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 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)
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 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 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. [ X ]
As of April 10, 2000, the aggregate market value of voting stock held by
non-affiliates of Registrant was $91,568,805 based on the last reported sale
price of Registrant's common stock on The Nasdaq Stock Market(R).
14,067,948 shares of common stock were outstanding on April 10, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive proxy statement to be filed pursuant
to Regulation 14A within 120 days after the end of Registrant's fiscal year are
incorporated by reference in Part III.
<PAGE>
J. Baker, Inc.
Report on Form 10-K
Year Ended January 29, 2000
Part I
Item 1. BUSINESS
J. Baker, Inc. ("J. Baker" or the "Company", which term shall include all
subsidiaries of the Company) was incorporated in 1985 and, through its
predecessor companies, has operated as a retail company for over forty years.
The mission of J. Baker is to own, operate and grow leading companies in large,
under-exploited retail niche markets by taking advantage of size and scale and
leveraging overhead and other administrative expenses.
The Company's operating businesses compete in two retail segments:
apparel and footwear. The Company operates businesses engaged in the retail sale
of apparel through (i) its Casual Male Big & Tall and Repp Big & Tall businesses
which offer fashion, casual and dress clothing and footwear to the big and tall
man and (ii) its Work n' Gear subsidiary, which sells a wide selection of
workwear, health-care apparel and uniforms for industry and service businesses.
The Company's apparel businesses offer their merchandise to customers through
diverse selling and marketing channels, including retail stores, catalogs,
direct selling workforces and e-commerce websites. The Company also operates
retail footwear businesses that sell footwear through self-service licensed
departments in discount, department and specialty stores. Financial information
with respect to the Company's industry segments can be found in Note 13 to the
Consolidated Financial Statements.
The relative size of the Company's businesses in each of the focused
market niches in which it operates often allows it to obtain favorable pricing
on merchandise and provides certain other competitive advantages such as the
ability to attract recognized brands. In addition, the Company is able to
leverage each operating business's overhead and administrative expenses through
the provision of centralized services including: business development,
distribution, finance and accounting, human resources, information systems,
legal, logistics, loss prevention, marketing and real estate (including leasing,
construction and store planning).
Retail Apparel Segment
Men's Big and Tall Apparel
The Company believes it is the leading multi-channel specialty retailer
of apparel for big and tall men. During fiscal year 2000, the Company
significantly increased its investment in this market niche by acquiring the
Repp Ltd. Big & Tall and Repp Ltd. By Mail businesses of Edison Brothers Stores,
Inc. ("Edison Brothers") and integrating them into its existing men's big and
tall apparel operations. See "--Men's Big & Tall Apparel - Repp Big & Tall" and
"Significant Recent Transactions - Acquisition of Repp Ltd. and Repp Ltd by
Mail." Trading under the Casual Male Big & Tall, Repp Premier, Repp Ltd. and B&T
Factory Store tradenames, the Company markets and sells to big (waist sizes to
70") and/or tall (6'2" or taller) men through retail stores, catalogs and
e-commerce websites as more fully described below. Sales in the men's big and
tall apparel businesses accounted for 53.1%, 45.8% and 43.4% of the Company's
total revenues for the years ended January 29, 2000, January 30, 1999 and
January 31, 1998, respectively.
The Market. A 1999 survey prepared for the Company by The NPD Group,
Inc. estimated total market sales of men's big and tall apparel during the
period of January 1, 1998 through December 31, 1998 to be approximately $5.2
billion. Of this, The NPD Group survey estimated that specialty stores, factory
outlet stores and catalogs accounted for approximately 36% of total market
sales. The Company believes that the size of the market for men's big and tall
apparel will continue to grow as the number of big and tall men in the United
States increases.
The Company believes the apparel demands of big and tall customers
historically have 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, the
big and tall specialty store market is characterized by many small, local
operators who typically have a narrow selection of current sportswear fashions.
Management believes its type and selection of merchandise, favorable prices and
ability to obtain desirable store locations are, and will continue to be, key
factors in enabling it to compete effectively in this market niche.
o Casual Male Big & Tall
The Casual Male Big & Tall business offers a wide range of quality
fashion, casual and dress clothing and footwear for big and tall men at moderate
prices through stores and catalogs. In addition to these selling channels, the
Company's Casual Male Big & Tall website, www.casualmale.com, is expected to
begin commerce-enabled operations in June 2000. Casual Male Big & Tall offers
private label as well as brand name casual sportswear and dress wear in a broad
array of styles, colors and fabrics with a focus on casual clothing, sports
coats, dress pants and shirts and footwear.
Stores. Casual Male operates full-line "anchor" stores and outlet
stores in 47 states. The anchor stores target the middle-income customer seeking
good value at moderate prices and as a result, Casual Male anchor stores limit
the amount of high-fashion oriented and low-turnover tailored clothing offered
and focus primarily on basic items and classic fashion sportswear, thereby
minimizing fashion risk and markdowns. The Casual Male Big & Tall Outlet Stores
and B&T Factory Stores target value-oriented customers, and offer both
merchandise purchased specifically for the outlet stores and items consolidated
from Casual Male and Repp stores.
The Company completed a store retrofit program during fiscal year 2000
for the Casual Male chain whereby all anchor stores received upgraded fixturing,
improved and standardized marketing collateral and certain other cosmetic
enhancements. Management believes these low-cost enhancements highlight the
Company's merchandise better and have made the stores more attractive to the
customer and easier to shop.
In deciding to open Casual Male anchor and outlet 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, Company management projects sales volumes and estimates operating costs
for each location and decides to open a store if such projections demonstrate an
acceptable return on the Company's inventory and fixed asset investment can be
realized. New Casual Male anchor stores require an average inventory and fixed
asset investment of approximately $180,000 to $230,000, comprised of
approximately $85,000 to $120,000 for fixed assets and $95,000 to $110,000 for
inventory. All new outlet stores, which are expected to be constructed in the
B&T Factory Store format, generally require a similar level of fixed asset and
inventory investment as Casual Male anchor stores.
The Company makes decisions to close Casual Male locations when
management believes 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. In addition, the Company seeks to negotiate
early termination rights in its leases wherever possible that allow the Company
to terminate the lease prior to the expiration of the term if it is unable to
attain certain specified sales volumes. The costs to close stores are expensed
at the time the decision is reached to close the store.
Catalog. In March 2000, the Company released the first issue of the Casual
Male Catalog. This catalog targets customers having similar demographic profiles
as customers of Casual Male anchor stores. While carrying a similar assortment
of casual merchandise as is available in Casual Male stores, the Casual Male
Catalog offers a broader assortment of sportcoats, suit separates and other
tailored clothing. The Company anticipates issuing spring, fall and holiday
editions of the Casual Male Catalog and expects to circulate a total of
approximately 2.5 million catalogs during fiscal year 2001. The Company's
mailing strategy for the Casual Male Catalog includes mailing catalogs to people
who have purchased in the past from a Casual Male store who are also known to
purchase from catalogs generally and individuals whose names appear on mailing
lists rented from third-party sources. In addition, the Company is testing a
fixture in approximately 60 Casual Male stores that allows customers to place
catalog merchandise orders directly to the catalog call center through a
dedicated telephone line. Store associates are trained in the "Nobody Walks"
selling program, which emphasizes the importance of offering customers the
opportunity to find the items they are looking for in the Company's catalogs and
assisting the customer in placing the order through the Company's call center.
Currently, in-bound telemarketing and fulfillment are handled by the Company's
69,000 square foot Alpharetta, Georgia fulfillment and call center. In February
2000, the Company signed an agreement to lease a 135,000 square foot fulfillment
and call center that is currently under construction in Alpharetta, which the
Company expects to move into, and operate from, by June 2000(the "New
Fulfillment and Call Center").
E-commerce. The Company expects that the www.casualmale.com website, which
has historically been used primarily to market Casual Male stores, will be
commerce-enabled in June 2000. The Company currently plans to offer on this
website substantially the same items as are offered or will be offered in the
Casual Male Catalog. During the Fall of 1999, the Company entered into an
agreement with Smith-Gardner Associates, Inc. to implement the WebOrder
e-commerce system, which provides, among other things, electronic shopping carts
and order taking, payment and security systems, order management, warehouse and
shipping management and real-time inventory availability (the "WebOrder
System"). The Company intends to process and fulfill orders from the
www.casualmale.com website through the New Fulfillment and Call Center.
o Repp Big & Tall
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. See
"-- Significant Recent Transactions - Acquisition of Repp Ltd. and Repp Ltd. By
Mail." At the time of the acquisition, Edison Brothers operated 175 stores under
the Repp Ltd. tradename, four catalog titles and an e-commerce website. During
the second half of fiscal 2000, the Company successfully completed the
integration of the Repp businesses' information, distribution and merchandising
systems and continuing into the first half of fiscal year 2001, the Company took
measures to enhance the systems, facilities and personnel employed in Repp's
catalog and e-commerce operations. These activities, while positioning the Repp
brand for further growth, also provided the Company with the platform to
accelerate the development of the Casual Male Catalog and the www.casualmale.com
e-commerce website.
Stores. As of January 29, 2000 the Company operates 90 Repp Ltd. stores
and 45 Repp Premier stores in 31 states. Repp Ltd. stores, which are typically
located in strip or power centers or as stand-alone stores, cater to mid- to
upper-middle income big and tall men and primarily offer non-designer branded
casual and dress apparel. Repp Premier stores, which were introduced by the
Company during the fall of fiscal year 2000, target upper-income customers and
offer higher-end fashion, often carrying designer labels such as Tommy
Hilfiger(R), Polo Ralph Lauren(R) and Nautica(R). Repp Premier stores are
located principally in or near regional malls. The Company currently plans to
undertake a retrofit program for the Repp Ltd. stores during fiscal year 2001.
The scope of this retrofit program is expected to be similar to the scope of the
Casual Male anchor store retrofit program undertaken during fiscal year 2000.
See "--Casual Male Big & Tall - Stores."
The Company uses the same factors set forth under the heading "--Casual
Male Big & Tall - Stores" above in determining whether to open or close Repp
Ltd. stores. Sites are selected for Repp Premier stores based on the same
factors as well as the nearby regional mall's reputation as a center for fashion
merchandise. New Repp Ltd. stores require an average inventory and fixed asset
investment of approximately $230,000 to $270,000, comprised of approximately
$120,000 to $140,000 for fixed assets and $110,000 to $130,000 for inventory.
New Repp Premier stores require an average inventory and fixed asset investment
of approximately $320,000 to $370,000, comprised of approximately $140,000 to
$170,000 for fixed assets and $180,000 to $200,000 for inventory.
Catalog. The Company currently issues two catalog titles bearing the
Repp brandname: (i) the Repp Catalog and (ii) the Repp Premier Catalog. The Repp
Catalog carries substantially all of the merchandise categories offered in Repp
Ltd. stores and is targeted to customers whose demographics are similar to those
of customers of Repp Ltd. stores. The Company currently issues editions of the
Repp Catalog in the winter, pre-spring, spring, summer and holiday seasons. The
Repp Premier Catalog offers substantially similar merchandise categories as is
offered in Repp Premier stores, with an emphasis on designer and fashion brands,
and is targeted at upper-income customers. The Repp Premier Catalog is currently
issued twice a year during the spring and fall seasons. From time to time, Repp
also issues smaller catalogs featuring a focused assortment of products offered
under one brandname. For example, the Company issued two editions of the Cutter
& Buck Catalog during fiscal year 2000, which were targeted to customers having
a similar demographic profile as the Repp Premier customer.
The Company mails all Repp catalogs to individuals whose names appear on
the Repp house file of past purchasers, people who have purchased in the past
from the Company's stores and who are also known to purchase from catalogs
generally, and mailing lists rented from third-party sources. Combined
circulation for the catalog titles offered by Repp was approximately 7.8 million
in fiscal year 2000. In addition, all Repp Ltd. and Repp Premier stores contain
a fixture that allows customers to place catalog merchandise orders directly to
the catalog call center through a dedicated telephone line. As is the case in
Casual Male stores, Repp store associates are trained in the "Nobody Walks"
selling program, which emphasizes the importance of offering customers the
opportunity to find the items they are looking for in the Company's catalogs and
assisting the customer in placing the order through the Company's call center.
Currently, as with the Casual Male Catalog, in-bound telemarketing and
fulfillment operations are handled by the Company's 69,000 square foot
Alpharetta, Georgia fulfillment and call center, and are expected to be moved to
the New Fulfillment and Call Center in June 2000.
E-commerce. The Company also operates the www.reppbigandtall.com
e-commerce website, which can also be reached by using its former URL,
www.reppbynet.com. This website offers substantially similar merchandise as the
Repp Catalog. The Company plans to employ the WebOrder System to manage the
e-commerce activities of the www.reppbigandtall.com website beginning in Fall
2000. Orders placed on this website will continue to be fulfilled from the
Company's existing fulfillment and call center in Alpharetta, Georgia until the
New Fulfillment and Call Center becomes operable.
o Competition
The Company's men's big and tall apparel businesses face competition
from a variety of sources, including department stores, specialty stores,
discount stores and off-price and other retailers that sell big and tall
merchandise. In addition, sales of apparel through catalogs, e-commerce and home
shopping networks or other electronic media provide additional sources of
competition. These businesses face competition on a local level from independent
retailers and small, regional retail chains, as well as on a national scale from
a limited number of national specialty chains. While the Company has
successfully competed on the basis of merchandise selection, inventory
replenishment on an on-going basis by color and size, favorable pricing and
desirable store locations, there can be no assurance other retailers will not
adopt purchasing and marketing concepts similar to those of the Company. In
addition, discount retailers with significant buying power, such as Wal-Mart,
K-Mart and Target stores, represent an increasing source of competition for the
Company. The bulk of the merchandise carried by these department stores is
classified as commodity, or "basic" items, but the stores' buying power provides
them with a competitive edge and an ability to charge low prices for such items.
Work 'n Gear
Work 'n Gear is a specialty retail company exclusively focused on
marketing and selling utility workwear, uniforms, healthcare apparel and
footwear through stores, a business-to-business direct selling sales force,
catalog and direct marketing initiatives and, beginning in fiscal year 2001,
e-commerce activities. Work 'n Gear seeks to address the needs of three major
groups: (i) 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) corporate customers who either supply uniforms or provide a
clothing allowance to their employees to purchase uniforms, and (iii) customers
who work in the healthcare industry and related fields. Work 'n Gear sales
accounted for 8.7%, 9.7% and 8.9% of the Company's total revenues for the years
ended January 29, 2000, January 30, 1999 and January 31, 1998, respectively.
The Market. 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.
Stores. Work 'n Gear stores, which are currently located in northeastern
and midwestern states, carry a wide selection of workwear products, including
rugged specialty outerwear, work shirts and pants, cold weather accessories and
footwear, as well as a complete line of uniforms for industry and service
businesses and healthcare apparel. 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 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.
Other Marketing and Selling Initiatives. Work 'n Gear also sells its
products through a direct corporate sales force, which markets workwear and
uniforms to large accounts, including government entities, supermarket chains,
manufacturing entities and private security companies. In the summer of fiscal
year 2000, Work `n Gear entered into an agreement to test a licensed healthcare
apparel department in a major regional discount department store. In addition to
pursuing other licensed department arrangements, the Company plans to test
several new marketing and selling channels for its Work `n Gear business during
fiscal year 2001, including business-to-business and business-to-customer
catalogs and e-commerce sites.
Competition. 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 stores similar to Work 'n Gear exist
on a national basis. Competition for corporate workwear (purchased by employers)
comes from large manufacturers such as WearGuard/ARAMARK, Uniforms to You and
Cintas, 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 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.
Retail Apparel Segment Stores
The following is a summary of stores operated by the Company in the
retail apparel segment:
<TABLE>
<S> <C> <C>
No. Open No Open
Store Tradename at 1/29/00 at 1/30/99
--------------- ----------- ----------
Casual Male Big & Tall ............. 393 402
Casual Male Outlet Stores/B&T
Factory Stores ..................... 52 51
Repp Ltd. .......................... 90 --
Repp Premier ....................... 45 --
Work `n Gear ....................... 65 67
</TABLE>
Footwear Segment
Through its JBI, Inc. and Morse Shoe, Inc. subsidiaries, the Company
operates licensed footwear departments in discount, department and specialty
stores operated by independent third parties. Typically, the Company and a
licensor 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 host store's
name, in space supplied by the licensor and, in most cases, the licensor
collects payments from customers and credits the Company. The Company pays the
licensor a license fee, generally a percentage of net sales, for the right to
operate the footwear department and for 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 footwear departments is sold
under the Company's private labels or on an unbranded basis, although the
Company also sells a small percentage of name brand merchandise in certain of
its licensed accounts.
The Company's licensed footwear departments are operated on a
self-service basis. The Company's personnel employed in particular departments
are responsible for the 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. Sales in the footwear division accounted for 38.2%, 44.5% and
44.7% of the Company's total revenues in the years ended January 29, 2000,
January 30, 1999 and January 31, 1998, respectively.
Licensed Departments. The Company and its predecessors have operated
licensed footwear departments in mass merchandising department stores for more
than forty years. At January 29, 2000, the Company operated a total of 858
licensed footwear departments under license agreements with 13 licensors. In
February 2000 the Company acquired the rights to operate 204 licensed footwear
departments in department and specialty stores operated by four licensors as
part of the acquisition of the ongoing assets of the Shoe Corporation of
America. See "Significant Recent Transactions -- Disposition and Re-acquisition
of Certain Assets of Shoe Corporation of America." In addition, the Company
entered into an agreement to operate footwear departments in approximately 350
stores operated by Variety Wholesalers, Inc. During fiscal 2000, the Company
opened 28 departments and closed 45 departments, representing a net decrease of
17 units for the year. (These department opening and closing statistics do not
include the closing of Hills stores and their subsequent re-opening as Ames
stores and the scheduled closing of departments in stores operated by Shopko
Stores, Inc., as described under the headings "Significant Recent Transactions -
Ames Department Stores Acquisition of Hills Stores Company" and "--Termination
of Shopko Licensed Footwear Departments.") The Company's 858 licensed footwear
departments are located in 39 states and in the District of Columbia.
The Company conducts its licensed footwear department operations under
written agreements for fixed terms. Of the 858 licensed footwear departments the
Company operated at January 29, 2000, 403, or 47.0%, are covered by agreements
with terms expiring in five years or less and 455, or 53.0%, 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
additional information, see "--Significant Recent Transactions -- Ames
Department Stores Acquisition of Hills Stores Company." For the fiscal year
ended January 29, 2000, Ames accounted for 21.0% of the Company's total
revenues.
Competition. The Company's licensed footwear department business faces
competition at two levels: (i) for sales to retail customers and (ii) for the
business of the department and specialty store chains who are its footwear
licensor customers. The Company's success in its licensed footwear department
operations is substantially dependent upon the success of the department and
specialty store chains in which it operates. See "Outlook: Important Factors and
Uncertainties - Dependence on Footwear Department Licensors." Within the
particular market served by the department and specialty store chains, the
Company believes the primary competitive factors are the quality, price and the
breadth and suitability of the selection of footwear offered, as well as store
location, customer service and promotional activities.
