UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 1, 1997
Commission File Number 0-934
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B. B. WALKER COMPANY
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(Exact name of registrant as specified in its charter)
North Carolina 56-0581797
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
414 East Dixie Drive, Asheboro, NC 27203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (336) 625-1380
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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
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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. ( )
On January 23, 1998, the aggregate market value of voting stock held by non-
affiliates was approximately $1,079,084.
On January 23, 1998, 1,726,534 shares of the Registrant's voting common stock
with a par value of $1.00 per share were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders of the Company for the year
ended November 1, 1997 are incorporated herein by reference in Parts II and
IV. Portions of the Proxy Statement for the Company's Annual Meeting of
Shareholders to be held on March 16, 1998 are incorporated by reference in
Part III.
The Exhibit Index is on Pages F-4 and F-6.
B.B. WALKER COMPANY
1997 FORM 10-K ANNUAL REPORT
Table of Contents
PART I
Page No.
Item 1. Business 1
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Executive Officers of the Company 12
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of the
Results of Operations and Financial Condition 13
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure 13
PART III
Item 10. Directors, Executive Officers, Promoters and
Control Persons of the Registrant 13
Item 11. Executive Compensation 13
Item 12. Security Ownership of Certain Beneficial Owners
and Management 14
Item 13. Certain Relationships and Related Transactions 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 14
Exhibit Index F-4 to F-6
B.B. Walker Company
1997 Form 10-K
PART I
ITEM 1. BUSINESS
GENERAL
B.B. Walker Company, (the "Company") was incorporated in North Carolina on
October 15, 1952. The Company designs, manufactures and markets complete
lines of moderately-priced, value-oriented western and work/outdoor boots and
shoes for men and women. The majority of the Company's products are sold
under its proprietary brand names, with the remainder sold under major
retailers' private labels and on contract to other footwear manufacturers.
The Company markets its product primarily to wholesale customers in the United
States, but it also serves customers in Canada, Japan and Europe. The Company
has one subsidiary, Bender Shoe Company ("Bender"), which is wholly-owned.
Bender is located in Somerset, Pennsylvania and principally manufactures
western footwear. In addition, the Company operates two retail shoe outlets
which carry a wide assortment of footwear, including other footwear companies'
brands, accessories and footwear care products.
The Company's business is separated into two divisions, wholesale and retail.
Footwear manufactured and wholesaled by the Company, which includes branded,
private label and institutional sales, comprised 92.0% of net sales in 1997,
92.6% of net sales in 1996 and 93.4% of net sales in 1995. The remaining
8.0%, 7.4% and 6.6% of net sales in fiscal 1997, 1996 and 1995, respectively,
were sales from the Company's retail outlets.
During the fourth quarter of 1996, in response to a soft retail environment,
management made a critical assessment of the Company's situation and the steps
that were necessary to move the Company in a more positive direction.
Management's plans included consolidating some operations and services and
reducing other parts of the Company to make it more competitive. The most
significant change was a repositioning of the Company's branded product lines
to direct the Company's limited resources towards those styles that displayed
the most potential for the Company. Management reviewed the existing lines
offered by the Company and eliminated styles that would not generate
acceptable returns for the Company. Most of the styles eliminated were part
of the outdoor line. The Company continues to offer styles within all of its
existing branded lines. However, with fewer styles in the Company's product
lines, less capital is tied up in finished goods and raw material inventories.
In addition, the rate of turns in existing inventories improved.
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B.B. Walker Company
1997 Form 10-K
To support the more efficient product lines and improve market coverage for
the Company's styles, the separate sales forces which previously served the
Work/Outdoor Division and the Western Division were merged into a single sales
force under the supervision of one national sales manager. Several new sales
territories were established to allow concentration of efforts in larger
metropolitan areas. The new sales force now markets both western and
work/outdoor footwear to customers in their established territories which
effectively eliminates the overlap that existed with separate sales forces
under the previous divisional structure. The Company provided extensive
training for the sales force to prepare them to market both lines of footwear
in their territories. This change impacted the Company's sales during the
first quarter and into the second quarter of fiscal 1997 as this transition
was implemented. Management also reviewed and refined how the sales team
markets the product lines to customers and what customers the Company wants to
serve in order to take full advantage of the new sales structure.
In relation to manufacturing, management examined its operations to identify
changes needed to maximize use of manufacturing capacity. Limited
modifications to the work flow in Asheboro, NC and Somerset, PA were made
which resulted in gains in efficiency. Also, a reorganization in the
structure of the raw materials management was implemented with an emphasis on
improving procedures and reducing the Company's investment in inventory.
Efforts in these areas have identified additional areas for improvement and
management continues to review its options for the manufacturing function.
