SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
April 29, 2000
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)
Indicate by check mark whether Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such period that Registrant was required to file
such reports), and (2) has been subject to filing such reports for the past 90
days.
YES X NO
----- -------
14,067,948 shares of common stock were outstanding on April 29, 2000.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of April 29, 2000 (unaudited) and January 29, 2000
<TABLE>
April 29, January 29,
Assets 2000 2000
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................... $ 2,035,778 $ 5,486,290
Accounts receivable:
Trade, net ................................. 14,074,403 11,544,036
Other ...................................... 3,359,536 3,870,115
------------ ------------
17,433,939 15,414,151
------------ ------------
Merchandise inventories ........................ 253,735,172 206,790,453
Prepaid expenses ............................... 8,390,336 4,730,806
Deferred income taxes, net ..................... 2,924,000 2,924,000
------------ ------------
Total current assets .................. 284,519,225 235,345,700
------------ ------------
Property, plant and equipment, at cost:
Land and buildings ............................. 19,839,687 19,726,648
Furniture, fixtures and equipment .............. 89,572,274 83,098,450
Leasehold improvements ......................... 34,255,372 32,806,415
------------ ------------
143,667,333 135,631,513
Less accumulated depreciation and amortization . 68,308,700 65,098,471
------------ ------------
Net property, plant and equipment ..... 75,358,633 70,533,042
------------ ------------
Deferred income taxes, net ......................... 52,894,415 53,423,000
Other assets, at cost, less accumulated amortization 16,472,562 17,325,421
------------ ------------
$429,244,835 $376,627,163
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt .............. $ 13,965,934 $ 13,867,302
Accounts payable ............................... 84,635,144 84,089,991
Accrued expenses ............................... 15,075,020 12,052,606
Income taxes payable ........................... - 352,302
------------ ------------
Total current liabilities ............. 113,676,098 110,362,201
------------ ------------
Other liabilities .................................. 2,516,609 2,474,540
Long-term debt, net of current portion ............. 143,847,977 96,211,132
Senior subordinated debt ........................... 7,791,000 7,500,000
Convertible subordinated debt ...................... 70,353,000 70,353,000
Stockholders' equity ............................... 91,060,151 89,726,290
------------ ------------
$429,244,835 $376,627,163
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
For the quarters ended April 29, 2000 and May 1, 1999
(Unaudited)
<TABLE>
Quarter Quarter
Ended Ended
April 29, 2000 May 1, 1999
-------------- -----------
<S> <C> <C>
Net sales ..................................................... $170,057,212 $129,192,610
Cost of sales ................................................. 89,911,578 68,973,108
------------ ------------
Gross profit ............................................ 80,145,634 60,219,502
Selling, administrative and general expenses .................. 68,771,125 51,720,385
Depreciation and amortization ................................. 4,037,526 3,488,615
------------ ------------
Operating income ........................................ 7,336,983 5,010,502
Net interest expense .......................................... 4,924,102 3,478,512
------------ ------------
Earnings before income taxes ............................ 2,412,881 1,531,990
Income tax expense ............................................ 868,000 552,000
------------ ------------
Net earnings ............................................ $ 1,544,881 $ 979,990
============ ============
Net earnings per common share:
Basic ................................................... $ 0.11 $ 0.07
============ ============
Diluted ................................................. $ 0.11 $ 0.07
============ ============
Number of shares used to compute net earnings per common share:
Basic ................................................... 14,067,526 14,064,526
============ ============
Diluted ................................................. 14,481,095 14,149,469
============ ============
Dividends declared per share .................................. $ 0.015 $ 0.015
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the quarters ended April 29, 2000 and May 1, 1999
(Unaudited)
<TABLE>
April 29, 2000 May 1, 1999
-------------- -----------
Cash flows from operating activities:
<S> <C> <C>
Net earnings .............................................. $ 1,544,881 $ 979,990
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization:
Fixed assets ....................................... 3,210,229 2,931,145
Deferred charges, intangible assets and