Because of the large scale of many licensing arrangements and years of
commitment involved, the Company has observed that changes in licensed footwear
department 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
licensee companies for the business of a licensor. To the extent there is active
competition for new business in this area, the Company believes 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. The Company also faces potential competition from
the in-house operational capabilities of its licensors. The Company believes,
however, that its ability to leverage costs and buying power across its store
base has allowed it to offer its licensors the same or better profit
opportunities than they could obtain on their own.
Renewed Emphasis Beginning in Fiscal Year 1999. During fiscal years 1996
through 1998, the Company pursued a strategy of de-emphasizing its footwear
operations (the "Footwear Restructuring") in order to focus its efforts on the
management, development and growth of its men's big and tall apparel and Work 'n
Gear businesses. (For additional information, See Note 10 to the Consolidated
Financial Statements.) Beginning in fiscal year 1999, the Company began to avail
itself of opportunities in the market that would permit the Company to return to
a position of leadership in the licensed footwear department market niche.
Recognizing the recent trend towards consolidation generally in the department
store industry, the Company re-evaluated its decision to de-emphasize the
licensed footwear business and decided to pursue a strategy of leveraging its
considerable industry experience, systems, infrastructure and human talent to
significantly grow market share. Beginning in the fall of 1998, the Company
began a successful effort to hire a new, talented management team with
significant footwear industry experience for this business. This team has set in
place several important new initiatives in the areas of product sourcing and
merchandising, and has successfully pursued the acquisition of a number of new
licenses to operate footwear departments including, among others, approximately
350 footwear departments in stores operated by Variety Wholesalers, Inc. In
addition, on February 29, 2000, the Company completed the acquisition of the
ongoing assets of Shoe Corporation of America ("SCOA") - a business previously
sold by the Company in 1997. See "--Significant Recent Transactions --
Disposition and Re-acquisition of Certain Assets of Shoe Corporation of
America." As part of the ongoing assets acquired from SCOA, the Company assumed
licenses to operate 204 footwear departments in moderate department and
specialty stores nationwide. With the acquisition of the licensed footwear
departments formerly operated by SCOA and other newly acquired accounts, the
Company has increased its buying power and ability to leverage overhead, while
diversifying its licensed footwear business geographically, thereby reducing
this business's exposure to weather-related risks.
Significant Recent Transactions
Acquisition of Repp Ltd. and Repp Ltd. by Mail.
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.
Edison Brothers is currently operating as a debtor-in-possession under Chapter
11 of the United States Bankruptcy Code, as amended. The Company paid cash, as
described below, for the acquisition of 175 United States and Canadian Repp Ltd.
Big & Tall retail locations and the Repp Ltd. By Mail catalog business. The
Company immediately sold Repp's Canadian operation, consisting of 16 stores, to
Grafton-Fraser, Inc., a Canadian men's retailer, and commenced the closing of 31
stores in the United States. The Company operates the remaining retail stores in
the United States and the Repp Ltd. By Mail catalog through a new subsidiary,
JBI Apparel, Inc. The transaction was financed primarily through (a) a new $20
million credit facility and a $5 million term loan provided to JBI Apparel, Inc.
by BankBoston Retail Finance Inc. and Back Bay Capital Funding LLC,
respectively, (both of which were amended on August 30, 1999 through a
refinancing), (b) the issuance by JBI Apparel, Inc. of $10 million of senior
subordinated notes to a group of investors, which included investment funds
affiliated with Donaldson, Lufkin & Jenrette, Inc. (the "Investor Group"), and
(c) the sale of the Canadian operations and the liquidation of the inventories
in the 31 closing stores. 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. In
connection with the $10 million financing provided by the Investor Group, J.
Baker issued 5-year warrants enabling holders to purchase 1,200,000 shares of
the Company's common stock at $5.00 per share. See Notes 2 and 4 to the
Consolidated Financial Statements.
Ames Department Stores Acquisition of Hills Stores Company
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, a significant licensor of the Company (see
"Industry Segments -- Footwear Segment - Licensed Departments"), 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. See Note 10 to the Consolidated Financial Statements.
Disposition and Re-acquisition of Certain Assets of Shoe Corporation of America
On March 5, 1997, the Company 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. Net cash proceeds
received from the sale totaled approximately $40 million. On June 14, 1999, SCOA
and certain affiliated companies filed for protection under Chapter 11 of the
United States Bankruptcy Code, as amended. On February 11, 2000, the Company
entered into an agreement to purchase the ongoing assets of SCOA and, on
February 29, 2000, the transaction was consummated. The purchase price paid by
the Company to acquire the ongoing assets of SCOA was approximately $14 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 for up to
six months following the closing. The Company financed the SCOA acquisition with
cash and borrowings available under its revolving credit agreement.
Bradlees Reorganization
On June 23, 1995, Bradlees Stores, Inc. ("Bradlees"), a company operating
stores in which the Company operates licensed footwear departments, 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 began paying the balance of the Company's pre-petition claim in thirty-six
equal monthly installments which commenced on March 1, 1999, with interest on
such outstanding balance 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 fiscal year 2000 were $47.7 million. See Note 11 to the
Consolidated Financial Statements.
Termination of Shopko Licensed Footwear Departments
In October 1999, the Company entered into an agreement to terminate the
relationship between the licensed footwear division and Shopko Stores, Inc. The
agreement calls for the orderly phasing out of operations and liquidation of
inventory, which liquidation is to be completed no later than July 1, 2000. The
Company operated 146 licensed footwear departments in Shopko stores during
fiscal year 2000. The Company is currently operating liquidation sales from all
such stores. The Company expects to cease all liquidation activities in Shopko
stores no later than May 31, 2000. The licensed footwear departments operated by
the Company in Shopko stores are included in licensed footwear department counts
included in this Annual Report on Form 10-K.
Sale of Parade of Shoe Business
On March 10, 1997, the Company sold its Parade of Shoes division to
Payless ShoeSource, Inc. of Topeka, Kansas. For additional information on the
sale of the Parade of Shoes division, see Note 10 to the Consolidated Financial
Statements.
Seasonality
The Company's businesses are seasonal. The men's big and tall apparel
businesses generate their largest sales volumes in June (in advance of Father's
Day) and the Christmas season, and the Work 'n Gear business generates its
largest sales volume during the second half of the fiscal year. The footwear
segment experiences its largest sales volumes during 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 sales during the
first half of each fiscal year. Unseasonable weather may affect sales of shoes
and boots, as well as cold weather related apparel and work clothing, especially
during the traditional high-volume periods. See "Outlook: Important Factors and
Uncertainties - Weather Conditions."
Inventory
The Company is required to carry a substantial inventory in order to
provide prompt deliveries to its retail stores and its licensed footwear
departments. In addition, the Company is required to carry sufficient inventory
to satisfy the demands of the customers of its catalog and e-commerce
businesses, which inventory levels the Company expects to increase as these
businesses grow. Catalog and e-commerce order backlogs, however, have not been
material to the Company's business to date, but are expected to grow as the
Company increases its catalog and e-commerce activities. 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 four percent of the Company's merchandise.
The Company purchases the substantial majority of its footwear from
China and, accordingly, benefits from favorable trade arrangements between the
United States and China. See "Outlook: Important Factors and Uncertainties --
Dependence on Foreign Vendors." Currently, there is extensive Congressional
debate with respect to the Clinton administration's proposal to grant permanent
normalized trade relations to China, which, if approved, would eliminate the
need for annual Congressional review of China's "most favored nation" status. If
China is not granted permanent normalized trade relations status, or if its most
favored nation trading status is not renewed, the Company would likely
experience substantially increased costs in footwear and apparel produced in
China. The Company believes, however, that, if this should occur, its
competitors in the footwear industry would be similarly affected.
Trademarks
The Company has no franchises or concessions except for agreements
granting it the right to operate licensed footwear departments in discount,
department and specialty stores, and healthcare apparel departments in one major
regional discount department store. The Company owns several servicemarks
relating to the names of its businesses and trademarks relating to products sold
in the businesses, and owns one patent. Aside from the servicemark registrations
relating to the Company's tradenames, the Company does not consider any
trademark or its 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 29, 2000, the Company employed approximately 3,674 persons
full-time and 3,303 persons part-time, of whom approximately 2,491 full-time and
3,040 part-time employees were engaged in retail operations at the store level.
Approximately 300 of the Company's full-time and part-time employees are covered
by collective bargaining agreements. The Company believes its employee relations
are generally good.
Executive Officers of the Company
<TABLE>
<S> <C> <C>
Name Age Office
---- --- ------
Sherman N. Baker 80 Chairman of the Board
Alan I. Weinstein 57 President and Chief Executive Officer
Stuart M. Glasser 52 Senior Executive Vice President; President and Chief
Executive Officer of The Casual Male, Inc.
Michael J. Fine 48 Executive Vice President; President of JBI Footwear
Division
Thomas J. Konecki 45 Executive Vice President; President of Work `n Gear
Division
Elizabeth C. White 42 First Senior Vice President and Chief Financial Officer
</TABLE>
Mr. Baker has been Chairman of the Company's Board of Directors 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, and has been a member
of the Board of Directors of the Company since 1996. From January 1999 to June
1999 Mr. Weinstein also held the position of Acting President of the Company's
Work `n Gear division. 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.
Mr. Glasser has held the positions of Senior Executive Vice President of
the Company since June 1998 and President and Chief Executive Officer of The
Casual Male, Inc. since September 1997, and has served as a member of the Board
of Directors of the Company since December 1999. 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. Glasser has also
served as a member of the Board of Directors of Allou Health & Beauty Care,
Inc., a distributor of nationally advertised health and beauty aid products,
pharmaceuticals, fragrances, cosmetics and non-perishable foods, since March
2000.
Mr. Fine has held the positions of Executive Vice President of the
Company and President of the JBI Footwear division since September 1998. Prior
to joining the Company, from June 1996 until June 1998, Mr. Fine was Group
President of the Footwear and Women's divisions of Edison Brothers, Inc. and
from November 1994 until May 1996, he was President of Edison Brothers' chain of
5-7-9 stores. Prior to joining Edison Brothers, from December 1992 until
November 1994, Mr. Fine was a senior merchant at Payless ShoeSource, Inc.
Previously, he held the position of Divisional Merchandise Manager at various
retailers, including the Foxmoor and Hit or Miss chains of stores, as well as
the Filene's division of Federated Department Stores, Inc.
Mr. Konecki has held the position of Executive Vice President of the
Company and President of the Work `n Gear division since December 1999. From
January 1998 to December 1999, Mr. Konecki was employed as a merchant in the
Company's Work `n Gear division, serving most recently as Senior Vice President,
General Merchandise Manager. From February 1994 through March 1997, Mr. Konecki
was employed as Vice President, General Merchandise Manager for G.H. Bass & Co.
(a division of Phillips-Van Heusen Corp.), a retailer of men's, women's and
children's footwear, apparel and accessories.
Ms. White has held the position of First Senior Vice President and Chief
Financial Officer since March 2000 after having served as interim Chief
Financial Officer from January 2000 through March 2000. Except for a five month
period during 1996 when she served as Controller of Quebecor Printing (USA), a
commercial printing company, Ms. White has been employed by the Company since
November 1983 in various capacities, including serving as Senior Vice President
and Controller from October 1996 through December 1999. Prior to joining the
Company, Ms. White was employed by the public accounting firm of Peat Marwick
Mitchell & Co., the predecessor of KPMG LLP.
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 Annual Report on Form 10-K which are not
historical facts, including statements about the Company's or management's
confidence or expectations, plans, 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. The Company's operating results could be
materially adversely affected by changes in the general economy, including broad
scale changes in consumer spending patterns. In addition, the Company's ability
to grow its businesses may be negatively impacted by changes in the financial
markets such as a tightening in the availability of credit, increases in
interest rates and lowered valuations of equity securities.
Weather Conditions. Like all other retailers, the Company would likely
experience reduced sales in the event that its stores or the stores within which
it operates footwear departments were closed as a result of severe weather
conditions. In addition, as a retailer of seasonal apparel and footwear, the
Company must make certain inventory decisions based upon an expectation of
future weather conditions. Accordingly, weather conditions or patterns different
from those forecasted by the Company could result in the Company carrying too
little or too much seasonal inventory. Should this occur, the Company could
experience decreased sales, increased markdowns and/or increased inventory
carrying costs.
Dependence on Footwear Department Licensors. The success of the Footwear
Segment is dependent upon the continued independence and financial health of its
significant licensors. Accordingly, if one or more of these licensors is
acquired by an entity that does not retain the Company's services, or if one or
more of these licensors files for protection under the U.S. bankruptcy laws or
otherwise becomes insolvent, the Company may be materially adversely affected.
Dependence on Foreign Vendors. The Company's Footwear Segment sources
substantially all of its merchandise from companies operating in foreign
countries, with China accounting for most of all such sourcing. In addition, a
significant portion of the Apparel Segment's merchandise is produced by foreign
vendors. The performance of any one of the Company's businesses would likely be
significantly impacted if production at, or deliveries by, certain of its key
vendors were disrupted for a material amount of time or if the cost of
merchandise was significantly increased. Such disruptions or cost increases
could occur as the result of social or political strife, unforeseen economic or
production regulations, import, licensing or trade restrictions, acts of God or
war or other unforeseen circumstances. In particular, the Company's Footwear
Segment, along with others in the footwear industry, would likely face increased
merchandise costs if the United States does not grant China permanent normalized
trade relations or otherwise fails to grant China most favored nations status.
In the event that any such disruption occurs, there can be no assurance that the
Company will be able to identify adequate substitute vendors to replace the
products affected by such a disruption in a timely manner or at comparable
prices.
Dependence on Fashion and Trends. Successful implementation of the
Company's merchandising strategy depends on its ability to introduce in a timely
manner new or updated products which both appeal to our customers and are priced
appropriately. The success of the Company also depends in part on its ability to
anticipate and respond to changing fashion and merchandise trends and consumer
demands in a timely manner. Accordingly, any failure by the Company's divisions
to identify and respond to these trends could adversely affect consumer
acceptance of the merchandise, which in turn could adversely affect the
Company's sales and profitability.
New Stores and Licensed Footwear Locations. 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 and its ability to locate suitable sites, negotiate favorable rents
and other lease and license terms. In addition, because the Company's store
designs must evolve over time, actual store-related capital expenditures may
vary from historical levels (and projections based thereon) due to such factors
as the scope of remodeling projects, general increases in the costs of labor and
materials and unusual product display requirements.
Leverage. The Company is highly leveraged. As of January 29, 2000, the
Company's outstanding consolidated long-term indebtedness (including current
maturities but excluding undrawn letters of credit) totaled approximately $188
million, which represented 67.7% of its total capitalization. This relatively
high level of indebtedness could impair the Company's ability to obtain
additional financing, requires the Company to dedicate a significant portion of
its net cash flow from operations to the payment of principal and interest on
this indebtedness, and puts the Company at increased risk in the event it
defaults under any indebtedness.
Competition. The Company faces intense competition for customers,
personnel and innovative products in each of its divisions. Many of the
Company's competitors have substantially greater financial, marketing and other
resources than the Company.
Retention of Qualified Employees. The Company's success depends upon its
ability to attract and retain highly skilled and motivated employees with
appropriate retail experience to work in management and in its stores.
Centralized Distribution. The Company conducts its retail store
distribution operations and its direct marketing and e-commerce fulfillment and
call center functions from centralized facilities located in Canton,
Massachusetts and Alpharetta, Georgia, respectively. A disruption in operations
at either one of these facilities may significantly increase the Company's
distribution costs or materially impact sales in its direct marketing and
e-commerce businesses. In addition, a delay in the construction of, or technical
difficulties in implementing information and distribution systems at, the New
Fulfillment and Call Center could result in lost sales and increased costs.
Direct Marketing Costs. Increases in the costs of printing and mailing
catalogs and other marketing pieces could have an adverse effect on the
Company's direct marketing businesses.
E-Commerce. The Company's e-commerce initiatives could be materially
adversely affected by technological failures in the Company's information
systems and distribution infrastructure and in the failure of third party
software and equipment employed in the service of the Company's e-commerce
activities. In addition, the Company's e-commerce activities could be disrupted
by outside forces engaged in activities aimed at preventing the Company's
e-commerce sites from working properly.
Trade Imbalances. Because the Company imports a significant amount of
its merchandise from foreign vendors, disruption in the shipping trade could
materially adversely impact its ability to receive merchandise in a timely
fashion.
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.
Item 2. PROPERTIES
The executive and administrative offices of the Company, the licensed
footwear division and the Work 'n Gear division are located at 555 Turnpike
Street in Canton, Massachusetts. This facility also serves as the distribution
center for the Company's Casual Male Big & Tall, Repp and Work 'n Gear retail
stores, and the licensed footwear division. The facility is located on 37 acres
of land (the "Canton Property") 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 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, which serves as administrative offices for Casual Male Big & Tall
and Repp. The building contains approximately 53,000 square feet of office
space. The lease on this facility expires January 31, 2008.
Catalog and e-commerce fulfillment and call center activities for the
Company's apparel divisions are currently provided from a 69,000 square foot
facility in Alpharetta, Georgia. In February 2000, the Company entered into an
agreement to lease a 135,000 square foot catalog and e-commerce fulfillment and
call center that is currently under construction. The Company expects to
relocate to this facility, which will also house certain members of the
Company's direct marketing management, in June 2000. The initial term of this
lease expires ten years after the lease commencement date (which is contingent
upon the date of substantial completion of the construction of the facility) and
the Company has one option to extend the term of the lease for a five year
period at the then-prevailing market rate.
The Company leases space in a building at 330 Turnpike Street, Canton,
Massachusetts, which serves as administrative offices for the Company's loss
prevention department and as an additional distribution center for the Company's
Work 'n Gear division. The space contains approximately 41,000 square feet,
including approximately 14,000 square feet of office space. The lease on this
facility expires October 31, 2003.
As of April 10, 2000, the Company operated 453 Casual Male Big & Tall
stores, all in leased premises ranging from 2,000 to 5,987 square feet, with
average space of approximately 3,274 square feet and total space of
approximately 1,483,034 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 April 10, 2000, the Company operated 136 Repp stores, all in
leased premises ranging from 2,190 square feet to 10,000 square feet, with
average space of approximately 3,951 square feet and total space of
approximately 537,331 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 April 10, 2000, the Company operated 65 Work 'n Gear stores, all
in leased premises ranging from 2,400 square feet to 6,200 square feet, with
average space of approximately 4,143 square feet and total space of
approximately 269,300 square feet. A majority of the leases run for initial
terms of five years. Most are renewable at the option of the Company for one or
more five-year terms.