Overall, the processes initiated during the year had a positive impact on the
Company's financial condition and operations. A reduction in receivables of
approximately $1,700,000 and a reduction in inventories of approximately
$3,000,000 generated enough cash flow to allow for a reduction in the advances
against the revolving credit facility of approximately $4,100,000 during
fiscal 1997. More importantly, the Company reported net income of $24,000
versus a loss of $4,041,000 in the prior year. This was accomplished through
an improvement in gross margins from 20.8% to 26.1% and a reduction in selling
and administrative expenses of approximately $3,400,000.
CURRENT PRODUCTS
The Company manufactures and distributes high quality, moderately-priced
branded and private label footwear. The Company's product offerings to its
customers consist principally of either western boots or work/outdoor boots.
The Company also manufactures safety shoes with steel toe construction. The
Company has approximately 4,000 active accounts. A majority of the customer
base is made up of small retail chains and independent retail outlets. In
1997, one customer accounted for approximately 10% of net sales. In 1996 and
1995, no single customer comprised 10% or more of net sales. The Company does
not feel that a single customer or group of customers comprise a significant
portion of operations or exert significant influence over the Company. The
loss of any single customer would not have a material adverse effect on the
Company. The following is a description of the respective product offerings
of the Company for each of its primary markets:
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B.B. Walker Company
1997 Form 10-K
BRANDED FOOTWEAR
For western boot customers, the Company offers quality western boots through
two proprietary brands. With its ABILENE[REGISTERED] brand, the Company
manufactures high quality, all-leather boots for the traditional boot wearer.
ABILENE BOOTS[REGISTERED] are made in both men's and women's styles and are
distributed mainly through a variety of western apparel and footwear stores.
A more contemporary line, SAGE[REGISTERED], is offered at a lower price point
and features brighter colors and accents. The SAGE[REGISTERED] line is
offered in both men's and women's styles. Also under the SAGE[REGISTERED]
brand, the Company has a children's line of western footwear which is
manufactured overseas for the Company. In addition to the sales force, the
Company also promotes these lines through use of a mobile sales showroom which
is used at special customer promotions, rodeos and other events.
During 1997, management decided not to renew the licensing agreement to
manufacture and market JACK DANIEL's<TRADEMARK> western boots because of weak
demand and declining profitability for the line. The JACK
DANIEL's<TRADEMARK> line was introduced in February 1994 and demand for the
line never achieved expectations. The impact on the Company of discontinuing
the line was not significant. For 1997, 1996 and 1995, the JACK
DANIEL's<TRADEMARK> line comprised .12%, .93% and 1.39% of net sales,
respectively.
To promote brand recognition for the ABILENE[REGISTERED] line of footwear, the
Company has entered into several promotional relationships with influential
talents in country music and rodeo. In fiscal 1996, the Company's
marketing/spokesman agreement with John Michael Montgomery expired. The
Company elected not to renew the formal agreement with John Michael Montgomery
but, on occasion, may contract with John Michael Montgomery to promote the
ABILENE[REGISTERED] line for special events. In addition, during 1997, the
Company signed promotional agreements with Confederate Railroad and DooWah
Riders, two prominent bands in country music, to promote the ABILENE
[REGISTERED] brand at their concerts and other special events. From rodeo,
the Company is sponsoring Jerome Davis, the 1995 World Champion Bullrider.
Beginning in 1998, the Company will begin actively promoting its product to
fans of NASCAR. The Company's association with stock car racing will come
through radio advertising on the NASCAR Country Network and other special
promotions. The Company hopes to establish its brand name with the massive
audience of racing fans that follow NASCAR.
The ABILENE[REGISTERED] and SAGE[REGISTERED] brands are manufactured at the
Company's facility in Somerset, Pennsylvania. The final product is shipped to
the central warehouse in Asheboro, North Carolina for distribution.
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B.B. Walker Company
1997 Form 10-K
For the work/outdoor customer, the Company manufactures and distributes
work/outdoor footwear under its GOLDEN RETRIEVER[REGISTERED] brand. The
Company offers a variety of work/outdoor styles under the GOLDEN
RETRIEVER[REGISTERED] trademark, including pull-on, lace-up, lined, insulated
and waterproof, in a variety of heights, soles and constructions. New in
1997, the Company introduced its new line of DURATUFF<TRADEMARK> Work Boots
which features double cushioned insoles. Upon implementation of management's
plans, the GOLDEN RETRIEVER[REGISTERED] brand will cover the majority of the
Company's work and outdoor styles. In addition, the Company manufactures and
markets quality boots and shoes for work and safety use under the WALKER
FOOTWEAR THAT WORKS[REGISTERED] brand and the SAFETY FIRST[REGISTERED] brand.
The work/outdoor lines are manufactured at the Company's Asheboro facility.
