benefit obligations 3,778,000 (3,095,000)
Unrecognized prior service benefit - (449,000)
Unrecognized net transitional liability - 979,000
Unrecognized net actuarial loss (gain) (925,000) 520,000
---------- ----------
Prepaid (accrued) pension cost $ 2,853,000 $(2,045,000)
========== ==========
</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 $160,000, but
less than $267,326. The following table sets forth the Supplemental
Plan's funded status at January 31, 1998 and February 1, 1997:
<TABLE>
<S> <C> <C>
1998 1997
---- ----
Actuarial present value of benefit obligation:
Vested $ 248,000 $ 251,000
Non-vested 20,000 110,000
--------- ---------
Total accumulated benefit obligations $ 268,000 $ 361,000
======== =========
Plan assets at fair value $ - $ -
Actuarial present value of projected benefit obligations (691,000) (700,000)
-------- --------
Deficiency of plan assets over projected benefit obligations (691,000) (700,000)
Unrecognized prior service cost 248,000 400,000
Unrecognized net actuarial loss (gain) (130,000) (149,000)
-------- ---------
Accrued pension cost $(573,000) $(449,000)
======== ========
</TABLE>
Assumptions used to develop the plans' funded status were
discount rate (7.0% in 1998, 7.5% in 1997) and
increase in compensation levels (4.5%).
Plan assets of the Pension Plan consist primarily of common stock,
U.S. government obligations, mutual funds and insurance contracts.
Net pension cost (benefit) for the years ended January 31,
1998, February 1, 1997 and February 3, 1996 included the following
components:
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
---- ---- ----
Service cost - benefits earned
during the year $ 315,000 $1,828,000 $1,260,000
Interest cost on projected
benefit obligation 1,180,000 1,420,000 1,199,000
Actual return on plan assets (3,432,000) (2,657,000) (1,528,000)
Net amortization and deferral 2,146,000 1,734,000 655,000
Effect of curtailment (3,669,000) - -
---------- ---------- ----------
Net pension cost (benefit) $(3,460,000) $2,325,000 $1,586,000
========== ========= =========
</TABLE>
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Assumptions used to develop the net periodic pension cost for fiscal
1998 were discount rate (7.5%), expected long-term return on assets
(9.0%) and increase in compensation levels (4.5%).
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
50% (25% for the years ended February 1, 1997 and February 3, 1996)
of the qualified employee's contribution up to 6% (3% for the years
ended February 1, 1997 and February 3, 1996) of the employee's
salary. The total cost of the matching contribution was $897,000,
$379,000 and $441,000 for the years ended January 31, 1998, February
1, 1997 and February 3, 1996, respectively.
The Company has established incentive bonus plans for certain
executives and employees. The bonus calculations are generally based
on the achievement of certain profit levels, as defined in the
plans. For the years ended January 31, 1998, February 1, 1997 and
February 3, 1996, $70,000, $145,500 and $50,000, respectively, was
provided for bonuses under the plans.
The Company does not provide post-retirement benefits other than
pensions as defined under SFAS #106.
(8) Stock Options and Performance Share Awards
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 January 31, 1998 as no options could be granted thereunder 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. Under this plan, at January 31, 1998, there are no
shares of common stock available for grants of performance shares,
and 194,810 shares of common stock remain available for all other
types of grants.
Options granted under the Amended and Restated 1985 Stock Option
Plan and the 1994 Equity Incentive Plan become exercisable either
ratably over four or more 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 a director's 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 no shares
of common stock available for grant at January 31, 1998.
The Company applied Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its stock options.
Accordingly, $98,000 of compensation cost has been recognized for
stock options in the Company's results of operations for fiscal
1998. Had the Company recorded a charge for the fair value of
options granted consistent with SFAS No. 123, net income and net
earnings per common share would have decreased by $1,458,000 and
$0.10 in fiscal 1998 and net loss and net loss per common share
would have been increased by $940,000 and $0.07 in fiscal 1997 and
$300,000 and $0.02 in fiscal 1996, respectively.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The fair value of each option grant is estimated on the date of the
grant using the Black-Scholes options pricing model, with the
following weighted average assumptions used for grants in fiscal
years 1998, 1997 and 1996:
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
---- ---- ----
Risk-free interest rate 5.8% 5.9% 6.2%
Expected option lives 6.8 years 6.8 years 7.1 years
Expected volatility 51.5% 59.0% 59.2%
Expected dividend yield 0.8% 0.8% 0.5%
</TABLE>
The effect of applying SFAS No. 123 is not representative of the pro
forma effect on net earnings in future years because it does not
take into consideration pro forma compensation expense related to
grants made prior to fiscal 1996.
Data with respect to stock options for fiscal years 1998, 1997 and
1996 is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1998 1997 1996
--------------------------- ------------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ --------- ------ -------- ------ --------
Outstanding at beginning of year 1,072,430 $ 9.58 1,176,170 $15.30 1,091,395 $16.58
Granted 637,500 7.16 731,262 8.70 338,000 12.88
Exercised (8,500) 5.62 (13,749) 7.65 (32,000) 4.82
Canceled (516,507) 11.13 (821,253) 16.55 (221,225) 19.43
--------- --------- ---------
Options outstanding at end of year 1,184,923 8.37 1,072,430 9.58 1,176,170 15.30
========= ========= =========
Options exercisable at end of year 439,801 516,027 589,102
Weighted average fair-value of
options granted during the year $3.78 $4.94 $8.08
</TABLE>
Effective as of February 5, 1996, the Board of Directors offered all
employee participants in the Stock Option Plans the opportunity to
reprice to $9.00 per share any currently outstanding stock options
with exercise prices in excess of $9.00 per share. On February 5,
1996, the fair market value of the Company's common stock was $5.25
per share. Pursuant to the repricing program, any employee electing
to reprice outstanding stock options was also required to accept a
reduced number of options shares commensurate with the reduction in
price to $9.00 from the price of the original grant. Each repriced
option retained the vesting schedule associated with the original
grant. Holders of original option grants totaling 646,376 shares
elected to reprice such options at $9.00 per share resulting in a
reduction of such options held to 342,962 shares, which is contained
in the number of options granted in fiscal 1997.
The following table sets forth a summary of the stock options
outstanding at January 31, 1998:
<TABLE>
<S> <C> <C> <C> <C> <C>
Options Outstanding Options Exercisable
-------------------------------------------------- --------------------------------
Weighted Average
Remaining
Range of Number Years of Weighted Average Number Weighted Average
Exercise price Outstanding Contractual Life Exercise Price Exercisable Exercise Price
-------------- ----------- ---------------- -------------- ----------- --------------
$ 1.00 - $ 8.63 552,545 8.1 $ 5.96 158,201 $ 6.84
$ 8.94 - $ 9.88 522,053 7.7 $ 9.15 177,850 $ 9.07
$12.00 - $17.00 62,025 5.5 $13.55 56,975 $13.58
$19.25 - $22.38 48,300 5.8 $20.93 46,775 $20.97
--------- -------
$ 1.00 - $22.38 1,184,923 7.7 $ 8.37 439,801 $10.12
========= =======
</TABLE>
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During fiscal 1997 and fiscal 1998, the Company granted Performance
Share Awards that entitle certain officers to shares of the
Company's common stock in fiscal 1999 and fiscal 2000 if the price
of the common stock attains a "Target Price" (the average closing
price of the Company's common stock for certain defined periods)
between $10.00 and $15.00. If such Target Price is attained, the
Company will grant between 82,750 and 165,500 shares of the
Company's common stock, respectively, to the eligible officers.
(9) Commitments and Contingent Liabilities
Leases
The Company leases its retail stores, computers, vehicles and
certain of its offices and warehouse facilities. The Company also
operates from leased premises under license agreements generally
requiring payment of annual rentals contingent upon sales.
The Company remains liable under certain leases and lease guaranties
for premises previously leased by the Company for the operation of
Parade of Shoes and Fayva footwear stores (the "Excess Property
Leases"). The total liability under the Excess Property Leases is
approximately $47.6 million as of January 31, 1998. The Company has
reduced its actual liability by assigning or subleasing
substantially all of the Excess Property Leases to unaffiliated
third parties.
At January 31, 1998, 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)
1999 $ 33,937 $ 511
2000 28,212 472
2001 21,727 180
2002 17,762 72
2003 12,868 42
Thereafter 21,565 -
------- ------
$136,071 $1,277
======= =====
</TABLE>
Rent expense for the years ended January 31, 1998, February 1, 1997
and February 3, 1996 was as follows:
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
---- ---- ----
(in thousands)
Minimum rentals $ 32,882 $ 49,167 $ 52,284
Contingent rentals 51,611 83,084 93,289
------- ------- -------
84,493 132,251 145,573
Less sublease rentals 556 317 336
------- ------- -------
Net rentals $ 83,937 $131,934 $145,237
======= ======= =======
</TABLE>
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
$5.3 million through April, 2000.
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 either 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 thirteen covered employees be terminated, is approximately $2.7
million.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At January 31, 1998 and February 1, 1997, the Company was
contingently liable under letters of credit totaling $8.8 million
and $11.2 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 September 17, 1997, the Company settled a patent infringement
lawsuit brought against the Company and Morse Shoe, Inc. by Susan
Maxwell. Pursuant to the settlement agreement, both cases were
dismissed with prejudice with no admissions of liability and the
parties executed a mutual release of all claims. Under the terms of
the settlement, the Company agreed to make payments to Ms. Maxwell
of $4,137,000, in the aggregate, over a three-year period and in
connection with the settlement, has recorded a one-time charge to
earnings of $3.4 million ($2.1 million on an after-tax basis) during
the third quarter of fiscal 1998 reflecting costs of the settlement
not previously accrued for.