See "Item 1. BUSINESS--Industry Segments - Footwear--Licensed
Departments", for information regarding the Company's licenses to operate
footwear departments in retail stores of its licensors.
Item 3. LEGAL PROCEEDINGS
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 trades on The Nasdaq Stock Market(R) (Nasdaq)
under the symbol "JBAK".
The following table sets forth the last reported high and low sales
prices, as reported by Nasdaq, for the Company's common stock for each quarterly
period during the years ended January 29, 2000 and January 30, 1999. The prices
set forth below do not include retail mark-ups, mark-downs or commissions.
Year Ended January 29, 2000 High Low
First Quarter $ 6 1/4 $ 3 3/4
Second Quarter 9 5 3/4
Third Quarter 7 7/8 5 1/2
Fourth Quarter 6 4 1/2
Year Ended January 30, 1999 High Low
First Quarter $11 3/4 $ 4 1/2
Second Quarter 13 1/2 9 7/8
Third Quarter 11 1/8 3 3/4
Fourth Quarter 6 3/8 4 1/16
Holders
There were approximately 700 holders of record of the Company's common
stock as of April 10, 2000. The Company believes 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 outstanding common stock 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 dividend of 1 1/2 cents per share.
The Company's revolving credit facility limits the amount of cash
dividends that may be paid to stockholders. For additional information, see Note
4 to the Consolidated Financial Statements.
Other
On December 15, 1994, the Company's Board of Directors adopted a
Shareholder Rights Agreement (the "Rights Agreement") designed to enhance the
Company's ability to protect shareholder interests and to ensure shareholders
receive fair treatment in the event any future coercive takeover attempt of the
Company is made. Pursuant to the Rights Agreement, the Board of Directors
declared a dividend distribution of one preferred stock purchase right (the
"Right") for each share of the Company's outstanding common stock 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 Company's outstanding common stock 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 Company's outstanding common stock; 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.
In May 1999, to facilitate the Repp acquisition, the Company issued 13%
Senior Subordinated Notes due December 31, 2001 (the "Notes") in the principal
amount of $10.0 million to a group of 12 investors, which included investment
funds affiliated with Donaldson, Lufkin and Jenrette, Inc. (the "Investor
Group") see "Significant Recent Transactions - Acquisition of Repp Ltd. and Repp
Ltd. By Mail." Detachable warrants were issued in connection to the Notes, which
enable the holders thereof to purchase 1,200,000 shares of J. Baker, Inc. common
stock at a purchase price of $5.00 per share (the "Warrants"). The Notes mature
on December 31, 2001 and the Warrants expire on May 21, 2004. The Notes and the
Warrants were offered and sold in a private placement transaction utilizing the
exemption set forth in Section 4(2) of the Securities Act of 1933, as amended,
and were sold directly by the Company without the involvement of a broker or
commissioned agent.
<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 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. In recent years, the Company bought the Repp Big &
Tall businesses in fiscal 2000 and sold its SCOA and Parade of Shoes businesses
in fiscal 1998, disposed of its Fayva footwear business during fiscal 1996 and
has also experienced a number of licensor bankruptcy filings. The purchase of
the Repp Big & Tall businesses, 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
- - Significant Recent Transactions" and Notes 10 and 11 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
--------------------------------------------------------------
1/29/00 1/30/99 1/31/98 2/01/97 2/03/96
--------- --------- --------- --------- ---------
Income Statement Data: (53 weeks)
Net sales $ 665,456 $ 584,276 $ 592,151 $897,492 $1,020,413
Cost of sales 359,983 324,360 327,827 542,247 580,067
-------- --------- --------- --------- ---------
Gross profit 305,473 259,916 264,324 355,245 440,346
Selling, administrative and
general expenses 257,717 226,439 226,151 347,977 392,586
Depreciation and amortization 17,637 15,768 15,102 29,431 32,428
Restructuring and other non-recurring charges -- -- -- 122,309 69,300
Litigation settlement charges -- -- 3,432 -- --
-------- --------- --------- --------- ---------
Operating income (loss) 30,119 17,709 19,639 (144,472) (53,968)
Interest income (181) (192) (109) (254) (526)
Interest expense 17,058 14,723 13,497 13,056 10,983
-------- --------- --------- --------- ---------
Earnings (loss) before income taxes 13,242 3,178 6,251 (157,274) (64,425)
Income tax expense (benefit) 4,369 1,144 2,438 (45,846) (25,823)
-------- --------- --------- --------- ---------
Net earnings (loss) $ 8,873 $ 2,034 $ 3,813 $(111,428) $ (38,602)
======== ======== ======== ========= =========
Earnings (loss) per common share:
Basic $ 0.63 $ 0.15 $ 0.27 $ (8.02) $ (2.79)
======== ======== ======== ========= ========
Diluted $ 0.62 $ 0.14 $ 0.27 $ (8.02) $ (2.79)
======== ======== ======== ========= ========
</TABLE>
<TABLE>
As of:
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/29/00 1/30/99 1/31/98 2/01/97 2/03/96
-------- -------- -------- -------- --------
Balance Sheet Data:
- -------------------
Working capital $124,983 $120,089 $121,368 $182,122 $205,080
Total assets 376,627 324,035 335,067 388,541 526,082
Long-term debt 174,064 174,583 186,251 214,092 207,766
Stockholders' equity 89,726 78,183 75,263 71,989 184,037
======== ======== ======== ======== ========
Cash dividends declared
per common share $ .06 $ .06 $ .06 $ .06 $ .06
======== ======== ======== ======== ========
</TABLE>
<PAGE>
J. BAKER, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
Store Openings and Closings:
Apparel Footwear
------------------------------ ---------------------------------------------------
Total Parade
Casual Work Total JBI Licensed of Total
Male 'n Gear Repp Apparel Footwear SCOA Shoe Dept. Shoes Footwear Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
Openings 10 1 -- 11 29 -- 29 -- 29 40
Closings (16) -- -- (16) (13) -- (13) -- (13) (29)
---- --- ---- ---- ---- ---- ------ ---- ------ ------
Stores open at
January 30, 1999 453 67 -- 520 875 -- 875 -- 875 1,395
Openings 5 -- 137* 142 28** -- 28 -- 28 170
Closings (13) (2) (2) (17) (45)** -- (45) -- (45) (62)
---- --- ---- ---- ---- ---- ------ ---- ------ ------
Stores open at
January 29, 2000 445 65 135 645 858 -- 858 -- 858 1,503
==== === ==== ==== ==== ==== ====== ==== ====== ======
* Excludes the 16 Canadian Repp stores sold to Grafton Fraser and the 31
stores whose leases were terminated at or around closing and whose
inventory was sold by a liquidator.
** Excludes the closing and reopening of 151 Hills/Ames stores.
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
All references herein to fiscal 2000, fiscal 1999 and fiscal 1998 relate
to the years ended January 29, 2000, January 30, 1999 and January 31, 1998,
respectively. To the extent the Company may have incurred increased costs
resulting from inflation, the Company believes it has been able to offset these
costs through higher revenues. Accordingly, the Company believes inflation has
had no significant impact on its operations.
Results of Operations
Fiscal 2000 versus Fiscal 1999
The Company's net sales increased by $81.2 million to $665.5 million in
fiscal 2000 from $584.3 million in fiscal 1999, primarily due to $72.6 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. Sales in the
Company's apparel operations increased by $86.8 million to $411.1 million in
fiscal 2000 from $324.3 million in fiscal 1999, primarily due to sales in the
newly acquired Repp businesses and a 5.5% 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 open in corresponding weeks of the two comparison periods),
partially offset by the closing of a net of ten Casual Male Big & Tall and Work
`n Gear stores. Sales in the Company's footwear operations decreased by $5.6
million to $254.3 million in fiscal 2000 from $259.9 million in fiscal 1999,
primarily due to a $7.4 million decrease in sales due to the temporary closing
of 151 former Hills stores for a portion of fiscal 2000, prior to their
reopening as Ames stores. This decrease was partially offset by a 2.8% increase
in comparable retail footwear store sales (comparable retail footwear store
sales increases/decreases are based upon comparisons of weekly sales volume in
ongoing licensed footwear departments open in corresponding weeks of the two
comparison periods).
The Company's cost of sales constituted 54.1% of sales in fiscal 2000,
compared to 55.5% of sales in fiscal 1999. Cost of sales in the Company's
apparel operations was 51.6% of sales in fiscal 2000, compared to 52.4% of sales
in fiscal 1999. 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
58.1% of sales in fiscal 2000, compared to 59.4% of sales in fiscal 1999. This
decrease was primarily due to a $3.6 million non-recurring charge to cost of
sales in fiscal 1999 for costs associated with the liquidation of the Company's
inventory in the 155 Hills stores prior to 151 of these stores remodeling and
reopening as Ames stores and lower markdowns as a percentage of sales in fiscal
2000 as compared to fiscal 1999, partially offset by a lower initial markup on
merchandise purchases in fiscal 2000 versus fiscal 1999.
Selling, administrative and general expenses increased $31.3 million, or
13.8%, to $257.7 million in fiscal 2000 from $226.4 million in fiscal 1999,
primarily due to the acquisition of the Repp businesses. As a percentage of
sales, selling, administrative and general expenses were 38.7% of sales in
fiscal 2000, compared to 38.8% of sales in fiscal 1999. Selling, administrative
and general expenses in the Company's apparel operations were 38.9% of sales in
fiscal 2000, compared to 39.7% of sales in fiscal 1999. This decrease was
primarily due to a decrease in fixed overhead as a percentage of sales caused
principally by the volume added by the Repp acquisitions and an increase in
comparable apparel store sales. Selling, administrative and general expenses in
the Company's footwear operations were 38.4% of sales in fiscal 2000, compared
to 37.6% of sales in fiscal 1999. This increase was primarily due to an increase
in store level expenses.
Depreciation and amortization expense increased by $1.8 million to $17.6
million in fiscal 2000 from $15.8 million in fiscal 1999, primarily due to an
increase in depreciable and amortizable assets.
As a result of the above, the Company's operating income increased to
$30.1 million in fiscal 2000 from $17.7 million ($21.3 million excluding the
$3.6 million non-recurring Hills related charge in cost of sales) in fiscal
1999. As a percentage of sales, operating income was 4.5% of sales in fiscal
2000, compared to 3.0% of sales (3.7% of sales excluding the non-recurring
charge in cost of sales) in fiscal 1999.
Net interest expense increased by $2.4 million to $16.9 million in
fiscal 2000 from $14.5 million in fiscal 1999, primarily due to higher interest
rates on bank borrowings and higher average levels of bank borrowings in fiscal
2000 versus fiscal 1999.
Taxes on earnings for fiscal 2000 were $4.4 million, yielding an
effective tax rate of 33.0%, as compared to taxes on earnings of $1.1 million in
fiscal 1999, yielding an effective tax rate of 36.0%. The decrease in the
effective tax rate was primarily due to adjustments recorded in fiscal 2000 to
deferred taxes and the related valuation reserve.
Net earnings for fiscal 2000 were $8.9 million, compared to net earnings
of $2.0 million in fiscal 1999.
Fiscal 1999 versus Fiscal 1998
The Company's net sales decreased by $7.9 million to $584.3 million in
fiscal 1999 from $592.2 million in fiscal 1998, 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 $14.8 million to $324.3 million in
fiscal 1999 from $309.5 million in fiscal 1998, primarily due to a 3.4% 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 open in corresponding weeks of
the two comparison periods) and an increase in sales generated by Work 'n Gear
to its corporate customers. Excluding net sales of $17.7 million in the
Company's SCOA and Parade of Shoes businesses in fiscal 1998, sales in the
Company's footwear operations decreased by $5.0 million to $259.9 million in
fiscal 1999 from $264.9 million in fiscal 1998, primarily due to a 2.4% 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 open in corresponding weeks of the two comparison
periods).
The Company's cost of sales constituted 55.5% of sales in fiscal 1999,
compared to 55.4% of sales in fiscal 1998. Cost of sales in the Company's
apparel operations was 52.4% of sales in fiscal 1999, compared to 52.8% of sales
in fiscal 1998. 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
59.4% of sales in fiscal 1999, compared to 58.2% of sales in fiscal 1998. Cost
of sales in the Company's JBI Footwear division was 59.4% of sales in fiscal
1999, compared to 58.5% of sales in fiscal 1998. The increase in such percentage
was primarily attributable to the January, 1999 acquisition of Hills Stores
Company ("Hills") by Ames Department Stores, Inc. ("Ames"), both of which are
footwear department licensors of the Company, which resulted in a $3.6 million
non-recurring charge to cost of sales for costs associated with the liquidation
of the Company's inventory in the 155 Hills stores prior to 151 of these stores
remodeling and reopening as Ames stores, coupled with higher markdowns as a
percentage of sales, partially offset by a higher initial markup on merchandise
purchases.
Selling, administrative and general expenses increased $288,000, or
0.1%, to $226.4 million in fiscal 1999 from $226.2 million in fiscal 1998. This
increase was primarily attributable to an increase in management information
systems costs, coupled with the inclusion of a benefit realized from the
curtailment of the Company's defined benefit pension plan in fiscal 1998,
partially offset by the elimination of costs recorded in the first quarter of
fiscal 1998 associated with the Company's former SCOA and Parade of Shoes
businesses. As a percentage of sales, selling, administrative and general
expenses were 38.8% of sales in fiscal 1999, compared to 38.2% of sales in
fiscal 1998. Selling, administrative and general expenses in the Company's
apparel operations were 39.7% of sales in fiscal 1999, compared to 39.4% of
sales in fiscal 1998. This increase was primarily attributable to an increase in
management information systems costs, coupled with the inclusion of a benefit
realized from the curtailment of the Company's defined benefit pension plan in
fiscal 1998. Selling, administrative and general expenses in the Company's
footwear operations were 37.6% of sales in fiscal 1999, compared to 36.9% of
sales in fiscal 1998. Selling, administrative and general expenses in the
Company's JBI Footwear division were 37.6% of sales in fiscal 1999, compared to
36.3% of sales in fiscal 1998, primarily due to an increase in store level
expenses as a percentage of sales and an increase in management information
systems costs, coupled with the inclusion of a benefit realized from the
curtailment of the Company's defined benefit pension plan in fiscal 1998.
Depreciation and amortization expense increased by $665,000 to $15.8
million in fiscal 1999 from $15.1 million in fiscal 1998, primarily due to an
increase in depreciable and amortizable assets.
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 two patent infringement lawsuits brought against the
Company, reflecting costs of the settlement not previously accrued for. For
additional information, see Note 10 to the Consolidated Financial Statements.
As a result of the above, the Company's operating income decreased to
$17.7 million ($21.3 million excluding the $3.6 million non-recurring Hills
related charge in cost of sales) in fiscal 1999 from $19.6 million ($23.1
million excluding the litigation settlement charges) in fiscal 1998. As a
percentage of sales, operating income was 3.0% of sales (3.7% of sales excluding
the non-recurring charge in cost of sales) in fiscal 1999, compared to 3.3% of
sales (3.9% of sales excluding litigation settlement charges) in fiscal 1998.
Net interest expense increased by $1.1 million to $14.5 million in
fiscal 1999 from $13.4 million in fiscal 1998, primarily due to higher interest
rates on bank borrowings and higher average levels of bank borrowings in fiscal
1999 versus fiscal 1998.
Taxes on earnings for fiscal 1999 were $1.1 million, yielding an
effective tax rate of 36.0%, as compared to taxes on earnings of $2.4 million in
fiscal 1998, yielding an effective tax rate of 39.0%. The decrease in the
effective tax rate was primarily due to adjustments recorded in fiscal 1999 to
deferred taxes and the related valuation reserve.
Net earnings for fiscal 1999 were $2.0 million, compared to net earnings
of $3.8 million in fiscal 1998.
Financial Condition
January 29, 2000 versus January 30, 1999
The increase in accounts receivable at January 29, 2000 from January 30,
1999 was primarily due to an increase in trade receivables due to licensed
footwear sales in the latter part of January 2000 being higher than licensed
footwear sales in the latter part of January 1999.
The increase in merchandise inventories at January 29, 2000 from January
30, 1999 was primarily due to the acquisition of the Repp businesses and an
increase in forward selling inventory brought in to ensure product flow in the
event of a disruption in the vendor supply chain caused by vendor software
failures resulting from the so-called "Y2K" problem. The Company has suffered no
material disruptions to its product sourcing operations as a result of this
software problem through the end of March 2000.
The increase in net property, plant and equipment at January 29, 2000
from January 30, 1999 was the result of capital additions of $16.9 million, of
which $3.0 million were acquired in the Repp acquisition. The remaining fiscal
2000 capital expenditures were primarily for the opening of new stores and the
renovation of existing units. The increase was partially offset by the recording
of $14.9 million in depreciation expense during fiscal 2000.
The increase in other assets at January 29, 2000 was primarily due to
the recording of goodwill of $6.2 million related to the acquisition of the Repp
businesses.
The increase in current portion of long-term debt at January 29, 2000
versus January 30, 1999 was primarily due to current maturities of portions of
the Company's new bank financing arrangements.
The increase in accounts payable at January 29, 2000 from January 30,
1999 was primarily due to the increase in merchandise inventories. The ratio of
accounts payable to merchandise inventory was 40.7% at January 29, 2000,
compared to 34.0% at January 30, 1999 primarily due to the acquisition of the
Repp businesses, which purchase a large percentage of the division's inventory
from domestic sources, which provide greater trade credit than foreign trade
sources.
The increase in accrued expenses at January 29, 2000 from January 30,
1999 was primarily due to additional accruals at January 29, 2000 for general
operating expenses.
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 2000, the Company's primary source of
capital to finance its cash needs was cash provided by operating activities.
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.
The $150 million revolving line of credit (the "Revolver") was provided
by a group of lenders led by Bank Boston 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 $25 million term loan (the "Term Loan") was provided by Back Bay
Capital Funding LLC. If certain conditions are met, a principal payment of $5
million is due on April 30, 2000, and payments of $2.5 million are due on each
of July 31, 2000 and November 30, 2000. Borrowings under the Term Loan bear
interest at 16% per year.
The $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, and amended or replaced the
following previously existing credit facilities:
o An $85 million revolving credit facility which was used to finance the
Company's Casual Male Big & Tall and Work `n Gear apparel businesses;
o A $50 million revolving credit facility which was used to finance the
Company's footwear business;
o A $20 million revolving line of credit and $5 million term loan facility
which were used to finance the Company's Repp Ltd. Big & Tall businesses.
As of January 29, 2000, the Company had aggregate borrowings outstanding
under the Revolver totaling $66.3 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. The purchase price and working capital
needs of the Repp business were financed primarily through (a) a new credit
facility provided to JBI Apparel, Inc. by BankBoston Retail Finance Inc.
("BBRF") and Back Bay Capital Funding LLC, respectively, and (b) senior
subordinated notes and warrants issued to a group of investors, which included
investment funds affiliated with Donaldson, Lufkin and Jenrette, Inc. (the
"Investor Group").
