1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE SECOND QUARTER ENDED APRIL 29, 1995
Commission File Number 0-934
B. B. WALKER COMPANY
(Exact name of registrant as specified in its charter)
North Carolina 56-0581797
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
414 East Dixie Drive, Asheboro, NC 27203
- - ----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (910) 625-1380
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
On May 15, 1995, 1,726,556 shares of the Registrant's voting common stock with
a par value of $1.00 per share were outstanding.
2
FINANCIAL STATEMENTS
B.B. WALKER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
April 29, October 29,
Assets 1995 1994
-------- ----------- -----------
Cash $ 1 $ 1
Accounts receivable, less allowance for doubtful
accounts of $847 in 1995 and $778 in 1994 11,361 13,736
Inventories 17,431 15,403
Prepaid expenses 121 240
Income tax recovery receivable 576 -
Deferred income tax benefit, current 898 884
----------- -----------
Total current assets 30,388 30,264
Property, plant and equipment, net of accumulated
depreciation and amortization of $5,448 in 1995
and $5,115 in 1994 3,274 3,593
Deferred income tax benefit, long-term 65 80
Other assets 94 79
----------- -----------
$ 33,821 $ 34,016
=========== ===========
Liabilities and Shareholders' Equity
------------------------------------
Borrowings under finance agreement $ 12,432 $ 12,890
Current portion of long-term obligations 801 500
Accounts payable, trade 6,743 5,489
Accrued salaries, wages and bonuses 466 678
Other accounts payable and accrued liabilities 1,090 916
Income taxes payable - 37
----------- -----------
Total current liabilities 21,532 20,510
----------- -----------
Long-term obligations, net of current portion 3,520 2,996
Short-term debt to be refinanced - 696
Minority interests in consolidated subsidiary 34 34
Shareholders' equity:
7% cumulative preferred stock, $100 par value,
1,150 shares authorized, 828 shares issued
and outstanding in 1995 and 1994 83 83
Common stock, $1 par value, 6,000,000 shares
authorized, 1,726,556 shares in 1995 and
1,743,520 shares in 1994 issued and outstanding 1,727 1,744
Capital in excess of par value 2,724 2,842
Retained earnings 4,348 5,408
Shareholders' loans (147) (297)
----------- -----------
Total shareholders' equity 8,735 9,780
----------- -----------
$ 33,821 $ 34,016
=========== ===========
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
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B.B. WALKER COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)
Second Quarter Ended
--------------------------
April 29, April 30,
1995 1994
----------- -----------
Net sales $ 10,717 $ 12,872
Interest and other income 22 18
----------- -----------
Total revenues 10,739 12,890
----------- -----------
Cost of products sold 8,364 8,986
Selling and administrative expenses 2,896 3,041
Depreciation and amortization 168 145
Interest expense 393 231
----------- -----------
Total costs and expenses 11,821 12,403
----------- -----------
Income (loss) before income taxes and
minority interest (1,082) 487
Provision for (recovery of) income taxes (394) 174
Minority interest - -
----------- -----------
Net income (loss) (688) 313
Retained earnings at beginning of period 5,038 5,257
Dividends on common stock - (4)
Dividends on preferred stock (2) (2)
----------- -----------
Retained earnings at end of period $ 4,348 $ 5,564
=========== ===========
Net income (loss) per share:
Primary $ (.40) $ .17
=========== ===========
Fully diluted $ (.40) $ .17
=========== ===========
Weighted average common shares outstanding:
Primary 1,730 1,791
=========== ===========
Fully diluted 1,730 1,793
=========== ===========
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(Unaudited)
Six Months Ended
--------------------------
April 29, April 30,
1995 1994
----------- -----------
Net sales $ 21,163 $ 25,824
Interest and other income 44 29
----------- -----------
Total revenues 21,207 25,853
----------- -----------
Cost of products sold 16,083 18,259
Selling and administrative expenses 5,691 5,845
Depreciation and amortization 333 268
Interest expense 765 478
----------- -----------
Total costs and expenses 22,872 24,850
----------- -----------
Income (loss) before income taxes and
minority interest (1,665) 1,003
Provision for (recovery of) income taxes (609) 375
Minority interest 1 1
----------- -----------
Net income (loss) (1,057) 627
Retained earnings at beginning of period 5,408 5,071
Dividends on common stock - (131)
Dividends on preferred stock (3) (3)
----------- -----------
Retained earnings at end of period $ 4,348 $ 5,564
=========== ===========
Net income (loss) per share:
Primary $ (.61) $ .35
=========== ===========
Fully diluted $ (.61) $ .35
=========== ===========
Weighted average common shares outstanding:
Primary 1,739 1,782
=========== ===========
Fully diluted 1,739 1,786
=========== ===========
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
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B.B. WALKER COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended
--------------------------
April 29, April 30,
1995 1994
----------- -----------
Cash Flows From Operating Activities:
Net income $ (1,057) $ 627