As discussed previously, during the fourth quarter of fiscal 1996, the Company
carefully reviewed all styles in its product lines and eliminated those styles
that offered only marginal returns to the Company. The majority of the styles
dropped were from the work/outdoor line, primarily, outdoor styles. In recent
years, efforts to expand the number and type of outdoor styles offered met
with mixed success. Many of the outdoor styles required significant resources
to develop and promote but could not be turned quickly enough to provide
acceptable returns to the Company. Management decided to reduce the variety
of outdoor styles that were in the line and refocus its marketing and product
development efforts on work styles. Historically, the Company has developed a
solid reputation as a producer of quality, durable work boots. Capitalizing
on this strength is an important component of the reduction in the product
line and consolidation of the sales force. Many of the work boot styles have
the potential to be marketed to western customers, thereby expanding the
customer base.
PRIVATE LABEL FOOTWEAR
The Company manufactures shoes for large retailers and other footwear
manufacturers under contract. Most of the private label products consist of
work/outdoor footwear although the Company is actively pursuing new customers
of western private label products. The significant customers in this division
consist of large national retail chains, specialty catalogue retailers and
large wholesalers. In addition, this division serves large accounts overseas,
primarily in Europe and Japan.
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B.B. Walker Company
1997 Form 10-K
OTHER
The Company operates two retail stores which offer the Company's branded
merchandise at discount prices to retail customers. In addition to Company
brands, a wide selection of other manufacturers' brands and accessories are
offered to provide customers with a variety of options from which to choose.
One retail store, which operates under THE FOOTFACTORY[REGISTERED] name, is
located in an outlet mall in Lancaster, Pennsylvania. The second store is a
factory outlet store located in its Asheboro facility.
In addition, the Company also manufactures footwear for institutional
customers, primarily prisons and correctional facilities. Styles manufactured
for these customers are a basic work boot construction. Most orders for
institutional customers are obtained through a competitive bidding process.
MANUFACTURING
The Company operates two manufacturing facilities, in Asheboro, North Carolina
and Somerset, Pennsylvania. The Asheboro plant primarily makes work/outdoor
footwear, while the Somerset plant primarily makes western footwear. The
Company traditionally has manufactured the majority of its footwear products
in its own factories. In situations where it is advantageous to the Company,
production of components, primarily uppers, used in the manufacture of
footwear are outsourced to other manufacturers. Some of these manufacturers
are outside of the United States which subjects the Company to the normal
risks of conducting business abroad, such as political unrest, labor
disturbances or expropriation. No such problems have been experienced or are
anticipated.
The manufacture of footwear is relatively labor-intensive and involves five
primary operations: production of uppers; lasting the uppers to define the
shape, form and size of the footwear; bottoming the footwear; finishing the
footwear; and packaging the footwear. The Company produces boots and shoes
with molded or cemented bottoms and welted boots and shoes with bottoms that
are "welted" or stitched to the uppers.
The Company continues to explore manufacturing and product design innovations
in order to utilize its production capacity in the most efficient manner, to
produce high quality footwear, and to maintain a moderate price structure for
its products. Management believes innovation in its manufacturing process,
including innovation in product design and cost containment, is instrumental
in the Company's long term success.
5
B.B. Walker Company
1997 Form 10-K
SALES AND MARKETING
The Company markets its products through a single sales force directed by a
national sales manager. The national sales manager is accountable for
planning the territory, budget, service, sales operations and motivation of
the sales staff. Territories are established by the national sales manager
using Metro Market Demographic and other statistical data. Salespersons are
hired based on strengths and experience to sell and service within a
territory, including development of the customer base. The Company's
salespersons solicit orders within the territory to which they are assigned.
Orders are submitted to the Company's credit department in Asheboro, North
Carolina for acceptance or rejection based on the customer's credit history.
To a lesser extent, the Company's products are also marketed by independent
sales representatives. Such sales representatives are often engaged to
develop new geographic markets for the Company.
The Company markets its products primarily to wholesale customers in the
United States, but also provides footwear to customers in Canada, Japan and
Europe. The Company has approximately 4,000 active accounts. The Company's
salesmen are offered special incentives for opening new accounts. A majority
of the customer base is made up of small retail chains and independent retail
outlets. These customers have traditionally sold western or rugged
work/outdoor products and, as such, have not been affected by changing fashion
trends. During 1997, one customer accounted for approximately 10% of net
sales. For 1996 and 1995, no customers comprised 10% or more of net sales.
Historically, the largest ten customers account for less than 25% of net
sales. The Company does not feel that a single customer or group of customers
comprise a significant portion of operations or exert significant influence
over the Company.