(10) 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 $70 per unit, subject
to adjustment, upon the occurrence of certain events as set forth in
the Rights Agreement. These events include the earliest to occur of
(i) the acquisition of 15% or more of the outstanding shares of
common stock of the Company by any person or group, (ii) the
commencement of a tender or exchange offer that would result upon
its consummation in a person or a group becoming the beneficial
owner of 15% or more of the outstanding common stock of the Company
or (iii) the determination by the Board of Directors that any person
is an "Adverse Person", as defined in the Rights Agreement. The
Rights are not exercisable until or following the occurrence of one
of the above events and will expire on December 14, 2004, unless
previously redeemed or exchanged by the Company as provided in the
Rights Agreement.
(11) Principal Licensor
Sales in licensed footwear departments operated under the Ames
license agreement accounted for 15.4%, 10.5% and 9.4% of the
Company's net sales in the years ended January 31, 1998, February 1,
1997 and February 3, 1996, respectively. On a pro forma basis,
excluding sales generated by the Company's SCOA and Parade of Shoes
divisions, sales in Ames accounted for 15.9% of the Company's sales
for the year ended January 31, 1998.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(12) Segment Information
The Company is a specialty retailer conducting business through
retail stores in two business segments: apparel and footwear.
Information about operations for each of these segments is
summarized as follows:
<TABLE>
<S> <C> <C> <C>
Year Ended
--------------------------------------------------------------
January 31, 1998 February 1, 1997 February 3, 1996
---------------- ---------------- ----------------
($ in thousands) (53 weeks)
Apparel
Net sales $309,500 $293,775 $263,322
Operating profit 24,185 24,123 24,814
Identifiable assets 132,335 116,859 110,461
Depreciation and amortization 6,747 7,501 6,973
Additions to property, equipment and
leasehold improvements 6,660 6,665 10,461
Footwear
Net sales $282,651 $603,717 $757,091
Restructuring and other
non-recurring charges - (122,309) (69,300)
Litigation settlement charges (3,432) - -
Operating profit (loss) 14,367 (144,744) (51,768)
Identifiable assets 112,935 178,126 372,657
Depreciation and amortization 4,715 18,094 20,524
Additions to property, equipment and
leasehold improvements 718 8,043 13,271
Consolidated
Net sales $592,151 $897,492 $1,020,413
Restructuring and other
non-recurring charges - (122,309) (69,300)
Litigation settlement charges (3,432) - -
Operating profit (loss) before general
corporate expense 38,552 (120,621) (26,954)
General corporate expense (18,913) (23,851) (27,014)
Interest expense, net (13,388) (12,802) (10,457)
Earnings (loss) before income taxes $ 6,251 $(157,274) $(64,425)
Identifiable assets $245,270 $294,985 $483,118
Corporate assets 89,797 93,556 42,964
Total assets $335,067 $388,541 $526,082
Depreciation and amortization $ 15,103 $ 29,430 $ 32,428
Additions to property, equipment and
leasehold improvements $ 8,810 $ 16,421 $ 28,062
</TABLE>
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Selected Quarterly Financial Data (Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- ------
(In thousands, except per share data)
Year ended January 31, 1998
Net sales $137,350 $143,929 $139,148 $171,724 $592,151
Gross profit 61,998 63,790 62,586 75,950 264,324
Net earnings (loss) $ 269 $ 1,904 $ (1,383) $ 3,023 $ 3,813
======== ======== ======== ======== =========
Earnings (loss) per common share:
Basic $ .02 $ .14 $ (.10) $ .22 $ 0.27
======= ======= ======= ======= =======
Diluted $ .02 $ .14 $ (.10) $ .22 $ 0.27
======= ======= ======= ======= =======
Year ended February 1, 1997
Net sales $195,530 $231,805 $222,764 $247,393 $897,492
Gross profit 90,621 101,427 96,184 67,013 355,245
Net earnings (loss) $ 826 $ 1,486 $ 1,418 $(115,158) $(111,428)
======== ======== ======== ======== ========
Earnings (loss) per common share:
Basic $ .06 $ .11 $ .10 $ (8.29) $ (8.02)
======== ======== ======== ========= ========
Diluted $ .06 $ .11 $ .10 $ (8.29) $ (8.02)
======== ======== ======== ======== ========
</TABLE>
(14) Advertising Costs
Advertising costs are charged to expense as incurred. The Company
incurred advertising costs of $11.7 million, $14.8 million and $20.5
million in the years ended January 31, 1998, February 1, 1997 and
February 3, 1996, respectively.
(15) Supplemental Schedules to Consolidated Statements of Cash Flows
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
----- ---- ----
Cash paid for interest $13,545,337 $12,670,073 $11,069,341
Cash paid for income taxes 272,104 1,168,901 2,039,089
Income taxes refunded - (8,315,483) -
============ ========== ==========
</TABLE>
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. 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",
"REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION", "Executive Compensation" and "Employment and Severance
Arrangements" is incorporated herein by this reference.
Item 11. EXECUTIVE COMPENSATION
The information appearing in the Proxy Statement under the caption
"Executive Compensation", "Employment and Severance Arrangements", "Information
About Board of Directors and Committees" and "REPORT OF THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION" is incorporated
herein by this reference.
Item 12. 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" and SECTION 16(a)
"BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" is incorporated herein by this
reference.
Item 13. 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
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements. 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. Exhibits. The Exhibits listed in the Exhibit Index. Exhibits
10.15 through 10.36 constitute all of the management contracts
and compensation plans and arrangements of the Company
required to be filed as exhibits to this Annual Report.
(b) Reports on Form 8-K. 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/Alan I. Weinstein
Sherman N. Baker Alan I. Weinstein
Chairman of the Board President and
Chief Executive Officer
By/s/Philip G. Rosenberg
Philip G. Rosenberg
Executive Vice President
and Principal Financial Officer
April 22, 1998
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/Harold Leppo /s/David Pulver
Harold Leppo, Director David Pulver, Director
/s/Melvin M. Rosenblatt /s/Nancy Ryan
Melvin M. Rosenblatt, Director Nancy Ryan, Director
/s/Alan I. Weinstein
Alan I. Weinstein, Director
All as of April 22, 1998
<PAGE>
EXHIBITS
Filed with
Annual Report on Form 10-K
of
J. BAKER, INC.
555 Turnpike Street
Canton, MA 02021
For the Year Ended January 31, 1998
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit Page No.
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 State Street Bank and Trust Company 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) 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).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
(.07) Waiver Agreement and Amendment to Senior Subordinated Note Agreement *
between JBI, Inc. and Massachusetts Mutual Life Insurance Company and
MassMutual Participation Investors ("MassMutual") dated February 24,
1997 (filed as Exhibit 10.26 to the Company's Report on Form 10-K
for the year ended February 1, 1997).
(.08) Guaranty Agreement of certain subsidiaries of the Company in favor of *
MassMutual dated as of March 13, 1997 (filed as Exhibit 10.27 to the
Company's Report on Form 10-K for the year ended February 1, 1997).
10. Material Contracts
(.01) Asset Purchase Agreement dated as of March 5, 1997 by and between *
Shoe Corporation of America and JBI, Inc. (filed as Exhibit 2.1 to
the Company's Form 8-K Report dated March 20, 1997).
(.02) Asset Purchase Agreement dated as of January 13, 1997 by and between *
Payless ShoeSource, Inc., JBI, Inc. and J. Baker, Inc. (filed as
Exhibit 2.2 to the Company's Form 8-K Report dated March 20, 1997).
(.03) 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).
(.04) 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).
(.05) 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).
(.06) 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).
(.07) 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).
(.08) 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).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
(.09) Credit Agreement by and among The Casual Male, Inc., TCM Holding *
Co., Inc., WGS Corp., TCMB&T, Inc. and J. Baker, Inc., and Fleet
National Bank and BankBoston, N.A., et al, dated May 30, 1997 (filed
as Exhibit 10.01 to the Company's Report on Form 10-Q for the
quarter ended May 3, 1997).
(.10) First Amendment to Credit Agreement by and among The Casual Male, **
Inc., TCM Holding Co., Inc., WGS Corp., TCMB&T, Inc. and J. Baker,
Inc., and Fleet National Bank and BankBoston, N.A., et al, dated
February 24, 1998, attached.
(.11) Second Amendment to Credit Agreement by and among The Casual Male, **
TCM Holding Co., Inc., WGS Corp., TCMB&T, Inc. and J. Baker, Inc.
and Fleet National Bank and BankBoston, N.A., et al., dated April 2, 1998,
attached.
(.12) Loan and Security Agreement between JBI, Inc., Morse Shoe, Inc. *
and JBI Holding Company, Inc., and BankBoston Retail Finance Inc.
(formerly known as GBFC, Inc.) and Fleet National Bank, dated May 30,
1997 (filed as Exhibit 10.02 to the Company's Report on Form 10-Q
for the quarter ended May 3, 1997).