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 333 268
Gain on sale of fixed assets (1) -
Deferred income taxes 1 25
(Increase) decrease in:
Accounts receivable, net 2,375 1,998
Inventories (2,028) (2,596)
Prepaid expenses 119 (34)
Other assets (15) 43
Increase (decrease) in:
Accounts payable, trade 1,254 697
Accrued salaries, wages and bonuses (212) (127)
Other accounts payable and accrued liabilities 174 (608)
Income taxes payable (613) (343)
----------- -----------
Net cash provided by (used for)
operating activities 330 (50)
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (14) (747)
Proceeds from disposal of property, plant
and equipment 1 -
----------- -----------
Net cash used for investing activities (13) (747)
----------- -----------
Cash Flows From Financing Activities:
Net borrowing under finance agreement (458) 1,304
Proceeds from issuance of long-term obligations 941 -
Payment on long-term obligations (812) (441)
Repurchase of common stock (135) (2)
Proceeds from issuance of common stock - 68
Loans to shareholders, net of repayments 150 2
Dividends paid on common stock - (131)
Dividends paid on 7% cumulative preferred stock (3) (3)
----------- -----------
Net cash provided by (used for)
financing activities (317) 797
----------- -----------
Net change in cash - -
Cash at beginning of year 1 1
----------- -----------
Cash at end of second quarter $ 1 $ 1
=========== ===========
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
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B.B. WALKER COMPANY AND SUBSIDIARY
Notes To Consolidated Financial Statements
Note 1
- - ------
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary for a fair presentation
of the financial results of B.B. Walker Company and Subsidiary (the "Company")
for the interim periods included. All such adjustments are of a normal
recurring nature. The results of operations for the interim periods shown in
this report are not necessarily indicative of the results to be expected for
the fiscal year.
Note 2
- - ------
Earnings per common share is computed by deducting preferred dividends from
net income to determine net income attributable to common shareholders. This
amount is divided by the weighted average number of common shares outstanding
during the quarter plus the common stock equivalents arising from stock
options. For primary earnings per share, the common stock equivalents are
calculated using the average of the high and low asked price for the period.
For fully diluted earnings per share, the common stock equivalents are
calculated using the asked price at the end of the period if greater than the
average asked price for the period.
Note 3
- - ------
Long-term obligations consist of the following amounts (in thousands):
(Unaudited)
April 29, October 29,
1995 1994
----------- -----------
Mortgage notes payable $ 2,798 2,118
Promissory notes payable to shareholders 1,184 965
Capital lease obligations 339 413
----------- -----------
4,321 3,496
Less portion payable within one year 801 500
----------- -----------
$ 3,520 2,996
=========== ===========
Note 4
- - ------
In July 1994, the Company purchased a larger manufacturing facility in
Somerset, Pennsylvania to replace the existing facility also located in
Somerset. As discussed below, the Company had obtained commitments for
permanent financing on a portion of the purchase cost of the facility. During
the period between the closing date of the purchase and the date the permanent
financing was finalized, the Company temporarily borrowed $696,000 from a bank
on a short term note to provide the funds for closing. The Company refinanced
the note on March 7, 1995 with long-term financing from two sources. The
first source of financing was from the Pennsylvania Industrial Development
Authority ("PIDA"), a program offered by the Department of Commerce of the
Commonwealth of Pennsylvania. The loan was for $480,000 and bears interest at
2% annually. Monthly installments of $3,089, which includes principal and
interest, will be paid over 15 years. The second source of financing came
from a bank note for $240,000. This loan bears interest at .75% above the
bank's prime rate (9.75% at April 29, 1995) and will be repaid in monthly
installments of principal and interest, currently $2,055, for 15 years.
5
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B.B. WALKER COMPANY AND SUBSIDIARY
Notes To Consolidated Financial Statements, Continued
Note 4, Continued
- - -----------------
The Company has received another commitment for long-term financing from a
program offered by the Department of Commerce of the Commonwealth of
Pennsylvania. This commitment is from the Economic Development Partnership
Program for 25% of the project cost up to a maximum of $240,000. The note
will bear interest at 2% annually with monthly payments of principal and
interest for 15 years. The Company expects to finalize this financing in the
third quarter.
All notes are secured by the manufacturing facility. Capitalized in fixed
assets at April 29, 1995 are land and buildings with a cost of approximately
$1,052,000 related to the facility. The remainder of the expenditures made
for the facility were paid with borrowings under the revolving finance
agreement.
