<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: August 1, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to
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Commission file number: 333-57009
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Iron Age Holdings Corporation
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(Exact name of registrant as specified in its charter)
Delaware 04-3349775
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(State or other jurisdiction (I.R.S. Employer
incorporation or organization Identification Number)
Robinson Plaza Three, Suite 400, Pittsburgh, Pennsylvania 15205
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(Address of principal executive offices) (Zip Code)
(412) 787-4100
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(Registrants telephone number, including area code)
Not Applicable.
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(Former name, former address and former fiscal year, if changed since
last report)
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 the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ ] No [ x ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ] Not Applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date. Not Applicable.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements are presented herein:
Condensed Consolidated Balance Sheets as of August 1, 1998 and
January 31, 1998
Condensed Consolidated Statements of Income for the three months and
six months ended August 1, 1998 and July 26, 1997
Condensed Consolidated Statements of Cash Flows for the six months
ended August 1, 1998 and July 26, 1997
Notes to Condensed Consolidated Financial Statements
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<PAGE>
Iron Age Holdings Corporation
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
August 1 January 31
1998 1998
(unaudited) (Note)
Assets (Dollars in Thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 343 $ 2,069
Accounts receivable, net 15,778 15,996
Inventories (Note 2) 37,827 36,841
Prepaid expenses 5,863 1,640
Deferred income taxes 649 640
-------- --------
Total current assets 60,460 57,186
Notes receivable and other assets 394 290
Property and equipment, net 10,653 10,479
Intangible assets, net 110,102 106,846
-------- --------
Total assets $181,609 $174,801
======== ========
Liabilities and stockholder's equity
Current liabilities:
Current maturities of long-term debt $ 589 $ 3,699
Accounts payable 2,945 3,510
Accrued expenses 7,266 7,272
-------- --------
Total current liabilities 10,800 14,481
Long-term debt, less current maturities 150,518 97,976
Accrued pension liability 516 516
Deferred income taxes 6,737 6,949
-------- --------
Total liabilities 168,571 119,922
Commitments and contingencies - -
Redeemable preferred stock - 17,031
Stockholder's equity:
Common stock, $.01 par value; 200,000 shares
authorized, 99,625 issued and outstanding 1 1
Additional paid-in capital 38,086 38,086
Retained earnings (24,868) (174)
Comprehensive income (181) (65)
-------- --------
Total stockholder's equity 13,038 37,848
-------- --------
Total liabilities and stockholder's equity $181,609 $174,801
======== ========
</TABLE>
Note: The balance sheet at January 31, 1998 has been derived from the audited
financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
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<PAGE>
Iron Age Holdings Corporation
Condensed Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Successor Successor Successor Predecessor Successor
------------ ----------- ------------- ------------- -------------
Six months January 26 February 27
Three months ended Ended 1997 through 1997 through
August 1 July 26 August 1 February 26 July 26
1998 1997 1998 1997 1997
----------- ----------- ------------- ------------- --------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Net sales $29,112 $28,128 $61,279 $10,937 $45,434
Cost of sales 14,805 14,214 30,848 5,610 23,009
------- ------- ------- ------- -------
Gross profit 14,307 13,914 30,431 5,327 22,425
Selling, general and administrative 11,112 9,955 24,079 5,120 15,640
Depreciation 426 389 850 121 634
Amortization of intangible assets 878 860 1,724 117 1,459
------- ------- ------- ------- -------
Operating income 1,891 2,710 3,778 (31) 4,692
Interest expense 4,102 2,482 6,844 1,116 3,931