(.13) First Amendment to Loan and Security Agreement between JBI, Inc., **
Morse Shoe, Inc. and JBI Holding Company, Inc., and BankBoston
Retail Finance Inc. (formerly GBFC, Inc.) and Fleet National
Bank, dated July 15, 1997, attached.
(.14) Second Amendment to Loan and Security Agreement between JBI, Inc., Morse **
Shoe, Inc. and JBI Holding Company, Inc., and BankBoston Retail Finance Inc.
(formerly known as GBFC, Inc.) and Fleet National Bank, dated
February 18, 1998, attached.
(.15) 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).
(.16) 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).
(.17) Amendment to Employment Agreement between J. Baker, Inc. and *
Sherman N. Baker, dated March 31, 1996 (filed as Exhibit 10.09 to
the Company's Form 10-K Report for the year ended February 3, 1996).
(.18) Third Amendment to Employment Agreement between J. Baker, Inc. and *
Sherman N. Baker dated as of March 31, 1997 (filed as Exhibit 10.10 to
the Company's report on Form 10-K for the year ended February 1, 1997).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
(.19) Performance Share Award granted to Alan I. Weinstein dated March 26, *
1996 (filed as Exhibit 10.04 to the Company's Form 10-Q Report for
the quarter ended August 3, 1996).
(.20) Executive Employment Agreement between J. Baker, Inc. and Alan I. *
Weinstein dated April 1, 1997 (filed as Exhibit 10.17 to the Company's
Report on Form 10-K for the year ended February 1, 1997).
(.21) Amendment to Executive Employment Agreement between J. Baker, Inc. *
and Alan I. Weinstein, dated September 1,1997 (filed as Exhibit 10.06 to
the Company's Form 10-Q Report for the quarter ended November 1, 1997).
(.22) Performance Share Award granted to James D. Lee dated October 18, 1996 *
(filed as Exhibit 10.01 to the Company's Form 10-Q Report for the
quarter ended November 2, 1996).
(.23) Executive Employment Agreement dated as of April 1, 1997 *
between James D. Lee and J. Baker, Inc.
(.24) Performance Share Award granted to James D. Lee, dated June 5, 1997 *
(filed as Exhibit 10.02 to the Company's Report on Form 10-K for the
quarter ended November 1, 1997).
(.25) Forgivable Promissory Note made by James D. Lee in favor of J. Baker, *
Inc., dated November 24, 1997 (filed as Exhibit 10.03 to the Company's
Report on Form 10-Q for the quarter ended November 1, 1997).
(.26) First Amendment to Executive Employment Agreement between **
J. Baker, Inc. and James D. Lee, dated April 10, 1998, attached.
(.27) Performance Share Award granted to Philip G. Rosenberg dated October *
18, 1996 (filed as Exhibit 10.03 to the Company's Form 10-Q Report
for the quarter ended November 2, 1996).
(.28) Executive Employment Agreement between J. Baker, Inc. and Philip G. *
Rosenberg, dated April 1, 1997 (filed as Exhibit 10.55 to the Company's
Report on Form 10-K for the year ended February 1, 1997).
(.29) First Amendment to Executive Employment Agreement between J. Baker, **
Inc. and Philip G. Rosenberg, dated April 10, 1998, attached.
(.30) Executive Employment Agreement between J. Baker, Inc. and Stuart M. *
Glasser, dated September 15, 1997 (filed as Exhibit 10.04 to the Company's
Report on Form 10-Q for the quarter ended November 1, 1997).
(.31) Performance Share Award granted to Stuart M. Glasser, dated *
September 15, 1997 (filed as Exhibit 10.05 to the Company's Report on Form
10-Q for the quarter ended November 1, 1997).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
(.32) Executive Employment Agreement dated as of June 5, 1997 between Roger *
Osborne and J. Baker, Inc. (filed as Exhibit 10.02 to the Company's Report
on Form 10-Q for the quarter ended August 2, 1997).
(.33) First Amendment to Executive Employment Agreement between J. Baker, **
Inc. and Roger J. Osborne dated April 10, 1998, attached.
(.34) 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).
(.35) 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).
(.36) 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).
(.37) 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 for the quarter ended October 30, 1993).
(.38) 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).
(.39) 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).
(.40) 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 for the quarter ended October 31, 1992).
(.41) 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).
(.42) 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.
(.43) Mortgage, Assignment of Leases and Rents and Security Agreement from *
Morse Shoe, Inc. to Fleet National Bank dated as of June 21, 1996
(filed as Exhibit 10.06 to the Company's Form 10-Q Report for the
quarter ended August 3, 1996).
(.44) Mortgage, Assignment of Leases and Rents and Security Agreement from *
JBI, Inc. to Fleet National Bank dated as of June 21, 1996 (filed as
Exhibit 10.07 to the Company's Form 10-Q Report for the quarter ended
August 3, 1996).
(.45) Release and Discharge of Mortgage from Fleet National Bank as Agent *
with respect to the Canton, Massachusetts property dated December 27,
1996 (filed as Exhibit 10.67 to the Company's Report on Form 10-K for
the year ended February 1, 1997).
(.46) Release of Mortgage from Fleet National Bank as Agent with *
respect to the Columbus, Ohio property dated February 27, 1997,
attached.
(.47) Mortgage and Security Agreement by JBAK Canton Realty, Inc. to *
The Chase Manhattan Bank dated as of December 30, 1996, attached.
11. Statement re: Computation of Net Earnings (Loss) Per Common **
Share, attached.
12. Statement re: Computation of Ratio of Earnings to Fixed Charges, **
attached.
21. Subsidiaries of the Registrant, attached. **
23. Consent of KPMG Peat Marwick LLP, attached. **
27. Financial Data Schedule, attached. **
</TABLE>
* Incorporated herein by reference
** Included herein
EXHIBIT 10.10
J. Baker, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Dated as of February 24, 1998
Fleet National Bank
One Federal Street
Boston, Massachusetts 02210
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts, 02110
Re: First Amendment to The Casual Male Credit Agreement
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of May 30, 1997 (as
amended, supplemented, modified or restated and in effect from time, the "Credit
Agreement"), by and among (a) THE CASUAL MALE, INC. ("Casual Male"), TCM HOLDING
CO., INC. ("TCM"), WGS CORP. ("WGS") and TCMB&T, INC. ("TCMB&T" and, together
with Casual Male, TCM and WGS, collectively, the "Borrowers" and each,
singularly, a "Borrower"), (b) J. BAKER, INC. (the "Guarantor"), and (c) FLEET
NATIONAL BANK ("Fleet"), BANKBOSTON, N.A. ("BankBoston") and the other lending
institutions from time to time party thereto (collectively, the "Lenders"),
Fleet as Administrative Agent for itself and the other Lenders (in such
capacity, the "Administrative Agent") and BankBoston as Documentation Agent for
itself and the other Lenders (in such capacity, the "Documentation Agent", and
together with the Administrative Agent, collectively, the "Agents").
Capitalized terms used and not otherwise defined in this letter
agreement (this "Amendment Agreement") shall have the meanings assigned to such
terms in the Credit Agreement.
The Borrowers and the Guarantor desire to amend the defined term
"Majority Lenders" contained in the Credit Agreement The Lenders and the Agents
have advised the Borrowers and the Guarantor that they are prepared to so amend
the Credit Agreement, subject to the satisfaction of the conditions precedent
and in reliance upon the representations and warranties of the Obligors set
forth herein.
Accordingly, the Borrowers and the Lenders hereby agree as follows:
Section 1. Amendments to the Credit Agreement. As of the Amendment Date
(as defined in Section 2 below), the Credit Agreement shall be amended by
amending and restating the following defined term that appears therein to read
as follows:
"Majority Lenders. As of any date, the Lenders holding at
least sixty-six and two-thirds percent (66 2/3%) of the outstanding
principal amount of the Notes on such date; and if no such principal is
outstanding, the Lenders whose aggregate Commitments constitute at
least sixty-six and two-thirds percent (66 2/3%) of the Total
Commitment."
Section 2. Conditions to Effectiveness. This Amendment Agreement shall
become effective (the date of such effectiveness being referred to hereinafter
as the "Amendment Date") on the date on which each of the following conditions
precedent is satisfied:
(a) the Administrative Agent shall have received copies of this
Amendment Agreement bearing the signature of each of the
Borrowers, the Guarantor and all of the Lenders;
(b) the representations and warranties of the Obligors set forth in Section 3
below, shall be true and correct in every respect; and
(c) the Administrative Agent shall receive such other documents
and writings as the Administrative Agent may reasonably
determine necessary to effect the transactions contemplated
hereby.
Section 3. Representations and Warranties. By its signature hereto,
each of the Obligors, jointly and severally, represents and warrants to the
Lenders and the Agents that, as of the date hereof and after giving effect to
the amendments to the Credit Agreement contemplated in Section 1 above:
(a) This Amendment Agreement has been duly executed and delivered
by each of the Obligors. The agreements and obligations of the
Obligors contained herein constitute legal, valid and binding
obligations of each such Person enforceable against such
Person in accordance with their respective terms.
(b) The execution, delivery and performance by the Obligors of
this Amendment Agreement and the transactions contemplated
hereby are within the corporate authority of each such Person,
have been duly authorized by proper corporate proceedings, do
not and will not contravene any contractual obligation of such
Person or any applicable law, and do not and will not result
in or require the creation or imposition of any Lien on any
property of such Person, other than Liens in favor of the
Administrative Agent on behalf of the Lenders.