Note 5
- - ------
Inventories are composed of the following amounts (in thousands):
(Unaudited)
April 29, October 29,
1995 1994
----------- -----------
Finished goods $ 10,307 8,688
Work in process 921 738
Raw materials and supplies 6,203 5,977
----------- -----------
$ 17,431 15,403
=========== ===========
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B.B. WALKER COMPANY AND SUBSIDIARY
Management's Discussion and Analysis of
Results of Operations and Financial Condition
RESULTS OF OPERATIONS
The following summarizes the results of operations for the Company for the
second quarters and six months ended April 29, 1995 and April 30, 1994:
Second Six
Quarter Ended Months Ended
------------------- -------------------
April 29, April 30, April 29, April 30,
1995 1994 1995 1994
--------- --------- --------- ---------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 78.0% 69.8% 76.0% 70.7%
--------- --------- --------- ---------
Gross margin 22.0% 30.2% 24.0% 29.3%
Selling and administrative
expenses 27.0% 23.6% 26.9% 22.6%
Depreciation and amortization 1.6% 1.1% 1.6% 1.0%
Interest expense 3.7% 1.8% 3.6% 1.9%
Interest and other income (.2%) (.1%) (.2%) (.1%)
--------- --------- --------- ---------
Income before income taxes
and minority interest (10.1%) 3.8% (7.9%) 3.9%
Provision for income taxes (3.7%) 1.4% (2.9%) 1.5%
Minority interest - - - -
--------- --------- --------- ---------
Net income (6.4%) 2.4% (5.0%) 2.4%
========= ========= ========= =========
Net Sales
- - ---------
Net sales for the second quarter were $10,717,000 which was 16.7% lower than
net sales of $12,872,000 in the second quarter of 1994. For the six months
ended April 29, 1995, net sales were $21,163,000, or 18.0% lower, as compared
to $25,824,000 for the same period in 1994.
Sales of branded footwear in the Work/Outdoor Division were down 1.0% and
23.6% for the six months and the second quarter, respectively. Domestic sales
in this division have been favorably impacted by the growing popularity of
this type of footwear in the United States. For the six months ended April
29, 1995, domestic sales were up 5.8% compared to the prior year. However,
this trend was offset by a particularly mild winter in most parts of the
country during the second quarter. In the second quarter, domestic sales were
down 13.9% from 1994's second quarter. Pair shipments in the second quarter
were off 4.1% from 1994 because of the slow demand at the retail level. For
the six month period, pair shipments were up 6.9%. In addition, significant
competition forced the Company to aggressively price its styles in order to
maintain market share, resulting in a lower average price per unit shipped in
the second quarter. Export sales in this division, which were strong in the
first quarter, fell 52.7% in the second quarter compared to 1994. For the six
months, export sales were off 22.1% from 1994. Orders from export customers
were down significantly.
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Branded footwear sales in the Western Boot Division showed improvement during
the second quarter. Sales in this division were higher than 1994 by 3.8% for
the six months and 10.6% for the second quarter. Retailers have worked down
their inventories to a comfortable level and are in position to begin placing
larger orders for western footwear. As a result, orders to replace inventory
increased. Pair shipments were up 13.7% in the second quarter of 1995 over
the second quarter of 1994. For the six month period, pair shipments
increased 7.4% over 1994. However, as with the Work/Outdoor Division,
competition for market share led to competitive pricing and lower average
price per unit shipped.
Sales in the Private Label Division decreased 49.0% and 38.2% in the six
months and second quarter ended April 29, 1995, respectively, when compared to
the same periods for 1994. The Company's largest private label customers
continue to be affected by overstocked inventories. In addition, the
relatively mild winter in 1995 impacted sales in this division as the most
sales in this division are styles of work/outdoor footwear.
Finally, other sales of the Company, which include retail sales and import
sales, are down 44.9% in the six months and 36.4% in the second quarter. The
Company is no longer importing shoes for large customers from overseas. This
service was phased out during the first quarter of 1995.
Gross Margin
- - ------------
The Company's gross margin fell to 24.0% for the first six months of 1995 from
29.3% for the first six months of 1994. For the second quarter of 1995 and
1994, the gross margin was 22.0% and 30.2%, respectively. The Company's gross
margin continued to be negatively impacted by discounting programs offered in
the branded divisions. Significant competition has led to aggressive pricing
and dating terms in order to induce orders and maintain market share. In
addition, manufacturing variances, primarily from fixed expenses, have had a
considerable impact on gross margin. The Company has produced 18.6% fewer
pairs in its plants in the first six months of 1995 compared to 1994.
Selling and Administrative Expenses
- - -----------------------------------
Selling and administrative expenses were $2,896,000 for the second quarter of
1995 as compared to $3,041,000 for the second quarter of 1994, an decrease of
$145,000 or 4.8%. For the six months ended April 29, 1995 and April 30, 1994,
selling and administrative expenses were $5,691,000 and $5,845,000,
respectively, or $154,000 (2.6%) lower. Except for the following, most
expenses for the first six months of 1995, as well as for the second quarter,
have remained consistent with the same period for 1994. Many expenses in the
second quarter of 1995 were marginally lower than those incurred in the second
quarter of 1994 as the Company began aggressively reducing operating costs
during the latter half of the quarter. Advertising expenses were $291,000 and
$159,000 lower in the six months and second quarter ended April 29, 1995 as
compared to the prior year. During 1994, the Company was completing the
development of its consumer/retailing advertising program. These programs
were in place during 1995, resulting in lower advertising outlays. In
addition, the Company has reduced expenditures for some programs in order to
reduce expenses. These lower expenses were offset by higher health care
costs. Health care costs were $75,000 higher in the first six months of 1995
and $35,000 higher in the second quarter of 1995 in relation to the comparable
periods of 1994. Claims incurred and paid in 1995 have exceeded claims
incurred and paid during 1994. Finally, freight expenses in 1995 have
exceeded 1994 by $196,000 for the first six months and $108,000 for the second
quarter. This is the result of reduced freight promotions offered to
customers.