Effective May 21, 1999, a combination $20 million revolving line of
credit and $5 million term loan facility (the "JBI Apparel Credit Facility") was
established with BBRF and Back Bay Capital LLC, respectively. The JBI Apparel
Credit Facility was amended by the Revolver and the Term Loan.
Also effective on May 21, 1999, the Investor Group 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 January 29, 2000 has been reduced $2.5 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 provided by operating activities for fiscal 2000 was $32.1
million, as compared to net cash provided by operating activities of $19.3
million in fiscal 1999. The $12.8 million change was primarily due to an
increase in accounts payable in fiscal 2000, which was primarily due to, and
partially offset by, an increase in merchandise inventories (related to the
acquisition of the Repp businesses) and an increase in accrued expenses, versus
smaller increases in accounts payable and inventory and a decrease in accrued
expenses in fiscal 1999. The higher increases in inventory and accounts payable
in fiscal 2000 versus fiscal 1999 were primarily the result of the Repp
acquisition. Also, there was an increase in net accounts receivable in fiscal
2000 versus a decrease in net accounts receivable in fiscal 1999, which was
primarily due to the receipt of litigation settlement proceeds in fiscal 1999.
Net cash used in investing activities for fiscal 2000 was $43.4 million,
as compared to net cash used in investing activities of $7.8 million in the
fiscal 1999. The $35.6 million change was primarily due to the acquisition of
Repp assets, fees paid in connection with the Company's new financing
arrangements, capital expenditures of $13.9 million in fiscal 2000 as compared
to $9.9 in fiscal 1999 and the receipt of $888,000 in escrowed proceeds from the
earlier sales of the footwear businesses in fiscal 2000 versus receipt of $2.9
million in escrowed proceeds in fiscal 1999.
Net cash provided by financing activities for fiscal 2000 was $13.1
million, as compared to net cash used in financing activities of $11.8 million
in fiscal 1999. The $24.9 million change was primarily due to the incurrence of
new senior subordinated and bank debt for the Repp acquisition.
Excluding furniture, fixtures, equipment and leasehold improvements
acquired with the Repp Ltd. Big & Tall businesses, the Company invested $13.9
million, $9.9 million and $8.8 million in capital expenditures during fiscal
2000, 1999 and 1998, 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.
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 25 Casual Male Big & Tall
stores, 10 Repp stores, six Work `n Gear stores and 618 JBI Footwear departments
and to close approximately five Casual Male Big & Tall stores, two Repp stores,
one Work `n Gear store and 146 JBI Footwear departments in fiscal 2001. See
"Outlook: Important Factors and Uncertainties--New Stores and Licensed Footwear
Locations."
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. See
"Outlook: Important Factors and Uncertainties--Leverage."
Certain Factors That May Affect Future Results
For a discussion of certain factors and uncertainties that may affect
future results see "Outlook: Important Factors and Uncertainties" on pages 11
and 12 of this Annual Report on Form 10-K.
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> <C>
Consolidated Financial Statements: PAGE
Independent Auditors' Report 24
Consolidated balance sheets as of January 29, 2000 and January 30, 1999 25
Consolidated statements of earnings for the years ended January 29, 26
2000, January 30, 1999 and January 31, 1998
Consolidated statements of stockholders' equity for the years ended 27
January 29, 2000, January 30, 1999 and January 31, 1998
Consolidated statements of cash flows for the years ended January 29, 28
2000, January 30, 1999 and January 31, 1998
Notes to consolidated financial statements 29
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.
</TABLE>
<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 29, 2000 and January 30, 1999, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended January 29, 2000. 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 the
Company's management, as well as evaluating the overall financial statement
presentation. We believe 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 29, 2000 and January 30, 1999, and their results of
operations and cash flows for each of the years in the three-year period ended
January 29, 2000, in conformity with generally accepted accounting principles.
KPMG LLP
Boston, Massachusetts
March 15, 2000
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of January 29, 2000 and January 30, 1999
<TABLE>
<S> <C> <C>
Assets 2000 1999
------ ---- ----
Current assets:
Cash and cash equivalents $ 5,486,290 $ 3,679,115
Accounts receivable:
Trade, net 11,544,036 9,979,178
Other 3,870,115 2,768,651
------------- -------------
15,414,151 12,747,829
Merchandise inventories 206,790,453 164,057,913
Prepaid expenses 4,730,806 3,595,858
Deferred income taxes, net 2,924,000 4,535,000
------------- -------------
Total current assets 235,345,700 188,615,715
------------- -------------
Property, plant and equipment, at cost:
Land and buildings 19,726,648 19,726,648
Furniture, fixtures and equipment 83,098,450 76,008,130
Leasehold improvements 32,806,415 26,869,958
------------- -------------
135,631,513 122,604,736
Less accumulated depreciation and amortization 65,098,471 54,109,006
------------- -------------
Net property, plant and equipment 70,533,042 68,495,730
------------- -------------
Deferred income taxes, net 53,423,000 55,404,641
Other assets, at cost, less accumulated amortization 17,325,421 11,518,573
------------- -------------
$ 376,627,163 $ 324,034,659
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 13,867,302 $ 2,112,955
Accounts payable 84,089,991 55,830,124
Accrued expenses 12,052,606 8,772,148
Income taxes payable 352,302 1,811,701
------------- -------------
Total current liabilities 110,362,201 68,526,928
------------- -------------
Other liabilities 2,474,540 2,741,591
Long-term debt, net of current portion 96,211,132 104,229,825
Senior subordinated debt 7,500,000 --
Convertible subordinated debt 70,353,000 70,353,000
Stockholders' equity:
Common stock, par value $.50 per share, authorized 40,000,000 shares,
14,067,526 shares issued and outstanding in 2000 (14,064,526 in 1999) 7,033,763 7,032,263
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 120,866,660 117,353,846
Accumulated deficit (38,174,133) (46,202,794)
------------- -------------
Total stockholders' equity 89,726,290 78,183,315
------------- -------------
$ 376,627,163 $ 324,034,659
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
For the years ended January 29, 2000, January 30, 1999 and January 31, 1998
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
---- ---- ----
Net sales $665,456,337 $584,276,206 $592,151,411
Cost of sales 359,983,047 324,359,899 327,826,816
------------ ----------- -----------
Gross profit 305,473,290 259,916,307 264,324,595
Selling, administrative and general expenses 257,717,486 226,439,442 226,151,041
Depreciation and amortization 17,636,726 15,767,752 15,102,619
Litigation settlement charges - - 3,432,000
----------- ----------- -----------
Operating income 30,119,078 17,709,113 19,638,935
Interest income (180,915) (192,112) (108,750)
Interest expense 17,058,383 14,723,707 13,496,578
---------- ---------- ----------
Earnings before income taxes 13,241,610 3,177,518 6,251,107
Income tax expense 4,369,000 1,144,000 2,438,000
----------- ----------- -----------
Net earnings $ 8,872,610 $ 2,033,518 $ 3,813,107
=========== =========== ===========
Earnings per common share:
Basic $ 0.63 $ 0.15 $ 0.27
=========== =========== ===========
Diluted $ 0.62 $ 0.14 $ 0.27
=========== =========== ===========
Number of shares used to compute
earnings per common share:
Basic 14,065,734 14,006,478 13,911,080
========== =========== ==========
Diluted 14,373,272 14,139,735 13,970,299
========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the years ended January 29, 2000, January 30, 1999 and January 31,1998
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
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
Net earnings for the year ended
January 30, 1999 -- -- -- 2,033,518 2,033,518
Exercise of stock options 23,199 11,599 442,941 -- 454,540
Shares issued to certain employees 121,750 60,875 1,213,438 -- 1,274,313
Dividends paid ($.06 per share) -- -- -- (841,570) (841,570)
---------- --------- ---------- ---------- ----------
Balance, January 30, 1999 14,064,526 7,032,263 117,353,846 (46,202,794) 78,183,315
Net earnings for the year ended
January 29, 2000 -- -- -- 8,872,610 8,872,610
Warrants issued on subordinated debt 3,300,000 3,300,000
Exercise of stock options 3,000 1,500 212,814 -- 214,314
Dividends paid ($.06 per share) -- -- -- (843,949) (843,949)
---------- --------- ---------- ---------- ---------
Balance, January 29, 2000 14,067,526 $ 7,033,763 $120,866,660 $(38,174,133) $89,726,290
========== ========== =========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows For the
years ended January 29, 2000, January 30, 1999 and January 31, 1998
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net earnings $ 8,872,610 $ 2,033,518 $ 3,813,107
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization:
Fixed assets 14,857,166 13,575,597 13,334,762
Deferred charges, intangible assets and
deferred financing costs 3,581,538 2,200,066 1,806,557
Deferred income taxes, net 3,592,641 1,240,359 2,567,000
Change in:
Accounts receivable (2,666,322) 6,332,655 568,003
Merchandise inventories (25,831,170) (4,650,911) (15,442,592)
Prepaid expenses (242,173) 822,313 1,612,862
Accounts payable 28,259,867 3,721,772 (4,897,733)
Accrued expenses 3,280,458 (5,401,922) (18,514,062)
Income taxes payable/receivable (1,459,399) 832,141 (401,104)
Other liabilities (149,365) (1,368,545) (7,873,826)
------------ ----------- -----------
Net cash provided by (used in)
operating activities 32,095,851 19,337,043 (23,427,026)
------------ ----------- -----------
Cash flows from investing activities:
Capital expenditures for:
Property, plant and equipment (13,894,478) (9,942,251) (8,810,193)
Other assets (3,337,174) (795,360) (2,304,132)
Payments received on note receivable - - 2,900,000
Net cash paid in acquisition of Repp Ltd. Big &
Tall businesses (27,021,980) - -
Net proceeds from sales of footwear businesses 887,903 2,902,335 60,134,835
------------ ----------- ----------
Net cash provided by (used in)
investing activities (43,365,729) (7,835,276) 51,920,510
------------ ----------- ----------
Cash flows from financing activities:
Repayment of senior debt (1,500,000) (1,500,000) (1,500,000)
Proceeds from revolving credit facilities 94,957,430 - 99,980,354
Proceeds from senior subordinated debt 10,000,000 - -
Repayment of revolving credit facilities (123,108,822) (9,564,859) (125,800,000)
99,980,354
Proceeds from term and chattel loans 34,000,000 - -
Repayment of mortgage payable (612,954) (560,388) (512,327)
Payment of mortgage escrow, net (28,966) (61,933) (94,779)
Proceeds from issuance of common stock 214,314 710,103 294,834
Payment of dividends (843,949) (841,570) (834,687)
-------- ---------- ----------
Net cash provided by (used in)
financing activities 13,077,053 (11,818,647) (28,466,605)
---------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 1,807,175 (316,880) 26,879
Cash and cash equivalents at beginning of year 3,679,115 3,995,995 3,969,116
----------- ----------- -----------
Cash and cash equivalents at end of year $ 5,486,290 $ 3,679,115 $ 3,995,995
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 29, 2000, January 30, 1999 and January 31, 1998
(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 29, 2000, the
Company's Casual Male Big & Tall, Repp Big & Tall, Work 'n Gear and
JBI Footwear businesses operated a total of 1,503 locations in 47
states and the District of Columbia. The Company operates the 445
store chain of Casual Male Big & Tall stores and the 135 store chain
of Repp Big & Tall stores, both of which sell fashion, casual and
dress clothing and footwear to the big and tall man; the Work 'n Gear
chain, comprised of 65 utility workwear, healthcare apparel and custom
uniforms for industry and service businesses, and 858 self-service
licensed footwear departments in discount department stores. The
Company also operates catalog, e-commerce and other direct selling and
marketing businesses.
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.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the consolidated
financial statements and accompanying notes. Actual results could
differ from those estimates.
Fiscal Year
The Company's fiscal year ends the Saturday closest to January 31.
Fiscal years 2000, 1999 and 1998 ended on January 29, 2000, January
30, 1999 and January 31, 1998, respectively. Each of these fiscal
years included 52 weeks. References to years in these financial
statements and notes relate to fiscal years rather than calendar
years.
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. Fair value of the Company's long-term
instruments is estimated based on market values for similar
instruments. At January 29, 2000, 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, goodwill
and other intangible assets 3 to 15 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
Statement of Financial Accounting Standards No. 121 ("SFAS No. 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate 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
exceeds 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.
Goodwill
Goodwill, which represents the excess of the purchase price over the
fair value of net assets acquired, is amortized on a straight-line
basis over a period of 15 years. The Company evaluates goodwill for
impairment whenever events or circumstances indicate that the carrying
amount may not be recoverable. If the carrying amount of the goodwill
exceeds the expected undiscounted future cash flows, the Company would
record an impairment loss.
Earnings Per Common Share
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, after giving effect to all
potentially dilutive common shares outstanding during the period. The
common stock issuable under the 7% convertible subordinated notes due
2002 and the convertible debentures was not included in the
calculation for fiscal 2000, fiscal 1999 and fiscal 1998 because its
effect would be antidilutive.
Net earnings and shares used to compute net earnings per share, basic
and diluted, are reconciled below:
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
---- ---- ----
Net earnings, basic and diluted $ 8,872,610 $ 2,033,518 $ 3,813,107
========== ========== ==========
Weighted average common shares:
Basic 14,065,734 14,006,478 13,911,080
Effect of dilutive securities:
Stock options, warrants and
performance share awards 307,538 133,257 59,219
---------- ---------- ----------
Diluted 14,373,272 14,139,735 13,970,299
========== ========== ==========
</TABLE>
Revenue Recognition
The Company recognizes revenue in its retail stores and licensed
footwear departments at the time of sale and in its catalog and
e-commerce business at the time orders are shipped.
Store Opening and Closing Costs
Store opening costs are expensed as incurred. 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
Stock Options
SFAS No. 123, "Accounting for Stock-Based Compensation" permits
entities to recognize as expense over the vesting period the fair
value on the date of grant of all stock-based awards. Alternatively,
SFAS No. 123 also allows entities to continue to apply the provisions
of APB Opinion No. 25, "Accounting for Stock Issued to Employees" 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 continues 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.
Reclassifications
Certain reclassifications have been made to the consolidated financial
statements of prior years to conform to the fiscal 2000 presentation.
(2) Acquisition of Repp Ltd. And Repp Ltd. By Mail
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. Edison Brothers is operating as a debtor-in-possession under
Chapter 11 of the United States Bankruptcy Code, as amended. The Company
paid cash, as described below, for the acquisition of 175 United States
and Canadian Repp Ltd. Big & Tall retail locations and the Repp Ltd. By
Mail catalog business. The Company immediately sold Repp's Canadian
operation, 16 stores, to Grafton-Fraser, Inc., a Canadian men's
retailer, and commenced the closing of 31 stores in the United States.
The Company operates the remaining retail stores in the United States
and the Repp Ltd. By Mail catalogs through a new subsidiary, JBI
Apparel, Inc. The transaction was financed primarily through (a) a new
$20 million credit facility and a $5 million term loan provided to JBI
Apparel, Inc. by BankBoston Retail Finance Inc. and Back Bay Capital
Funding LLC, respectively, (both of which were amended on August 30,
1999 through a refinancing - see Note 4 to the Consolidated Financial
Statements), (b) the issuance by JBI Apparel, Inc. of $10 million of
senior subordinated notes to a group of investors, which included
investment funds affiliated with Donaldson, Lufkin & Jenrette, Inc. (the
"Investor Group") (see Note 4), and (c) the sale of the Canadian
operations and the liquidation of the inventories in the 31 closing
stores. 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. In
connection with the $10 million financing provided by the Investor
Group, J. Baker issued 5-year warrants enabling holders to purchase
1,200,000 shares of the Company's common stock at $5.00 per share.
The acquisition was accounted for under the purchase method of
accounting and, accordingly, the results of operations of Repp Big &
Tall are included in the consolidated statements of earnings since the
date of acquisition.
The net purchase price of $27.0 million was allocated as follows:
<TABLE>
<S> <C>
Property, plant and equipment $ 3,000,000
Prepaid expenses 892,775
Merchandise inventories 16,901,370
Goodwill 6,227,835
-----------
$ 27,021,980
===========
</TABLE>
Goodwill of $6.2 million is included in other assets and is being
amortized on a straight line basis over fifteen years. Accumulated
amortization was $277,000 as of January 29, 2000.
For the period from May 24, 1999 through January 29, 2000, Repp Ltd. and
Repp Ltd. By Mail generated sales of $72.6 million. At January 29, 2000,
Repp Ltd. operated 135 Repp Ltd. Big & Tall retail locations.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
3) Accounts Receivable
Trade accounts receivable are comprised principally of amounts due
from licensors of the Company's JBI Footwear division. 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 29, 2000,
January 30, 1999 and January 31, 1998.
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
---- ---- ----
Balance, beginning of year $ 185,000 $ 577,458 $ 5,286,617
Additions charged to expense 107,000 10,000 15,000
Write-offs, net of recoveries (92,000) (402,458) (4,724,159)
--------- ---------- ----------
Balance, end of year $ 200,000 $ 185,000 $ 577,458
========== ========== ==========
</TABLE>
(4) Debt
<TABLE>
Long-Term Debt
Long-term debt at January 29, 2000 and January 30, 1999 was comprised of:
<S> <C> <C>
2000 1999
---- ----
$150 million revolving line of credit
(weighted average interest rate 7.9%) $ 63,258,573 $ -
Term loan, net of current portion
(interest rate of 16.0%) 15,000,000 -
Chattel Loan, net of current portion
(interest rate of 10.35%) 4,808,683 -
Mortgage note, net of current portion
(interest rate of 9.0%) 13,143,876 13,814,330
Apparel credit facility (weighted average interest rate
of 7.8%) - 59,500,000
Footwear credit facility (weighted average interest rate
of 8.3%) - 30,915,495
----------- -----------
$ 96,211,132 $104,229,825
=========== ===========
</TABLE>
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
and replaced $160 million in previously existing bank credit
facilities which would have otherwise expired in May 2000 and May
2001.
The $150 million revolving line of credit (the "Revolver") was
provided by a group of lenders led by Bank Boston 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.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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 January 29, 2000, the Company was in compliance with
all such covenants.
The $25 million term loan (the "Term Loan") was provided by Back Bay
Capital Funding LLC. If certain conditions are met, a principal
payment of $5 million is due on April 30, 2000, and payments of $2.5
million are due on each of July 31, 2000 and November 30, 2000.
Borrowings under the Term Loan bear interest at 16% per year.
The $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, and amended or
replaced the following previously existing credit facilities:
o An $85 million revolving credit facility which was used to
finance the Company's Casual Male Big & Tall and Work `n Gear
apparel businesses (the "Apparel Credit Facility");
o A $50 million revolving credit facility which was used to finance
the Company's footwear business (the "Footwear Credit Facility");
o A $20 million revolving line of credit and $5 million term loan
facility which was used to finance the JBI Apparel Inc.'s
purchase of the Repp Ltd. Big & Tall businesses (the "JBI Apparel
Credit Facility").