DISTRIBUTION
The Company's footwear is distributed nationally from its warehouse in
Asheboro, North Carolina. The Company ships its finished goods with its own
fleet of trucks and trailers or uses a parcel delivery service and common
carriers when cost effective or requested by the customer. The Company's
trucks deliver goods to large customers, as well as to trucking terminals for
subsequent delivery to customers by local or cartage carriers. On the back
haul, the trucks generally pick up raw materials from suppliers for delivery
to the Company's warehouse at its Asheboro facility.
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B.B. Walker Company
1997 Form 10-K
COMPETITION
The Company operates in a highly competitive industry. Competition comes from
numerous domestic manufacturers of footwear, as well as imports, particularly
from China. With the North American Free Trade Agreement ("NAFTA") and the
General Agreement on Trade and Tariffs ("GATT"), foreign competition has
easier access to the United States markets. However, the growth in footwear
imports in the western and work/outdoor markets, the Company's two primary
markets, has been less than that experienced by footwear manufacturers serving
other markets.
Many of the Company's competitors have greater financial, distribution, brand
name recognition and marketing resources than the Company. The Company relies
on product performance, styling, quality, timeliness of product delivery and
perceived product value to distinguish its products from the competition. The
Company believes that, based on these factors, it maintains a strong
competitive position in its current market niches. Additionally, with the use
of an extensive cost accounting system, the Company maintains a tight control
on the costs that go into the manufacture of its products. The Company
believes this gives it the advantage of being a low cost producer and allows
it to be competitive in the pricing of its products, which are medium priced
in relation to the market. The Company anticipates that substantial
competition will continue in the future and therefore continues to plan and
develop strategies to enhance its competitive position.
RAW MATERIAL AND FINISHED GOODS INVENTORIES
Each of the Company's footwear styles has different raw material requirements
and is produced in numerous sizes and widths. The Company maintains its
inventories of raw materials at its Asheboro facility. Raw materials are
shipped from the Asheboro facility to the Somerset facility based on scheduled
orders. To the extent practicable, the Company strives to support customers
by maintaining the Company's most popular branded products in stock and by
shipping products quickly to meet customer delivery requirements, with timely
notification to customers of unavoidable delays in delivery. Because of the
large number of variations in sizes and widths for each style, the Company
continues to develop enhancements to its inventory control system and
production planning process to ensure adequate stock levels are maintained and
to minimize delivery time for out-of-stock items.
While the Company believes that its products are relatively insensitive to
fashion trends, changes in consumer tastes do impact inventory levels. The
Company's product development staff monitors the market and responds on a
timely basis with new constructions and styles to prevent the buildup of
inventory that is no longer in peak demand in the marketplace. In addition,
the Company offers special incentive-based inventory reduction programs to
turn over on-hand inventory of styles that are slow moving or that are being
replaced with newer styles.
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B.B. Walker Company
1997 Form 10-K
The Company's principal raw materials are leather, rubber and composition-
based heels and soles, and fiber based items, such as insoles. The Company
purchases its raw materials from numerous suppliers, the majority of which are
domestic. The Company is not dependent on any one supplier for raw materials.
While the Company expects that supplies of raw materials will continue to be
readily available as needed for the Company's operations, the price of some of
the components of its products, primarily leather, has exhibited volatility in
the past, and some price volatility can be anticipated in future years. The
supply of leather and other raw materials was adequate in 1997.
SEASONALITY
The Company experiences significant seasonal fluctuations in net sales because
consumers purchase a large percentage of the Company's products from September
through January. As a result, retail dealers of the Company's products
generally request delivery of products from June through October for advance
orders and from October through December for restocking orders. Accordingly,
inventory levels are highest during June and July and accounts receivable
levels are highest during October through December. Because of seasonal
fluctuations, there can be no assurance that the results of any particular
quarter will be indicative of results for the full year or for future years.
BACKLOG
Backlog records are maintained based on orders for pairs of footwear, rather
than in terms of dollars. The backlog fluctuates on a seasonal basis,
reaching higher levels in the spring and summer months when retailers buy for
fall selling. At November 1, 1997, the backlog for orders believed to be firm
was 119,470 pairs, as compared to 92,385 pairs as of November 2, 1996. The
backlog at a particular time is affected by a number of factors, including
seasonality and scheduled date of manufacture and delivery. Private label and
export orders often have significant lead times. Therefore, a comparison of
the Company's backlog from period to period may not be meaningful and may not
be indicative of future sales.
Advance private label and export orders provide the Company with a stable work
flow which complements orders for branded footwear. The Company attempts to
ship orders for branded products from inventory as they are received. Thus,
the backlog of branded products only reflects orders that were not immediately
filled from inventory and does not accurately predict the mix of future sales.
All orders at November 1, 1997 are expected to be filled during the current
fiscal year.