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Interest Expense
- - ----------------
Interest expense for the six months ended April 29, 1995 was $765,000, or
$287,000 higher than interest expense of $478,000 for the six months ended
April 30, 1994. For the second quarter, 1995 expense was $162,000 higher than
1994 expense. The increase is primarily attributable to the higher average
balance outstanding on the revolving finance agreement and higher interest
rates. For the six months, the average daily outstanding amount on the
revolving finance agreement was approximately $4,000,000 higher in 1995 than
in 1994. In addition, during the first six months of 1995, interest rates on
the revolving finance agreement ranged from 8.25% to 9.5%. During the same
period of 1994, interest rates ranged from 6.75% to 7.5%. In addition, the
Company borrowed approximately $700,000 in the fourth quarter of 1994 to
finance the purchase of a larger manufacturing facility in Somerset,
Pennsylvania. Interest on this amount ranged from 8.5% to 9.75%.
Depreciation and Amortization
- - -----------------------------
Depreciation and amortization rose $65,000 to $333,000 in 1995 from $268,000
in 1994 for the first six months of the year. For the second quarter,
depreciation expense was $168,000 in 1995 compared to $145,000 in 1994, an
increase of $23,000. The increase is attributed to the Company's significant
upgrade of equipment during 1994. Capital expenditures during 1994 were
$2,045,000.
Provision for Income Taxes
- - --------------------------
The Company has an income tax recovery of $394,000 for the second quarter
ended April 29, 1995. The Company had income tax expense of $174,000 for the
second quarter of 1994. For the six months, the Company had an income tax
recovery of $609,000 in 1995 and income tax expense of $375,000 in 1994.
Income tax rates were consistent between 1995 and 1994.
Net Income
- - ----------
The Company reported a net loss of $688,000 for the second quarter of 1995
compared to net income of $313,000 for the second quarter of 1994. For the
first six months of 1995, the Company had a net loss of $1,057,000 compared to
net income of $627,000 for the same period in 1994. Net sales for the Company
were significantly lower for the six months and second quarter ended April 29,
1995 compared to the prior year. In addition, weaker margins and higher
interest expense have combined to produce a net loss for 1995.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
The Company continues to rely on the revolving finance agreement with a bank
to provide its daily working capital requirements. The maximum availability
under the agreement is $15,000,000. At April 29, 1995 and October 29, 1994,
the Company outstanding advances of $12,432,000 and $12,890,000, respectively.
The amount available to be drawn is determined by a formula based on certain
percentages of eligible accounts receivable and inventories. At April 29,
1995, an additional $387,000 was available under the agreement. On June 1,
1995, the Company received a letter from its bank under this revolving
credit agreement indicating the bank's position that the Company is in
default under certain financial covenants. If a default under the
agreement is not cured, the bank may pursue certain options which may include
termination of the loan arrangement. The Company has entered into discussions
with its bank to address the issues raised in the letter. The Company
believes that it will continue to be able to obtain access to sufficient
financing on acceptable terms to finance its daily working capital
requirements.
9
11
In July 1994, the Company purchased a larger manufacturing facility in
Somerset, Pennsylvania to replace the existing facility also located in
Somerset. As discussed below, the Company had obtained commitments for
permanent financing on a portion of the purchase cost of the facility. During
the period between the closing date of the purchase and the date the permanent
financing was finalized, the Company temporarily borrowed $696,000 from a bank
on a short term note to provide the funds for closing. The Company refinanced
the note on March 7, 1995 with long-term financing from two sources. The
first source of financing was from the Pennsylvania Industrial Development
Authority ("PIDA"), a program offered by the Department of Commerce of the
Commonwealth of Pennsylvania. The loan was for $480,000 and bears interest at
2% annually. Monthly installments of $3,089, which includes principal and
interest, will be paid over 15 years. The second source of financing came
from First National Bank and Trust Co. in the form of a bank note for
$240,000. This loan bears interest at .75% above the bank's prime rate (9.75%
at April 29, 1995) and will be repaid in monthly installments of principal and
interest, currently $2,055, for 15 years.
The Company has received another commitment for long-term financing from a
program offered by the Department of Commerce of the Commonwealth of
Pennsylvania. This commitment is from the Economic Development Partnership
Program for 25% of the project cost up to a maximum of $240,000. The note
will bear interest at 2% annually with monthly payments of principal and
interest for 15 years. The Company expects to finalize this financing in the
third quarter.