Section 4. Continued Validity of Loan Documents. Except for the
amendment of the Credit Agreement pursuant to Section 1 hereof, this Amendment
Agreement shall not, by implication or otherwise, limit, impair, constitute a
waiver of or otherwise affect any rights or remedies of any of the Lenders or
the Agents under the Credit Agreement or the other Loan Documents, nor alter,
modify, amend or in any way affect any of the obligations or covenants contained
in the Credit Agreement or any of the other Loan Documents, all of which are
ratified and confirmed in all respects and shall continue in full force and
effect.
Section 5. Consent of Obligors. Each of the Obligors acknowledges and
consents to the execution and delivery of this Amendment Agreement on the terms
specified herein and the performance by each such Person of its respective
obligations hereunder, under the Credit Agreement (as amended hereby) and the
other Loan Documents. Each Obligor, by signing this Amendment Agreement,
confirms and agrees with the Lenders and the Agents that (a) all of its
obligations under the relevant Security Documents shall remain in full force and
effect and are hereby ratified and confirmed, and (b) its grant (as the case may
be) to the Lenders and the Agents of a security interest under the Security
Documents to which it is a party shall remain in full force and effect and is
hereby ratified and confirmed.
Section 6. Loan Documents. From and after the date hereof, this
Amendment Agreement shall be deemed a Loan Document for all purposes of the
Credit Agreement, and each reference to Loan Documents in the Credit Agreement
shall be deemed to include this Amendment Agreement.
Section 7. Reference to Documents. When referring to any documents
herein, any such reference is to such document as it may be amended, restated,
modified or supplemented, except as otherwise expressly indicated herein.
Section 8. APPLICABLE LAW. THIS AMENDMENT IS INTENDED TO TAKE EFFECT AS
A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
Section 9. Counterparts. This Amendment Agreement may be executed in
any number of counterparts, each of which shall constitute an original but all
of which when taken together shall constitute but one agreement. Delivery of an
executed counterpart of a signature page by facsimile transmission shall be
effective as delivery of a manually executed counterpart of this Amendment
Agreement.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed and delivered as of the day and year first above
written.
THE CASUAL MALE, INC.
By /s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
TCM HOLDING CO., INC.
By /s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
WGS CORP.
By /s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
TCMB&T, INC.
By /s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
J. BAKER, INC.
By /s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
ACKNOWLEDGED AND AGREED TO:
FLEET NATIONAL BANK,
individually and as Administrative Agent
By /s/Christopher J. Kampe
Name:
Title: AVP
BANKBOSTON, N.A.
individually and as Documentation Agent
By /s/Linda H. Thomas
Name:
Title: Managing Director
THE CHASE MANHATTAN BANK
By /s/Roger A. Stone
Name:
Title: SVP
IMPERIAL BANK
By /s/James F. Higgins, Jr.
Name:
Title: First VP
USTRUST
By /s/P. Jeffrey Huth
Name:
Title:VP
WAINWRIGHT BANK AND TRUST COMPANY
By /s/Jan A. Miller
Name:
Title: President
BANK POLSKA KASA OPIEKI, S.A.
By /s/Harvey Winter
Name:
Title: Vice President
EXHIBIT 10.11
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT is dated as of April 2, 1998
(this "Agreement"), by and among (a) THE CASUAL MALE, INC. ("Casual Male"), TCM
HOLDING CO., INC. ("TCM"), WGS CORP. ("WGS") and TCMB&T, INC. ("TCMB&T" and,
together with Casual Male, TCM and WGS, the "Borrowers" and each, singularly, a
"Borrower"), (b) J. BAKER, INC. (the "Guarantor"), (c) FLEET NATIONAL BANK
("Fleet"), BANKBOSTON, N.A. ("BankBoston") and each of the other lending
institutions party to the Credit Agreement (as hereinafter defined)
(collectively, the "Lenders" and each singularly, a "Lender"), (d) Fleet as
Administrative Agent for itself and the other Lenders (in such capacity, the
"Administrative Agent"), and (e) BankBoston as Documentation Agent for itself
and the other Lenders (in such capacity, the "Documentation Agent" and together
with the Administrative Agent, collectively, the "Agents").
WHEREAS, the Borrowers, the Guarantor, the Lenders and the Agents are
parties to a Credit Agreement dated as of May 30, 1997 (as amended, supplemented
or modified and in effect from time to time, the "Credit Agreement")
(capitalized terms used but not defined in this Agreement having the meanings
specified for such terms in the Credit Agreement);
WHEREAS, the Total Commitment, as in effect on the Closing Date as
reflected on Schedule 1 to the Credit Agreement (as such Schedule was in effect
prior to giving effect to this Agreement), was automatically reduced to
$90,000,000 pursuant to the terms of Section 2.4 of the Credit Agreement (as
such Section 2.4 was in effect prior to giving effect to this Agreement);
WHEREAS, the Borrowers and the Guarantor have requested that the Agents
and the Lenders agree to amend the Credit Agreement (including Schedule 1 and
Schedule 2 thereto) in order (i) to increase the Total Commitment to $95,000,000
(as such amount shall be reduced, terminated or otherwise modified pursuant to
the terms of the Credit Agreement as amended and in effect from time to time)
and to amend the schedule of automatic reductions in the Total Commitment, (ii)
to amend the financial covenants contained in Section 10 of the Credit Agreement
in certain respects, and (iii) to amend the definition of Applicable Margin in
certain respects, in each case as provided more fully herein; and
WHEREAS, the Agents and the Lenders are willing to agree to such
amendments to the Credit Agreement, upon the terms and subject to the conditions
contained herein;
NOW, THEREFORE, for valuable consideration, receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Amendment to the Credit Agreement. The Credit Agreement is hereby
amended as set forth below:
(a) Mandatory Reduction of Total Commitment. Section 2.4 of the Credit
Agreement is hereby amended and restated to read in its entirety as
follows:
"ss.2.4. Mandatory Reduction of Total Commitment. On each of
the dates set forth in the table below (each such date being hereinafter
referred to as a "Commitment Reduction Date"), the Total Commitment shall be
automatically reduced by the amount (the "Reduction Amount") set forth opposite
such date in the column headed "Reduction Amount" set forth below, to the amount
set forth opposite such date in the column headed "Total Commitment" set forth
below:
<TABLE>
<S> <C> <C>
Date Reduction Amount Total Commitment
December 31, 1998 $10,000,000 $85,000,000
December 31, 1999 $10,000,000 $75,000,000"
</TABLE>
(b) Fixed Charge Coverage Ratio. Section 10.1 of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
"ss.10.1. Fixed Charge Coverage Ratio. The Borrowers will not
permit the Fixed Charge Coverage Ratio at the end of any fiscal quarter ending
during any period described below to be less than the ratio set forth opposite
such period below:
<TABLE>
<S> <C>
Period Ratio
------ -----
Fiscal quarter ending May 3, 1997 1.00 to 1
Two consecutive fiscal quarters ending August 2, 1997 1.00 to 1
Three consecutive fiscal quarters ending November 1, 1997 1.00 to 1
Each period of four consecutive fiscal quarters ending thereafter 1.25 to 1"
</TABLE>
(c) Leverage Ratio. Section 10.2 of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
"ss.10.2. Leverage Ratio. The Borrowers will not permit the Leverage Ratio as at
the end of any fiscal quarter ending during any period described below to
be greater than the ratio set forth opposite such period below:
<TABLE>
<S> <C>
Period Ratio
Fiscal quarter ended January 31, 1998 3.00 to 1
February 1, 1998 through October 31, 1998 3.75 to 1
November 1, 1998 through January 30, 1999 2.75 to 1
January 31, 1999 through October 30, 1999 3.50 to 1
October 31, 1999 through January 29, 2000 2.25 to 1
January 30, 2000 and thereafter 3.00 to 1"
</TABLE>
(d) Capital Expenditures; Capitalized Leases. Section 10.5 of the Credit
Agreement is hereby amended and restated to read in its entirety as
follows:
"ss.10.5. Capital Expenditures; Capitalized Leases. None of
the Apparel Obligors will make Capital Expenditures plus Capitalized Lease
expenditures (including the "face amount" of Capitalized Leases) that exceed,
in the aggregate for all Apparel Obligors (a) $9,000,000 in the aggregate
during the fiscal year of the Borrowers ending January 31, 1998, (b)
$8,000,000 in the aggregate during the fiscal year of the Borrowers ending
January 30, 1999, and (c) $9,000,000 in the aggregate during the fiscal year
of the Borrower ending January 29, 2000."
(e) Schedule 1 to Credit Agreement. Schedule 1 to the Credit Agreement
is hereby amended and restated in its entirety and shall be replaced by the
Schedule 1 attached hereto.