deferred financing costs ......................... 1,118,297 559,448
Deferred income taxes, net ............................. 528,585 385,010
Change in:
Accounts receivable ................................ (2,019,788) (3,579,676)
Merchandise inventories ............................ (36,115,357) (10,970,120)
Prepaid expenses ................................... (3,659,530) (2,388,263)
Accounts payable ................................... 545,153 (5,810,992)
Accrued expenses ................................... 4,397,414 548,005
Income taxes payable/receivable .................... (352,302) (1,811,701)
Other liabilities .................................. 71,985 (3,453)
------------ ------------
Net cash used in operating activities .......... (30,730,433) (19,160,607)
------------ ------------
Cash flows from investing activities:
Capital expenditures for:
Property, plant and equipment .......................... (5,721,875) (2,962,886)
Other assets ........................................... (593,687) (18,767)
Proceeds from sales of footwear businesses ................ 614,161 887,903
Net cash paid in acquisition of assets of SCOA ............ (14,518,307) -
------------ ------------
Net cash used in investing activities ........... (20,219,708) (2,093,750)
------------ ------------
Cash flows from financing activities:
Proceeds from revolving credit facilities ................. 48,666,094 19,244,729
Repayment of chattel loan ................................. (768,596) -
Repayment of mortgage payable ............................. (162,021) (148,125)
Payment of mortgage escrow, net ........................... (24,828) 112,989
Payment of dividends ...................................... (211,020) (210,962)
------------ ------------
Net cash provided by financing activities ....... 47,499,629 18,998,631
------------ ------------
Net decrease in cash ............................ (3,450,512) (2,255,726)
Cash and cash equivalents at beginning of year ................ 5,486,290 3,679,115
------------ ------------
Cash and cash equivalents at end of period .................... $ 2,035,778 $ 1,423,389
============ ============
Supplemental disclosure of cash flow information
Cash paid for:
Interest ............................................... $ 3,127,702 $ 2,493,430
Income taxes ........................................... 689,467 1,978,691
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
NOTES
1] The accompanying unaudited consolidated financial statements, in the
opinion of management, include all adjustments necessary for a fair
presentation of the financial position and results of operations of J.
Baker, Inc. (the "Company"). The results for the interim periods are not
necessarily indicative of results that may be expected for the entire
fiscal year.
2] Basic Earnings Per Share ("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 potentially dilutive common
shares outstanding during the period.
For the quarters ended April 29, 2000 and May 1, 1999, the calculation of
diluted earnings per common share includes the dilutive effect of
outstanding stock options and warrants. The common stock issuable under the
7% convertible subordinated notes due 2002 and the convertible debentures
was not included in the calculation for the quarters ended April 29, 2000
and May 1, 1999 because its effect would be antidilutive.
Net earnings and shares used to compute net earnings per share, basic and
diluted, are reconciled below:
April 29, 2000 May 1, 1999
-------------- -----------
Net earnings, basic and diluted $ 1,544,881 $ 979,990
=========== ==========
Weighted average common shares:
Basic 14,067,526 14,064,526
Effect of dilutive securities:
Stock options and warrants 413,569 84,943
----------- -----------
Diluted 14,481,095 14,149,469
========== ==========
3] On February 11, 2000, the Company entered into an agreement to purchase the
ongoing assets of Shoe Corporation of America ("SCOA") and, on February 29,
2000, the transaction was consummated. The purchase price paid by the
Company to acquire the ongoing assets of SCOA, which consisted primarily of
inventory and fixed assets, was approximately $14.5 million. As part of
this acquisition, the Company acquired the rights to operate 204 licensed
footwear departments in moderate department and specialty stores
nationwide. In addition, pursuant to the terms of the acquisition
agreement, SCOA agreed to provide the Company with certain transition
services, all of which were terminated by the Company on May 31, 2000. The
Company financed the SCOA acquisition with cash and borrowings available
under its revolving credit agreement. The acquisition was deemed not to be
significant in accordance with SEC guidelines, and accordingly proforma
information is not presented.
Of the licensed footwear departments acquired from SCOA, 38 were in
department stores operated by Lamonts Apparel, Inc. ("Lamonts"). Lamonts, a
debtor in possession under Chapter 11 of the U.S. Bankruptcy Code, as
amended, entered into an Asset Purchase Agreement with Gottschalks Inc.