All notes are secured by the manufacturing facility. Capitalized in fixed
assets at April 29, 1995 are land and buildings with a cost of approximately
$1,052,000 related to the facility. The remainder of the expenditures made
for the facility were paid with borrowings under the revolving finance
agreement.
The level of capital expenditures in 1995 has been significantly lower than in
the prior two years. Capital expenditures for the first six months of 1995
were $14,000 compared to $747,000 in the first six months of 1994. The
Company made significant upgrades to its equipment and facilities in 1994,
while no such outlays have been made in 1995. The Company is focusing on
improving operations in 1995, making capital expenditures only to maintain
current levels of operation. Funding for capital expenditures other than the
building acquisition has primarily come from the available balance on the
finance agreement.
FINANCIAL CONDITION
Accounts Receivable
- - -------------------
Accounts receivable were $11,361,000 at April 29, 1995 compared to $13,736,000
at October 29, 1994, a decrease of $2,375,000. The balance is lower because
of two reasons. Trade receivables have historically been at their highest
point at the end of the fourth quarter because of the heavy sales volume
related to Christmas buying by retailers. Second, certain dating programs
offered by the Company ended in the first quarter of 1995, resulting in
collection of significant receivables.
Inventories
- - -----------
Inventories were $17,431,000 at April 29, 1995, an increase of $2,028,000 from
the inventories held at October 29, 1994 of $15,403,000. Of the increase,
approximately $1,619,000 is finished goods, $183,000 is work in process, and
$226,000 is raw materials. Finished goods inventory finished higher because
of the sluggish sales in the first six months of 1995 compared to the strong
sales volume of the fourth quarter of 1994. Sales are historically at their
highest point in the fourth quarter of each year.
10
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Borrowings Under Finance Agreement
- - ----------------------------------
The balance outstanding under the finance agreement was $12,432,000 at April
29, 1995 compared to $12,890,000 at October 29, 1994. The decrease can be
attributed to the cash applied against the outstanding balance from
collections of accounts receivable which were down $2,375,000 and is offset by
an increase in inventories of $1,973,000.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
- - --------------------------------
Effective March 20, 1995, the Company executed an amendment to its financing
agreement which established new financial covenants for the agreement and
waived certain other covenants for specified periods of time.
Item 4. Submission of Matters to a Vote of Security Holders
- - --------------------------------------------------------------
The Forty-Fourth Annual Meeting of the Shareholders of the Company was held on
Monday, March 20, 1995, as set forth in the Notice of Annual Meeting of
Shareholders dated and mailed on February 27, 1995. Of the 1,726,602 shares
of common stock issued and outstanding on the record date, 1,411,283 shares or
81.74% of the common stock outstanding were represented in person or by proxy
at the meeting. For the issues presented to the shareholders for their
consideration, the results were as follows:
1 - The Board of Directors, in accord with the By-laws, established the
number of Directors at six by recommending the shareholders elect the six
persons nominated by them in the proxy statement mailed February 27, 1995.
All director nominees had served as directors during the prior year and all
were elected by the shareholders. There were no other nominations for
director presented at the meeting. The six nominees were elected with results
as follows:
Shares Shares Shares Marked
Director For Against Withhold Authority
-------- ---------- ---------- ------------------
Kent Anderson 1,410,040 - 1,243
George M. Ball 1,410,040 - 1,243
Robert L. Donnell, Jr. 1,409,534 506 1,243
James P. McDermott 1,410,040 - 1,243
Michael C. Miller 1,410,040 - 1,243
Edna A. Walker 1,410,040 - 1,243
2 - Ratification by the Shareholders of the action by the Board of Directors
to adopt the 1995 Incentive Stock Option Plan. The action was ratified with
1,388,137 shares voting for, 6,826 shares voting against, and 16,320
abstaining from the vote.
3 - Ratification by the Shareholders of the action by the Board of Directors
to appoint Price Waterhouse LLP as the Company's independent certified public
accounting firm for the 1995 fiscal year. The action was ratified with
1,408,201 shares voting for, 892 shares voting against, and 2,190 abstaining
from the vote.
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Item 6. Exhibits and Reports on Form 8-K
- - -------------------------------------------
(a) Exhibits Filed:
(4)(c)(5) Fifth Amendment to the Loan and Security Agreement and Consent
Agreement between B.B. Walker Company and Sanwa Business Credit Corporation
(b) Reports on Form 8-K:
NONE
Signatures
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 therunto duly authorized.