(f) Schedule 2 to Credit Agreement. Schedule 2 to the Credit Agreement
is hereby amended by amending and restating the definition of "Applicable
Margin" set forth in such Schedule to read in its entirety as follows:
"Applicable Margin. With respect to any Loan, at any time after
January 31, 1998, the Applicable Margin shall be the interest rate margin
determined by the Administrative Agent based upon the Leverage Ratio as of
the last day of the fiscal quarter immediately preceding any date of
determination, effective as of the fifth Business Day after the financial
statements referred to in Section 8.4 hereof have been or, if earlier, are
required to be furnished by the Borrowers to the Administrative Agent and
each Lender for such immediately preceding fiscal quarter, expressed as a
per annum rate of interest, in each case as set forth (a) with respect to
such Leverage Ratio as of the last day of any of the first three fiscal
quarters of any fiscal year, in table 1 below, and (b) with respect to such
Leverage Ratio as of the last day of the last fiscal quarter of any fiscal
year, in table 2 below:
Table 1 (first three fiscal quarters):
<TABLE>
<S> <C> <C> <C> <C> <C>
Base Rate LIBOR Rate
Applicable Applicable Facility
Level Leverage Ratio Margin Margin Fee Rate
----- -------------- ---------- ---------- ---------
But
Less Than Greater
Or Equal To Than
----------- -----
Level 1 2.75:1 -- 0.25% 1.500% .50%
Level 2 3.25:1 2.75:1 0.75% 2.00% .50%
Level 3 -- 3.25:1 1.25% 2.50% .50%
Table 2 (last fiscal quarter):
Base Rate LIBOR Rate
Applicable Applicable Facility
Level Leverage Ratio Margin Margin Fee Rate
----- -------------- --------- ---------- --------
But
Less Than Greater
Or Equal To Than
Level 1 1.75:1 -- 0.25% 1.500% .50%
Level 2 2.50:1 1.75:1 0.75% 2.00% .50%
Level 3 -- 2.50:1 1.25% 2.50% .50%
</TABLE>
provided, however, that, in the event that any Borrower fails to timely
provide the financial statements referred to above in accordance with the terms
of Section 8.4 hereof, and without prejudice to any additional rights under
Section 14.3 hereof, no downward adjustment of the Applicable Margin shall occur
until the second Business Day after the actual delivery of such statements. From
April 3, 1998 until the date of delivery of the financial statements for the
fiscal quarter ending on January 31, 1998 pursuant to Section 8.4(a), the
Leverage Ratio shall be deemed to be at Level 3 as set forth in table 2 above."
Section 2. Conditions to Effectiveness. This Agreement shall become
effective (the date of such effectiveness being referred to hereinafter as the
"Effective Date") on the date on which each of the following conditions
precedent is satisfied:
(a) the Administrative Agent shall have received copies of this
Agreement bearing the signature of each of the Borrowers, the Guarantor,
the Agents and the Lenders;
(b) the Administrative Agent shall have received from each of the
Apparel Obligors a certificate signed by a duly authorized officer of such
Person to the effect that its certificate or articles of incorporation or
organization and its by-laws, in each case as previously delivered to the
Administrative Agent on or prior to the Closing Date, have not been amended
or modified and remain in full force and effect;
(c) all corporate action necessary for the valid execution, delivery
and performance by each Apparel Obligor of this Agreement and the other
Loan Documents to which it is or is to become a party shall have been duly
and effectively taken, and evidence thereof satisfactory to the Agents
shall have been provided to the Administrative Agent;
(d) the Administrative Agent shall have received from each of the
Apparel Obligors an incumbency certificate signed by a duly authorized
officer of such Person and giving the name and bearing a specimen signature
of each individual who shall be authorized: (i) to sign, in the name and on
behalf of Person, this Agreement and each of the Loan Documents to which
such Person is or is to become a party, (ii) in the case of each Borrower,
to make Loan Requests and apply for Credit Instruments, and (iii) to give
notices and to take other action on such Persons' behalf under the Loan
Documents;
(e) the Administrative Agent shall have received from each of the
Apparel Obligors a certificate of good standing as of a recent date from
the Secretary of State (or similar applicable governmental authority) of
its state of organization;
(f) the Administrative Agent shall have received a favorable legal
opinion, addressed to the Lenders and the Agents and in form and substance
satisfactory to the Lenders and the Agents, from Goodwin, Procter & Hoar
LLP, counsel to the Obligors;
(g) the Obligors shall have paid or reimbursed the Administrative
Agent for all of the fees and disbursements of Bingham Dana LLP, the
Administrative Agent's special counsel, which shall have been incurred by
the Administrative Agent in connection with the preparation, negotiation,
execution and delivery of this Agreement and the implementation of the
transactions contemplated thereby, or which otherwise are required to be
paid under the Credit Agreement;
(h) the Apparel Obligors shall have paid to the Administrative Agent
an amendment fee in the aggregate amount of $275,000, such fee to be for
the ratable accounts of the Lenders in accordance with their respective
Commitment Percentages;
(i) the Administrative Agent shall have received evidence satisfactory
to it that all of the Obligations constitute "Senior Indebtedness," "Senior
Debt," or "Superior Indebtedness" under the Subordinated Debt;
(j) the representations and warranties of the Apparel Obligors set
forth in Section 3 below, shall be true and correct in every respect; and
(k) the Administrative Agent shall receive such other documents and
writings as the Administrative Agent may reasonably determine necessary to
effect the transactions contemplated hereby.
Notwithstanding anything in this Agreement to the contrary, should the
Effective Date not occur on or before April 3, 1998, this Agreement shall be
null and void and of no force or effect.
Section 3. Representations and Warranties. By its signature hereto,
each of the Borrowers and the Guarantor represents and warrants to the Lenders
and the Agents that, as of the date hereof and after giving effect to the
agreements of the Lenders contemplated by Section 1 hereof:
(a) This Agreement has been duly executed and delivered by each of the
Borrowers and the Guarantor. The agreements and obligations of each of the
Borrowers and the Guarantor contained herein constitute legal, valid and
binding obligations of each such Person enforceable against such Person in
accordance with their respective terms.
(b) The execution, delivery and performance by the Borrowers and the
Guarantor of this Agreement and the transactions contemplated hereby are
within the corporate authority of each such Person, have been duly
authorized by proper corporate proceedings, do not and will not contravene
any contractual obligation of such Person or any applicable law, and do not
and will not result in or require the creation or imposition of any Lien on
any property of such Person, other than Liens in favor of the
Administrative Agent on behalf of the Lenders.
(c) The representations and warranties of the Apparel Obligors
contained in the Credit Agreement (i) were true and correct when made and
(ii) after giving effect to this Agreement, continue to be true and correct
on the date hereof (except to the extent of changes resulting from
transactions contemplated or permitted by the Credit Agreement, as amended
hereby, and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the extent
that such representations and warranties relate expressly to an earlier
date).
(d) No Default or Event of Default has occurred, is continuing or will
exist under the Credit Agreement or any of the other Loan Documents after
giving effect to this Agreement.
(e) All of the Apparel Obligors' obligations and liabilities to the
Agents and the Lenders as evidenced by or otherwise arising under the
Credit Agreement or any of the other Loan Documents are hereby ratified and
confirmed in all respects, and no counterclaim, right of set-off or defense
of any kind exists or is outstanding with respect to such obligations and
liabilities.
Section 4. Miscellaneous.
(a) No Other Amendments, Etc. Except as expressly set forth in this
Agreement, this Agreement shall not, by implication or otherwise, limit,
impair, constitute a waiver of or otherwise affect any rights or remedies
of the Agents or the Lenders under the Credit Agreement or the other Loan
Documents, nor alter, modify, amend or in any way affect any of the terms,
obligations or covenants contained in the Credit Agreement or the other
Loan Documents, all of which are ratified and confirmed on and as of the
date hereof in all respects and shall continue in full force and effect. In
the event of any conflict between the terms of this Agreement and the terms
of the Credit Agreement, the terms of this Agreement shall control.
(b) Counterparts, Etc. This Agreement may be executed in any number of
counterparts, but all of such counterparts shall together constitute but
one and the same agreement. In making proof of this Agreement, it shall not
be necessary to produce or account for more than one such counterpart.
Delivery of an executed counterpart of a signature page by facsimile
transmission shall be effective as delivery of a manually executed
counterpart of this Agreement.
(c) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors in title and assigns.
(d) Governing Law, Etc. This Agreement and the respective rights and
obligations hereunder of each of the parties hereto shall be governed by
and interpreted and determined in accordance with the laws of The
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
THE CASUAL MALE, INC.
By: /s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
TCM HOLDING CO., INC.
By: /s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
WGS CORP.
By: /s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
TCMB&T, INC.
By: /s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
J. BAKER, INC.
By: /s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
FLEET NATIONAL BANK,
individually and as Administrative Agent
By: /s/Christopher J. Kampe
Name:
Title: AVP
BANKBOSTON, N.A.,
individually and as Documentation Agent
By: /s/Susan Pardus-Galland
Name:
Title: Vice President
THE CHASE MANHATTAN BANK
By: /s/Jeffrey Heuer
Name:
Title: VP
IMPERIAL BANK
By: /s/James F. Higgins, Jr.
Name:
Title: First V.P.
USTRUST
By: /s/P. Jeffrey Huth
Name:
Title: V.P.
WAINWRIGHT BANK AND
TRUST COMPANY
By: /s/Jan A. Miller
Name:
Title: President
BANK POLSKA KASA OPIEKI, S.A.
By:/s/ Harvey Winter
Name:
Title: V.P.
/July 16, 1997 /
EXHIBIT 10.13
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT GBFC, INC.