("Gottschalks") as of April 24, 2000, by which Gottschalks agreed to
acquire, among other things, Lamonts' real estate leases and certain store
assets (excluding inventory). The U.S. Bankruptcy Court for the Western
District of Washington at Seattle approved this transaction and the Asset
Purchase Agreement on May 16, 2000. However, an appeal has been filed by
two losing bidders. The Company and Gottschalks are in discussions on an
arrangement by which the Company would continue to operate licensed
footwear departments in the Gottschalks stores formerly operated by Lamonts
for a period of two years from the date that Gottschalks begins operations
from such stores.
On February 24, 2000, the Company entered into an agreement with Variety
Wholesalers, Inc. ("Variety") to begin operating 349 shoe departments in
the Variety Wholesale chain, which includes Maxway and Bargain Town stores,
on March 26, 2000. The Company made payments to Variety of approximately
$2.7 million in respect of this agreement, primarily for inventory.
4] On May 23, 1999, the Company acquired substantially all of the assets of
the Repp Ltd. Big & Tall and Repp Ltd. By Mail divisions of Edison Brothers
Stores, Inc. ("Edison Brothers"). The net purchase price for the acquired
assets, which primarily consisted of inventory and fixed assets for the 128
retail stores in the United States and the Repp Ltd. By Mail catalogs, was
$27.0 million.
5] The Company is a specialty retailer conducting business through retail
stores in two business segments: apparel and footwear. The Company also
operates catalog, e-commerce and other direct selling and marketing
businesses. The Company's chief operating decision-maker, the Chief
Executive Officer, evaluates the performance of the Company's segments
based on operating profit and cash flow. Operating profit includes all
revenues and direct expenses attributable to the segment and excludes
certain expenses that are managed outside the segment, primarily general
corporate expenses. General corporate expenses are comprised primarily of
administrative functions, such as management, finance, information systems
and human resources.
Net sales and operating profits for each of the Company's business segments
are set forth below. There were no material inter-segment revenues.
Quarters Ended
--------------
April 29, 2000 May 1, 1999
-------------- -----------
($ in thousands)
Apparel
Net sales ..................... $ 103,485 $ 74,198
Operating profit .............. 8,814 7,013
Footwear
Net sales ..................... $ 66,572 $ 54,995
Operating profit .............. 4,426 3,618
Consolidated
Net sales ..................... $ 170,057 $ 129,193
Operating profit before general
corporate expense ........ 13,240 10,631
General corporate expense ..... (5,903) (5,620)
Interest expense, net ......... (4,924) (3,479)
Earnings before income taxes .. $ 2,413 $ 1,532
6] The Company operated licensed footwear departments in stores operated by
Hills Stores Company ("Hills") from 1986 until Hills ceased operations in
1999. On November 12, 1998, Ames Department Stores, Inc. ("Ames"), a
significant licensor of the Company, entered into an agreement for the
acquisition of Hills. On December 31, 1998, Ames acquired control of Hills
through its acquisition of substantially more than a majority of Hills'
outstanding common stock and convertible preferred stock and notes. In
March 1999, Ames consummated the merger of Hills into a subsidiary of Ames.
At the time of the acquisition, Hills operated 155 discount department
stores in twelve states. In February 1999, Ames began a program to remodel
and convert 151 of the acquired Hills stores to Ames stores in three
sequential phases of approximately 50 stores each. Upon the completion of
the remodeling and conversion process, the last phase of which was
completed in September 1999, all such stores were incorporated into the
Company's license agreement with Ames on the same terms and conditions as
presently exist. During the conversion process, the Company participated in
liquidation sales of its footwear inventory in each store. These
liquidation sales ended on July 26, 1999.
7] 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. On April 13, 1998, Bradlees filed its Joint Plan of
Reorganization and Disclosure Statement (the "Plan") with the United States
Bankruptcy Court for the Southern District of New York, which, as amended,
was confirmed on November 18, 1998. The Plan became effective on February
2, 1999 (the "Effective Date"), the Company's license agreement with
Bradlees was amended and assumed and the reorganized Bradlees emerged from
bankruptcy. Pursuant to the amended agreement, ten days after the Effective
Date, Bradlees made a cash distribution to the Company in the amount of
$360,000 and shall pay the unpaid balance of the Company's pre-petition
claim in thirty-six equal monthly installments, which commenced on March 1,
1999, with interest payable on the unpaid balance outstanding commencing
with the seventh monthly payment. As provided in the amended licensed
agreement, upon the occurrence of certain events, the entire unpaid balance
of the Company's claim shall be paid within 30 days after such occurrence,
without penalty or interest. The Company's sales in the Bradlees chain for
the quarter ended April 29, 2000 were $10.2 million.