The Apparel Credit Facility was a $100 million revolving credit
facility secured by all the capital stock of The Casual Male, Inc. and
four 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 was reduced by $10 million on December
31, 1998. Borrowings under the Apparel Credit Facility bore interest
at variable rates and could be in the form of loans, bankers'
acceptances and letters of credit.
The Footwear Credit Facility was a $50 million revolving credit
facility, secured by substantially all the assets of JBI, Inc. and
Morse Shoe, Inc. Aggregate borrowings under the Footwear Credit
Facility were limited to an amount determined by a formula based on
various percentages of eligible inventory and accounts receivable.
Borrowings under the Footwear Credit Facility bore interest at
variable rates and could be in the form of loans or letters of credit.
The JBI Apparel Credit Facility was a combination $20 million
revolving line of credit and $5 million term loan facility secured by
substantially all of the assets of JBI Apparel, Inc. Aggregate
borrowings were limited to an amount determined by a formula based on
various percentage of eligible inventory and accounts receivable.
Borrowings under the $20 million revolving line of credit bore
interest at variable rates and could be in the form of loans or
letters of credit. Borrowings under the term loan bore interest at 19%
per year.
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 the Company, obtained a $15.5
million mortgage loan from The Chase Manhattan Bank (the "Mortgage
Loan") secured by the real estate, buildings and other improvements
located at 555 Turnpike Street, Canton, Massachusetts (the "Canton
Property") owned by JBAK Realty. JBAK Realty leases the Canton
Property to JBI, Inc. ("JBI"), a wholly-owned subsidiary of the
Company. The Canton Property is used as the Company's corporate
headquarters. Neither JBAK Holding nor JBAK Realty have agreed to pay
or make their assets available to pay creditors of the Company or of
JBI. Neither the Company nor JBI have agreed to make their assets
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
available to pay creditors of JBAK Holding or of JBAK Realty. Proceeds
of the Mortgage Loan were used to pay down loans under the Company's
revolving credit facility. This loan is being repaid in equal monthly
payments of principal and interest over 15 years.
Senior Subordinated Debt
In May 1999, to facilitate the purchase of the Repp Ltd. and Repp Ltd.
By Mail businesses (See Note 2), a group of investors, which included
investment funds affiliated with Donaldson, Lufkin and Jenrette, Inc.
provided $10 million to the Company 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 January 29,
2000 has been reduced by $2.5 million, the unamortized balance of the
$3.3 million value assigned to the detachable warrants. The value of
the detachable warrants was recorded as additional paid-in capital in
stockholders' equity, and is being amortized using the effective
interest method. The 13% Senior Subordinated Notes mature on December
31, 2001, and the warrants expire on May 21, 2004.
In June 1989, the Company issued $35 million of senior subordinated
notes with detachable warrants, which enabled the holders to purchase
600,000 shares of the Company's common stock at a price of $20 per
share, subject to adjustments, and which expired in May, 1999.
Subordinated notes of $1,498,023 at January 30, 1999 are presented net
of $1,977, 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 was 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 were due in installments of $1.5 million per
year beginning in May, 1995 with a final payment made in May, 1999.
Convertible Subordinated Debt
Convertible subordinated debt at January 29, 2000 and January 30, 1999
was comprised of:
<TABLE>
<S> <C> <C> <C>
2000 1999
---- ----
7% convertible subordinated notes $70,000,000 $70,000,000
Convertible debentures 353,000 353,000
----------- ----------
$70,353,000 $70,353,000
========== ==========
</TABLE>
In June 1992, the Company issued $70 million of 7% convertible
subordinated notes due 2002. The notes are convertible into common
stock at a conversion price of $16.125 per share, subject to
adjustment in certain events.
The 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.
Scheduled principal repayments of long-term debt, 13% Senior
Subordinated Notes and convertible subordinated debt for the next five
fiscal years and thereafter are as follows:
Fiscal year
ending January
--------------
<TABLE>
<S> <C> <C>
2001 $ 13,867,302
2002 14,630,224
2003 150,325,521
2004 877,387
2005 959,693
Thereafter 9,771,307
</TABLE>
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Taxes on Earnings
Income tax expense (benefit) attributable to income (loss) from
operations consists of:
<TABLE>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Year ended January 29, 2000:
Federal $ 151,000 $ 3,773,000 $ 3,924,000
State and city 625,000 (180,000) 445,000
---------- ---------- -----------
$ 776,000 $ 3,593,000 $ 4,369,000
========== ========== ==========
Year ended January 30,1999:
Federal $ - $ 631,000 $ 631,000
State and city 450,000 63,000 513,000
---------- ---------- ----------
$ 450,000 $ 694,000 $ 1,144,000
========== ========== ==========
Year ended January 31, 1998:
Federal $ (604,000) $ 2,131,000 $ 1,527,000
State and city 475,000 436,000 911,000
---------- ---------- ----------
$ (129,000) $ 2,567,000 $ 2,438,000
========== ========== ==========
</TABLE>
The following is a reconciliation between the statutory federal
income tax rate and the Company's effective rate for the years ended
January 29, 2000, January 30, 1999 and January 31, 1998:
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
---- ---- ----
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal
income tax benefit 2.2% 10.5% 9.5%
Change in beginning of year balance of
the valuation allowance for deferred
tax assets (4.2%) (9.5%) -
Other - - (5.5%)
------- ------ -------
33.0% 36.0% 39.0%
======= ====== =======
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and deferred tax
liabilities at January 29, 2000 and January 30, 1999 are presented
below:
<TABLE>
<S> <C> <C>
2000 1999
---- ----
Deferred tax assets:
Accounts receivable $ 88,000 $ 81,000
Inventory 1,991,000 2,210,000
Intangible assets 4,057,000 3,481,000
Operating loss and credit carryforwards 86,787,000 89,676,000
----------- -----------
Total gross deferred tax assets 92,923,000 95,448,000
Less valuation allowance (27,671,000) (25,669,000)
----------- -----------
Net deferred tax assets 65,252,000 69,779,000
Deferred tax liabilities:
Property, plant and equipment (4,425,000) (6,509,000)
Intangible assets (345,000) (1,669,000)
Nondeductible accruals and reserves (4,135,000) (1,661,000)
---------- -----------
Total gross deferred tax liabilities (8,905,000) (9,839,000)
----------- -----------
Net deferred tax asset $ 56,347,000 $ 59,940,000
=========== ===========
</TABLE>
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At January 29, 2000 and January 30, 1999, net deferred tax asset
consisted of the following:
<TABLE>
<S> <C> <C>
2000 1999
---- ----
Deferred tax asset, net - current $ 2,924,000 $ 4,535,000
Deferred tax asset, net - non-current 53,423,000 55,405,000
---------- ----------
$ 56,347,000 $ 59,940,000
=========== ===========
</TABLE>
At January 29, 2000, the Company has net operating loss carryforwards
("NOLS") and general business credit carryforwards for federal income
tax purposes of approximately $187 million and $1.3 million,
respectively, which expire in years ended January, 2002 through
January, 2019. SFAS No. 109, "Accounting for Income Taxes", requires
the tax benefit of such NOLS be recorded as an asset to the extent
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 its operating income will more
likely than not be sufficient to fully utilize the $187.0 million of
NOLS prior to their expiration in the year 2019.
The valuation allowance for deferred tax assets as of January 30,
1999 was $25,669,000. The valuation allowance increased by $2,002,000
to $27,671,000 at January 29, 2000, as a result of an increase of
temporary differences for certain carry forward items.
The Company also has minimum tax credit carryforwards of
approximately $4.0 million available to reduce future regular federal
income taxes, if any, over an indefinite period.
(6) 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 of $3.7
million, which had an after-tax effect of $2.2 million, in fiscal
1998. The curtailment gain is included in selling, administrative and
general expenses for the fiscal year ended January 31, 1998.
The following table sets forth the Pension Plan's funded status at
January 29, 2000 and January 30, 1999:
<TABLE>
<S> <C> <C>
2000 1999
---- ----
Change in benefit obligation:
Balance at beginning of year $ 14,858,000 $15,368,000
Benefits and expenses paid (776,000) (1,248,000)
Service and interest costs 1,124,000 1,236,000
Actuarial gains (577,000) (498,000)
----------- ----------
Balance at end of year 14,629,000 14,858,000
Change in fair value of plan assets:
Balance at beginning of year 23,297,000 19,146,000
Actual return on plan assets 529,000 5,399,000
Employer contributions - -
Benefits and expenses paid (776,000) (1,248,000)
----------- ----------
Balance at end of year 23,050,000 23,297,000
Plan assets greater than benefit obligation 8,421,000 8,439,000
Unrecognized net gain (4,887,000) (5,379,000)
------------ ----------
Prepaid pension cost $ 3,534,000 $ 3,060,000
=========== ==========
</TABLE>
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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. In December, 1998, the Board of Directors of the
Company approved an amendment to the Supplemental Plan, which resulted
in the freezing of all future benefits under the Plan as of December
31, 1998. As a result, the Company recognized a curtailment gain of
$250,000 which is included in selling, administrative and general
expenses for the fiscal year ended January 30, 1999. The following
table sets forth the Supplemental Plan's funded status at January 29,
2000 and January 30, 1999:
<TABLE>
<S> <C> <C>
2000 1999
---- ----
Change in benefit obligation:
Balance at beginning of year $ 333,000 $ 691,000
Benefits and expenses paid (2,000) (2,000)
Service and interest costs 23,000 119,000
Actuarial gains (68,000) -
Effect of curtailment - (475,000)
--------- --------
Balance at end of year 286,000 333,000
Change in fair value of plan assets:
Balance at beginning of year - -
Employer contributions 2,000 2,000
Benefits and expenses paid (2,000) (2,000)
--------- --------
Balance at end of year - -
Plan assets less than benefit obligation (286,000) (333,000)
Unrecognized net gain (188,000) (126,000)
--------- ---------
Accrued pension cost $ (474,000) $ (459,000)
========= =========
</TABLE>
Assumptions used to develop the Plans' funded status were a discount
rate of 7% and an increase in compensation level of 4.5%.
Plan assets of the Pension Plan consist primarily of common stock,
U.S. government obligations, mutual funds and insurance contracts.
Net pension benefit for the years ended January 29, 2000, January 30,
1999 and January 31, 1998 includes the following components:
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
---- ---- ----
Service cost earned during the year $ 27,000 $ 296,000 $ 315,000
Interest cost on projected benefit obligation 1,121,000 1,059,000 1,180,000
Expected return on plan assets (1,606,000) (1,423,000) (1,286,000)
Effect of curtailment - (250,000) (3,669,000)
--------- --------- ----------
Net pension benefit $ (458,000) $ (318,000) $(3,460,000)
========= ========= ==========
</TABLE>
Assumptions used to develop the net periodic pension cost were a
discount rate of 7%, expected long-term return on assets of 9% and an
increase in compensation levels of 4.5%.
In January, 1992, the Company implemented a qualified 401(k) profit
sharing plan available to eligible full-time employees. Under the
401(k) plan, the Company matches 50% of the qualified employee's
contribution up to 6% of the employee's salary. The total cost of the
matching contribution was $989,000, $867,000 and $897,000 for the
years ended January 29, 2000, January 30, 1999 and January 31, 1998,
respectively.
The Company has established incentive bonus plans for certain
executives and employees. The bonus calculations are generally based
on achievement of certain profit levels, as defined in the plans. For
the years ended January 29, 2000, January 30, 1999 and January 31,
1998, $1.1 million, $180,000 and $70,000, respectively, was provided
under the bonus plans.
The Company does not provide post-retirement benefits, other than
pensions as defined under SFAS No. 106.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Stock Options, Performance Share Awards and Restricted Stock 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 officers and
employees at an option price of not less than 100% of the fair market
value of a share on the date of grant. Under this plan, no shares of
common stock are available for grant at January 29, 2000, 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 29, 2000, there are 390,612 shares of
common stock available for all 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 date of grant.
The 1992 Directors' Stock Option Plan provides for the automatic grant
of 2,500 shares of the Company's common stock upon a director's
initial election to the Board of Directors and 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. Options granted under the 1992 Directors' Plan are
exercisable in full upon grant and expire ten years from date of
grant. Under this plan, at January 29, 2000, there are 60,000 shares
of common stock available for grants.
The Company applied APB Opinion No. 25 and related interpretations in
accounting for its stock options. Accordingly, $199,219 of
compensation cost has been recognized for stock options in the
Company's results of operations in fiscal 2000. Had the Company
recorded a charge for the fair value of options granted consistent
with SFAS No. 123, net earnings and net earnings per common share
would have decreased by $1,827,250 and $0.13 in fiscal 2000 and
$1,786,500 and $0.13 in fiscal 1999 and $1,458,000 and $.10 in fiscal
1998, respectively.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes options pricing model, with the following
weighted average assumptions used for grants in fiscal 2000, 1999, and
1998:
2000 1999 1998
---- ---- ----
Risk-free interest rate 6.9% 5.2% 5.8%
Expected option lives 7.7 years 7.7 years 6.8 years
Expected volatility 70.0% 56.8% 51.5%
Expected dividend yield 1.0% 1.4% 0.8%
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.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Data with respect to stock options for fiscal 2000, 1999 and 1998 is
as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
2000 1999 1998
-------------------- ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
Outstanding at beginning of year 1,249,840 $ 8.23 1,184,923 $ 8.37 1,072,430 $ 9.58
Granted 381,456 5.33 264,686 7.61 637,500 7.16
Exercised (3,000) 5.03 (23,199) 7.86 (8,500) 5.62
Canceled (62,799) 10.29 (176,570) 6.92 (516,507) 11.13
--------- --------- ---------
Options outstanding at end of year 1,565,497 $ 7.58 1,249,840 $ 8.23 1,184,923 $ 8.37
========= ========= =========
Options exercisable at end of year 769,472 585,751 439,801
Weighted average fair-value of
options granted during the year $5.33 $5.06 $3.78
</TABLE>
The following table sets forth a summary of the stock options
outstanding at January 29, 2000:
<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-$ 8.63 911,895 7.8 $ 5.57 320,076 $ 6.08
$ 8.88-$ 9.88 513,102 6.3 $ 9.14 343,021 $ 9.12
$10.31-$17.00 105,500 6.4 $12.84 71,375 $13.28
$19.25-$22.38 35,000 4.0 $20.95 35,000 $20.95
------- -------
$1.00- $22.38 1,565,497 7.1 $ 7.58 769,472 $ 8.78
========= =======
</TABLE>
During fiscal 1997 and fiscal 1998, the Company granted Performance
Share Awards, which entitled certain officers to shares of the
Company's common stock in fiscal 1999 if the price of the common stock
attained a "Target Price" (the average closing price of the Company's
common stock for certain defined periods) between $10.00 and $15.00.
In fiscal 1999, the Company granted 21,750 shares of the Company's
common stock to eligible officers.
During fiscal 1999, the Company granted certain officers stock price
performance based restricted stock awards, pursuant to which the
officers purchased, in the aggregate, 100,000 shares of the Company's
common stock at a purchase price of $10.18 per share. Each of such
officers executed a promissory note with the Company as consideration
for the aggregate purchase price. Each note will be ratably forgiven
over five years provided each of such officers remain employed by the
Company during such time. In the event certain stock price
appreciation criteria are not met during the performance period, the
Company has the right to repurchase a portion of the shares, up to a
maximum of 80% of each officer's shares, as defined in each agreement.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) 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 $23.2 million as of January 29, 2000. The Company has
reduced its actual liability by assigning or subleasing substantially
all of the Excess Property Leases to unaffiliated third parties.
At January 29, 2000, minimum rental commitments under operating leases
are as follows:
<TABLE>
<CAPTION>
Fiscal Year
ending January Net minimum rentals Minimum sub-rentals
-------------- ------------------- -------------------
(in thousands)
<S> <C> <C>
2001 $ 44,340 $ 893
2002 37,973 750
2003 31,235 251
2004 23,072 22
2005 15,335 -
Thereafter 20,503 -
------- --------
$ 172,458 $ 1,916
========= ========
</TABLE>
Rent expense for the years ended January 29, 2000, January 30, 1999
and January 31, 1998 was as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Minimum rentals $ 39,068 $ 32,989 $ 32,882
Contingent rentals 49,416 49,821 51,611
------- ------- -------
88,484 82,810 84,493
Less sublease rentals 921 821 556
-------- ------- -------
Net rentals $ 87,563 $ 81,989 $ 83,937
======= ======= =======
</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 $2.9
million through May, 2001.
During fiscal 2000, the Company's Board of Directors adopted executive
severance agreements, which create certain liabilities in the event of
termination of the covered executives within three years following
either a change of control of the Company or termination of certain
key executives of the Company. The aggregate commitment amount under
these executive severance agreements, should all six covered employees
be terminated, is approximately $1.9 million.
At January 29, 2000 and January 30, 1999, the Company was contingently
liable under letters of credit totaling $3.0 million and $4.4 million,
respectively. These letters of credit, which have terms ranging from
one month to one year, are used primarily to collateralize obligations
to third parties for the purchase of the Company's inventory. The fair
value of these letters of credit is estimated to be the same as the
contract values based on the nature of fee arrangements with the
issuing banks. No material loss is anticipated due to non-performance
by counterparties to these arrangements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) 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 Company's Board of Directors adopted a
Shareholder Rights Agreement (the "Rights Agreement") designed to
enhance the Company's ability to protect shareholder interests and to
ensure shareholders receive fair treatment in the event any future
coercive takeover attempt of the Company is made. 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 the Company's common stock 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 Company's outstanding common stock 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 Company's outstanding common
stock; 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.
(10) Restructuring and Other Non-Recurring Charges
In the year ended January 30, 1999, the Company recorded a
non-recurring charge of $3.6 million ($2.3 million, or $0.17 per share
on an after-tax basis), related to the January, 1999 acquisition of
Hills Stores Company ("Hills") by Ames Department Stores, Inc.
("Ames"), both of which are footwear department licensors of the
Company. This charge, which was included in cost of sales, reflected
the estimated costs associated with the liquidation of the Company's
inventory in all 155 Hills stores prior to 151 of these stores
remodeling and reopening as Ames stores. Upon completion of the
remodeling and conversion process, the last phase of which was
completed in September, 1999, 151 of the former Hills stores were
incorporated into the Company's license agreement with Ames on the
same terms and conditions as presently exist.
During fiscal years 1998 and 1997, the Company 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. The Company's
remaining restructuring reserve at fiscal 2000 and fiscal 1999 relates
primarily to lease termination, severance and other costs.
A summary of the restructuring activity is presented below:
2000 1999
---- ----
Balance, beginning of year $1,358,000 $ 5,578,000
Inventory liquidation, lease termination,
severance and other costs (575,000) (4,220,000)
-------- ----------
Balance, end of year $ 783,000 $ 1,358,000
========= ===========
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Sale of Shoe Corporation of America Division
On March 5, 1997, the Company 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 SCOA stockholders
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. See Note 17 to the Consolidated Financial Statements.