------- ------- ------- ------- -------
Income (loss) before income taxes (2,211) 228 (3,066) (1,147) 761
Provision (benefit) for income taxes (637) (10) (765) (452) 195
------- ------- ------- ------- -------
Income (loss) before extraordinary item (1,574) 238 (2,301) (695) 566
Extraordinary item, net of tax effect - - (4,015) - -
------- ------- ------- ------- -------
Net income (loss) $(1,574) $ 238 $(6,316) $ (695) $ 566
======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
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<PAGE>
Iron Age Holdings Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Successor Predecessor Successor
----------------- ------------- -------------
January 26 February 27
Six months ended 1997 through 1997 through
August 1 February 26 July 26
1998 1997 1997
----------------- -------------- -------------
(Dollars in Thousands)
<S> <C> <C> <C>
Operating activities
Net income (loss) $ (6,316) $ (695) $ 566
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary item, net of tax 4,015 -
Depreciation and amortization 2,793 246 2,198
Amortization of deferred financing fees included in interest 1,049 16 255
Provision for losses on accounts receivable 60 10 84
Deferred income taxes (493) - (12)
Stock-based compensation - 1,054 -
Changes in operating assets and liabilities:
Accounts receivable 1,095 (954) 1,101
Inventories 741 797 (4,739)
Prepaid expenses 58 65 285
Other assets (357) 20 (88)
Accounts payable (1,246) (573) (670)
Accrued expenses (3,057) 1,450 (2,621)
--------- ------- ---------
Net cash provided by (used in) operating activities (1,658) 1,436 (3,641)
Investing activities
Net cash used in business acquisitions (5,240) - (141,717)
Purchases of property and equipment (1,019) (117) (697)
--------- ------- ---------
Net cash used in investing activities (6,259) (117) (142,414)
Financing activities
Borrowing under revolving credit agreement 37,600 (1,909) 28,000
Proceeds from senior term notes - - 65,000
Proceeds from senior subordinated notes 100,000 - 14,550
Proceeds from the Discount notes 25,000 - -
Capital contribution - - 40,000
Issuance of Preferred Stock - - 14,900
Issuance of stock purchase warrants - - 100
Principal payment on debt (114,585) (357) (9,536)
Payment of financing costs (6,285) - (7,468)
Redemption of Preferred Stock (17,664) - -
Dividend paid (17,745) - -
Principal payments on capital leases (14) (33) (30)
--------- ------- ---------
Net cash provided by (used in) financing activities 6,307 (2,299) 145,516
Effect of exchange rate changes on cash and cash equivalents (116) (37) (28)
--------- ------- ---------
(Decrease) increase in cash and cash equivalents (1,726) (1,017) (567)
Cash and cash equivalents at beginning of period 2,069 1,517 500
--------- ------- ---------
Cash and cash equivalents at end of period $ 343 $ 500 $ (67)
========= ======= =========
</TABLE>
See accompanying notes.
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<PAGE>
Iron Age Holdings Corporation
Notes to Condensed Consolidated
Financial Statements (Unaudited)
August 1, 1998
1. Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six month period ended August 1, 1998 are not
necessarily indicative of the results that may be expected for the year ended
January 30, 1999. For further information, refer to Holdings' consolidated
financial statements and footnotes thereto for the year ended January 31, 1998.
2. Inventory
Inventories consist of the following:
<TABLE>
<CAPTION>
August 1 January 31
1998 1998
------- ----------
<S> <C> <C>
Raw materials $ 2,255 $ 2,788
Work-in-process 706 682
Finished goods 34,866 33,371
------- ----------
$37,827 $36,841
======= ==========
</TABLE>
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
The following discussions should be read in conjunction with the accompanying
Condensed Consolidated Financial Statements for the period ended August 1, 1998,
and the audited consolidated financial statements for the year ending January
31, 1998 of Iron Age Holdings Corporation ("Holdings").
Acquisitions
On February 26, 1997, Fenway Partners Capital Fund, L.P., together with certain
other investors, in partnership with certain members of management, acquired all
of the outstanding stock of the predecessor to Holdings for an aggregate
purchase price of approximately $143.6 million (the "Fenway Acquisition").