8] In October 1999, the Company entered into an agreement to terminate the
relationship between the licensed footwear division and Shopko Stores, Inc.
("Shopko"). The agreement calls for the orderly phasing out of operations
and liquidation of inventory, which liquidation was completed on June 3,
2000. The Company operated 146 licensed footwear departments in Shopko
stores during fiscal year 2000 and began liquidation sales from all such
stores during the first quarter of fiscal 2001.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
STATEMENTS MADE OR INCORPORATED INTO THIS QUARTERLY 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, EXPECTATION OR INTENT
REGARDING THE COMPANY'S FUTURE PERFORMANCE. THE COMPANY'S ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES ARE
DESCRIBED IN THE SECTION ENTITLED "OUTLOOK: IMPORTANT FACTORS AND UNCERTAINTIES"
FOUND ON PAGE 12 OF THIS QUARTERLY REPORT.
All references herein to fiscal 2001 and fiscal 2000 relate to the years ending
February 3, 2001 and January 29, 2000, respectively.
Results of Operations
---------------------
First Quarter Fiscal 2001 versus First Quarter Fiscal 2000
The Company's net sales increased by $40.9 million to $170.1 million in the
first quarter of fiscal 2001 from $129.2 million in the first quarter of fiscal
2000, primarily due to $24.8 million in sales generated by the Repp Ltd. Big &
Tall stores and the Repp Ltd. By Mail catalogs, which were acquired by the
Company on May 23, 1999, and $11.0 million in sales generated by the 204
licensed footwear departments acquired from SCOA by the Company on February 29,
2000. Sales in the Company's apparel operations increased by $29.3 million to
$103.5 million in the first quarter of fiscal 2001 from $74.2 million in the
first quarter of fiscal 2000 primarily due to sales of $24.8 million in the
newly acquired Repp businesses, coupled with a 6.6% 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). Sales in the Company's footwear operations increased by
$11.6 million to $66.6 million in the first quarter of fiscal 2001 from $55.0
million in the first quarter of fiscal 2000 primarily due to sales of $11.0
million in the new licensed footwear departments acquired from SCOA, coupled
with a 1.5% increase 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 open in corresponding weeks
of the two comparison periods).
The Company's cost of sales constituted 52.9% of sales in the first quarter
of fiscal 2001 as compared to 53.4% of sales in the first quarter of fiscal
2000, reflecting an increase in apparel sales as a percentage of the Company's
total sales due to the Repp acquisition. Cost of sales in the Company's apparel
operations was 50.5% of sales in the first quarter of fiscal 2001 as compared to
50.8% of sales in the first quarter of fiscal 2000. The decrease in such
percentage was primarily attributable to lower markdowns as a percentage of
sales and a higher initial markup on merchandise purchases. Cost of sales in the
Company's footwear operations was 56.6% of sales in the first quarter of fiscal
2001, as compared to 56.9% of sales in the first quarter of fiscal 2000. The
decrease in such percentage was primarily attributable to lower buying and
warehousing costs as a percentage of sales resulting from the Company's ability
to leverage such costs across its footwear operations. The decrease was
partially offset by higher markdowns as a percentage of sales and a lower
initial markup on merchandise purchases.
Selling, administrative and general expenses increased $17.1 million, or
33.1%, to $68.8 million in the first quarter of fiscal 2001 from $51.7 million
in the first quarter of fiscal 2000 primarily due to the operation of the Repp
businesses subsequent to the first quarter of fiscal 2000, and the acquisition
of the licensed footwear departments from SCOA in the first quarter of fiscal
2001. As a percentage of sales, selling, administrative and general expenses
were 40.4% of sales in the first quarter of fiscal 2001, as compared to 40.0% of
sales in the first quarter of fiscal 2000. Selling, administrative and general
expenses in the Company's apparel operations were 42.0% of sales in the first
quarter of fiscal 2001 as compared to 41.2% of sales in the first quarter of
fiscal 2000. This increase was primarily due to the operation of the Repp
businesses, which had higher selling, administrative and general expenses as a
percentage of sales than the Company's Casual Male Big & Tall and Work 'n Gear
apparel operations. Selling, administrative and general expenses in the
Company's footwear operations were 37.9% of sales in the first quarter of fiscal
2001 as compared to 38.5% of sales in the first quarter of fiscal 2000. This
decrease was primarily due to the acquisition of the licensed footwear
departments from SCOA, which had lower selling, administrative and general
expenses as a percentage of sales than the Company's existing footwear
operations.