B.B. WALKER COMPANY
Date May 22, 1995 KENT T. ANDERSON
-------------------
Kent T. Anderson
Chairman of the Board, Chief Executive
Officer and President
Date May 22, 1995 WILLIAM C. MASSIE
-------------------
William C. Massie
Vice President-Finance and Administration
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Exhibit (4)(c)(5)
FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND CONSENT AGREEMENT
----------------------------------------------
THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND CONSENT AGREEMENT
("Amendment") is dated as of March 20, 1995 by and between B.B. WALKER
COMPANY, a North Carolina corporation (the "Borrower"), and SANWA BUSINESS
CREDIT CORPORATION, a Delaware corporation (the "Lender"). All capitalized
terms used but not otherwise defined herein shall have the meanings ascribed
thereto in the Loan Agreement (as hereinafter defined).
W I T N E S S E T H:
--------------------
WHEREAS, the Borrower and the Lender have entered into that certain Loan and
Security Agreement dated as of October 16, 1992 (as the same has heretofore
been, or may hereafter be, amended, modified or supplemented from time to
time, the "Loan Agreement"); and
WHEREAS, Borrower has requested that its compliance with certain covenants in
the Loan Agreement be waived and that these covenants be reset; and
WHEREAS, the parties desire to amend the terms of the Loan Agreement in
certain respects as herein set forth and the Borrower desires to obtain the
consent of the Lender to the taking of certain actions which require the
consent of the Lender under the terms of the Loan Agreement;
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
Section 1. AMENDMENTS TO THE LOAN AGREEMENT. The Loan Agreement shall be
amended as follows on the date (the "Effective Date") on which the conditions
set forth in Section 3 hereof have been completed to the satisfaction of the
Lender:
A. Subsection 7.10 is hereby amended by adding the following at the end
of such subsection:
"Fiscal Quarter ending April 30, 1995 .012 to 1.0
Fiscal Quarter ending July 30, 1995 .68 to 1.0
Fiscal Year ending October 31, 1995 1.28 to 1.0"
B. Subsection 7.12 is hereby amended by adding the following at the end
of such subsection:
The following at the end of such subsection:
"Fiscal Quarter ending January 30, 1995 $9,463,000
Fiscal Quarter ending April 30, 1995 9,326,000
Fiscal Quarter ending July 30, 1995 9,552,000
Fiscal Year ending October 31, 1995 10,013,000"
C. Subsection 7.13 is deleted in its entirety and the following is
substituted therefor:
"The Borrower, on a consolidated basis, shall maintain Cash Flow of not
less than (i) $(794,000) for the six-month period ending on April 30, 1995,
(ii) $(738,000) for the nine-month period ending on July 30, 1995 and (iii)
$(339,000) for the twelve-month period ending on October 31, 1995."
13
15
Exhibit (4)(c)(5), Pg.2
D. Subsection 8.2 is deleted in its entirety and the following is
substituted in its place:
"8.2 INDEBTEDNESS AND LIABILITIES. Except for (i) the Indebtedness set
forth in the Financial Statements, (ii) Indebtedness permitted in clause (iv)
of subsection 8.1 above and (iii) Indebtedness of the Borrower to the
Subsidiary or of the Subsidiary to the Borrower which, in the case of
Indebtedness of the Borrower to the Subsidiary, shall be subordinated to
Borrower's Obligations hereunder and, in the case of Indebtedness of the
Subsidiary to the Borrower, shall be subordinated to the obligations of the
Subsidiary under the Subsidiary Guaranty, each pursuant to terms and
conditions satisfactory to the Lender, the Borrower shall not, and shall not
cause or permit the Subsidiary to, incur, create, assume, become or be liable
in any manner with respect to, or suffer to exist, any Indebtedness, except
for the Obligations; PROVIDED that the Borrower may issue new Shareholder
Notes so long as (A) no Event of Default shall have occurred and be continuing
(or will result therefrom), (B) the aggregate principal amount of any and all
Shareholder Notes maturing in any Fiscal Quarter shall not exceed $250,000,
(C) the aggregate principal amount of Shareholder Notes outstanding at any
time shall not exceed $1,500,000 and (D) the aggregate principal amount of
Shareholder Notes outstanding at any time shall not be less than $1,000,000
unless the ratio of Borrower's EBIT to Interest Expense exceeds 1.0 to 1.0."
E. Subsection 2.1(a)(2)(c) is deleted in its entirety and the following
is substituted in its place:
"(c) up to fifty percent (50%) of the book value of the Borrower's then
existing Eligible Inventory consisting of finished goods (other than those
referred to in clause (B) above); PROVIDED, HOWEVER, that no more than Seven
Million Dollars ($7,000,000) of the principal balance of the Revolving Loan
outstanding plus the Lender Guaranty Reserve amount at any one time shall be
attributable to that portion of the Current Asset Base consisting of Eligible
Inventory as derived from the foregoing formulas. The book value of Eligible
Inventory shall be determined at the lower of cost (determined on a first-in-
first-out ("FIFO") basis) or market, less such reserves as the Lender in its
sole and reasonable discretion elects to establish; and MINUS"
SECTION 2. WAIVERS. Borrower has requested, and subject to the following terms
and conditions, Lender does hereby waive the following terms and conditions of
the Loan Agreement:
(A) Section 7.10 for a period ending March 31, 1995;
(B) Section 7.13 for a period ending March 31, 1995; and
(C) Section 7.1(v) for a period ending December 31, 1994.
SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. The Effective Date
shall occur on the date on which the Borrower has delivered to the Lender the
following, all in form and substance satisfactory to the Lender:
A. Two fully executed copies of this Amendment;
B. Two fully executed legal opinions from the Borrower's counsel
addressing, with respect to this Amendment and the Reaffirmation of Guaranty
referred to in Section 3.C below, those matters covered in paragraphs 1
through 4 of such counsel's opinion delivered on October 16, 1992 with respect
to the Loan Agreement prior to its amendment hereby; and
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16
Exhibit (4)(c)(5), Pg.3
C. Two fully executed copies of a Reaffirmation of Guaranty (the
"Reaffirmation") by Bender Shoe Company (the "Subsidiary") in the form
attached hereto as Exhibit A.
D. Borrower shall pay to Lender a documentation fee equal to $1,000.00 in
connection with the documentation of this Amendment. Such fee shall be in
addition to any other fee payable by Borrower hereunder or under the Loan
Agreement and is fully earned upon the execution of this Amendment.
SECTION 4. BORROWERS REPRESENTATIONS AND WARRANTIES. In order to induce the
Lender to enter into this Amendment and to amend the Loan Agreement in the
manner provided herein, the Borrower represents and warrants to the Lender
that the following statements are true, correct and complete:
A. CORPORATE POWER AND AUTHORITY. Each of the Borrower and the
Subsidiary has all requisite corporate power and authority to enter into this
Amendment and the Reaffirmation, respectively, and to carry out the
transactions contemplated by, and perform its obligations under, the Loan
Agreement as amended by this Amendment (the "Amended Agreement") and the
Reaffirmation, respectively.
B. AUTHORIZATION OF AGREEMENTS. The execution, delivery and performance
of this Amendment and the Reaffirmation have been duly authorized by all
necessary corporate action by the Borrower and the Subsidiary, respectively.
C. NO CONFLICT. The execution, delivery and performance by the Borrower
of this Amendment and by the Subsidiary of the Reaffirmation, and the
performance by the Borrower of the Amended Agreement and by the Subsidiary of
the Reaffirmation do not and will not (i) violate any provision of any law,
rule or regulation applicable to the Borrower or the Subsidiary, as
applicable, the Certificate of Incorporation or Bylaws of the Borrower or the
Subsidiary, as applicable, or any order, judgment or decree of any court or
other agency or government binding on the Borrower or the Subsidiary, as
applicable, (ii) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any obligation of the
Borrower or the Subsidiary, as applicable, (iii) result in or require the
creation or imposition of any lien upon any of their properties or assets
(other than Permitted Liens), or (iv) require any approval of stockholders or
any approval or consent of any Person, except for such approvals or consents
which will be obtained on or before the date hereof and disclosed in writing
to the Lender.
D. GOVERNMENTAL CONSENTS. The execution, delivery and performance by the
Borrower of this Amendment and by the Subsidiary of the Reaffirmation, and the
performance by the Borrower of the Amended Agreement and by the Subsidiary of
the Reaffirmation do not and will not require any registration with, consent
or approval of, or notice to, or other action to, with or by, any federal,
state or other governmental authority or regulatory body or other governmental
Person.
E. BINDING OBLIGATION. This Amendment and the Reaffirmation have been
duly executed and delivered by the Borrower and the Subsidiary, respectively,
and constitute valid and binding obligations of the Borrower and the
Subsidiary, respectively, enforceable against the Borrower and the Subsidiary,
respectively, in accordance with their respective terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to or limiting creditors'
rights generally or general principles of equity, whether such enforceability
is considered in a proceeding in equity or at law, and subject to the
discretion of the court before which any proceeding therefor may be brought.
15
17
Exhibit (4)(c)(5), Pg.4
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM LOAN AGREEMENT.
The representations and warranties contained in Section 6 of the Loan
Agreement are and will be true, correct and complete in all material respects
on and as of the Effective Date of this Amendment to the same extent as though
made on and as of that date, except to the extent that such representations
and warranties specifically relate to an earlier date, in which case they are
true, correct and complete in all material respects as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this
Amendment or the Reaffirmation which would constitute an Event of Default.
Section 5. MISCELLANEOUS.
A. REFERENCE TO AND EFFECT UPON THE LOAN AGREEMENT. Except as
specifically amended hereunder, the Loan Agreement shall remain in full force
and effect and is hereby ratified and confirmed. The execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any rights,
power or remedy of the Lender under the Loan Agreement, nor constitute a
waiver of any provision of the Loan Agreement. Upon the Effective Date, (i)
each reference in the Loan Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of similar import and (ii) each reference in any
of the other Financing Agreements to the Loan Agreement shall mean and be a
reference to the Loan Agreement as amended by this Amendment.