Concurrently with the Fenway Acquisition, (i) Holdings and its subsidiary, Iron
Age Corporation ("Iron Age"), entered into a syndicated senior bank
loan facility (the "Existing Credit Facility"), (ii) Iron Age issued 12.5%
Senior Subordinated Notes due 2006 (the "Existing Subordinated Notes"), (iii)
Holdings issued Series A Preferred Stock (the "Holdings Series A Preferred
Stock"), (iv) Holdings issued Common Stock for equity capital of approximately
$32.2 million and (v) management rolled over certain options to acquire shares
of the predecessor company into options to acquire shares of Common Stock of
Holdings and were granted additional options to acquire shares of Holdings.
Holdings and Iron Age used excess cash and net proceeds from the Discount Note
Offering (as defined below), the April 24, 1998 offering of 9 7/8% Senior
Subordinated Notes due 2008 (the "Senior Subordinated Note Offering") and a new
credit facility (the "New Credit Facility") to repay the Existing Credit
Facility and the Existing Subordinated Notes and to pay a dividend to Holdings
to allow Holdings to redeem the Holdings Series A Preferred Stock. Concurrently
with the Senior Subordinated Note Offering, Holdings offered 12 1/8% Senior
Discount Notes ("Discount Notes") due 2009 (the "Discount Note Offering" and,
together with the Senior Subordinated Note Offering and the application of
proceeds therefrom, the "Transactions").
During the last five weeks of the three months ended May 2, 1998, Holdings
acquired the stock of Safety Supplies and Service Company, Inc. and acquired
certain assets and assumed certain liabilities of Safety Depot Ltd., ACT Safety,
Inc. and J Mars-Knapp Shoes (the "First Quarter Acquisitions"). The combined
purchase price for the First Quarter Acquisitions was approximately $4.64
million, including transaction costs of approximately $150,000. In addition, on
July 7, 1998, Holdings acquired certain assets of Work-Saf, Inc. for
approximately $0.75 million (the "Second Quarter Acquisition"). The First
Quarter Acquisitions and the Second Quarter Acquisition have been accounted for
using the purchase method of accounting for business combinations, and
accordingly, (i) the results of operations for each of the acquired companies
are included in Holdings' financial statements only from the date of the
respective acquisitions and (ii) the purchase price has been allocated to
Holdings' assets and liabilities based upon fair market value. The First Quarter
Acquisitions and the Second Quarter Acquisition resulted in goodwill of
approximately $2.50 million, which is being amortized over 40 years.
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<PAGE>
Divestitures
On September 9, 1998, Holdings announced the sale of Dunham and related
trademarks. The sale of the trademarks to New Balance Athletic Shoes, Inc. was
effective August 31, 1998. In conjunction with the trademark sale, Holdings'
Falcon manufacturing subsidiary agreed to a minimum two year supply agreement
with New Balance and the sale of on-hand inventory.
Results of Operations
Three Months ended August 1, 1998 compared to
Three Months ended July 26, 1997
Net Sales for the three months ended August 1, 1998 ("second quarter 1998") were
$29.1 million compared to $28.1 million for the comparable period in 1997
("second quarter 1997"), an increase of $1.0 million, or 3.5%. The increase was
primarily attributable to growth in both the core business of 5.7% and the Knapp
distribution channel of 9.6%.
Gross Profit for the second quarter 1998 was $14.3 million compared to $13.9
million for the second quarter 1997, an increase of $0.4 million, or 2.9%. The
increase was attributable to the increase in net sales. As a percentage of net
sales, gross profit decreased 0.4% to 49.1% for the second quarter 1998. The
decrease in gross profit percentage was attributable to the operations of
regional distributors acquired in the First Quarter Acquisitions. Excluding the
impact of these acquisitions, gross profit as a percentage of sales would have
increased in the second quarter 1998.
Selling, General and Administrative Expenses for the second quarter 1998 were
$11.1 million compared to $10.0 million for the second quarter 1997, an increase
of $1.1 million, or 11.0%. The increase was primarily related to the First
Quarter Acquisitions and infrastructure added in the Knapp distribution channel
since the second quarter 1997.
Operating Income for the second quarter 1998 was $1.9 million, or 6.5% of net
sales compared to $2.7 million, or 9.6% of net sales, for the second quarter
1997. The decrease was primarily attributable to increased selling, general and
administrative expenses as discussed above.