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B.B. Walker Company
1997 Form 10-K
INTELLECTUAL PROPERTY
The Company owns federal trademark registrations for many of its marks,
including ABILENE[REGISTERED], SAGE[REGISTERED], GOLDEN RETRIEVER[REGISTERED],
WALKER FOOTWEAR THAT WORKS[REGISTERED], SAFETY FIRST[REGISTERED],AIR
RIDE[REGISTERED] COMFORT SYSTEM and EASY COMFORT[REGISTERED] SYSTEM. The
Company's trademarks are valuable assets. Therefore, it is the policy of the
Company to pursue registration of its trademarks whenever possible and to
defend its trademarks from infringement to the greatest extent practicable
under the law. There are no patents, licenses, franchises or concessions that
are material to the operations of the Company.
GOVERNMENTAL REGULATION
All of the Company's operations are subject to federal, state and local
regulatory standards, primarily in the area of safety, health, employment and
environmental standards. In general, the Company has experienced no
difficulty in complying with these standards and believes that they have not
had any material effect on its capital expenditures, earnings or competitive
position.
EMPLOYEES
The Company and its subsidiary employed 423 persons as of November 1, 1997,
261 at the Asheboro, North Carolina facility and 162 at the Somerset,
Pennsylvania facility. Of these individuals, 308 were engaged in
manufacturing and 115 in administrative, sales and transportation functions.
Substantially all of the Company's employees were employed on a full-time
basis. None of the Company's employees are covered by collective bargaining
agreements and the Company believes its relations with its employees are good.
YEAR 2000 COMPLIANCE
The Company has and will continue to make certain investments in its software
systems and applications to ensure that the Company is year 2000 compliant.
It is anticipated that the project will be completed by internal staff without
significant contributions from outside contractors. The financial impact to
the Company has not been and is not anticipated to be material to the
Company's financial position or results of operations in any given year.
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B.B. Walker Company
1997 Form 10-K
FORWARD-LOOKING STATEMENTS
The foregoing discussion contains some forward-looking statements about the
Company's financial condition and results of operations, which are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in the forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's judgment only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements
to reflect events and circumstances that arise after the date hereof.
Factors that might cause actual results to differ materially from these
forward-looking statements include (1) the effects of general economic
conditions, (2) the impact of competitive products and pricing in the footwear
industry, (3) failure to achieve anticipated sales results, (4) management's
ability to accurately predict the effect of cost reductions, and (5)
management's ability to accurately predict the adequacy of the Company's
financing arrangement to meet its working capital and capital expenditure
requirements.
ITEM 2. PROPERTIES
As of November 1, 1997, the Company and its subsidiary utilized an aggregate
of approximately 355,000 square feet of floorspace in various facilities, all
of which are in service and are adequate for the operations performed.
Substantially all of the Company's property, including its facilities and
inventories, are insured on a replacement value basis.
The Company and its subsidiary, Bender Shoe Company, operate manufacturing and
warehousing facilities as follows:
Asheboro, North Carolina - This location on 414 East Dixie Drive, Asheboro,
North Carolina contains the major manufacturing facility for work/outdoor
footwear, as well as the executive offices of the Company. The Company uses
281,857 square feet of space in one building on approximately 21.8 acres of
land. The premises are used for manufacturing, shipping, warehousing,
administration and a retail outlet store. Paved parking and truck loading
areas are maintained. The premises owned in fee are subject to an existing
lien under a deed of trust in favor of Mellon Bank, N.A.
Somerset, Pennsylvania - The Company's subsidiary, Bender Shoe Company, moved
to a larger facility in Somerset in August 1994. The facility provides
approximately 68,000 square feet of space on 3.8 acres of land. The facility
is used primarily for manufacturing and raw material storage. A small portion
of the space is used as administrative offices. The Company owns the facility
which is subject to existing liens in favor of First National Bank and Trust
Company in Asheboro, NC, the Pennsylvania Industrial Development Authority,
the Pennsylvania Economic Revitalization Fund and Mellon Bank, N.A.
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B.B. Walker Company
1997 Form 10-K
The Company also operates factory outlet retail stores in Asheboro, North
Carolina and Lancaster, Pennsylvania. The Asheboro retail store is located at
the Company's Asheboro facility. The retail store space in Lancaster is
leased by the Company.
The Company has also entered into long-term agreements with non-related
lessors to lease certain machinery and equipment, including transportation
equipment. Some of the leases are in substance financing arrangements and
have been capitalized by the Company. Information regarding cost and present
value of the capitalized leases is presented in Notes 3 and 9, respectively,
in the Notes to Consolidated Financial Statements for the year ended November
1, 1997 and is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
(a) From time to time, the Company is a defendant in legal actions
involving claims arising in the normal course of business. In management's
opinion, after consultation with counsel and a review of the facts, the
liabilities, if any, resulting from such legal proceedings will not have a
material effect on the Company's financial position or results of operations.