Depreciation and amortization expense increased by $549,000 to $4.0 million
in the first quarter of fiscal 2001 from $3.5 million in the first quarter of
fiscal 2000, primarily due to an increase in depreciable and amortizable assets.
As a result of the above, the Company's operating income increased by $2.3
million to $7.3 million in the first quarter of fiscal 2001 from $5.0 million in
the first quarter of fiscal 2000. As a percentage of sales, operating income was
4.3% in the first quarter of fiscal 2001 as compared to 3.9% in the first
quarter of fiscal 2000.
Net interest expense increased by $1.4 million to $4.9 million in the first
quarter of fiscal 2001 from $3.5 million in the first quarter of fiscal 2000,
primarily due to higher interest rates on bank borrowings and higher average
levels of bank borrowings in the first quarter of fiscal 2001 versus the first
quarter of fiscal 2000.
Taxes on earnings for the first quarter of fiscal 2001 were $868,000,
yielding an effective tax rate of 36.0%, as compared to taxes on earnings of
$552,000, yielding an effective tax rate of 36.0%, in the first quarter of
fiscal 2000.
Net earnings for the first quarter of fiscal 2001 were $1.5 million,
compared to net earnings of $980,000 in the first quarter of fiscal 2000.
Financial Condition
-------------------
April 29, 2000 versus January 29, 2000
The increase in accounts receivable at April 29, 2000 from January 29, 2000
was primarily due to an increase in trade receivables due to seasonal factors,
licensed footwear department sales in April being higher than licensed footwear
department sales in January, coupled with the additional sales volume generated
by the licensed footwear departments acquired from SCOA.
The increase in merchandise inventories at April 29, 2000 from January 29,
2000 was primarily due to the acquisition of the licensed footwear departments
from SCOA in February 2000 and a seasonal increase in the average inventory
level per location. The ratio of accounts payable to merchandise inventory was
33.4% at April 29, 2000, as compared to 40.7% at January 29, 2000 and 28.6% at
May 1, 1999.
The increase in net property, plant and equipment at April 29, 2000 from
January 29, 2000 was the result of capital additions of $5.7 million, primarily
for the opening of new stores and the renovation of existing units. The Company
acquired $2.3 million in fixed assets with its acquisition of SCOA. The increase
was partially offset by the recording of $3.2 million in depreciation expense
during the first quarter of fiscal 2001.
The increase in long-term debt, net of current portion, at April 29, 2000
from January 29, 2000 was primarily due to additional bank borrowings to meet
seasonal working capital needs, fund capital expenditures and fund the purchase
of the assets acquired from SCOA.
Liquidity and Capital Resources
-------------------------------
On August 30, 1999, the Company established a total of $184 million in bank
financing arrangements, comprised of a $150 million revolving credit facility, a
$25 million term loan and a $9 million chattel loan. These three facilities, all
of which mature in May 2002, amended or replaced $160 million in previously
existing bank credit facilities which would have otherwise expired in May 2000
and May 2001.
A $150 million revolving line of credit (the "Revolver") was provided by a
group of lenders led by Fleet Retail Finance (formerly known as BankBoston
Retail Finance Inc.). Aggregate borrowings under the Revolver are limited to an
amount determined by a formula based on various percentages of eligible
inventory and accounts receivable. Borrowings under the Revolver bear interest
at variable rates and can be in the form of loans and letters of credit.
The Company's revolving credit facility contains various covenants and
restrictive provisions, including restrictions on the incurrence of additional
indebtedness and liens, the payment of dividends, the maintenance of specified
financial ratios and other financial criteria. As of April 29, 2000, the Company
was in compliance with all such covenants.