Sale of Parade of Shoes Division
On March 10, 1997, the Company sold its Parade of Shoes division to
Payless ShoeSource, Inc. ("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. By March, 2000, the Company had received
all of the escrow proceeds.
Settlement of Litigation
On September 17, 1997, the Company settled a patent infringement
lawsuit brought against it and its Morse Shoe, Inc. subsidiary 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
$4.1 million, in the aggregate, over a three-year period. The final
payment under the settlement was made in January, 2000. In connection
with the settlement, the Company recorded a one-time charge to
earnings in fiscal 1998 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.
(11) Bankruptcy Filings of Licensors
On June 23, 1995, Bradlees Stores, Inc. ("Bradlees"), a company
operating stores in which the Company operates licensed footwear
departments, 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 began paying
the balance of the Company's pre-petition claim in thirty-six equal
monthly installments commencing on March 1, 1999, with interest on such
outstanding balance 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 fiscal year
2000 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 during the second quarter of fiscal
1998,
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
the Company received a partial distribution of the amount owed to it
under the settlement. 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 the 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 12), 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, received
$5.0 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 $2.9 million from Ames
representing the outstanding balance of the Ames promissory note and
discharged a mortgage lien and security interest in Ames' real
property and buildings located in Rocky Hill, Connecticut.
(12) Principal Licensor
Sales in licensed footwear departments operated under the Ames license
agreement accounted for 21.0%, 16.3% and 15.4% of the Company's net
sales in the years ended January 29, 2000, January 30, 1999 and
January 31, 1998, respectively.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Segment Information
The Company is a specialty retailer conducting business primarily
through two business segments: apparel and footwear. The Company's
chief operating decision maker, the Chief Executive Officer, evaluates
the performance of the Company's segments based on operating profit
and cash flow. Operating profit includes all revenues and direct
expenses attributable to the segment, and excludes certain expenses
that are managed outside the segment, primarily general corporate
expenses. General corporate expenses are comprised primarily of
administrative functions such as management, finance, information
systems and human resources. Corporate assets include the Company's
headquarters facility, distribution center and management information
systems. Information about operations for each business segment is
summarized as follows:
<TABLE>
<CAPTION>
Year Ended
January 29, 2000 January 30, 1999 January 31, 1998
---------------- ---------------- ----------------
($ in thousands)
<S> <C> <C> <C>
Apparel
Net sales $411,107 $324,336 $309,500
Operating profit 39,966 26,459 24,185
Identifiable assets 180,730 135,781 132,335
Depreciation and amortization 8,994 7,861 6,747
Additions to property, equipment
and leasehold improvements 10,770 7,845 6,660
Footwear
Net sales $254,349 $259,940 $282,651
Litigation settlement charges - - (3,432)
Operating profit 12,283 12,140 14,367
Identifiable assets 108,941 100,071 112,935
Depreciation and amortization 4,468 4,054 4,715
Additions to property, equipment
and leasehold improvements 3,147 304 718
Consolidated
Net sales $665,456 $584,276 $592,151
Litigation settlement charges - - (3,432)
Operating profit before general
corporate expense 52,249 38,599 38,552
General corporate expense (22,130) (20,889) (18,913)
Interest expense, net (16,877) (14,532) (13,388)
Earnings before income taxes $ 13,242 $ 3,178 $ 6,251
Identifiable assets $289,671 $235,852 $245,270
Corporate assets 86,956 88,183 89,797
------- -------- --------
Total assets $376,627 $324,035 $335,067
Segment depreciation and amortization $ 13,462 $ 11,915 $ 11,462
Corporate depreciation and amortization 4,175 3,853 3,641
------ ------- -------
Total depreciation and amortization $ 17,637 $ 15,768 $ 15,103
Segment additions to property, equip-
ment and leasehold improvements $ 13,917 $ 8,149 $ 7,378
Corporate additions to property, equip-
ment and leasehold improvements 2,977 1,793 1,432
------ ------ ------
Total additions to property, equipment
and leasehold improvements $ 16,894 $ 9,942 $ 8,810
</TABLE>
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Year ended January 29, 2000
Net sales $ 129,193 $ 169,248 $ 158,804 $ 208,211 $ 665,456
Gross profit 60,220 77,300 75,517 92,436 305,473
Net earnings $ 980 $ 3,374 $ 1,429 $ 3,090 $ 8,873
========= ======== ======== ======== =========
Earnings per common share:
Basic $ 0.07 $ 0.24 $ 0.10 $ 0.22 $ 0.63
========= ========= ======== ======== =========
Diluted $ 0.07 $ 0.23 $ 0.10 $ 0.22 $ 0.62
========= ========= ======== ======== =========
Year ended January 30, 1999
Net sales $ 126,637 $ 146,496 $ 138,257 $ 172,886 $ 584,276
Gross profit 58,324 66,798 62,220 72,574 259,916
Net earnings (loss) $ 516 $ 2,594 $ 737 $ (1,814) $ 2,033
========= ======== ======== ====== ========
Earnings (loss) per common share:
Basic $ 0.04 $ 0.19 $ 0.05 $ (0.13) $ 0.15
========= ========= ======== ======== =========
Diluted $ 0.04 $ 0.18 $ 0.05 $ (0.13) $ 0.14
========= ========= ======== ======== =========
</TABLE>
(15) Advertising Costs
The Company expenses in-store advertising costs as incurred. Direct
response advertising costs, which consist of catalog production and
postage costs, are deferred and amortized over the period of expected
direct marketing revenue, which is less than one year. Advertising
expense was approximately $15.8 million, $10.8 million and $11.7 million
for the years ended January 29, 2000, January 30, 1999 and January 31,
1998, respectively.
(16) Supplemental Schedules to Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Cash paid for:
Interest $ 16,141,233 $ 14,190,926 $13,545,337
Income taxes 2,235,758 438,299 272,104
=========== =========== ==========
Schedule of non-cash financing activity:
Warrants issued with senior
subordinated debt $ 3,300,000 $ - $ -
========== =========== ==========
</TABLE>
(17) Subsequent Event
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 was
approximately $14 million. As part of this acquisition, the Company
acquired the rights to operate 204 licensed footwear departments for
moderate department and specialty store chains nationwide. In addition,
pursuant to the terms of the acquisition agreement, SCOA agreed to
provide the Company with certain transition services for up to six
months following the closing. The Company financed the SCOA acquisition
with cash and borrowings available under its revolving credit agreement.
<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
<TABLE>
<S> <C>
(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 10.12 through 10.45
constitute all 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.
-------------------
</TABLE>
<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/Elizabeth C. White
------------------------------------
Elizabeth C. White
First Senior Vice President
and Principal Financial Officer
April 19, 2000
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/Douglas Kahn /s/Harold Leppo
- --------------------------- ------------------------------
Douglas Kahn, Director Harold Leppo, Director
/s/David Pulver /s/Theodore M. Ronick
- --------------------------- ------------------------------
David Pulver, Director Theodore M. Ronick, Director
/s/Melvin M. Rosenblatt /s/Nancy Ryan
- --------------------------- ------------------------------
Melvin M. Rosenblatt, Director Nancy Ryan, Director
/s/Alan I. Weinstein /s/Stuart M. Glasser
- --------------------------- ------------------------------
Alan I. Weinstein, Director Stuart M. Glasser, Director
All as of April 19, 2000
<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 29, 2000
<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
Report on Form 10-K 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
Report on Form 10-Q for the quarter ended November 3, 1990).
4. Instruments Defining the Rights of Security Holders, Including Indentures
(.01) 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 Report on Form 10-K for the year ended
January 30, 1993).
(.02) 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 Report on Form 10-Q for the
quarter ended May 1, 1993).
(.03) 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 Report on Form 10-Q for the quarter ended
August 1, 1992).
(.04) 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 Report on Form 8-K dated
December 15, 1994).
(.05) Securities Purchase Agreement by and among J. Baker, Inc., *
JBI, Inc, and JBI Apparel, Inc. as Guarantor, and DLJ Fund
Investment Partners II, L.P. and others (the "Investor Group"),
as Purchasers, dated as of May 19, 1999 (filed as Exhibit 4.01 to the
Company's Report on Form 10-Q for the quarter ended May 1, 1999).
(.06) Form of 13% Senior Subordinated Note dated as of May 21, 1999 (filed *
as Exhibit 4.02 to the Company's Report on Form 10-Q for the quarter
ended May 1, 1999).
(.07) Form of Warrant, dated as of May 21, 1999 (filed as Exhibit 4.03 to *
the Company's Report on Form 10-Q for the quarter ended May 1, 1999).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
- ------- --------
(.08) Guaranty by JBI, Inc. in favor of the Investor Group, *
dated as of May 21, 1999 (filed as Exhibit 4.04 to the
Company's Report on Form 10-Q for the quarter ended May 1, 1999).
(.09) Registration Rights Agreement by and among J. Baker, Inc., *
JBI, Inc. and JBI Apparel, Inc. and the Investor Group, dated as of
May 21, 1999 (filed as Exhibit 4.05 to the Company's Report on
Form 10-Q for the quarter ended May 1, 1999).
10. Material Contracts
(.01) 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 Report on Form 8-K dated March 20, 1997).
(.02) Asset Purchase Agreement by and among J. Baker, Inc. as Purchaser *
and Edison Brothers, Stores, Inc., Edison Brothers Apparel Stores, Inc.
and Repp Ltd. Big & Tall as Sellers, dated as of April 30, 1999 (filed as
Exhibit 10.01 to the Company's Report on Form 10-Q for the quarter
ended May 1, 1999).
(.03) License Agreement between Ames Department Stores, Inc., et al and *
JBI Holding Company, Inc. (filed as Exhibit 10.01 to the Company's
Report on Form 10-K 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 Report on Form 10-K 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 Report on Form 10-Q 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 Report on Form 10-K 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 Report on Form 10-Q for the quarter ended
April 29, 1989).
(.08) 1999 Loan and Security Agreement by and among J. Baker, Inc. *
(as Borrower's representative), Morse Shoe, Inc., JBI, Inc., JBI
Apparel, Inc., The Casual Male, Inc., WGS Corp. and TCMB&T, Inc.
and BankBoston Retail Finance Inc., et.al. and Back Bay Capital
Funding LLC, dated August 30, 1999 (filed as Exhibit 10.01 to the
Company's Report on Form 10-Q for the quarter ended July 31, 1999).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
- ------- --------
(.09) Chattel Promissory Note made by Morse Shoe, Inc., JBI, Inc., The *
Casual Male, Inc., WGS Corp. and TCMB&T, Inc. in favor of
BancBoston Leasing Inc. dated August 26, 1999 (filed as Exhibit 10.02 to the
Company's Report on Form 10-Q for the quarter ended July 31, 1999).
(.10) Master Security Agreement by Morse Shoe, Inc., JBI, Inc., The Casual *
Male, Inc., WGS Corp. and TCMB&T, Inc. in favor of BancBoston Leasing, Inc.
dated August 26, 1999 (filed as Exhibit 10.03 to the Company's Report on
Form 10-Q for the quarter ended July 31, 1999).
(.11) Security Agreement by Morse Shoe, Inc., JBI, Inc., The Casual *
Male, Inc., WGS Corp. and TCMB&T, Inc. in favor of BancBoston Leasing, Inc.
dated August 26, 1999 (filed as Exhibit 10.04 to the Company's Report on
Form 10-Q for the quarter ended July 31, 1999).
(.12) Executive Employment Agreement dated March 25, 1993 between Sherman N. *
Baker and J. Baker, Inc. (filed as Exhibit 10.01 to the Company's Report
on Form 10-Q for the quarter ended July 31, 1993).
(.13) Amendment to Executive Employment Agreement between J. Baker, Inc. and *
Sherman N. Baker, dated March 31, 1995 (filed as Exhibit 4.10 to the
Company's Report on Form 10-K for the year ended January 28, 1995).
(.14) Amendment to Executive Employment Agreement between J. Baker, Inc. and *
Sherman N. Baker, dated March 31, 1996 (filed as Exhibit 10.09 to the
Company's Report on Form 10-K for the year ended February 3, 1996).
(.15) Third Amendment to Executive Employment Agreement between J. Baker, Inc. *
and Sherman N. Baker dated March 31, 1997 (filed as Exhibit 10.10 to
the Company's Report on Form 10-K for the year ended February 1, 1997).
(.16) Fourth Amendment to Executive Employment Agreement between J. Baker, Inc. *
and Sherman N. Baker dated March 31, 1998 (filed as Exhibit 10.01 to
the Company's Report on Form 10-Q for the quarter ended October 31, 1998).
(.17) Fifth Amendment to Executive Employment Agreement between J. Baker, Inc. *
and Sherman N. Baker dated April 10, 1999 (filed as Exhibit 10.21 to the
Company's Report on Form 10-K for the year ended January 30, 1999).
(.18) Sixth Amendment to Executive Employment Agreement between J. Baker, Inc. **
and Sherman N. Baker dated April 19, 2000, attached.
(.19) 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).
(.20) 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 Report on Form 10-Q for the quarter ended November 1, 1997).
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
- ------- --------
(.21) Second Amendment to Executive Employment Agreement between J. Baker, *
Inc. and Alan I. Weinstein, dated March 31, 1998 (filed as Exhibit 10.02 to
the Company's Report on Form 10-Q for the quarter ended May 2, 1998).
(.22) Restricted Stock Award Agreement between Alan I. Weinstein and J. Baker, *
Inc., dated July 8, 1998 (filed as Exhibit 10.01 to the Company's Report
on Form 10-Q for the quarter ended August 1, 1998).
(.23) Forgivable Promissory Note made by Alan I. Weinstein in favor of J. Baker *
Inc., dated July 8, 1998, issued in connection with Restricted Stock
Award (filed as Exhibit 10.02 to the Company's Report on Form 10-Q
for the quarter ended August 1, 1998).
(.24) Third Amendment to Executive Employment Agreement between J. Baker, *
Inc. and Alan I. Weinstein, dated April 10, 1999 (filed as Exhibit 10.27
the Company's Report on Form 10-K for the year ended January 30, 1999).
(.25) Fourth Amendment to Executive Employment Agreement between J. Baker, **
Inc. and Alan I. Weinstein, dated March 14, 2000, attached.
(.26) 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).
(.27) First Amendment to Executive Employment Agreement between J. Baker, *
Inc. and Philip G. Rosenberg, dated April 10, 1998 (filed as Exhibit 10.29
to the Company's Report on Form 10-K for the year ended January 31, 1998).
(.28) Second Amendment to Executive Employment Agreement between J. Baker, *
Inc. and Philip G. Rosenberg, dated April 16, 1999 (filed as Exhibit 10.33
to the Company's Report on Form 10-K for the year ended January 30, 1999).
(.29) 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).
(.30) Restricted Stock Award Agreement between Stuart M. Glasser and J. Baker, *
Inc., dated July 8, 1998 (filed as Exhibit 10.03 to the Company's Report on
Form 10-Q for the quarter ended August 1, 1998).
(.31) Forgivable Promissory Note made by Stuart M. Glasser in favor of J. Baker *
Inc., dated July 8, 1998, issued in connection with Restricted Stock
Award (filed as Exhibit 10.04 to the Company's Report on Form 10-Q
for the quarter ended August 1, 1998).
(.32) Amendment to Executive Employment Agreement between J. Baker, Inc. and **
Stuart M. Glasser dated December 27, 1999, attached.
(.33) Second Amendment to Executive Employment Agreement between J. Baker, Inc. **
and Stuart M. Glasser dated April 17, 2000 attached.
* Incorporated herein by reference
** Included herein
<PAGE>
Exhibit Page No.
- ------- --------
(.34) Executive Employment Agreement between J. Baker, Inc. and Michael J. *
Fine, dated September 9, 1998 (filed as Exhibit 10.01 to the Company's
Report on Form 10-Q for the quarter ended October 31, 1998).
(.35) First Amendment to Executive Employment Agreement between J. Baker, *
Inc. and Michael J. Fine, dated April 12, 1999 (filed as Exhibit 10.38 to
the Company's Report on Form 10-K for the year ended January 30, 1999).
(.36) Second Amendment to Executive Employment Agreement between J. Baker, **
Inc. and Michael J. Fine, dated April 4, 2000, attached.
(.37) Forgivable Promissory Note made by Thomas J. Konecki in favor of J. **
Baker, Inc. dated January 27, 1998, attached.
(.38) Executive Employment Agreement between J. Baker, Inc. and Thomas J. **
Konecki, dated January 19, 1999, attached.
(.39) Amendment to Executive Employment Agreement between J. Baker, Inc. **
and Thomas J. Konecki, dated December 27, 1999, attached.
(.40) Second Amendment to Executive Employment Agreement between J. **
Baker, Inc. and Thomas J. Konecki, dated April 4, 2000, attached.
(.41) Promissory Note made by Thomas J. Konecki in favor of J. Baker, **
Inc. dated January 25, 2000, attached.
(.42) Change of Control Severance Compensation Agreement between J. Baker, **
Inc. and Elizabeth C. White, dated December 28, 1999, attached.
(.43) J. Baker, Inc. Amended and Restated 1985 Stock Option Plan (filed *
as Exhibit 19.02 to the Company's Report on Form 10-Q for the quarter
ended August 1, 1992).
(.44) J. Baker, Inc. 1994 Equity Incentive Plan dated March 29, 1994 *
(filed as Exhibit 10.23 to the Company's Report on Form 10-K
for the year ended January 29, 1994).
(.45) J. Baker, Inc. 1992 Directors Stock Option Plan dated April 13, 1992 *
(filed as Exhibit 19.03 to the Company's Report on Form 10-Q
for the quarter ended August 1, 1992).
(.46) Mortgage and Security Agreement by JBAK Canton Realty, Inc. to *
The Chase Manhattan Bank dated as of December 30, 1996 (filed as
Exhibit 10.69 to the Company's Report on Form 10-K for the year
ended February 1, 1997).
11. Statement re: Computation of Net Earnings 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 LLP, attached. **
-------------------
27. Financial Data Schedule, attached. **
-----------------------
</TABLE>
* Incorporated herein by reference
** Included herein
SIXTH AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED MARCH 25, 1993
Reference is made to the Executive Employment Agreement dated as of
March 25, 1993, as amended on March 31, 1995, March 31, 1996, March 31, 1997,
March 31, 1998 and April 10, 1999 (the "Agreement") by and between J. Baker,
Inc. and Sherman N. Baker. Pursuant to paragraph 19 of the Agreement and in
order to further amend certain provisions of the Agreement, the Agreement is
hereby amended as follows:
1. Paragraph 3(a) of the Agreement entitled "Compensation" is hereby
amended by deleting the figure "$206,676" in the third line thereof and
inserting in its place the figure "$186,000".
2. Paragraph 6 of the Agreement is hereby amended by deleting the
phrase "ending on April 1, 2000" in the fifth line thereof and inserting in its
place the phrase "ending on April 1, 2001".