Effective: July 15, 1997
THIS FIRST AMENDMENT is made to the May 30, 1997 Loan and Security
Agreement, as amended (the "Loan Agreement") between
GBFC, Inc., a Delaware corporation with its principal executive offices
at 40 Broad Street, Boston, Massachusetts, as Administrative Agent for the
ratable benefit of the "Lenders" and as a "Lender;
Fleet National Bank, a national banking association with offices at One
Federal Street, Boston, Massachusetts, as Co-Agent for the ratable benefit of
the Lenders and as a "Lender;
and
JBI, Inc. a Massachusetts corporation with its principal executive offices
at 555 Turnpike Street, Canton, Massachusetts 02012, as "Lead Borrower" and as
agent for the "Borrowers", being the following:
JBI, Inc.;
MorseShoe, Inc. (a Delaware corporation with its principal executive
offices at 555 Turnpike Street, Canton, Massachusetts, 02012); and
JBI Holding Company, Inc. (a Delaware corporation with its principal
executive offices at 900 Market Street, Wilmington, DE, 19801),
in consideration of the mutual covenants contained herein and benefits
to be derived herefrom,
WITNESSETH:
Article 3 (Definition of "Acceptable Host Store") is amended to read as
follows:
"Acceptable Host Store": (a) A Key Host Store which has executed a Host
Store Consent.
(b) Until July 31, 1997, any Host Store which is
not a Key Host Store.
(c) After July 31, 1997, any Host Store which has
executed a Host Store Consent.
Each Borrower hereby represents that, at the execution of the within
Agreement, no Suspension Event has occurred.
Except as amended hereby, all terms and provisions of the Loan
Agreement shall remain in full force and effect as executed.
THE LEAD BORROWER
JBI, INC.
By /s/ Philip Rosenberg
Print Name: Philip Rosenberg
Title:Executive Vice President
THE BORROWERS
JBI, INC. MORSE SHOE, INC.
By /s/Philip Rosenberg By /s/ Philip Rosenberg
Print Name: Philip Rosenberg Print Name: Philip Rosenberg
Title: Executive Vice President Title:Executive Vice President
JBI HOLDING COMPANY, INC.
By /s/Philip Rosenberg
Print Name:Philip Rosenberg
Title: Executive Vice President
THE AGENTS AND LENDERS
GBFC, INC. FLEET NATIONAL BANK
By /s/ Robert D'Angelis By /s/John C. McDonough
Print Name: Robert D'Angelis Print Name: John C. McDonough
Title:Senior Vice President Title: Vice President
EXHIBIT 10.14
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
As of February 18, 1998
THIS SECOND AMENDMENT is made to the May 30, 1997 Loan and Security
Agreement, as amended (the "Loan Agreement") between
BankBoston Retail Finance Inc., (formerly known as "GBFC, Inc."), a
Delaware corporation with its principal executive offices at 40 Broad Street,
Boston, Massachusetts, as Administrative Agent for the ratable benefit of the
"Lenders" and as a "Lender;
Fleet National Bank, a national banking association with offices at One
Federal Street, Boston, Massachusetts, as Co-Agent for the ratable benefit of
the Lenders and as a "Lender;
and
JBI, Inc. a Massachusetts corporation with its principal executive
offices at 555 Turnpike Street, Canton, Massachusetts 02012, as "Lead
Borrower" and as agent for the "Borrowers", being the following:
JBI, Inc.;
MorseShoe, Inc. (a Delaware corporation with its principal executive
offices at 555 Turnpike Street, Canton, Massachusetts, 02012); and
JBI Holding Company, Inc. (a Delaware corporation with its principal
executive offices at 900 Market Street, Wilmington, DE, 19801),
in consideration of the mutual covenants contained herein and benefits
to be derived herefrom,
WITNESSETH:
1. AGREEMENT TO AMEND
Provided each of those "Conditions to Amendment" set forth in Section
2, below, is satisfied timely as provided in that Section, the Loan Agreement
shall be amended, as set forth below, such amendment to take effect as of
February 18, 1998, it being understood, however, that in the event that any of
such conditions is not satisfied by 5:00PM (Boston Time) on the deadline date
for that condition (as stated in Section 2), then such amendment shall become
null and void, effective as of 5:00PM (Boston Time) on the subject deadline
date:
Section 1-1(b) of the Loan Agreement is amended to read as follows:
(b) As used herein, the term "Availability" refers at any time
to the lesser of (i) or (ii), below, where:
(i) Is the result of:
(A) The Loan Ceiling.
Minus
(B) The then unpaid principal balance of the
Loan Account. Minus (C) The then aggregate
of such Availability Reserves as may have
been
established by the Administrative Agent as provided herein.
Minus
(D) The then outstanding Stated Amount of all L/C's.
(ii) Is the result of:
(A) Up the lesser of
(I) (1) During the calendar months of November
and December: Twelve Million Dollars ($12,000,000.00).
(2) At all other times: Ten Million Dollars
($10,000,000.00)
or
(II) Eighty-Five Percent (85%) of the face amount of
Acceptable Accounts.
Plus
(B)Up to the following percentage of the Retail of Acceptable Inventory:
(I) Through June 30, 1997: 30%.
(II) After June 30, 1997 : 25%.
Plus
(C) "O/A Availability", being up to the following
percentage of the Retail of Acceptable Inventory (the
result of which percentage is reduced, however, dollar
for dollar by the aggregate of all Canadian
Settlement Payments):
(I) February 15 to 28, 1998 : 2.5%
(II) March 1 to 31, 1998 : 3.5%
(III) April 1 to April 30, 1998 : 2.5%
(IV) May 1 to May 31, 1998 : 2.5%
(V) All other times : Zero
Plus
(D) Up to the lesser of
(I) Seven Million Five Hundred Thousand Dollars
($7,500,000.00). or
(II) The following percentage of the Cost of Acceptable
In-Transit Inventory:
(1) Through June 30, 1997: 55%.
(2) After June 30, 1997 : 50%.
Minus
(E) The then unpaid principal balance of the Loan Account.
Minus
(F) The then aggregate of such Availability Reserves
as may have been established by the Lender as provided
herein.
Minus
(G) The then outstanding Stated Amount of all L/C's.
Section 1-5 of the Loan Agreement is Amended to read as follows:
1-5. Requests For Revolving Credit Loans.
(a) Subject to the limitations included in this Agreement, the
Lead Borrower shall have the option to elect an interest rate and Interest
Period to be applicable to a Revolving Credit Loan by giving the Administrative
Agent notice within the time frames set forth in Section 1-5(c).
(b) Loans which are, or which otherwise would be converted to
a Base Rate Loan, shall be, or be converted to, an O/A Loan to the extent that
such Revolving Credit Loan is supported by O/A Availability.
(c) Subjection to Section 1-5(b), the following are the time
frames applicable to the election of interest rates and Interest Periods:
(i) If such Loan is, or is to be converted to a Base
Rate Loan: By 1:00PM on the Business Day on which the subject Revolving
Credit Loan is to be made or is to be so converted.
(ii) If such Loan is, or is to be continued as a
Eurodollar Loan: By 1:00PM Three (3) Business Days before the end of
the then applicable Interest Period.
(iii) If such Loan is to be converted to a Eurodollar
Loan: By 1:00PM Three (3) Business Days before the day on which such
conversion is to take place.
(d) Provided that there is sufficient Availability to support
the same, (but subject, however, to Subsection 1-8(d), below (which deals with
the effect of a Suspension Event)), a loan or advance under the Revolving Credit
so requested by the Lead Borrower shall be made by the transfer of the proceeds
of such loan or advance to the Funding Account or as otherwise instructed by the
Lead Borrower.
Section 1-6(a) of the Loan Agreement is amended to read as follows:
(a) Except as provided in Sections 1-6(a)(i), (ii), and (iii),
each Revolving Credit Loan shall bear interest at the Base Rate.
(i) O/A Loans shall bear interest at the O/A Rate.
(ii) If timely notice is given (as provided in
Section 1-5(a)), then the subject Revolving Credit Loan (or a portion
thereof) shall be, or shall be converted to, a Eurodollar Loan.
(iii) Revolving Credit Loans shall be deemed O/A
Loans in the following order (and in all instances, only to the extent
that the subject Revolving Credit Loan is then supported by O/A
Availability) and shall cease to be deemed O/A Loans in the reverse of
the following order:
(A) First: Base Rate Loans.
(B) Second: Eurodollar Loans.
Section 1-6(f) of the Loan Agreement is amended to read as follows:
(f) The margins, applicable to the various interest options
available to the Borrowers pursuant hereto, are subject to change as described
on Pricing Grid I and Pricing Grid II, respectively included in the definition
of "Pricing Grid", as then applicable.
Section 1-11(a) of the Loan Agreement is amended to read as follows:
(a) The Borrowers may repay all or any portion of the
principal balance of the Loan Account from time to time until the Termination
Date. Such payments shall be applied first to O/A Loans, then to Base Rate
Loans, and only then to Eurodollar Loans.
Section 1-11(b) of the Loan Agreement is amended to read as follows:
(b) The Borrowers, without notice or demand from any Agent or
any Lender, shall pay the Administrative Agent that amount, from time to time,
which is necessary so that the principal balance of the Loan Account does not
exceed Maximum Loan Exposure. Such payments shall be applied first to O/A Loans,
then to Base Rate Loans, and only then to Eurodollar Loans.