A $25 million term loan (the "Term Loan") was provided by Back Bay Capital
Funding LLC. Borrowings under the Term Loan bear interest at 16% per year. The
Company may generally not prepay the Term Loan. However, if the Company achieves
certain levels of availability under the Revolver, then the Company is required
to prepay $5 million of principal on or after April 30, 2000, $2.5 million on or
after July 31, 2000 and $2.5 million on or after November 30, 2000. As of the
filing date of the Form 10-Q, there is $25 million outstanding under the Term
Loan.
A $9 million chattel loan (the "Chattel Loan") was provided by BancBoston
Leasing Inc. The Chattel Loan is payable in equal monthly installments of
principal and interest and bears interest at 10.35%.
Each of the Revolver, the Term Loan and the Chattel Loan is secured by
substantially all of the assets of the Company.
As of April 29, 2000, the Company had aggregate borrowings outstanding
under the Revolver totaling $115.4 million, consisting of loans and obligations
under letters of credit.
In May 1999, a new subsidiary of the Company, JBI Apparel, Inc., acquired
the Repp Ltd. Big & Tall retail store business operated in the United States and
the Repp Ltd. By Mail catalog. Effective on May 21, 1999, a group of investors,
which included investment funds affiliated with Donaldson, Lufkin and Jenrette,
Inc., provided $10 million to JBI Apparel, Inc. through the issuance of 13%
Senior Subordinated Notes. Detachable warrants were issued in connection with
the 13% Senior Subordinated Notes, which enable the holders to purchase
1,200,000 shares of J. Baker, Inc. common stock at $5.00 per share. The amount
of the 13% Senior Subordinated Notes at April 29, 2000 has been reduced by $2.2
million, which represents the remaining balance of the $3.3 million value
assigned to the detachable warrants. The value of the detachable warrants is
included in additional paid-in capital in stockholders' equity, and is being
amortized using the interest method. The 13% Senior Subordinated Notes mature on
December 31, 2001, and the warrants expire on May 21, 2004.
Net cash used in operating activities for the first quarter of fiscal 2001
was $30.7 million, as compared to net cash used in operating activities of $19.2
million in the first quarter of fiscal 2000. The $11.5 million change was
primarily due to a larger increase in expenditures for merchandise inventories
in the first quarter of fiscal 2001 versus the first quarter of fiscal 2000
primarily due to the operation of the Repp businesses and the acquisitions of
the licensed footwear departments from SCOA in February 2000 and the licensed
footwear departments in the Variety chain in March 2000. The increase was
partially offset by a larger increase in accrued expenses in the first quarter
of fiscal 2001 versus the first quarter of fiscal 2000, and an increase in
accounts payable in the first quarter of fiscal 2001 versus a decrease in the
first quarter of fiscal 2000.
Net cash used in investing activities for the first quarter of fiscal 2001
was $20.2 million, as compared to net cash used in investing activities of $2.1
million in the first quarter of fiscal 2000. The $18.1 million change was
primarily due to the acquisition of the licensed footwear departments from SCOA
in February 2000, coupled with a larger increase in capital expenditures in the
first quarter of fiscal 2001 versus the first quarter of fiscal 2000.
Net cash provided by financing activities for the first quarter of fiscal
2001 was $47.5 million, as compared to net cash provided by financing activities
of $19.0 million in the first quarter of fiscal 2000. The $28.5 million change
was primarily due to the net borrowing of $48.7 million under the Company's
revolving lines of credit during the first quarter of fiscal 2001 versus the net
borrowing of $19.2 million during the first quarter of fiscal 2000.
Excluding furniture, fixtures, equipment and leasehold improvements of $2.3
million acquired with the licensed footwear departments from SCOA, the Company
invested $5.7 million and $3.0 million in capital expenditures during the first
quarters of fiscal 2001 and fiscal 2000, respectively. The Company's capital
expenditures generally relate to new store and licensed footwear department
openings and remodeling of existing stores and departments, coupled with
expenditures for general corporate purposes.