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 19, 2000
------------------------------ --------------
Alan I. Weinstein Date
President and
Chief Executive Officer
/s/ Sherman N. Baker April 19, 2000
- ------------------------------------- --------------
Sherman N. Baker Date
FOURTH AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED APRIL 1, 1997
Reference is made to the Executive Employment Agreement dated as of April
1, 1997 as amended on September 1, 1997, March 31, 1998 and April 10, 1999 (the
"Agreement") by and between J. Baker, Inc. and Alan I. Weinstein. 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 3 of the Agreement is hereby amended by deleting $625,000 in
the second line thereof and inserting in its place $675,000.
2. Paragraph 6 of the Agreement is hereby amended by deleting the phrase
"ending on April 30, 2001" in the fifth line thereof and inserting in its place
the phrase "ending on April 30, 2002".
3. All other terms of the Agreement shall remain unchanged and continue in
full force and effect.
J. BAKER, INC.
By: /s/ Sherman N. Baker 3/14/00
--------------------------------- ---------
Sherman N. Baker Date
Chairman of the Board
/s/ Alan I. Weinstein 3/14/00
- ------------------------------------ ----------
Alan I. Weinstein Date
AMENDMENT TO EXECUTIVE
EMPLOYMENT AGREEMENT
DATED SEPTEMBER 15, 1997
Reference is made to the Executive Employment Agreement dated as of
September 15, 1997 (the "Agreement") by and between J. Baker, Inc. and Stuart M.
Glasser. Pursuant to paragraph 25 of the Agreement and in order to further amend
certain provisions of the Agreement, the Agreement is hereby amended as follows:
1. Paragraph 7 of the Agreement is hereby amended by deleting the phrase
"to and including the date immediately preceding the third anniversary of this
Agreement" in the fourth line thereof and inserting in its place "ending on
April 30, 2001."
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 12/27/99
----------------------------- -----------
Alan I. Weinstein Date
President and
Chief Executive Officer
/s/ Stuart M. Glasser 12/23/99
- -------------------------------- -----------
Stuart M. Glasser Date
SECOND AMENDMENT TO EXECUTIVE
EMPLOYMENT AGREEMENT
DATED SEPTEMBER 15, 1997
Reference is made to the Executive Employment Agreement dated as of
September 15, 1997, as amended December 27, 1999 (the "Agreement") by and
between J. Baker, Inc. and Stuart M. Glasser. Pursuant to paragraph 25 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 is hereby amended by adding to the end
thereof the following: "The Base Salary will be increased to the rate of
$650,000 per annum effective as of April 30, 2000 and shall be further increased
to the rate of $700,000 per annum beginning on April 30, 2001."
2. Paragraph 7 of the Agreement is hereby amended by deleting the phrase
"ending on April 30, 2001" in the fourth line thereof and inserting in its place
"ending on April 30, 2002."
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 17, 2000
------------------------------ ---------------------
Alan I. Weinstein Date
President and
Chief Executive Officer
/s/ Stuart M. Glasser April 17, 2000
--------------------------- ---------------------
Stuart M. Glasser Date
SECOND AMENDMENT
TO EMPLOYMENT AGREEMENT
DATED SEPTEMBER 9, 1998
Reference is made to the Executive Employment Agreement dated as of
September 9, 1998, as amended on April 11, 1999 (the "Agreement") by and between
J. Baker, Inc. and Michael Fine. 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 is hereby amended by deleting the figure
"$400,000" in the second line thereof and inserting in its place the figure
"$440,000."
2. Paragraph 6 of the Agreement is hereby amended by deleting the phrase
"ending on April 30, 2001" in the fourth line thereof and inserting in its place
the phrase "ending on April 30, 2002".
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 4/4/00
------------------------------ ---------
Alan I. Weinstein Date
President and
Chief Executive Officer
/s/ Michael Fine 4/5/00
- --------------------------------- ---------
Michael Fine Date
FORGIVABLE PROMISSORY NOTE
$20,000.00 Canton, Massachusetts
January 27, 1998
FOR VALUE RECEIVED, the undersigned, Thomas Konecki ("Payor"), promises to
pay to the order of J. Baker, Inc., a Massachusetts corporation, at 555 Turnpike
Street, Canton, Massachusetts 02021 ("Lender"), the principal sum of TWENTY
THOUSAND DOLLARS ($20,000.00), or so much thereof as may be outstanding all upon
the terms and provisions herein ("Principal Amount").
If Payor remains employed by Lender, or by any company directly or
indirectly controlled by Lender through the following dates, the outstanding
Principal Amount of this Note shall automatically be reduced to the amount
indicated:
<TABLE>
<S> <C>
Date Outstanding Principal Amount
Prior to 1st year anniversary from January 27, 1998 Full Amount of Loan
1st year anniversary from January 27, 1998 $15,000.00
2nd year anniversary from January 27, 1998 $10,000.00
3rd year anniversary from January 27, 1998 $5,000.00
</TABLE>
If Payor remains employed by Lender through January 27, 2002, this Note
shall automatically be canceled and no amount shall be due hereunder.
If at any time prior to January 27, 2002, Payor is no longer employed by
Lender for any reason whatsoever (including, without limitation, resignation,
termination, layoff, death, disability or wrongful discharge), the Outstanding
Principal Amount of this Note shall be immediately due and payable on the last
day of Payor's employment. Notwithstanding the foregoing, in the specific
instance where Lender eliminates Payor's position with Lender and does not
reassign Payor into another position with Lender, this Note will be forgiven and
does not have to be repaid. All payments due Lender pursuant to this Note shall
be made by certified check to Lender. At such time as Payor is no longer
employed by Lender, interest on the Outstanding Principal Amount shall accrue
and be payable on the last day of each month, in arrears, at an interest rate
per annum of nine percent (9%). Interest will be computed on the basis of a
360-day year, compounded monthly.
Nothing contained herein shall be construed as creating an employment
contract and Payor's employment with Lender and Lender's employment of Payor
shall be at-will and terminable at any time by either Lender or Payor, with or
without cause.
For as long as Payor remains employed by Lender, this Note shall not bear
any interest. However, IRS regulations require, with respect to non-interest
bearing loans (or below market loans) in excess of $10,000.00 between an
employer and an employee, that the amount of foregone interest (that is,
interest which has not been charged by the lender) be treated as taxable
compensation income to the Payor.
Payor shall be responsible for any federal, state or local taxes which may
be payable as a result of the forgiveness of the loan whereas this forgiveness
shall be considered taxable income. Payor should seek the advice of his or her
own tax advisor as to the tax consequences of this loan.
Lender is hereby authorized at any tine and from time to time to set off
and apply any and all indebtedness owing by Lender to Payor (including unpaid
wages and earned but unpaid vacation pay) and other assets or properties of
Payor at any time held in the possession, custody or control of Lender against
any and all of the Outstanding Principal Amount and interest due under this
Note. Without limiting the foregoing, Payor hereby grants to Lender a continuing
security interest in and to all such indebtedness, assets and properties in the
possession of Lender.
Payor hereby waives presentment, demand for payment, protest and notice of
protest, and any or all other notices or demands in connection with the
delivery, acceptance and performance of this Note. No waiver of or modification
to this Note or any part hereof shall be effective unless contained in writing,
signed by the party against whom enforcement is sought. No delay or omission of
Lender in exercising any right or remedy hereunder shall constitute a waiver of
any such right or remedy. A waiver on one occasion shall not operate as a bar to
or waiver of any such right or remedy on any future occasion.
This Note shall inure to the benefit of Lender and its successors and
assigns. This Note shall be binding upon Payor and its successors.
This Note shall be deemed to be under seal and shall be governed and
construed according to the laws of the Commonwealth of Massachusetts without
reference to the principles of conflict of law thereof.
/s/ Thomas J. Konecki
Thomas J. Konecki
P.O. Box 1136
Scarborough, ME 04070
/s/ Alan I. Weinstein
Alan I. Weinstein
Authorized Signature
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is dated as of January 19, 1999 by and between Thomas
Konecki (the "Employee") and J. BAKER, INC., a Massachusetts corporation
together with any subsidiaries of the Company (the "Company").
WHEREAS, the Employee and the Company desire to set forth in writing the
terms and conditions of the Employee's employment agreement with the Company
from the date hereof;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Employment. Under and subject to the terms and conditions set forth
herein, the Company hereby agrees to employ, or to continue to employ, the
Employee during the Term (as defined in Section 6 hereof) as its Senior Vice
President and General Merchandise Manager of the Company's WGS. Corp. subsidiary
and/or in such other senior executive management position(s) with the Company,
or any parent or subsidiary of the Company, as the Board of Directors of the
Company (the "Board") may determine from time to time, and the Employee hereby
accepts such employment.
2. Duties. The Employee agrees, during the Term and any extension of the
Term, faithfully to perform for the Company such duties as may be assigned to
him from time to time by the Company. The Employee further agrees to devote his
entire business time, attention and energies exclusively to such employment and
to conform to the rules, regulations, instructions, personnel practices and
policies of the Company and its subsidiaries, as existing and amended from time
to time. The Employee may be required to relocate his principal residence only
to an area in which the Company or a subsidiary of the Company has or determines
to have significant operations.
3. Compensation.
(a) The Company shall pay the Employee during the Term an annual base
salary of not less than $175,000, payable no less often than monthly, in equal
installments in accordance with the Company's regular pay intervals for its
senior executives.
(b) Cash Incentive Compensation. In addition to his annual base salary as
determined pursuant to Section 3(a), during the Term, the Employee shall also be
paid such amounts, if any, to which the Employee is entitled, as an officer of
the Company, under the Company's Cash Incentive Compensation Plan (the
"Incentive Plan"), as from time to time such Incentive Plan may be amended.
4. Other Benefits.
(a) Fringe Benefits. The Employee shall be entitled to participate in all
benefit programs that the Company establishes and makes available to management
generally and in any event shall be entitled to receive benefits at least
substantially comparable to those provided pursuant to the present practices of
the Company and its subsidiaries.
(b) Paid Vacations. The Employee shall be entitled to an annual paid
vacation of four (4) weeks in each calendar year, to be taken at such time or
times as the Employee and the Company shall mutually agree, provided, however,
that no more than two (2) weeks shall be taken during any three month period
unless otherwise agreed upon by the Company's Chief Executive Officer.
5. Expenses. The Company shall reimburse the Employee for all reasonable
travel, entertainment and other business expenses incurred or paid by the
Employee in performing his duties under this Agreement upon presentation by the
Employee of expense statements or vouchers and such other supporting information
as the Company may from time to time request, provided, however, that the amount
available for such expenses may be fixed in advance by the Board after
consultation with the Employee. The Company shall also pay or reimburse the
reasonable relocation expenses of the Employee (consistent with the present
policies of the Company) in connection with a relocation of the Employee's
principal residence outside of the greater Boston area required by the Company
pursuant to Section 2 hereof.
6. Effective Date and Term. This Agreement shall become effective as of the
date hereof and the Employee's employment under this Agreement shall commence on
such date and, unless sooner terminated as provided herein or extended, shall
continue for a term (the "Term") ending on January 19, 2000. The Employee and
the Company have obligations hereunder extending past the Term.
7. Non-competition.
(a) During the Employee's employment under this Agreement or otherwise and
for a period of twelve (12) months after the date of the Employee's voluntary
termination of such employment (through his voluntary resignation or otherwise
(the "Termination Date"), the Employee will not, without the express written
consent of the Company, anywhere in the United States: (i) compete with the
Company or any other entity directly or indirectly controlled by the Company
(each an "Affiliate"), in the Company's Business (as defined in Section 7(c)
hereof); or (ii) otherwise interfere with, disrupt or attempt to interfere with
or disrupt the relationship between the Company or an Affiliate and any person
or business that was a customer, supplier, lessor, licensor, contractor, or
employee of the Company or such Affiliate on the Termination Date.
(b) The term "compete" as used in this Section 7 means directly or
indirectly, or by association with any entity or business, either as a
proprietor, partner, employee, agent, consultant, director, officer, shareholder
(provided that the Employee may make passive investments in competitive
enterprises the shares of which are listed on a national securities exchange if
the Employee at no time owns directly or indirectly more than 2% of the
outstanding equity ownership of such enterprise) or in any other capacity or
manner to solicit, hire, purchase from, sell to, rent from, or otherwise conduct
business related to the Company's Business with any party that is a customer or
supplier of the Company or an Affiliate.
(c) The term "Company's Business" as used in this Section 7 means the
operation of any of the following specialty retail businesses, as a principal
business unit, either alone or in combination: (i) Leased Departments in
discount or mass merchandising department stores; (ii) retail stores offering
casual clothing for "Big and Tall" men; or (iii) retail stores offering
primarily work related clothing and uniforms for medical and laboratory purposes
or the mail order catalog or corporate ("business to business") sales thereof.
The term shall also include any additional specialty retail businesses which the
Company may acquire subsequent to the date hereof and which are operated as
principal business units of the Company on the Termination Date.
(d) The term "supplier" as used in this Section 7 shall mean any party or
affiliate of a party from which, on the Termination Date the Company or an
Affiliate was purchasing or, in the one (1) year prior to the Termination Date
had purchased products sold by the Company or an Affiliate or was in contact in
connection with the purchase of products sold by the Company or an Affiliate on
or before the Termination Date.
(e) The term "customer" as used in this Section 7 shall mean any party or
affiliate of a party, that on the Termination Date or within one year prior to
the Termination Date, was a wholesale vendee or prospective wholesale vendee of
the Company or an Affiliate or in connection with whose business the Company or
an Affiliate operated a Leased Department, a retail store for the sale of casual
clothing for "Big and Tall" men, work related clothing and uniforms for medical
and laboratory purposes or any other specialty retail business which the Company
operated as a principal business unit on the Termination Date, had contacted in
connection with the potential operation of such businesses within one year prior
to the Termination Date or which the Company or an Affiliate was actively
planning to contact in connection with the potential operation of any such
businesses on the Termination Date.
8. Confidential Information. The Employee will never use for his own
advantage or disclose any proprietary or confidential information relating to
the business operations or properties of the Company, any Affiliate or any of
their respective customers, suppliers, landlords, licensors or licensees. Upon
termination of the Employee's employment, the Employee will surrender and
deliver to the Company all documents and information of every kind relating to
or connected with the Company and Affiliates and their respective businesses,
customers, suppliers, landlords, licensors and licensees.
9. Termination.
(a) Death. In any event of the death of the Employee during the Term, his
employment shall terminate and the Company shall pay to the Employee's surviving
spouse, or to the Employee's estate if their is no surviving spouse, the
Employee's base salary for nine (9) months from the date of death. Upon the
death of the Employee, the rights of the Employee's surviving spouse or estate
hereunder, as the case may be, shall be limited solely to the benefits set forth
in this Section 9(a).
(b) Disability. In the event that the Employee shall become disabled (as
hereinafter defined) during the Term, the Company shall have the right to
terminate the Employee's employment upon written notice, provided, however, that
in such event the Company shall continue to pay the Employee's base salary for
nine (9) months from the date such termination occurs, payable in accordance
with the Company's regular pay intervals for its senior executives. For purposes
of this Agreement, the Employee shall be considered disabled on the date when
any physical or mental illness or other incapacity shall, in the judgment of a
majority of the members of the Board, after consulting with or being advised by
one or more physicians (it being understood that one of such physicians may be
the Employee's physician but that the Board shall not be bound by his views),
have prevented the performance in a manner reasonably satisfactory to the
Company of the Employees duties under this Agreement for a period of six
consecutive months.
(c) For Cause. For purposes of this Agreement, "Cause" shall mean the
occurrence of one or more of the following: (i) Employee is convicted of, pleads
guilty to, or confesses to any felony or any act of fraud, misappropriation or
embezzlement which has an immediate and materially adverse effect on the Company
or any Subsidiary, as determined by the Board in good faith in its sole
discretion, (ii) Employee engages in a fraudulent act to the material damage or
prejudice of the Company or any subsidiary or in conduct or activities
materially damaging to the property, business or reputation of the Company or
any Subsidiary, all as determined by the Board in good faith in its sole
discretion, (iii) any material act or omission by Employee involving malfeasance
or negligence in the performance of Employee's duties to the Company or any
Subsidiary to the material detriment of the Company or any Subsidiary, as
determined by the Board in good faith in its sole discretion, which has not been
corrected by Employee within 30 days after written notice from the Company of
any such act or omission, (iv) failure by Employee to comply in any material
respect with the terms of his employment agreement, if any, or any written
policies or directives of the Board as determined by the Board in good faith in
its sole discretion, which has not been corrected by Employee within 30 days
after written notice from the Company of such failure, or (v) material breach by
Employee of his non-competition agreement with the Company, if any, as
determined by the Board in good faith in its sole discretion.
(d) Without Cause. During the Term hereof the Company may terminate this
Agreement at any time without cause. In such event, the Company shall pay to the
Employee, in accordance with the Company's regular pay intervals for its senior
executives, an amount equal to the greater of (i) the amount of Base Salary the
Employee would have received through the last day of the Term or (ii) nine (9)
months of Base Salary; provided, however, that any such payments shall be offset
by any salary or other compensation earned by the Employee from other
employment.
10. Approval of Board. The Company represents that this Agreement has been
duly approved by the Board and is in all respects valid and binding upon the
Company.
11. Key Person Insurance. The Employee agrees to take such actions as may
be reasonably required to permit the Company to maintain key person life
insurance on the Employee's life in such amounts and for such periods of time,
if any, as the Company deems appropriate, with all benefits being payable to the
Company. Upon payment by the Employee of the cash surrender value, if any, of
any such policy and any paid but unearned premiums for such policy, the Company
will assign such policy to the Employee upon termination (other than because of
the Employee's death) of the Employee's employment with the Company, provided,
however, that, in the event the Employee's employment is terminated by reason of
the disability of the Employee and the death of the Employee may reasonably be
expected within one year after such termination as a result of such disability,
the Company shall not be required to assign any such policy.
12. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been given and
received when actually delivered, one business day after dispatch by telegraphic
means, two business days after dispatch by recognized overnight delivery
service, or five days after mailing by certified or registered mail with proper
postage affixed, return receipt requested and addressed as follows (or to such
other address as a party entitled to receive notice hereunder may have
designated by notice pursuant to this Section 12):
(a) If to the Company:
J. Baker, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Attention: President
(b) If to the Employee:
Thomas Konecki
500-C Falls Boulevard, Apt. #3131
Quincy, Massachusetts 02169
13. Severability. If any provision of this Agreement or its application to
any person or circumstances is invalid or unenforceable, then the remainder of
this Agreement or the application of such provision to other persons or
circumstances shall not be affected thereby. Further, if any provision or
application hereof is invalid or unenforceable, then a suitable and equitable
provision shall be substituted therefor in order to carry out so far as may be
valid or enforceable the intent and purposes of the invalid and unenforceable
provision.