Article 3 (Definition of "EBITDA") of the Loan Agreement is amended to
read as follows:
"EBITDA":The Borrowers' Consolidated earnings from continuing
operations before interest, taxes, depreciation, and
amortization, each as determined in accordance with GAAP and
before any charge on account of the settlement of the "Maxwell
Litigation" (so-called). Consolidated earnings from continuing
operations shall not, in any event, include any Canadian
Settlement Payments or other amounts received by any Borrower
or any Related Entity on account of, or in respect to, the
Canadian Action),
Article 3 (Definition of "Interest Payment Date") is amended to read as
follows:
"Interest Payment Date": With reference to:
(a) Any Eurodollar Loan: the last day of the Interest
Period relating thereto, the Termination Date, and the End
Date, except that, to the extent that, by reason of Section
1-6(a)(ii), interest on any part of such Eurodollar Loan
accrues at the O/A Rate, the "Interest Payment Date" for the
difference between interest at the O/A Rate and at the
applicable Eurodollar Rate shall be the same as the Interest
Payment Date for O/A Loans.
(b) Any Base Rate Loan: the first day of each month;
the Termination Date; and the End Date.
(c) Any O/A Loan: the first day of each month; the
Termination Date; and the End Date.
Article 3 (Definition of "Interest Period") is amended to read as
follows:
"InterestPeriod": (a) With respect to each Eurodollar Loan: Subject to
Subsection (d), below, the period commencing on the date of
the making or continuation of, or conversion to, such
Eurodollar Loan and ending one, two, or three months
thereafter, as the Lead Borrower may elect by notice (pursuant
to Section 1-5(a)) to the Administrative Agent.
(b) With respect the O/A Loan: the period commencing
on the date of the making of such O/A Loan and ending (with
respect to all or a portion of the O/A Loan) on that day on
which, and to the extent that, O/A Availability is not needed
to support the unpaid principal balance of the Revolving
Credit Loans.
(c) With respect to each Base Rate Loan: Subject to
Subsection (d), below, the period commencing on the date of
the making or continuation of or conversion to such Base Rate
Loan and ending on that date (i) as of which the subject Base
Rate Loan is converted to a Eurodollar Loan, as the Lead
Borrower may elect by notice (pursuant to Section 1-5(a)) to
the Administrative Agent, or (ii) on which the subject Base
Rate Loan is paid by the Borrowers.
(d) The setting of Interest Periods is in all
instances subject to the following:
(i) Any Interest Period for a Base Rate
Loan which would otherwise end on a day
which is not a Business Day shall be extended
to the next succeeding Business Day.
(ii) Any Interest Period for a Eurodollar
Loan which would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding
Business Day, unless that succeeding Business Day is
in the next calendar month, in which event such
Interest Period shall end on the last Business Day of
the month during which the Interest Period ends.
(iii) Subject to Subsection (v), below, any
Interest Period applicable to a Eurodollar Loan,
which Interest Period begins on a day for which there
is no numerically corresponding day in the calendar
month during which such Interest Period ends, shall
end on the last Business Day of the month during
which that Interest Period ends.
(iv) Subject to Subsection (vi), any
Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(v) Except as provided in Subsection (vi),
below, the Borrower shall not request any Eurodollar
Loan which would have an Interest Period of less than
one (1) month.
(vi) For the periods (A) commencing with the
execution of the within Agreement and ending on June
30, 1997 and (B) consisting of the last month prior
to the Maturity Date, the Borrower may request
Eurodollar Loans otherwise permitted by this
Agreement, but with Interest Periods of 7, 14, and 21
days.
(vii) The number of Interest Periods in
effect at any one time is subject to Section 1-6(c),
above.
Article 3 (Definition of "Pricing Grid") is amended to read as follows:
"Pricing Grid": (I) For any month (a) during any part of which month
"O/A Availability" is greater than zero (whether or not any
O/A Loan is made) or (b) Pricing Grid II is not effective, the
Eurodollar Margin, Base Margin, the O/A Margin, and Line Fee
shall be as follows:
<TABLE>
<S> <C> <C> <C>
PRICING GRID I
EURODOLLAR MARGIN BASE MARGIN O/A Margin LINE FEE
(Basis Points) (Basis Points) (Basis Points) (Percentage)
275% 100 250 0.375%
</TABLE>
(II) For any month during which both (a)"O/A
Availability" is zero and (b) Excess Availability on each day
of the immediately prior month was greater than $5,000,000.00,
the Eurodollar Margin, Base Margin, and Line Fee shall be
determined in accordance with Pricing Grid II.
<TABLE>
<S> <C> <C>
PRICING GRID II
EURODOLLAR MARGIN BASE MARGIN LINE FEE
(Basis Points) (Basis Points) (Percentage)
225 50 0.375%
</TABLE>
Article 3 (Definitions) is amended by the addition of the following
Definitions in alphabetical order therein:
"Allowable Canadian Settlement Deductions": The aggregate of the following:
(a) The Canadian Cost Fund.
(b) Backup withholding, not to exceed 5%, of any
settlement or payment made on account of, or in respect to,
the Canadian Action, other than the payment described in
Subsection (a) of this definition.
(c) Canadian federal and provincial income tax due on
account of any settlement or payment made on account of, or in
respect to, the Canadian Action.
"Canadian Action": The action in the Provincial Court of Ontario, styled Morse
Shoe (Canada) Limited and Zellers Inc., et al (Court File No. 91-CQ-6044).
"Canadian Cost Fund": Cdn$800,000.00 paid in trust to Borden & Elliot pursuant
to subparagraph 2(k) of the Agreement dated February 12, 1998, between
counsel to the Canadian Action.
"Canadian Settlement Payments": The aggregate of
(a) Cash proceeds (net only of Allowable Canadian
Settlement Deductions) received by, or for the account of any
Borrower or for Morse Canada, on account of the subject matter
of the Canadian Action,
plus
(b) The amount (if any) remaining after the
application of amounts netted against such cash proceeds
(clause (a) of this Definition) for the purposes stated or
referred to in clauses (a), (b), or (c) of the Definition of
"Allowable Canadian Settlement Deduction".
"Morse Canada": Morse Shoe (Canada) Limited.
"O/A Availability": That percentage of Acceptable Inventory (net of
the aggregate of all Canadian Settlement Payments) which is
determined in accordance with Section 1-1(b)(ii)(C).
"O/A Loan": The unpaid principal balance of all Revolving Credit Loans which are
then supported by O/A Availability. -
"O/A Margin": The per annum percentage to be added to Base, as determined
pursuant to the Pricing Grid.
"O/A Rate": The aggregate (calculated based on a 360 day year and actual days
elapsed) of Base plus the applicable O/A Margin.
Section 7-2 of the Loan Agreement is amended to read as follows:
7-2. Proceeds and Collection of Accounts and Canadian Settlement Payments
(a) On or before the Cash Management Date, and at all times
thereafter, each Borrower shall cause each Host Store to pay all amounts owed by
that Host Store to such lockbox or remittance account as may from time to time
be required by the Administrative Agent. Such lock box or remittance account
shall be swept to the Concentration Account with such frequency as may from time
to time be determined by the Administrative Agent.
(b) The Lead Borrower shall cause all Canadian Settlement
Payments to be wire transferred to the Concentration Account no later than five
(5) Business Days following receipt of any such Canadian Settlement Payment by a
Borrower or by Morse Canada. In the event that, at that time, it appears that
the Canadian Cost Fund is not sufficient to satisfy payment of accrued and
reasonably anticipated costs and expenses associated with the prosecution and
settlement of the Canadian Action, the Lead Borrower, with the consent of the
Administrative Agent (which consent will not be unreasonably withheld or
delayed), may adopt a tax efficient method to assure payment of such costs and
expense.
Section 9-3(a) of the Loan Agreement is amended by the addition of the
following Section:
(v) Any fact, circumstance, or development in the Canadian
Action or any dispute resolution procedure adopted to resolve the
subject matter of the Canadian Action which has more than a de minimus
effect on any Borrower or on Morse Canada.
Section 9-3(b) of the Loan Agreement is amended by the addition of the
following Section:
(vi) Provide the Administrative Agent and its counsel, when
sent or received by any Borrower or by Morse Canada, all nonprivileged
correspondence, written communications, pleadings, and rulings in the
Canadian Action or any dispute resolution procedure adopted to resolve
the subject matter of the Canadian Action, other than correspondence,
written communications, pleadings, and rulings of a de minimus nature.
Section 10-14, to read as follows, is added to the Loan Agreement:
10-14. Morse Canada.
(a) The abandonment, by Morse Canada, of its claims arising
out of the facts and circumstances which formed the basis for the Canadian
Action.
(b) The granting, creation, levying, or imposition of any lien
or Encumbrance on any asset of Morse Canada.
(c) Morse Canada's engaging in any business activities or
incurring of any obligations or indebtedness other than in its prosecution of
the Canadian Action.
EXHIBIT 9-11(a) of the Loan Agreement (Financial Performance
Covenants) is amended by its replacement with EXHIBIT 9-11(a)
annexed to this Second Amendment.
2. CONDITIONS TO EFFECTIVENESS OF AMENDMENT
The within Amendment shall remain effective only if each of the
following conditions is satisfied on or before 5:00PM (Boston Time) on the
deadline date for the subject condition:
(a) Deadline Date: February 19, 1998: Receipt by the Administrative Agent, for
the account of the Lenders, of an Amendment Fee of $125,000.00.