Interest Expense for the second quarter 1998 was $4.1 million compared to $2.5
million for the second quarter 1997, an increase of $1.6 million or 64.0%. The
increase in interest expense was attributable to the additional indebtedness of
Holdings due to the Transactions and the New Credit Facility.
Income Tax Expense for the second quarter of 1998 was a benefit of $0.6 million
compared to a benefit of $0.01 million in the second quarter of 1997. The
increased benefit in the second quarter 1998 was attributable to the decrease in
operating income and the increase in interest expense as described above.
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<PAGE>
Six Months ended August 1, 1998 compared to
Six Months ended July 26, 1997
Net Sales for the first six months of 1998 ("first half of 1998") were $61.3
million compared to $56.4 million for the six months ended July 26, 1997 ("first
half of 1997"), an increase of $4.9 million, or 8.7%. The increase was
attributable to growth in both the core business of 6.0% and the Knapp
distribution channel of 36.3%. For comparability with prior periods, net sales
for the predecessor and successor periods in the first half of 1997 have been
discussed on a combined basis. Management believes that a combined discussion
of predecessor and successor periods is reasonable and appropriate because there
were no adjustments to net sales for a change in basis resulting from the Fenway
Acquisition.
Gross Profit for the first half of 1998 was $30.4 million compared to $27.8
million for the first half of 1997, an increase of $2.6 million, or 9.4%. As a
percentage of net sales, gross profit increased 0.5% to 49.7% for the first half
of 1998. The increase in gross profit as a percentage of sales was primarily
attributable to the growth in the Knapp distribution channel. The core business
gross profit percentage decreased 0.2% from the first half of 1997 due to the
operations of regional distributors acquired in the First Quarter Acquisitions.
Excluding the impact of these acquisitions, gross profit as a percentage of
sales would have increased in the core business in the first half of 1998. For
comparability with prior periods, gross profit for the predecessor and successor
periods in the first half of 1997 have been discussed on a combined basis.
Management believes that a combined discussion of predecessor and successor
periods is reasonable and appropriate because there were no adjustments to gross
profit for a change in basis resulting from the Fenway Acquisition.
Selling, General and Administrative Expenses for the first half of 1998 were
$24.1 million compared to $20.8 million for the first half of 1997, an increase
of $3.3 million, or 15.9%. The increase was primarily related to the First
Quarter Acquisitions and infrastructure added in the Knapp distribution channel
since the first half of 1997. For comparability with prior periods, selling,
general and administrative expenses for the predecessor and successor periods in
the first half of 1997 have been discussed on a combined basis. Management
believes that a combined discussion of predecessor and successor periods is
reasonable and appropriate because there were no adjustments to selling, general
and administrative expenses for a change in basis resulting from the Fenway
Acquisition.
Operating Income for the first half of 1998 was $3.8 million, or 6.2% of net
sales, and was $4.7 million, or 10.3% of net sales, for the period from February
27, 1997 through July 26, 1997. Operating loss and operating loss as a
percentage of sales for the predecessor period January 26, 1997 through February
26, 1997 were $0.03 million and 0.3%, respectively. Operating income for the
successor periods included selling, general and administrative expenses, as
discussed above, and additional depreciation and amortization of $0.2 million.
The additional depreciation and amortization is primarily due to the increase in
basis of goodwill, customer lists and other tangible and intangible assets
capitalized as a result of the Fenway Acquisition and the acquisition of the
assets of Knapp Shoes, Inc. in March 1997 (the "Knapp Acquisition").
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<PAGE>
Interest Expense for the first half of 1998 was $6.8 million and was $3.9
million for the period from February 27, 1997 through July 26, 1997. Interest
expense for the predecessor period January 26, 1997 through February 26, 1997
was $1.1 million. Interest expense for the successor periods prior to April 25,
1998 reflect the additional indebtedness of Holdings incurred in connection with
the Fenway Acquisition and the Knapp Acquisition. The successor periods
subsequent to April 24, 1998 reflect interest incurred in connection with the
Transactions.