14. Applicable Law. This Agreement shall be interpreted and construed in
accordance with, and shall be governed by, the laws of the Commonwealth of
Massachusetts without giving effect to the conflict of law provisions thereof.
15. Assignment. Neither of the parties hereto shall, without the written
consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder, provided, however, that in the event that the Company
sells all or substantially all of its assets the Company may assign its rights
and transfer its obligations hereunder to the purchaser of such assets. A merger
of the Company with or into another corporation shall be deemed not to be an
assignment of this Agreement, and, in any such event, this Agreement shall inure
to the benefit of and be binding upon the surviving corporation and the
Employee. Subject to the foregoing, this Agreement shall be binding upon, and
shall inure to the benefit of, the parties and their respective successors,
heirs, administrators, executors, personal representatives and assigns.
16. Headings. This section and paragraph headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
17. Remedies. It is specifically understood and agreed that any breach of
the provisions of Section 7 or 8 of this Agreement is likely to result in
irreparable injury to the Company, that damages at law will be inadequate remedy
for such breach, and that in addition to any other remedy it may have, the
Company shall be entitled to enforce the specific performance of said Sections
and to seek both temporary and permanent injunctive relief therefor without the
necessity of proving actual damages.
18. Waiver of Breach. Any waiver by either the Company or the Employee of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
19. Amendment of Agreement. This Agreement may be altered, amended or
modified, in whole or in part, only by a writing signed by both the Employee and
the Company.
20. Integration. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter thereof and supersedes all prior
agreements with respect to such subject matter between the parties.
Intending to be legally bound, the Company and the Employee have signed
this Agreement as if under seal as of the date set forth at the head of the
first page.
J. BAKER, INC.
/s/ Alan I. Weinstein
-----------------------
Alan I. Weinstein
President
/s/ Thomas Konecki
-----------------------
Thomas Konecki
AMENDMENT TO EXECUTIVE
EMPLOYMENT AGREEMENT
DATED JANUARY 19, 1999
Reference is made to the Executive Employment Agreement dated as of January
19, 1999 (the "Agreement") by and between J. Baker, Inc. and Thomas J. Konecki.
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 1 of the Agreement is hereby amended by deleting Senior Vice
President and General Merchandise Manager of the Company's WGS Corp. subsidiary
in the third and fourth lines thereof and inserting Executive Vice President of
the Company and President of the Company's WGS Corp. subsidiary.
2. Paragraph 3 of the Agreement is hereby amended by deleting $175,000 in
the second line thereof and inserting in its place $210,000.
3. Paragraph 6 of the Agreement is hereby amended by deleting the phrase
"ending on January 19, 2001" in the fifth line thereof and inserting in its
place "ending on April 30, 2001."
4. All other terms of the Agreement shall remain unchanged and continue in
full force and effect.
J. BAKER, INC.
By: /s/ Alan I. Weinstein 12/27/99
-------------------------------------- -----------
Alan I. Weinstein Date
President and
Chief Executive Officer
/s/ Thomas Konecki 1/10/00
- ----------------------------------------- ------------
Thomas Konecki Date
SECOND AMENDMENT TO EXECUTIVE
EMPLOYMENT AGREEMENT
DATED JANUARY 19, 1999
Reference is made to the Executive Employment Agreement dated as of January
19, 1999, as amended on January 10, 2000 (the "Agreement") by and between J.
Baker, Inc. and Thomas J. Konecki. 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 is hereby amended by deleting $210,000
in the second line thereof and inserting in its place $225,000.
2. Paragraph 6 of the Agreement is hereby amended by deleting the phrase
"ending on April 30, 2001" in the fifth line thereof and inserting in its place
"ending on April 30, 2002."
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 4/4/00
------------------------------------ -----------------------
Alan I. Weinstein Date
President and
Chief Executive Officer
/s/ Thomas Konecki 4/6/00
- --------------------------------------- --------------------------
Thomas Konecki Date
J. Baker, Inc. and Subsidiaries - 555 Turnpike Street - Canton, MA 02021
Promissory Note
Name: Thomas J. Konecki Social Security #: ###-##-#### Store or Dept. Name
and Location: Work 'n Gear Home Office Amount:$15,000.00 Date: January 25, 2000
- --------------------------------------------------------------------------------
For value received, the undersigned Thomas J. Konecki (the "Payor") promises to
pay to the order of J. Baker Inc. or its assignees (the "Holder") at 555
Turnpike Street, Canton, MA 02021 or at such other place as may be designated in
writing by the Holder, the principal sum of Fifteen Thousand Dollars and 00/100
($15,000.00) Dollars together with interest on the principal balance thereof at
a rate of ( 8.5%) per cent per annum payable in full on May 1, 2001.
Total repayment (principal plus interest) on May 1, 2001 will be $16,987.57.
PRE-PAYMENT
The unpaid principal hereof together with all unpaid interest accruing may
be prepaid in whole or in part at any time without premium or penalty. All
prepayments shall be applied first to accrued interest on such prepayment and
second against the principal.
EVENTS OF DEFAULT
a. The entire unpaid balance of this Note together with accrued interest
thereon shall become immediately due and payable at the option of the Holder,
without notice to the Payor, upon the happening of any one or more of the
following events (an "Event of Default"):
[i] Payor has failed to pay the principal sum or interest on this Note
on the date such payment is due;
[ii] Payor has failed to perform any of the terms,conditions,
covenants or provisions of this Note; or
[iii] Payor's employment with J. Baker Inc. or any of its subsidiaries
is terminated for any reason whatsoever; or [iv] Breach of any warranty or
obligation hereunder with respect to the Collateral.
b. Upon an Event of Default, and notwithstanding any other interest rate
set forth herein, interest shall accrue on the entire unpaid principal balance
of this Note from and including the date of such default at the annual simple
interest rate of eighteen (18%) percent per annum.
c. The Payor will pay all costs and expenses of collection including
attorney's fees incurred or paid by the Holder in enforcing this Note or the
obligations hereby evidenced, to the fullest extent permitted by law.
WAIVER OF PRESENTMENT/DEMAND
The Payor hereby waives presentment, demand for payment, notice of
dishonor, protest and notice of protest and any or all other notices or demands
in connection with the delivery, acceptance and performance of this Note. No
waiver of or modification to this Note or any part hereof shall be effective
unless contained in writing signed by the party against whom enforcement of such
waiver or modification is sought.
RIGHT OF SET-OFF
Upon the occurrence and during the continuance of any Event of Default, the
Holder hereby is authorized at any time and from time to time, without notice to
the Payor, to set-off and apply any and all indebtedness at any time owing by
the Holder to or for the credit, account or benefit of the Payor against any and
all of the principal sum or interest now or hereafter existing under this Note
whether or not the Holder shall have declared a default, accelerated the
obligations or made any demand or taken any other action under this Note and
although such obligations may be unmatured. Without limiting the foregoing, the
Payor hereby grants to the Holder a continuing security interest in and to all
such indebtedness in the possession of the Holder and the Payor hereby
authorizes the Holder to set-off and apply such amounts at such times and in
such manner as the Holder may direct pursuant to this Section.
GOVERNING LAW
This Note is a Massachusetts contract, and the rights and obligations of
the parties shall be governed by the laws of the Commonwealth of Massachusetts.
In the event that any provision or clause of this Note conflicts with applicable
law, such conflict shall not affect the other provisions of this Note which can
be given effect without the conflicting provision. The undersigned agrees to
submit to jurisdiction in a court in the Commonwealth of Massachusetts. The
Payor and the Holder hereby waive trial by jury.
EXECUTED AS A SEALED INSTRUMENT THIS 26th DAY OF January, 2000.
Signature of Payor /s/ Thomas J. Konecki
Witness to Signature /s/ Elizabeth C. White
FOR OFFICE USE ONLY:
Authorized Corporate Signature: /s/ Alan I. Weinstein
CHANGE OF CONTROL SEVERANCE
COMPENSATION AGREEMENT
This Change of Control Severance Compensation Agreement (the
"Agreement") by and between J. Baker, Inc., a Massachusetts corporation together
with its subsidiaries and divisions (the "Company") with its principal place of
business at 555 Turnpike Street, Canton, Massachusetts and Elizabeth C. White of
11 Wycliffe Road, E. Walpole, MA 02032 (the "Executive") shall be effective as
of the 28th day of December, 1999 (the "Agreement").
In consideration of the agreements contained herein including the
undertakings of the parties hereto, the receipt and sufficiency of which are
hereby acknowledged by each of the parties hereto, it is covenanted and agreed
as follows:
1. Severance Compensation upon Termination of Employment.
------------------------------------------------------
(a) In the event the Executive's employment with the Company is terminated:
(i) within three (3) years after a Change in Control of the
Company occurring during the Term hereof (regardless of
whether such Executive's termination occurs after the
expiration of the Term) either (A) by the Company or (B) by
the Executive for "good reason", or
(ii) within three (3) years after the employment of Alan I.
Weinstein with the Company has terminated during the Term
hereof (regardless of whether the Executive's termination
occurs after the expiration of the Term) for any reason
including, without limitation, dismissal, resignation,
retirement, death or termination for any other reason either
(A) by the Company (except if the termination of Executive is
for "cause") or (B) by the Executive for good reason,
then, in such event, the Company shall pay to the Executive an amount, in cash,
(the "Severance Payment") equal to the amount set forth below corresponding to
Executive's number of years of credited employment service:
Number of Years of Credited Service Severance Payment
---------------------------------------- -------------------------------
---------------------------------------- -------------------------------
0 to 9 1 year at Annual Base Salary
---------------------------------------- -------------------------------
---------------------------------------- -------------------------------
10 to 19 1.5 years at Annual Base Salary
---------------------------------------- -------------------------------
---------------------------------------- -------------------------------
20 and greater 2.0 years at Annual Base Salary
---------------------------------------- -------------------------------
For purposes of this Agreement "Annual Base Salary" shall mean the
Executive's base salary in effect on the date of this Agreement, as such base
salary may be increased from time to time. As of the date of this Agreement,
Executive had 16 years of credited employment service.
(b) In the event the Executive's employment is terminated as described
in Section 1(a)(i) above, the Severance Payment shall be made to the Executive
in a single lump sum cash payment. In the event the Executive's employment is
terminated as described in Section 1(a)(ii) above, the Severance Payment shall
be made to the Executive in accordance with the Company's regular pay intervals
for its senior executives beginning immediately following the Executive's
termination of employment with the Company.
(c) Notwithstanding the Executive's rights to receive the payments and
benefits pursuant to this agreement, the Executive shall not be deemed to have
waived any rights the Executive may have at law or equity with respect to the
termination of his employment.
(d) A termination for "good reason" shall be deemed to have occurred,
and the Executive shall be entitled to the benefits set forth in this Section 1,
if the Executive voluntarily terminates his employment after the occurrence of
any of the following events, if either the circumstances set forth in paragraphs
(a)(i) or (a)(ii) has occurred: (i) the assignment to the Executive of any
duties inconsistent with the highest position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities attained by
the Executive during the period of his employment by the Company; (ii) a
relocation of the Executive outside the metropolitan Boston area; or (iii) a
decrease in the Executive's compensation (including base salary, bonus or fringe
benefits). For purposes hereof, "Cause" shall mean (i) failure by the Employee
to cure a material breach of this Agreement within 15 days after written notice
thereof by the Company, (ii) the continuation after notice by the Company of
willful misconduct by the Employee in the performance of the Employee's duties
hereunder or (iii) the commission by the Employee of an act constituting a
felony; and "Change of Control of the Company" shall have the meaning set forth
in the Company's 1994 Equity Incentive Plan, as approved by the Stockholders of
the Company on June 7, 1994 (and without regard to any subsequent amendments
thereto).
2. Term.
-----
This Agreement shall become effective as of the date hereof, shall
continue for a period of three (3) years thereafter and shall renew
automatically for a period of one year on the anniversary of the effective date
unless either party gives notice to the other party in accordance with Section 6
hereof of its desire to terminate the agreement no less than 30 days prior to
the date the Agreement is due to expire (the initial three year term and any
extension thereof are herein referred to as the "Term").
3. Nonguarantee of Employment.
Nothing contained in this Agreement shall be construed as a contract of
employment between the Company and the Executive, or as a right of the Executive
to continue in the employ of the Company, or as a limitation of the right of the
Company to discharge the Executive with or without cause.
4. Successors.
-----------
(a) This Agreement shall be binding upon the Company, its successors
and assigns, and in the event of a Change of Control of the Company or in the
event the Company shall be merged or consolidated or otherwise combined into one
or more other corporations or other entities, or substantially all of its assets
are sold or otherwise transferred to one or more other corporations or entities,
this Agreement shall be binding upon the corporation or entity resulting from
such merger or consolidation or to which such assets shall be sold or
transferred and shall be assignable by it by way of transfer of assets, merger,
consolidation or combination to the same extent as if it were the Company.
Except as provided above in this Section 4(a), this Agreement shall not be
assignable by the Company or its successors and assigns. The Company will
require any successor or assign (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance satisfactory to
the Executive, expressly, absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
5. Assignment.
-----------
This Agreement shall not be assignable by the Executive and shall not
be subject to attachment, execution, pledge or hypothecation.
6. Notice.
-------
For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and either delivered in hand,
by nationally recognized overnight courier service or by mail by United States
registered or certified mail, return receipt requested, postage prepaid, and
shall be deemed to have been duly given the sooner of when actually received, on
the next business day following deposit with a nationally recognized overnight
courier service or three (3) days following deposit in the mail by United States
registered or certified mail, return receipt requested, postage prepaid, as
follows:
If to the Company:
J. Baker, Inc.
555 Turnpike Street
Canton, MA 02021
Attn: Chief Executive Officer
If to the Executive:
Elizabeth C. White
11 Wycliffe Road
E. Walpole, MA 02032
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. Modification.
-------------
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
the Executive and the Company. No waiver by either party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such party shall be deemed a waiver of any other provisions hereof or of any
similar or dissimilar provisions or conditions at the same or any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
8. Validity.
---------
The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect.
9. Governing Law.
--------------
This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts without giving effect to the conflicts of law principles thereof.
10. Entire Agreement
This Agreement constitutes the entire understanding of the parties, and
revokes and supersedes all prior agreements between the parties and is intended
as a final expression of their Agreement. It shall not be modified or amended
except in writing signed by the parties hereto and specifically referring to
this Agreement. This Agreement shall take precedence over any other documents
that may be in conflict therewith.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
J. BAKER, INC.
By: /s/ Alan I. Weinstein
-----------------------
Alan I. Weinstein
President and
Chief Executive Officer
EXECUTIVE:
/s/ Elizabeth C. White
-----------------------------
Elizabeth C. White
EXHIBIT 11
J. BAKER, INC. AND SUBSIDIARIES
Computation of Primary and Fully Diluted Earnings Per Share*
<TABLE>
<CAPTION>
Year Ended
January 29, January 30, January 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Net Earnings Per Common Share:
- -----------------------------
Net earnings, basic and diluted $ 8,872,610 $ 2,033,518 $ 3,813,107
========== ========== ==========
Weighted average common
shares outstanding, basic 14,065,734 14,006,478 13,911,080
Effect of dilutive securities:
Stock options and performance share awards 307,538 133,257 59,219
----------- ---------- ----------
Weighted average common
shares outstanding, diluted 14,373,272 14,139,735 13,970,299
========== ========== ==========
Net earnings per common share, basic $0.63 $0.15 $0.27
=========== =========== ==========
Net earnings per common share, diluted $0.62 $0.14 $0.27
=========== =========== ==========
</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>
<CAPTION>
Fiscal Years Ended
February 3, February 1, January 31, January 30, January 29,
1996(a) 1997(b) 1998(d) 1999 2000
---------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Historical ratio of earnings to fixed charges
Earnings (loss) from continuing operations
before taxes and extraordinary item per
consolidated statements of earnings $ (64,425) $(157,274) $ 6,251 $ 3,178 $ 13,242
Add:
Portion of rents representative of the
interest factor 17,316 16,283 10,775 10,723 12,716
Interest on indebtedness including the
amortization of debt expense and
detachable warrant value(1) 18,754 19,554 13,497 14,723 17,058
-------- -------- -------- -------- --------
Earnings (loss) before fixed charges,
as adjusted $ (28,355) $(121,437) $ 30,523 $ 28,624 $ 43,016
======= ======== ======= ======= =======
Fixed charges
Interest on indebtedness including the
amortization of debt expense and
detachable warrant value (1) $ 18,754 $ 19,554 $ 13,497 $ 14,723 $ 17,058
------- ------- ------- ------- --------
Rents $ 51,948 $ 48,850 $ 32,326 $ 32,168 $ 38,147
Portion of rents representative of
the interest factor (2) $ 17,316 $ 16,283 $ 10,775 $ 10,723 $ 12,716
------- ------- ------- ------- -------
Fixed charges (1) + (2) $ 36,070 $ 35,837 $ 24,272 $ 25,446 $ 29,774
======= ======= ======= ======= ========
Ratio of earnings to fixed charges -(c) -(c) 1.26x 1.12x 1.44x
========= ========= ====== ====== ======
(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.
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
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 Apparel, Inc.** Massachusetts Repp Ltd. Big & Tall
JBI, Inc. Massachusetts JBI, Inc.
J. Baker, Inc.
JBI Holding Company, Inc.** Delaware JBI Holding Company, Inc.
LP Innovations, Inc.**** Massachusetts LP Innovations, 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
* Subsidiary of JBAK Holding, Inc.
** Subsidiary of JBI, Inc.
*** Subsidiary of The Casual Male, Inc.
**** Subsidiary of WGS Corp.
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, No. 333-35923 and No. 333-85563 of our report dated March 15, 2000
appearing in the Annual Report on Form 10-K of J. Baker, Inc. for the year ended
January 29, 2000.
/s/ KPMG LLP
---------------------------
KPMG LLP
Boston, Massachusetts
April 19, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF J. BAKER, INC. FOR THE YEAR END JANUARY 29, 2000 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> JAN-29-2000
<CASH> 5,486,290
<SECURITIES> 0
<RECEIVABLES> 15,614,151
<ALLOWANCES> 200,000
<INVENTORY> 206,790,453
<CURRENT-ASSETS> 235,345,700
<PP&E> 135,631,513
<DEPRECIATION> 65,098,471
<TOTAL-ASSETS> 376,627,163
<CURRENT-LIABILITIES> 110,362,201
<BONDS> 174,064,132
0
0
<COMMON> 7,033,763
<OTHER-SE> 82,692,527
<TOTAL-LIABILITY-AND-EQUITY> 376,627,163
<SALES> 665,456,337
<TOTAL-REVENUES> 665,456,337
<CGS> 359,983,047
<TOTAL-COSTS> 359,983,047
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,058,383
<INCOME-PRETAX> 13,241,610
<INCOME-TAX> 4,369,000
<INCOME-CONTINUING> 8,872,610
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,872,610
<EPS-BASIC> 0.63
<EPS-DILUTED> 0.62
</TABLE>