B. SECTION HEADINGS. All section headings are inserted for convenience
of reference only and shall not affect any construction or interpretation of
this Amendment.
C. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original, but
all of which taken together shall constitute one and the same agreement.
D. GOVERNING LAW. This Amendment shall be construed and enforced in
accordance with and governed with and governed by the internal laws, as
opposed to the conflict of laws provisions, and decisions of the State of
Illinois.
E. SEVERABILITY. Whenever possible, each provision of this Amendment
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Amendment shall be prohibited by
or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Amendment.
F. SUBMISSION TO JURISDICTION; WAIVER OF JURY AND BOND. THE LENDER AND
THE BORROWER HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS, AND
IRREVOCABLY AGREE THAT, SUBJECT TO THE LENDER'S SOLE AND ABSOLUTE ELECTION,
ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AMENDMENT OR THE OTHER FINANCING
AGREEMENTS SHALL BE LITIGATED IN SUCH COURTS, AND THE BORROWER WAIVES ANY
OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO
THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OR PROCESS BE
MADE BY MAIL OR MESSENGER DIRECTED TO IT AT THE ADDRESS SET FORTH IN
SUBSECTION 10.13 OF THE LOAN AGREEMENT, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW. THE BORROWER DESIGNATES AND APPOINTS CT CORPORATION SYSTEM,
208 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60604, AND SUCH OTHER PERSON AS
MAY HEREAFTER BE SELECTED BY THE BORROWER WHICH IRREVOCABLY AGREES IN WRITING
TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN
ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED
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18
BY THE BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY
OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE
BORROWER AT ITS ADDRESS PROVIDED IN SUBSECTION 10.13 OF THE LOAN AGREEMENT,
EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL
SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICES OF PROCESS. IF ANY AGENT
APPOINTED BY THE BORROWER REFUSES TO ACCEPT SERVICE, THE BORROWER HEREBY
AGREES THAT SERVICE UPON IT BY MAIL OR OTHERWISE IN ACCORDANCE WITH SUBSECTION
10.13 OF THE LOAN AGREEMENT SHALL CONSTITUTE SUFFICIENT NOTICE. THE LENDER
AND THE BORROWER ACKNOWLEDGE THAT THE TIME AND EXPENSE REQUIRED FOR TRIAL BY
JURY EXCEED THE TIME AND EXPENSE REQUIRED FOR A BENCH TRIAL AND HEREBY WAIVE,
TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, AND WAIVE ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE
LENDER. NOTHING CONTAINED IN THIS SUBSECTION 5(F) SHALL AFFECT THE RIGHT OF
THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF THE LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE
BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION TO THE EXTENT
NECESSARY TO ENFORCE THE LENDER'S LIENS AND SECURITY INTERESTS AGAINST ASSETS
LOCATED IN SUCH JURISDICTIONS.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their duly authorized officers on the date
first above written.
B.B. WALKER COMPANY
By: WILLIAM C. MASSIE
-----------------
Title: VP-FINANCE AND ADMINISTRATION
-----------------------------
SANWA BUSINESS CREDIT CORPORATION
By: MICHAEL J COX
-------------
Title: VICE-PRESIDENT
--------------
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19
Exhibit (4)(c)(5), Pg.6
EXHIBIT A
REAFFIRMATION OF GUARANTY
-------------------------
March 20, 1995
Sanwa Business Credit Corporation
One South Wacker Drive
Chicago, Illinois 60606
Gentlemen:
Reference is made to (i) that certain Loan and Security Agreement (the
"Loan Agreement") dated as of October 16, 1992 by and between Sanwa Business
Credit Corporation ("Sanwa") and B.B. Walker Company ("Walker") and (ii) that
certain Guaranty ("Guaranty") dated as of October 16, 1992 from the
undersigned to Sanwa. The undersigned hereby recognizes and acknowledges that
(1) Walker has requested certain amendments to the Loan Agreement, (2) Sanwa
is willing to amend the Loan Agreement, but only pursuant to the terms and
conditions of a Fifth Amendment to Loan and Security Agreement and Consent
Agreement dated as of March 20, 1995 (the "Amendment"), (3) one of the
conditions to the effectiveness of the Amendment is the execution and delivery
by the undersigned of this Reaffirmation of Guaranty and (4) the undersigned
has reviewed the Amendment and understands the contents thereof.
To induce Sanwa to agree to the amendments, the undersigned hereby
reaffirms, ratifies and confirms all terms and provisions of the Guaranty and
agrees that (x) the same is and remains in full force and effect and (y) the
term Loan Agreement as used in the Guaranty shall mean the Loan Agreement as
amended by the Amendment.
Very truly yours,
BENDER SHOE COMPANY
By: WILLIAM C. MASSIE
-----------------
Title: VP-FINANCE AND ADMINISTRATION
-----------------------------
18