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 1997 fiscal year.
11
B.B. Walker Company
1997 Form 10-K
EXECUTIVE OFFICERS OF THE COMPANY
The names, ages and positions of the executive officers of the Company as of
November 1, 1997 are listed below along with their business experience during
the past five years. Officers are elected annually by the Board of Directors
at the Annual Meeting of the Board of Directors convened immediately following
the Annual Meeting of the Shareholders. Executive officers serve until the
next annual meeting of the Directors and until their successors are elected
and qualified.
Executive Officer (Age) Position and Office
----------------------- -------------------
Kent T. Anderson (55) Chairman (1992), President (1984) and
Chief Executive Officer (1986) (1)
French P. Humphries (57) Executive Vice President (1995) (2)
William C. Massie (60) Executive Vice President (1995) (3)
John R. Whitener (34) Controller (1993) (4)
(1) Officer is also a director of the Company.
(2) As of December 1995, officer was named Executive Vice President and
directs the Company's marketing and merchandising efforts. From 1992 to 1995,
he served as Vice President - Marketing. Prior to 1992, he was General
Manager of the Western Division, a position he held since 1977.
(3) As of December 1995, officer was named Executive Vice President. His
current responsibilities involve the Company's administrative and operating
functions. Prior to this position, he served as Vice President - Finance and
Administration since joining the Company in 1988.
(4) Served in this position since September 1993. His responsibilities
include the finance and accounting functions of the Company. Prior to joining
the Company, he was a senior manager with KPMG Peat Marwick, a public
accounting firm.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is found under the heading "Stock
Prices" on page 43 of the Annual Report to Shareholders (included as Exhibit
13 to this filing) for the year ended November 1, 1997 and is incorporated
herein by reference. The Company had 1,173 shareholders of record at January
23, 1997.
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B.B. Walker Company
1997 Form 10-K
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is reported on page 29 of the Annual
Report to Shareholders (included as Exhibit 13 to this filing) under the
heading "Selected Financial Data" and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information required by this Item is on pages 30 thru 42 of the Annual
Report to Shareholders (included as Exhibit 13 to this filing) under the
heading "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is reported on pages 4 thru 28 of the
Annual Report to Shareholders (included as Exhibit 13 to this filing) and is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There is nothing to report for this Item.
PART III
Certain information required by Part III has been omitted under Item G of the
General Instructions for Form 10-K, Rule 12-b-23, as the Company files with
the Securities and Exchange Commission a definitive proxy statement pursuant
to Regulation 14A not later than 120 days after the end of its fiscal year.
Only those sections of the Proxy Statement which specifically address the
items set forth herein are incorporated by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information concerning the Company's directors required by this Item is
incorporated herein by reference to the Company's Proxy Statement.
Information concerning the Company's executive officers required by this Item
is incorporated herein by reference to Part I of this Form 10-K on Page 12,
under the caption "Executive Officers of the Company".
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement.
13
B.B. Walker Company
1997 Form 10-K
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) The following documents are filed as part of this Form 10-K:
(1) Financial Statements - The following consolidated financial
statements of the Company are incorporated herein by reference to
pages 4 thru 28 of the Annual Report to Shareholders:
(a) Consolidated Statements of Income (Loss) for the fiscal years
ended November 1, 1997, November 2, 1996 and October 28, 1995.
(b) Consolidated Balance Sheets at November 1, 1997 and
November 2, 1996.
(c) Consolidated Statements of Cash Flows for the fiscal years ended
November 1, 1997, November 2, 1996 and October 28, 1995.
(d) Consolidated Statements of Shareholders' Equity for the fiscal
years ended November 1, 1997, November 2, 1996 and October 28,
1995.
(e) Notes to Consolidated Financial Statements
(f) Report of Independent Accountants
(2) Financial Statement Schedules - The following supplementary
consolidated financial statement schedules of the Company are filed
as part of this Form 10-K and should be read in conjunction with the
Annual Report to Shareholders:
Schedule Page
-------- ----
VIII Valuation and Qualifying Accounts F-2
X Supplementary Income Statement Information F-3
14
B.B. Walker Company
1997 Form 10-K
The reports of the Company's independent public accountants with
respect to the above described financial statements and financial
statement schedules appear on page 28 of the Annual Report to
Shareholders and on page F-1 of this report, respectively, and are
incorporated herein by reference.
All other financial statements and schedules not listed have been
omitted since the required information is included in the
consolidated financial statements or the notes thereto or is not
applicable or required.
(B) No reports on Form 8-K were filed by the Company during the last quarter
of fiscal 1997.
(C) A listing of exhibits is incorporated herein by reference to the Index to
Exhibits on pages F-4 thru F-6.