Income Tax Expense was $0.2 million in the period February 27, 1997 through July
26, 1997. Income tax benefit for the predecessor period January 26, 1997
through February 26, 1997 was $0.5 million. Income tax benefit for the first
half of 1998 was $0.8 million. Income taxes for the successor periods reflect
the effect of additional nondeductible goodwill amortization.
Extraordinary Item for the first half of 1998 was an extraordinary loss of $4.0
million, net of tax, due to the early extinguishment of indebtedness resulting
from the repayment of the Existing Subordinated Notes and the Existing Credit
Facility in April 1998, in connection with the Transactions.
Liquidity and Capital Resources
Holdings' primary cash needs are working capital, capital expenditures and debt
service. Holdings anticipates that it may use cash in the future to finance
acquisitions. Holdings has financed cash requirements primarily through
internally generated cash flow and funds borrowed under Holdings' and the
Company's credit facilities.
Net cash used for operating activities was $1.7 million in the first half of
1998, a decrease of $0.5 million as compared to net cash used in operating
activities of $2.2 million in the first half of 1997. The increase in cash from
operating activities is primarily the result of the decrease in inventory
levels. Inventory decreased by $0.7 million in the first half of 1998 compared
to an increase of $3.9 million in the first half of 1997, as a result of the
Knapp Acquisition.
Excluding cash paid for acquisitions, Holdings used cash for investing
activities of $1.0 million in the first half of 1998 compared to $0.8 million
used for investing activities in the first half of 1997. Holdings' capital
expenditures were $1.0 million in the first half of 1998 compared to $0.8
million in the first half of 1997. Capital expenditures for the first half of
1998 included $0.2 million in remaining costs related to the addition to
Holdings' central distribution center building. The remaining $0.8 million in
capital expenditures related to improvements in retail stores, shoemobiles and
equipment in the core business and installing POS (Point-of Sale) systems in
stores and trucks acquired as a component of the First Quarter Acquisitions.
Holdings' total working capital as of August 1, 1998 was $49.7 million. At
January 31, 1998, working capital was $42.7 million. The primary reason for the
increase to working capital was the elimination of the current portion of long
term senior debt in connection with the Transactions in April 1998. Management
believes Holdings' liquidity, working capital and borrowing capacity are
sufficient to meet future capital expenditures, acquisitions and working capital
needs in the future.
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<PAGE>
Excluding cash paid for regional distributor acquisitions, Holdings generated
approximately $1.1 million from financing activities in the first half of 1998
due primarily to borrowings under the New Credit Facility. In the first half of
1997, Holdings generated cash of $1.5 million due primarily to borrowings under
the Existing Credit Facility.
Holdings is a holding company, and its ability to pay interest on the Discount
Notes is dependent upon receipt of dividends from its subsidiaries. Holdings
does not have, and may not in the future have, any assets other than the common
stock of Iron Age (which is pledged to secure the obligations of Iron Age under
the New Credit Facility). Iron Age is party to the New Credit Facility and an
indenture pursuant to which the Senior Subordinated Notes were offered, each of
which imposes substantial restrictions on Iron Age's ability to pay dividends to
Holdings.
Cash flow from operations for the first half of 1998 was sufficient to cover
debt service requirements under the New Credit Facility and the Senior
Subordinated Notes. Holdings' ability to make scheduled payments of principal,
or to pay the interest or premium (if any) on, or to refinance, its indebtedness
(including the Discount Notes of Holdings), or to fund planned capital
expenditures will depend on its future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond its control. Based upon the current level of
operations, management believes that cash flow from operations and available
cash, together with available borrowings by Iron Age under the New Credit
Facility, will be adequate to meet Holdings' anticipated future requirements for
working capital, budgeted capital expenditures and scheduled payments of
principal and interest on its indebtedness for the next several years. There
can be no assurance that the Holdings' business will generate sufficient cash
flow from operations or that future borrowing will be available under the New
Credit Facility in an amount sufficient to enable Holdings to service its
indebtedness, including the Discount Notes and the Senior Subordinated Notes, or
to make capital expenditures.