Following is a table showing actual and planned store openings by division
for fiscal 2001:
<TABLE>
Planned Openings Total
Actual Openings Second through Actual/Planned
Division First Quarter Fourth Quarters Openings
-------- ------------- --------------- --------
<S> <C> <C> <C>
Casual Male Big & Tall 9 9 18
Repp Ltd. Big &Tall 2 12 14
Work 'n Gear 0 6 6
JBI Footwear 573 45 618
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The actual store openings for the first quarter for JBI Footwear include
the 204 licensed footwear departments acquired on February 29, 2000 from SCOA
and the 349 licensed departments opened in stores owned by Variety on March 26,
2000. Offsetting the above actual and planned store openings, the Company closed
one Repp Limited Big & Tall store and 66 JBI Footwear departments during the
first quarter of fiscal 2001. The Company has plans to close approximately an
additional five Casual Male Big & Tall stores, two Repp Ltd. Big & Tall stores,
one Work `n Gear store and 110 JBI Footwear departments (including 99 additional
Shopko licensed shoe departments) during the second through fourth quarters of
fiscal 2001. See Note 8 to the Financial Statements. The closing of the shoe
departments in the Lamonts stores and their subsequent reopening in the new
Gottschalks stores have been excluded from the planned store openings and
closings discussed above. See Note 3 to the Financial Statements.
On April 14, 2000, the Company's Work `n Gear subsidiary entered into a
letter of intent to operate licensed workwear departments beginning in August
2000 in 19 Super Shoe Stores operated by H.H. Brown Retail, Inc., a subsidiary
of Berkshire Hathaway, Inc. The departments that will be operated by the Company
pursuant to this arrangement are not included in the Work `n Gear planned store
openings provided above.
Statements in this Quarterly Report on Form 10-Q regarding planned store
and licensed footwear department openings are forward looking statements. The
Company's ability to open new stores and to operate and expand its licensed
footwear department program successfully depends upon, among other things, the
Company's capital resources, the availability of suitable sites and construction
services and its ability to negotiate favorable rents and other lease and
license terms.
The Company believes 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 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.
Outlook: Important Factors and Uncertainties.
---------------------------------------------
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves without fear of litigation so long as
the forward-looking information is accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those set forth in the forward-looking statement.
Statements in this Quarterly Report on Form 10-Q which are not historical facts,
including statements about the Company's or management's confidence or
expectations, plans for opening new stores and other retail locations,
opportunities for sales growth or cost reductions and other statements about the
Company's operational outlook, are forward-looking statements subject to risks
and uncertainties that could cause actual results to vary materially. The
following are important factors, among others, that should be considered in
evaluating these forward-looking statements and the Company's future prospects:
general economic factors, weather conditions, dependence on footwear department
licensors, dependence on foreign vendors, dependence on fashion and trends, the
availability of appropriate real estate transactions and footwear department
licensing opportunities, leverage, competition, centralized distribution, the
availability of suitable employees, paper and postage costs, e-commerce
technology and trade imbalances.
You should carefully review and consider all of these factors when
analyzing a forward-looking statement and should be aware that there may be
other factors that could cause results to differ from the Company's
expectations. Any forward-looking statement made by the Company is based on
information, plans, estimates and beliefs at the time such statement was made,
and the Company assumes no obligation to update any forward-looking statements
to reflect changes in the underlying assumptions or factors, new information,
future events or other changes.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The Exhibits in the Exhibit Index are filed as part of this report.
(b) No reports on Form 8-K were filed by the Registrant during the quarter
for which this report is filed.
<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.
By: /s/ Alan I. Weinstein
---------------------------
Alan I. Weinstein
President and Chief Executive
Officer
Date: Canton, Massachusetts
June 12, 2000
By: /s/ Elizabeth C. White
----------------------------
Elizabeth C. White
First Senior Vice President,
Chief Financial Officer
and Treasurer
Date: Canton, Massachusetts
June 12, 2000
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------
EXHIBITS
Filed with
Quarterly Report on Form 10-Q
of
J. BAKER, INC.
555 Turnpike Street
Canton, MA 02021
For the Quarter ended April 29, 2000
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit Page No.
------- --------
10. Material Contracts
[.01] Third Amendment to Executive Employment Agreement between *
J. Baker, Inc. and Thomas Konecki dated April 25, 2000, attached.
[.02] Letter Agreement dated December 28, 1999 between J. Baker, Inc.'s *
Compensation Committee and Alan I. Weinstein, attached.
11. Computation of Net Earnings Per Common Share, attached. *
27. Financial Data Schedule **
</TABLE>
* Included herein
** This exhibit has been filed with the Securities and Exchange
Commission as part of J. Baker, Inc.'s electronic submission of this
Form 10-Q under EDGAR filing requirements. It has not been included
herein.