15
B.B. Walker Company
1997 Form 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
B.B. WALKER COMPANY (Registrant)
By: DOROTHY W. CRAVEN
---------------------
Dorothy W. Craven
Date: January 23, 1998 Corporate Secretary
----------------
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities indicated and on the date indicated.
Signature Title
--------- -----
Principal Executive Officer:
KENT T. ANDERSON 1/23/98 Chairman of the Board, Chief Executive
- ------------------ ------- Officer and President
Kent T. Anderson Date
Principal Financial and Accounting Officer:
JOHN R. WHITENER 1/23/98 Corporate Controller
- ------------------ -------
John R. Whitener Date
BOARD OF DIRECTORS
KENT T. ANDERSON 1/23/98 EDNA A. WALKER 1/23/98
- ------------------ ------- ---------------- -------
Kent T. Anderson Date Edna A. Walker Date
Chairman
ROBERT L. DONNELL, JR. 1/23/98 MICHAEL C. MILLER 1/23/98
- ------------------------ ------- ------------------- -------
Robert L. Donnell, Jr. Date Michael C. Miller Date
JAMES P. McDERMOTT 1/23/98 GEORGE M. BALL 1/23/98
- -------------------- ------- ---------------- -------
James P. McDermott Date George M. Ball Date
16
B.B. Walker Company
1997 Form 10-K
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
---------------------------------
To the Board of Directors and Shareholders of
B.B. Walker Company
Our audits of the consolidated financial statements referred to in our report
dated December 1, 1997 appearing on page 28 of the 1997 Annual Report to
Shareholders of B.B. Walker Company (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules listed in Item
14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules
present fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Winston-Salem, North Carolina
December 1, 1997
F-1
B.B. WALKER COMPANY Schedule VIII
-------------
VALUATION AND QUALIFYING ACCOUNTS
Balance at Charged to Charged to
Beginning Costs and Other Balance at
Description of Year Expenses Accounts Deductions End of Year
----------- ---------- ---------- ----------- ---------- -----------
Allowance for Doubtful Accounts:
November 1, 1997 $ 742,000 267,000 - 506,000 $ 503,000
========== ========== =========== ========== ===========
November 2, 1996 $ 521,000 922,000 - 701,000 $ 742,000
========== ========== =========== ========== ===========
October 28, 1995 $ 778,000 425,000 - 682,000 $ 521,000
========== ========== =========== ========== ===========
F-2
B.B. WALKER COMPANY Schedule X
----------
SUPPLEMENTARY INCOME STATEMENT INFORMATION
November 1, November 2, October 28,
1997 1996 1995
(52 weeks) (53 weeks) (52 weeks)
----------- ----------- -----------
The following amounts were charged to
costs and expenses:
Maintenance and repairs $ 338,000 $ 438,000 $ 565,000
========== ========== ==========
Advertising costs $1,011,000 $1,349,000 $1,118,000
========== ========== ==========
F-3
INDEX TO EXHIBITS
Page Number or
Exhibit Incorporation By
Number Description Reference To
- ------- ----------- ------------
(3) Articles of Incorporation and By-Laws
(3)(a) Articles of Amendment to Articles of Exhibit D to Form 10-K
Incorporation and Restated Charter of for the fiscal year
B.B. Walker Company dated November 28, 1979, ended November 3, 1979
filed with the Secretary of State in Raleigh, NC
(3)(b) Articles of Amendment to Articles of Exhibit A to Form 10-Q
Incorporation dated March 24, 1980, filed with for the six month
the Secretary of State in Raleigh, NC period ended May 3,
1980
(3)(c) Articles of Merger of Lyon & Shaw, Inc. Exhibit (3) (c) to the
into Registrant dated January 21, 1987 Form 10-K for the
fiscal year ended
November 1, 1986
(3)(d) Copy of the revised By-Laws of B.B. Walker Exhibit (3)(d) to the
Company as amended January 7, 1992 Form 10-K for the
fiscal year ended
November 2, 1991
(3)(e) Articles of Merger of Walker Shoe Company Exhibit (3)(g) to the
into B.B. Walker Company dated June 29, 1987 Form 10-K for the
fiscal year ended
October 31, 1987
(3)(f) Articles of Amendment to Articles of Exhibit (3)(f) to the
Incorporation dated November 16, 1988, filed Form 10-K for the
with the Secretary of State in Raleigh, NC fiscal year ended
October 30, 1988
(3)(g) Articles of Amendment to Articles of Exhibit (3)(g) to the
Incorporation dated March 30, 1994, filed Form 10-K for the
with the Secretary of State in Raleigh, NC fiscal year ended
October 29, 1994
(4) The Registrant, B.B. Walker Company, by signing Exhibit (4) to Form
this report, agrees to furnish the Securities 10-K for the fiscal
and Exchange Commission upon its request a copy year ended November
of any instrument which defines the rights of 2, 1985
holders of long-term debt of the Registrant and
its subsidiary for which consolidated or
unconsolidated financial statements are required
to be filed and which authorizes a total amount
of securities not in excess of 10% of the total
assets of the Registrant and its subsidiary on a
consolidated basis.