As of August 1, 1998, Holdings' debt consisted of the Discount Notes, the Senior
Subordinated Notes, the New Credit Facility and certain other debt. The New
Credit Facility consists of a $35.0 million multiple draw acquisition term loan
facility (the "New Acquisition Credit Facility") and $30.0 million in revolving
credit loans, letters of credit and swing line loans (the "New Revolving Credit
Facility"). Holdings' other debt of $1.0 million consists of capital leases and
other notes. As of August 1, 1998, approximately $13.3 million of the New
Acquisition Credit Facility and approximately $11.0 million of the New Revolving
Credit Facility were outstanding, and Holdings had additional borrowing
availability under the New Acquisition Credit Facility of $21.7 million and
under the New Revolving Credit Facility of approximately $19.0 million. The New
Acquisition Credit Facility matures in quarterly installments from July 2001
until final payment in April 2004. The New Revolving Credit Facility will
mature in April 2004 and has no scheduled interim amortization.
Impact of Year 2000 Issue
Holdings is in the process of conducting a comprehensive review of its
internal computer systems to identify the systems that could be affected by the
year 2000 issue and is developing an implementation plan to resolve the issue
that is expected to be completed in the latter part of fiscal 1999. Holdings
presently believes that the year 2000 issue will not pose significant
operational problems for Holdings' computer systems as so modified and
converted. Based upon a preliminary assessment, Holdings expects to spend under
$50,000 to modify its existing computer systems to ensure proper transaction
processing in the year 2000 and beyond. Through August 1, 1998, Holdings has
incurred approximately $10,000 related to the assessment of, and preliminary
efforts
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<PAGE>
in connection with, its year 2000 project and the development of a
remediation plan. Holdings plans to complete the critical elements of the year
2000 project by November 15, 1998. Holdings presently believes that the cost of
preparing its systems for the year 2000 will not have a material effect on
Holdings' current financial position, liquidity or results of operations. If
modifications and conversions are not completed in a timely manner, the year
2000 issue may have a material impact on Holdings' operations.
Inflation and Changing Prices
Holdings' sales and costs are subject to inflation and price fluctuations.
However, they historically have not, and in the future are not expected to have,
a material adverse effect on Holdings' results of operations.
Forward Looking Statements
When used in this quarterly report, the words "believes," "anticipates"
and similar expressions are used to identify forward looking statements. Such
statements are subject to risks and uncertainties which could cause actual
results to differ materially from those projected. Holdings wishes to caution
readers that the following important factors and others in some cases have
affected and in the future could affect Holdings' actual results and could cause
Holdings' actual results to differ materially from those expressed in any
forward statements made by Holdings: (i) economic conditions in the safety shoe
market, (ii) availability of credit, (iii) increase in interest rates, (iv) cost
of raw materials, (v) inability to maintain state-of-the-art manufacturing
facilities, (vi) heightened competition, including intensification of price and
service competition, the entry of new competitors and the introduction of new
products by existing competitors, (vii) inability to capitalize on opportunities
presented by industry consolidation, (viii) loss or retirement of key
executives, (ix) loss or disruption of Holdings' relationships with its major
suppliers, including Holdings' largest supplier in China and (x) inability to
grow by acquisition of additional safety shoe distributors or to effectively
consolidate operations of businesses acquired.
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<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Index.
3.1* Iron Age Certificate of Incorporation, as amended.
3.2* Iron Age By-laws.
4.1* Indenture dated as of April 24, 1998.
10.1* Credit Agreement dated as of April 24, 1998.
10.2* Security Agreement dated April 24, 1998.
10.3* Intellectual Property Security Agreement dated April 24, 1998.
10.4* Canadian Security Agreement dated April 24, 1998.