(b) Deadline Date: February 20, 1998:
(i) Creation of a perfected security interest, in
favor of the Administrative Agent (for the ratable benefit of the
Lenders), in all capital stock of Morse Shoe (Canada) Limited, which
security interest secures the Liabilities, (which security interest
shall be created pursuant to a Stock Pledge Agreement substantially
similar to those executed by certain Borrowers on or about May 30,
1997).
(ii) Receipt by the Administrative Agent of a
Certificate, executed by the Lead Borrower's President or its Chief
Financial Officer, respectively confirming that no Suspension Event is
then extant.
(c) Deadline Date: February 25, 1998:
(i) Receipt by the Administrative Agent of a
Certificate setting forth the text of the resolutions adopted by the
Directors of each Borrower authorizing that Borrower's execution of the
within Amendment, and attesting to the authority of the persons who
executed the within Amendment on behalf of that Borrower.
(ii) Receipt by the Administrative Agent of an
opinion of counsel to the Borrowers as to the due execution and
effectiveness of the within Amendment (which opinion is subject only to
the same qualifications as had been included in the opinion delivered
by that counsel at the initial execution of the Loan Agreement).
Each Borrower hereby represents that, at the execution of the within
Agreement, no Suspension Event has occurred.
Except as amended hereby or by the First Amendment to the Loan
Agreement, all terms and provisions of the Loan Agreement shall remain in full
force and effect as executed.
THE AGENTS AND LENDERS
BANKBOSTON RETAIL FINANCE INC. FLEET NATIONAL BANK
(Formerly "GBFC, Inc.")
By/s/Elizabeth A. Ratto By /s/Gregory Kress
Print Name:Elizabeth A. Ratto Print Name: Gregory Kress
Title: Vice President Title:Assistant Vice President
THE LEAD BORROWER
JBI, INC.
By /s/ Philip Rosenberg
Print Name: Philip Rosenberg
Title:Executive Vice President
THE BORROWERS
JBI, INC. MORSE SHOE, INC.
By /s/Philip Rosenberg By /s/ Philip Rosenberg
Print Name: Philip Rosenberg Print Name: Philip Rosenberg
Title: Executive Vice President Title:Executive Vice President
JBI HOLDING COMPANY, INC.
By /s/Philip Rosenberg
Print Name:Philip Rosenberg
Title: Executive Vice President
EXHIBIT 10.26
FIRST AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED APRIL 1, 1997
Reference is made to the Executive Employment Agreement dated as of April
1, 1997 (the "Agreement") by and between J. Baker, Inc. and James D. Lee.
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, 1999" in the fifth line thereof and inserting in its
place the phrase "ending on April 30, 2000".
2. All other terms of the Agreement shall remain unchanged and continue
in full force and effect.
J. BAKER, INC.
By:/s/ Alan I. Weinstein April 10, 1998
----------------------------- --------------
Alan I. Weinstein Date
President and
Chief Executive Officer
/s/ James D. Lee April 10, 1998
- --------------------------------- --------------
James D. Lee Date
EXHIBIT 10.29
FIRST AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED APRIL 1, 1997
Reference is made to the Executive Employment Agreement dated as of April
1, 1997 (the "Agreement") by and between J. Baker, Inc. and Philip G. Rosenberg.
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 "$225,000" in the third line thereof and
inserting in its place the figure "$250,000".
2. Paragraph 6 of the Agreement is hereby amended by deleting the
phrase "ending on April 1, 1999" in the fifth line thereof and inserting in its
place the phrase "ending on April 30, 2000".
3. All other terms of the Agreement shall remain unchanged and continue
in full force and effect.
J. BAKER, INC.
By:/s/ Alan I. Weinstein April 10, 1998
-------------------------------------- --------------
Alan I. Weinstein Date
President and
Chief Executive Officer
/s/ Philip Rosenberg April 10, 1998
- ---------------------------------------- --------------
Philip G. Rosenberg Date
EXHIBIT 10.33
FIRST AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED JUNE 5, 1997
Reference is made to the Executive Employment Agreement dated as of June 5,
1997 (the "Agreement") by and between J. Baker, Inc. and Roger J. Osborne.
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 "$220,000" in the third line thereof and
inserting in its place the figure "$250,000".
2. Paragraph 6 of the Agreement is hereby amended by deleting the
phrase "ending on June 5, 1999" in the fifth line thereof and inserting in its
place the phrase "ending on April 30, 2000".
3. All other terms of the Agreement shall remain unchanged and continue
in full force and effect.
J. BAKER, INC.
By:/s/ Alan I. Weinstein April 10, 1998
-------------------------------- --------------
Alan I. Weinstein Date
President and
Chief Executive Officer
/s/ Roger J. Osborne April 10, 1998
- -------------------- --------------
Roger J. Osborne Date
EXHIBIT 11
J. BAKER, INC. AND SUBSIDIARIES
Computation of Net Earnings (Loss) Per Common Share*
<TABLE>
<S> <C> <C> <C>
Year Ended
---------------------------------------------------------------
January 31, February 1, February 3,
1998 1997 1996
-------- -------- ------
Net Earnings (Loss) Per Common Share:
Net earnings (loss), basic and diluted $ 3,813,107 $(111,427,903) $(38,602,114)
========== ============ ============
Weighted average common
shares outstanding, basic 13,911,080 13,887,544 13,858,273
Effect of dilutive securities:
Stock options 59,219 - -
------------ ------------ ------------
Weighted average common
shares outstanding, diluted 13,970,299 13,887,544 13,858,273
========== ========== ==========
Net earnings (loss) per common share, basic $0.27 $(8.02) $(2.79)
========== =========== ===========
Net earnings (loss) per common share, diluted $0.27 $(8.02) $(2.79)
========== =========== ===========
</TABLE>
* This calculation is submitted in accordance with Item 601(b)(11) of Regulation
S-K.
EXHIBIT 12
J. BAKER, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
Fiscal Years Ended
--------------------------------------------------------------------------
January 29, January 28, February 3, February 1, January 31,
1994 1995 1996(a) 1997(b) 1998(d)
---------- ---------- ------------ ----------- -----------
Historical ratio of earnings to fixed charges
Earnings (loss) from continuing operations
before taxes and extraordinary item per
consolidated statements of earnings $36,424 $36,899 $(64,425) $(157,274) $ 6,251
Add:
Portion of rents representative of the
interest factor 15,227 17,593 17,316 16,283 10,775
Interest on indebtedness including the
amortization of debt expense and
detachable warrant value(1) 8,146 9,735 18,754 19,554 13,497
------- ------- ------- ------- ---------
Earnings (loss) before fixed charges,
as adjusted $59,797 $64,227 $(28,355) $(121,437) $ 30,523
====== ====== ======= ======== =======
Fixed charges
Interest on indebtedness including the
amortization of debt expense and
detachable warrant value (1) $ 8,146 $ 9,735 $ 18,754 $ 19,554 $ 13,497
-------- ------- ------- ------- ---------
Rents $ 45,680 $ 52,780 $ 51,948 $ 48,850 $ 32,326
Portion of rents representative of
the interest factor (2) $ 15,227 $ 17,593 $ 17,316 $ 16,283 $ 10,775
------- ------- ------- ------- ---------
Fixed charges (1) + (2) $ 23,373 $ 27,328 $ 36,070 $ 35,837 $ 24,272
======= ======= ======= ======= ========
Ratio of earnings to fixed charges 2.56x 2.35x -(c) -(c) 1.26x
==== ======= ========= ========= ========
</TABLE>
(a) 1996 reflects the impact of restructuring charges of $69,300.
(b) 1997 reflects the impact of restructuring and other non-recurring charges of
$122,309. (c) For 1996 and 1997, earnings did not cover fixed charges by $28,355
and $121,437, respectively. (d) 1998 reflects the impact of litigation
settlement charges of $3,432.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<S> <C> <C>
State or other
Jurisdiction Name under which
Name of Incorporation Business is done
JBAK Canton Realty, Inc.* Massachusetts JBAK Canton Realty, Inc.
JBAK Holding, Inc. Massachusetts JBAK Holding, Inc.
JBI, Inc. Massachusetts JBI, Inc.
J. Baker, Inc.
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>
* Subsidiary of JBAK Holding, Inc.
** Subsidiaries of JBI, Inc.
*** Subsidiary of The Casual Male, Inc.
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, No.
333-2797 and No. 333-35923 of our report dated March 23, 1998 appearing in the
Annual Report on Form 10-K of J. Baker, Inc. for the year ended January 31,
1998.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Boston, Massachusetts
April 20, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of J. Baker, Inc. for the year ended January 31, 1998 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 3,995,995
<SECURITIES> 0
<RECEIVABLES> 19,639,192
<ALLOWANCES> 577,458
<INVENTORY> 159,407,002
<CURRENT-ASSETS> 192,112,902
<PP&E> 116,724,174
<DEPRECIATION> 44,595,098
<TOTAL-ASSETS> 335,067,412
<CURRENT-LIABILITIES> 69,324,347
<BONDS> 186,250,751
0
0
<COMMON> 6,959,789
<OTHER-SE> 68,302,725
<TOTAL-LIABILITY-AND-EQUITY> 335,067,412
<SALES> 592,151,411
<TOTAL-REVENUES> 592,151,411
<CGS> 327,826,816
<TOTAL-COSTS> 327,826,816
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,387,828
<INCOME-PRETAX> 6,251,107
<INCOME-TAX> 2,438,000
<INCOME-CONTINUING> 3,813,107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,813,107
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