F-4
INDEX TO EXHIBITS
Page Number or
Exhibit Incorporation By
Number Description Reference To
- ------- ----------- ------------
(4)(a) Certificate of Common Capital Stock of B.B. Exhibit (N) to Form
Walker Company 10-K for the fiscal
year ended October 28,
1978
(4)(b) Unsecured Promissory Note of B.B. Walker Exhibit (B) to Form
Company with flexible rate minimum interest 10-K for the fiscal
provisions year ended November 1,
1980
(4)(c)(1) Credit Agreement dated August 15, 1995 Exhibit (4)(c)(1) to
between Mellon Bank, N.A., Philadelphia, PA, Form 10-Q for the
as Lender and B.B. Walker Company, Asheboro, third quarter ended
NC, the Registrant, as Borrower. The twenty- July 29, 1995
one supporting schedules have been omitted
being detailed forms, lists and support for
specific provisions set out in the agreement.
(4)(c)(2) Revolving Credit Note dated August 15, 1995 Exhibit (4)(c)(2) to
in the amount of $20 million; signed by the Form 10-Q for the
Registrant and in favor of Mellon Bank, N.A., third quarter ended
Philadelphia, PA July 29, 1995
(4)(c)(3) Term Loan Note dated August 15, 1995 in the Exhibit (4)(c)(3) to
amount of $3 million; signed by the Form 10-Q for the
Registrant and in favor of Mellon Bank, third quarter ended
N.A., Philadelphia, PA July 29, 1995
(4)(c)(4) Letter dated February 6, 1996 acknowledging Exhibit (4)(c)(4) to
Mellon Bank's agreement to amend financial Form 10-Q for the
covenants of the Revolving Credit Agreement first quarter ended
effective as of October 28, 1995 and February 3, 1996
thereafter
(4)(c)(5) First Amendment to the Credit Agreement Exhibit (4)(c)(5) to
dated April 15, 1996 between B.B. Walker Form 10-Q for the
and Mellon Bank, N.A. second quarter ended
May 4, 1996
(4)(c)(6) Second Amendment to the Credit Agreement Exhibit (4)(c)(6) to
dated October 18, 1996 between B.B. Walker Form 10-K for the
and Mellon Bank, N.A. fiscal year ended
November 2, 1996
(4)(c)(7) Third Amendment to the Credit Agreement Exhibit (4)(c)(7) to
dated November 14, 1996 between B.B. Walker Form 10-K for the
and Mellon Bank, N.A. fiscal year ended
November 2, 1996
F-5
INDEX TO EXHIBITS
Page Number or
Exhibit Incorporation By
Number Description Reference To
- ------- ----------- ------------
(4)(c)(8) Fourth Amendment to the Credit Agreement Exhibit (4)(c)(8) to
dated April 15, 1997 between B.B. Walker Form 10-Q for the
and Mellon Bank, N.A. second quarter ended
May 3, 1997
(10)(a) B.B. Walker Company Nonqualified Deferred Exhibit (10) to Form
Compensation Plan as amended, adopted 10-K for the fiscal
June 7, 1983. year ended October 29,
1983
(10)(d) 1987 Incentive Stock Option Plan effective Exhibit (10)(d) to
February 11, 1987 Form 10-K for the
fiscal year ended
October 29, 1988
(10)(e) 1995 Incentive Stock Option Plan for Key Filed with the 1994
Employees and Non-Employee Directors Proxy Statement mailed
effective March 20, 1995 to shareholders on
February 27, 1995
(10)(f)(1) Employment Agreement between B.B. Walker Exhibit (10)(f)(1) to
Company and Kent T. Anderson, President Form 10-Q for the
and Chief Executive Officer, dated October nine months ended
2, 1989 July 28, 1990
(10)(f)(2) First Amendment to Employment Agreement Exhibit (10)(f)(2) to
between B.B. Walker Company and Kent T. Form 10-Q for the
Anderson, President and Chief Executive nine months ended
Officer, dated July 6, 1990 July 28, 1990
(11) Computation of earnings per share amounts are
explained in Note 1 to the Consolidated
Financial Statements in the Annual Report to
Shareholders for the fiscal year ended
November 1, 1997, which is Exhibit 13 to this
filing
(13) Annual Report to Shareholders for the fiscal Filed herewith as
year ending November 1, 1997 Exhibit (13)
(22) Subsidiaries of the Registrant Filed herewith as
Exhibit (22)
F-6