10.5* Mortgage, Assignment of Leases and Rents, Fixture Filing, Security
Agreement and Financing Statement dated February 26, 1997, as amended
April 24, 1998.
10.6* Intercompany Subordination agreement dated April 24, 1998.
10.7* Subsidiary Guaranty dated April 24, 1998.
10.8* Iron Age Trademark License Agreement with W.L Gore & Associates, Inc.
dated August 15, 1994.
10.9* Falcon Trademark License Agreement with W.L. Gore & Associates, Inc.
dated
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<PAGE>
July 25, 1994.
10.10* Falcon Manufacturing Certification Agreement with W.L Gore &
Associates, Inc. dated July 25, 1994.
10.11* General Services Administration Contract effective July 26, 1994, as
modified May 24, 1995.
10.12* Amended and Restated Management Agreement dated as of February 26,
1997.
10.13* Stockholders Agreement dated as of February 26, 1997.
10.14* Amendment No. 1 to Stockholders Agreement dated as of March 25, 1997.
10.15* American Home Assurance Company Joinder to the Stockholders Agreement
dated as of March 25, 1997.
10.16* Banque Nationale de Paris Joinder to the Stockholders Agreement dated
as of March 25, 1997.
10.17* Stock Option Plan dated February 26, 1997.
10.18* Securities Purchase Agreement dated February 26, 1997.
10.19* Stock Purchase Agreement dated as of December 26, 1996.
10.20* Amendment No. 1 to the Stock Purchase Agreement dated as of February
26, 1997.
10.21* Pittsburgh, Pennsylvania Lease Agreement dated March 1, 1993, as
amended June 2, 1994, as amended June 12, 1996, as amended December
10, 1997.
10.22* Jerusalem, New York Lease Agreement dated December 9, 1992, as amended
January 1, 1994, as amended April 1997.
10.23* Jerusalem, New York Lease Agreement dated June 20, 1997, as amended
January 9. 1998.
10.24* Lewiston, Maine Lease Agreement dated January 14, 1994.
10.25* Lewiston, Maine Lease Agreement dated November 30, 1990, as amended
June 8, 1994.
10.26* Ontario, Canada Lease Agreement dated June 11, 1991, as amended
November 23, 1995.
10.27* Jensen Employment Agreement dated February 26, 1997.
10.28* Mills Employment Agreement dated November 20, 1995.
10.29* McDonough Employment Agreement dated November 20, 1995.
10.30* Johanson Employment Agreement date August 1, 1994.
10.31* Johanson Non-Competition Agreement dated August 1, 1994.
27.1 Financial Data Schedules.
______________
* Incorporated by reference to the similarly numbered exhibit in the Company's
Registration Statement on Form S-4, No. 333-57009, filed June 17, 1998.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the second quarter ended August 1,
1998.
-14-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IRON AGE HOLDINGS CORPORATION
By: /s/Keith A. McDonough
-------------------------------------
Name: Keith A. McDonough
Title: Vice President-Finance
Chief Financial Officer
(Duly authorized officer and
principal financial officer)
Dated: September 15, 1998
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS PREPARED BY ERNST & YOUNG AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> AUG-01-1998
<CASH> 343
<SECURITIES> 0
<RECEIVABLES> 16,126
<ALLOWANCES> (348)
<INVENTORY> 37,827
<CURRENT-ASSETS> 60,460
<PP&E> 13,325
<DEPRECIATION> (2,672)
<TOTAL-ASSETS> 181,609
<CURRENT-LIABILITIES> 10,800
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 13,037
<TOTAL-LIABILITY-AND-EQUITY> 181,609
<SALES> 61,279
<TOTAL-REVENUES> 61,279
<CGS> 30,848
<TOTAL-COSTS> 30,848
<OTHER-EXPENSES> 26,593
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 6,844
<INCOME-PRETAX> (3,066)
<INCOME-TAX> (765)
<INCOME-CONTINUING> (2,301)
<DISCONTINUED> 0
<EXTRAORDINARY> (4,015)
<CHANGES> 0
<NET-INCOME> (6,316)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
